ADK Annual Report 2007
Year Ended December 31, 2007

ADK Profile
ASATSU-DK INC., commonly known by its initials ADK, wasfounded in March 1956 by current Chairman Masao Inagaki
as a small, ambitious firm focusing on magazine advertising.
ASATSU INC., as it was known at the time, quickly built up asolid client base, primarily in the financial sector, giving it astrong foundation for growth.
As Japan entered the high-growth years of the
1960s, ASATSU INC. broadened its creative reach to include
planning and production of animation programs for the thenstill-new medium of television. In 1987, it was listed on theSecond Section of the Tokyo Stock Exchange (TSE), becoming
the first advertising agency in Japan to make a public stock
offering. The company listed on the First Section of the
TSE in 1990.
In 1998, it made another major move, signing areciprocal share agreement and strategic alliance withWPP Group plc, the world’s second largest marketing andcommunication service organization ( Advertising Age
May 5, 2008).
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 period of
renewed growth.

Contents
Topics1

Board of Directors & Auditors

23

Business at a Glance2

Management’s Discussion and Analysis

24

A Letter to Our Shareholders

4

Forward-Looking Statements and Risk Factors

32Interview with the President and Group CEO

6

Financial Section

35

Interview with the Cross-Communications Group Director

14

Securities Holdings

62

Corporate Social Responsibility

17

Investor Information

63

Corporate Governance & Internal Control

18

ADK Group Network64

Topics

year-on-yearincreases in revenue and earnings, on bothconsolidated and nonconsolidated bases, andraised annual cash dividends.

our aggressive sharebuyback program, purchasing 2 million shares
during the year and subsequently cancelling
6 million shares.

numerous creative awards, bothin Japan and overseas, including the Gold Lion at
the Cannes International Advertising Festival.

progress in Asia andstrengthened our bases in India and the Middle East.

ADK Annual Report 20071

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ADK Annual Report 2007

3

To OurValued Shareholders
It is our pleasure to provide an overview of ADK’s
performance in fiscal 2007, ended December 31, 2007.

Fiscal 2007 in Brief
For the year, we reported generally improved results,
with year-on-year increases in gross billings, gross profit,
gross margin, operating income, and net income. We
also achieved higher EPS and ROE, which we regard asimportant performance indicators. These results represent
a turnaround from the previous fiscal year, when we
posted declines in operating income and net income. We
are therefore confident that ADK is back on a firm growthtrajectory. However, our results were affected by the weak
performance of several subsidiaries and affiliates, and weare now taking action to correct this situation.

Shareholder Returns
Maximizing shareholder value is a top priority at ADK. Under
our new dividend distribution policy set in February 2007,
we are targeting a dividend payout ratio of 35%, which weachieved in the year under review. For the year, we declaredan annual cash dividend of ¥42 per share, up from ¥32 in
fiscal 2006.
During the period, we maintained our aggressive
share buyback program, which is aimed at further boosting
shareholder value. In fiscal 2007, we acquired just over2 million shares, and we cancelled 6.5 million shares in
November. Total shareholder return–the value of sharesbought back plus total cash dividend payments–was
equivalent to 181.6% of net income for the year.

Masao Inagaki
Representative Director, Chairman

4

ADK Annual Report 2007

We will continue the buyback program as a means ofunderpinning EPS and ROE and demonstrating our strong
commitment to shareholders. At the same time, we will retain
sufficient financial stability to make investments geared tosustained growth and improvements in corporate value.

Philosophy and Strategies
Since our establishment, we have embraced a corporate
philosophy of “Management by All.” At the same time, wehave constantly sought to develop technologies enabling us
to offer optimal communications programs that meet the
expectations of clients and win their confidence.
Without neglecting important basic matters, such as
the establishment of strict compliance and efficient internal
control systems, we will step up efforts to manage ourorganization properly and thus become a company worthyof the trust of all stakeholders.
We look forward to the ongoing support andunderstanding of our shareholders as we pursue our futuregoals.
June 2008

Masao Inagaki
Representative Director, Chairman

Koichiro Naganuma
Representative Director, President & Group CEO

Koichiro Naganuma
Representative Director, President & Group CEO

ADK Annual Report 2007

5

A Year of

Challenge and Progress
Interview with Koichiro Naganuma, President and Group CEO
Despite a sluggish advertising market, ADK achieved a turnaround in revenue and earnings andis now back on a growth trajectory. We also continued enhancing our business model to meetthe evolving needs of clients. Equally important, we significantly increased cash dividends andmaintained our aggressive share buyback program aimed at maximizing the return for shareholders.

6

ADK Annual Report 2007

Fiscal 2007 represented a turnaround in

Q ADK’s performance after a decline in the

improvement on fiscal 2006, we are still well behind thefiscal 2004 figure of 16.8%.

previous fiscal year. Do you feel that ADK is now
on a firm growth footing?

In fiscal 2007, the staff cost to gross profit ratio was
57.8%, unchanged from fiscal 2006 but above the fiscal
2004 figure of 55.7%. We will keep working hard to keep

A but I am not completely satisfied. As you know, fiscal

I am happy with our performance in many respects,

growth in staff costs below that of gross profit, without

2004 was our best year to date. Our performance slipped

attract and develop the highest-quality talent.

compromising our important ongoing objective, which is toin fiscal 2005 and 2006. Last year, we recovered again, but

To better serve shareholders, back in 2004 we set

operating income remained below the fiscal 2004 level.

an EPS goal of ¥130 or more by fiscal 2007. We have since

Until we surpass fiscal 2004 in all areas that we feel are

worked to achieve that goal through improvements inimportant, I will not be fully satisfied. On a brighter note,

profitability and share buybacks. In fiscal 2007, however,

we generated a 3.6% increase in consolidated gross billings

we could not reach the target, due to limited growth

in a sluggish market that grew only 1.1%.* In fact, theof operating income and poor performances by somecombined gross billings of the Top 8 advertising companies

subsidiaries and affiliates. Nevertheless, EPS grew 9.2%

edged up only 0.3%.

year on year, reaching ¥116.40.

More important than billings, however, is profitability.

In addition to EPS, we have decided to add ROE to our

We have set a number of profitability indicators as targets

performance targets in our medium-term management plan.

for improving corporate value. These include operating

To achieve a higher ROE, we are trying to maximize earnings

margin, staff cost to gross profit, earnings per share (EPS),

through organic growth and acquisitions, as well as shareand return on equity

buybacks. Our ROE in fiscal 2007 was 3.9%, an improvement(ROE). In fiscal 2007, ouron the previous year but still behind the figures for fiscal

operating margin was

2004 and 2005.

13.8%. While this is an* According to “Advertising Expenditures in Japan ” reported by Dentsu Inc.

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CY2007 Gross Billings of the Top 8 Agencies (Non-Consolidated)
Gross Billings (Millions of Yen)

DentsuHakuhodo
ADK
Daiko
Tokyu Agency
East Japan M&C
YomikoAsahi Koukokusha
Total¥ 1,588,769
716,975
387,860
137,947
121,971
109,794
98,02557,984¥ 3,219,325

Y/Y

-1.1%
0.4
2.4
1.4
-1.0
7.6
8.3
1.7
0.3%

ADK Annual Report 2007

7

What are the other highlights

Q of fiscal 2007?

It was a good year for our Magazine Division, which

A generated a significant increase in billings. This was

mainly because we added prominent new clients, especiallyin the Apparel/Jewelry and Cosmetics/Toiletries sectors.
Newspaper Division billings declined, affected bysluggish demand among clients in the Finance/Insurance
sector. The newspaper medium has been hardest hit by

Non-Consolidated Gross Billings Breakdown by MediaMagazine
Newspaper
Television
Radio
Digital MediaOOH Media
Sales Promotion
Creative
Other
Total

2007 (Millions of Yen)
¥ 28,400
34,157
177,965
4,453
13,506
11,592
57,97847,53812,266¥ 387,860

Y/Y
30.8%
-4.6
-10.1
6.2
8.0
-3.3
0.8
5.2
18.6
2.4%

the rise of the Internet. However, it remains a core partof our business. Every form of media has its own uniquecharacteristics, and we develop communication plans thatIn the previous year, our domestic branch offices in Osakautilize all such characteristics as part of our 360-degree

and Nagoya produced excellent results. This resulted

communications approach.

from our successful strategy of dispatching personnel

In the Television Division, we posted a slight decline

branch and headquarters staff. In fiscal 2007, however,affected by sluggish demand among clients in the Finance/

both branches posted disappointing results.

Insurance sector. And the decline in the popularity of Yu-Gi-

The Osaka market is very large, almost as big as

Oh! , a major hit in Japan and overseas in 2004, continued

the nationwide markets of South Korea or Australia, so

its fall, which had some impact on our content business in

we must further reinforce our operations there.

the Television Division. Nevertheless, we have many otherOn a positive note, our Kyushu branch, covering Japan’s

high-quality animation programs in our repertoire, which we

fourth largest regional market, has done consistently

expect will continue to do well overseas.

well over the past six or seven years. Our aim is to seize

The performance of the Digital Media (Internet), OOHMedia and Sales Promotion divisions needs to be further
improved. OOH billings declined 3.3% and Sales Promotion

the second largest market share there in thenear future.
Overseas, we did particularly well in Thailand

Division billings remained unchanged. These

thanks to the addition of major Japanese clients withareas are important for ensuring a holistic

local operations. In fact, we are strong generally inapproach to consumers, especially given

Asia. For the entire region, except China, Hong Kong,that lifestyles are changing rapidly andand Taiwan, our billings and profit including non-media consumption is becoming more

consolidated subsidiaries have almost doubled over

diversified. In 2008 and beyond, we will

the past five years.

direct more resources into these importantbusinesses, which have considerable
potential for future growth and provide
synergies with our other businesses.
In the previous fiscal year, our In In

8from headquarters and promoting collaboration between

in billings, but improved profitability. The performance was

ADK Annual Report 2007

How has the Japanese advertising market evolved in

Q recent years, and what are the challenges foradvertising companies?

Since around 2000, the power of the traditional four

A mass media—newspapers, magazines, television, andradio—has been decreasing. I attribute this trend to two
main factors, both of which are interconnected. The first ischanging consumer purchasing behavior.

Typical modern consumers, for example, would noticea product advertised on television. Intrigued, they would
then use the Internet to find out more information on

In my opinion, this situation presents many

features, prices, and store locations. They might visit one oropportunities for advertising companies that are brave andmore stores to see and feel the product first-hand. Finally,

creative enough to reinvent themselves. ADK is one suchthey would purchase the product, either at a store or online,

company. Some advertising companies perceive the Internet

having researched the “best deal” via the Internet. Today’s

as a potential threat to their livelihood. I see it asconsumers are very savvy. They know how to get the latest

an opportunity just like the advent of TV more than 50

information about products.

years ago.

The second factor is the emergence of the Internet.
This exciting medium has opened a whole new world for
consumers and given them greater power over their own
purchasing decisions. Not only can the Internet be used toaccess information about almost any product, but it can also

How does ADK propose shifting from the traditional

Q business model to meet the needs of today’s clients?

serve as the channel for actual purchases. Moreover,consumers can exchange such information using the Internet
and a mobile phone.
What are the challenges for an advertising company?

I believe our clients need tailored solutions that

A flexibly combine diverse forms of media. In otherwords, they require an ideal communications package that

For a start, the Japanese advertising business model

helps boost both long-term and short-term growth. Branding

remains mass media-centric. In fact, the model hasn’t

is important for creating the foundation for long-termchanged much for the past 50 years. However, many

growth and traditional mass media are perhaps best suited

advertising companies are not ready, or perhaps not willing,

to brand-building.

to transform themselves to meet the realities of changing
consumer behavior and the rise of the Internet.
Let’s face the realities. Television spot advertising

For short-term growth there’s the Internet, ofcourse. But don’t neglect in-store media. In fact, I cannot
overemphasize the importance of in-store media, especiallyis lucrative for any advertising company. But it is notfor commodity products. Despite the growing power ofnecessarily the best solution for every advertiser.

new media, it is generally said that for commodity products

Many clients are looking for something different to attract

about 70% of people still make their final purchasing

modern consumers, and the traditional communication

decision at the store. The storefront is the ultimate touchmodel may not meet their needs. Therefore, we must

point, or experiential point between the consumer and the

prepare to offer media-neutral and solution-neutral

product.

communication plans to meet our clients’ needs.

ADK Annual Report 20079

So a typical program would have elements of mass
media, the Internet, and in-store media, as well as outof-home (OOH) media, such as billboards and public
transportation advertising. They should be combined in
an integrated, holistic package in which all elements aremutually reinforcing to deliver the best possible outcome.
Here is where our 360-degree communications
approach comes in. This involves efficiently utilizing every
consumer experiential point to address client demands withmedia-neutral, solution-neutral plans. When formulating
an advertising program, our policy is to start from scratch,without harboring loyalties to any particular medium orsolution. We must be flexible enough to create tailored
programs that are not necessarily dependent on mass media.
With the emergence of consumer-generated media(CGM), such as Web blogs, advertisers are seeking toestablish more interactive relationships with consumers.
Rather than simply promoting products and services, weneed to find ways to build closer ties between the twoparties. So we have taken the 360-degree communications
approach one step further, with the establishment of our
Cross-Communication Group in 2008. The new group will
spearhead our efforts to generate change and help ADK
lead the advertising industry into the future. (For more
information on the new Cross-Communication Group and its
strategy, see the interview with Toshiyuki Inoue, director in
charge of the Cross-Communications Group, on page 14.)10ADK Annual Report 2007

You talk about the “return on investment (ROI)”

Q aspect in advertising as a key part of your approach

Combined with the ¥10.00 interim dividend already paid,

to clients. Can you elaborate?

from ¥27.00 in fiscal 2006. Accordingly, the dividend payout

this brings the total annual dividend to ¥42.00 per share, up
ratio jumped from 25% to 35%. I would also like to point out

Advertising spending is just one of multiple

A investment options for our clients. Increasingly,
companies are looking for ways to measure the effectivenessthat ADK pays dividends on a semiannual basis rather thanquarterly, in order to save operational costs.
In addition to steady increases in cash dividends,of their advertising expenditures. If they cannot see results,

we have an aggressive share buyback program aimed atthey can easily opt for alternative investments that provide

maximizing shareholder returns. ADK has been buying backbetter returns.

shares since 2001 to help improve EPS and ROE. The Board

The term “ROI” is daunting for many advertisingof Directors has resolved to accelerate acquisitions, buying

companies. It has never been part of the traditional

back 4% of outstanding shares per year for the time being.

advertising business model, because advertising spending

If we are unable to reach the targeted number of shares,

has long been regarded as a necessity, not a choice.

we will consider raising cash dividends to make up each

At ADK, however, we embrace ROI as a way to measureshareholder’s return. In fiscal 2007, we bought back justthe effectiveness of our services. We already incorporate

over 2 million shares, amounting to ¥7,812 million. Total

sophisticated ROI measurements in our 360-degree

shareholder return—the value of shares bought back plus

communications programs. So it is only natural to apply

total dividends paid—was the equivalent of 181.6% of net

our experience and creative resources to maximize ourincome for the year.

client’s ROI.

We will continue our aggressive shareholder return
program. At the same time, however, we recognize that
we cannot spend all our earnings on dividends and share

ADK seems to have a proactive shareholder return

Q policy, of which share buybacks are an importantbuybacks. That would spread our financial resources toopart. Can you describe this policy in more detail?

to keep our company stable and prepare us for businessthinly. Therefore, our policy is to retain sufficient funds
investment opportunities. It’s a delicate balance, but I think

My philosophy is that when a company goes public,

A it has responsibility for shareholders’ money. Asa publicly listed company, therefore, ADK is essentially

we’ve got it right, and we’ll keep fine-tuning it according to
the circumstances.
There’s one more point I should make on this subject.

borrowing funds from its shareholders. Like our advertising

Despite the accelerated buybacks and cancellation ofclients, our shareholders have multiple investment options,

our own shares, we intend to maintain our current cross-and those who choose to invest in ADK have done soownership alliance with the WPP Group. Both groups will

because they believe we can provide superior returns. And

work together to enhance their strategic business alliancethat is exactly what we strive to deliver.

while helping maximize each other’s shareholder value.

