ADK Annual Report 2011
Year ended December 31, 2011

ADK Profile

History

ASATSU-DK INC., commonly known by its initials ADK,1956

was founded in March 1956 by Masao Inagaki as a small,

ASATSU (now ASATSU-DK) commenced
advertising agency operations

ambitious firm focusing on magazine advertising. ASATSU
INC., as it was known at the time, quickly built up a solidclient base, primarily in the financial sector, giving it astrong foundation for growth.

1984

As Japan entered the high-growth years of theEstablishes strategic business alliance andcapital tie-up with BBDO International, Inc.

1960s, ASATSU INC. broadened its creative reach to(currently BBDO, Omnicom Group)

include planning and production of animation programsfor the then still-new medium of television. In 1987, it waslisted on the Second Section of the Tokyo Stock Exchange

1987

Becomes first advertising company to list its(TSE), becoming the first advertising agency in Japan toshares on the Second Section of the Tokyo

make a public stock offering. The company listed on the

Stock Exchange (TSE)First Section of the TSE in 1990.
In 1998, it made another major move, signing areciprocal share agreement and strategic alliance with

1990

Elevated to First Section of the TSE

1998

Establishes strategic business alliance and

WPP, the world’s largest marketing organization.*
The following year, the company merged with Dai-Ichi
Kikaku Co., Ltd., another Top 10 Japanese agency, changed
its name to ASATSU-DK INC. (ADK), and entered a periodof renewed growth. Now it is Japan’s third largest total
communications service agency and the 14th largest

capital tie-up with WPP Group plc.

communications service group in the world .*Since its foundation, ADK has steadily expanded its
operations based on an unwavering commitment to
the “Management by All” philosophy. This means every
employee in the ADK Group is expected to embracea management-level perspective and approach clientneeds proactively.
* Advertising Age, April 30, 20121999

ASATSU-DK Inc. formed through the merger of
ASATSU Inc. and Dai-Ichi Kikaku Co., Ltd.

Contents
Business at a Glance ............................................................ 2
To Our Valued Shareholders ............................................. 4
Medium-Term Business Plan ........................................... 6
Corporate Social Responsibility ...................................10
Topics ......................................................................................12
Corporate Governance .....................................................14
Board of Directors and Auditors ..................................20
Financial Section .................................................................21
Management’s Discussion and Analysis ....................22
Forward-Looking Statements and Risk Factors ......30
Securities Holdings .............................................................66
Investor Information ..........................................................67
ADK Group Network...........................................................68

Business at a Glance
Consolidated Five-Year Summary
Thousands of
U.S. Dollars

Millions of Yen

2011

2010

2009

2008

2007

2011

Gross billings¥347,112¥346,565¥350,211¥399,452¥435,011$4,465,036

Gross profit

45,83642,02841,36749,14351,754

589,612Selling, generaland administrative expenses

41,98342,00642,12345,44444,619540,051

Operating income (loss)

3,853

22

(756)

3,699

7,134

49,561

Income (loss) before income taxes
and minority interests

5,028(4,749)

343

3,775

10,12264,679Net income (loss)

2,294(4,656)

73

2,125

5,350

29,503

Income Statement Data

EBITDA*

¥

4,828

¥

810

¥

187

¥

4,502

¥

8,274

$

62,107*EBITDA = Operating income + Depreciation/Amortization + Amortization of negative goodwill

Balance Sheet Data

Thousands of
U.S. Dollars

Millions of Yen

Total assets¥184,188¥194,510¥190,024¥191,782¥246,097$2,369,285

96,800103,168

107,465

101,617

131,846

1,245,178

5,278

7,467

4,765

2,611

14,35467,89248.14¥ 116.40$ 0.70Total net assets*
Total long-term liabilities* Total net assets consists of Shareholder’s equity, valuation and translation adjustments, and minority interests.

Per Common Share Data (Yen and U.S. Dollars)
Net income (loss) per share (EPS)Dividend per share
Book value per share
No. of common shares outstanding*

¥

54.37

¥ (110.28)

¥

1.73

¥

109

20

20

20

42

1.40

2,270.23

2,423.06

2,499.05

2,334.48

2,898.49

29.20

42,213,802

42,165,296 42,585,533 43,088,073 45,091,103*Does not include treasury stock. In addition, ADK set up an Employee Stock Ownership Plan (ESOP) trust in fiscal 2010 (see page 43). Shares owned by the ESOP trust
were included in treasury stock at fiscal year-end.

Financial Ratios
AS PERCENT OF GROSS BILLINGS
Gross profit

13.21%

12.13%

11.81%

12.30%

11.90%

SG&A expenses

12.10

12.12

12.03

11.38

10.26

Operating income (loss)

1.11(0.01)(0.22)

0.93

1.64

Income (loss) before income taxes
and minority interests

1.45(1.37)

0.10

0.94

2.33

Net income (loss)

0.66(1.34)

0.02

0.53

1.23

Operating income (loss)

8.4%

0.1%

(1.8%)

Staff cost

61.8

67.3

67.0

62.4

57.8

Return on equity

2.4

(4.7)

0.1

1.8

3.9

AS PERCENT OF GROSS PROFIT

0.04

7.5%

13.8%

Return on assets

1.2

(2.4)

1.7

2.8

Equity ratio*

52.0

52.5

56.0

52.4

53.1

Current ratio

1.55×

1.52×

1.57×

1.50 ×

1.48 ×*Equity ratio, according to TSE formulas, equals book equity (excluding minority interest) divided by book total assets.
Note: For convenience purposes, U.S. dollar amounts are converted from Japanese yen at the rate of ¥77.74=US$1, the approximate rate of exchange as ofDecember 31, 2011.

2

ADK Group■Japan■■China■• Kyowa Kikaku Ltd.
• ADK International Inc.
• ADK Dialog Inc.
• ADK Arts Inc.
• Boys Inc.
• Digital Advertising Consortium Inc.
Eiken Co., Ltd.
NIHONBUNGEISHA Co., Ltd.
Neo Shobo Inc.

■

■Asia
■

• Guangdong Guangxu (ASATSU)
Advertising Co., Ltd.*• ASATSU-DK HONG KONG LTD.
• DK ADVERTISING (HK) Ltd.
• Asatsu Century (Shanghai)
Advertising Co., Ltd.
• Shanghai Asatsu Advertising Co., Ltd.

Taiwan■Europe■• Asatsu Europe Holding BV• Asatsu Europe BV• Asatsu (Deutschland) GmbH

• United-Asatsu International Ltd.
• DIK-OCEAN Advertising Co., Ltd.

• Advertising• ASATSU-DK SINGAPORE PTE. LTD.
• ADK Thai Holding Ltd.
• DAI-ICHI KIKAKU (THAILAND) CO., LTD.
• ASDIK Ltd.
• ASATSU (THAILAND) CO., LTD.
• ASATSU-DK Malaysia Sdn. Bhd.

■North America■

Other business* Affiliates accounted for by equity method• ADK America Inc.

■

Digital Advertising Consortium Inc.
In the fiscal year under review, ADK sold all of its shares of Digital Advertising Consortium Inc. (DAC), an equity-method affiliate in the previous fiscal year.
Accordingly, DAC was removed from the scope of equity-method application on September 30, 2011.

Performance of ADK Group Breakdown by Area
Millions of Yen
Year on Year

FY2011ADK
Japan
Subsidiaries

Gross Billings

Gross Profit

Operating Income

Net Income¥301,878¥33,156¥1,734¥ 2,302-1.3%
42,107
10.4%

—

—

8,461

8.0%

909

101

15.3%

129.1%—

Subsidiaries in Greater China(Shanghai, Hong Kong, Taipei)

15,513

2,451

734

714

13.0%

15.4%

36.0%

41.9%

Asia
(Thailand, Malaysia)

8,749

1,675

351

369

-19.9%-7.9%

Europe and North America(Germany, Netherlands, USA)

3,214

465

34

56

-14.5%-5.2%-32.9%-43.5%(Adjustment)(24,350)

(374)

86

(1,250)Total¥ 347,111¥45,836¥3,852¥ 2,293

-1.7%

-2.1%

3

4

Koichiro Naganuma

Yoji Shimizu

Representative Director, Chairman of the Board

Representative Director, President & Group CEO

To Our Valued Shareholders

To Our Valued Shareholders
It is a pleasure to report on the ADK Group’s
performance in fiscal 2011, ended December 31, 2011.
At the Board of Directors meeting held
following the close of the Annual General Meeting

In the advertising industry, which accounts
for the majority of the Group’s revenue, conditions
remained uncertain.
Under these circumstances, the ADK Groupon March 29, 2012, Koichiro Naganuma and Yoji

focused on providing services that address

Shimizu were elected as representative directors

structural changes in the business environment.

and assumed their positions on the same day. Under

We also worked actively to advance our businessour new organization based on two representativein newly emerging markets and achieve a businessdirectors, we will further strengthen our operational

recovery. As a result, gross billings remained

system to allow swift and accurate responses

mostly unchanged year on year, edging up slightly.

to increasingly complex business issues, thus

However, we enjoyed a certain level of recovery,

promoting advancement of the ADK Group. We lookposting significant year on year growth in earnings.

forward to your support for these endeavors.
In fiscal 2011, the Japanese economy retreatedWe, the executives and employees of the ADKGroup, are committed to further reinforcing oursignificantly in the wake of the Great East Japan

corporate foundation in order to realize sustained

Earthquake, an unprecedented natural disaster.

growth even in the current difficult businessToward the middle of the year, the economy

environment. In these endeavors, we will continue

showed some signs of recovery thanks to ongoing

following the “Management by All” philosophy,

efforts aimed at disaster restoration, including aunchanged since our foundation.

rapid recovery of the supply chain. With the added
impact of the growing debt crisis in Europe andJune 2012

flooding in Thailand, however, full-scale economic
recovery failed to materialize.

5Medium-Term Business Plan
The ADK Group has embarked on

Plan Overview

its new medium-term business plan,

The Japanese economy remains in a state of stagnation,

covering the three-year period fromcharacterized by such factors as domestic market

January 2012 to December 2014.

well as deflationary undertones and ongoing appreciation

Guided by the “Enterprising Spirit”
it has embraced since its foundation,
ADK and its fellow Group companies
will target further significant advances

saturation, a low birthrate and an aging population, asof the yen. In the future, as well, we cannot expect major
growth in GDP.
Accompanying the depressed economy is weakness
in advertising expenditures. Despite signs of bottoming
in 2010, advertising expenditures in 2011 declined
slightly year on year, affected by the Great East Japan
Earthquake in the first half and flooding in Thailand in

as a “Global Communications Company”

the second half.

that generates new levels of value.

advertising clients are finding new markets in emerging

Under these circumstances, many of ournations. However, cost competition in such nations
is intensifying, and the key to success against suchcompetition lies in the ability to deliver sophisticatedtechnologies and high added value. With respect to theiradvertising outlays, clients are emphasizing return on
investment (ROI). They are also seeking new marketingand communications techniques, such as the evergrowing social network services (SNS), to appeal to thediversified tastes of consumers.
Facing these challenges, the ADK Group is seeking
to become a “Global Communications Company” thatgenerates and delivers new levels of value in thecommunications domain, driven by an enterprising spirit
and original perspectives. In the process, we will strive tobenefit clients, consumers and society.
Three areas of focus under the plan are as follows:(1) Strengthen solutions capabilities in the digitaldomain.
(2) Concentrate on global markets, centering on
Greater China and the rest of Asia.
(3) Diversify income sources by deploying strengths
in the animation content business and developing
new businesses.

6

Medium-Term Business PlanOur consolidated numerical targets for fiscal 2014 arecompanies, ADK will focus on addressing this issue in an

as follows:

efficient manner.

[1 ] Operating income of ¥7.5 billion[2] Operating margin of 13.0%[3] Return on equity (ROE) of 5.0%

Today, corporations have access to huge volumesof data, but the analysis and deployment of such data forbusiness purposes represent major challenges. For thisreason, ADK will concentrate on enhancing its data analysis
and planning capabilities. One powerful method is accessCore Strategies
for Achieving Plan Targets
1

Strengthen solutions capabilities
in the digital domain

Reinforce digital media and solutions capabilities

log analysis using SiteCatalyst, and accordingly we placeurgent priority on increasing the number of personnel withanalytical skills while enhancing their capabilities.
Social customer relationship management (CRM) is
crucial to achievement of sustained corporate growth.
Together with partner companies, ADK is focusing its
efforts on this area.

ADK and other members of the ADK Group are building
an infrastructure aimed at enhancing the efficiencyof their digital media operations and strengthening
their solutions delivery capabilities. Spearheaded

2 Emerging markets(such as Greater China and Asia)

by the Digital Business Division, ADK (parent

Expand income in Southeast Asian markets

company) is enhancing its comprehensive production

In Southeast Asia, ADK has identified India, Indonesia

capabilities in terms of both organizational structure

and Thailand as key markets, and is seeking to attractand human resources, with the aim of improving its

business from Japanese companies—including home

digital proposal and sales skills. In January 2012, weelectronics manufacturers, telecommunications carriers,

established the Communications Architect Department,

and automakers—that are seeking to expand their regional

staffed by producers capable of proposing integrated

market share. We will promote our new marketing

communications programs underpinned by digital media.

techniques to swiftly address rapid market changes, while

It will work to deliver unique proposals, including in

proposing communications programs that incorporate thecooperation with overseas creators, while fostering andinsights of consumers in each region. To this end, we will

upgrading the skills of its producers.

establish and reinforce local business bases and actively

In August 2012, ADK established its own media rep

invest in local resources.

company, called ADK Digital Communications Inc. (ADDC),
as a joint venture with Dentsu Digital Holdings, Inc. The

Expand income in China

new company enables us to enhance the efficiency of our

ADK made inroads in mainland China ahead of its

digital media operations and broaden the spectrum ofcompetitors, establishing its own operations in major

offerings we can provide to our clients.

Chinese cities. Mobilizing our local experience andSearch engine marketing (SEM) and affiliate

network, we will concentrate on clients in industries

marketing are integral components of a communications

earmarked for future market growth in China. Notable

program but require time and labor to be implemented

among these are home electronics manufacturers,

properly. Deploying the resources of fellow Group

telecommunications carriers, automakers and general7

merchandise producers. In addition to major coastal

Reinforce direct business support

cities, we will broaden our responsiveness to small andAmid changing consumer lifestyles, the direct sales (mailmedium-sized cities in interior regions experiencing

order) business market continued to expand. Rather than

explosive growth.

rely solely on traditional distribution channels, therefore,

At present, around 90% of our business in China

many companies are broadening their operations

is with Japanese clients, but we are also focusing on

through direct sales. For some time, ADK has provided

tapping local clients. At Expo 2010 in Shanghai, we

meticulous services to clients engaged in direct sales.

planned and operated the Chinese Private Enterprises

Deploying the expertise we have amassed in the process,

Joint Pavilion in collaboration with 17 prominent

we are expanding and strengthening the specialist skills

Chinese private-sector corporations. We are confidentof our producers. At the same time, we are working inthat the channels established with such companies while

alliance with fellow Group companies, with an emphasis

working on the pavilion project will lead to expansion

on enhancing our CRM capabilities, in order to broaden

of our local business.

our overall business. Utilizing knowledge gained inJapan, moreover, we will establish a direct mail business

Overseas sales currently account for 7.4%* of the ADK

infrastructure in China and actively apply reaourses toGroup’s total billings. By 2014, we hope to raise this ratio

advance our direct business in that nation.

to 10% or higher.
*Calculated as the ratio of aggregate sales of overseas consolidated
subsidiaries to total Group gross billings before consolidation adjustment

3 Diversify income sources

To achieve our operating income target of ¥7.5 billion

Strengthen the animation content businessin fiscal 2014, we will need to increase revenue by

One of ADK’s key strengths is its animation content

implementing the aforementioned strategies. Also

business, especially TV animation. With more than 50

extremely important, however, will be enhancing theyears of experience, ADK has pioneer status in theefficiency and profitability of our existing advertisingcharacter merchandising business and a portfolio of muchbusiness, which forms the core of our current operations.

exceptional content.

At the parent company, we will shift personnel andGoing forward, we will develop original ADK

other resources to clients in growth sectors in a flexible

content and reinforce our sales capabilities whilemanner. We will also ensure ample profits by enabling

renewing our focus on tapping the global market. In

visualization of personnel work status and internal costs,

2010, we launched our animation content distribution

as well as stringently controlling overall costs, including

business in China with the establishment of IMMG-

personnel expenses. In addition, we will reinforce

Beijing Co., Ltd. In other regions—such as Asia, thestrategies utilizing the specialist expertise of various

Americas and Europe—we will set up operations andGroup companies and renew our emphasis on in-houseform alliances with partner companies in order toproduction, with the aim of raising Groupwide profitability.

upgrade our sales prowess. We will also focus on new
and peripheral businesses. Examples include musicaltheaters of animation content, hosting of events, anddevelopment and sales of DVDs and related items.

8

Boost Growth andProfitability of Core Businesses

Medium-Term Business PlanInvest in Growth
Going forward, the ADK Group will invest actively in

Financial Strategies andShareholder Return

growth areas in order to implement the strategies

ADK has a stable financial foundation, with a consolidated

described above and boost profitability. Specifically, we

equity ratio in excess of 50% and a current ratio above

will secure an investment fund and invest in key areas.

1.5 times. Because our performance weakened following

In addition to priority businesses—global, digital andthe collapse of Lehman Brothers in 2008, we have placed

content—these include social communication and othera strong emphasis on financial stability. However, weareas earmarked for strategic growth. Also crucial in thisreturned to profitability in fiscal 2010, so in the future we

regard will be investment in personnel development andwill focus on more efficient financial and capital strategies.

skills enhancement. As an urgent priority, we will focus

With respect to shareholder return, we will maintainon nurturing and increasing the numbers of international

stable and consistent dividend payments. Our policy is

personnel capable of addressing the global strategies of

to pay 35% of consolidated net income to shareholders

clients, as well as specialists in the digital domain, a key

in the form of cash dividends while setting an annual

growth area.

dividend at a minimum of ¥20.00 per share, in principle.
We will also undertake share buybacks to maintain agood balance between retaining the earnings necessary
for business investments and ensuring financial stability.

ADK Group’s Growth Strategy

By combining the aforementioned profit expansion
strategies and shareholder return policy, we will boost
capital efficiency with an ROE target of 5.0% in fiscal

Services, products

2014. In fiscal 2015 and beyond as well, we will renew
our emphasis on operational efficiency.
The ADK Group will strive to achieve

FY2011
Consolidated
operating income

Developnew domains(Diversify
income sources)

Markets, clients¥3.8 billion
Strengthencore businesses

sustained growth in corporate value through theaforementioned initiatives, while embracing the“Management by All” philosophy, unchanged since its
foundation. We look forward to the support of our

Digitalshareholders and all other stakeholders.
Content

Tap new markets
Global

FY2014
Consolidated
operating income¥7.5 billion

Invest in growth9Corporate Social Responsibility
ADK’s basic policy is to take an active role inCompliancerealizing a sustainable society. Based on this policy,
we have continued to pursue a range of corporate

ADK regards compliance as the most fundamental factor

social responsibility (CSR) activities, with a renewedin fulfilling its social responsibility, and compliance isfocus on1 Reinforcing our compliance system;
2 Demonstrating our commitment toenvironmental protection; and3 Continuing to engage in the other social
contribution activities that we have pursued
over the years.

now demended by stakeholders. In 2011, the Compliance
Committee conducted a number of training workshops
targeting all employees. The aim of the workshops was
to make employees aware of senior management’s
responsibilities for directing their staff to behave properly
under the “ADK Compliance Guidelines,” which conformto the “ADK Group Code of Conduct” and were issued in
March 2008. Through the workshops, the Committee also
raised awareness of ADK’s in-house reporting system,
called the “ADK Group Helpline,” which is expected tofunction as a key engine to promote compliance.

The task of reinforcing our compliance system
is handled by the Compliance Committee, asubcommittee of the Risk Management Committee.

Environmental Protection

Our environmental protection and other social
contribution initiatives are promoted by the CSR
Committee, established in January 2008 under the
direct control of the president.

ADK acquired ISO14001 certification in 2008. In 2011,
the entire company pursued a number of energy-saving
measures to address the aftermath of the Great East Japan
Earthquake. These included decreasing the temperature
settings of office air-conditioning systems and lowering
the level of office lighting. Coupled with the energy-saving
benefits of replacing personal computers and other equipment, these efforts led to significant reductions in electricity and space heating/cooling usage volumes.

Social Contribution
The ADK Group Code of Conduct declares that theADK Group shall strive hard to benefit society in thecommunications domain. To this end, the Group shallprovide ideas and creative services free of charge
where appropriate, working in close cooperation withpublic entities and organizations, nongovernmentalorganizations (NGOs) and nonprofit organizations (NPOs),
and outside entities with specialist expertise. Guided bythis declaration, ADK conducted the following activities
in 2011.

