Accelerating Sensational Growth€¦ · Accelerating Sensational Growth. Founded in 1988, the Avex Group has grown over the years by consistently transforming its business model

2012 Investors’ Guide11.04.01–12.03.31

Accelerating Sensational Growth

Founded in 1988, the Avex Group has grown over the years by consistently transforming its business model. The vision guiding the Group today is to become a company that delivers emotional experiences to create value. To this end, the Group is shifting from a conventional record company business geared mainly to music package sales and music distribution to a unique business model that comprehensively develops various businesses surrounding the artist and content. These include everything from video package sales, video distribution, artist management, live concerts, and the sale of goods, to the operation of fan clubs. In this way, the Group is determined to realize sustainable growth in the entertainment industry, where change never stops.

Creating Sensational Value

MAnAGeMenT MeSSAGe

02 To Our Shareholders and Other Investors

Contents GROwTH STRATeGIeS

08 Strategy 1 360-Degree Business Strategy10 Strategy 2 Avex Growth engine12 Strategy 3 Redefining Our Asia Strategy

012012 Investors’ Guide

OperatIOnal revIew

14 at a glance16 review of Operations 16 Music Business 17 video Business 18 Management/live Business 19 Other Business

ManageMent OrganIzatIOn

20 the avex group’s Csr activities22 Corporate governance25 Directors, auditors and

Corporate executives

FaCts & FIgures

26 Market Data28 Core Business Data30 Consolidated Financial highlights32 Business and Other risks33 Corporate Data and Investor Information

to Our shareholders and Other Investors

ready to Deliver sensational valueCreative energy and Flexibility Carry avex Into a new stage of growthThe Avex Group’s business domain extends beyond that of a traditional recording company. In addition to the sale of music content, either as packages or as digital downloads, our operations include artist man-agement and live entertainment production, as well as areas such as merchandising and fan club manage-ment. In short, we cover every type of business related to artists and content as an entertainment group that pursues a 360-degree Business Model. The fact that we possess publication rights, master licensing rights and other rights in connection to our content stands as a big advantage of the Avex Group.

The market for music packages in Japan has been shrinking since 1998. Due to the Avex Group’s high dependency on such sales, this trend caused growth to stagnate briefly. Around 2005, we took steps to expand our 360-degree Business Model, in a move that drove net sales higher once more. However, the aggressive attempt to tackle new businesses caused profitability and our financial position to worsen.

This situation prompted the Avex Group in April 2010 to radically alter its entire management struc-ture in order to enhance corporate governance and achieve both swifter and more efficient Group man-agement. In December that same year, we formulated “Next Era 2014,” our medium-term business plan, and announced our medium-term vision of becoming a company known for “creating value through emo-tional experiences,” with the Avex Group to grow net sales to JPY140 bn by fiscal 2013.

During fiscal 2011, the plan’s initial year, we restructured the Music Business to focus on producing new hits, expanded our live entertainment business, offered and enhanced new online video distribution services that take advantage of smartphone functionality, and switched the focus of our business model in the Asian market outside Japan. These actions resulted in record-high net sales, as well as operating income built on leaner operations than ever before. These outcomes are good indicators that our push in recent years to improve the Group’s corporate structure was a successful one.

Going forward, the Avex Group will harness this characteristic momentum and flexibly transform its busi-ness style to create value through new emotional experiences. Our goal remains to become a corporate group that shareholders, investors and our many other stakeholders will consistently feel they know and trust.

Your continued support will be vital to our success.

August 2012 Representative Director, CEO Masato Matsuura

Representative Director, CSO Ryuhei Chiba

Representative Director, CFO Shigekazu Takeuchi

Representative Director, CBO Shinji Hayashi

02 Avex Group Holdings Inc.

ManageMent Message grOwth strategIes

MasatO MatsuuraRepresentative Director, CEO

shIgekazu takeuChIRepresentative Director, CFO

ryuheI ChIBaRepresentative Director, CSO

shInjI hayashIRepresentative Director, CBO


OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures

Overview of Fiscal 2011The entertainment industry is in the midst of a

dramatic change, as the rapid market spread of

smartphones and their related infrastructure

create new genres of entertainment and new

modes of consumption. The changes can be

seen particularly clearly in the music distribution

business. As an increasing number of consum-

ers purchase smartphones, users not only find

it easier to access music content; they also

have access to a wider selection of entertain-

ment. On the other hand, the ease of access

has meant a steady decline in the overall

number of music downloads.

During fiscal 2011, the Avex Group saw a

drop in revenues from online music distribution,

reflecting the impact of the current market envi-

ronment. On the other hand, music package

sales climbed due to a strong title lineup. As a

result, the Music Business as a whole enjoyed an

increase in sales. The Video Business, mean-

while, saw explosive growth in the number of

subscribers to our “d Market Video Store pow-

ered by BeeTV” (“Video Store”) service, which

distributes video content to smartphone custom-

ers, and by strong sales of video packages, par-

ticularly animated series. Changing trends in the

marketplace have also spurred demand for live

entertainment. By taking steps to expand our live

event and music concert business, the Avex

Group has been able to increase attendance

dramatically, sparking sharp revenue growth in

the Management/Live Business.