In February 2007, we set a new dividend distribution
policy, calling for 35% of consolidated net income to be
distributed through common dividends, with a minimum
annual dividend of ¥20.00 per share. Adhering to this policy,
we declared a year-end dividend of ¥32.00 per share.

ADK Annual Report 2007

11

What is your outlook for

Q fiscal 2008?

Considering the global and Japanese economic

A outlooks, I think the domestic advertising market
will remain slow, with little or no growth or, even worse,
negative growth. Despite the challenges, we will work
harder to outperform the market in terms of revenue
growth. Although ADK ranks third among Japanese
advertising companies in size, its share of the domestic
market is just above 5%.* Therefore, there is plenty of room
to grow by winning market share from others. We can dothis by providing better-quality services and targeting
sectors where our profile remains low, such as automobiles,
home electronic products, and food. The pharmaceuticals
sector also holds good promise.
We have formulated a new medium-term businessplan covering the three-year period from January 2008 to
December 2010. Under the plan, we are targeting an EPS of¥170 or higher and an ROE of 6% or higher, and will maintaina dividend payout ratio of 35%.
To achieve our goals, we will further bolster our
360-degree communications approach and enhance

IKEA
At the Cannes International Advertising Festival, IKEA’s LaunchCampaign was awarded the Gold Lion in the Media Category.
The Balcony filled with ads astonished the train passengers
near the first store of IKEA and 4.5 Museum, which was
designed to prove that IKEA furniture is suitable for Japanesepeople’s lifestyles by showing the small space furnished with
its products in the typical 4.5 tatami mat-sized rooms.

our cross-communications planning ability. This means
providing media-neutral, solution-neutral, consumer-centriccommunications plans covering all media, including Internet,
mobile, and OOH, to reach all possible consumer touchpoints.
We will also increase our focus on the direct business, anarea to which our clients are attaching more and more
importance. We already have expertise to support thoseclients’ needs and the creativity to enhance their brandpower.
* According to “Advertising Expenditures in Japan ” reported by Dentsu Inc.
The scope of this report was expanded from the current issue reflecting the effect of
the rapid expansion of the internet and promotional advertising.

Maxell DVD
The Maxell DVD “Time capsule campaign” featured a small
school being closed. The documentary of the last one week ofthe school moved audiences all over Japan and impressed thebrand image of Maxell DVD as a long-lasting recording media.

12

ADK Annual Report 2007

Creativity is the heart of an advertising company. In
2007, we won several prestigious creative awards, bothoverseas and in Japan. These include the Gold Lion (Media
category) at the Cannes International Advertising Festival,
the Gold and Grand Prix (Radio category) at the Asia PacificAdvertising Festival, and the Grand Prix (TVCF category) at
the All Japan Radio and Television Commercial Confederation(ACC). In fiscal 2008 and beyond, we will work to further
enhance our creative capabilities.
ADK also has a unique expertise in the content
business, which represents another important source

Emerging markets are a key element of our futureof income. Although we cannot expect to consistently

strategy. In India, we recently formed a joint venture

produce such “mega-hits” as Yu-Gi-Oh! , we have abundantwith JWT, a core brand of the WPP Group that has ahigh-quality animation content in our portfolio, including

strong presence in that market. We have also set up a

Doraemon, a highly beloved character both in Japan andrepresentative office in Dubai to identify opportunities in

elsewhere in Asia. Going forward, We will seek to export

the growing Middle East region. We also plan to enter thefine animation content to broaden our business scope

Russian market in the near future.

and income sources. At the same time, of course, we willcontinue creating new content.
We recognize the crucial importance of human talent
in implementing the aforementioned strategies. To
effectively nurture our human resources, we operate ADK

Finally, how does the “Management by All”

Q philosophy fit in the context of ADK’s future plans?

University and other educational programs. These are partof our ongoing efforts to foster “Communication Planners”“Management by All” will remain our core guiding

capable of providing media-neutral, solution-neutral

A philosophy as long as our company exists. Under thiscommunications programs to our clients.

philosophy, every employee in the ADK Group is expected

We will also focus on consolidated groupwide

to embrace a management perspective and approach client

operational management and maintain more hands-on

needs proactively. Applying these principles, the Group

control over our subsidiaries and affiliates. Overseas, we will

will strive to deliver value both to clients and consumers

further reform our European operations and develop new

to ensure sustained growth in shareholder value. This isbusinesses in Asia.

integral to our successful development as a “Future Agency”
that offers media-neutral, solution-neutral ideas through360-degree communications programs designed to help
clients build up their brands and enhance profitability.

ADK Annual Report 200713

CrossCommunications Solutions:
The Key to the Future of Advertising
In January 2008, ADK set up its new Cross-

Each of the points at which consumers comeCommunications Group to spearhead formulation

into contact with information is called a touchpoint orof cross-communications programs that are media-

experiential point®. The number of such points has grownneutral, solution-neutral, and consumer-centric. So

massively, to an extent unheard of in earlier days, when

what exactly is cross-communications, and whatrole will it play in the rapidly changing advertisingmarket? The following section is a summary of aninterview with Toshiyuki Inoue, director in chargeof ADK’s new Cross-Communications Group.

information dissemination was dominated by the four
traditional mass media—television, radio, magazines, andnewspapers. Now, consumers come into contact withinformation at all times of the day.
The evolution of non-mainstream media has broughtchanges in the way advertising agencies do their business.
In the pre-Internet days, the “media-mix” concept was used
to describe communications programs combining traditional

Changing Media and Consumer Behavior

mass media and other forms, such as out-of-home (OOH)
media, notably billboards, public transport advertising,Today’s consumers are bombarded constantly by

and in-store media. More recently, with the proliferation

information. When they wake up, they listen to the radioof IT-driven media, the industry has embraced the “cross-and read the morning newspaper. Going to work or school,

media” concept, which is essentially “media-mix” combined

they read magazines and see public transport ads andwith advanced media, such as the Internet and mobile

billboards. Along the street, they receive free pamphlets

communications. In designing “cross-media” programs,

and newsletters. Back at home, they watch television. And

agencies endeavor to ensure that the messages of theirat various times during the day, they access the Internet, via

clients reach consumers via as many points as possible.

computer or mobile phone.

Despite the efforts of advertising agencies toformulate sophisticated programs combining multiple new
and old media, the problem is that the overwhelming bulk of
information fails to catch the consumer’s attention. There’s
too much quantity, and not enough quality. The huge efforts
and investments devoted to creating such information
mostly go to waste.

Toshiyuki Inoue
Director in Charge of the
Cross-Communications Group14ADK Annual Report 2007

The reason lies in the changing behavior of theconsumer. Until a few years ago, consumers were essentiallyrecipients of information, but today they are also informationtransmitters. They have evolved into mature, sophisticatedbeings, capable of sifting through huge amounts of data,
selecting the pieces of information they desire, and taking
action aimed at making their lives better. Equally significant,in their new role as information sources, they pass valuable
information to others via e-mail or mobile phone, or to a

Cross-Communications Concept

wider audience via consumer-generated media (CGM), such
Given the onslaught of technological innovation andas Web blogs and social networking service (SNS) sites.

increasing sophistication of consumer purchasing patterns,
we at ADK believe that the cross-media concept is alreadybecoming outdated. Simply creating communication packages

Advertisers Demand Better Resultsthat combine several forms of new and old media does not
Japanese advertisers are keenly aware of these changes,

necessarily deliver the best solutions for our customers.

and they are calling out for more effective ways to reach

The advertising industry needs a new communication model.
For this reason, we have created the cross-their intended consumers. No longer satisfied with mass
media-buying power alone, they expect agencies tocommunications concept to better reflect the realities of

expand their services to deliver optimized media planningtoday’s market. Cross-communications differs from cross-solutions that integrate traditional and digital media. They

media because it is media-neutral and solution-neutral.

are demanding ever more diversified and sophisticatedMoreover, it is consumer-centric, because it places muchcommunications programs from their agencies. Just as

greater emphasis on understanding consumer behavior

important, they want their agencies to show quantifiable

and incorporating it in the programs.

returns on their advertising and communication investments.
Today’s clients demand verification of ROI to confirm theeffectiveness of their ad spending. Providing ROI feedback
to clients is a good way to increase trust and satisfaction,
yet most agencies are reluctant to embrace ROI as away to measure their results.

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ADK Annual Report 200715

We must scrutinize the behavioral characteristicsof the consumers we wish to reach. We must identify
the lifestyles, hobbies, and intelligence levels of target

Now, we have all of the resources necessary to provide
cross-communications programs under one umbrella.
Going forward, we will place top priority on enhancing

consumers, as well as what motivates them. Then we must

the talents of the Cross-Communications Group’s staff. In

create communications programs that holistically link all

addition to in-house training, we will consider diverse otherof these factors and incorporate every conceivableways to improve our creative capabilities, such as businessexperiential point.

tie-ups with external parties and personnel exchanges.

But still, this is not enough. The impact of our

In June 2008, ADK announced a new development—

communication package will depend crucially on the quality

establishment of a new company to specialize in Internetof the message contained therein. Idea-filled content,

advertising in a tie-up with Digital Advertising Consortium

designed to win the hearts and minds of consumers, isInc. (DAC). ADK Interactive Division effectively becomes

the key. It is not easy to create such content in the floodan independent new company with part of the divisionof information. What is more, in order to engage withremaining inside ADK to ensure seamless integration with

consumers, the content must be closely connected with

its Cross-Communications Group. By maximizing synergies

the brand, for example, magazine-like brand stories thatwith existing media, the new company will be able to moresatisfy consumers’ interest or cultural information such as

efficiently and efficiently promote Internet advertising tomusic, art, or movies that they can really enjoy and identify

ADK’s growing clientele.

with. Only “branded content,” which leverages the features,history, and brand value of products, can be fully effective
to deepen engagement with consumers on a daily basis.

Greater Change Ahead

ADK on the Move

We believe that the pace of social change will increase in the
future. To succeed, we must preempt change and move to

ADK has long been at the forefront of change in thethe forefront of progress. By doing so, we can gain a moreindustry. For some time, we have promoted our 360-degree

in-depth understanding of consumers and win the lasting

communications approach, based on the seamless integration

trust and satisfaction of customers.

of traditional and new media. In July 2006, we took this one

changes now taking place in society. This is because we havea new in-house division, and we have since reinforced oura wealth of human talent and in-depth knowledge derived

Internet capabilities and sought to develop seamless,from years of delivering our 360-degree communications

holistic communications programs incorporating new andapproach to our clients—backed up by our “Management bytraditional media.

All” corporate philosophy. We also have the infrastructure in

Seeking to further reinforce our cross-communications

place to deliver truly cross-communications programs thatapproach, in January 2008 we reorganized our operations,

are media-neutral, solution-neutral, and consumer-centric.

bringing three existing divisions together to create a new

We are well on the way to fulfilling our “Future Agency”

entity, called the Cross-Communications Group. The three

mission.

divisions were the Cross-Communications Unit (formerly
the Media Strategy Division), which develops crosscommunications plans for our clients; ADK Interactive, which
specializes in Internet media-buying and branded content
creation; and the Direct Communication Unit, which is incharge of supporting our clients’ direct business initiatives insuch areas as Internet mail order.

16

ADK is in an excellent position to capitalize on thestep further with the establishment of ADK Interactive as

ADK Annual Report 2007

Corporate Social Responsibility

Using our 360-degree communications approach, ADK

In fiscal 2007, ADK built on its track record of social

proposes communications plans that provide sensational

contribution via activities befitting a creative advertisingand unforgettable consumer experiences and implements

agency.

these plans for our clients. We regard these activities as theEach year, the Japan Ad Council holds a public service

core element of our corporate social responsibility (CSR)

advertising campaign competition, attracting more than 100

commitment.

entries from more than 40 companies. Overcoming stiff

In the face of growing social awareness of CSR, ADK

competition, two advertisements from ADK were selected–

as a corporate citizen understands it is necessary to take an

one promoting AIDS prevention and one encouraging breast

active role in realizng a sustainable society.

cancer examinations.

We have established a compliance system and set up

Featuring a popular Japanese rock musician, the AIDS

the CSR Committee under the direct control of the president

advertisement was designed to foster an understanding

to promote social contribution activities in accordance withamong young people

the ADK Group’s Code of Conduct, which we established toof the importancepromote these activities.

of getting tested for
AIDS, and to eliminate
the misunderstanding

Complianceand anxiety associatedwith such tests. The

ADK established the Risk Management Committee,

other advertisement,

independent from its existing corporate organization,

calling on women toat the end of 2003. Since 2004, we have set up fiveget screened for breast

subcommittees: the Compliance Committee, the Information

cancer, emphasized

Security Committee, the Personal Information Protection

the importance ofCommittee, the Business Continuity Committee, and thehaving mammography

Business Process Committee. For details on the functions

examinations.

of each subcommittee and the status of the Company’s risk

AIDS prevention poster, featuring a popular
Japanese rock musician

We also carry out pro bono work for various nonprofit

management system, please refer to the “Risk Management”

organizations (NPOs). During the year, our Sendai Officesection on page 19.

(in northeast Japan) produced a poster promoting thecreation of communities in which disabled people can live
independently. The poster, produced for an NPO working

Social Contribution

to support people with autism and other disabilities, drewwidespread praise.

Commitment to Environmental Protection

Cultural Contribution

ADK, as a key part of its CSR approach, has decided toUsing knowledge and experience amassed over many years

reinforce the effort to respond to environmental issuesof serving its clients, ADK makes significant contributions

through introducing an environmental management system.

to culture and the arts. In fiscal 2007, Masao Inagaki, ourBy implementing this system, ADK aims to obtain ISO 14001

chairman and representative director, became a Grandcertification toward the end of 2008.

Officier dans l’Ordre des Arts et des Letters (Grand Officerof the Order of Arts and Letters), an honor bestowed by

Pro Bono Creative and Idea WorkFrance’s Ministry of Culture. This was in recognition of

We realize that communication service is the domain

ADK’s support over 19 years for the Long-Thibaud

where we can utilize our experience and know-how as an

International Music Concours Gala Concert, which is held

advertising company most effectively.

annually in Japan.

ADK Annual Report 200717

Corporate Governance andInternal Control
Corporate Governance Policy

We believe the current corporate auditor system is more
efficient, because the Board of Directors, centered oninternal directors, shares responsibilities for all areas of

ADK believes that the ultimate objective of a publicly listed

the Company’s activities and implements speedy and agile

corporation should be to maximize corporate value for its

decision making on the spot, while exchanging significant

shareholders. Among the various stakeholders including

information.

employees, the board of directors of a corporation must

With regard to reinforcing the management supervisory

try to obtain the best balance among complex interest

function, because the committee system has not been

relationships. However, because a publicly listed company

proven to be superior, ADK will ensure proper management

seeks broad access to capital markets for fund-raising, andsupervision via its corporate auditor system.

because the authority of the board of directors is awarded

To reinforce the corporate auditor system, ADK has aby the shareholders, who ultimately provide the capital,

policy of maintaining four or more corporate auditors–threeshareholder value and their rights must be prioritized. Itor more outside corporate auditors and three or more full-is essential for a corporation to motivate and monitor its

time corporate auditors–exceeding the legal requirement. If

management team to decide and execute business strategies

a vacancy arises during a fiscal year, it shall be filled at thein this context.

next General Meeting of Shareholders.

It is self-evident that corporate value is generated by

We have limited the tenure of directors to one year. This

profits and continuing growth. Only when a corporation’s

enables us to better clarify the responsibilities of directors

long-term soundness is secured, it is possible for theand gives us greater opportunity to gauge the trust of

corporation to enhance corporate value through increased

shareholders. At present, we have 16 directors, two of whomcompetitiveness. Effective corporate governance will bringhave representative status under Japanese law, with 13

appropriate management of a corporation, thereby securingserving as operating officers (as of March 27, 2008).

long-term soundness.
Moreover, at a publicly listed corporation, theThe Board of Directors meets once a month, in principle,
and more often as necessary. In fiscal 2007, the Board

shareholders will change from time to time and the size ofmet 13 times. On two occasions, the Board requested thetheir shareholdings will vary. Accordingly, an environment

attendance of the accounting auditors to receive directthat protects and equally handles shareholder rights isreports on the results of accounting audits.

important. ADK believes that this is the essence of effective

With respect to the business execution and management

corporate governance. ADK executes its various corporate

supervisory frameworks, ADK has appointed operating

governance strategies based on these ideas. We preserve

officers from among its executive directors and employees.

group-wide corporate governance, while maintaining close

Operating officers are charged with business execution

links between ADK and the other companies of the ADK

related to broader decisions made by the Board of Directors.

group.

