The worldwide recession, sparked by the sub-prime loan crisis in the United States, is showing signs of bottoming out. Nevertheless, the economic outlook remains unclear and difficult business conditions are expected to continue. By strengthening our competitive edge and working to squeeze costs, we will strive to bolster gross profit and increase profitability by reducing expences, while also stressing financial stability. In these ways, we will address the difficult challenges we face.

With the progress of Internet and mobile technologies, together with proliferation of blogs and social networking services, major changes are taking place in advertising media environments. This is placing pressure on advertising companies to propose communication programs that best suit consumers in terms of their sophisticated purchasing behavior and media interaction patterns.
     As a solutions partner, the ADK Group seeks to address the needs of advertisers and reach consumers and making stronger impressions on them. To this end, we have promoted 360-degree communications programs that seamlessly integrate various forms of media based on a media-neutral, solution-neutral perspective. In the future, we will upgrade our capabilities in the digital, in-store, and direct business arenas, with the aim of reinforcing our strategies and systems.
     In the field of digital media, we will work to strengthen our Web-related solutions capabilities, including by using search engines to direct people to the websites of our advertising clients. To this end, we have formed an alliance with DA Search & Link Inc., a specialist in search engine marketing (SEM). In the field of in-store media, in September 2009 we formed an alliance with MACS Co., Ltd.,an agency that specializes in in-store merchandising and sales support. Under this agreement, we will jointly provide integrated services ranging from advertising to distribution, merchandising, and customer interface.

To strengthen our ability to deliver 360-degree solutions, we have set up client business units (CBUs) to address the requirements of specific clients, while linking and integrating the functions of our creative, communication planning, promotions, digital business, and media content divisions. These CBUs are designed to compensate for the deficiencies of vertical business structures. By ensuring maximum effectiveness in their operation, we will strive to deliver optimal communication programs to our advertising clients.

Animation content is a traditional strength of the ADK Group and its additional income source after regular advertising. With respect to animation content and secondary businesses derived from it, our plan is to reinvigorate existing popular content while developing new content to diversify our content portfolio. In addition to Japan, we will seek to tap overseas markets in order to promote program and character goods sales.

Within Japan, we will continue reinforcing the operations of our regional branches, with particular focus on Osaka, Nagoya (West Japan), and Fukuoka (Kyusyu), which we regard as major potential growth regions.

The ADK Group is working to build an overseas network that helps its clients advance their international operations. We regard markets in Asia and other emerging regions as areas with relatively high growth potential while many advertisers are increasing their emphasis especially on China and ASEAN nations. Accordingly, the Group will further strengthen its activities in these nations. In fiscal 2009, for example, set up our Russian office. In China, we are fortifying our operational network, spearheaded by our local subsidiary in Shanghai. In other Asian regions, as well, we are upgrading our personnel and functional capabilities in order to attract Japanese companies and local corporations as clients. In the mature markets of Europe and North America, we will effectively utilize the global resources of WPP Group, in addition to mobilizing our own network. We will also reinforce our educational program for Global Account Directors able to accurately address the global needs of advertisers who are advancing their business internationally. At present, ADK Group’s overseas business accounts for around 6% of consolidated gross billings, and our plan is to raise this ratio to around 10% over the medium term.

The ADK Group believes “ad business is a people business,” and a company’s competitiveness is deeply dependent on the quality of its people. The key to success is to make proposals that address changes in the purchasing behavior of consumers and match the needs of advertisers. This requires advanced communication technologies, including branding-related skills, as well as in-depth knowledge about the ever-changing media environment. Through ADK University, an in-house educational program, the Group is working to nurture people who can address such market requirements.

The importance of reinforcing creativity continues to grow, even in the digital age. In order to promotes 360-degree communications programs, ADK’s creators are required to serve as Communications Directors—capable of designing holistic communication programs that contribute to the businesses of clients from advanced, all-encompassing perspectives. To this end, our creative division combine two initiatives—continuous training aimed at nurturing next-generation creative staff, together with scouting of highly talented from outside the Group—in our ongoing quest to reinforce the Group’s creativity.

It is important to offer proposals that match the needs of advertisers—who demand greater impact from their advertising investments—and also meet consumer’s purchasing behavior and insight in this digital age. For this reason, we will step up training of Communications Channel Planners capable of reaching consumers touchpoints from 360-degree perspectives. We will also continue emphasizing organizational reinforcement aimed at raising our negotiating skills.

Advertising activities represent an important element of an advertiser’s investment strategy. Accordingly, advertisers demand ongoing improvements in ad investment efficiency, and want verification of such efficiency from their ad agencies. The ADK Group strives to propose optimal advertising programs and implement measures that maximize the return on investment in such programs. We also provide clients with our ROI Model, which enables them to verify the effectiveness of their advertising investments. Determined to strengthen our ability to formulate 360-degree communications programs and reinforce our effectiveness verification systems, we will continue incorporating and developing the necessary knowledge and technologies, including introduction and nurturing of talented human resources.

The ADK Group includes companies specializing in various fields. To properly address the difficult business conditions we face, we will generate cross-lateral Groupwide synergies by fostering the growth of each company and strengthening interaction among Group entities. We will also adopt appropriate measures to deal with businesses and Group companies with declining profitability, in order to improve our consolidated business performance.

Fiscal 2009 was the first year in which ADK applied its internal control system reporting framework pursuant to the Financial Instruments and Exchange Law. We have suitable and rational mechanisms in place to guarantee the reliability of our financial reporting. Going forward, we will also continue our tireless quest to enhance our internal control system. We will also step up risk management, including by our tightening information security and compliance systems. At the same time, we will acquire ISO14001 certification to upgrade our environmental management protocols. Social contribution activities represent a key part of our CSR commitment. To this end, we pursue a variety of initiatives in our unique role as an advertising company. For example, we hold seminars on ad production in cooperation with Ritsumeikan University, and we participate in production of public welfare ad campaigns promoted by the Japan Advertising Council. The ADK Group is acutely aware of its corporate social responsibilities and will work relentlessly toward their fulfillment.

Since our establishment, we have embraced a corporate philosophy of “Management by All.” Guided by this philosophy, we will work as a united group, adopting measures aimed at ensuring a swift business performance recovery. We look forward to the ongoing support and understanding of our shareholders as we pursue our future goals.