These factors contributed to the highest

revenue figure in the Group’s history. Consoli-

dated net sales rose 8.5% year on year, to

JPY121,027 mn. Even in a breakdown by busi-

ness segments, the Music Business, Video

rOe Over 15% 14.7%

Fiscal 2011

net sales Over jpy140 Bn jpy121 Bn

OperatIng InCOMe MargIn Over 10% 10.1%

MeDIuM-terM target guIDelIne

net sales

jpy

121,027Mn



Business, Management/Live Business and Other

Businesses segments all posted higher sales

than in the previous fiscal year. This contributed

to an 8.1% year-on-year increase in operating

income, to JPY12,263 mn.

On the other hand, changes in the statutory

corporate tax rate in Japan led to a reversal in

deferred tax assets, and the Group booked losses

from the lump-sum amortization of goodwill con-

nected to affiliated companies. These and other

factors caused net income for the term to decline

by 7.1%, to JPY4,934 mn.

3. prOvIDIng value tO sOCIety thrOugh exCItIng entertaInMent

Famous performing artists, actors and producers have the ability and

opportunity to make a significant impact on society. Music and film can

influence people emotionally, giving them a sense of energy, comfort and

courage. The Avex Group always seeks opportunities to use the entertain-

ment experience to make a positive contribution to society.

1. DevelOpIng exCItIng new entertaInMent experIenCes

The entertainment industry is no longer confined to the conventional products

and media that were typical in the past. We will create a multitude of exciting

new experiences, as well as new ways to access them.

2. CreatIng new ways tO share experIenCes

The Avex Group believes that the essence of entertainment is a communion

of feelings, ideas and emotions between individuals. For example, social

networking services allow fans today to interact with performing artists, and to

build a rapport with people whom they have never met, by listening to the

same music or attending the same concert.

Create value thrOugh eMOtIOnal experIenCes

Create value through emotional experiencesThe general objective outlined in the Avex

Group’s current medium-term business plan,

“Next Era 2014,” is to “create value through

emotional experiences.”

By this, we mean that the Avex Group will

seek to develop new types of entertainment and

emotional experiences, offer better ways for

people to share their experiences, and strive to

provide value to society in general, through the

experiences and entertainment we create.



Medium-term Business plan progressAlthough fiscal 2011 was nominally the first year

of our medium-term business plan, the Avex

Group made strides in meeting the targets set for

the fiscal year ending March 31, 2014—sales of

JPY140 bn and an operating income margin of

10% (which corresponds to JPY14 bn in operat-

ing income). Fiscal 2011 was also a year in which

the Group made enormous strides in its online

video distribution business, the opening move in

the digital and alliance strategies outlined in the

medium-term business plan. We enabled BeeTV

to offer users higher and larger screen resolutions

for video on smartphones (Android devices from

NTT DOCOMO only) compared with conventional

mobile phones, and membership increased

steadily. In November 2012, we sought to

broaden the online video distribution business

further by complementing our existing BeeTV

service with the launch of Video Store, a service

offering access to over 5,000 movies, TV dramas

and other content titles. With the start of Video

Store, we successfully developed a customer

base different from that of BeeTV, a point that is

accelerating membership growth. By further

expanding both content and services, we are

targeting additional growth in the customer base

and ARPU going forward.

Furthermore, to meet our quantitative targets

for fiscal 2013, the Avex Group will need to main-

tain sales in existing businesses at current levels

in the face of ongoing contraction in the market

for music distribution. To offset the likely drop in

music revenues, we intend to focus on other

existing businesses with potential for growth, such

as live performances, merchandising, and the

market for animated series and other video pack-

ages. In order to generate growth, the Group will

focus on new businesses, particularly the video

distribution platform, which has currently attracted

over 3 million fee-paying members (including

subscribers to Video Store).

vIDeO DIstrIButIOn servICe Fee-payIng suBsCrIBers

Over 3MIllIOn

OvervIew OF the MeDIuM-terM BusIness plan

From the “Next Era 2014” medium-term business plan announced in 2010

COnCerts, MerChanDIsIng, vIDeO paCkages, Others

MusIC paCkages, MusIC DIstrIButIOn

vIDeO DIstrIButIOn, Others

Net sales

Current level

Time framereInFOrCeMent OF ManageMent struCture

DIg

Ital s

trate

gy

New

ExistingrestruCture

OF CreatIve struCture

hIgh-value aDDeD

strategy

allIanCe strategy



During fiscal 2012, we will continue strength-

ening initiatives to meet targets while laying the

groundwork for medium-term growth.

refocusing strategy for the asian MarketThe Avex Group started its push into overseas

markets in 2006, focusing on the potential for

growth in Asia. While these efforts have yet to

yield significant success, we continue to pursue

an active overseas growth strategy, albeit with a

major shift in focus.

During the fiscal year under review, the Avex

Group formed a capital alliance with BASE

Entertainment, a company with a strong presence

in the entertainment business. We also made

progress on preparations to transfer the head-

quarters of our overseas business from Beijing to

Shanghai. This business will now focus mainly on

live entertainment, rather than music packages

and online distribution, as we aim for growth in

overseas markets.

Refer to “Strategy 3—Redefining Our Asia Strategy” on page 12 for more specific details.