The business execution organization is separated intofunctional groups, divisions, and departments, all reportingto the president.

Corporate Governance System

The Management Strategy Committee helps decision
making by the president, who has the ultimate authority
over day-to-day operations. Consisting of operating

ADK has adopted the corporate auditor system because it isofficers in charge of divisions, the Committee meets almost

most suitable for two aspects of corporate governance:

three times a month (32 times in fiscal 2007) to submit(1) enhancing management decision making efficiency andinformation and exchange opinions on important matters.

(2) reinforcing the management supervisory function.

Full-time corporate auditors also attend such meetings toWith regard to enhancing the efficiency of management

18

monitor the relevance of items discussed. To ensure thedecision making, we have decided against the committee

common recognition and transparency of important issues

system, in which the Board of Directors, centered onamong the employees, excerpts of the meeting minutes areoutside directors, retains certain decision making authority.

posted on the Company’s intranet.

ADK Annual Report 2007

ADK maintains close communication on management

The Compliance Committee is responsible for creating

strategies and corporate governance with its groupsystems to prevent illegal acts and for operating ADK’s

companies to ensure proper group-wide corporate

internal reporting system. The job of the Personal

governance.

Information Protection Committee is to establish systems

Internal audits are conducted by the Audit Office, which

aimed at avoidance of leakage of personal consumer

reports directly to the president and had a staff of two at

information when handling the large volumes of suchthe end of fiscal 2007. Since the beginning of 2008, theinformation collected in the course of undertaking

Audit Office has been upgraded into the Group Audit Office,marketing and campaign activities. The Information Security

in conjunction with ADK’s establishment of an internalCommittee handles the the operation of the ADK Group’s

control system, and its staff has been increased to five (asentire information security management system to ensureof March 28, 2008).

the proper management of personal and other business

ADK has four corporate auditors, three of whom are

information. Its tasks include the acquisition of the ISO

external. One of the three is a lawyer and serves on a part-

27001 certification. The Business Continuity Committee

time basis. As of March 28, 2008, the ADK group did notsets up various procedures aimed at ensuring thecontract with him for his legal services. The group has also

continuation of business during emergencies, such as majorestablished a policy not to do so in the future to ensure thatearthquakes or power outages. The responsibilities of theperson’s independence as an auditor. One internal auditor

Business Process Committee are explained in the “Internal

is a full-time auditor. The three full-time corporate auditors

Control” section below.

attend all Board of Directors meetings. The Board of
Corporate Auditors met eight times in fiscal 2007. There areno full-time employees assigned to the corporate auditors.
ADK uses Yasumori Audit Corporation as its independent
auditor. There is no conflict of interest between ADK andInternal Control

Yasumori or ADK and the executive of Yasumori responsible
for auditing ADK’s accounts.

ADK is building a group-wide internal control system,
spearheaded by the Risk Management Committee. One of its
subordinate organizations, the Business Process Committee,
specializes in setting up an internal control reporting system

Risk Management

as stipulated under the Financial Instruments and Exchange
Law of Japan. This internal control reporting system will
become effective during fiscal 2009. Until that time, we will

In May 2006, the Board of Directors passed a resolution

identify and correct internal control problems that could

concerning “Basic Policies for Establishing an Internal

affect the reliability of our financial reporting significantly.

Control System,” and decided to set up a group-wide internal

Meanwhile, we are also using process management

control system headed by the Risk Management Committee,

techniques to document and establish internal control

which is chaired by the president. The risk management

procedures. In fiscal 2007, we completed documentation

system serves as the “Rules and System relating to Risk

and assessment of the most important processes andManagement” and is consistent with internal control systems

entered the problem correction phase. In fiscal 2008, we

as defined under the New Corporate Law in Japan.

will undertake manager assessment rehearsals, and in fiscal

The Risk Management Committee heads five subordinate
organizations, each of which undertakes its own specific2009 we will prepare a schedule for creating a complete
internal control reporting system.

risk management. They are the Compliance Committee, thePersonal Information Protection Committee, the Information
Security Committee, the Business Continuity Committee, andthe Business Process Committee.

ADK Annual Report 200719

Basic Philosophy and Status of
Implementation of the Internal Control

Specific Rules
1. System to Ensure Directors and Employees Perform
Their Duties in Accordance with Laws, Regulations, Ordinances,

The following is an English translation of a section of theand the Articles of Incorporation

Corporate Governance Report for informational purposes only.

The Board of Directors formulated the “ADK Group’s Code ofThis section is about the basic philosophy and the status ofConduct” to clarify the ethics and values to be shared by all

implementation of internal controls. The original Corporate

directors and employees. The directors themselves observe thisGovernance Report was written in Japanese and filed with thecode, and the chairman and the president continuously reiterateTokyo Stock Exchange. In the event that any discrepancy exists

its spirit to employees.

between the translation and the Japanese original, the lattershall prevail.

The Risk Management Committee appoints the Compliance
Committee as a subordinate organization chaired by the director
in charge of compliance; its members shall include external

At the Board of Directors meeting on January 28, 2008, ADK

attorneys. The Compliance Committee implements policies todecided to revise its basic policies for the internal control

raise compliance awareness among directors and employees,

system. The following gives an overview of the resolution of theinvestigates major violations of laws and regulations or suspicion

Board of Directors after the revision.

of violations, and instructs the responsible departments to takecorrective action. The Compliance Committee also operates
the “Helpline System,” which involves external law offices

General Rules

and guarantees anonymity to encourage employees to report

Based on the “Management by All” principle that has guided ADK

correct such violations.

since its establishment, we have developed an internal control

violations of laws and regulations in order to prevent and
The Risk Management Committee also appoints thesystem with the following aims:

Business Process Committee, which is chaired by the director(1) Raise operational effectiveness and efficiency;

in charge of the maintenance and control of the system for(2) Maintain the reliability of financial reporting;ensuring the reliability of financial reporting, as a subordinate(3) Ensure compliance with laws and regulations relating toorganization. The responsibility of the Business Processbusiness activities; andCommittee is to ensure that business execution complies with

(4) Safeguard assets.

laws and regulations, especially pertaining to the system forDevelopment of the Internal Control System is overseen

ensuring the reliability of financial reporting. To this end, theby the Risk Management Committee, which is chaired byBusiness Process Committee instructs relevant departments tothe president. The Risk Management Committee regularly

adopt measures for setting up appropriate business processes

investigates if the system functions effectively, using a process

and related provisions, with the aim of clearly conveying tomanagement method based on the PDCA (Plan, Do, Check, Act)

employees how business should be executed.

cycle, and reports its results to the Board of Directors.
Elements required by the Corporate Law and the

2. System Regarding the Retention andenforcement regulations of the Corporate Law are described inManagement of Information and Documents

the following section.

Related to the Execution of Duties of Directors
The following policies have been put in place under thesupervision of the director in charge of the information
management system with regard to the retention andmanagement of information and documents related to the
execution of duties of directors.
(1) The minutes of the Board of Directors meetings and thematerials distributed to directors for deliberation of resolutions
are retained for a minimum of 10 years in the division in chargeof the secretariat.

20

ADK Annual Report 2007

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Relating to Risk Management
The Risk Management Committee

management for the entire ADK group,
consisting of ADK and its subsidiaries. The
Risk Management Committee implements
risk management by using a process
management method and instructs the
responsible departments to take necessary
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Under the control of the Risk

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Management Committee, in addition
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Corporate Governance, Internal Control, and Risk Management Framework

Personal Information Protection Committee, the Information

The Board of Directors sets companywide goals for

Security Committee, and the Business Continuity Committee

directors and employees and establishes medium-term andhave been established as specialist committees to implement

annual business plans to achieve these goals. Progress isrisk management in their respective fields. Other specialist

reported on a quarterly basis to the Board of Directors. In casecommittees will be established as needed. The Risk Management

there are factors that affect the progress toward these goals,

Committee directly implements risk management in fields not

the executive director in charge of the relevant department

covered by the specialist committees.

takes responsibility for formulating solutions, and the president

The Audit Office monitors the effectiveness of the risk

directs the relevant departments to accomplish the tasks.

management system and reports to the Risk Management
Committee.

5. System to Maintain Appropriate Business Practices
throughout the ADK Group

4. System to Ensure theUnder the supervision of the Risk Management Committee, theEffective Execution of Directors’ Duties

division in charge of the management of subsidiaries establishes

The Company maintains an appropriate number of directors ina group-wide internal control system by requesting subsidiaries

order to ensure the flexible holding of and active discussions atcompliance with the “ADK Group’s Code of Conduct” and thethe Board of Directors meetings. The Company also limits theimplementation of specific measures.

tenure of each director to one year in order to frequently checkthe qualifications of directors.
The Company has set up an operating officer system

The division in charge of the management of subsidiaries
makes arrangements with major subsidiaries about approval andreporting, including gaining approval from or reporting to ADK

to clarify the different duties of operating officers and thebefore making decisions and taking actions regarding certain

members of the Board of Directors. As the Japanese Corporate

matters while respecting each subsidiary’s autonomy.

Law stipulates, the Board has the authority to resolve and

The division in charge of the management of subsidiaries

supervise the execution of businesses strategies, whereas thealso reports on the status of the internal control of theoperating officers execute such resolved business strategies andsubsidiaries to the Risk Management Committee regularly, atreport the development and results.

least once a year, and more often as necessary.

ADK Annual Report 200721

6. Support for the Board of Corporate Auditors

In addition to the Board of Directors meetings, theUpon a request by the Board of Corporate Auditors, theattendance of corporate auditors is requested at BusinessCompany assigns appropriate persons as assistants to corporate

Strategy Meetings, monthly sales review meetings, and otherauditors as soon as possible. To ensure independence from theimportant regular meetings, and the minutes of those meetings

directors, the employees who will assist the Board of Corporate

must be presented to all corporate auditors. If corporate

Auditors shall not be assigned to any concurrent duties under

auditors request attendance at any other meetings, directors

the authority of the directors. Performance review, personnel

and employees would not refuse their request. Directors andtransfer, and decisions on reward and punishment must be

employees shall report immediately to the Board of Corporate

approved in advance by the Board of Corporate Auditors.

Auditors any issues that might cause serious damage to theCompany, serious non-compliance with laws and regulations,

7. Reporting to the Board of Corporate Auditors andinappropriate actions in the execution of duties by directors,

System to Ensure the Efficient Execution of Audits

reports received through the Helpline System, or results of

The Company has a policy of maintaining four or more corporate

inspections by government agencies or the independent

auditors. Three or more of them must be outside corporate

auditor’s audit. At least twice a year, the president holds a

auditors, and three or more of them must be full-time corporate

meeting to exchange opinions with the Board of Corporate

auditors, thereby exceeding the legal requirement.

Auditors. The Audit Reports by the Audit Office are submitted
to the Board of Corporate Auditors, and members of the Audit
Office attend meetings of the Board of Corporate Auditors tomaintain proper two-way communication.

Takeover Defense Policy

On the other hand, in the event of a large-scalepurchase of the Company’s shares or a takeover proposal,
the Board of Directors, which assumes the fiduciary

At ADK, we believe that management authority, including

duties for shareholders, will assess the impact of suchimportant financial and business strategies, let alone thatpurchase on corporate value and the common interests offor shareholders’ return and takeover defense, should be

the shareholders, while obtaining the opinions of outside

ultimately awarded and approved by the shareholders.

specialists. In addition to expressing its views publicly,

In addition to the improvement of capital efficiency andthe Board of Directors will negotiate with such potential

the implementation of various measures to return profits topurchasers and do its best to provide the necessary

shareholders, the Company has been making companywide

information to shareholders and ensure sufficient time for

efforts to maximize corporate value and the common

them to properly judge whether to accept such a bid.

interests of shareholders based on our “Management byMoreover, in the event that such potential purchasers do

All” principle. In the advertising industry, which is often

not provide the necessary information or it is deemed that

described as a “People Business,” the Company believes thatsuch proposal may damage corporate value and the common

management with such a companywide sense of unity andinterests of the shareholders, the Board of Directors willcommon goals among directors and employees is the best

take reasonable countermeasures.

defense against an inappropriate takeover attempt, and

The Company will carefully judge whether to implement

the Company has not implemented any specific takeover

specific takeover defense measures in advance, in

defense measures at present.

consideration of future economic environments, the capital
markets, and possible changes in common and statutory
laws and regulations.

22

ADK Annual Report 2007

Board of Directors & Auditors
Masao Inagaki

Komei Kasai

Shinichi Ueno

Representative Director
Chairman

Executive Director
Operating Officer
Account Services

Executive Director
Operating Officer
Corporate

Koichiro Naganuma
Representative Director
President & Group CEO

Hideaki Hirose
Executive Director
Senior Operating Officer
Domestic Network

Takeo Hishiyama
Executive Director
Senior Operating Officer
Strategic Planning & Group Business

Kenji Mori
Executive Director
Senior Operating Officer
Account Services

Hideyuki Nagai
Executive Director
Senior Operating Officer
Media & Content Business

Kazuhiko Narimatsu

Yoshiki Uemura

Executive Director
Operating Officer
Account Services

Executive Director
Operating Officer
Creative

Shoji Honda

Sir Martin Sorrell

Executive Director
Operating Officer
Finance & Accounting

Non-Executive Director
Group Chief Executive
WPP Group plc

Jiro Kitamura

Yoshiro Sakai

Executive Director
Operating Officer
Promotion

Corporate Auditor

Osamu Okayasu
Executive Director
Operating Officer
Account Services

Katsumi Abe
Corporate Auditor

Yuzo Shikata
Corporate Auditor

Toshiyuki Inoue

Hideshige Haruki

Executive Director
Operating Officer
Cross Communications

Corporate Auditor

Atsuo Ota

Ryuji Yokoyama

Huang Hui

Mikiro Kokita

Osamu Ishikawa

Chikara Yoshioka

Yasuto Horie

Hiroaki Onohara

Makoto Nakamura

Toshio Anada

Hiroshi Nomiyama

Takeshi Kato

Katsuhiro Ikuma

Hiroshi Nakazato

Akio Yoshi

Yoji Shimizu
Executive Director
Senior Operating Officer
Account Services

Operating Officers

Hidekatsu Ikedo

ADK Annual Report 200723

Management’s Discussion and Analysis

Performance Highlights of Fiscal 2007
Consolidated gross billings grow
Gross profit rises

3.6 %

6.3%

11.6 %
Dividend payout ratio hits 35.5 %EPS rises to ¥116.40
Operating income edges up

ADK Group Overview

In fiscal 2007, the Group’s advertising businessgenerated gross billings of ¥426,402 million, equivalent
to 98.0% of consolidated total billings. Other businesses
generated ¥8,609 million, or 2.0% of total billings.
The ADK Group’s non-advertising business consists of bookand magazine publishing and sales, as well as information
processing services.

ASATSU-DK is the third largest advertising agency in Japan,

The ADK Group consists of 50 subsidiaries (45 inand the 11th largest advertising agency in the world.*

advertising and five in non-advertising) and 23 affiliates (22We provide companies in Japan and overseas with a fullin advertising and one in non-advertising). Our global reach

spectrum of services, encompassing creative planning andextends to 21 cities and is reinforced by a close alliance withproduction for newspaper, magazine, radio, television, and

WPP Group plc, the world’s second largest marketing anddigital media advertising, as well as sales promotion andcommunications service group.

other advertising services. We launched our TV animation
content business in the 1960s and have been a pioneer inthis category ever since.

In fiscal 2007, all overseas sales of the ADK Group weregenerated by the advertising business. Together, overseas
sales represented 7.2% of consolidated gross billings.
*According to Advertising Age , May 5, 2008.

24

ADK Annual Report 2007

Consolidated Performance

Gross Profit
The gross margin improved further by enhanced profitability
in the media buying business. As a result, gross profit grew
6.3% to ¥51,754 million, and the gross margin improved 0.3
percentage point to 11.9%.
?jgkkHjg^alGross Billings(/

In fiscal 2007, gross billings totaled ¥435,011 million, up(.