10

Corporate Social Responsibility

Pro Bono Activity
Recovering fromthe Great East Japan Earthquake

the Japanese terms niko-niko (meaning “smile”) andkokoro (which means “heart” and “spirit”). It embodies theaspiration of bringing cheer and hope back into the livesof survivors through the provision of psychological andemotional care.

Medical Assistance Centering on
Psychological and Emotional Care

Since then, psychiatrists, nurses, relaxation
therapists and other professional volunteers have been
helping the people of Otsuchi. Those who survived thedisaster have experienced the trauma of having lost loved

Nicocoro Project

ones, their homes, possessions and livelihoods, and also

Médecins du Monde (MdM), or Doctors of the World, isface an uncertain future living in shelters and temporary

an international humanitarian aid organization. With

housing. The resulting stress is unimaginable. In someheadquarters in Paris, it is an NGO that sends volunteer

cases, individuals who did not display any symptoms

medical and healthcare professionals to provide medical

immediately after the disaster began to recall events onceand health services to vulnerable populations around thethe situation had settled down somewhat. Such people

world, irrespective of their nationality, ethnicity, beliefs

may also suffer psychological and emotional distress foror religion.

a long time.

Since participating in the creative content side of

In addition to prescribing medication, professionals

the “Congophone” campaign—aimed at informing theworking under the Nicocoro Project have been focusing on

Japanese public about the situation in the Congo inteaching methods of self-relaxation, including breathing

2010—ADK has continued supporting MdM’s activities.

techniques and massage.

On March 11, 2011, the Great East Japan Earthquake

The project’s Web site contains information forstruck Japan. In early April 2011, MdM began working

survivors about the various services available, as wellin the town of Otsuchi in Iwate Prefecture. Medical

as messages from doctors and pointers on how to lookprofessionals working for MdM have been visiting

after themselves. At the same time, the Web site seeks

temporary shelters andboth volunteers and donations to keep the project’s

private homes to provide

activities going.

mainly psychological and

ADK’s contribution since the launch of the projectemotional care to survivors.

has included creating the Nicocoro logo, visual content

Named the “Nicocoro

and the Web site, as well as producing and sending out

Project,” ADK created a Webpress releases. As part of efforts to raise the profilesite established specificallyof the Nicocoro Project in Japan, ADK has placedfor MdM’s program. The

advertisements about the project in the Yomiuri, Mainichi

name “Nicocoro” combinesand other national newspapers.

11Topics 1
ADK supports reconstruction fromthe Great East Japan Earthquake and the Tsunami

Photo Collection from the Devastated Area

To provide support for communities

Photo Letter from Minami-Sanriku

ADK believes that Mr. Sato’s

devastated by the Great East Japanby Shinichi Sato is the collection

collection conveys hope for the

Earthquake and the tsunami, ADK

of photos taken by Mr. Sato since

future of his home town and its

published a collection of photos

immediately after the disaster.

irreplaceable citizens. Throughtaken by Shinichi Sato. Mr. Sato

Even though there are somecooperation from Mr. Sato andoperates a photography studioshocking photos portraying theother local citizens, ADK plansin Minami-Sanriku Town, Miyagi

tremendous impact of the tsunami

to continuously and periodicallyPrefecture, an area destroyed by(like those appearing in the press),publish a Photo Letter fromthe Great East Japan Earthquake.

the collection includes many

Minami-Sanriku by Shinichi Sato

Despite being a victim of thesnapshots of local people—photos

collection. We believe “continuity”

disaster himself, Mr. Sato continued

befitting the operator of the town

is an important aspect ofto photograph local scenes (disasterphoto studio. Accordingly, it is fullreconstruction, which will takevictims/areas) from immediatelyof warm-hearted images that could

some time. The second series isafter the earthquake until today.

only have been photographedscheduled for release in June 2012.

From every purchase of theby Mr. Sato. The photographs

photography collection, ¥300 isshow the true nature of the

donated as aid money to Minami-

townspeople instead of contrived

Sanriku Town. In addition, allimages. More than anything, thefurther profits are donated ascollection is filled with energy

aid money.

for reconstruction.

Photographer Profile
Born in 1966 in Minami-Sanriku Town, Motoyoshi
County, Miyagi Prefecture. Together with his parents,
operated a photography studio named “Sagara Studio”
in Minami-Sanriku Town. However, he lost both hishome and studio to the tsunami occurring after theGreat East Japan Earthquake on March 11, 2011. “Iwill take photos from the hardest of times. This way,
whatever happens in the future, we can all overcome

TopicsAuthor：Shinichi Sato
Format: B5 paper; 96 pages

together.” Using a single camera that he took before evacuating, beginning

Publication date: September 27, 2011

from immediately after the earthquake, he continues to photograph the

Publisher: ADK Minami-Sanriku Town

devastated town’s path to reconstruction.

12

Photo Letter from Minami- Sanriku
by Shinichi Sato

Reconstruction Support Project
Released by: NIHONBUNGEISHA Co., Ltd.

Topics 2
ADK 2011 Insight Forum——China & Asia

ADK Shares with ClientsIts Extensive Knowledge on Asia

On November 28, 2011, ADK held

Columbia Business School talked

the “ADK 2011 Insight Forum—on “Diversity and Change Among

China & Asia” at the Marunouchi

Consumers in Asia.” In addition

Building Hall in Tokyo. Someto individual speakers, there was

400 clients with an interesta panel discussion on survey

in markets in China and Asia

data from six Asian countries.

attended the forum. In addition,

The panelists, who were ADK

representatives from around 20

employees working in Asia,

media organizations, including

shared their insights and engaged

newspapers, television networks

in a lively exchange of opinions.

and industry magazines, covered

According to the results of athe event.

follow-up questionnaire, nearly

The purpose of the forum

90% of participants felt thatwas to pass on insights andoverall the forum had been

information from a consumer

useful. It was pleasing to learn

perspective that ADK has

that we succeeded in providing

amassed through its early

our clients with valuable insights

focus on China and other Asianon how to do business in Asia.

markets and establishing offices

A speaker addresses the audience

Professor Schmitt gives his presentation

As a dynamic advertisingin the region. The forum’s

agency, we regard the forum

program included addresses

not only as a one-off event

by guest speakers, as well as

but also as an opportunity to

executives from ADK’s regional

connect directly with clients andheadquarters in China and otherproactively create new business.

countries. Japanese economist

ADK will continue evolving

Eisuke Sakakibara spoke on theby boldly accepting new

topic “A New Future Outlook forchallenges that transcend the

China and Asia,” and Professor

conventional model.

Panel discussion

Bernd H. Schmitt of New York’s

A photo montage of the forum’s speakers

13Corporate Governance
1 Corporate Governancethe reinforcement of the supervisory function and themonitoring of business execution.
At fiscal year-end, ADK had 13 directors,* one of1

Corporate Governance Structure

ADK recognizes that enhancing management decisionmaking efficiency and reinforcing the management

whom had representative status, whereas 10 served as
operating officers.
*Thirteen directors were elected at the Ordinary General Meeting of
Shareholders held on March 29, 2012. Currently, two directors haverepresentative status, whereas seven serve as operating officers.

supervisory function constantly raises shareholder
value over the long term and ultimately enhances

The Board of Directors meets once a month, incompetitiveness. ADK also believes that corporate

principle, and more often as necessary. In fiscal 2011, thegovernance that functions effectively is essential for

Board met 23 times.

maximizing shareholder value.
Management has to reconcile the complex interests

With regard to the business execution andmanagement supervisory frameworks, ADK appointsof various stakeholders. As a publicly listed company,

operating officers from among its executive directors andimproving an environment that protects shareholder rights

employees. Operating officers are charged with businessand facilitates fair and equal dealings is vital for effective

execution related to broader decisions made by the

corporate governance. This is because the selection and

Board of Directors.

supervision of management and the authority of directors

The business execution organization is separated

to perform their management duties ultimately depend on

into Groups, Centers, Divisions and Departments, all

the confidence of shareholders—who provide the capital—

reporting to the president.

and because a listed company also seeks broad access

In February 2012, we established the Operating

to capital markets, which are made up of an unspecified

Executive Committee, which is chaired by the president.

number of investors.

The Committee is tasked with making decisions on

ADK bases its policy on corporate governance onthese principles.

matters delegated to it by the Board of Directors, andother specified matters. Corporate auditors attend Board
meetings, and the Committee’s deliberations concerning
resolution items are reported to the Board of Directors.

a. Organizational Framework

To ensure common recognition and transparency of

ADK adopts the corporate auditor system. We haveminutes are posted on the Company’s intranet.

important issues among employees, excerpts of meetingconcluded that this structure is superior from thestandpoint of efficient management decision making.
Under this structure, the Board of Directors, consistingb. Status of Establishment of Risk Management

primarily of internal directors, makes decisions flexibly

14

in a timely manner while sharing the abundance of

In May 2006, the Board of Directors passed a resolution

information at its disposal through the division ofconcerning “Basic Policies for Establishing an Internal

responsibilities for all of the Company’s activities among

Control System” (most recently revised on December 29,

the Directors.

2011) based on Japan’s Companies Act and decided toThree external directors were newly elected at

set up a group-wide internal control system headed by

the Ordinary General Meeting of Shareholders held

the Risk Management Committee, which is chaired byon March 29, 2012. The Company believes that close

the president. The risk management system serves ascooperation between outside directors, corporate“Regulations and Systems Relating to Risk Management”

auditors, internal auditors and directors responsible

and is consistent with the internal control systems as

for the Company’s internal control system facilitates

defined under Japan’s Companies Act.

Corporate Governance

The Risk Management Committee heads four

2 Internal Audits and Auditing by

subordinate organizations, each of which undertakes

Corporate Auditors

its own specific risk management. They are thea. Organization, Personnel and ProceduresCompliance Committee, the Information Security
Committee, the Business Continuity Committee and
the Process Owner Committee.

The Group Audit Office is responsible for conducting

The Compliance Committee is responsible forinternal audits. As of December 31, 2011, the office had acreating systems to prevent illegal acts and for operating

staff of eight.

ADK’s internal reporting system. The Information Security

ADK has four corporate auditors, three of whom are

Committee handles operation of the ADK Group’s entire

full-time. Three of the four corporate auditors are external,

information security management system to ensure proper

one of whom is an attorney. We maintain a robust systemmanagement of personal and other business information. Itsof corporate auditing by employing four or more corporatetasks include the acquisition of ISO27001 certification. The

auditors, three or more external auditors, and three orBusiness Continuity Committee sets up various procedures

more full-time corporate auditors, all of which exceed theaimed at ensuring the continuation of business during times

statutory minimum. Makoto Ichikawa, one of our corporateof emergency, such as major earthquakes, power stoppages

auditors, has a wealth of experience working in financial

or an epidemic of H1N1 influenza. The duty of the Process

institutions and possesses a high level of expertise

Owner Committee is to meet internal control reportingin financial affairs and accounting. Hiroshi Ota, also asystem requirements under the Financial Instruments andcorporate auditor, has a strong background working for

Exchange Law of Japan.
General Publicc. Status of the Establishmentof a System of Internal
Controls
ADK operates a group-wide internal

Corporate Governance

Shareholders
General Meeting of Shareholders

Elect

Elect

Elect
Board of Directors

Board ofCorporate Auditors
Audit

Corporate
Auditors

control system as stipulated under
the Companies Act. The Risk

Stakeholders Other Than Shareholders

Expectations

Directors

Representative
Directors
Executive Directors

Communicate

Accounting Auditors

ReportManagement Committee spearheads
the Company’s internal control
system. One of its subordinate

Consult

Operating Officers

Internal Control

Centers

Management Strategy Committee

Committee, specializes in setting up

Risk Management Committee

reporting system that maintains thereliability of financial reporting.

Appoint

Audit

bodies, the Process Ownerand maintaining an internal control

Supervise & Manage

Elect &
Supervise

Information Security Committee
Business Continuity Committee
Compliance Committee
Process Owner Committee

Supervise & Manage

Group Audit
Room

Divisions/Units

Audit

Supervise& Manage
Planning
Management
Rooms

Departments,
Branches &Branch Offices
MonitorAccount Service
Operation Support
Departments

MonitorBusiness Execution Organization

Corporate Social Responsibility (CSR)

Business Execution Monitoring, Internal Control and Risk Management Framework
Note:
The Group’s system of internal controls is divided into three areas for monitoring purposes, each of which isoverseen by a particular office or department. The Group Audit Office monitors the Group’s overall businessexecution framework, the Account Service Operation Support Department monitors the organization attachedto the Integrated Account Service Management Center, and the Planning Management Office monitors theorganization attached to the Media Buying and Staff Center.

15

securities companies, and he too possesses a high level ofexpertise in financial affairs and accounting.
In fiscal 2011, the Board of Directors met on 23
occasions. Full-time corporate auditors Yoshiro Sakai and
Makoto Ichikawa attended all of these meetings, whereas

3 External Directors and External

Corporate Auditors

a. System, Function and Roles of External
Directors and External Corporate Auditors

Hiroshi Ota attended all 16 Board of Directors meetings held
after his appointment in fiscal 2011. Part-time corporate

As of March 30, 2012, ADK had three external directors andauditor Masayuki Yoshinari attended 14 of the 16 Board

three external corporate auditors. All six are independent

meetings held after his appointment in fiscal 2011.

officers, that is, no conflicts of interest exist between any

In fiscal 2011, the Board of Corporate Auditors metof these officers and general shareholders. The Company

12 times. Mr. Sakai and Mr. Ichikawa attended all of thesehas notified the Tokyo Stock Exchange of these external

meetings, and Mr. Ota and Mr. Yoshinari attended all nine

officers. Two of the three external corporate auditors aremeetings held after their appointments.

full-time auditors, and as such attend meetings of the

One support staff member is assigned to assist

Executive Board and Board of Directors and other importantthe corporate auditors with their duties. As a means ofmeetings. They routinely monitor business execution andreinforcing independence from directors, the approval ofparticipate in discussions at these meetings as necessary

the corporate auditors is obtained beforehand concerning

to ensure the appropriateness of decisionmaking.

the support staff member’s performance review,

In accordance with Article 427, Paragraph 1, of

personnel transfer and the determination of applicable

the Companies Act of Japan, ADK has concluded limited

rewards and penalties.

liability agreements with each external director andexternal corporate auditor that limit their liability under
Article 423, Paragraph 1, of the Act. This limitation ofb. Coordination Between Internal Auditors,
Corporate Auditors and Accounting Auditors

liability applies if the external directors and external
corporate auditors perform their duties in good faithand without gross negligence.

The Group Audit Office submits audit reports to thepresident and the corporate auditors. Attendance atmeetings of the Board of Corporate Auditors by Group
Audit Office employees ensures coordination between
internal auditing and auditing by the corporate auditors.
To promote close cooperation between corporate
auditors, in addition to official Board of Corporate Auditors

b. Personal Relationships, Capital
Relationships, Business Relationships or
Other Relationships of Interest Between
the Company and the Company’s External
Corporate Auditors

meetings, both full-time and part-time corporate auditors
discuss important matters at meetings held after Board

No conflicts of interest exist between ADK and any of itsof Directors’ meetings. Furthermore, accounting auditors

external directors or external corporate auditors.

from Ernst & Young ShinNihon LLC, which is contracted
to audit ADK’s accounts, are required to attend meetingsof the Board of Corporate Auditors. At these meetings,
the accounting auditors submit reports and brief thecorporate auditors on items including the annual audit of
the Company’s accounts and the auditing system of Ernst& Young ShinNihon LLC.

16

Corporate Governance4 Executive Remunerationa. Total Executive Remuneration, Total per Type of Executive Remuneration and Number of
Eligible Executives
Position

Total
remuneration(Millions of Yen)

Directors(excludes external directors)

Total per type of remuneration (Millions of Yen)
Fixed
remuneration

BonusesNumber of
eligible
persons

Retirement
benefits

309

301

—

7

14

Corporate auditors(excludes external corporate auditors)

16

16

—

—

1

External executives

34

34

—

—

5

Notes:
1. Bonuses were not paid in fiscal 2011.
2. The above remuneration includes that paid to two directors who retired upon the conclusion of the Company’s 56th Ordinary General Meeting of Shareholders heldon March 30, 2012. One of the Company’s 13 directors as of the end of fiscal 2011 serves without compensation and therefore is not included in the table above.
3. The amount of retirement benefits is the portion for services rendered during fiscal 2011 that will be included in the retirement benefit to be paid to each director
upon his retirement.

b. Total Performance-Linked Remuneration

The Company determines specific levels of
remuneration by referring to corresponding data on a group

No executives were paid performance-linked remunerationof companies in the non-manufacturing sector that achieves

in an amount exceeding ¥100 million during fiscal 2011.

a similar level of net sales as the Company and its peers.

c. Summary of Policies Concerning
Determination of Directors’ Total
Remuneration

i. Fixed Remuneration
The Company passed a resolution at the 56th Ordinary
General Meeting of Shareholders held on March 30, 2011,
to limit directors’ fixed annual remuneration to an amount

Directors charged with business execution receive “fixed

not exceeding ¥500 million. Previously, the Company

remuneration” and “performance-linked remuneration”

had passed a resolution at the Extraordinary Generaldetermined according to the functions they perform.

Meeting of Shareholders held on November 20, 1998,

External directors, directors and corporate auditors

to limit corporate auditors’ fixed monthly remuneration

not charged with business execution receive fixed

to an amount not exceeding ¥10 million monthly. Fixed

remuneration only.

remuneration for directors is made up of the conventional

The Company offers both long-term and short-term“basic remuneration,” plus “in-house share purchase funds”

incentives to directors charged with business execution infor purchasing shares via the directors’ shareholding

the form of performance-linked remuneration. It consists

association. However, “in-house share purchase funds”

of “bonuses” that are linked to short-term performance andare paid only to full-time directors.

“stock options” that are linked to long-term performance.
Because the Company does not treat directors as

ii. Bonuses

employees, it does not pay separate salaries to directors.

The Company passed a resolution at the 57th Ordinary

The Company has abolished the system of granting ofGeneral Meeting of Shareholders held on March 29, 2012,

retirement benefits to retiring directors and corporate

to grant directors (excluding external directors) bonuses

auditors. It terminated the granting of retirement benefits

separate from the aforementioned fixed remuneration

to corporate auditors as of the close of the 52nd Ordinarythat are commensurate with the consolidated operating

General Meeting of Shareholders held on March 28, 2007,

income recorded each business year in an amount not

and terminated the granting of retirement benefits toexceeding ¥150 million annually. The Company does

directors as of the close of the 56th Ordinary General

not grant bonuses when annual consolidated operating

Meeting of Shareholders held on March 30, 2011.

income does not reach the targeted amount. When thetargeted amount has been achieved, the Company grants

17

bonuses amounting to 20% –40% of base remuneration,
which is fixed remuneration. (However, this excludes any
funds for acquiring treasury stock through the directors’shareholding association.)assisted with the audit are provided below.
Certified Public Accountants(Account Auditors)
Designated employeewith limited liability

Mitsuo Sakamoto

Designated employeewith limited liability

Kazuki Hayashi

iii. Stock Options
The Company passed a resolution at the 57th Ordinary
General Meeting of Shareholders held on March 29, 2012,
to grant directors (excluding external directors) stock

Company

Ernst & Young
ShinNihon LLC

Persons who assisted the auditing of accounts

acquisition rights separate from the aforementioned

consisted of 16 Certified Public Accountants and seven

fixed remuneration and the aforementioned bonuses,

other persons.

not to exceed ¥100 million annually. The amount ofsuch stock acquisition rights shall be equivalent toYasumori Audit Corporation retired from theapproximately 30% of the basic remuneration portion of

position of the Company’s independent auditor on the

fixed remuneration (excludes in-house share purchaseexpiration of its contract as of the close of the 56th

funds for purchasing shares

Ordinary General Meeting of Shareholders held on Marchvia the directors’ shareholding association).