Issues to addressThe surrounding market environment in enter-

tainment and users’ consumption habits are

changing rapidly. The Avex Group’s overarching

mission to create new hits, however, remains

unchanged. In recent years, though, the Group

has struggled to produce a stream of hit artists

under management. Devising a mechanism for

creating both artists and content has thus

emerged as a pressing issue. Addressing it will

entail doing away with the underlying

approaches, methods and concepts crafted

during the heyday of music packages as we

seek to create hits that perfectly mesh with the

needs and lifestyles of today’s users.

returning profits to shareholdersOne of our most important management tasks is

to ensure long-lasting and comprehensive profit

distribution to our shareholders. Specifically, it is

our basic policy to pay an annual dividend of

JPY40 per share to our shareholders, and to

achieve a dividend payout ratio of more than

30% on a consolidated basis. When determining

the amount of the dividend to be paid from

retained earnings, we also make a comprehen-

sive evaluation of factors such as consolidated

performance, cash flows and future funding

requirements. The year-end dividend is decided

at the General Shareholders’ Meeting, while

interim dividends are determined by the Board of

Directors. Under this basic policy, we paid an

annual dividend of JPY40 per share in fiscal

2011, consisting of interim and year-end divi-

dends of JPY20 per share, respectively. The

Avex Group is also contemplating a shift to a

profit-linked dividend system in the near future.

Going forward, we will continue to explore a

comprehensive range of options for returning

profits to our shareholders.

Cash DIvIDenDs per share

jpy 40



strategy 1

360-Degree Business strategy

Developing an Integrated Music Business ModelIn fiscal 2011, the avex group posted record high revenue, thanks to the success of strategic initiatives laid out in the medium-term business plan. amid music market contraction driven by changing consumer behavior among users, music packages now account for around 30% of avex sales, down from more than 80% a decade ago. this section introduces our 360-degree Business Model, the growth strategy that will complement the avex group’s conventional record company business model driven by music package sales.

Manage-Ment

OnlIne DIstrIBu-

tIOn

lIve COnCerts

MerChan-DIsIng

Fan CluBspaCkages MusIC



Discover artist by

downloading music

purchase merchandise

at concert venue

attend live concert

want to attend live concert

and join fan club

like artist and purchase

music package

appearances by avex artists only

The Avex Group was the first in the industry to introduce a 360-degree Business Model, whereby we

are engaged in all types of music-related businesses. In addition to CD and DVD sales, we are now

involved in a wide range of entertainment businesses, including online music distribution, fan clubs,

merchandising, and live concerts. These businesses have contributed to our operating performance.

In promoting the 360-degree Business Model, we sought to construct a value chain built on more

robust coordination between products and services. For example, as shown in the flow chart below, we

are moving to maximize revenues in each business area by designing pathways that will draw in users.

Also, rather than having a closed-loop business model featuring only Avex content and artists, we

have bolstered our capabilities to enable participation from outside players as well. As a result, rather

than simply having an internal infrastructure for each business, we are expanding business using an

open platform approach that will make consistent earnings possible.

Open BusIness platFOrM

DrawIng In users

appearances by many artists from other labels

lineup of many products from other companies

a-nation

sales of avex songs and products only

Now:

Now:

At launch:

At launch:

Online music distribution site

mu-moe-commerce site

mu-mo shop

Outdoor live



Movie tv Drama Music

d Market video store

Movie tv Drama

Beetv

Beetv

d Market is a content store for smartphones offered by NTT DOCOMO. It includes content from five categories: videos, books, music, applications and reviews, and an anime store.

avex growth engine

As consumers’ video content needs grow with the spread of smart-

phones and ever faster data loading speeds, to complement BeeTV

we launched Video Store, a paid mobile video distribution service

that boasts one of the largest collections of titles in Japan.

With Video Store, users can watch or listen to as many movies

and dramas, or as much animation and music from Japan and over-

seas, and original titles from BeeTV as they want, choosing from

more than 5,000 titles and some 20,000 episodes for a monthly fee

of JPY525 (tax included), making it a very price-competitive service.

BeeTV is a popular mobile-only service, featuring original con-

tent based on careful marketing that is easy to view and enjoy. In

September 2011, we set a target of 1.8 million subscribers by the

platform strategyIn november 2011, we launched d Market video store powered by Beetv (“video store”) in collaboration with ntt DOCOMO, InC. we will carry out aggressive business development, leveraging our strength as a pioneer in the paid video distribution market.

strategy 2



Music

avex growth engine

approx. 5,000tItles

approx. 20,000epIsODes

end of March 2012, a goal which was reached ahead of schedule.

Video Store subscribers growth has also been strong, topping

700,000 subscribers in just 3 months following the launch of the

service. With some 80% of the subscribers being new to the ser-

vice, we believe that we are able to target a market that is even

larger than the one for BeeTV.

By adding Video Store, with its movies and TV dramas, to

BeeTV, which offers primarily original content, we have been able to

reach a wider range of users. Going forward, we will expand the

range of users and grow the ARPU by offering a broader spectrum

of content and services.

Beetv + video store suBsCrIBers

2.4 MIllIOn subscribers in fiscal 2011 4.0MIllIOn subscribers in

fiscal 2012 (projection)



strategy 3

the avex group began its business operations in asia in hong kong in 1996, and in 2006 established a goal to evolve into the entertainment brand company with the strongest creative and communication capabilities in asia. since then, business efforts overseas have been focused in east asia.today, to adapt to the contraction in the music market, we are working to capture business opportunities by re-establishing our approach based on three keywords: business bases, business focus, and business alliances.Instead of simply exporting japanese artists and songs to asia, we are building a platform to create content that will be popular throughout the region.

redefining Our asia strategy

Create the Next Hit Sensation to Become Asia’s Biggest Name in Live Entertainment

1. establish avex shanghai3. Consider partnerships

with industry players from europe and the u.s.