3.6% from the previous year. Growth came from aggressive(-

marketing to both existing and new clients.

Eaddagfkg^Q]f(,(+?jgkk:addaf_k
Eaddagfkg^Q]f()($(((*($(((+($(((,($(((-($(((.($((((/(.
(-

Operating Income(,

Operating income rose 11.6% to ¥7,134 million. The ADK(+Group reported a 13.8% operating margin, lower than()(($(((*(($(((+(($(((-(($(((,(($(((

management’s target of 15%, but a slight improvement from
13.1% in fiscal 2006.

Consolidated Gross Billings and Selected Profitability Data
Millions of Yen except per commonshare amounts and financial ratios

Gross billings

2007

2006

2005

¥435,011¥420,059¥424,705

Gh]jYlaf_Af[ge](/(.

Gross margin

11.9%

11.6%

11.2%

(-

Operating margin

13.8%

13.1%

15.7%

(,

Income before income taxes ¥ 10,122

¥

9,682

¥ 11,028

Net income

¥

¥

5,070

¥

Net income per share (Yen)¥ 116.40

5,350¥ 106.62

5,946¥ 122.11

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Other Income and Expenses
The ADK Group incurred equity in loss of affiliates–netof ¥258 million, because Digital Advertising Consortium
Inc. (DAC), a publicly traded Internet media buying rep,
had a large but one-time loss due to an unrealized loss ininvestments in one of its subsidiaries. ADK held a 27.1%
share in DAC as of the end of 2007. Dividend income
improved, mainly from WPP Group plc.

ADK Annual Report 200725

Net Income
Income before income taxes and minority interests totaled

Segment Information¥10,122 million. After deductions of ¥4,694 million in income
taxes and ¥78 million in minority interest, net income was¥5,350 million, up 5.5% year on year. Net income per share
grew 9.2% to ¥116.40.
The ADK Group’s businesses are classified into two mainF]lAf[ge]Eaddagfkg^Q]fsegments: advertising, which accounted for 98.0% of gross(/billings in fiscal 2007, and non-advertising, which made(.

up the remaining 2.0%. The non-advertising businessincludes book and magazine publishing and sales, as well as(-

information processing services.
(,
(+
(

)$(((

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+$(((

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AdvertisingF]lAf[ge]h]jK`Yj]

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The Group’s advertising business generated gross billingsof ¥426,402 million, registering 3.8% year-on-year growth.

(/

Segment operating income increased 12.1% to ¥7,139 million.

(.

Since all of ADK’s non-consolidated gross billings and(-income are generated from the advertising business, and(,those non-consolidated gross billings represent 91.0% of the(+Company’s consolidated advertising gross billings, its nonconsolidated performance is reviewed below.
(

+(

.(

1(

)*(

)-(

Fgl]2:Yk]\gfl`]fmeZ]jg^k`Yj]k]p[dm\af_lj]Ykmjqklg[c&Magazine Division
The Magazine Division increased its billings to clients in the
Apparel/Jewelry and Cosmetics/Toiletries sectors, especiallyby attracting new clients. Division gross billings jumped
30.8% year on year to ¥28,400 million.
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26

ADK Annual Report 2007-$((( )($((( )-$((( *($((( *-$((( +($(((

Newspaper Division

Radio Division

The Newspaper Division suffered a decline in gross billings,

The Radio Division increased gross billings to clients inwith lower billings to clients in the Finance/Insurance andthe Information/Communications and Cosmetics/Toiletries

Transportation/Leisure sectors. As a result, the divisionsectors and was successful in marketing professional

generated gross billings of ¥34,157 million, down 3.6%.

baseball night game programs. The division’s billings grew to¥4,453 million, up 6.2% year on year.

:addaf_kg^F]okhYh]j<anakagf
Eaddagfkg^Q]f

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:addaf_kg^JY\ag<anakagf
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0&0
(/

K`Yj]g^?jgkk:addaf_k
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)($(((*($(((+($(((,($(((
(

)$(((

*$(((

+$(((

,$(((

-$(((

Television Division
The Television Division focused on profitability rather

Digital Media Division

than the size of gross billings. The division generated

The Digital Media Division continued generating higher

lower billings from program TV sales, due mainly to tighter

gross billings to clients in various sectors by providing

advertising budgets among some clients in the Finance/

faster and more proactive services, while offering “Cross-Insurance sector. Profitability improved, however, thanks

communications” planning. With larger gross billings toto better performance by the media buying business. Spotclients in the Hobbies/Sporting Goods sector, as well as

TV sales boosted gross billings and gross profits fromcontinued growth in the Pharmaceuticals/Medical Supplies

clients in the Cosmetics/Toiletries, Restaurants/Others, andsector, the division generated an 8.0% increase in grossInformation/Communications sectors. Content-related sales

billings to ¥13,506 million.

declined because of a continued decline of one of the bestselling animation contents, Yu-Gi-Oh! As a result, the division:addaf_kg^<a_alYdE]\aY<anakagf

yielded gross billings of ¥177,965 million, down 1.1%.

Eaddagfkg^Q]f

K`Yj]g^?jgkk:addaf_k
Fgf%[gfkgda\Yl]\!

+&-:addaf_kg^L]d]nakagf<anakagf
Eaddagfkg^Q]f

K`Yj]g^?jgkk:addaf_k
Fgf%[gfkgda\Yl]\!

(/
(.

,-&1
(/

(

+$(((

.$(((

1$(((

)*$((()-$((((.
(-($((()(($((()-($(((*(($(((

Reference: Non-Consolidated Gross Billings for the
Television Division by Segment
2007

2006

(Millions of Yen)

Y/YTime (program-sponsored ads)

¥ 63,106 ¥ 66,187

95.3%

Spot

100,821101.5%

Content-related sales
Total TV Division billings

99,37814,037

14,375

97.6%¥177,965¥179,940

98.9%

ADK Annual Report 200727

Out-of-Home Media Division

Creative and Other Divisions

The Out-of-Home Media Division generated lower gross

The Creative Division continued its success in winning major

billings, because a major campaign contract with a client ininternational and Japanese advertising awards by helping

the Cosmetics/Toiletries sector ended in the previous year.

and educating creators, enabling them to design integrated

Public transport and newspaper insert advertising also

communications programs with deep insights into every

slowed. As a result, division gross billings decreased 3.3% tomedium. The division also focuses on certain growing¥11,592 million.

markets, such as real estate, and succeeded in generating
new business in those areas. The Marketing Division,:addaf_kg^Gml%g^%@ge]E]\aY
<anakagf

Eaddagfkg^Q]f

K`Yj]g^?jgkk:addaf_k
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+&(
(/

however, could not generate large gross billings from clientsin the Finance/Insurance sector. The combined gross billingsof the two divisions and other miscellaneous advertisingbusinesses increased 7.7% year on year to ¥59,804 million.

(.
(

*$(((

.$(((

)($(((:addaf_kg^;j]Ylan]Yf\Gl`]j<anakagfk),$(((

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(.

Sales Promotion Division
The Sales Promotion Division generated gross billings of¥57,978 million, up 0.8%. During the year, we promoted
integrated promotion ideas that covered not only individual
event services and promotional tools but also in-store
communications. At the same time, we offered faster,
less costly, more sophisticated implementation to clientsand generated larger sales in the Retail/Distribution andInformation/Communications sectors.

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28

)($((( *($((( +($((( ,($((( -($((( .($(((ADK Annual Report 2007()($(((+($(((-($(((/($(((

Gross Billings: Breakdown by Division(Non-consolidated)aMillions of Yen

2007

2006

% of total

Magazine¥ 28,400

7.3% ¥ 21,717

Non-Consolidated Gross Billings,
Market Share and Industry Ranking (1998—2007)(Non-consolidated)

Millions of Yen% of total

5.7%

Year

Gross billings

Year-on-year
Market share Industry rank
rate

Newspaper

34,1578.8

35,4479.4

1998¥200,540

100.3%

3.47%

3

Television

177,96545.9

179,940

47.5

1999

320,085

104.6

5.62

3

4,453

1.1

4,193

1.1

2000

340,888

106.5

5.57

3

Digital Media

13,506

3.5

12,503

3.3

2001

358,830

105.3

5.92

3

Out-of-Home Media

11,592

3.0

11,9893.2

2002

334,915

93.3

5.87

3

357,597

106.8

6.29

3
3

Radio

Sales Promotion

57,97815.0

57,504

15.2

2003

Creative and Other

59,80415.4

55,50714.7

2004

373,897

104.6

6.38

2005

384,849

102.9

5.64

3

2006

378,804

98.4

5.46

3

2007

¥387,860

102.4%

5.53%

3

Total

¥387,860 100.0% ¥378,804 100.0%*Market share: According to “Advertising Expenditures in Japan ” reported by Dentsu Inc.
The scope of this report was expanded from the current issue reflecting the effect of
the rapid expansion of the Internet and promotional advertising.

Gross Billings: Breakdown by Client Industry(Non-consolidated)

Millions of Yen

2007
Energy/Raw Materials/Machinery
Foods

¥

Composition
ratio

2006
¥

Composition
ratio

ChangeYear-on-year
rate

4,985

1.3%

6,369

1.7%

¥ -1,385

78.3%

32,631

8.4

32,0958.5

535

101.7%

Beverages/Tobacco Products

25,140

6.5

25,985

6.9

-846

96.7%

Pharmaceuticals/Medical Supplies

15,2393.9

13,9253.7

1,314

109.4%

Cosmetics/Toiletries

38,3919.9

36,3179.6

2,075

105.7%

Apparel/Jewelry

13,303

3.4

7,409

1.9

5,893

179.5%

Precision Instruments/Office Equipment

6,230

1.6

5,892

1.5

337

105.7%

Electric Machines/AV Equipment

9,149

2.4

8,411

2.2

738

108.8%

Automobiles/Automobile-Related Products

24,882

6.4

24,3696.4

513

102.1%

Household Products

1,898

0.5

2,871

0.8

-972

66.1%

Hobbies/Sporting Goods

20,308

5.2

19,1115.0

1,198

106.3%

Real Estate/Housing

13,775

3.6

9,795

2.6

3,980

140.6%

Publications

3,554

0.9

3,426

0.9

128

103.7%

Information/Communications

44,594

11.5

41,867

11.1

2,727

106.5%

Distribution/Retail25,762

6.6

23,8476.3

1,915

108.0%

Finance/Insurance

40,692

10.5

51,86813.7-11,17678.5%

Transportation/Leisure13,285

3.4

15,541

4.1-2,255

85.5%

Restaurants/Other Services

16,7504.3

13,7203.6

3,030

122.1%
94.1%

Government/Organizations

9,387

2.4

9,973

2.6

-586

Educational/Health Care Services

3,976

1.0

4,192

1.1

-216

94.8%

Classified Ads/Other

23,930

6.2

21,8215.8

2,108109.7%¥387,860

100.0%

100.0%¥ 9,055

102.4%

Total¥378,804

ADK Annual Report 200729

Group Companies in the Advertising Business
The ADK Group’s advertising agency companies had mixed

Balance Sheet and Cash Flow

results. Domestic subsidiaries as a whole increased theirgross billings and operating income by generating new
business and implementing tighter cost controls. Overseas
subsidiaries suffered from smaller gross billings, but a Thai
subsidiary led the way with a considerable increase inoperating income.

Assets and Liabilities
The ADK Group did not make any large capital expendituresduring fiscal 2007, but it accelerated its share buyback

Non-Advertisingprogram and continued its efficient capital management

ADK has two consolidated subsidiaries in the publications

total assets of ¥246,097 million, down ¥10,657 million

industry. The smaller subsidiary, specializing in thefrom a year earlier. Consolidated interest-bearing debt was

publication of periodicals to select membership clubs, could¥1,193 million. Total net assets, including minority interests,

not obtain sufficient new contracts to absorb its fixed costs.

amounted to ¥131,846 million.

program focus. At the end of fiscal 2007, the Group had

As the industry has been experiencing sluggish growth due
to growing consumer preference for the Internet and mobile
media, the general publications subsidiary registered a fall in

Cash Flowsales. Thanks to the careful selection of new titles, however,At the end of fiscal 2007, cash and cash equivalents totaled

the Company had fewer returned items. As a result, the¥17,994 million, a decrease of ¥3,937 million from theGroup’s non-advertising category generated gross billings

previous fiscal year-end.

of ¥8,609 million, a 6.3% year-on-year decline, and an

Net cash provided by operating activities amounted

operating loss of ¥4 million compared with operating income

to ¥183 million, down from ¥7,507 million in fiscal 2006.

of ¥36 million in fiscal 2006.

Among operating activities, income before income taxes

Gross billings
Operating income

Millions of Yen

and minority interests was ¥10,122 million and depreciation

2007

2006

was ¥1,170 million. Meanwhile, there was a ¥6,156 million¥8,609-4¥9,18436

increase in notes and accounts receivable and a ¥1,435
million increase in notes and accounts payable, stemmingfrom larger gross billings generated by the parent company
and a Thai subsidiary, especially toward the end of theperiod. In addition, the Group posted a ¥926 million

Overseas Sales¥4,664 million, a relatively high figure, because taxes paid

The ADK Group obtained 7.2% of its gross billings fromin fiscal 2006 were low, reflecting smaller taxable income

abroad. All overseas sales are generated from thein fiscal 2005.

advertising business.

30

decrease in work in progress. Income taxes paid totaled

ADK Annual Report 2007

Net cash provided by investing activities totaled¥4,488 million compared with ¥3,191 million in net cash

Outlook for Fiscal 2008

used in such activities in fiscal 2006. Major components
included ¥6,933 million in proceeds from sales of securitiesand ¥1,476 million in purchases of securities.
Net cash used in financing activities was ¥8,968
million, up from ¥5,300 million in fiscal 2006. This was
mainly due to ¥1,258 million in dividends paid and ¥7,812

We expect the Japanese economy to remain on a path ofmillion in purchases of treasury stock–net, reflecting theslow, but prolonged, growth led by exports and corporate

Company’s strong commitment to shareholder return.

capital expenditures. There are increasing concerns,
however, that the economy may be affected by such factors
as uncertain government leadership, cost-driven inflation

Capital Expenditures and Depreciation
Millions of Yen

2007

2006

CapitalCapitalexpenditures Depreciation expenditures Depreciation

Buildings
Structures
VehiclesEquipment and fixtures
Land
LicensesComputer software
Other
Total

¥138
0
40
122
0
0
304
0
¥607

¥ 158
3
40
161
0
52
744
10
¥1,170

¥ 54
0
30
106
0
0
399
3
¥592

Net cash provided by operating activities
Business reinvestment*
Free cash flow

2007
¥ 183
-581
¥-398

¥ 155
4
25
182
0
52
783
4
¥1,205due to rising oil and grain prices, yen appreciation, and thefallout from the subprime mortgage crisis in the UnitedStates. Given today’s increasingly demanding businessconditions, the advertising market environment will remaina challenging one.
Facing this difficult environment, in February 2008
ADK set the following consolidated forecasts for fiscal 2008:¥445.5 billion in gross billings, ¥7.7 billion in operating
income, and ¥5.9 billion in net income. We expect to post an
EPS of ¥130.4. On a non-consolidated basis, the forecasts
are ¥397 billion in gross billings, ¥6.6 billion in operating
income, and ¥5.4 billion in net income.

Millions of Yen

Cash Flow2006¥7,507-586¥6,921*Business reinvestment = purchase of property and equipment + purchase of intangible
assets - sales of property and equipment

ADK Annual Report 200731

Forward-Looking Statements and Risk Factors
Forward-Looking Statements

Competitive Risk

This report may contain forward-looking statements

Competition among Japan’s major advertising companies isbased on ADK management’s view and assumptions ofintensifying. In addition, the entry of foreign “mega agency”

future developments as of the date of such statements.

groups into the Japanese market, the entry of many new and

The foregoing statements herein are inherently subject torapidly growing entrants in the Internet advertising market,

risks, including, but not limited to those shown below, andand the dominance of Google in search engine marketing

uncertainties that could lead to material differences between

are also accelerating competition. In the event that ADK issuch statements and actual outcomes. Therefore, ADK does

unable to respond appropriately to client needs and changes

not warrant any certainty and accuracy thereto. ADK also

in the advertising industry, and loses its competitiveness as

expressly disclaims any obligation to update or revise its

a result, there is a significant risk that its market share could

forward-looking statements.

decline and profitability could deteriorate. This would have aserious impact on its performance and financial condition.