30, 2011. At the same meeting of shareholders, theThe exercise price of such stock acquisition rights
shall be ¥1.00 per share. The number of share acquisition

Company newly appointed Ernst & Young ShinNihon LLC
as its independent auditor.

rights to be exercised fluctuates within a range from 0%
to 100% of the total number of stock acquisition rights
allocated according to the Total Shareholder Return results

6 Number of Directors(i.e. , the sum of the difference between the average stock

The Company’s Articles of Incorporation specify aprice on the Tokyo Stock Exchange in the three months

minimum of three directors. There is no maximum number(excluding non-trading dates) immediately preceding theof directors. The Company appoints directors to a term ofallotment date and the average stock price on the Tokyo

one year, which increases opportunities for shareholders

Stock Exchange in the three months (excluding non-to test the mandate of directors.

trading dates) immediately preceding the first date of theexercise period and the dividend per share for the period
from the allotment date to the first date of the exercise
period, divided by the average stock price on the Tokyo

7 Change to Resolutions on the

Appointment of Directors

Stock Exchange in the three months (excluding non-trading

Under the Articles of Incorporation, a resolution for

dates) immediately preceding the allotment date) from theappointing a director shall be adopted by a majority

allotment date to the first date of the exercise period.

of votes upon the participation of one-third or more ofshareholders with exercisable voting rights. The purpose

5 Accounting Auditors
In accordance with the Companies Act and the Financial
Instruments and Exchange Law, the Company has aof this reduction in the quorum is to facilitate smooth
general meetings of shareholders.
The appointment of a director shall not be
determined by cumulative voting.

contractual agreement with Ernst & Young ShinNihon
LLC to serve as its accounting auditor. Furthermore, no
special interests exist between any managing partnersof said audit organization engaged in the auditing of theCompany’s accounts and the Company.
Details of the independent account auditors who

8 Delegation of Authority to the Board of

Directors

Under the Articles of Incorporation, items covered in
Article 459, Paragraph 1, of the Companies Act, su ch

audited the Company’s fiscal 2011 accounts, the nameas distribution of surplus and purchase of treasuryof their accounting firm and the number of persons who

stock, shall, except as otherwise provided for in laws or
regulations, be determined by resolution of the Board of18

Corporate GovernanceDirectors, and not by resolution of a general meeting ofshareholders. The Board has been delegated authority

9 Change to Requirements for Special

Resolutions at General Shareholder
Meetings

to distribute surplus funds in order to facilitate flexible
profit distribution and acquisition of treasury stock inline with the Company’s policy that positions shareholder

Under the Articles of Incorporation, resolutions covered

return as a high management priority. Furthermore, thisin Article 309, Paragraph 2, of the Companies Act shallauthority is not granted to general shareholder meetings

be adopted by a majority exceeding two-thirds of

to avoid excessive returns and procedural confusion due

votes upon the participation of one-third or more ofto the duplication of the Board of Directors’ policy onshareholders with exercisable voting rights. The purpose

shareholder return and the policy on returns reflected inof this reduction in the quorum is to facilitate smoothshareholder proposals.

general meetings of shareholders.

2 Auditor Remuneration
1

Remuneration of Certified Public Accountants
Fiscal 2010

Fiscal 2011

Remuneration for audit
certification work
ADK
Affiliates
Total(Millions of Yen)

Remuneration for
non-auditing work

110

Remuneration for audit
certification work—

Remuneration for
non-auditing work

110

—

—

—

—

—

110

—

110

—

Note:
In the previous fiscal year, the Company had a contract with Yasumori Audit Corporation. In the year under review, the Company had a contract with Ernst & Young
ShinNihon LLC.

2 Other Important Remuneration
Fiscal 2010 (January 1–December 31, 2010)
Not applicable

4 Policy on Determining Audit

Remuneration

Decisions regarding remuneration for auditing work
conducted by accounting auditors shall be determined upon

Fiscal 2011 (January 1–December 31, 2011)

obtaining the approval of the Board of Corporate Auditors

Certain consolidated overseas affiliates paid remuneration

pursuant to Article 399 of the Companies Act following

in the amount of ¥2 million for authorized audit certification

discussion that takes into consideration the appropriatenesswork by audit offices belonging to the network of Ernst &of the number of audit hours based on the details of anYoung ShinNihon LLC, which the Company contracts foraudit plan submitted by the accounting auditors.

auditing services by Certified Public Accountants.

3 Non-Auditing Work Conducted by

Certified Public Accountants

Fiscal 2010 (January 1–December 31, 2010)
Not applicable
Fiscal 2011 (January 1–December 31, 2011)
Not applicable

19

Board of Directors and Auditors
as of March 29, 2012

[From front left] Kazuhiro Narimatsu, Koichiro Naganuma, Yoji Shimizu, Shinichi Ueno
[From back left] Hiroshi Nomiyama, Takeshi Kato, Hideaki Kido, Hiroaki Ohbayashi, Stuart Neish,
Mochio Umeda, Hiroaki Onohara, Yoshiki Uemura, Hiroshi Nakazato

Koichiro Naganuma

Yoji Shimizu

Representative Director,
Chairman of the Board

Representative Director,
President & Group CEO

Kazuhiko Narimatsu

Shinichi Ueno

Yoshiki Uemura

Executive Director, Senior Operating Officer
Account Service Management

Executive Director, Senior Operating Officer
Integrated Solution Center

Executive Director, Operating Officer
Network Service and Procurement Management

Hiroshi Nakazato

Hiroaki Onohara

Hiroshi Nomiyama

Executive Director, Operating Officer
Business Development and Integrated Solution
CenterExecutive Director, Operating Officer
Media & Content Center

Executive Director, Operating Officer
Account Service Management

Takeshi Kato

Stuart Neish

Executive Director, Operating Officer
Corporate Management and Planning Center

Non-Executive Director
Regional Director, WPP Asia Pacific

Hiroshi Ohbayashi

Hideaki Kido

Mochio Umeda

Outside Director

Outside Director

Outside Director

Yoshiro Sakai

Hiroshi Ota

Makoto Ichikawa

Auditor (Full-time)

Auditor (Full-time)

Auditor (Full-time)

Masayuki Yoshinari
Auditor20

Board of Directors and Auditors

Financial Section
Management’s Discussion and Analysis ................................22
Forward-Looking Statements and Risk Factors .................30
Consolidated Balance Sheets .....................................................34
Consolidated Statements of Income .......................................36
Consolidated Statements of Changes in Net Assets ......... 37
Consolidated Statements of Cash Flows ...............................40
Notes to Consolidated Financial Statements .......................41
Report of Independent Auditors .............................................. 65

Management’s Discussion and Analysis

Fiscal 2011 Consolidated Performance Highlights
Gross Billings Up 0.2% to ¥347.1 billion
Gross Profit Up 9.1% to ¥45.8 billion
Gross Margin Improved to 13.2%
Operating Income Up Significantly to ¥3.8 billion
Returned to Profitability: Net Income of ¥2.2 billion; Net Income per Share of ¥54.37

ADK Group Overview
In fiscal 2011, mainly due to the Great East Japan
Earthquake and the European sovereign debt crisis, Japan

2011 Advertising Expenditures in Japan(Millions of Yen, %)600,000

Total Sales
Year- on-Year Change

experienced severe economic conditions throughout
the year. Toward the end of 2010, the economy seemed

50%

500,000

40%

400,000

30%

300,000

20%

200,000

10%

100,000

0%

to be coming out of a leveling-off phase, but later
sharply declined due to the disruptions of the supply
chain and the restrictions posed on the electric power
supply following the Great East Japan Earthquake andthe damages at the nuclear power plants. Mid year, thecountry’s economy recovered from the slump thanks to
the rapid recovery of the supply chain and the improving
world economy. However, the pace of the recovery of theworld economy slowed as the severity of the sovereign
debt crisis in Europe increased, and in summer andthenceforth, partly due to the sharp appreciation of the
yen and the flooding in Thailand, the pace of recovery0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Nov Dec-10%Preliminary Report on the Current Survey of Selected Service Industries:
Research and Statistics Department, Minister's Secretariat, Ministry of
Economy, Trade and Industryof the Japanese economy slackened.
Dentsu estimated total advertising expenditures inAmid these circumstances, the ADK Group

2011 as ¥5.7 trillion, down 2.3% from the previous year.

provided communication programs giving priority to the

According to the Current Survey of Selected Service

maximization of the return on investment (ROI) of theIndustries by the Ministry of Economy, Trade and Industry

advertisers. The Group also worked proactively to develop(METI), total sales in the advertising industry increased

its business in the newly emerging nations and China

year on year in August and September consecutively,

and in the animation content business. Consequently, theshowing signs of recovery. However, they fell in OctoberGroup achieved sales that were a little higher than theand November, and were again lower year on year. In

previous year. The Group also achieved a certain extent

December, they showed a 10.1% increase but it seems thatof recovery in income from the previous year by strictly

the instability will continue.

managing the cost of sales and reducing selling, generaland administrative expenses.

22Management’s Discussion and Analysis

Consolidated Performance
Gross Billings

Other Income and Expenses

Gross billings totaled ¥347,112 million, an increase of

Dividend income was ¥1,194 million, and the equity in

0.2% compared with fiscal 2010, thanks to increased sales

earnings of affiliates was ¥184 million.

of subsidiaries in the advertising business in Japan, as

The Group posted a ¥1,862 million gain on sales ofwell as in Greater China and Southeast Asia. The parent

securities including a ¥1,242 million profit from the salecompany ADK recorded a decline in sales partly becauseof Digital Advertising Consortium Inc. shares. The loss onof damage from the Great East Japan Earthquake and thevaluation of securities was ¥1,279 million.

shortage of electric power caused by the accident at the
Fukushima nuclear power station. (For more details of
non-consolidated performance, please see page 25.)

Net Income
As a result, income before income taxes and minority
interests totaled ¥5,028 million compared with a ¥4,749

Gross Profit

million loss for fiscal 2010. The Group reported net income

Gross profit increased 9.1% year on year to ¥45,836

of ¥2,294 million compared with a ¥4,656 million loss formillion. The gross margin improved 1.1 percentage points

fiscal 2010.

to 13.2%, mainly because of a significant improvementof ADK’s profitability, from 10.0% in fiscal 2010 to 11.0%
in fiscal 2011, with rigorous control of cost of sales. Also,

Appropriation of Earnings

the Group improved its profitability by utilizing morePursuant to Article 459-1 of the New Corporate Law inof the in-house operational resources within the groupJapan, ADK’s Articles of Incorporation include a provisioncompanies.

allowing the Board of Directors to determine distributionof earnings and other matters. In exercising this authority,
the Board follows the policies outlined below.

Operating Income

We believe that returning profits to shareholders

Operating income was ¥3,853 million, an increase fromis one of the ADK Group’s most important management¥22 million in fiscal 2010. SG&A expenses decreased

priorities. Our policy is to maximize our total corporate

0.1% due to an effort to control both staff cost and othervalue by maintaining a balance between (a) short- andexpenses at ADK, the parent company. The staff cost of

long-term shareholder return based on cash dividends

subsidiaries increased because ADK International Inc.

and share buybacks and (b) the retention of earnings

merged a smaller advertising company, and subsidiaries

required for business investments based on medium-in promising market areas such as Shanghai increased theand long-term management strategies.

number of their staff.

QUARTERLY FINANCIAL HIGHLIGHTS(Millions of Yen)

1st Quarter
January 1, 2011 –March 31, 2011
Gross billings

2nd Quarter
April 1, 2011 –June 30, 2011

3rd Quarter

4th Quarter

July 1, 2011 –October 1, 2011–
September 30, 2011 December 31, 201185,38180,25684,356

97,117

Income before income taxes andminority interests

293

1,600

1,668

1,465

Net income

170

705

440

977

23

In determining the amount of cash dividends, weof September 30, 2011. In addition to the two standard

have set a policy calling for 35% of Group consolidated

record dates (September 30 and March 31), the Board of

net income to be distributed annually as dividends. At the

Directors, at its meeting on October 13, 2011, decided tosame time, we emphasize long-term distribution stability

set a temporary record date of October 12, 2011, and payon the condition that the annual cash dividend will be aan extraordinary additional dividend of ¥89.00 per share.

minimum of ¥20.00 per share, in principle. For the time

This brought the annual cash dividend for the year tobeing, we will pay dividends on a semiannual basis. In¥109.00 per share.

principle, therefore, we aim to pay an interim dividend of

The Company also focuses on buying back shares,¥10.00 per share and a year-end dividend of ¥10.00, orin addition to increasing net income, as a means ofachieve a total payout ratio of 35%—whichever is higher.

accelerating improvements of return on equity (ROE).

Based on the aforementioned policy, ADK announced

In implementing such buybacks, we consider marketa ¥10.00 year-end dividend at its Board of Directors

conditions surrounding the Group, consolidated earnings

meeting held on February 22, 2012, with the disbursement

power and financial stability, and we make sure there isdate set at March 21, 2012. We previously paid an

no impediment to our growth strategies.

interim dividend of ¥10.00 for shareholders of record as

Balance Sheets and Cash Flows
Assets and Liabilities

Cash Flows

During fiscal 2011, the balance of total assets decreased

At the end of fiscal 2011, cash and cash equivalentsby ¥10,322 million to ¥184,188 million due to a decreaseamounted to ¥26,519 million, an increase of ¥7,392 million

in investment securities, reflecting a decline in market

from the previous fiscal year-end because the cash inflow

value. The total of current and long-term liabilitiesof operating and investing activities surpassed cash

decreased by ¥3,954 million to ¥87,388 million due

outflow for financing activities by ¥7,793 million.

to a decrease in deferred tax liabilities, reflecting the

Net cash provided by operating activities wasaforementioned decline in market value of investment¥8,957 million compared with ¥221 million used insecurities. Net assets decreased by ¥6,368 million to

fiscal 2010, whereas the decrease in notes and accounts¥96,800 million, with a 52.0% book to net assets ratio,

receivable and the increase in notes and accounts payable

down 0.5 percentage point from a year earlier.

were ¥3,536 million and ¥3,099 million, respectively.
Net cash of ¥3,780 million was provided byinvesting activities compared with ¥2,298 million

Free Cash Flow

(Millions of Yen)

2011

2010

Net cash provided byoperating activities¥8,957¥ (221)Business reinvestment*(1,895)(642)

Free cash flow

7,062

(864)

*Business reinvestment = Purchase of property and equipment +Purchase of intangible assets – Sales of property and equipment

24

Management’s Discussion and Analysis

provided in fiscal 2010 due to proceeds from salesof securities.
Net cash used for financing activities was ¥4,944
million compared with ¥1,266 million used in fiscal 2010,
mainly for dividends paid to shareholders of ¥4,600
million, including extra dividends.

Capital Expenditures(Millions of Yen)

2011
Capital expenditures
Buildings¥

2010
Depreciation

78

Capital expenditures

¥184

¥

Depreciation

49

¥125

Building improvements

—

0

—

1

Vehicles

17

22

27

28

Furniture, fixtures and equipment

255

176

107

148

—

—

—

—

Land
LicensesComputer software

—

—

—

—

1,570

456

501

459

23

119

460

41

Lease assets
Others
Total

—

16

—

12

¥1,945¥975¥1,146¥818

Segment Information
Advertising Business

ADK recorded an increase in gross billings fromclients in the Beverages/Tobacco and Pharmaceuticals

The Group’s advertising business segment generated gross& Medical Supplies sectors. However, gross billings

billings of ¥340,082 million, registering 0.2% year-on-yearfrom clients in the sectors of Distribution/Retail,growth, whereas segment profit (operating income) grewTransportation/Leisure and Foods, etc., decreased.

significantly, from ¥49 million in fiscal 2010 to ¥3,859
million in fiscal 2011.
The subsidiaries in Japan and overseas increased

Broken down by business discipline, TV advertising,Radio advertising and Creative and Others grew year on

gross billings, however, ADK slightly decreased grossyear, but in other divisions, income was down from fiscalbillings. ADK and its subsidiaries in Japan and overseas

2010.

all increased their profit.
Non-Consolidated Performance Summary

Non-Consolidated Performance Information
The parent company, ADK, which is the core of theGroup, reported gross billings of ¥301,878 million, down
1.3% from fiscal 2010. ADK continued to devote itself
to measures aiming at the improvement of profitability
such as strict cost control of sales cost. As a result, gross(Millions of Yen)

2011

2010

ChangeGross billings¥301,878¥305,759-1.3%

Gross profit

33,15630,7138.0%

Operating income

1,734(1,674)—

Net income

2,302(2,112)—

profit was ¥33,156 million, up 8.0% year on year. Dueto the continuous effort to control selling, general andadministrative expenses, operating income was ¥1,734
million compared with a ¥1,674 million operating loss
for fiscal 2010.

25

Non-Consolidated Gross Billings Breakdown by Client Industry
Share of
total

2011
Energy/Raw Materials/Machinery¥(Millions of Yen)

5,027

1.6%

Food

31,73911.0%

Beverages/Tobacco Products

23,034

5.8%

Pharmaceuticals/Medical Supplies

15,687

4.2%

2010
¥

Share oftotal

Year-on-YearchangeChange

4,976

1.4%

50

1.0%

33,602

10.5%¥(1,862)-5.5%

17,653

7.1%

5,380

30.5%

12,728

4.4%

2,958

23.2%
-4.9%

Cosmetics/Toiletry Goods

33,038

11.4%

34,746

11.7%(1,707)

Apparel/Jewelry

8,766

2.9%

8,670

2.8%

95

1.1%

Precision Instruments/Office Equipment

2,037

0.7%

2,265

0.7%

(228)

-10.1%

Electric Machines/AV Equipment

3,667

1.2%

3,270

1.1%

397

12.1%

Automobiles/Auto-Related Products

15,4185.1%

15,857

5.2%

(438)

-2.8%

Household Products

3,193

1.1%

3,464

1.1%

(271)

-7.8%

20,9977.0%

19,969

6.5%

1,027

5.1%

Real Estate/Housing

8,555

2.8%

7,772

2.5%

783

10.1%

Publications

2,668

0.9%

3,563

1.2%

(894)

-25.1%

Information/Communications

35,725

11.8%

38,557

12.6%(2,831)-7.3%

Distribution/Retail21,3307.1%

24,846

8.1%(3,516)-14.2%

Finance/Insurance

25,912

8.6%

24,393

8.0%

1,519

6.2%

Transportation/Leisure

10,6203.5%

11,957

3.9%(1,336)-11.2%

Restaurants/Other Services

6,728

2.2%

6,464

2.1%

264

4.1%

Government/Organizations

9,561

3.2%

12,1204.0%(2,559)-21.1%

Education/Healthcare Services/Religion

5,679

1.9%

4,931

1.6%

748

15.2%

Classified Ads/Other

12,486

4.1%

13,946

4.6%(1,460)-10.5%¥301,878

100.0%¥305,759

100.0%¥ (3,881)-1.3%

Hobbies/Sporting Goods

Total

Non-Consolidated Performance by Discipline
Creative and Others

Newspaper

MarketingandPromotion(Millions of Yen)

Magazine

Breakdown by Discipline
Magazine

TOTAL¥301,878
million(100%)MediaTV

OOH Media
Digital Media
Radio
Notes:
1. Because we offer cross-media programs, data may not represent grossbillings by medium.
2. TV includes Program, Spot and Content.
3. Digital Media includes Internet and Mobile-Related Media.
Digital Solutions, such as Web Site Creation and System Development, areincluded in “Marketing and Promotion.”
4. OOH (Out-of-Home) Media includes transportation and outdoor advertisingand insertions.
5. Marketing and Promotion includes Marketing, Communication Planning,
Promotion, Events, PR, Exposition Events and Digital Solutions, etc.

26

Management’s Discussion and Analysis

Year-onYearchange¥ 13,599

4.5%-12.7%

20,371

6.8%

-3.9%

TV

145,178

48.1%

0.2%
12.2%

Radio

3,215

1.1%

Digital Media

8,276

2.7%

-7.1%

OOH Media

8,525

2.8%

-2.1%

199,166

66.0%

-1.5%

53,772

17.8%

-8.4%

48,938

16.2%

9.0%

102,711

34.0%

-0.9%

¥301,878

100.0%-1.3%

MarketingandNon-Media Promotion
Creative andOthers
Total

Composition

Newspaper

Subtotal

SubtotalGrossbillings

Magazine

Television

According to the Preliminary Report on the Current

Total sales of television advertising in Japan were almost

Survey of Selected Service Industries announced byunchanged from the previous year, with a 0.6% decline.

METI, total sales of magazine advertising in Japandeclined 7.4%.

ADK’s gross billings from television advertising
increased 0.2% year on year to ¥145,178 million.

ADK’s gross billings from magazine advertising

Program TV advertising sales increased 1.7% thanks

were ¥13,599 million, a 12.7% year-on-year decline,

to larger gross billings from clients in the Cosmetics/

due to tighter budgets at many clients especially thoseToiletry, Finance/Insurance and Hobbies/Sporting Goodsin the Hobbies/Sporting Goods, Beverages/Tobacco

sectors, although the company reported a decrease

and Information/Communications sectors, although

due to smaller business with clients in the Information/

gross billings from clients in the Education/Healthcare

Communications and Food sectors. Spot TV advertisingServices/Religion and Household Products sectors grew.

sales decreased 2.2% due to smaller business withclients in the Information/Communications andMagazine
Millions of Yen

Share of
Gross Billings(Non-consolidated)

4.5%

11

Cosmetics/Toiletry sectors, even though business withclients in the Pharmaceuticals/Medical Supplies andBeverages/Tobacco sectors grew. We promoted salesof our animation content business by developing digital
animation distribution sites on PCs and mobile phones,

10

investment in new characters and active use of popular
0

5,000

10,00015,00020,00025,000characters.
TelevisionNewspaper

Millions of Yen

Total sales of newspaper advertising in Japan

Share of
Gross Billings(Non-consolidated)

48.1%

11

declined 7.2%.
ADK’s gross billings from newspaper

10

advertising suffered a decline with smaller gross0billings of clients in the Finance/Insurance and50,000100,000

150,000

200,000

Automobile/Auto-Related Products sectors, although
we handled larger gross billings of clients in the
Government/Organizations, Transportation/Leisure

Gross Billings from Television Ads (Breakdown by Category)(Millions of Yen)

and Distribution/Retail sectors. As a result, gross2011

billings for newspaper ads were ¥20,371 million,
Time (program-sponsored ad)a 3.9% year-on-year decline.