2. Create an active base for artists developed by avex taiwan

1 Base relOCatIOnshift From Beijing to shanghai

The Avex Group had been primarily basing its Chinese operations in Beijing, but we will relocate our base to Shanghai, the hub of both China’s economy and live entertainment business. Many people in Shanghai hold a positive view towards Japanese culture, and Shanghai is also a good base for performances by artists devel-oped by Avex Taiwan.

In the summer of 2012, we launched operations at Avex Shanghai Co., Ltd., which primarily produces and manages live events in China. With this Shanghai subsidiary, we have our sights set on fully advancing artists from Japan, South Korea, Taiwan and Hong Kong into the mainland China market, holding performances throughout Asia as well as developing partnerships with Western players in the entertainment industry.



FOCus untIl nOw FOCus gOIng FOrwarD

Music packages/distribution live entertainment

• Development of theatrical content from Base entertainment

• Access to BASE Entertainment business base

• Joint development in East Asia

2 Change OperatIOnal FOCusshift From Online Distribution of Music packages to live entertainment

Up until this point, our focus had been on the Japanese success model centered on music packages and online distribution, but this model is plagued by a number of problems overseas, including widespread illegal content, differences in business practices, as well as various regulatory issues.

On the other hand, there is strong demand for live concerts and television appearances from dynamic artists and other entertainers. As we anticipate revenue to be at least as high as in Japan, we will focus on the live entertainment field in the future. We will also offer theatrical content such as musicals and plays.

In tandem, we will endeavor to continuously develop artists capable of working on the global stage, as we aim to be Asia’s largest live entertainment company.

3 allIanCesjoint Development of live entertainment Business with top players Overseas

In January 2012, we formed a business and capital tie-up with New York-based BASE Entertainment, one of the leading entertainment companies in the promotion of musicals and theatrical management worldwide.

We will leverage the content, business bases, and know-how of BASE Entertainment, and jointly develop business operations with them in the East Asia market. This collaboration will allow for joint performances featur-ing content such as Avex Group music concerts from Japan, as well as content jointly produced by both compa-nies. Also, we will collaboratively work to tailor content to match the special characteristics of Japan and other parts of Asia.

Meanwhile, we are making progress on forming alliances with key players in countries throughout the world, with one example being a business tie-up with Media Asia, the largest Chinese visual content company.

Baseentertainment



at a glance

the avex group is a comprehensive entertain-ment company with a broad range of opera-tions. today, the avex group is expanding its earning streams further by optimally drawing out the appeal of its artists and other talent.

Music BusinessThis business involves the production of music content, sales of packages and digital distribution, music publication business, and operation of the Company’s own “mu-mo” music distribution site.GROUP COMPANIESn Avex Entertainment Inc.n Avex Marketing Inc.n Avex Music Publishing Inc.

sales COMpOsItIOn

video Business

15%

Management/ live Business

27%

Other Businesses

3%

Music Business

55%



video BusinessThis business covers the production of video content, sale of pack-ages and film distribution, and the operation of BeeTV, a video distribution service for mobile phone users.GROUP COMPANIESn Avex Entertainment Inc.n Avex Marketing Inc.n Avex Broadcasting & Communications Inc.

Management/live BusinessThis business involves the management of artists and talent, mer-chandising, operation of fan clubs, and the planning, production, and operation of concerts and events. GROUP COMPANIESn Avex Management Inc.n Avex Marketing Inc.n Avex Live Creative Inc.

Other BusinessesEfforts here focus on development and nurturing of new artists, school businesses (Avex Artist Academy), and restaurant businesses.

GROUP COMPANIESn Avex Planning & Development Inc.



Fiscal 2011 OverviewIn fiscal 2011, the Avex Group faced a difficult business environment as the online music distribution market continued to contract and the number of downloads declined. This trend was negated, however, by an increase in sales of music packages from new artists and performers signed from other labels, coupled with new hit album releases by the group EXILE and other key artists. Sales increased by 4.3% year on year, to JPY70,643 mn, while operating income rose 5.1%, to JPY8,439 mn.

Initiatives going ForwardThe Music Business currently accounts for roughly half of the Company’s total sales. However, this segment is likely to continue to decline as a shifting industry structure in Japan and changing consumption trends among customers drive continued

review of Operations

contraction in the music package and online distribution markets. Based on anticipated market trends and the product mix of planned releases for the current period, we are projecting sales for fiscal 2012 to decline by JPY3,423 mn, to JPY67,220 mn, while operating income is likely to fall by JPY1,019 mn year on year, to JPY7,420 mn.

We are now restructuring our business model to take advantage of changes in consumer behavior. This includes pursuing greater selectivity and focus in items slated for release and the development of new business models. The Avex Group is also stepping up efforts to streamline its organi-zation and relocate personnel, coupled with a financial-side push to use expenses more efficiently. Taken together, these measures should help minimize the decline in sales and profits.