Domestic Economy
In fiscal 2007, 98.0% of group billings were generated fromRelationships with Advertisers

the advertising market. The group also generated 92.8%

In Japan, traditionally advertisers do not strictly requireof its gross billings from the Japanese domestic market.

exclusive relationships with their agencies, which may haveJapanese national advertising spending is closely correlated

business with competitors. However, there is no assurancewith nominal GDP. In the event that the domestic economy

that this practice will continue in the future. In the event

deteriorates seriously, the ADK Group’s performance andthat ADK fails to adapt to such changes in the advertisingfinancial condition could be negatively impacted.

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

Changes in the Advertising Market

The ADK Group has a diversified portfolio of first-

The ADK Group intends to continue selling traditional mass-tier clients. The parent company’s largest 10 and 20 clients

media advertising space and time to its well-diversified

accounted for 21.5% and 32.0%, respectively, of totalclientele, as well as carry out sales promotions and anonconsolidated gross billings in fiscal 2007. Comparedwide range of peripheral services under its 360-degreewith competitors, moreover, sector concentration risk iscommunications approach. However, failure to respond

limited. Although we strive to maintain and develop good

appropriately to any market changes—including, but not

relationships with our clients, there is no assurance that we

limited to, changes in advertisers’ budgets (by name and/or

will be able to continue to do so.

industry), media inventory costs, and advertising methods—

An advertising agency buys media time or space

could significantly impact the group’s performance andand materials on behalf of its clients on its own account.

financial condition.

Sometimes a purchase is made through another agency.
Therefore, even if a client and/or such other agency defaults,

Development of New Mediathe advertising company is still liable for the media and/or

The ADK Group continues to focus on both traditional

materials to the media owner and/or the subcontracting

and new media through its 360-degree communications

production company.

approach. Under this approach, we do not see traditional and32

Advertising companies in Japan do not always havenew media cannibalizing each other. Rather, they enhance

documented contracts with media and clients, so as toeach other. In addition, the Group has been accelerating

maximize their flexibility in order to adapt to sudden

efforts to enhance its functionalities to lead the digitalchanges. However, ADK works to ensure it has written

advertising market, including the Internet, by setting up ADK

contracts with more media and more clients. When thisInteractive Division and forming joint ventures with someis the rule, not the exception, the Company believes

leading companies in these markets. However, if ADK fails toaccountability by both parties will minimize disputes. Until

adapt to changes in advertising media, its performance andthat time, however, there remains the possibility of disputes

financial condition could be adversely impacted.

with media and clients.

ADK Annual Report 2007

Relationships with Media

resale income from it. Accordingly, in the case that theIn fiscal 2007, ADK generated 69.6% of its gross billings

group is not able to generate income as expected, it couldby handling the four major mass media, as well as theexperience a significant impact on its performance andrapidly growing Internet and digital advertising sectors

financial condition.

and OOH media. During the year, ADK continued to secureadvertising time and/or space of these traditional and newOverseas Operations

media. However, in the event of a decrease in advertising

In overseas markets, a variety of problems may arise due tovolume and/or changes in business terms and conditions

cultural and social differences. In addition, both country risk

and advertising methods, and/or the emergence of new

and currency risk are inherent in conducting international

advertising formats, there is a significant possibility that thebusiness. In the event that the ADK Group is unable to

ADK Group’s performance and financial condition could be

expand its overseas operations as planned, its performanceadversely affected if it does not respond to these changes

and financial condition could be significantly impacted.

appropriately.

Relationship with WPP Group plc
Media Inventories

ADK has maintained strategic operating and equity ties

Occasionally, ADK purchases media inventories, particularly

with WPP Group plc of the United Kingdom since August

animation programs, at fixed prices based on orders from1998, holding a 2.63% equity stake in WPP (as of December

client advertisers. Although we strive to improve the quality

31, 2007). WPP Group holds 22.97% of the voting rights inof content and increase the demand of such programs by

ADK. At the same time, both companies have non-executive

keeping a close relationship with the media, in the case of

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

weak sales, excess inventories could have an adverse effectalliances with WPP Group operating companies, including

on our performance and financial condition.

JWT, ADK has made a number of creative and promotional
tie-ups and will continue to develop operations worldwide.

Relationships with Subcontractors

Because ADK does not own a majority of WPP’s voting

While ADK carries out the planning for advertising and sales

rights, and its influence on WPP Group operations is limited,promotion campaigns, the execution of these activities isin the event that the ADK Group is unable to realize themostly outsourced to qualified subcontractors. In the case of

benefits from this relationship, or if the relationship shoulda change in trading relationships with these subcontracted

negatively change in any way, there may be an impact oncompanies, and in the event that ADK is unable to respondthe ADK Group’s performance and financial condition in theappropriately, this could have a negative impact on groupfuture.

performance and financial condition.
In Japanese advertising markets, an advertising agency

In addition, although the yen-translated market valueof the equity stake in WPP was ¥46,145 million as of theis usually required to absorb credit and functionality risks

end of December 2007, compared with the book value ofof many small and specialty subcontractors without shifting¥22,262 million (under the lower-of-cost-or-market method),them to the advertisers. Besides, sometimes an agency

in the event of a major deterioration in WPP Group’s stockneeds to help finance such subcontractors by advanceprice there is a possibility that ADK would have to accountpayments. In an international business, a partial advancefor valuation losses on this holding.

payment is commonly required. When a subcontractor cannot
fulfill an order from an advertiser or maintain its business as

Staff

a going concern, an agency is likely to suffer a loss.

Advertising is a people business and talent is a critical asset
in the advertising industry. In the event that ADK is unable

Content Businessto secure and train its talented staff adequately, there

ADK continues to develop new content under existing andcould be a negative impact on its performance and financial

new business models. However, there is no guarantee of thecondition.

continued success of such content or of derivative and/or

ADK Annual Report 200733

Marketable Securities and Investment Securities

For the year through March 2007, the ADK Group’s

The ADK Group’s holdings of marketable and investment

cash contribution share by employers and employees weresecurities (including the aforementioned stake in WPP

9.01% and 5.67%, respectively, making the total 14.68%.

Group plc and equity-method value of Digital Advertising

Applying simply the shares to the aforementioned total fundConsortium, Inc., or “DAC”) totaled ¥83,720 million,

assets, the group’s prorated share of assets as of March

representing 34.0% of ¥246,097 million in total assets as

31, 2007, was ¥11,879 million in total. Of this amount, theof December 31, 2007. Of this amount, ¥68,206 million

employers’ portion and employees’ portion were ¥7,290

was in publicly traded equity securities, mostly for cross-million and ¥4,588 million, respectively. Likewise, the group’s

shareholdings in advertising clients and other tradingprorated share of pension liabilities was ¥9,559 million in

partners (excluding our investment in a 27.1% stake of DAC,

total. Of this amount, the employers’ portion and employees’

the unconsolidated results of which is accounted for by the

portion were ¥5,867 million and ¥3,692 million, respectively.

equity method at ¥1,826 million). The balance of unrealized
gains on available-for-sale securities was ¥20,304 million

Legal Risks

after deducting deferred tax liabilities on such gains.

The ADK Group’s advertising clients are affected by a

However, in the event of a major decline in the market

number of mandatory and voluntary regulations, depending

prices of these holdings, ADK would be forced to accounton the type or types of businesses in which they arefor valuation losses.

engaged. If these laws and regulations are tightened or
new ones are enacted, our clients’ advertising activities

Retirement Benefits and Pension Plans

could shrink or become curtailed. Such changes may have a

At the end of 2004, ADK (parent company) reformed its

negative impact on our performance and financial condition.

employee retirement benefits and pension plans, andadopted a defined contribution pension plan and a cash

Regulatory Changes

balance plan to reduce the volatility of net periodic benefit

In Japan, there are a number of laws that bind advertisingcosts (an element of staff costs) through a smaller Projectedcompanies, including ADK. These include laws to prevent

Benefit Obligation and less-risky pension asset investment

delays in payment to subcontractors and protect personal

strategies.

information, as well as regulations applicable to advertising

In the event of a deterioration in pension asset

companies. If there is a strengthening of existing laws or

management performance, and a significant change inregulations affecting the advertising activities of advertisers

actuarial assumptions, the ADK Group could face a negativeor the format or content of advertisements, the financial

impact on its performance and financial condition.

results of the ADK Group and other advertising companies

ADK and some of its domestic subsidiaries are thecould be adversely affected. In the case of new laws or

members of the Japan Advertising Industry Welfare Pension

regulations being introduced, or existing laws or regulations

Fund. Because the ADK Group cannot technically andbeing reinterpreted, the ADK Group’s performance could bereasonably define how much pension assets and liabilities

affected.

it is accountable for, the group recognizes its annual cash
contribution to the fund as its periodical benefit costs

Contingent Litigation Risks

applicable for the fund. In the case that the fund requires the

As of the date of the statements, the ADK Group was notgroup to make a larger contribution due to changes in the

involved or exposed to any lawsuits or disputes that could

discount rate, pension plan asset performance, number ofplace significantly negative influence on its performance andmember companies and beneficiaries, and so on, the groupfinancial condition. However, there is no guarantee that thewould need to recognize larger net periodic benefit costs.

group will never be involved in or exposed to such lawsuits

The fund’s total pension assets and liabilities as ofMarch 31, 2007, were ¥80,894 million and ¥65,101 million,
respectively, and therefore the difference was positive by¥15,793 million. The discount rates for liabilities weremainly 5.5%.

34

ADK Annual Report 2007

or disputes in the future.

Financial Section
Consolidated Balance Sheets

36

Consolidated Statements of Income

38

Consolidated Statements of Changes in Net Assets

39

Consolidated Statements of Cash Flows

42

Notes to Consolidated Financial Statements

43

Independent Auditors' Report61Consolidated Balance Sheets
ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2007 and 2006
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS

2007

2006

2007

¥ 22,863¥ 22,145$ 200,289

3,676

5,213

32,203108,045

100,907946,518

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

(624)

(759)

(5,467)

9,037

7,979

79,168

711

575

6,229

3,838

2,823

33,622

147,546

138,883

1,292,562

Land

1,293

1,310

11,327

Buildings and leasehold improvements

4,142

4,020

36,286

Other

2,107

1,940

18,458

7,542

7,270

66,071(3,676)(3,402)(32,203)

3,866

3,868

33,86877,24695,023676,706

6,812

7,209

59,676

449

459

3,933

10,178

11,312

89,164

94,685

114,003829,479¥246,097¥256,754$2,155,909

Inventories
Deferred tax assets (Note 7)
Other current assets
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.

36

ADK Annual Report 2007

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

2007
¥

1,084
48
87,417
2,345
679
537
—
7,787
99,897

2006
¥

344
549
84,448
2,771
289
770
8
7,048
96,227

2007
$

9,496
420
765,808
20,543
5,949
4,705
—
68,217875,138

60
1,246

108
1,694

526
10,915694—
12,132
222
14,354681
246
16,263
148
19,1406,080—
106,281
1,945
125,747

37,581
20,02451,901(203)
109,30337,58140,60747,671(12,973)
112,886

329,225
175,418454,674(1,779)957,538

20,304
1
1,087
21,392
1,151
131,846

26,676
1775
27,452
1,049
141,387

177,871
99,523
187,403
10,083
1,155,024¥246,097¥256,754$2,155,909

CONTINGENT LIABILITIES (Note 10)
NET ASSETS (Note 6):
Shareholders’ equity
Common stock
Authorized: 206,000,000 shares in 2007 and 2006;
Issued: 45,155,400 and 51,655,400 shares in2007 and 2006, respectively
Capital surplus
Retained earnings
Treasury stock—at cost
Total shareholders’ equity—net
Valuation and translation adjustments
Unrealized gain on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Foreign currency translation adjustments
Total valuation and translation adjustments
Minority interests
Total net assets
TOTAL*No allowance for retirement benefits to corporate auditors was standing as of Dec. 31, 2007,
due to the abolition of the retirement bonus system to them.
See notes to consolidated financial statements.

ADK Annual Report 200737

Consolidated Statements of Income
ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2007 and 2006
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2007

2006

2007

GROSS BILLINGS (Note 12)¥435,011¥420,059$3,810,872

COST OF SALES (Note 12)383,257

371,374

3,357,486

51,754

48,685453,386

EXPENSES (Notes 8 and 12)

44,62042,293

390,889

Operating income

7,134

6,392

62,497

Interest and dividend income—net

1,902

1,764

16,662Gain on sales of securities

2,761

1,844

24,187

Loss on sales of securities

(0)

(31)

(0)

(1,644)(384)(14,402)

31

7

272

Gross profit
SELLING, GENERAL AND ADMINISTRATIVEOTHER INCOME (EXPENSES):

Loss on valuation of securities
Amortization of negative goodwill
Equity in earnings (losses) of affiliated companies—net

(258)

240

(2,260)Retirement benefits paid to directors and corporate auditors

—

(117)

—

(47)

(65)

(412)

—

(246)

—

Additional retirement benefits paid to employees
Provision for loss on guarantees
Expenses for 50th anniversary

—

(134)

—

243

412

2,129

2,988

3,290

26,176

10,122

9,682

88,673Current

4,514

4,045

39,545

Deferred

180

511

1,577

78

56

683

Other—net
Other income—net
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTSINCOME TAXES (Note 7):

MINORITY INTERESTS IN NET INCOME
NET INCOME

See notes to consolidated financial statements.

38

ADK Annual Report 2007

¥

5,350

¥

5,070

$

46,868

Consolidated Statements of Changes in Net Assets (1)ASATSU-DK INC. and Consolidated Subsidiaries
Year Ended December 31, 2007

Millions of Yen

Year Ended December 31, 2007

Balance as of December 31, 2006

Shareholders’ equity
Common stock

Capital surplus¥37,581¥ 40,607

Retainedearnings

Treasurystock—at cost

Total
shareholders’equity¥(12,973)¥112,886¥47,671

Change during the consolidated fiscal year
Dividend payments(1,258)(1,258)Net income

5,350

5,350

Increase due to newly consolidated
subsidiaries

138

138

Acquisitions of treasury stock
Disposals and cancellation of treasury stock(20,583)(7,813)(7,813)

20,5830(Net) changes of items other thanshareholders’ equity
Total change during the consolidated fiscal year
Balance as of December 31, 2007—

(20,583)

4,230¥37,581¥ 20,024¥51,901¥

12,770(3,583)(203)¥109,303
Millions of Yen

Valuation and translation adjustments
Foreign
Unrealized
Deferred gain
Total valuation
currency
gain onon derivatives
and translation
available-for- under hedgetranslation
adjustments
sale securities
accounting
adjustments

Balance as of December 31, 2006

¥26,676¥1¥ 775¥27,452

Minority
interests¥1,049Total net
assets¥141,387

Change during the consolidated fiscal year
Dividend payments(1,258)Net income

5,350

Increase due to newly consolidated
subsidiaries

138

Acquisitions of treasury stock(7,813)

Disposals and cancellation of treasury stock0(Net) changes of items other thanshareholders’ equity
Total change during the consolidated fiscal year
Balance as of December 31, 2007

(6,372)0

312(6,060)102(5,958)(6,372)0

312(6,060)102(9,541)¥20,304¥1¥1,087¥21,392¥1,151¥131,846

ADK Annual Report 200739

Consolidated Statements of Changes in Net Assets (2)ASATSU-DK INC. and Consolidated Subsidiaries
Year Ended December 31, 2006

Millions of Yen

Year Ended December 31, 2006

Balance as of December 31, 2005

Shareholders’ equity
Common stock

Capital surplus¥37,581¥40,607

Retainedearnings

Treasurystock—at cost

Total
shareholders’equity¥ (9,690)¥112,689¥44,191

Change during the consolidated fiscal year
Dividend payments(1,721)(1,721)

Net income

5,070

5,070

Bonuses to directors and corporate auditors

(38)

(38)

Increase due to new consolidated subsidiaries

163

163

Acquisitions of treasury stock
Disposals and cancellation of treasury stock

0(3,283)(3,283)00Increase due to change in accounting
standards of foreign subsidiaries