Spot
Newspaper
Millions of Yen

Share of
Gross Billings(Non-consolidated)

Content-related sales
Total

2010

¥ 54,475 ¥ 53,590

Change1.7%

78,314

80,104-2.2%

12,388

11,186

10.7%¥145,178 ¥144,882

0.2%

3.9%
11
10
0

5,000 10,000 15,000 20,000 25,000 30,000 35,000

27RadioOut-of-Home Media

Total sales of radio advertising in Japan declined 3.7%.
ADK’s gross billings from advertising on radio

This category includes outdoor advertising such as
billboards, traffic advertising and inserts. Japan’s total

increased to ¥3,215 million, for year-on-year growthsales of outdoor advertising increased 8.3% and trafficof 12.2%, thanks to larger business with clients in suchads decreased 3.3%, whereas inserts and direct mailsectors as Financial/Insurance and Beverages/Tobacco,increased 0.3%.

even with smaller business with clients in the Energy/
Materials/Machinery and Food sectors.

ADK’s gross billings from advertising on out-ofhome media were ¥8,525 million, or a 2.1% year-on-year
decrease, due to a decline in business with clients in theRadio
Millions of Yen

11

Share of
Gross Billings

Automobile/Auto-Related Products, and Transportation/(Non-consolidated)

Leisure sectors, although we grew business with clients

1.1%

in sectors such as Beverages/Tobacco, Pharmaceuticals/
Medical Supplies, etc., by offering our cross-media
approach and the development of in-store media.

10
0

1,000

2,000

3,000

4,000

Out-of-Home MediaMillions of Yen

Share of
Gross Billings(Non-consolidated)

2.8%

Digital Media

11

Total sales of Internet advertising in Japan increased 11.8%.
ADK established ADK Digital Communications Inc.

10

in August with an aim to increase sales and improve the

0

2,000

6,000

10,00014,000Group’s profitability. But it began its services in October,
therefore advertising in the digital media business did
not grow enough in the year under review. The grossbillings from advertisement on digital media including
mobile were ¥8,276 million, a year-on-year decreaseof 7.1%, due to a decline in business with clients in the
Information/Communications, Hobbies/Sporting Goods
and Automobiles/Auto-Related Products sectors althoughbusiness with clients in the Cosmetics/Toiletry Goods andFood sectors grew.

Marketing and Promotion
According to the aforementioned survey of METI, thetotal sales of sales promotion, PR and event planning inJapan decreased 3.3% in 2011. ADK’s gross billings fromthe marketing and promotion business decreased to¥53,772 million a decrease of or 8.4% year on year due
to smaller business with clients in the Distribution/Retailand Government/Organizations sectors, although wegrew business with clients in sectors such as Beverages/

Digital MediaMillions of Yen

Share of
Gross Billings(Non-consolidated)

2.7%
11
10

Tobacco and Finance/Insurance by offering integrated
communications services taking advantages of onsite
merchandising and digital solutions to better respond toclient demands.
Marketing and Promotion

0

3,000

6,000

9,000

12,00015,000Millions of Yen

100

Management’s Discussion and Analysis(Non-consolidated)

17.8%

11

28

Share of
Gross Billings

20,00040,00060,00080,000Creative and Others

Other Business

ADK’s gross billings of creative and others increased
to ¥48,938 million, or 9.0% year on year. Sales of

Subsidiaries in the publishing business segment reported

creative increased 10.7%, thanks to larger business with

¥7,029 million in sales, a 1.5% year-on-year decline, andclients in sectors such as Information/Communications,continued to report a segment loss of ¥8 million compared

Beverages/Tobacco, Pharmaceuticals/Medical Supplies

with a segment loss of ¥24 million in fiscal 2010.

and Food.
Creative and Others
Millions of Yen

Share of
Gross Billings

Overseas Sales(Non-consolidated)

16.2%
11

The ADK Group obtained 7.4% of its gross billings fromabroad compared with 6.8% in fiscal 2010. All overseas
sales are in the advertising business.

10
0

10,000 20,000 30,000 40,000 50,000 60,000

Outlook for Fiscal 2012
In the Japanese economy, owing to continuing strong

In such a slow growth environment, ADK forecasts

demand for post-earthquake projects and the effects

consolidated performance for fiscal 2012, of gross billingsof various governmental policies, the trend toward aof ¥352 billion, ¥3.9 billion in operating income, ¥5.4

gradual recovery is expected to continue. However,billion in ordinary income and ¥3 billion in net income.

it is also anticipated that considerable uncertainty

EPS for the year is forecast at ¥71.07.

over the future economy will continue due to several
concerns, such as the shortage of electric power

On a nonconsolidated basis, the forecasts for fiscal 2012supply, the strong yen and the European sovereignare ¥306 billion in gross billings, ¥2.0 billion in operatingdebt crisis.

income, ¥3.4 billion in ordinary income and ¥1.7 billion in
net income. EPS for the year is forecast at ¥40.27.

29

Forward-Looking Statements and Risk Factors
This report may contain forward-looking statements based

traditional and digital media. However, if ADK fails to adapt

on ADK management’s view and assumptions of future

to changes in the advertising media, its performance anddevelopments as of the date of such statements. The

financial condition could be adversely affected.

foregoing statements herein are inherently subject to risks,
including, but not limited to, those shown below (underTokyo Stock Exchange guidance) and uncertainties that

Risks Arising from Trading Customs

could lead to material differences between such statements
and actual outcomes. Therefore, ADK does not warrant

1 Relationship with Advertisers

any certainty and accuracy thereto. ADK also expressly

In Japan, traditionally advertisers do not strictly require an

disclaims any obligation to update or revise its forward-

exclusive relationship with their agencies, which may havelooking statements.

business with competitors. However, there is no assurance
that this practice will continue in the future. In the eventthat ADK fails to adapt to such changes in the advertising

Domestic Economy

market, its performance and financial condition could be
adversely affected.

In fiscal 2011, the Group generated 92.6% of its gross billings
from the Japanese domestic market. Japanese national

Advertising companies in Japan do not always haveadvertising spending is directly influenced by corporate

documented contracts with media and clients, so as toadvertisers’ budgets and therefore is closely correlated withmaximize their flexibility to adapt to sudden changes.

nominal consumer spending and GDP. In the event that the

However, ADK works to ensure that it has written contracts

domestic economy deteriorates seriously, the ADK G roup’s

with more media and more clients. When this is the rule,

performance and financial condition could be negatively

not the exception, the Company believes accountability

affected.

by both parties will minimize disputes. Until that time,
however, there remains the possibility of disputes withthe media and clients.

Response to Diversification and Digitalizationof Media and Changing Consumers’ Media
Consumption

An advertising agency buys media time or space andmaterials on behalf of its clients on its own account.
Sometimes a purchase is made through another agency.

Advertising media continue to diversify with the advent of

Therefore, even if a client and/or such other agency

new display equipment, such as digital signage, smartphones

defaults, the advertising company is still liable for theand tablet PCs. At the same time, people’s media

media and or materials toward a media owner and or aconsumption and behaviors are changing with the rapid

subcontracting production company.

diffusion of social networks, such as Facebook and Twitter.

30

Therefore, markets of traditional mass media, especially

2 Media Inventories

print media, are shrinking, whereas the Internet business

Normally, ADK purchases media inventories, particularly

is growing fast. Advertising clients expect their advertising

animation programs, at fixed prices based on orders

companies to offer advanced solutions utilizing digitalfrom client advertisers. Occasionally, ADK speculates on

media, thereby allowing clients to gather and analyze data

inventories for strategic reasons. We strive to improve theof people’s media consumption and purchasing behavior.

quality of content and increase demand for such programs

We do not see traditional and new media cannibalizingby maintaining close relationships with the media. However,each other. Rather, they could enhance each other. The

weak sales could lead to excess inventories, which could

ADK Group continues to provide solutions, including its

have an adverse effect on our performance and financial

cross-communications approach, which can integrate bothcondition.

Forward-Looking Statements and Risk Factors

3 Credit Risks of Subcontractors

non-consolidated gross billings in fiscal 2011, which is a

In Japanese advertising markets, an advertising agency

similar sector concentration risk as its competitors. Although

is usually required to absorb the credit and functionality

we strive to maintain and develop good relationships withrisks of many small and specialty subcontractors without

our clients, there is no assurance that we will be able toshifting them to the advertisers. Moreover, sometimes

continue to do so.

an agency needs to help finance such subcontractors
through advance payments. In an international business,

2 Relationship with the Mediaa partial advance payment is commonly required. When

The ADK Group buys and resells various media, including

a subcontractor cannot fulfill an order from an advertiser

mass media and rapidly growing digital media, such asor maintain its business as a going concern, the agency ismobile and the Internet. In fiscal 2011, the parent company

likely to suffer a loss.

generated 66.0% of its gross billings by handling the four
major mass media, as well as the Internet, digital advertising
and OOH media. Gross billings from television represented

Competitive Risk

48.1% of ADK’s non-consolidated gross billings. ADK
strives to secure advertising time and/or space in these

The ADK Group, as Japan’s third-largest advertising group,

media. However, in the event of a decrease in advertisingcompetes against other large companies. Advertising clients

volume and/or changes in business terms and conditions

tend to select a preferred agency to enjoy economies ofand advertising methods, and/or the emergence of newscale to minimize procurement costs. Consolidation among

advertising formats, and the ADK Group does not respond toclients would accelerate this trend. In addition, competition

these changes appropriately, there is a significant possibility

is accelerated by the entry of foreign mega-agency groups

that its performance and financial condition could be

into the Japanese market, as well as many new and rapidly

adversely affected.

growing entrants in the Internet and other nontraditional
mass media advertising markets. In the event that ADK is

3 Relationship with Subcontractors

unable to respond appropriately to client needs and changes

Although ADK carries out planning for advertising and sales

in the advertising industry, and loses its competitiveness aspromotion campaigns, the execution of these activities isa result, there is significant risk that its market share could

mostly outsourced to qualified subcontractors. In the case of

decline and profitability could deteriorate. This would havea change in trading relationships with these subcontracted

a serious impact on its performance and financial condition.

companies, and in the event that ADK is unable to respond
appropriately, this could have a negative impact on its
performance and financial condition.

Risks Arising from Operations

4 Staff

1 Client Portfolio

Advertising is a people business, and human talents are

Advertising spending by client industry sector may vary andcritical assets in the advertising industry. In the eventchange. In the past 10 years, according to a 2010 report bythat ADK is unable to secure and train its talented staff

Dentsu Inc., companies in the Information/Communications,adequately, there could be a negative impact on its

Cosmetics/Toiletry Products, Apparel/Jewelry and Finance/

performance and financial condition. In addition, most of its

Insurance sectors increased their spending, whereas

staff costs are fixed costs and represent the largest portion

companies in the Government/Organizations, Hobbies/of its selling, general and administrative expenses. On a

Sporting Goods, Pharmaceuticals/Medical Supplies andconsolidated basis, staff costs represented as much as 61.8%

Transportation/Leisure sectors decreased their spending.

of SG&A expenses in fiscal 2011. It is not easy to reduce

The ADK Group has a diversified portfolio of first-tierstaff costs even when gross profit decreases. Thus, staff

clients. The parent company’s largest 10 and 20 clients

costs significantly influence the Group’s profitability.

accounted for around 20% and 30%, respectively, of total

31

5 Overseas Operations

8 Management of Group Companies

ADK has been striving to develop overseas revenues. In

The ADK Group consists of the parent company, 51

fiscal 2011, the ADK Group generated 7.4% of its grosssubsidiaries, 16 affiliates and one related company, andbillings from overseas sources. In overseas markets, because

operates in the advertising and publications businesses.

of differences in culture, society, law and commercial

Although the ADK Group strives hard to realize synergies

customs, a variety of problems may arise. In addition, both

among these companies, in the event that it is unable to do

country risk and currency risk are inherent in conducting

so as planned, its performance and financial condition could

international business. In the event that the ADK Group is

be significantly affected.

unable to expand its overseas operations as planned, its
performance and financial condition could be significantly

9 Relationship with WPP plc

affected.

ADK has maintained strategic operating and equity ties
with WPP plc since August 1998, holding a 2.48% equity

6 Content Businessstake in WPP (as of December 31, 2011). WPP is the largest

ADK has been successful in the animation content business,shareowner of ADK, holding 24.32% of the voting rights.

as well as in sports and cultural event marketing, which

At the same time, both companies have non-executive

enables ADK to differentiate itself from competitors. ADK

directors on each other’s boards. By way of operating

continues to develop new content under existing and newalliances with WPP Group operating companies, including

business models. However, the demography of Japan is

JWT, ADK has formed a number of creative and promotional

aging, and people’s preferences and media consumption

tie-ups and will continue to develop operations worldwide.

are changing. Accordingly, the content business is getting
more complicated and competition is becoming tougher. The

Although ADK plans to continue and expand its capital andtypical amount of content development investment is rising,business alliance with WPP Group, in the event that the ADK

volatility is growing and the time to recoup investments is

Group is unable to realize the benefits from this relationship,

increasing. In sum, the content business is getting riskier

or if the relationship should negatively change in any way,

but less profitable. There is no guarantee that such content

there could be an impact on the ADK Group’s performanceor its derivatives will continue to succeed. Continued

and financial condition in the future.

resale income from existing content is not guaranteed
either. Accordingly, in the case that the ADK Group is not

Although the yen-translated market value of the equity

able to generate income as it expects, it could experiencestake in WPP was ¥25,328 million (at a stock price of £6.755

a significant impact on its performance and financial

per share) as of the end of December 2011 compared withconditions.

a book value of ¥22,262 million (at a stock price of £3.6517
per share under the lower-of-cost-or-market method), in

7 Investment in Competitivenessthe event of a major deterioration in WPP Group’s sterling-

To enhance its competitiveness in the changing advertisingbased stock price, there is a possibility that ADK would havemarket, ADK occasionally invests in the digital businessto account for valuation losses on this holding.

domain. Moreover, ADK invests in data collection and R&D,
which would be critical in offering cross-communications
program ideas, and invests in IT to enhance operational
efficiency. However, in the event that the ADK Groupis unable to realize benefits from its investments asplanned, its performance and financial condition could
be significantly affected.

32

Forward-Looking Statements and Risk Factors

10 Marketable Securities and Investment Securities

13 Risk Related to Legal Restrictions, etc.

The ADK Group’s holdings of marketable and investment

The advertising activities of an advertiser are subject tosecurities (including the aforementioned stake in WPP)

legal restrictions under various laws— such as the Law

totaled ¥42,133 million, representing 22.9% of its ¥184,188

for Preventing Unjustifiable Lagniappes and Misleading

million in total assets as of December 31, 2011. Of thisRepresentation, the Copyright Law, the Trademark Law, theamount, ¥37,053 million consisted of publicly traded equity

Pharmaceutical Affairs Law and the Specified Commercial

securities, mostly the equity alliance with WPP plc andTransactions Law— as well as to various self-imposedcross-shareholdings in advertising clients and other trading

restrictions regarding media publications, evaluation criteria

partners. The balance of unrealized gains on available-for-and so on. In the event that tightening or new establishment

sale securities was ¥4,063 million after deducting deferredof such legal restrictions or self-imposed control restrains

tax liabilities on such gains (compared with ¥7,727 million

the advertising activities of an advertiser, this could

as of December 31, 2010). However, in the event of a major

influence the business results and financial status of

decline in the market prices of these holdings, we would be

the Group.

forced to account for valuation losses.
Also, although there are no laws or regulations specific to

11 Retirement Benefits and Pension Plans

the advertising business itself, which is the main business

ADK and some of its Group companies adopt combinationsof the Group, the accompanying businesses are subject toof defined contribution and defined benefits pension plans,

restrictions under various laws, such as the Construction

as well as lump-sum retirement allowances.

Industry Act and the Security Services Act. The Group isalso subject to the Law on the Prevention of Delay in the

In the event of deterioration in its pension asset

Payment of Subcontracting Charges and Related Matters,

management performance, and a significant change in

the Act for Protection of Computer Processed Personal Dataactuarial assumptions, the ADK Group could face a negative

Held by Administrative Organs and other laws regulating

impact on its performance and financial condition.

business activities in general. Moreover, the Group isrequired to strictly observe the Internal Control Reporting

ADK and some of its domestic subsidiaries are members

System stipulated in the Financial Instruments and Exchangeof the Japan Advertising Industry Welfare Pension Fund.

Act. Although we believe that none of the above can

Because the ADK Group cannot technically and reasonably

severely affect the Group, in the event that we are unable todefine the amounts of pension assets and liabilities it

appropriately respond to changes in these legal restrictions

is accountable for, the Group recognizes its annual cashin the future, such inability could affect the business results

contribution to the fund as its periodic benefit costs

and financial status of the Group, such as an increase inapplicable for the fund. In the case that the fund requires

operational expenses required to cope with the situation.

the Group to make a larger contribution due to changes inthe discount rate, pension asset performance, number ofmember companies and beneficiaries, and so on, the Groupmay need to recognize larger net periodic benefit costs.

12 Contingent Litigation Risks
The ADK Group cannot disregard the possibility of becoming
involved in future lawsuits or disputes, either directly or
indirectly, due to various circumstances. If the Group does
become involved in a lawsuit or dispute, its business results
and financial position could be affected depending on thenature, progress and outcome of said lawsuit or dispute.

33

Consolidated Balance Sheets
ASATSU-DK INC. and Consolidated Subsidiaries
At December 31, 2011 and 2010
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS

2 011

2 010

2 011

¥ 22,642¥ 21,520$ 291,249

6,334

1,436

81,47888,956

92,774

1,144,272

(311)

(286)

(3,999)Inventories

6,841

8,274

87,996

Deferred tax assets (Note 7)

1,134

1,501

14,581Other current assets

1,618

2,344

20,826

127,214

127,5631,636,403

Land

1,260

1,263

16,202

Buildings and leasehold improvements

4,503

3,920

57,924

Other

3,193

2,929

41,069

8,956

8,112

115,195(4,644)(4,019)(59,734)

4,312

4,093

55,461

39,90247,372513,274

2,232

5,743

28,706

412

645

5,303

10,1169,094

130,138

52,66262,854

677,421¥184,188¥194,510$2,369,285

CURRENT ASSETS:
Cash and time deposits
Marketable securities (Note 3)
Notes and accounts receivable—tradeAllowance for doubtful receivables

Total current assets
PROPERTY AND EQUIPMENT:

Total
Accumulated depreciation
Net property and equipment
INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3)
Investments in unconsolidated
subsidiaries and affiliated companies
Deferred tax assets (Note 7)
Other assets
Total investments and other assets
TOTAL

See notes to consolidated financial statements.

34

Financial Section

ASATSU-DK INC. and Consolidated Subsidiaries
At December 31, 2011 and 2010
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

LIABILITIES AND NET ASSETSCURRENT LIABILITIES:
Short-term debt (Note 4)
Current portion of long-term debt (Note 4)
Notes and accounts payable—trade
Income taxes payable (Note 7)
Accrued bonuses to employees
Accrued bonuses to directors
Allowance for sales returns
Deferred tax liabilities (Note 7)
Other current liabilities				 Total current liabilities

2 011

2 010

2 011

¥

¥

$

508
—
7,905
83,875

1,210
3,510
918,226
9,531
9,823
154
7,721
8
106,032
1,056,215

484
1,378
395
35
1,582
1,404
5,278

765
1,347
1,203
—
3,527
625
7,467

6,224
17,721
5,077
448
20,345
18,077
67,892NET ASSETS (Note 6):
Shareholders’ equity
Common stock		 Authorized: 206,000,000 shares in 2011 and 2010;
		 Issued: 45,155,400 shares in 2011 and 2010, respectively
Capital surplus
Retained earnings
Treasury stock—at cost				 Total shareholders’ equity—net

37,581
20,02443,557(7,632)
93,53037,581
20,02445,907(7,718)95,794483,424
257,575
560,297(98,182)
1,203,114

Accumulated other comprehensive income
		 Unrealized gain on available-for-sale securities
		 Deferred loss on derivatives under hedge accounting
		 Foreign currency translation adjustments				 Total accumulated other comprehensive income

4,063
(77)
(1,681)
2,305

7,727
(94)
(1,258)6,375

52,266(986)(21,631)
29,649965

999

12,41596,800103,168

1,245,178¥184,188¥194,510$2,369,285

LONG-TERM LIABILITIES:Long-term debt (Note 4)
Accrued retirement benefits (Note 5)
Allowance for retirement benefits to directors
Provision for loss on guarantees
Deferred tax liabilities (Note 7)
Other long-term liabilities				 Total long-term liabilities

94
273
71,383
741
764
12
600
1
8,242
82,1108427874,358358
384

CONTINGENT LIABILITIES (Note 11)

Minority interests				 Total net assets
TOTAL
See notes to consolidated financial statements.