Music Businesssales

OperatIng InCOMe

(JPY mn)

(JPY mn)

20,000

40,000

60,000

80,000

0 09 10 11 (FY)

0

3,000

6,000

9,000

(FY)09 10 11



Fiscal 2011 OverviewIn fiscal 2011, sales of DVDs were brisk, supported by the release of the movie “Life” and the “ONE PIECE Log Collection” animated series. The Company also teamed up with NTT DOCOMO in online video distribution to launch and manage a new service called “Video Store” for smart-phone subscribers in November 2011. The number of smartphone subscribers to this service has risen steadily.

The fiscal year under review saw the release of many more highly profitable video packages than in fiscal 2010. Furthermore, steady growth in the number of subscribers to our video distribution service led to a reduction in the cost of sales. Consequently, sales increased by 13.8% year on year, to JPY18,791 mn, and operating income rose to JPY2,496 mn, a 15.3% increase over the previous fiscal year.

Initiatives going ForwardIn fiscal 2012, we expect to expand the release of video packages, particularly ani-mation, while further increasing the number of subscribers to online distribution services. The Company is projecting sales for the year of JPY31,080 mn, representing an increase of JPY12,289 mn year on year.

Operating income is projected to increase by JPY1,044 mn, to JPY3,540 mn.

Growth in demand related to video distribution services for smartphones is projected going forward. Through BeeTV and Video Store, the Company will establish a presence in the creation of content unique to smartphones. By the end of March 2013, the goal is to capture a dominant No. 1 position with a total membership for both services surpassing 4 million users.

video Businesssales

OperatIng InCOMe (lOss)

OnlIne vIDeO DIstrIButIOn servICe MeMBershIp

(JPY mn)

(JPY mn)

(Thousands of people)

0 (FY)

5,000

10,000

15,000

20,000

09 10 11

–5,000 (FY)

0

1,000

2,000

3,000

09 10 11

’113

’116

’119

’1112

’123

0

500

1,000

1,500

2,000

2,500



Fiscal 2011 OverviewSales for the Management/Live Business rose 12.7% year on year, to JPY34,810 mn. Among other factors, business benefit-ted from an increase in the number of large-scale concert tours by in-house art-ists, as well as live performances by artists represented by non-Avex Group manage-ment. Efforts to utilize sales promotion and advertising expenses, as well as general expenses, more efficiently greatly boosted profitability, with operating income climbing 64.3% year on year, to JPY1,475 mn.

During the second quarter, membership fees for some fan clubs were eliminated, reducing the number of fee-based mem-berships. However the launch of many new fan clubs kept total revenues and operating income from this business at roughly the same level as in the previous year.

Initiatives going ForwardThe Company is pursuing a vertical integra-tion model, which maximizes the appeal and impact of Avex Group artists and per-formers. Concerts, merchandising and fan club management are all key points of emphasis for this model. Looking ahead, we aim to leverage rights and platforms for each artist in ways that will transform every element of the artist’s identity—including fashion and hobby interests—into commer-cial opportunities. At the same time, we intend to further develop our planning and production capabilities for live performances and entertainment events in ways that only the Avex Group can.

In fiscal 2012, we expect growth in the merchandising business, coupled with an increase in fan club memberships, to boost sales to JPY35,980 mn, a year-on-year increase of JPY1,170 mn. Operating income is expected to rise JPY605 mn year on year, to JPY2,080 mn.

Management/live Businesssales

OperatIng InCOMe

(JPY mn)

(JPY mn)

10,000

20,000

30,000

40,000

0 (FY)09 10 11

0 (FY)

1,000

2,000

3,000

09 10 11



Fiscal 2011 OverviewStrong performance in the Group’s school businesses, among others, lifted sales 3.7% year on year, to JPY3,958 mn. However, SG&A costs increased sharply with the opening of Avex Artist Academy’s new Fukuoka campus, contributing to an operat-ing loss of JPY148 mn, reversing JPY253 mn in operating income a year earlier.

Initiatives going ForwardIn fiscal 2012, sales are projected to decline by JPY98 mn year on year, to JPY3,860 mn. Operating loss is expected to be JPY340 mn.

The Avex Group views the creation of new hits as a priority issue, and intends to reorganize its infrastructure for developing new artists to this end. For example, the Artist Development Division opened last year within the holding company should prove a powerful tool in helping the Group to develop and cultivate new talent swiftly. In April 2012 we took another step for-ward, with the launch of an international artist class at Avex Artist Academy. Hope-fully this will sow the seeds for a new crop of talented global performing artists.

Other Businessessales

OperatIng InCOMe (lOss)

(JPY mn)

(JPY mn)

1,000

2,000

3,000

4,000

0 (FY)09 10 11

0

150

300

450

–150 (FY)09 10 11



Official merchandisePublic viewing of “a-nation” festival

taking Full advantage of what we Offer as an entertainment Company to Contribute to society

the avex group’s Csr activities

The theme that guides the Avex Group’s CSR activities is expressed in our slogan: “Building joy through entertainment.” The Group takes part in a wide variety of CSR activities designed to make this slogan a reality for people everywhere. Avex Group artists take part in many charity events and promotional campaigns designed to boost aware-ness, particularly among young people, of problems of global signifi-cance, from environmental protection and the eradication of famine to AIDS prevention.

response to the great east japan earthquakesupport for recovery efforts by “a-nation”The Avex Group was involved in numerous projects again in fiscal 2011, both in-house and in cooperation with outside groups, to support the recovery effort in the Tohoku region following the Great East Japan Earthquake.