66(Net) changes of items other thanshareholders’ equity
Total change during the consolidated fiscal year
Balance as of December 31, 2006

—

0

3,480

(3,283)

197¥37,581¥40,607¥47,671¥(12,973)¥112,886
Millions of Yen

Valuation and translation adjustments
Foreign
Unrealized
Deferred gain
Total valuation
currency
gain onon derivatives
and translation
available-for- under hedgetranslation
adjustments
sale securities
accounting
adjustments

Balance as of December 31, 2005

¥21,784—¥278¥22,062

Minority
interests¥ 997

Total net
assets¥135,748

Change during the consolidated fiscal year
Dividend payments(1,721)

Net income

5,070

Bonuses to directors and corporate auditors

38

Increase due to new consolidated subsidiaries

163

Acquisitions of treasury stock(3,283)

Disposals and cancellation of treasury stock0

Increase due to change in accounting
standards of foreign subsidiaries

6(Net) changes of items other thanshareholders’ equity
Total change during the consolidated fiscal year
Balance as of December 31, 200640

ADK Annual Report 2007

4,892

1

497

5,390

52

5,442

4,892

1

497

5,390

52

5,639

¥26,676¥1¥775¥27,452¥1,049¥141,387

Consolidated Statements of Changes in Net Assets (3)ASATSU-DK INC. and Consolidated Subsidiaries
Year Ended December 31, 2007

Thousands of U.S. Dollars (Note 1)

Year Ended December 31, 2007

Balance as of December 31, 2006

Shareholders’ equity
Common stock

Capital surplus

Retainedearnings

Treasurystock—at cost

Total
shareholders’equity$329,225$355,734$417,617$(113,649)$988,927

Change during the consolidated fiscal year
Dividend payments(11,021)(11,021)

Net income

46,86846,868

Increase due to newly consolidated
subsidiaries

1,210

1,210

Acquisitions of treasury stock
Disposals and cancellation of treasury stock(180,316)(68,446)(68,446)

180,3160(Net) changes of items other thanshareholders’ equity
Total change during the consolidated fiscal year
Balance as of December 31, 2007—

(180,316)

37,057$329,225$175,418$454,674$

111,870(31,389)(1,779)$957,538

Thousands of U.S. Dollars (Note 1)

Valuation and translation adjustments
Foreign
Unrealized
Deferred gain
Total valuation
currency
gain onon derivatives
and translation
available-for- under hedgetranslation
adjustments
sale securities
accounting
adjustments

Balance as of December 31, 2006

$233,693$9$6,789Minority
interests$240,491

Total net
assets$ 9,189 $1,238,607

Change during the consolidated fiscal year
Dividend payments(11,021)

Net income

46,868

Increase due to newly consolidated
subsidiaries

1,210

Acquisitions of treasury stock(68,446)

Disposals and cancellation of treasury stock0(Net) changes of items other thanshareholders’ equity
Total change during the consolidated fiscal year
Balance as of December 31, 2007

(55,822)0

2,734(53,088)(55,822)0

2,734(53,088)$177,871$9$9,523$187,403(52,194)

894(83,583)$10,083 $1,155,024

Yen

PER SHARE OF COMMON STOCK:Net income
Basic
DilutedNet assets
Cash dividend applicable to the year

894

U.S. Dollars (Note 1)

2007

2006

¥ 116.40—
2,898.49
42.00¥ 106.62
106.562,979.79
27.00

2007

$ 1.02
—
25.39
0.37

See notes to consolidated financial statements.

ADK Annual Report 200741

Consolidated Statements of Cash FlowsASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2007 and 2006
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2007

2006

2007

¥10,122¥ 9,682$ 88,673(4,664)
1,170
258(2,761)0
1,644(1,852)1,205(240)(1,844)31
384(40,859)
10,2502,260(24,187)014,402(6,156)
(926)
1,435
61
(9,939)
183

2,893
(280)
(1,963)(509)(2,175)
7,507(53,929)(8,112)
12,571534(87,070)
1,603

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 used in investing activities

(893)
6,933
(1,476)
25
(302)
(304)
505
4,488

(1,377)
6,134(7,503)
5
(190)
(401)
141
(3,191)(7,823)60,736(12,930)219(2,646)(2,663)
4,424
39,317

FINANCING ACTIVITIES:
Increase (Decrease) in short-term debt—net
Repayment of long-term debt
Redemption of bonds
Purchases of treasury stock—net
Dividends paid
Other financing activities
Net cash used in financing activities

686
(49)
(500)
(7,812)(1,258)(35)(8,968)

(230)
(49)
—
(3,283)(1,721)(17)(5,300)

6,010
(429)
(4,380)(68,437)(11,021)(307)(78,564)

252

561

2,208

(423)

$ (35,436)

OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes—paidDepreciation and amortization
Equity in losses (earnings) of affiliated companies
Gain on sales of securities
Loss on sales of securities
Loss on valuation of securities
Changes in assets and liabilities:(Increase) Decrease in notes and accounts receivable
Increase in work in progress
Increase (Decrease) in notes and accounts payable
Others—net
Total adjustments
Net cash provided by operating activities

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS¥

CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR

21,932

21,938

192,134

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

107

417

937

¥17,994¥21,932$157,635

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

42¥ (4,045)

ADK Annual Report 2007

Notes to Consolidated Financial Statements
ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2007 and 2006

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have

The consolidated financial statements are statedbeen prepared from the accounts maintained by ASATSU-

in Japanese yen, the currency of the country in which

DK INC. (the "Company") and its consolidated subsidiaries

the Company is incorporated and mainly operates. The

in accordance with the provisions set forth in the Financialtranslation of Japanese yen amounts into U.S. dollar

Instrument and Exchange Law and its related accounting

amounts is included solely for the convenience of readers

regulations, and in conformity with accounting principles

outside Japan and has been made at the rate of ¥114.15

and practices generally accepted in Japan, which are

to US$1 the approximate rate of exchange on December

different in certain respects as to application and disclosure

31, 2007. Such translation should not be construed as arequirements from International Financial Reporting

representation that the Japanese yen amounts could beStandards.

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

In preparing these consolidated financial statements,

Certain reclassifications have been made in the 2006

certain reclassifications and rearrangements have been

financial statements to conform to the presentation formade to the consolidated financial statements issued

2007.

domestically in order to present them in a form which
is more familiar to readers outside Japan.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements
include the accounts of the Company and its 23 (20 in2006) significant majority-owned subsidiaries (together,the "Group").
Under the control or influence concept, thosecompanies in which the Company, directly or indirectly,
is able to exercise control over operations are fully
consolidated, and those companies over which theGroup has the ability to exercise significant influence
are accounted for by the equity method.
22 subsidiaries use a fiscal year ended at December
31, so does the Company. One subsidiary uses a fiscal
year ended at September 30. The consolidated financial
statements include the financial statements of thissubsidiary for its respective fiscal years after making
appropriate adjustments for significant transactions during
the periods from its respective year-end dates to the dateof the consolidated financial statements.
Investments in three affiliated companies, of which
20%–50% of the interests are owned by the Company, areaccounted for by the equity method. (Investments in one
insignificant unconsolidated subsidiary and four affiliatedcompanies were accounted for by the equity method
in 2006.) Investments in the remaining 27 (28 in 2006)

unconsolidated subsidiaries and 19 (20 in 2006) affiliatedcompanies are stated at cost. If these companies are fully
consolidated, or the equity method of accounting had been
applied to the investments in these companies, the effecton the accompanying consolidated financial statements
would not be material.
Goodwill is charged or credited to income in the year
incurred.
All significant inter-company balances and transactions havebeen eliminated in consolidation. All material unrealized
profits included in assets resulting from transactions within
the Group are eliminated.
b. Cash and Cash Equivalents—Cash and cash equivalents
consist of cash, demand deposits with banks and thosewhich are short-term investments that are readily
convertible into cash and that are not exposed to significant
risk of changes in value.
Cash equivalents include time deposits, certificates ofdeposit and money management funds investing in bonds
for the short term, all of which mature or become due
within three months of the date of acquisition.

ADK Annual Report 2007

43

The balances of cash and cash equivalents as of December 31, 2007 and 2006, are reconciled to the balance sheets as follows:

Thousands of
U.S. Dollars

Millions of Yen

Balance sheet:
Cash and time deposits
Securities
Total
Less:
Time deposits over three months
Securities not applicable to cash equivalents(Securities other than Money Management Funds, etc.)
Cash and cash equivalents

c. Inventories—Inventories consist principally of billable
production orders in process, which are stated at cost
determined by the specific identification method. Billable
production orders in process are primarily costs incurredon behalf of clients when providing advertising services
such as marketing and branding consultation, designingand producing of sales promotion programs, and event
marketing to clients.
d. Marketable and Investment Securities—All applicablesecurities are classified and accounted for, depending on
management’s intent, as follows:i) trading securities, which are held for the purposeof earning capital gains in the near term, are reported atfair value, and the related unrealized gains and losses arereflected to earnings in the period of such gain or loss, ii)
held-to-maturity debt securities, which are expected tobe held to maturity with the positive intent and ability tohold to maturity are reported at amortized cost, and iii)
available- for-sale securities, which are not classified aseither of the aforementioned securities, are reported at fairvalue, with unrealized gains and losses, net of applicabletaxes, being reported in a separate component of net
assets.
If the market values of held-to-maturity debt
securities, equity securities issued by unconsolidated
subsidiaries and affiliated companies, and available-for-salesecurities decline significantly, such securities are stated
at fair market value, and the difference between the fairmarket value and the carrying amount is recognized as aloss in the period of the decline. If the fair market valueof equity securities issued by unconsolidated subsidiaries
and affiliated companies which have not been accounted

44

ADK Annual Report 2007

2007

2006

2007

¥22,863
3,676
26,539¥22,145
5,213
27,358$200,289
32,203
232,492

5,326

3,041

46,658

3,219¥17,994

2,385¥21,932

28,199$157,635

for by the equity method is the not readily available, suchsecurities should be written down to the net asset value
with a corresponding charge in the statement of income inthe event the net asset value declines significantly. In thesecases, such fair market value or the net asset value will be
the carrying amount of the securities at the beginning of
the next year.
e. Property and Equipment—Property and equipment
are carried at cost. Depreciation for the property andequipment other than the buildings acquired after April 1,
1998, is computed mainly by the declining-balance method
at rates based on the estimated useful lives of the assets.
Depreciation of buildings acquired after April 1, 1998, iscomputed on the straight-line method over their estimateduseful lives. The estimated useful lives of major assets are
as follows:
Buildings and leasehold improvements 10–50 years
In accordance with an amendment to the JapaneseCorporation Tax Law, the Company and its domestic
subsidiaries changed the depreciation method for property,
plant and equipment acquired on or after April 1, 2007. The
effects of this change are immaterial.
f. Provision for Loss on Guarantees—The Group sets aside areserve of losses on guarantees for liabilities owed by nonconsolidated subsidiaries, affiliated companies or businessassociates. The amount of such provision reflects estimatedpotential losses based on such factors as the financial
condition of parties whose liabilities are guaranteed.

g. Retirement Benefits and Pension Plans—The Groupaccounted for the liability for retirement benefits basedon the projected benefit obligations and plan assets at thebalance sheet date.
The Company’s directors are entitled, in mostcircumstances, to lump-sum severance payments based on
current rates of pay, length of service, and certain otherfactors. The Company accrues 100% of obligations basedon its rule required under the assumption that all directors
retired at the balance sheet date.
The Company decided to abolish the system for
granting retirement benefits for corporate auditors at
the 52nd Ordinary General Meeting of Shareholders heldon March 28, 2007, and to make cutoff payments for
retirement benefits, which would be paid at the time ofretirement of the respective corporate auditors. This has
led to the reclassification of the allowance for retirement
benefits to corporate auditors as other long-term liabilities.
The Company and some of its domestic subsidiaries
are the members of the Japan Advertising Industry Pension
Fund. Because the Group cannot technically or reasonably
define how much pension assets and liabilities the Groupis accountable for, the Group recognizes its annual cash
contribution to the fund as its periodical benefit costs
applicable for the fund but not as pension assets andliabilities.
h. Sales Recognition—Income derived from media
advertising is recognized upon publication or broadcasting.
Product sales are recognized when the products arereceived by clients. One domestic consolidated subsidiary
provides allowances, based upon the Japanese tax code, for
returned publication merchandise and losses derived from
unsold publication merchandise.
i. Leases—Leases are accounted for as operating leases in
the Company and domestic consolidated subsidiaries. Under
Japanese accounting standards for leases, finance leases
that deem to transfer ownership of the leased property
to the lessee are to be capitalized, while other financeleases are permitted to be accounted for as operating leasetransactions if certain "as if capitalized" information isdisclosed in the notes to the lessee's consolidated financial
statements. In major overseas consolidated subsidiaries,
leases are accounted for as finance leases and leased
property to the lessee is capitalized.
j. Software and R&D Costs—Research–and–development
costs are charged to income as incurred. Capitalized
software for internal use amounting to ¥970 million ($8,498
thousand) in 2007 and ¥1,410 million in 2006, respectively,

included in "Other assets" of investments and other assets,
was amortized by the straight-line method based on theestimated useful lives (five years).
k. Income Taxes—The provision for income taxes iscomputed based on the pretax income or loss reported in
the consolidated statements of income. Deferred income
taxes are recorded based on the asset-and-liability method
to reflect the impact of temporary differences between
assets and liabilities recognized for financial reporting
purposes and such amounts recognized for tax purposes.
The Group measures deferred taxes by applying enacted
tax laws to the temporary differences that will be in effectwhen the differences are expected to reverse.
l. Appropriations of Retained Earnings—Appropriationsof retained earnings at each year-end are reflected in the
consolidated financial statements for the following year.
m. Foreign Currency Transactions—Short-term and longterm monetary receivables and payables denominatedin foreign currencies are translated into Japanese yen at
the exchange rates at the balance sheet dates. The foreignexchange gains and losses from translation are recognizedin the consolidated statements of income in the cases
where they are not hedged by foreign exchange derivatives
or a hedging transaction does not qualify for specific hedge
accounting.
n. Foreign Currency Financial Statements—Both balance
sheet accounts and revenue and expense items of theconsolidated overseas subsidiaries and affiliated companies
are translated into Japanese yen at the current exchange
rates as of the balance sheet dates except for shareholders'equity, which is translated at historical exchange rates.
Differences arising from such translation are shown
as “Foreign currency translation adjustments” in a separate
component of shareholders’ equity.
o. Derivatives and Hedging Activities—The Group uses
derivative financial instruments to manage its exposure tofluctuations in foreign exchange. Foreign exchange forward
contracts are utilized by the Group to reduce foreign
currency exchange risks. The Group does not enter into
derivatives for trading or speculative purposes.
Derivatives are recognized as either assets or
liabilities at fair value, and gains or losses on derivativetransactions are recognized in the consolidated statements
of income, unless such derivatives qualify for specific hedge
accounting.

ADK Annual Report 200745

Short-term receivables and payables denominatedin foreign currencies for which foreign exchange forward
contracts are used to hedge the foreign currency
fluctuations are translated at the contracted rate if theforward contracts qualify for specific hedge accounting.
p. Per Share Information—The computation of basic net
income per share is based on net income attributable toshareholders of common stock and the weighted average
number of shares outstanding during each year, and diluted
net income per share is computed based on net income
attributable to shareholders of common stock after giving

effect to the net income of an affiliated company which has
the dilutive potential of shares and the weighted average
number of shares outstanding during each year. The
average number of common shares used in the computation
was 45,963,907 shares for the fiscal year ended December
31, 2007, and 47,557,502 shares for the fiscal year ended
December 31, 2006.
Cash dividends per common share presented in theaccompanying consolidated statements of income are
dividends applicable to the respective years including
dividends paid after the end of the year.