35

Consolidated Statements of Income andComprehensive Income
ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2011 and 2010
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2 011

2 010

2 011

GROSS BILLINGS (Note 15)¥347,112¥346,565$4,465,036

COST OF SALES (Note 15)

301,276

304,537

3,875,424

45,83642,028589,61241,98342,006

540,051

Operating income

3,853

22

49,561OTHER INCOME (EXPENSES):Interest and dividend income—net
Gains on sales of securities
Losses on sales of securities
Losses on valuation of securities

1,391
1,862
(78)
(1,279)1,421
14(1,022)(2,324)

17,892
23,955(1,009)(16,449)

184
(7)
2
—
(94)
(538)
(268)

213
(2,770)
(304)
45
(236)
—
192

2,373
(96)
26
—
(1,203)(6,919)(3,452)

1,175(4,771)

15,118

INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS

5,028(4,749)64,679INCOME TAXES (Note 7):
Current
Deferred
Total
INCOME (LOSS) BEFORE MINORITY INTERESTS

1,073
1,651
2,724
2,304

524
(640)
(116)
(4,633)13,801
21,24535,046
29,633

10

23

130

2,294

(4,656)

29,503

10

23

130

2,304

(4,633)

29,633(3,636)
17
(451)

2,873
(110)
(772)

(46,771)219(5,801)(27)(4,097)

(55)
1,936

(347)
(52,700)(1,793)(2,697)(23,067)(1,776)(17)(2,714)17(22,848)(219)

Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 8 and 15)

Equity in earnings of affiliated companies—net
Additional retirement benefits paid to employees
Provision for bad debts reserve—net of reversals
Provision for loss on guarantees—net
Foreign exchange losses—net
Loss on settlement of dispute
Other—net
Other income (expenses)—net

MINORITY INTERESTS IN NET INCOME
NET INCOME (LOSS)MINORITY INTERESTS IN NET INCOME
INCOME (LOSS) BEFORE MINORITY INTERESTSOTHER COMPREHENSIVE INCOME
Unrealized gains (losses) on available-for-sale securities
Deferred gains (losses) on derivatives under hedge accounting
Foreign currency translation adjustments
Share of other comprehensive income in equity-method
affiliates
Total other comprehensive income
COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO
Shareholders of ASATSU-DK INC.
Minority Interests
See notes to consolidated financial statements.

36

Financial Section

Consolidated Statements of Changes in Net Assets (1)ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2011 and 2010

Millions of Yen

Year Ended December 31, 2011
Shareholders’ equity
Common stock Capital surplus

Balance as of December 31, 2010

¥37,581¥20,024

Retainedearnings

Total
Treasury stockshareholders’at costequity¥45,907¥( 7,718)¥95,794

Changes during the fiscal year
Dividend payments(4,641)

Net income

2,294

Acquisitions of treasury stock(4,641)
2,294
(2)

(2)

88

88

Disposals and cancellation of treasury
stock
Other decrease of retained earnings

(3)

(3)

Net change of items other thanshareholders’ equity
Total changes during the fiscal year
Balance as of December 31, 2011——

(2,350)86(2,264)¥37,581¥20,024¥43,557¥(7,632)¥93,530

Millions of Yen

Year Ended December 31, 2011
Accumulated other comprehensive income
Unrealized
Deferred
Total
Foreign
gain onloss onvaluation
currency
available- derivatives
andtranslation
for-sale under hedgetranslation
adjustments
securities accounting
adjustments

Balance as of December 31, 2010

¥ 7,727¥(94)¥(1,258)¥ 6,375

Minority
interests¥999

Total net
assets¥103,168

Changes during the fiscal year
Dividend payments(4,641)

Net income

2,294

Acquisitions of treasury stock(2)

Disposals and cancellation of treasury
stock

88

Other decrease of retained earnings(3)

Net change of items other thanshareholders’ equity(3,664)17(423)(4,070)(34)(4,104)

Total changes during the fiscal year

(3,664)17(423)(4,070)(34)(6,368)

Balance as of December 31, 2011

¥ 4,063¥(77)¥(1,681)¥ 2,305¥965¥ 96,800

See notes to consolidated financial statements.

37

Consolidated Statements of Changes in Net Assets (2)ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2011 and 2010

Millions of Yen

Year Ended December 31, 2010
Shareholders’ equity
Common stock Capital surplus

Balance as of December 31, 2009

¥37,581¥20,024

Total
Treasury stockshareholders’at costequityRetainedearnings¥51,354¥(6,970)¥101,989

Effect of changes in accounting policies
applied to foreign subsidiaries

—

—

(851)

(851)

(4,656)(4,656)

Changes during the fiscal year
Dividend payments
Net income
Increase due to newly consolidated		

subsidiaries

81

Acquisitions of treasury stock

81
(825)

(825)

Disposals and cancellation of treasury
		

stock

77

Other decrease of retained earnings

(21)

77
(21)

Net changes of items other than		shareholders’ equity

Total changes during the fiscal year
Balance as of December 31, 2010——

(5,447)(748)(6,195)¥37,581¥20,024¥45,907¥(7,718)¥ 95,794
Millions of Yen

Year Ended December 31, 2010
Accumulated other comprehensive income
Unrealized
Deferred
Total
Foreign
gain onloss onvaluation
currency
available- derivatives
andtranslation
for-sale under hedgetranslation
adjustments
securities accounting
adjustments

Balance as of December 31, 2009

¥4,910¥ 16¥ (492)¥4,434

Minority
interests¥1,042

Total net
assets¥107,465

Effect of changes in accounting policies
applied to foreign subsidiaries—

Changes during the fiscal year
Dividend payments(851)

Net income(4,656)

Increase due to newly consolidated		

subsidiaries

81

Acquisitions of treasury stock(825)

Disposals and cancellation of treasury
		

stock

77

Other decrease of retained earnings(21)

Net changes of items other than
		

38

2,817

(110)

(766)

1,941

(43)

1,898

Total changes during the fiscal year

shareholders’ equity

2,817

(110)

(766)

1,941

(43)

(4,297)

Balance as of December 31, 2010

¥7,727¥ (94)¥(1,258)¥6,375¥ 999¥103,168

Financial Section

Consolidated Statements of Changes in Net Assets (3)ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2011 and 2010

Thousands of U.S. Dollars (Note 1)

Year Ended December 31, 2011
Shareholders’ equity
Common stock Capital surplus

Balance as of December 31, 2010

$483,424$257,575

Retainedearnings

Total
Treasury stockshareholders’at costequity$590,522$(99,288)$1,232,233

Changes during the fiscal year
Dividend payments(59,699)

Net income

29,503Acquisitions of treasury stock(59,699)
29,503
(26)

(26)

1,132

1,132

	Disposals and cancellation of treasury
		

stock

Other decrease of retained earnings

(29)

(29)

Net change of items other than		shareholders’ equity

Total changes during the fiscal year
Balance as of December 31, 2011——(30,225)

1,106(29,119)$483,424$257,575$560,297$(98,182)$1,203,114

Thousands of U.S. Dollars (Note 1)

Year Ended December 31, 2011
Accumulated other comprehensive income
Unrealized
Deferred
Total
Foreign
gain onloss onvaluation
currency
available- derivatives
andtranslation
for-sale under hedgetranslation
adjustments
securities accounting
adjustments

Balance as of December 31, 2010

$ 99,397$(1,205)$(16,190)$82,002

Minority
interests

Total net
assets$12,852$1,327,087

Changes during the fiscal year
Dividend payments(59,699)

Net income

29,503Acquisitions of treasury stock(26)

	Disposals and cancellation of treasury
		

stock

1,132

Other decrease of retained earnings(29)

Net change of items other than		shareholders’ equity(47,131)219(5,441)(52,353)(437)(52,790)

Total changes during the fiscal year

(47,131)219(5,441)(52,353)(437)(81,909)

Balance as of December 31, 2011

$ 52,266$ (986)$(21,631)$ 29,649$12,415$1,245,178

See notes to consolidated financial statements.

39

Consolidated Statements of Cash FlowsASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2011 and 2010
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2 011
OPERATING ACTIVITIES:
Income (loss) before income taxes and minority interests
Adjustments for:
Income taxes—paidDepreciation and amortization
Equity in earnings of affiliated companies
Gains on sales of securities
Losses on valuation of securities
Changes in assets and liabilities:
Decrease (Increase) in notes and accounts receivable
Increase in inventories(Decrease) Increase in notes and accounts payable
Increase in provision for bad debts
Increase in accrued retirement benefits
Decrease in receivables
Increase in payables
Others—net
Total adjustments
Net cash provided by (used for) operating activities

2 011¥ 5,028¥ (4,749)$ 64,679

(680)
975
(184)
(1,784)
1,279

(803)
818
(213)
1,007
2,324

(8,749)12,546(2,373)(22,946)
16,4493,536
1,318(3,099)
47
35
624
490
1,372
3,929
8,957

(5,562)
293
5,068
258
346
173
692
127
4,528
(221)

45,484
16,960(39,860)
610
454
8,031
6,309
17,62750,542
115,221

INVESTING ACTIVITIES:
Increase in time deposits—net
Proceeds from sales of securities
Purchases of securities
Proceeds from sales of property and equipment
Purchases of property and equipment
Purchases of intangible assets
Other investing activities
Net cash provided by investing activities

1,213
5,085
(819)
27
(351)
(1,571)
196
3,780

318
4,065
(1,521)
44
(184)
(501)
77
2,298

15,601
65,410(10,529)345(4,517)(20,205)
2,516
48,621FINANCING ACTIVITIES:
Increase (Decrease) in short-term debt—net
Increase of long-term debt
Repayment of long-term debt
Purchases of treasury stock—net
Dividends paid
Other financing activities
Net cash used for financing activities

10
—
(276)
86
(4,600)(164)(4,944)

(251)
925
(187)
(747)
(851)
(155)
(1,266)129—(3,547)1,104(59,170)(2,117)(63,601)

(450)

(745)

(5,786)66$ 94,455

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS
NET INCREASE IN CASH AND CASH EQUIVALENTS¥ 7,343¥

CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR

19,127

18,844

246,048

CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATEDSUBSIDIARIES, BEGINNING OF THE YEAR

—

217

—

CASH AND CASH EQUIVALENTS RESULTING FROM MERGERBETWEEN CONSOLIDATED SUBSIDIARIES AND UNCONSOLIDATEDSUBSIDIARIES

49

—

624

¥26,519¥19,127$341,127

CASH AND CASH EQUIVALENTS, END OF THE YEAR
See notes to consolidated financial statements.

40

2 010

Financial Section

Notes to Consolidated Financial Statements
ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2011 and 2010

1. BASIS OF PRESENTING CONSOLIDATEDFINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES

The accompanying consolidated financial statements havea. Consolidation—The consolidated financial statements

been prepared from the accounts maintained by ASATSU

include the accounts of the Company and its significant

DK INC. (the “Company”) and its consolidated subsidiaries

twenty-four (24) (twenty-four (24) in 2010) majority-ownedin accordance with the provisions set forth in the Financial

subsidiaries (together, the “Group”).

Instruments and Exchange Law and its related accounting
regulations, and in conformity with accounting principles

Under the control or influence concept, those companies inand practices generally accepted in Japan, which arewhich the Company, directly or indirectly, is able to exercise

different in certain respects as to the application andcontrol over operations are fully consolidated, and those

disclosure requirements of International Financial Reporting

companies over which the Group has the ability to exercise

Standards.

significant influence are accounted for by the equity
method.

Under Japanese GAAP, consolidated statements ofcomprehensive income are required from the fiscal year

Twenty-three (23) subsidiaries have a fiscal year-end

ended December 31, 2011, and have been presented herein.

of December 31, as does the Company. One subsidiary

Accordingly, accumulated other comprehensive income

has a fiscal year-end of September 30. The consolidated

is presented in the consolidated balance sheets and thefinancial statements include the financial statements ofconsolidated statement of changes in net assets. In addition,

this subsidiary for its respective fiscal years after making“income before minority interests” is disclosed in theappropriate adjustments for significant transactions duringconsolidated statements of income and comprehensive

the period from its respective year-end date to the year-

income from the year ended December 31, 2011.

end date of the consolidated financial statements.

In preparing these consolidated financial statements, certain

Investments in one (1) affiliated company, in which thereclassifications and rearrangements have been made toCompany owns interests of 20% to 50%, are accounted forthe consolidated financial statements issued domesticallyby the equity method. (Investments in two (2) affiliatedin order to present them in a form that is more familiar tocompanies were accounted for by the equity method inreaders outside Japan.

2010.) Investments in the remaining twenty-seven (27)(twenty-eight (28) in 2010) unconsolidated subsidiaries

The consolidated financial statements are stated inand fifteen (15) (twenty (20) in 2010) affiliated companies

Japanese yen, the currency of the country in which

are stated at cost. If these companies had been fully

the Company is incorporated and mainly operates. The

consolidated, or the equity method of accounting had beentranslation of Japanese yen amounts into U.S. dollar

applied to the investments in these companies, the effectamounts is included solely for the convenience of readerson the accompanying consolidated financial statements

outside Japan and has been made at the rate of ¥77.74 towould not be material.

US$1.00, the approximate rate of exchange on December
31, 2011. Such translation should not be construed as a

Digital Advertising Consortium, Inc (“DAC”), which was an

representation that the Japanese yen amounts could be

equity-method affiliate for fiscal 2010, has been excluded

converted into U.S. dollars at that or any other rate.

from the scope of the equity method for fiscal 2011 because
the Company sold off its shares in DAC during the fiscal
year.

41

During the fiscal year, DAC changed its fiscal year-end fromunrealized profits included in assets resulting from intra-

November 30 to March 31, and as a result, the figures forgroup transactions are eliminated.

DAC and its consolidated subsidiaries used in the calculationof the Company’s consolidated results are for the 10-monthb. Cash and Cash Equivalents—Cash and cash equivalents

period from December 1, 2010, to September 30, 2011.

consist of cash, demand deposits with banks and those

The amount of gain on sales of the shares in DAC wasdeposits that are short-term investments, which are readily¥1,242 million ($15,976 thousand), included in gain on sales

convertible into cash and are not exposed to significant riskof securities for the fiscal year.

of changes in value.

Goodwill is charged or credited to income in the year

Cash equivalents include time deposits, certificates of

incurred.

deposit and money management funds invested in bonds
for the short term, all of which mature or become due

All significant inter-company balances and transactions

within three months of the date of acquisition.

have been eliminated in consolidation. All material
The balances of cash and time deposits as of December 31, 2011 and 2010, in the consolidated balance sheets, are reconciled
to cash and cash equivalents for the years then ended as follows:
Thousands of
U.S. Dollars

Millions of Yen

2 011
Balance sheet:
Cash and time deposits
Securities
Total
Less:
Time deposits more than three months
Securities not applicable to cash equivalents(e.g., securities other than money management funds)
Cash and cash equivalents

2 010

2 011

¥22,642
6,334
28,976¥21,520
1,436
22,956$291,249
81,478372,727

2,417

3,544

31,08540¥26,519285¥19,127515$341,127c. Inventories—Inventories consist principally of billable

to be held to maturity with positive intent and ability, areproduction orders in process, which are stated at cost

reported at cost after amortization or accumulation of any

determined by the specific identification method. Billable

differences between cost and face value; and iii) available-

production orders in process are primarily costs incurred

for-sale securities that are not classified as either of theon behalf of clients when providing advertising services

aforementioned securities are reported at fair value, andsuch as marketing and branding consultation, designing andany resulting unrealized gains and losses, net of applicableproducing sales promotion programs, and event marketingtaxes, are reported as unrealized gains (losses) on available-

to clients. Inventories also include publication merchandise.

for-sale securities in net assets. As of the end of 2011 and2010, the Company and its consolidated subsidiaries had nod. Marketable and Investment Securities—All applicableheld-to-maturity debt securities.

securities are classified and accounted for, depending on
management’s intent, as follows:

If the market values of held-to-maturity debt securities,
equity securities issued by unconsolidated subsidiaries

42i) trading securities, which are held for the purpose of

and affiliated companies, and available-for-sale securities

earning capital gains in the near term, are reported at

decline significantly, such securities are stated at fair

fair value, and the related unrealized gains and losses arevalue, and the difference between fair value and thereflected in earnings in the period such gains or losses arise;

carrying amount is recognized as a loss in the period ofii) held-to-maturity debt securities, which are expected

the decline. If the fair value of equity securities issued by

Financial Sectionunconsolidated subsidiaries and affiliated companies thati. Provision for Loss on Guarantees—The Group sets

are not accounted for by the equity method is not readily

aside a reserve of losses on guarantees for liabilities owed

available, such securities are written down to net asset

by non-consolidated subsidiaries, affiliated companies

value with a corresponding charge in the statement ofor business associates. The amount of such provision

income when the net asset value declines significantly. Suchreflects estimated potential losses based on such factors

adjusted fair value or net asset value becomes the carrying

as the financial condition of parties whose liabilities areamount of the securities for the beginning of the next year.

guaranteed.

e. Allowance for Doubtful Receivables—A generalj. Retirement Benefits and Pension Plans—The Group

provision is made for doubtful receivables based on theaccounted for the liability for retirement benefits based

actual rate of uncollected receivables of the Company inon the projected benefit obligations and plan assets atprior years. Provisions are also made against for specificthe balance sheet date, except for the liability of thereceivables as and when required.

Japan Advertising Industry Pension Fund, as noted below.
Actuarial differences are amortized over 13 years, which isf. Property and Equipment—Property and equipment arewithin the average remaining service lives of the employees

carried at cost. Depreciation of property and equipmentof each consolidated company, on a straight-line basis, andother than buildings acquired after April 1, 1998, ispast service costs are expensed as they are incurred.

computed mainly by the declining-balance method at
rates based on the estimated useful lives of the assets.

The directors of some domestic subsidiaries are entitled,

Depreciation of buildings acquired after April 1, 1998, isin most circumstances, to lump-sum severance payments

computed by the straight-line method over their estimatedbased on current rates of pay, length of service and otheruseful lives. The estimated useful lives of major assets arefactors. The Group accrued 100% of the obligations based on

as follows:internal regulations under the assumption that all directors
retired at the balance sheet date.

Buildings and leasehold improvements

3—65 years
The Company and some of its domestic subsidiaries are

In March 2008, the Accounting Standards Board of Japanmembers of the Japan Advertising Industry Pension(ASBJ) issued the accounting standard for asset retirement

Fund. Because the Group cannot technically or reasonably

obligations, ASBJ Statement No. 18, “Accounting Standard

define how much pension assets and liabilities the Groupfor Asset Retirement Obligations,” and ASBJ Guidance No.

is accountable for, the Group recognizes its annual cash

21, “Guidance on Accounting Standard for Asset Retirement

contribution to the fund as its periodic benefit costs

Obligations.”

applicable for the fund but not as pension assets andliabilities.

The Company applied this accounting standard effective
January 1, 2011. The effect of this change was to decrease

The retirement benefits system for directors of theoperating income by ¥38 million ($489 thousand) andCompany was abolished in February 2011 and theincome before income taxes and minority interests byshareholders’ meeting of the Company held on March 30,¥282 million ($3,627 thousand) for the year ended

2011, approved a resolution to pay the remaining balance

December 31, 2011.

of retirement benefits to directors upon their retirement.
As a result, accrued retirement benefits for directors of theg. Accrued Bonuses to Employees—The Group accrued theCompany were reclassified to other long-term liabilities at

estimated amount of bonuses to be paid for employees.

December 31, 2011.

h. Accrued Bonuses to Directors—The Group accrued thek. Sales Recognition—Income derived from media

estimated amount of bonuses to be paid for directors ofadvertising is recognized upon publication or broadcasting.

certain domestic subsidiaries.