One of the most high-profile of these efforts was the dedication of our tenth annual “a-nation” festival to the overarching theme “for Life.” Through this event, the Avex Group, through its core enter-tainment business, sought to bring joy and optimism to the lives of those affected by the disaster, and to convey the energy, enthusiasm and emotion of artists and concertgoers alike to those most in need of comfort and encouragement. Other activities included the following:

1. Free public viewing of the eventFree public viewing sites were set up at six Ito-Yokado stores in

Iwate, Miyagi and Fukushima prefectures, allowing over 13,000 people in the disaster-struck region to view the concerts live on large-screen displays.

2. Contributions to the Japanese Red Cross SocietyAvex contributed a share of the revenues from ticket sales and merchandising to the Japanese Red Cross Society’s relief opera-tion, which supports rebuilding in areas hit by the earthquake and tsunami.• Contributed JPY100 from the Group and JPY100 from the customers from the price of each ticket, for a total of around JPY54 mn.• In addition, we contributed a portion of the profits generated from official merchandise sales, as well as the proceeds from a charity auction of stage outfits worn by the performing artists. This generated a further donation of around JPY4 mn.

3. Electric power conservation effortsAt the concert venue, power generator trucks were provided to supply all of the power needed for each stage event (roughly 1500 kW for each performance). LED lights were used for a portion of the stage lighting to conserve power usage. We also set up “aerobike” human-powered electric generators. This allowed concertgoers to provide some of the electricity for perfor-mances, while raising awareness of the need to conserve energy.



Workplace visit by studentsPower generator truck

accepting workplace visits by junior and senior high school studentsIn recent years, an increasing number of schools have begun orga-nizing company visits by students as a way of giving young people experience in social skills and human relations, while helping them plan future careers. The Avex Group has actively taken part in these efforts, accepting visits by junior and senior high school students.

During the visits, we provide a studio tour, describe typical work activities, and allow students to watch Avex Group artists perform. By giving students a taste of what work is like at our company, we try to convey the attraction of a career in the entertainment industry.

Another aspect of these visits is to explain to young people the need to protect copyrights and the rights of performers, songwriters and recording companies. In cooperation with the Recording Indus-try Association of Japan, we try to discourage students from visiting illegal downloading websites and making illegal copies of music.

providing vaccinations to people in developing countriesTo raise awareness of environmental protection and social contri-bution efforts among Avex Group employees, we conduct in-house ECOCAP bottle cap collection activities. Avex performing artists also take part in these activities. In fiscal 2011, the third year of this program, we collected 78,840 individual caps, which provided enough funding to supply polio vaccines to nearly 100 people*. The contributions are provided to a certified nonprofit organization,

the Japan Committee for “Vaccines for the World’s Children” (JCV)**, which offers vaccinations to people in developing countries.

* For every 800 bottle caps collected (worth around JPY20), enough funds are provided to vaccinate one child against polio.

** JCV provides vaccines and preventative medicines that help protect children around the world from infectious diseases.

promoting a balance between work and personal lifeThe Avex Group strives to create conducive workplace conditions and foster the individual attitudes needed to promote a healthy balance between work and personal life.

During the fiscal year ended March 31, 2012, the General Affairs & Personnel Administration Division launched a “Work-Life Fusion Promotion Project,” conducting in-house interviews and discussions to identify issues that might interfere in the ability of employees to balance childrearing with the demands of their careers, and seek solutions. In addition, we conducted “Life Design” seminars aimed at female employees, to help them deal with such issues.

The Avex Group strives to create an enjoyable workplace that can attract the talented human resources needed to produce and distribute entertainment, and motivate them to work effectively.



Overview of Corporate governance structureAvex Group Holdings (“the Company”) uses the

corporate auditor system. There is a Board of

Auditors with four members, including two out-

side auditors, who monitor the performance of

Corporate governance

the avex group (“the group”) is determined to achieve the targets outlined in its “next era 2014” medium-term business plan. In parallel with moves to heighten group management efficiency and transparency, this effort requires that the group enhance corporate governance to ensure it promotes business in a proper manner. Our fundamental approach to corporate governance is to go beyond sustaining and improving the group’s compliance structure to promote information sharing centered on stronger monitoring functions. knowing the status of the group’s diverse operations and how they intertwine allows for the early discovery of management concerns and faster responses to changes in the business environment. these, in turn, are ultimately linked to additional growth for the avex group.

struCture OF COrpOrate gOvernanCe unIts anD Internal COntrOl systeM

the directors. In addition, there is a Board of

Directors with seven members, including two

outside directors, which meets once a month, as

a general rule, to decide on the main issues

facing the Company and its Group companies.

The Executive Board Committee, comprised of

the four representative directors and charged with

ensuring the control and flexibility of Group man-

agement, as a general rule meets weekly to

discuss management matters significant to the

Company and its Group companies.

Compliance CommitteeThe Compliance Committee, which counts the outside directors and audi-tors among its members, deliberates on the main compliance-related issues facing the Company. The Committee also strives to effect improvements by checking and discussing the content of the reports made to the internal Helpline system.

Investment advisory CommitteeThe Investment Advisory Committee, composed mainly of the director of the Management Information Administration Division and other division heads, strives to ensure the effectiveness and soundness of investments made by the Company and its Group subsidiaries by objectively examining the positive and negative aspects of the investment decisions made and by verifying the post-investment situation and results.

production ethics CommitteeThe Production Ethics Committee is comprised of members of the Executive Board Committee and deliberates on any doubtful points and problems that arise with regard to the presentation and reproduction of the music and visual images handled by the Group, in addition to considering the response guidelines to be followed.