3. MARKETABLE AND INVESTMENT SECURITIESThe carrying amount and aggregate fair value of the securities classified as available-for-sale as of December 31, 2007 and2006, were as follows:
Millions of Yen

2007
Available-for-sale:
Equity securities
Debt securities
Other
Total

Cost

¥34,636
10,732483¥45,851

Unrealized gains

Unrealized losses¥34,132146
4¥34,282

¥ 561
689
34
¥1,284

Fair value¥68,207
10,189453¥78,849
Millions of Yen

2006
Available-for-sale:
Equity securities
Debt securities
Other
Total

Cost

¥38,295
13,221
654¥52,170

Unrealized gains

Unrealized losses¥45,503230
7¥45,740¥1,338507
0¥1,845

Unrealized gains

Unrealized losses$299,010
1,279
35$300,324$ 4,914
6,036
298$11,248

Fair value¥82,460
12,944661¥96,065
Thousands of U.S. Dollars

2007
Available-for-sale:
Equity securities
Debt securities
Other
Total

46

ADK Annual Report 2007

Cost

$303,425
94,0174,231$401,673

Fair value$597,521
89,2603,968$690,749

Available-for-sale securities whose fair values are not readily determinable as of December 31, 2007 and 2006, were as
follows:

Thousands of
U.S. Dollars

Millions of Yen

2007

Carrying amount
Available-for-sale:Non-listed equity securities
Money management funds
Free financial funds
Medium-term government bond funds
Other
Total

¥1,63983
468
279¥2,073

Total sales of available-for-sale securities sold in the2006¥1,535
2,068
71
—
497
¥4,171

2007$14,358
727
35
596
2,444
$18,160

The redemption schedule for available-for-saleyears ended December 31, 2007 and 2006, amounted tosecurities with maturities as of December 31, 2007 and¥8,449 million ($74,017 thousand) and ¥6,400 million and2006, is as follows (Note: If a security with a derivative

the related gains amounted to ¥2,761 million ($24,187

instrument is to be redeemed earlier than the contracted

thousand) and ¥1,844 million, and the related losses

maximum maturity date under certain conditions, regardlessamounted to ¥0 million ($0 thousand) and ¥15 million,of such conditions, the maximum maturity date is reflected

respectively.

in the schedule.):Millions of Yen

2007
Debt securities
Other
Total

Due within one year

¥3,09916¥3,115

1 to 5 years¥3,459—¥3,4595 to 10 years¥1,021—¥1,021

Over 10 years¥2,61047¥2,657
Millions of Yen

2006
Debt securities
Other
Total

Due within one year

2007
Debt securities
Other
Total

Due within one year

¥2,31716¥2,333

1 to 5 years¥ 7,472—¥ 7,472

5 to 10 years

¥812
—
¥812

Over 10 years¥2,341—¥2,341Thousands of U.S. Dollars$27,149140$27,289

1 to 5 years$30,302—$30,302

5 to 10 years$8,944—$8,944

Over 10 years$22,865411$23,276

ADK Annual Report 2007

47

4. SHORT-TERM AND LONG-TERM DEBT
The weighted average annual interest rates applicable to the short-term debt were 3.27% and 1.81% at December 31, 2007
and 2006, respectively.
Long-term debt as of December 31, 2007 and 2006, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2007
0.58% bonds due on October 10, 2007
Secured loans due through 2009 with weighted average interest rates
of 1.67% in 2007 and 2.39% in 2006
Amount due within one year
Total

¥

2006

2007

—

¥ 500

$

—

108
(48)
¥ 60

157
(549)
¥ 108

946
(420)
$ 526

The repayment schedule of long-term debt as of December 31, 2007, was as follows:Year Ending December 31

Millions of Yen

2008
2009
Total

¥ 48
60
¥108

Thousands of
U.S. Dollars

$420
526
$946

The carrying amounts of assets pledged as collateral for the current portion of long-term debt of ¥48 million ($420 thousand)and long-term debt of ¥60 million ($526 thousand) as of December 31, 2007, were as follows:

Millions of Yen

Time deposits
Land, property and equipment—net of accumulated depreciation
Investment securities
Total

48

ADK Annual Report 2007

¥123
200
168
¥491

Thousands of
U.S. Dollars$1,0771,752
1,472$4,301

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 thebenefit pension plans. The latter consists of cash balancelevel of salary, length of service and certain other factors.

plans, funded non-contributory pension plans and plans
The liabilities for employees’ retirement benefits and pension plans as of December 31, 2007 and 2006, comprise the following:
Millions of Yen

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

Thousands of
U.S. Dollars

2007

2006

2007

¥10,953(8,816)(891)¥ 1,246¥10,609(8,267)(648)¥ 1,694$ 95,953(77,232)(7,806)$ 10,915

The components of net periodic benefit costs for the years ended December 31, 2007 and 2006, were as follows:
Millions of Yen

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial differences
Contributions paid during the period, etc.*
Net periodic benefits costs
The discount rate used by the Group was 2.0% as of theyears ended December 31, 2007 and 2006. The rate of
expected return on plan assets used by the Group was 1.5%
for the years ended December 31, 2007 and 2006. The
estimated amount of retirement benefits to be paid at the
future retirement date is allocated equally to each service*Remarks:

Thousands of
U.S. Dollars

2007

2006

2007

¥ 792
195
(123)
104
929
¥1,897

¥ 715
198
(101)
135
909
¥1,856$ 6,938
1,708(1,078)911
8,139$16,618

year over the estimated number of total service years.
Unrecognized actuarial net gains and losses are amortizedover 13 years on a straight-line basis commencing fromthe succeeding period. Prior service costs are charged toincome 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 not pension assets and liabilities as stated above.
The above-stated contributions paid during the period, etc., include the Group’s cash contribution for the period
to the Japan Advertising Industry Pension Fund.
The information of total pension assets and liabilities of the Japan Advertising Industry Pension Fund, theGroup’s share of the contribution to the fund, and the products of pension assets or liabilities and the Group’s
share of the contribution to the fund are as follows (Note: As stated above, the Group cannot technically or
reasonably allocate pension assets and liabilities to the Group’s account. The product calculation is simply for
information purposes only.):
ADK Annual Report 200749

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

Millions of Yen

Pension liabilities
Pension assets
Net assets

March 31,2007

March 31,2006

Marc h 3 1 ,2007¥(65,101)
80,894¥ 15,793¥(60,171)
73,345¥ 13,174$(570,311)
708,664$ 138,353

April 1, 2006 –March 31, 2007

April 1, 2007 –March 31, 2008

9.01%
5.67%
14.68%

9.18%
5.64%
14.82%The rate of expected return on plan assets used by the fund was 5.5%.
b. The Group’s share of the contribution to the fund

Share of the Group as employers
Share of Employees
Total
c. Products of pension assets or liabilities and the Group’s share of the contribution to the fundMillions of Yen

March 31, 2007
Pension liabilities
Pension assets
Net assets

Share of the Groupas employer¥(5,867)
7,290¥ 1,423

Share ofemployees¥(3,693)
4,588
¥ 895

Millions of Yen

March 31, 2006
Pension liabilities
Pension assets
Net assets

Share of the Groupas employer¥(5,524)
6,733¥ 1,209

Share ofemployees¥(3,393)
4,136
¥ 743

Thousands of U.S. Dollars

March 31, 2007
Pension liabilities
Pension assets
Net assets

50

ADK Annual Report 2007

Share of the Groupas employer$(51,397)
63,863$ 12,466

Share ofemployees$(32,352)
40,193$ 7,841

d. Supplemental information

Prior service liabilities are amortized over 20 years by

The fund’s net pension asset amount of ¥15,793 million

the straight-line method through the fund accounting,($138,353 thousand) and ¥13,174 million on March 31,

and the Group expensed an additional contribution of2007 and March 31, 2006, stated in “a” above equals¥113 million ($990 thousand) and ¥112 million during

the net of earnings surplus of ¥23,518 million ($206,027

the period from April 1, 2006, to March 31, 2007, andthousand) and ¥21,140 million and prior service liabilities

from April 1, 2005, to March 31, 2006, respectively, forof ¥7,724 million ($67,665 thousand) and ¥7,966 million,

this amortization.

respectively.

6. CHANGE IN NET ASSETS
The type and number of shares issued and treasury stock as of December 31, 2007 and 2006, were as follows:

2007
Number of shares as of December 31, 2006
Number of shares increased during the accounting
period ended December 31, 2007
Number of shares decreased during the accounting
period ended December 31, 2007
Number of shares as of December 31, 2007
Notes:

Type of treasury
stock

Common stock

Common stock

51,655,400

4,558,407—

2,006,087(6,500,000)
45,155,400(6,500,197)
64,297

1. The increase in the number of treasury stock was due to the purchase of 2,000,000 shares with the approval of a Board of
Directors meeting and the purchase of 6,087 shares of less-than-one-unit shares.
2. Decreases in the number of treasury stock were due to the cancellation of treasury stock of 6,500,000 shares based on theapproval by the Board of Directors and sales of 197 less-than-one-unit shares.

2006
Number of shares as of December 31, 2005
Number of shares increased during the accounting
period ended December 31, 2006
Number of shares decreased during the accounting
period ended December 31, 2006
Number of shares as of December 31, 2006
Notes:

Type of sharesissuedType of sharesissuedType of treasury
stock

Common stock

Common stock

51,655,400

3,702,551—

855,861—
51,655,400(5)4,558,407

1. The increase in the number of treasury stock was due to the purchase of 850,000 shares with the approval of a Board of Directors
meeting and the purchase of 5,861 shares of less-than-one-unit shares.
2. The decrease in the number of treasury stock was due to sales of less-than-one-unit shares.

ADK Annual Report 2007

51

Information related to dividends for the accounting periods ended December 31, 2007 and 2006, was as follows:
2007
Dividend paid during the accounting period ended December 31, 2007

Resolution
Total amount of dividend
Dividends per share
Record date
Payable date

Board of Directors
February 14, 2007

Board of Directors
August 15, 2007

¥800 million¥17
December 31, 2006
March 31, 2007

¥457 million¥10June 30, 2007
September 13, 2007

Dividend attributable to the performance of the accounting period ended December 31, 2007, but paid after said
accounting period
Board of Directors
February 14, 2008

Resolution
Total amount of dividend
Fund of dividend
Dividends per share
Record date
Payable date

¥1,442 million
Retained earnings¥32
December 31, 2007
March 12, 2008

2006
Dividend paid during the accounting period ended December 31, 2006

Resolution

Ordinary general meetingof shareholders
March 30, 2006

Board of Directors
August 16, 2006

Total amount of dividend
Dividends per share
Record date
Payable date

¥1,246 million¥26
December 31, 2005
March 31, 2006

¥474 million¥10June 30, 2006
September 13, 2006

Dividend attributable to the performance of the accounting period ended December 31, 2006, but paid after said
accounting period

Resolution
Total amount of dividend
Fund of dividend
Dividends per share
Record date
Payable date

52

ADK Annual Report 2007

Board of Directors
February 14, 2007

¥800 million
Retained earnings¥17
December 31, 2006
March 13, 2007

7. INCOME TAXESThe Company and its domestic consolidated subsidiaries are

and 2006, respectively, after reflection of the enterprise tax,

subject to corporate, inhabitant and enterprise taxes based

in a way that such tax should be deductible for tax purposes

on income. The normal effective statutory tax rate for these

only when paid. Overseas subsidiaries are subject to thetaxes in the aggregate was approximately 40.69% for 2007

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,
2007 and 2006, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Deferred tax assets:
Allowance for doubtful receivables
Accrued bonuses
Accrued retirement benefits
Investment securities
Tax loss carryforwards
Deferred tax assets in overseas consolidated subsidiaries*
Other
Valuation allowance**
Total deferred tax assets
Deferred tax liabilities:
Marketable securities
Deferred tax liabilities in overseas consolidated subsidiaries*
Other
Total deferred tax liabilities
Total net deferred tax liabilities*Remarks:

2007

2006

2007

¥

¥

$

424
183
386
403
131
43
1,014
2,584
(117)
2,467

13,436
3—
13,439¥10,972

462
47
608
452
199
39
978
2,785
(116)
2,669

17,8833
20
17,906¥15,237

3,714
1,603
3,382
3,530
1,148
377
8,883
22,637(1,025)
21,612

117,705
26—
117,731$ 96,119The deferred tax assets and liabilities in overseas consolidated subsidiaries as a result of the tax effects of thesignificant temporary differences and loss carryforwards as of the end of fiscal 2007 and 2006, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2007
Deferred tax assets:
Tax loss carryforwards
Other
Less valuation allowance**
Deferred tax assets
Deferred tax liabilities—Other
Deferred tax liabilities
Net deferred tax assets

¥ 85
57
(99)
43
2
2
¥ 41

2006

2007

¥ 88
30
(79)
39
3
3

¥ 36

$ 745
499
(867)
377
18
18
$ 359

**Remarks: The valuation allowances shown above are provided for tax loss carryforwards of certain subsidiaries under theGroup’s tax planning.

ADK Annual Report 200753

Reconciliation between the normal effective statutory tax rate for the years ended December 31, 2007 and 2006, and theactual effective tax rates reflected in the accompanying consolidated statements of income were as follows:

Normal effective statutory tax rate
Certain expenses permanently not deductible
for tax purposes
Certain income permanently not taxable for tax purposes
Per capita levy
Other—net
Actual effective tax rate

2007

2006

40.69%

40.69%

5.61(1.41)
0.29
1.20
46.38%

6.16(1.04)
0.15
1.10
47.06%

8. RESEARCH-AND-DEVELOPMENT COSTS
Research-and-development costs charged to income for the year ended December 31, 2007 and 2006, were ¥844 million($7,394 thousand) and ¥841 million, respectively.

54

ADK Annual Report 2007

9. LEASESThe Group leases certain computer equipment, office space,expense of finance leases that do not cause transfer ofvehicles and other assets.

ownership of the leased property to the lessee on an "as if

Pro forma information of leased property such as

capitalized" basis for the years ended December 31, 2007

acquisition cost, accumulated depreciation, obligations

and 2006, were as follows:

under finance leases, depreciation expense and interest

Millions of Yen

Year Ended December 31, 2007
Acquisition cost
Accumulated depreciation
Net leased property

Furniture andequipment¥2,213
1,292¥ 921

Machinery andvehicles

¥33
23
¥10

Software

¥381
178
¥203

Total

¥2,627
1,493¥1,134

Obligations under finance leases:
Millions of Yen

Due within one year
Due after one year
Total

¥ 433
732
¥1,165

Millions of Yen

Year Ended December 31, 2006
Acquisition cost
Accumulated depreciation
Net leased property

Furniture andequipment¥2,067
1,527¥1,080Machinery andvehicles

¥28
14
¥14

Software

¥386
111
¥275

Total

¥3,021
1,652¥1,369Obligations under finance leases:
Millions of Yen

Due within one year
Due after one year
Total

¥ 575
824
¥1,399ADK Annual Report 2007

55

Thousands of U.S. Dollars

Year Ended December 31, 2007
Acquisition cost
Accumulated depreciation
Net leased property

Furniture andequipment$19,387
11,319$ 8,068

Machinery andvehiclesSoftware

$289
201
$ 88

Total

$3,338
1,560$1,778$23,014
13,080$ 9,934

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

Due within one year
Due after one year
Total

$ 3,793
6,413$10,206

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

Millions of Yen

2007
Total lease payments
Depreciation expense
Interest expense

2006

¥603
580
23

¥717
688
28

2007
$5,2835,081
201

Depreciation expense and interest expense, which are not reflected in the accompanying consolidated statements of income
and retained earnings, are computed by the straight-line method and the interest method, respectively.

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

Millions of Yen

2007
Due within one year
Due after one year
Total

56

ADK Annual Report 2007

¥158
164
¥322

2006
¥ 9
9
¥18

2007
$1,384
1,437$2,821

10. CONTINGENT LIABILITIESAs of December 31, 2007, the Group had the following contingent liabilities:
Guarantee Obligations:Aggregated amount of guarantees for debts owed by subsidiaries
and affiliates and payables by a client, Mindshare Japan

Millions of Yen

Thousands of
U.S. Dollars¥836$7,324

Other contingent liability:
In September 2005, a former client filed a lawsuit against one of the Company’s consolidated subsidiaries and four othercompanies and five individuals seeking demands in excess of $12.5 million in connection with the subsidiary’s and the otherdefendants’ advertising business. The subsidiary and its legal counsel filed a motion to dismiss the complaint in November
2005. The court heard oral arguments on the motion in January 2006 and has not yet issued a ruling.

ADK Annual Report 200757

11. DERIVATIVESThe Group enters into foreign exchange forward contracts
to hedge foreign exchange risk associated with certain
assets and liabilities denominated in foreign currencies.
The Group does not hold or issue derivatives for trading or
speculative purposes.

