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CEO Message

Masumi Minegishi

Masumi Minegishi

President, CEO, and Representative Director

Strengthening the Group Management Philosophy

During the fiscal year ended March 31, 2018 (FY2017), we redefined our Vision, Mission and Values for the entire Group. The overarching concept is to create a briter, "creating a brighter world where all individuals can live life to the fullest." From there, we decided to call the world we aim our "Vision," and the role we will play in it our "Mission." To realize our Vision and Mission, we have identified our three most important "Values" as "WOW THE WORLD," "BET ON PASSION," and "PRIORITIZE SOCIAL VALUE."

These Vision, Mission and Values are founded on the belief that when people are free to pursue their will, dreams, desires, and passions- they will exhibit the greatest ability and each individual will shine and their potential will bloom. This belief permeates every element of the Group. As we will show in detail in Recruit Group's "Value Creation Process," we will generate a virtuous cycle that creates social impact through relationships with all of our stakeholders.

Over the recent years, the rapid changes in customer needs and the speed of innovation to respond has been remarkable. As a Group that operates globally, we need to constantly evolve to meet the changing expectations of our customers and society. However, we should maintain a consistent management philosophy and value we provide as a group. I believe that our recently redefined Recruit Group Vision, Mission and Values are the result of refining and extracting the elements that are consistent, working as a solid foundation for the Group.

Competitive Advantages, Opportunities and Risks

One example of our response to rapid technological innovation and its application in business is the use of artificial intelligence ("AI") in the field of HR. The information required by job seekers is scattered in so many different places, it makes job search very challenging. Information asymmetry can be a stumbling block for an individual trying to unlock their future potential or abilities. Cutting edge AI technology has the potential to resolve this problem in a flash. Specifically, by gathering information widely from the Internet, it can identify potential information and process the accumulated data to match an individual's need using an advanced algorithm and display the information that a person is really looking for. This was impossible 10 years ago, but if we are to succeed in realizing "Opportunities for Life," we must proactively adopt this rapid technological innovation and become the force for change.

Meanwhile, for the "Ribbon Model" that we have treasured as the driving force of our business since the Recruit Group's foundation, while it gradually evolves with the incorporation of new technologies, the fundamental logic of the business model will not change within all the Strategic Business Units (SBUs): HR Technology, Media & Solutions, and Staffing. In particular, we will create satisfaction that can only be achieved through the optimal matching of the information provided by our clients with the needs and requirements of individual users. Ultimately, we can eliminate dissatisfaction, inconvenience, and unease in society, which also enables us to create new opportunities for the society. The ability to evolve this Ribbon Model is the competitive advantage of Recruit Group, as well as the reason that we are able to treat the dramatic changes in the external environment as significant opportunities. For example, the HR industry is said to be a market that has room for significant improvement in its processes and efficiency. To provide unrivalled efficiency and convenience, we must evolve the Ribbon Model in combination with technology and respond to new needs. One example of this evolution of the Ribbon Model was welcoming Glassdoor as our subsidiary in June 2018, with its massive online database of reviews of recruiting companies and salary information. Moreover, I think the key factor that will keep us evolving the Ribbon Model is none other than our three important Values.

Naturally, such a rapid development in technology also brings significant risks. In addition to personal information protection, we must also be fully prepared to protect our data from cyber attacks and so forth. Furthermore, in the matching algorithm that uses AI, the key to sustainable operation and capturing profits will be in how we eliminate fabricated job ads and information that could conceivably infringe on human rights in some way. From this perspective, we have issued a rigorous data security policies for every SBU in Recruit Group and we apply these in establishing and maintaining their systems.

A Governance Structure for Further Evolution

The transformation we have been working on includes changes in our management structure. Since April 2016 we have operated each business through three SBUs within Recruit Holdings. However, to stay ahead of the global changes in technology and improve our business portfolio continuously and rapidly, in April 2018 we established SBU Headquarters within each SBU and changed to a governance system that allows each SBU to execute its independent strategy in a self-sustaining manner. Meanwhile, the holding company function has been focused and strengthened within Recruit Holdings, and new group governance structure, business monitoring mechanism, and financial data management system have been put in place. We undertook the reorganization as we considered that strengthening the headquarters functions of each SBU would most effectively enable them to further expand their business values.

Recruit Holdings and the SBUs are strengthening financial governance as well as non-financial governance, such as compliance and sustainability including diversity and inclusion. For compliance, which forms the core of our corporate activities, we ensure rigorous observance of internal rules such as the code of ethics. I believe it is necessary for us as a company to continuously meet society's expectations, taking on various challenges to provide value sustainably to industry and society, while consistently acting with a high sense of ethics and values as a member of society.

Moreover, it is essential for our competitive advantage to create a work environment in every SBU where diverse employees can draw on their unique individual abilities. We put effort in supporting diversified talents such as; different background in age, gender, nationality, sexual orientation, or staff with other obligations such as childcare or nursing. The Company has also welcomed personnel with diverse backgrounds onto the Board of Directors to incorporate various perspectives into management as we know that these differences make us stronger as a team.

Review of FY2017 and Outlook

As a step towards realizing our Vision, we set a target of becoming the world leader in the HR industry.

In the consolidated financial results for FY2017, revenue and EBITDA both reached new record highs, and the overseas ratio of consolidated revenue increased from 43% in the previous fiscal year to 46%, mainly reflecting growth at Indeed and a contribution of overseas subsidiaries including a newly consolidated company in the Staffing segment. Becoming the world leader in the HR industry is a milestone, but the most important thing I believe is to provide services of unrivalled convenience to companies and individuals in the HR industry.

As we proceed steadily forward with our initiatives for the future, we will increase the number of data scientists working in the Group in Japan to drive innovation by technology further. Also, at our AI research laboratory in Silicon Valley in the US, we are engaged in research on a daily basis aimed at realizing our Vision Mission and Values.

- Message to Our Stakeholders -

In FY2017, our revenue, EBITDA, and adjusted EPS, which is one of our management key performance indicators, all reached the highest levels since the Company was listed. As I have mentioned, we launched a new management structure in April 2018, and with each business promoting business strategies under its own headquarters we will realize even further increases in enterprise value. In addition, the overall Recruit Group will promote even further initiatives to improve our legal and regulatory compliance systems and risk management capabilities.

At Recruit Group, each individual employee has endeavored sincerely to meet the needs of stakeholders and has continued to create new value. As we have shown in our Value Creation Process, the output of our businesses not only contributes directly to resolving social issues but can also contribute to achieving the Sustainable Development Goals (SDGs*1) adopted by the United Nations General Assembly. In particular, the Ribbon Model can serve as a trigger for "10. Reduced inequalities" by eliminating asymmetries in information, while having a domino effect that helps to realize the related goals of "5. Gender equality," "4. Quality education," "8. Decent work and economic growth," and "1. No poverty." In the process, we will incorporate the feedback we receive from our stakeholders into management and cycle through this model continuously. We will continue to take bold steps in true Recruit Group's style, creating new value through innovation aimed at resolving the problems the world is facing.

*1 Acronym of Sustainable Development Goals, which were adopted by the U.N. summit meeting in September 2015 and are goals for the 193 member countries to achieve in the 15 years from 2016 to 2030.