Compensation CommitteeThe Compensation Committee consists mainly of outside directors, who exam-ine the propriety of executive compen-sation from an objective standpoint.

general shareholders’ Meeting

tactical Digital strategy Office of the CeO

new Business project promotion DepartmentBusiness process reengineering room

Board of Directors

executive Board Committee

CeO

Independent accountant

general affairs & personnel

administration

Management Information

administrationBusiness

administration

helpline

group Companies

Compliance Committee

Director for Compliance

Compliance Committee Office

Instructions

Instructions

Report

Report

Report

Opinions and reports

Questions/consulting

Oversight of performance

Opinion and report of investment judgment

Report of ethical judgment of products and content

Confirms suitability of compensation for directors and corporate auditors

Report

Financial auditing

Report

Board of auditors

Internal affairs

Investment advisory Committee

production ethics Committee

Compensation Committee

Monitoring

artist Development

Extensive collaboration

strategic planning

administration



Furthermore, to ensure proper business

operations by the Company and its Group com-

panies, the Internal Affairs Department conducts

monitoring in the form of operational audits.

Management control staff members, meanwhile,

are dispatched to all Group companies to carry

out appropriate monitoring of the state of their

business activities in an effort to maintain and

improve the Group’s governance system.

Furthermore, with the aim of ensuring the

effectiveness and soundness of business

operations, the Group has established the

following bodies.

Internal Control systemsThe Group has a system of internal controls for

increasing the effectiveness and efficiency of its

business operations and ensuring the reliability of

its financial reporting. In accordance with its

“Fundamental Policy for Internal Controls,” the

Group checks the status and configuration of its

system of internal controls every fiscal year.

Moreover, to maintain and improve its system, the

Group sets a compliance policy that underlies its

corporate ethics stance, and all executives and

employees are made aware of and fully under-

stand the importance of strict compliance with

laws and regulations. Furthermore, the Group has

established an Internal Reporting System and

allocated external lawyers and industry counselors

to a Helpline to continually strive to guard against

infractions of laws and regulations, unfair prac-

tices, and ethical transgressions occurring within

the Company.

The Group has developed a risk management

structure by establishing risk management regula-

tions, specifying divisions bearing executive

responsibility for risk, and appointing directors with

responsibility for risk control to manage the com-

prehensive risks that face the Group as a whole.

To enhance information security, tests were

conducted to inspect Group system vulnerability in

order to mitigate the potential for information leaks

and other issues. In parallel, training regarding

personal information was instituted for all employees,

coupled with a revision of the Group structure for

managing personal information. These steps were

taken to further advance the Avex Group’s internal

structure for personal information management.

Furthermore, the Internal Affairs Department

conducts audits of the risk control situation facing

the Company and its Group companies and reports

its findings to the president and to the auditors.

When potential issues are found, the department

takes steps to resolve them in partnership with

relevant divisions. This system ensures that the

risk control structure remains robust, and is con-

stantly maintained and improved.

Outside Directors and Outside auditorsThe Company appoints two outside directors and

two auditors. These outside officers are selected

on the basis of their experience and insight, in an

effort to help strengthen the management and

corporate governance of the Company. The

current outside officers hold qualifications as

certified public accountants or lawyers, and

possess the knowledge required to execute their

professional duties. These attributes serve the

officers well in their work to bolster and enhance

the Company’s management and corporate

governance structure.

The outside directors attend the meetings of

the Company’s Board of Directors, which are

held once a month as a general rule. Along with

monitoring the status of management, the direc-

tors render advice and exchange opinions when

necessary with respect to business decisions.

The outside auditors also attend the monthly

meetings of the Board of Directors and the Board

of Auditors meetings, which are also held once a

month as a general rule, and so are aware of the

situation regarding business execution by directors

of the Company and its Group companies. The

outside auditors also verify the results of internal

audits carried out by the Internal Affairs Department,

as well as the audit reports made by the accounting

auditor and of the structural condition of the system

for internal controls. This knowledge enables them

to liaise with the relevant departments to ensure

that the necessary actions are taken to make

corrections to and ensure the appropriateness of

the Group’s business operations.

Pursuant to Article 427, Paragraph 1 of the

Companies Act of Japan, the Company has

entered into contracts with all of the outside direc-

tors and outside auditors to limit the liability of each

outside director / outside auditor to the Company

under Article 423, Paragraph 1 of the same act.

The amount of liability set forth in each contract is

the minimum liability stipulated by Article 425,

Paragraph 1 of the Companies Act. These limita-

tions of liability are prefaced on good faith on the

part of the outside directors and auditors, as well

as the absence of any substantial losses pertaining

to their respective duties. There are no significant

financial or personal relationships between the

Company and its other directors and auditors and

the outside directors and auditors.

policy and Determination Method regarding the amounts of remuneration and Other payments and Method of CalculationThe Company adopts a three-person Compensa-

tion Committee chaired by an outside director and

with an additional outside director and the



representative director and CFO as members.

The committee is in line with a review of the

executive compensation system and procedures

for determining compensation. The new commit-

tee has resulted in a highly transparent executive

compensation system that incorporates an objec-

tive, external viewpoint.