Because the counterparties to these derivatives arelimited to major sound financial institutions, the Group does
not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group
have been made in accordance with internal rules andpolicies which regulate the authorization and exposure limit
amount.

The notional amounts, fair values and unrealized gain and loss on derivatives as of December 31, 2007 and 2006, weresummarized as follows:
Millions of Yen

Year Ended December 31, 2007
Currency:
OTC market
Foreign exchange forward contracts- buying (US$)
Swaps
Total

Notional
amounts

¥ 354
1,417

Due after
one year

Unrealized gain
(loss)

Fair value

¥283
—

¥339
0

¥(5)
0
¥(5)

Millions of Yen

Year Ended December 31, 2006
Currency:
OTC market
Foreign exchange forward contracts- buying (US$)
Swaps
Total
Interest rate:
OTC market
Swaps

Notional
amounts

¥

67
1,417

¥1,000Due after
one year

Unrealized gain
(loss)

Fair value

¥
—
1,417

¥69
2

¥2
2
¥4

¥

¥ (3)

¥3

—

Thousands of U.S. Dollars

Year Ended December 31, 2007
Currency:
OTC market
Foreign exchange forward contracts- buying (US$)
Swaps
Total

Notional
amounts$ 3,101
12,413Due after
one year$2,479—Derivative transactions which were accounted for by hedge accounting were excluded.

58

ADK Annual Report 2007

Fair value$2,9700Unrealized gain
(loss)

$(44)
0
$(44)

12. SEGMENT INFORMATION
Information about business segments, geographic segments and billings to foreign customers of the Group for the years
ended December 31, 2007 and 2006, was as follows:(1) Business Segment Information
Business segment information for the years ended December 31, 2007 and 2006, was as follows:a. Billings and Operating Income
Millions of Yen

2007
Billings to customers
Inter-segment billings
Total billings
Operating expenses
Operating income

Advertising

Nonadvertising¥426,402
37
426,439
419,300¥ 7,139¥8,609
222
8,831
8,835
¥
(4)

Advertising

Nonadvertising¥410,87599
410,974
404,605¥ 6,369¥9,184
311
9,495
9,459
¥
36

Total

¥435,011
259
435,270428,135¥ 7,135

Eliminations
or Corporate

Consolidated—¥(259)
(259)
(258)
¥ (1)

¥435,011—
435,011427,877¥ 7,134
Millions of Yen

2006
Billings to customers
Inter-segment billings
Total billings
Operating expenses
Operating income

Total¥420,059
410
420,469
414,064¥ 6,405

Eliminations
or Corporate

¥

—
(410)
(410)
(397)
¥ (13)

Consolidated¥420,059—
420,059
413,667¥ 6,392b. Assets, Depreciation and Capital Expenditures
Millions of Yen

2007
AssetsDepreciation
Capital expenditures

Advertising

Nonadvertising¥236,659
1,130
599¥9,70340
8Advertising

Nonadvertising

Total¥246,710
1,165
588¥10,05640
4¥256,766
1,205
592

Total

¥246,362
1,170
607

Eliminations
or corporate

Consolidated¥(265)——¥246,097
1,170
607
Millions of Yen

2006
AssetsDepreciation
Capital expenditures

Eliminations
or corporate

Consolidated

¥(12)
—
—

¥256,754
1,205
592

ADK Annual Report 200759

a. Billings and Operating Income
Thousands of U.S. Dollars

2007
Billings to customers
Inter-segment billings
Total billings
Operating expenses
Operating income

Advertising

Nonadvertising$3,735,454
324
3,735,778
3,673,237$ 62,541$75,418
1,945
77,36377,398
$
(35)

Total

Eliminations
or corporate

Consolidated—$(2,269)(2,269)(2,260)$( 9)$3,810,872—
3,810,872
3,748,375$
62,497$3,810,872
2,269
3,813,141
3,750,635$ 62,506

b. Assets, Depreciation and Capital Expenditures
Thousands of U.S. Dollars

2007
AssetsDepreciation
Capital expenditures

Advertising

Nonadvertising

Total$2,073,228
9,899
5,248

$85,002351
70$2,158,230
10,2505,318

Eliminations
or corporate

Consolidated$(2,321)——$2,155,909
10,2505,318

Notes: 1. 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 and branding 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. Consolidated operating expenses are equal to the total of cost of sales and selling, general and administrative expenses shown in theaccompanying consolidated statements of income and retained earnings.

(2) Geographic Segment Information
Because the billings and total assets of the foreign

60(3) Billings to Foreign Customers
Since the billings to foreign customers of the Group for

operations of the Group for the years ended December

the years ended December 31, 2007 and 2006, were31, 2007 and 2006, were less than 10% of those of the

7.2% and 5.7%, respectively, or less than 10% of the total

total consolidated operation, such segment information

consolidated billings in the two periods, such information

is not presented.

is not presented.

ADK Annual Report 2007

INDEPENDENT AUDITORS’ REPORTThe Board of Directors
ASATSU-DK INC.:
We have audited the accompanying consolidated balance sheets of ASATSU-DK INC. and its consolidated
subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of income,changes in net assets and cash flows for the years then ended, all expressed in Japanese yen. These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility
is to independently express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material 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 made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of ASATSU-DK INC. and consolidated subsidiaries as ofDecember 31, 2007 and 2006, and the consolidated results of their operations and cash flows for theyears then ended, in conformity with accounting principles generally accepted in Japan.
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in
our opinion, such translation has been made in conformity with the basis stated in Note 1. Such U.S. dollar
amounts are presented solely for the convenience of readers outside Japan.

Yasumori Audit Corporation
Certified Public Accountants
March 28, 2008

ADK Annual Report 2007

61

Securities Holdings

ASATSU-DK INC. Consolidated Investments as of December 31, 2007
Millions of Yen

2007
Current

Money management funds
Free financial funds
Cash reserve fund
Bonds
Mutual funds in equities and bonds and others

Non-Current

¥

83
4
68
3,099

10 funds

420

10 funds

Total¥ 3,676

WPP Group plc.

¥46,145 2.63% or 31,295,646 stocks

Digital Advertising Consortium Inc.

1,432

Equity method

Other publicly traded equities

22,060145 issues

Publicly traded equities total

69,638Non-publicly traded equities in affiliate companies

4,684

19 issues

Non-publicly traded equities in subsidiary companies

357

16 issues

Other non-publicly traded equities

1,639

75 issues

Non-publicly traded equities total

6,681

Bonds

7,090

28 issues

310

7 issues

Mutual funds in equities and bonds and others
Total non-current investments in securities¥ 7,400

Investments in affiliated companies (non-securities)338

7 funds

Investments in funds (non-securities)

130

3 funds

Total non-current Investments¥84,189
Millions of Yen

Top Five Equities by Balance including WPPWPP Group plc.

62

2007
¥46,145

31,295,646 shares

Tokyo Broadcasting System, Incorporated

2,358

982,900 shares

Omnicom Group Inc.

1,953

360,080 shares

ASAHI BREWERIES, Ltd.

1,892

1,000,000 shares

Mitsubishi UFJ Financial Group, Inc.

1,484

1,417,411 shares

ADK Annual Report 2007

Investor Information(As of December 2007)

Parent company nameASATSU-DK INC.

EstablishedMarch 19, 1956

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

Number of employees

3,215 (consolidated basis)2,017 (non-consolidated basis)

Common stock

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

Number of shareholders 10,001

Percentage of total shares issued

Treasury stock

0.14%

Individual and others

19.88%

Financial institutions

11.43%

Securities companies

0.95%

Distribution
byownersForeigners

61.92%

Other domestic corporations 5.68%

Percentage of Ownership Voting*Major shareholders

WPP International Holding B.V.

22.91%

Northern Trust Co. (AVFC) Sub A/C American Clients

4.96%

Mellon Bank N.A. Treaty Clients Omnibus

4.25%

The Silchester International Investors International Value Equity Trust

3.70%

Masao Inagaki

3.63%

CBNY-Third Avenue International Val. Fund

2.91%

Northern Trust Company AVFC Re U.S. Tax-Exempted Pension Funds

2.71%

CBNY-UMB Funds

2.39%

Bear Stearns and Company

1.80%

State Street Bank and Trust Company

1.75%* Note: Percentage of Ownership Voting figures are based on 45,091,103 shares (45,155,400 shares issued and outstanding,minus 64,297 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

ADK Annual Report 2007

63

ADK Group Network

DOMESTIC
AGENCY GROUPADK International Inc. … ■1-1, Tsukiji 4-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3546-9100
Fax: +81-3-3546-9150
ADK Dialog Inc.
1-1, Tsukiji 4-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-5151
Fax: +81-3-3547-5152
Digital Advertising Consortium Inc. … ❑20-3, Ebisu 4-chome, Shibuya-ku,
Tokyo 150-6033
Tel.: +81-3-5449-6200
Fax: +81-3-5449-6201
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.
12-19, Ginza 4-chome,
Chuo-ku, Tokyo 104-0061
Tel.: +81-3-3524-5056
Fax: +81-3-3524-5058

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 GROUP
Nihonbungeisha Co., Ltd. … ■1-7, Kanda-Jimbo-cho, Chiyoda-ku,
Tokyo 105-8407
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

Nippon Information Industry Corp. … ❑1-4, Shibuya 3-chome, Shibuya-ku,
Tokyo 150-0002
Tel.: +81-3-3409-9411
Fax: +81-3-3409-3785

OVERSEAS

ADK Arts Inc. … ■1-1, Tsukiji 4-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3545-5400
Fax: +81-3-3545-5075

NORTH AMERICA

Drill Inc.
19-5, Udagawa-cho, Shibuya-ku,
Tokyo 150-0042
Tel.: +81-3-5428-8771
Fax: +81-3-5428-8772
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

ADK Annual Report 2007

Amsterdam
ADK Europe Holding B.V. … ■ADK Europe B.V. … ■Barbara Strozzilaan 386,
1083 HN Amsterdam,
The Netherlands
Tel.: +31-20-799-3500
Fax: +31-20-799-3501
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,
FranceTel.: +33-1-5345-3450
Fax: +33-1-5345-3455
ASIA
Beijing
Beijing Huawen-Asatsu International
Advertising Co., Ltd.
25F, Block B Winterless Center, No. 1,
West Dawang Road, Chaoyang District,
Beijing 100026, P.R.C.
Tel.: +86-10-6464-0088
Fax: +86-10-6464-3889

Information Processing Service

CREATIVE GROUPADK Boys Inc. … ■13-13, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3545-1071
Fax: +81-3-3545-1305

64

Super Vision, Inc.
13-1, Tsukiji 1-chome, Chuo-ku,
Tokyo 104-0045
Tel.: +81-3-3547-2156
Fax: +81-3-3547-2098

New York
ADK America Inc. N.Y. … ■515 West 20th St., 6F, New York,NY 10011, U.S.A.
Tel.: +1-646-284-9800
Fax: +1-646-284-9825
Los Angeles
ADK America Inc. L.A.
970 W. 190th St. #710, Torrance,
CA 90502, U.S.A.
Tel.: +1-310-630-3600
Fax: +1-310-630-3620
EUROPE
Frankfurt
Asatsu (Deutschland) GmbH … ■Guiollettstrasse 45,60325 Frankfurt, Germany
Tel.: +49-6997-120-832
Fax: +49-6997-120-821

Tiexu Advertising Co., Ltd.
18F, Golden Land Bldg., No. 32,
Liangmaqiao Road, Chao Yang District,
Beijing 100016, P.R.C.
Tel.: +86-10-6466-2122
Fax: +86-10-8448-3324
Beijing Dai-Ichi Kikaku AdvertisingCo., 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
DS Public Relations Consulting Co., Ltd.
Room 828, Beijing Capital Times Square,No. 88 Xichang’an Ave., Beijing 100031,
P.R.C.
Tel.: +86-10-8391-3389
Fax: +86-10-8391-3399
Shanghai
Shanghai Asatsu Advertising Co.,
Ltd. … ■10F, Yongxin Mansion, No. 887, Huaihai
Zhong Lu, Shanghai 200020, P.R.C.
Tel.: +86-21-6467-4118
Fax: +86-21-6474-7803
Asatsu Century (Shanghai)
Advertising Co., Ltd.… ■9F, Yongxin Mansion, No. 887, Huaihai
Zhong Lu, Shanghai 200020, P.R.C.
Tel.: +86-21-6474-8908
Fax: +86-21-6474-8909

(As of April 2008)

DS Public Relations Consulting Co., Ltd.
Shanghai Agency
Rm. 1205, Yongxin Mansion,
No. 887, Huaihai Zhong Lu,
Shanghai 200020, P.R.C
Tel.: +86-21-6433-9623
Fax: +86-21-6443-9705
Guangzhou
Guangdong Guangxu (Asatsu)
Advertising Co., Ltd. … ❑26F, Telecom Plaza, No. 18,
Zhang Shan Er Road, Guangzhou
510081, P.R.C.
Tel.: +86-20-8888-9818
Fax: +86-20-8888-9815
Asatsu Century (Shanghai)
Advertising Co., Ltd.
Guangzhou Branch
Rm. E-F, 19F, Jin An Tower, No. 300,
Dong Feng Zhong Road,
Guangzhou 510030, P.R.C.
Tel.: +86-20-8321-2080
Fax: +86-20-8321-2032
ChengduAsatsu Century (Shanghai)
Advertising Co., Ltd.
Chengdu Branch
B-801, Times Plaza, No. 2, Zongfu Road,
Chengdu 610016, P.R.C.
Tel.: +86-28-8666-5471
Fax: +86-28-8672-5017
FuzhouFujian ASATSU-DK Ltd.
No. 131, 2F, Fuzhou Century Crown Bldg.,
Bei Huan Zhong Road, Fujian 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

DIK-OCEAN Advertising Co., Ltd. … ■13F, No. 287, Nanking East Road, Sec. 3,
Taipei 105, Taiwan, R.O.C.
Tel.: +886-2-2546-3636
Fax: +886-2-2546-1919
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
37 Beach Road, #2-02,
Singapore 189678
Tel.: +65-6336-2346
Fax: +65-6336-1982
IMMG Pte. Ltd.
213 Henderson Industrial Road, #01-09,
Henderson Industrial Park,
Singapore 1595535
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 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

DK ADVERTISING (HK) LTD. … ■25F, Leighton Centre, 77 Leighton Road,
Causeway Bay, Hong Kong
Tel.: +852-2811-9999
Fax: +852-2811-9699

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

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

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 MinhASATSU-DK VIETNAM INC.
18F, Sun Wah Tower, 115 Nguyen Hue
Blvd., District 1, Ho Chi Minh City,
VietnamTel.: +84-8-821-9211
Fax: +84-8-821-9210
SOL Advertising Company
18F, Sun Wah Tower,
115 Nguyen Hue Blvd., District 1,
Ho Chi Minh City, Vietnam
Tel.: +84-8-821-9211
Fax: +84-8-821-9210
ManilaASATSU-DK INC.
Philippine Representative Officec/o Catalytx Advertising,
9/F Raffles Corporate Center,
F. Ortigas, Jr. Road (formerly EmeraldAve.), Ortigas Center, Pasig City 1605,
Philippines
Tel.: +63-2-914-4297
Fax: +63-2-914-9001
Seoul
ASATSU-DK INC. Seoul LG AD/
ADK DIVISIONLG Mapo Bldg., 275, Kongdeok 2-dong,
Mapo-gu, Seoul 121-721, South Korea
Tel.: +82-2-705-2517
Fax: +82-2-705-2952
New Delhi
ADK-FORTUNE PVT. LTD.*B1/B2 Enkay Centre, Udyog Vihar Phase-V,
Gurgaon 122016, India
Tel.: +91-124-453-9700
Fax: +91-124-453-9752* Under the process of company registration(as of June 2008)

Dubai
ASATSU-DK INC.
Dubai Representative Office
Al Sufouh Tower, 7th Floor, Office No. 701,
Dubai Media City,
Dubai United Arab Emirates
Tel.: +971-4-4278-722
Fax: +971-4-4278-721… ■ Consolidated subsidiaries… ❑ Affiliates accounted for by the equity
methodADK Annual Report 2007

65

ASATSU-DK INC.

http://www.adk.jp/english/index.html

Printed in Japan