Product sales are recognized when the products arereceived by clients. One domestic consolidated subsidiary43

provides allowances, based on the Japanese tax code, forcompanies believe it is more likely than not that such tax

returned publication merchandise and losses derived from

benefits will be realized through the reduction of future

unsold publication merchandise.

taxable income.

l. Leases—In March 2007, the ASBJ issued ASBJ Statemento. Appropriation of Retained Earnings—The appropriation

No. 13, “Accounting Standard for Lease Transactions,”of retained earnings at each year-end is reflected in thewhich revised the previous accounting standard for leaseconsolidated financial statements for the following year.

transactions issued in June 1993.

p. Translation of Foreign Currency Amounts—ShortASBJ Statement No. 13 requires all finance leaseterm and long-term monetary receivables and payablestransactions to be capitalized so that lease assets and leasedenominated in foreign currencies are translated into

obligations are recognized on the balance sheet. However,Japanese yen at the exchange rates at the balance sheet

the standard allows certain leases to be accounted for as

dates. Foreign exchange gains and losses from translation

operating lease transactions, provided those transactions

are recognized in the consolidated statements of income

were contracted on or before the end of the year before

in the cases where not hedged by foreign exchange

the fiscal year of adoption of the revised Statement

derivatives or where hedging transactions do not qualify

and provided the leased property is not deemed to be

for hedge accounting.

transferred to the lessee. In such cases, information
to show the impact had such leases been capitalized is

The accounts of consolidated foreign subsidiaries anddisclosed in the notes to the lessee’s consolidated financial

affiliated companies are translated into Japanese yenstatements.

as follows:a.	Asset and liability items are translated at the exchange

The Group applied ASBJ Statement No. 13 effective fromfiscal 2009 but continues to report certain applicable lease

rates at the balance sheet dates;b.	Components of shareholders’ equity are translated attransactions as operating leases. For information on suchtheir historical rates at acquisition or upon occurrence;

operating leases, please refer to Note 9. Leases. In major

andoverseas consolidated subsidiaries, leases are accounted
for as finance leases and leased assets are capitalized.

c.	Revenues, expenses and cash flow items are translated
into Japanese yen at the average exchange rate for eachyear.

m. Software and R&D Costs—Research-and-development

Differences arising from such translation are shown ascosts are charged to income when incurred. Capitalized“Foreign currency translation adjustments” in a separate

software for internal use amounting to ¥2,328 million

component of net assets.

($29,952 thousand) in 2011 and ¥1,464 million in 2010,
included in “Other assets” of investments and other assets,

q. Derivatives and Hedging Activities—The Group uses

was amortized by the straight-line method based on

forward exchange contracts to manage its exposure toestimated useful lives of three to five years.

fluctuations in foreign exchange. The Group also has
investments in bonds with embedded derivatives, some ofn. Income Taxes—The provision for income taxes iswhich have terms and conditions where risk exists that thecomputed based on the pretax income or loss reported inoriginal face value of such securities might not be redeemedthe consolidated statements of income. Deferred income

even if there is no default. However, because the maximum

taxes are recorded based on the asset-and-liability method

amount of any such losses would be limited to the face

to reflect the impact of temporary differences between

value of such bonds, the impact of the risk is limited.

assets and liabilities recognized for financial reporting

44

purposes and such amounts recognized for tax purposes

Derivatives are recognized as either assets or liabilities at

by applying the statutory tax rate to the temporary

fair value and gains or losses on derivative transactions aredifferences. With respect to the deferred tax assets, therecognized in the consolidated statements of income, unlessFinancial Section

In addition, the Company seeks to increase employees’such derivatives qualify for specific hedge accounting.

awareness about our performance and stock price and thus
Short-term receivables and payables denominated inboost medium- and long-term corporate value. To achieve

foreign currencies for which foreign exchange forward

these aims, the Company has introduced an ESOP trust as

contracts are used to hedge the risk of foreign currency

an incentive plan.

fluctuations are translated at the contracted rate if the
An ESOP trust is a trust-type employee incentive planforward contracts qualify for specific hedge accounting.

that uses ADK’s employee shareholder group framework.

r. Per Share Information—The computation of basic net

Specifically, the Company will establish a trust, theincome per share is based on net income attributable tobeneficiaries of which will be employee members of theshareholders of common stock and the weighted average

ADK Employee Shareholding Association (the “Association”)

number of shares outstanding during each year, and diluted

who satisfy certain requirements. The trust will purchasenet income per share is computed based on net incomea certain number of ADK shares, determined according toattributable to shareholders of common stock after giving

the Association’s planned share purchases during the period

effect to the net income of an affiliated company that hasfrom April 2010 to March 2015. Such shares will be acquired

the dilutive potential of shares and a weighted averageover a certain purchase period, also to be determined.

number of shares outstanding during each year. The

Subsequently, the trust will sell shares to the Association at

average number of common shares used in the computation

the market price each month on a set date.

was 42,187,505 and 42,221,554 shares for the fiscal years
The Company guarantees the losses in the trusts Accountended December 31, 2011 and 2010, respectively.

(the “Trust Account”) resulting from the purchase and sale of
The cash dividend per common share presented in thethe ADK shares and accounts for the transactions involving

accompanying consolidated statements of income isthe trust as its own. Accordingly, shares of the Company

dividends applicable to net income of the respective years

held by the trust and the assets, liabilities, expenses andincluding dividends paid after the end of the respective

income of the trust were recorded in the accompanying

year.

consolidated financial statements.

s. ESOP Trust—The Company is committed to reinforcing

For the purpose of calculating basic net income (loss) andmeasures to ensure the welfare of its employees, who

net assets per common stock, the common stock held byrepresent the driving force behind the Group’s growth.

the ESOP trust is considered treasury stock.

3. MARKETABLE AND INVESTMENT SECURITIESThe fair value of marketable and investment securities as of December 31, 2011 and 2010 was as follows:
Millions of Yen

2011
Cost
Available-for-sale:
Equity securities
Debt securities
Other
Total

¥30,5871,460
199¥32,246

Unrealized gains

Unrealized losses¥7,0101
9¥7,020

¥544
69
13
¥626

Fair value¥37,053
1,392
195¥38,640

45

Millions of Yen

2010
Cost
Available-for-sale:
Equity securities
Debt securities
Other
Total

¥31,004
1,650
355¥33,009

Unrealized gains

Unrealized losses¥13,621—17¥13,638

¥595
56
11
¥662

¥44,030
1,594
361¥45,985

Thousands of U.S. Dollars

2011
Cost
Available-for-sale:
Equity securities
Debt securities
Other
Total

Fair value$393,453
18,781
2,560$414,794

Unrealized gains

Unrealized losses$90,172
13
116$90,301$6,998888
167$8,053

Fair value$476,627
17,9062,509$497,042

Available-for-sale securities sold during the year ended December 31, 2011, were as follows:
Millions of Yen

2011
Proceeds
Available-for-sale:
Equity securities
Debt securities
Other
Total

¥ 707
559
27
¥1,293

Realized gains

¥598
9
—
¥607

Proceeds

¥

78
1,399
30
¥1,507

Realized gains

¥15
3
—
¥18

Realized losses

¥11
32
—
¥43

Thousands of U.S. Dollars

2011
Proceeds
Available-for-sale:
Equity securities
Debt securities
Other
Total

¥79
1
—
¥80
Millions of Yen

2010
Available-for-sale:
Equity securities
Debt securities
Other
Total

Realized losses$ 9,094
7,191
347$16,632

Realized gains$7,692116—$7,808Realized losses$1,01613—$1,029Impairment losses on available-for-sale equity securities for the years ended December 31, 2011 and 2010, were ¥430
million ($5,531 thousand) and ¥2,156 million, respectively.
When the fair value of securities has declined to below 50% of cost and there is no contradictory evidence, this is considered
to be a significant decline and impairment losses are recognized. Further, where the decline is less than 50% but more than
30% of cost and that decline is consistent, if, based on analysis of the specific financial and operational conditions of each
investee, recovery of fair value to cost is considered unlikely, an impairment is recognized.

46

Financial Section

4. SHORT-TERM AND LONG-TERM DEBT
The weighted average annual interest rates applicable to the short-term debt were 1.82% and 1.94% at December 31, 2011 and2010, respectively.
Long-term debt as of December 31, 2011 and 2010, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2 011
Loans due through 2015*
Current portion
Total

2 010

¥ 757
(273)
¥ 484

¥1,043
(278)
¥ 765

2 011

$ 9,734(3,510)$ 6,224
Thousands of
U.S. Dollars

Millions of Yen

Obligations under capital leases*
Current portion
Total

2 011

2 010

¥ 375
(102)
¥ 273

¥ 459
(101)
¥ 358

2 011
$ 4,824(1,312)$ 3,512* The weighted average interest rates or the averages of interest rates applicable to loans outstanding at the end of each fiscal year
weighted by amounts of such loans as of said date, for loans due after more than one year were 1.31% p.a. in 2011 and 1.63% p.a. in2010. The weighted average interest rates of the loans due within one year were 2.08% p.a. in 2011 and 2.12% p.a. in 2010. The weighted
average interest rates of obligations under finance leases due after more than and within one year were 2.11% and 2.14% in 2011 and 2010,
respectively.

The repayment schedule of long-term debt as of December 31, 2011, was as follows:Year Ending December 31

Millions of Yen

Thousands of
U.S. Dollars

2012
2013
2014
2015
Later years

¥273
238
164
82
-

$3,510
3,060
2,110
1,054
-

Total

¥757

$9,734

The repayment schedule of obligations under capital leases as of December 31, 2011, was as follows:Year Ending December 31

Millions of Yen

Thousands of
U.S. Dollars

2012
2013
2014
2015
Later years

¥102
102
90
63
18

$1,312
1,312
1,158
810
232

Total

¥375

$4,824

The amounts of long-term debt used for the ESOP trust at December 31, 2011, were as follows:
Current portion of long-term debt: ¥164 million ($2,109 thousand)Long-term debt: ¥410 million ($5,274 thousand)47

5. RETIREMENT BENEFITS AND PENSION PLANS
The Company and certain of its consolidated subsidiaries

provided by the Japan Advertising Industry Pension Fund,

provide two types of post-employment benefit plans,

as well as unfunded lump-sum payment plans under which

namely defined contribution pension plans and defined

all eligible employees are entitled to benefits based on

benefit pension plans. The latter consists of cash balancelevels of salary, length of service and other factors.

plans, funded non-contributory pension plans and plans
Liabilities for employees’ retirement benefits and pension plans as of December 31, 2011 and 2010 comprised the following:*
Thousands of
U.S. Dollars

Millions of Yen

2 011
Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial differences
Accrued retirement benefits

2 010¥11,051(7,625)(2,048)¥ 1,378

2 011¥10,545(7,301)(1,897)¥ 1,347$142,148(98,083)(26,344)$ 17,721

Components of net periodic benefit costs for the years ended December 31, 2011 and 2010 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2 011
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial differences
Contributions paid during the period, etc.*
Net periodic benefits costs

¥ 843
192
(109)
258
942
¥2,126

2 010

2 011

¥ 819
209
(123)

256

978
¥2,139$10,844
2,470(1,402)
3,319
12,117$27,348

The discount rate used by the Group was 2.0% as of ended

equally to each service year over the estimated number

December 31, 2011 and 2010. The rate of expected returnof total service years. Unrecognized actuarial differenceson plan assets used by the Group was 1.5% as of December

are amortized over 13 years on a straight-line basis

31, 2011 and 2010. The estimated amount of retirement

commencing from the succeeding period. Prior service costs

benefits to be paid at the future retirement date is allocatedare charged to income when incurred.

* For plans provided by the Japan Advertising Industry Pension Fund, the Group cannot technically or reasonably allocate pension
assets and liabilities to the Group’s account. Therefore, the Group recognizes its annual cash contribution to this fund as its periodic
benefit costs, but does not recognize pension assets and liabilities as stated above.
		 Contributions paid during the period, etc., stated in the table shown above include the Group’s cash contribution for the period to theJapan Advertising Industry Pension Fund.
		 The information of total pension assets and liabilities of the Japan Advertising Industry Pension Fund, the Group’s share of thecontribution to the fund and the prorated share of pension assets or liabilities for the Group as measured by the share of thecontribution to the fund are as follows: (Note: This prorated calculation is simply for informational purposes only.)

48

Financial Section

a. Total pension assets and liabilities of the fundThousands of
U.S. Dollars

Millions of Yen

Pension liabilities*
Pension assets
Net assets (deficits)

M a r c h 31 , 2 011

M a r c h 31 , 2 010

M a r c h 31 , 2 011¥(88,314)
71,037¥(17,277)¥(86,650)
68,862¥(17,788)$(1,136,017)
913,776$ (222,241)

A p r il 1 , 2 010 –M a r c h 31 , 2 011

A p r il 1 , 2 0 0 9 –M a r c h 31 , 2 010

10.39%
6.09%
16.48%

10.61%
6.14%
16.75%*The discount rate for the pension liabilities was mainly 5.5%.

b. The Group’s share of the contribution to the fund

Share of the Group as employer
Share of employees
Total

c. Prorated share of pension assets or liabilities as measured by the Group’s share of the contribution to the fundMillions of Yen

March 31, 2011

Share of the Group
Share of employees
as employer
Pension liabilities
Pension assets
Net deficit¥(9,178)
7,383¥(1,795)¥(5,372)
4,321¥(1,051)
Millions of Yen

March 31, 2010

Share of the Group
Share of employees
as employer
Pension liabilities
Pension assets
Net deficit¥(9,191)
7,305¥(1,886)¥(5,320)
4,228¥(1,092)

Thousands of U.S. Dollars

March 31, 2011

Share of the Group
Share of employees
as employer
Pension liabilities
Pension assets
Net deficit$(118,060)
94,970$ (23,090)$(69,102)
55,583$(13,519)

d. Supplemental information
The Japan Advertising Industry Pension Fund’s total net

Prior service cost is amortized over 20 years by thepension deficit of ¥17,277 million ($222,241 thousand) andstraight-line method , and the Group expensed additional¥17,788 million as of March 31, 2011, and March 31, 2010,

contributions of ¥116 million ($1,492 thousand) and ¥117

respectively, stated in “a” above equals the sum of priormillion during the periods from April 1, 2010, to March

service liabilities of ¥7,161 million ($92,115 thousand) and

31, 2011, and from April 1, 2009, to March 31, 2010,¥7,823 million and net accumulated deficit carry-forward

respectively, for this amortization.

of ¥10,115 million ($130,113 thousand) and ¥9,964 million,
respectively.

49

6. CHANGE IN NET ASSETS
The type of and the changes in the number of shares issued and treasury stock as of and for the years ended December 31,
2011 and 2010, were as follows:
Millions of Yen

2011
Type of shares
Number of shares as of December 31, 2010
Increase in the number of shares
Decrease in the number of shares
Number of shares as of December 31, 2011

Shares issued

Treasury stock

Common stock

Common stock

45,155,400——
45,155,400

2,990,104
1,153(49,659)
2,941,598

Notes: 1. The increase in the number of treasury stock was due to the purchase of 1,153 shares of less-than-one-unit.
			

2. The decrease in the number of treasury stock was due to sales of 49,500 shares by the ESOP trust and sales of 159 shares ofless-than-one-unit.

Millions of Yen

2010
Shares issued
Type of shares
Number of shares as of December 31, 2009
Increase in the number of shares
Decrease in the number of shares
Number of shares as of December 31, 2010

Treasury stock

Common stock

Common stock

45,155,400——
45,155,400

2,569,867
464,237(44,000)
2,990,104

Notes: 1. The increase in the number of treasury stock was due to the purchase of 461,400 shares by the ESOP trust and the purchase of
2,837 shares of less than one unit.
			

2. The decrease in the number of treasury stock was due to sales of 44,000 shares by the ESOP trust.

Information related to dividends for the fiscal years ended December 31, 2011 and 2010, was as follows:

Dividends paid during the fiscal year ended December 31, 2011
Resolution by:

Board of Directors
February 10, 2011

Board of Directors
August 10, 2011

Board of Directors
October 13, 2011

Total amount of dividends*¥421 million¥421 million¥3,756 million

Dividend per share

¥10

¥10

¥89

Record date

December 31, 2010

June 30, 2011

October 31, 2011

Effective date

March 14, 2011

September 12, 2011

December 26, 2011

*Dividends paid to the ESOP trust in the amount of ¥4 million ($51 thousand), ¥3 million ($38 thousand) and ¥33 million ($424 thousand)have been excluded from the total amount of dividends at February 10, 2011, August 10, 2011, and October 13, 2011, respectively.

Dividends whose record date was in the fiscal year ended December 31, 2011, but whose effective date was in the following
fiscal year
Resolution by:

Board of Directors
February 22, 2012

Total amount of dividends*¥422 million

Fund for dividends

Retained earnings

Dividend per share¥10

Record date

December 31, 2011

Effective date

March 21, 2012

*Dividends paid to the ESOP trust in the amount of ¥3 million ($38 thousand) have been excluded from the total amount of dividends.

50

Financial Section

Dividends paid during the fiscal year ended December 31, 2010
Resolution by:

Board of Directors
February 12, 2010

Board of Directors
August 11, 2010

Total amount of dividends*¥425 million¥421 million

Dividend per share

¥10

¥10

Record date

December 31, 2009

June 30, 2010

Effective date

March 12, 2010

September 13, 2010

*Dividends paid to the ESOP trust in the amount of ¥4 million have been excluded from the total amount of dividends.

Dividends whose record date was in the fiscal year ended December 31, 2010, but whose effective date was in the following
fiscal year
Resolution by:

Board of Directors
February 10, 2011

Total amount of dividends*¥421 million

Fund of dividends

Retained earnings

Dividend per share¥10

Record date

December 31, 2010

Effective date

March 14, 2011

*Dividends paid to the ESOP trust in the amount of ¥4 million have been excluded from the total amount of dividends.

51

7. INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to corporate, inhabitant and enterprise taxes based on
income. The normal effective statutory tax rate for these taxes in the aggregate resulted in approximately 40.69% for 2011
and 2010, respectively. Overseas subsidiaries are subject to income taxes of the countries in which they operate.
The deferred tax assets and liabilities as a result of the tax effects of significant temporary differences as of December 31,
2011 and 2010, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Deferred tax assets:
Allowance for doubtful receivables
Accrued bonuses
Accrued retirement benefits
Inventory
Investment securities
Loss on settlement of disputeTax loss carry-forwards
Unrealized loss on marketable securities
Deferred tax assets in overseas consolidated subsidiaries*
Other

2 011

2 010

2 011

¥

¥

$

594
267
188
57
998
248
215
144
50
1,244
4,005

679
81
441
122
1,300
—
1,776
146
32
1,286
5,863

7,641
3,435
2,418
733
12,838
3,190
2,766
1,852
643
16,00251,518Valuation allowance(1,906)(2,152)(24,518)

Total deferred tax assets

2,099

3,711

27,000

Deferred tax liabilities:
Accrued retirement benefits
Unrealized gain on marketable securities
Deferred tax liabilities in overseas consolidated subsidiaries*
Other

—
2,079
41
15

—
5,047
44
0

—
26,743527
193

Total deferred tax liabilities

2,135

5,091

27,463(36)¥(1,380)

Total net deferred tax assets (liabilities)

¥

$

(463)

*Deferred tax assets and liabilities in overseas consolidated subsidiaries as a result of the tax effects of significant temporary differences
and losses carried forward as of December 31, 2011 and 2010, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2 011
Deferred tax assets:
Tax loss carry-forwards
Other
Less valuation allowance
Deferred tax assets
Deferred tax liabilities
Depreciation
Other
Deferred tax liabilities
Net deferred tax assets (liabilities)

52

Financial Section

2 010

2 011

¥ 11
58
(20)
49

¥ 41
22
(31)
32

$ 141
746
(257)
630

40
1
41

43
—
43

515
12
527

¥ 8

¥(11)

$ 103

The reconciliation between the statutory tax rate for the year ended December 31, 2011, and the actual effective tax rate
reflected in the accompanying consolidated statement of income were as follows:

2 011

2 010

Statutory tax rate
Certain expenses, including, but not limited to, entertainment expenses,
permanently not deductible for tax purposes
Certain income, including, but not limited to, dividend income, permanently
not taxable for tax purposes
Per capita levy
Consolidated adjustment due to sale of affiliated company
Amendment of statutory tax rate
Tax rate difference applicable to overseas subsidiaries
Change in valuation allowance
Other—net

40.69%—

6.50—(2.98)
0.61
8.71
1.66
(4.58)
2.11
1.46

—
—
—
—
—

Effective tax rate

54.18%——*The reconciliation for the year ended December 31, 2010, is not shown as a loss before income taxes and minority interests wasrecorded.
(Change of deferred tax assets and deferred tax liabilities by the change of the effective statutory tax rate)
The “Act on the Partial Revision of the Income Tax Act for the Establishment of a Taxation System Responding to Structural
Transformation of Economy and Society” and the “Act on Special Measures for Securing Financial Resources Needed to Implement
Measures to Recover from the Great East Japan Earthquake” were issued on December 2, 2011. By these acts, the statutory tax rateused to calculate deferred tax assets and liabilities was changed from 40.69%, which was used for the year ended December 31, 2010.
The new effective tax rates will be as follows, depending on when the temporary differences will reverse.
From January 1, 2013, to December 31, 2015: 38.01%
On and after January 1, 2016: 35.64%
As a result, deferred tax liabilities, net of deferred tax assets, decreased by ¥218 million ($2,804 thousand), deferred income taxes
increased by ¥84 million ($1,080 thousand) and unrealized gains on available-for-sale increased by ¥301 million ($3,871 thousand) asof and for the year ended December 31, 2011.

8. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, AND OTHER INCOME (EXPENSES)
Included within selling, general and administrative expenses are research-and-development costs charged to income for theyears ended December 31, 2011 and 2010, of ¥1,103 million ($14,188 thousand) and ¥1,035 million, respectively.
Included within gains on sales of securities and losses on sales of securities in Other Income (Expenses) for the years ended
December 31, 2011 and 2010, are gains on the sale of an equity-accounted affiliate of ¥1,242 million ($15,986 thousand) andlosses on the sale of an equity-accounted affiliate of ¥978 million, respectively.

9. LEASES
The Group leases certain computer equipment, office space, vehicles, software and other assets.
As discussed in Note 2.l. Leases, the Group accounts for certain leases as operating lease transactions, provided thetransactions were contracted on or before March 31, 2009, provided the leased assets are not deemed to be transferredto the lessee, and provided certain information is disclosed in the notes to the lessee’s consolidated financial statements to53

show the impact had such leases been capitalized. The pro forma information for such operating lease transactions, such as
acquisition cost, accumulated depreciation, obligations under finance leases, depreciation/amortization expense and interest
expense of s for the years ended December 31, 2011 and 2010, were as follows:

Millions of Yen

Year ended December 31, 2011
Furniture andequipment

Machinery and
VehiclesSoftwareTotal

Acquisition cost
Accumulated depreciation/amortization

¥384
322

¥—
—

¥45
39

¥429
361

Net book value

¥ 62

¥—

¥6

¥ 68

Obligations under finance leases:
Millions of Yen

Due within one year
Due after one year

¥53
22

Total

¥75

Millions of Yen

Year ended December 31, 2010
Furniture andequipment

Machinery and
VehiclesSoftwareTotal

Acquisition cost
Accumulated depreciation/amortization

¥915
726

¥—
—

¥167
147

¥1,082873

Net book value

¥189

¥—

¥ 20

¥ 209

Obligations under finance leases:
Millions of Yen

Due within one year
Due after one year

¥155
74

Total

¥229

Thousands of U.S. Dollars

Year ended December 31, 2011
Furniture andequipment

SoftwareTotal

Acquisition cost
Accumulated depreciation/amortization$4,940
4,142

$—
—

$579
502

$5,5194,644

Net book value

$ 798

$—

$ 77

$ 875

Obligations under finance leases:
Thousands of
U.S. Dollars

54

Machinery and
VehiclesDue within one year
Due after one year

$682
283

Total

$965

Financial Section

Breakdown of lease payments, or depreciation/amortization expense and interest expense under finance leases:
Thousands of
U.S. Dollars

Millions of Yen

2 011
Total lease payments
Depreciation/amortization expense
Interest expense

2 010

¥126
111
2

2 011

¥334
293
9

$1,6211,428
26

Depreciation/amortization expense and interest expense, which are not reflected in the accompanying consolidated
statements of income and comprehensive income, are computed by the straight-line method and the interest method,respectively.
Obligations under operating leases:
Thousands of
U.S. Dollars

Millions of Yen

2 011

2 010

2 011

Due within one year
Due after one year

¥ 618
2,552

¥ 605
2,904

$ 7,950
32,827

Total¥3,170¥3,509$40,777

10. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The ADK Group invests its cash surplus in low risk and liquid marketable financial asset classes. Such cash surpluses are
generated from the Group’s own operations and bank loans. Derivatives are used not for speculative purposes but to manage
financial exposure to the volatility of exchange rates by way of hedging transactions. In addition, the Group purchases bonds
with embedded derivatives for the purpose of asset management.

(2) N ature and Extent of Risks Arising from Financial Instruments, and Risk Management Method
Receivables such as trade notes and accounts are exposed to customer credit risk.
Investment securities, mainly equity instruments of customers for the purpose of building strong business relationships otherthan equity instruments of business alliances, are exposed to the risk of market price fluctuations.
The payment terms of payables, such as trade notes and trade accounts, are only short term.
Bank loans are aimed at (mainly short-term) cash operation and the purchase of treasury stock under the ESOP trust system
as the employees’ benefit plan. Bank loans, most of which are contracted with floating rates, are exposed to the risk of rate
fluctuations.
Derivatives mainly include forward foreign currency contracts, which are used to manage exposure to market risks fromchanges in the foreign exchange rates of receivables and payables. Some domestic subsidiaries have purchased bonds withembedded derivatives that are exposed to the risk of a loss of principal.
Regarding Hedge Accounting, please see Note 2.q. for more detailed information.

55

(3) Risk Management for Financial Instruments
Credit Risk Management
The Company manages its credit risk from receivables on the basis of internal accounting rules, which include screening
customers, setting credit limits for each customer, designating due date controls for each receivable and monitoring thefinancial status of major customers through the cooperation of the accounting department and each front office to preventthe default risk of customers.
Consolidated subsidiaries of the Company manage their credit risks and control their receivables, and are required to reportcertain substantial events to the Company when they happen.

Market Risk Management (Foreign exchange risk and interest rate risk)
To hedge the foreign currency exchange risk associated with foreign currency trade receivables and payables, foreign
currency forward contracts are entered into for the purpose of hedging risks associated with the ordinary course of business.
Loan payables are exposed to market risks from changes in interest rates, however, these market risks are considered limited
as the balance of loans payable is so small.
The market values of marketable and investment securities are managed by monitoring market prices and the financial
position of the issuers on a regular basis, considering the relationships with the issuers.
Derivative transactions are determined in specified types and volume based on the Company’s internal guidelines to beapproved by the authorized person. After the approval, derivative transactions are entered into and managed by theaccounting department. In addition, the accounting department is required to report the financial position and the resultsof derivative transactions to the management of the Company on a regular basis.

Liquidity Risk Management
The Company manages its liquidity risk by the corporate treasury department preparing and updating the fund management
plan based on reports from each department, and manages liquidity by holding adequate volumes of liquid assets.

(4) Supplementary Explanation on the Estimated Fair Value
The fair values of financial instruments are based on the quoted price in active markets. If the quoted price is not available,
other rational valuation techniques are used instead. Because various assumptions and factors are reflected in computing thefair value, different assumptions and actual factors could result in different fair values. The amounts of derivative contracts
presented in Note 13 do not indicate market risk.

(a) Fair value of financial instruments
Carrying amounts, the fair values and unrealized gains (losses) as of December 31, 2011, and December 31, 2010, were as
follows. Financial instruments whose quoted value cannot be reliably determined were not included in the following tables.
Millions of Yen

2011
Carrying amount1
Cash and time deposits
Notes and accounts receivable
Securities and investment securities2
Notes and accounts payable
Short-term debt
Long-term debt
Derivative transactions3

56

Financial Section¥ 22,642
88,95644,774(71,383)
(94)
(757)
51

Fair value¥ 22,642
88,952
44,774(71,383)
(94)
(759)
51

Unrealized gains(losses)

¥—
(4)
—
—
—
(2)
—

Millions of Yen

2010
Carrying amount1
Cash and time deposits
Notes and accounts receivable
Securities and investment securities2
Notes and accounts payable
Short-term debt
Long-term debt
Derivative transactions3¥ 21,520
92,77449,301(74,358)(84)(1,043)106

Unrealized gains(losses)

Fair value¥ 21,520
92,76052,034(74,358)(84)(1,050)
106

¥

—
(14)
2,733
—
—
(7)
—

Thousands of U.S. Dollars

2011
Carrying amount1
Cash and time deposits
Notes and accounts receivable
Securities and investment securities2
Notes and accounts payable
Short-term debt
Long-term debt
Derivative transactions3$ 291,249
1,144,272
575,945(918,227)(1,209)(9,737)656

Fair value

Unrealized gains(losses)$ 291,249
1,144,221
575,945(918,227)(1,209)(9,763)
656

$ —
(51)
—
—
—
(26)
—

Notes:
1. Liabilities are shown in parentheses.
2. The embedded derivatives, to the extent that they cannot be separated from the financial host contract, are considered with theseas trading transactions for measurement purposes and are shown in “Investment securities.”
3. Derivative transactions presented in the table above are net amounts. Total net payables are shown in parentheses.
> Cash, cash equivalents and time deposits, and notes and accounts receivable		 The carrying values of cash, cash equivalents and time deposits, and notes and accounts receivable due in one year or lessapproximate the fair value because of short maturities. The fair values of notes and accounts receivable due after one year are
calculated based on future cash flow discounted at an appropriate rate with credit spreads, for those grouped by a certain periodof time and credit rating.
> Securities and investment securities
		 These mainly consist of stocks, bonds and mutual funds. The fair values of stocks are measured at the quoted market price on thestock exchange, whereas the fair values of bonds are measured at the quoted price obtained from a financial institution, and the fairvalues of mutual funds are measured at the constant values available.
> Notes and accounts payable, short-term debt
		 The carrying values of notes and accounts payable and short-term debt approximate the fair value because of their short-term
maturities.
> Long-term debt
		 The carrying values of long-term debt with floating rates approximate the fair value because floating rates reflect the market rate
and the credit spread of the Company remains almost the same. The fair values of long-term debt with fixed rates are measured
at the present value of the principal and interest (including long-term debt due in one year or less), discounted at an expected rateapplied for new borrowings with the same terms.
> Derivative transactions
		 Information on the fair value for derivatives is included in Note 13.

57

(b) Carrying amount of financial instruments whose fair value cannot be reliably determined
Thousands of
U.S. Dollars

Millions of Yen

2 011
Investments in securities with no available market value
Investments in affiliates
Other
Total

2 010

¥1,411
2,057
224¥3,692

2 011¥1,823
2,964
139¥4,926$18,151
26,4592,881$47,491(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen

2011
Due in one year
or lessCash, cash equivalents and time deposits
Notes and accounts receivable
Securities and investment securities
Held-to-maturity securities
		 OtherTotal

Due after one year Due after five years
Due after 10 years
through five years through 10 years¥ 22,642
88,846
3

¥ —
110
116

¥

—
—
1,232

¥ —
—
40

¥111,491¥226¥1,232¥40
Millions of Yen

2010
Due in one year
or lessCash, cash equivalents and time deposits
Notes and accounts receivable
Securities and investment securities
Held-to-maturity securities
		 OtherTotal

Due after one year Due after five years
Due after 10 years
through five years through 10 years¥ 21,520
92,185
337

¥

—
589
52

¥114,042

¥641

¥

—
—
1,060

¥

¥1,060

—
—
145

¥145

Thousands of U.S. Dollars

2011
Due in one year
or lessCash, cash equivalents and time deposits
Notes and accounts receivable
Securities and investment securities
Held-to-maturity securities
		 OtherTotal

Due after one year Due after five years
Due after 10 years
through five years through 10 years$ 291,249
1,142,860
43

$

—
1,412
1,493

$1,434,152$2 ,905$——
15,847$——514$15,847$514

11. CONTINGENT LIABILITIESAs of December 31, 2011, the Group had the following contingent liabilities:
Guarantee Obligations:
Millions of Yen

Aggregated amount of guarantees fordebts of subsidiaries and affiliates and payables of a client, GroupM Japan

58

¥463

Thousands of
U.S. Dollars$5,955

Other contingent liabilities:

total amount of ¥379 million ($4,875 thousand) together

On January 8, 2010, the Company filed a lawsuit againstwith late charges. On April 22, 2010, Art Corporation filed

Art Corporation seeking payment of unpaid receivables

a countersuit against the Company seeking claims of ¥311

for services already provided and advance money in the

million ($4,000 thousand) together with late charges,

Financial Section

however, both cases are still pending in the courts.

On July 30, 2010, the Company faced a lawsuit by

The Company, considering the fact that Art Corporation

Tokyu Agency Inc. claiming payment of consideration

has filed a countersuit against it, has examined carefully

for advertisements in the amount of ¥142 million ($1,826

and sufficiently the content of the counterclaim andthousand) together with late charges and the case is still

has concluded that its claim is justifiable, whereas thepending in court. The Company has examined the content

counterclaim by Art Corporation is unjustified. The Companyof the claim and has concluded that it is unjustified. The

will handle its claim and the counterclaim consulting

Company has given a defense claiming dismissal withappropriately with the corporate lawyers of the Company,

prejudice on merits after consultation with the corporate

who have agreed with the presumption as stated above.

lawyers, who have agreed with the conclusion as statedabove. The Company will handle the lawsuit appropriately
consulting with the corporate lawyers.

12. PER SHARE INFORMATIONPer share information for the years ended December 31, 2011 and 2010, were as follows:
Yen

PER SHARE OF COMMON STOCK:(As of and for the years ended December 31)
Net income (loss)
		 Basic
		 Diluted
Net assets
Cash dividend applicable to the year

U.S. Dollars

2 011

2 010

¥

¥ (110.28)—
2,423.06
20.00

54.37
—
2,270.23
109.002 011$ 0.70
—
29.20
1.40

13. DERIVATIVESThe Group enters into foreign exchange forward contracts

Because the counterparties to these derivatives are limited

to hedge the foreign exchange risk associated with certain

to major sound financial institutions, the Group does notassets and liabilities denominated in foreign currencies.

anticipate any losses arising from credit risk.

The Group also has investments in debt securities withembedded derivatives. Some of those investments have

Derivative transactions entered into by the Group haveterms and conditions that could lead to a situation wherebeen made in accordance with the internal rules andthe original face value of such security is not redeemed

policies that regulate the authorization and exposure limit

even if there is no credit event. However, because such loss

amount.

would be limited to the face value at maximum, the impact
of such risk is limited.

Derivative transactions to which hedge accounting was not applied
Millions of Yen

Year ended December 31, 2011

Currency:
OTC market
Foreign exchange forward contracts
		 —buying (US$)
Total

Notional amounts

Due after one year

¥70

¥—

Fair value¥51

Unrealized gain
(loss)

¥(19)
¥(19)

59

Millions of Yen

Year ended December 31, 2010

Currency:
OTC market
Foreign exchange forward contracts
		 —buying (US$)
Total

Notional amounts

Due after one year

¥141

¥70

Fair value

¥106

¥(35)
¥(35)

Thousands of U.S. Dollars

Year ended December 31, 2011

Currency:
OTC market
Foreign exchange forward contracts
		 —buying (US$)
Total

Unrealized gain
(loss)

Notional amounts

Due after one year

$900

$—

Fair value$656

Unrealized gain
(loss)

$

(244)
(244)

Derivative transactions to which hedge accounting was applied
Millions of Yen

Year ended December 31, 2011
Hedged item
Currency:
OTC market
Not designated as hedging instrument
Foreign exchange forward contracts
		 —buying (US$)
Subtotal
Designated as hedging instruments
Foreign exchange forward contracts
		 —buying (US$)
		 —buying (EURO)		 —buying (STG)
Subtotal
Total

Notional amounts

Due after one year

Payables¥1,171¥1,171¥272¥272

PayablesPayablesPayables

¥

¥

26
16
4
¥
46
¥1,217

—
—
—
¥ —
¥272

Notional amounts

Due after one year

PayablesPayables¥1,98630¥2,016¥1,042—¥1,042

PayablesPayablesPayablesPayables¥¥Hedged item

Designated as hedging instruments
Foreign exchange forward contracts
		 —buying (US$)
		 —buying (EURO)		 —buying (STG)		 —buying (HKD)
Subtotal
Total

60

Financial Section¥1,041¥1,041***——Millions of Yen

Year ended December 31, 2010
Currency:
OTC market
Not designated as hedging instrument
Foreign exchange forward contracts
		 —buying (US$)
		 —buying (HKD)
Subtotal

Fair value

28
5
20
73
¥ 126
¥2,142————¥—¥1,042

Fair value¥1,81828¥1,846

*
*
*
*
—
—

Thousands of U.S. Dollars

Year ended December 31, 2011
Hedged item
Currency:
OTC market
Not designated as hedging instrument
Foreign exchange forward contracts
		 —buying (US$)
Subtotal
Designated as hedging instruments
Foreign exchange forward contracts
		 —buying (US$)
		 —buying (EURO)		 —buying (STG)
Subtotal
Total

Notional amounts

Due after one year

Payables$15,063$15,063$3,499$3,499

PayablesPayablesPayables

$

$

335
206
51
$
592
$15,655

Fair value$13,391$13,391———$—$3,499***——* The estimated fair value of forward foreign exchange contracts is included in the estimated fair value of accounts payable becauseamounts in such derivative contracts designated as hedging instruments are handled together with the payables denominated inforeign currencies that are subject to hedge accounting.

14. SUBSEQUENT EVENTS(1) Retirement of Treasury StockOn February 14, 2012, the Board of Directors resolved to retire a portion of treasury stock in accordance with Article 178 of
the Companies Act and completed the transaction.

Reason for Retirement
The Company has purchased and held treasury stocks for the purpose of exercising flexible capital policy responding
to changes in the business environment. The Company will retire the treasury stocks with the aim to increase returns toshareholders by reducing the number of shares issued.

Details
Method of retirement: The Company offset the capital surplus against the shares to be retired
Class of shares to be retired: Common Stock
Number of shares to be retired: 2,500,000 shares (Representing 5.53% of issued shares prior to retirement)
Effective date of retirement: February 27, 2012
Number of shares issued after this retirement: 42,655,400 shares(2) Stock Option Program
At the 57th general shareholders meeting held on March 29, 2012, shareholders of the Company approved a stock option
plan. The program provides for granting stock options to directors, excluding outside directors and part-time directors,of the Company.

61

15. SEGMENT INFORMATIONIn March 2008, the ASBJ revised ASBJ Statement No. 17,

The Group’s advertising segment covers all kinds of“Accounting Standard for Segment Information Disclosures,”advertising activities that include planning and treatment

and issued ASBJ Guidance No. 20, “Guidance on Accountingof advertisements in various media such as magazines,

Standard for Segment Information Disclosures.” Under

newspapers, television, radio, digital media and OOH

the standard and guidance, an entity is required to report

media. The advertising activities also include planning andfinancial and descriptive information about its reportableproduction for ad expressions and content, and service

segments.

activities such as sales promotion, marketing, and public
relations. The Group’s other business segments include thepublication and sales of magazines and books.

Reportable segments are operating segments oraggregations of operating segments that meet specified(2) Methods of Measurement for the Amounts ofcriteria. Operating segments are components of an entity

Sales, Profit (Loss), Assets and Other Items for Eachabout which separate financial information is available

Reportable Segment

and such information is evaluated regularly by the Boardof Directors in deciding how to allocate resources and in

The accounting policies of each reportable segment areassessing performance. Generally, segment informationconsistent with those disclosed in Note 2, “Summary ofis required to be reported on the same basis as is used

Significant Accounting Policies.”

internally for evaluating operating segment performanceand deciding how to allocate resources to operating

Segment profit (loss) is based on operating income of thesegments. This accounting standard and the guidance are

Consolidated Statement of Income.

applicable to segment information disclosures for the fiscal
years beginning on or after April 1, 2010.

The pricing of intra-segment sales or transfer is on an arm’s
length basis.

The segment information for the year ended December(3)	Information about Sales, Profit (Loss), Assets,

31, 2010, under the revised accounting standard is also

Liabilities and Other Items

disclosed hereunder as required.

Prior year information is omitted as information that would(1) Description of Reportable Segment

be disclosed pursuant to the “Accounting Standard for

The Group’s reportable segments are those for which

Disclosures about Segments of an Enterprise and Related

separate financial information is available and regular

Information“ (ASBJ Statement No. 17, March 27, 2009) has

evaluation by the Company’s management is performed

been disclosed as consolidated segment information basedin order to decide how resources are allocated among theon the previous treatment of segment information.

Group. Therefore, the Group consists of “the advertisingsegment” and “other business segments.”
Millions of Yen

2011
Reportable segments
Sales
Sales to external customers
Inter-segment sales or transfers
Total
Segment profit (loss)
Segment assets
Other:
Depreciation/amortization *4
Increase in property and equipment,
		 and intangible assets

62

Financial Section

Adjustments

Consolidated(3)

¥

—
(60)
(60)

¥347,112
0347,112

3,851

2*1

3,853

8,791

184,343(155)*2

184,188

934

41

975

—

975

1,926

19

1,945

—

1,945

Advertising

Other business

Total¥340,0830
340,083¥7,02960
7,089¥347,11260
347,172

3,859

(8)

175,552

Thousands of U.S. Dollars

2011
Reportable segments
Sales
Sales to external customers
Inter-segment sales or transfers
Total

Other business$4,374,621
0
4,374,621$90,415
773
91,188$4,465,036
773
4,465,809

49,640(92)

2,258,194

Segment profit (loss)
Segment assets

Adjustments

Advertising

Other:
Depreciation/amortization*4
Increase in property and equipment,
		 and intangible assets

Total

$

Consolidated

—
(773)
(773)

$4,465,036—
4,465,036

49,54813*1

49,561

113,082

2,371,276(1,991)*2

2,369,285

12,014528

12,542—

12,542

24,775244

25,019—25,019Notes: 1. Segment profit (loss) consists of elimination for inter-segment transactions and unrealized gain.
			 2. Adjustment to segment assets consists of elimination for inter-segment transactions.
			 3. Segment profit (loss) is adjusted with respect to operating income of the consolidated statement of income.
			 4. Depreciation/amortization includes software capitalized on the balance sheet.

Related Informationb. Property and equipment(1) Information by products and services
Information about products and services is omitted as theMillions of Yensame information is disclosed within “segment information.”

2011
Japan

Overseas¥3,612(2) Information by geographical areas

Total

¥699

Information by business segments, geographic segments¥4,311Thousands of U.S. Dollars

and billings to foreign customers of the Group for the years

2011

ended December 31, 2011 and 2010, was as follows:Japan

Overseas$46,463

Total$8,991$55,454

a. SalesInformation about sales is omitted as sales in Japanc. Major customers

account for more than 90% of the net sales in the

Information about major customers is omitted as no

consolidated statements of income.

customer accounts for more than 10% of the net sales in
the consolidated statements of income.

Information about Impairment Losses of Assets by Reportable Segment
Millions of Yen

2011
Advertising
Impairment losses of assets¥255

Other businessEliminations

—

¥255

Thousands of U.S. Dollars

2011
Advertising
Impairment losses of assets

Total

—

$3,280

Other business—Eliminations

Total

—

$3,28063

Segment Information for the Year Ended December 31, 2010
(1) Business segment information
Business segment information for the year ended December 31, 2010, was as follows:a. Billings and operating income
Millions of Yen

2010
Advertising
Billings to customers
Inter-segment billings
Total billings

Total

Consolidated¥339,432
15
339,447¥7,133279
7,412¥346,565
294
346,859—¥(294)(294)¥346,565—
346,565

339,398

7,436

346,834(291)

346,543

Total of cost of sales andselling, general and administrative expenses
Operating income (loss)

Non-advertising

Eliminations
or Corporate

¥

49

¥

(24)

¥

25

¥

(3)

¥

22

b. Assets, depreciation/amortization and capital expenditures
Millions of Yen

2010
Advertising
AssetsDepreciation/amortization
Capital expenditures¥185,666
781
1,103

Non-advertising¥8,972
37
43

Total

Eliminations
or Corporate¥194,638
818
1,146¥(128))——

Consolidated¥194,510
818
1,146

Note: The Group is engaged primarily in the advertising industry. The two business segments, namely, advertising services and nonadvertising, consist primarily of the following services:			 Advertising services: Planning, creating, producing and placing advertising in various media such as television, radio, newspapers,
magazines, public transportation, billboards and digital media. Additional services such as marketing andbranding consultation, design and production of sales promotion programs, and event marketing.
			 Non-advertising: Publishing and selling of magazines and books and information processing services.

(2) Geographic segment information
Because the billings and total assets of the overseas operations of the Group for the year ended December 31, 2010, wereless than 10% of those of the consolidated totals, such segment information is not presented.

(3) Billings to foreign customers
Because the billings to foreign customers of the Group for the year ended December 31, 2010, was 6.8%, which is less than
10% of the total consolidated billings in the period, such information is not presented.

64

Financial SectionReport of Independent Auditors
The Board of Directors
ASATSU-DK INC.

We have audited the accompanying consolidated balance sheet of ASATSU-DK INC. and consolidated subsidiaries as ofDecember 31, 2011, and the related consolidated statement of income and comprehensive income, changes in net assets,
and cash flows for the year then ended, all expressed in yen. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of ASATSU-DK INC. and consolidated subsidiaries at December 31, 2011, and the consolidated results of theiroperations and their cash flows for the year then ended in conformity with accounting principles generally acceptedin Japan.

The financial statements of ASATSU-DK INC. and its consolidated subsidiaries as of December 31, 2010, and for the year
then ended were audited by other auditors whose report dated March 25, 2011, expressed an unqualified opinion on
those statements.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended
December 31, 2011, are presented solely for convenience. Our audit also included the translation of yen amounts into U.S.
dollar amounts and, in our opinion, such translation has been made on the basis described in Note 1.

March 29, 2012
Tokyo, Japan65

Securities Holdings
ASATSU-DK INC. Consolidated Investments
as of December 31, 2011
Millions of Yen

2 011
Current

Bond investment trust/Money market fund

¥ 6,133

Bonds
Mutual funds in equities and bonds and others

Non-Current

4

2 funds

196

9 funds

Total current investments in securities¥ 6,334

WPP plc.

¥25,328

2.48% or 31,295,646 stocks

Other publicly traded equities

11,725131 issues

Publicly traded equities total

37,053

Non-publicly traded equities in affiliated companies¥996

12 issues

Non-publicly traded equities in subsidiary companies

1,061

19 issues

Other non-publicly traded equities

1,411

73 issues

Non-publicly traded equities total

3,468

Bonds

1,389

9 issues

221

6 issues

Mutual funds in equities and bonds and others

Total non-current investments in securities¥42,133

Millions of Yen

Top Five Equitiy Investments by Balance
WPP plc.
ASAHI Group Holdings, Ltd.

66

2 011
¥2,32831,295,646 shares

1,690

1,000,000 shares

Tokyo Broadcasting System, Incorporated

973

982,900 shares

Shochiku Co., Ltd.

804

1,100,000 shares

NISSHIN FOODS HOLDINGS CO., LTD.

663

220,000 shares

Securities Holdings

Investor Information(As of December 2011)

Parent company nameASATSU-DK INC.

EstablishedMarch 19, 1956

Head office13-1, Tsukiji 1-chome, Chuo-ku, Tokyo 104-8172, Japan

Number of employees

3,416 (consolidated basis)
1,925 (non-consolidated basis)

Common stock

Authorized: 206,000,000 shares
Issued: 45,155,400 shares

Number of shareholders 8,804

Percentage of Total Shares Issued

Treasury stock

5.70%

Individual and others

17.25%

Financial institutions

14.32%

Securities companies

0.21%

Other domestic corporations

5.53%

Distribution
byownersForeigners

56.99%

Percentage of Ownership Voting*Major shareholders

WPP International Holding B.V. ·························································································· 24.26%
Northern Trust Company (AVFC) Sub Account American Client ······································· 6.03%
The Silchester International Investors International Value Equity Trust ························ 3.93%
Northern Trust Company AVFC Re U.S. Tax-Exempted Pension Funds ··························· 3.91%
Masao Inagaki ·························································································································· 3.15%
State Street Bank and Trust Company 505225 ·································································· 2.65%
JP Morgan Chase Bank, 380055 ··························································································· 2.57%
Japan Trustee Service Bank, Ltd. (trust a/c) ········································································ 2.32%
State Street Bank and Trust Company ················································································· 2.26%
Mellon Bank N.A. as Agent for Its Client Mellon Omnibus US Pension ··························· 2.10%*Percentage of Ownership Voting figures are based on 42,582,696 shares (45,155,400 shares issued andoutstanding, minus 2,572,704 shares of treasury stock).

Stock listing

Tokyo Stock Exchange, First Section

Securities code

9747

Transfer agent

Tokyo Securities Transfer Agent Co., Ltd.
6-2, Otemachi 2-chome, Chiyoda-ku,
Tokyo 100-0004, Japan

Annual meeting

The annual meeting of shareholders is normallyheld in March in Tokyo, Japan.

For further information

ASATSU-DK INC. Office of Corporate Communications
Tel.: +81-3-3547-2003
URL: http://www.adk.jp/english/index.html

Investor Infomation

67

ADK Group Network
DOMESTIC
AGENCY GROUPADK International Inc. … ■1-1, Tsukiji 4-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3546-9100
Fax: +81-3-3546-9208
ADK Dialog Inc. … ■1-1, Tsukiji 4-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-5163
Fax: +81-3-3547-5152
ADK Digital Communications Inc..
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2720
Fax: +81-3-3547-2000
Kyowa Kikaku Ltd. … ■20-15, Shimbashi 2-chome,
Minato-ku, Tokyo 105-0004
Tel.: +81-3-3571-3111
Fax: +81-3-3571-3314
ASP Co., Ltd.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2100
Fax: +81-3-3547-2937
AD&M Inc.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3524-5056
Fax: +81-3-3524-5058
DA search & link Inc.
5-11, Nishi-Shimbashi 1-chome,
Minato-ku, Tokyo 105-0003
Tel.: +81-3-5157-3951
Fax: +81-3-5157-3976
Star Collaboration Inc.
1-1, Hiraga-sho 1-chome,
Chiyoda-ku, Tokyo 102-0093
Tel.: +81-3-6272-8912
Fax: +81-3-6272-8916
Cosmo Communications Inc.
24-15, Minami-Aoyama 2-chome,
Minato-ku, Tokyo 107-0062
Tel.: +81-3-3405-8111
Fax: +81-3-3405-8215

CREATIVE GROUPADK Arts Inc. … ■1-1, Tsukiji 4-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3545-5016
Fax: +81-3-3545-5075
Boys Inc. … ■13-13, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3545-1071
Fax: +81-3-3545-1305
Drill Inc.
19-5, Udagawa-cho,Shibuya-ku, Tokyo 150-0042
Tel.: +81-3-5428-8771
Fax: +81-3-5428-8772

68

ADK Group Network

TOPS INC.
46-3, Minami-Otsuka 3-chome,
Toshima-ku, Tokyo 170-0005
Tel.: +81-3-5955-7961
Fax: +81-3-5955-7950

ANIMATION CONTENT GROUP
Nihon Ad Systems Inc.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2183
Fax: +81-3-3547-2098
Super Vision, Inc.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2156
Fax: +81-3-3547-2098
Right Song Music Publishing Co., Ltd.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2184
Fax: +81-3-3547-2098
Eiken Co., Ltd. … ■56-7, Minamisenjyu 6-chome,
Arakawa-ku, Tokyo 116-0003
Tel.: +81-3-3802-3011
Fax: +81-3-3807-6205
PUBLISHING GROUPNIHONBUNGEISHA Co., Ltd. … ■1-7, Kanda-Jimbo-cho,
Chiyoda-ku, Tokyo 101-8407
Tel.: +81-3-3294-7771
Fax: +81-3-3294-7780
Neo Shobo Inc. … ■6-7, Shimbashi 1-chome,
Minato-ku, Tokyo 105-0004
Tel.: +81-3-3573-1277
Fax: +81-3-3574-8165

OVERSEASNORTH AMERICANew York
ADK America Inc. N.Y. … ■6F, 515 W. 20th Street,
New York, NY 10011, U.S.A.
Tel.: +1-646-284-9800
Fax: +1-646-284-9825
Los Angeles
ADK America Inc. L.A.
3137 South La Cienega Blvd.,
Los Angeles, CA 90016, U.S.A.
Tel.: +1-310-630-3600
Fax: +1-310-630-3620

EUROPE
Frankfurt
Asatsu (Deutschland) GmbH … ■Waldschmidtstrasse 19,60316 Frankfurt,Frankfurt am Main, Germany
Tel.: +49-6997-120-832
Fax: +49-6997-120-821

Amsterdam
ADK Europe B.V. … ■Neptunusstraat 31,
2132 JA Hoofddorp, The Netherlands
Tel.: +31-23-554-3530
Fax: +31-23-554-3553
Knots Europe B.V.
Neptunusstraat 31,
2132 JA Hoofddorp, The Netherlands
Tel.: +31-23-554-3554
Fax: +31-23-554-3553
Paris
ADK France S.A.S.
352 Rue Saint-Honore,
75001 Paris, France
Tel.: +33-1-5345-3450
Fax: +33-1-5345-3455
Moscow
ASATSU-DK INC.
Moscow Representative Office
12 Krasnopresnenskaya nab., No. 1603,
Mezhdunarodnaya-2,
Moscow 123610, Russia
Tel.: +7-495-258-1591

ASIA
Beijing
Beijing Huawen-Asatsu International
Advertising Co., Ltd.
Room 1216, Spaces International Center,
No. 8 Dongdaqiao Road,
Chaoyang District,
Beijing 100020, P.R.C.
Tel.: +86-10-5870-3636
Fax: +86-10-5870-3628
Tiexu Advertising Co., Ltd.
18F, Golden Land Bldg.,
No. 32 Liangmaqiao Road,
Chaoyang District,
Beijing 100016, P.R.C.
Tel.: +86-10-6464-2122
Fax: +86-10-8448-3324
Beijing Asatsu Advertising Co., Ltd.
C-3, Huitong Office Park,
No. 71 Jianguo Road,
Chaoyang District,
Beijing 100025, P.R.C.
Tel.: +86-10-8599-7788
Fax: +86-10-8599-7579
Beijing DongFang SanMeng Public Relations
Consulting Co., Ltd.
Room 1803, CITIC No. 19 Jianguomenwai
Street, Beijing, 100004, P.R.C.
Tel.: +86-10-8391-3389
Fax: +86-10-8391-3399
IMMG-Beijing Co., Ltd.
Room 2003, China Railway Construction
Bldg., No. 20 Shijingshan Road, Shijingshan
District, Beijing 100131, P.R.C.
Tel.: +86-10-5265-6220
Fax: +86-10-5265-6239

(As of April 2012)
Shanghai
Shanghai Asatsu Advertising Co., Ltd. … ■10F, Yongxing Mansion,
No. 887 Huaihai Zhong Lu,
Shanghai 200020, P.R.C.
Tel.: +86-21-6467-4118
Fax: +86-21-6474-7803
Asatsu (Shanghai) Exposition & AdvertisingCo., Ltd.
23F, Jiushifuxing Mansion,
No. 918 Huaihai Road (M),Shanghai 200020, P.R.C.
Tel.: +86-21-6415-5881
Fax: +86-21-6271-3651
Asatsu Century (Shanghai)
Advertising Co., Ltd. … ■9F, Yongxing Mansion,
No. 887 Huaihai Road (M),Shanghai 200020, P.R.C.
Tel.: +86-21-6474-8908
Fax: +86-21-6474-8909
Beijing DongFang SanMeng Public Relations
Consulting Co., Ltd. Shanghai Branch
Room 1201, Yongxing Mansion,
No. 887 Huaihai Road (M),Shanghai 200020, P.R.C.
Tel.: +86-21-6433-9875
Fax: +86-21-6443-9705
Guangzhou
Guangdong Guangxu (ASATSU)
Advertising Co., Ltd. … ❑26F, Telecom Plaza,No. 18 Zhongshan Er Road,
Guangzhou 510081, P.R.C.
Tel.: +86-20-8888-9818
Fax: +86-20-8888-9815
Shanghai Asatsu Advertising Co., Ltd.
Guangzhou Branch
Room 2604, 26F, Telecom Plaza,No. 18 Zhongshan Er Road,
Guangzhou 510081, P.R.C.
Tel.: +86-20-8888-8650
Fax: +86-20-8888-8461
ChengduShanghai Asatsu Advertising Co., Ltd.
Chengdu Branch
Room 1502, No. 16 in 3rd Section of
Hongxing Road,
Chengdu 610016, P.R.C.
Tel.: +86-28-8666-5471
Fax: +86-28-8672-5017
FuzhouShanghai Asatsu Advertising Co., Ltd.
Fuzhou Branch
Room 502, 8F, North Tower,
Xiao Kan Yuan Bldg., 208 Hudong Road,
Gulou District, Fuzhou 350003, P.R.C.
Tel.: +86-591-8801-2100
Fax: +86-591-8801-2108
Hong KongASATSU-DK HONG KONG LTD. … ■25F, Leighton Centre, 77 Leighton Road,
Causeway Bay, Hong Kong
Tel.: +852-2895-8111
Fax: +852-2576-3322

DK ADVERTISING (HK) LTD. … ■25F, Leighton Centre, 77 Leighton Road,
Causeway Bay, Hong Kong
Tel.: +852-2811-9999
Fax: +852-2811-9699
Taipei
United-Asatsu International Ltd. … ■13F, No. 287 Nanking E. Road,
Sec. 3, Taipei 105, Taiwan, R.O.C.
Tel.: +886-2-8712-8555
Fax: +886-2-8712-9555
DIK-OCEAN Advertising Co., Ltd. … ■13F, No. 287 Nanking E. Road,
Sec. 3, Taipei 105, Taiwan, R.O.C.
Tel.: +886-2-8712-8555
Fax: +886-2-8712-9555
Singapore
ASATSU-DK SINGAPORE PTE. LTD. … ■1 Liang Seah Street, #02-05,
Singapore 189022
Tel.: +65-6333-5115
Fax: +65-6333-5225
Scoop AD WORLD Pte Ltd.
1 Liang Seah Street, #02-05,
Singapore 189022
Tel.: +65-6333-5115
Fax: +65-6333-5225
IMMG Pte Ltd.
213 Henderson Industrial Road, #01-09,
Henderson Industrial Park,
Singapore 159553
Tel.: +65-6376-5088
Fax: +65-6375-2029
Jakarta
PT. Asta Atria Surya
Wisma Slipi, Lantai 11 Jl. Let.
Jend. S. Parman Kav. 12,
Jakarta 11480, Indonesia
Tel.: +62-21-530-7155
Fax: +62-21-530-7156
PT. Perdana IMMG Indonesia
Jl. Kemang I No. 5,
Jakarta Selatan 12730, Indonesia
Tel.: +62-21-718-3311
Fax: +62-21-718-3322
Kuala Lumpur
ASATSU-DK Malaysia Sdn. Bhd.… ■Level 18, Menara Merais, No. 1,
Jalan 19/3, 46300 Petaling Jaya,
Selangor, Malaysia
Tel.: +603-7954-0388
Fax: +603-7954-0266
Dai-Ichi Kikaku (Malaysia) Sdn. Bhd.
C-13A-3A, Dataran 3 Two, No. 2,
Jalan 19/1, 46300 Petaling Jaya,
Selangor, Malaysia
Tel.: +603-7960-8106
Fax: +603-7960-8103

DAI-ICHI KIKAKU (THAILAND) CO., LTD. … ■23F, Shinawatra Tower III,
1010 Vibhavadi Rangsit Road,
Ladyao, Chatuchak,Bangkok 10900, Thailand
Tel.: +66-2-949-2700
Fax: +66-2-949-2777
ASDIK Ltd. … ■6F, Shinawatra Tower III,
1010 Vibhavadi, Rangsit Road,
Ladyao, Chatuchak,Bangkok 10900, Thailand
Tel.: +66-2-949-2800
Fax: +66-2-949-2805
Ho Chi Minh CityASATSU-DK VIETNAM INC.
28 Nguyen Van Thu Street,
District 1, Ho Chi Minh City, Vietnam
Tel.: +84-8-3910-5550
Fax: +84-8-3910-5551
SOL Advertising Company
28 Nguyen Van Thu Street,
District 1, Ho Chi Minh City, Vietnam
Tel.: +84-8-3910-5550
Fax: +84-8-3910-5551
ManilaADK INTEGRA INC.
25F, Raffles Corporate Center,
F. Ortigas, Jr. Road (formerly Emerald Ave.),
Ortigas Center, Pasig City 1605, Philippines
Tel.: +63-2-914-4297
Fax: +63-2-914-9001
Seoul
Asatsu-DK Korea Co.,Ltd.
7F, DaeHeung Bldg., 4-3, Yangjae-dong,Seocho-gu, Seoul, Korea
Tel.: +82-2-511-5934
Fax: +82-2-511-5935
New Delhi
ADK-FORTUNE PVT. LTD.
B1/B2, Enkay Centre, Udyog Vihar Phase-V,
Gurgaon 122016, India
Tel.: +91-124-453-9723
Fax: +91-124-453-9752
Dubai
AGA ADK advertising & marketing
3F, Fortune Executive Tower,
Jumeirah Lake Towers,
Dubai, United Arab Emirates
Tel.: +971-4-4458-383
Fax: +971-4-4503-948… ■ Consolidated subsidiaries…❑A ffiliates accounted for by theequity method

Bangkok
ASATSU (THAILAND) CO., LTD. … ■24F, Sirinrat Bldg.,
3388/86 Rama 4 Road, Klongton, Klongtoey,
Bangkok 10110, Thailand
Tel.: +66-2-367-5951
Fax: +66-2-367-5946

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ASATSU-DK INC.
http://www.adk.jp/english/index.html

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