Under the system, executive compensation

is composed of basic remuneration, profit-

linked salary, and stock options. Profit-linked

salary is linked to consolidated net income for

each business term. The Company also offers

stock options for directors (excluding part-time

and outside directors) to motivate management

guided by a medium-term perspective, and a

stronger awareness of the Company’s business

performance and share price.

Publicly listed companies have come under increasing pressure today to reinforce and enhance

their corporate governance. Outside directors play a vital role in meeting this need.

Beyond sustaining and improving the Avex Group’s compliance structure, we promote

information sharing centered on stronger monitoring functions. Knowing the status of the

Group’s diverse operations and how they intertwine allows for the early discovery of manage-

ment concerns and faster responses to changes in the business environment.

As outside directors, we stand between the Group and ordinary shareholders as inde-

pendent officers with no conflicts of interest with the Avex Group. Individually, we

bring our specialized experiences and insights to bear in ensuring the propriety and

appropriateness of decisions by the Board of Directors, all from an objective,

outsider point of view. In so doing, we hope to contribute meaningfully to the

sound development of the Avex Group.

Comments From the Outside Directors

payment of profit-linked salaries to DirectorsOn May 25, 2011, the Company’s Board of

Directors passed a resolution authorizing the

payment of a profit-linked salary to the Company’s

representative directors pursuant to Article 34,

Paragraph 1 (iii) of the Corporation Tax Act from

the fiscal year ending March 31, 2012.

The method of calculation of profit-linked

salaries is based on documented methodology

that all of the Company’s auditors have judged to

be appropriate.

Financial auditsThe Company has a contract with Deloitte

Touche Tohmatsu LLC to conduct financial audits

as stipulated in the Companies Act and Japan’s

Financial Instruments and Exchange Law.

tOMOhIrO tOyaMaOutside Director, Member of the Compliance Committee and the Compensation CommitteeAttorney at Law

From left

yuIChI satO Outside Director, Chairman of the Compensation Committee Certified Public Accountant

tOtal aMOunt OF reMuneratIOn FOr DIreCtOrs anD auDItOrs (FIsCal 2011)

ClassificationTotal

remuneration (JPY mn)

Remuneration breakdown (JPY mn)Total number

of payeesBasic remuneration Stock options Bonus

Directors (Excluding outside directors) 1,004 598 25 380 5

Auditors (Excluding outside auditors) 39 36 — 3 2

Outside directors and auditors 19 19 — — 4



*1 Currently Avex Planning & Development Inc.*2 Currently Aniplex Inc.*3 Currently Avex Marketing Inc.*4 Currently Deloitte Touche Tohmatsu LLC

H The assignment of independent officers tasked with safeguarding the interests of ordinary shareholders is mandated by the Tokyo Stock Exchange.

Directors, auditors and Corporate executives

MasatO Matsuura | Representative Director, CEO |

Apr. 1988 Joined the company; named DirectorMar. 1991 Named Senior Managing DirectorSep. 2004 Named Representative Director, PresidentApr. 2005 Named Representative Director,

President of Avex Entertainment Inc. (current)Jan. 2009 Named Representative Director,

President of Avex Management Inc. (current)Apr. 2010 Named Representative Director, President and CEO,

Avex Group Holdings Inc. (current)

ryuheI ChIBa | Representative Director, CSO |

Jul. 1995 Joined White Atlas Inc.*1 as Representative Director, PresidentSep. 2004 Named Representative Director, Vice President, Avex Group Holdings Inc.Apr. 2005 Named Representative Director, Vice President,

Avex Entertainment Inc. (current)Jan. 2009 Named Representative Director, Vice President,

Avex Management Inc. (current)Apr. 2009 Named Representative Director, President, Avex Broadcasting &

Communications Inc. (current)Apr. 2010 Named Representative Director, CSO, Avex Group Holdings Inc. (current)

shIgekazu takeuChI | Representative Director, CFO |

Jun. 2000 Corporate Executive Officer, Sony Music Entertainment (Japan) Inc.Oct. 2002 Representative Director, SME Visualworks Co., Ltd.*2

Jun. 2006 Representative Director, Chairman, Sony Pictures Entertainment (Japan) Inc.Oct. 2009 Joined Avex Group Holdings Inc. as Corporate ExecutiveApr. 2010 Named Corporate Executive, CFO

Named Compliance Committee Chairman (current)Jun. 2010 Named Representative Director, CFO,

Director in charge of risk management (current)May 2011 Compensation Committee member (current)

shInjI hayashI | Representative Director, CBO |

May 1990 Joined the companyApr. 1993 Named DirectorJun. 1996 Named Managing DirectorApr. 2005 Named Representative Director, President,

Avex Marketing Communications Inc.*3

Apr. 2010 Named Representative Director, CBO, Director in charge of compliance, Avex Group Holdings Inc. (current) Named Representative Director, President, Avex Marketing Inc. (current)

tOru kenjO | Director (Part-time) |

Nov. 1993 Gentosha Inc. established, named Representative Director, President (current)

May 2009 Named Chief Advisor, Avex Broadcasting & Communications Inc. (current)Jun. 2009 Named President & CEO, Gentosha Inc. (current)Jun. 2010 Named Director, Avex Group Holdings Inc. (current)

yuIChI satO | Director (External) | Certified Public Accountant |

Jun. 1988 Representative, Chuo Auditors Co., Ltd.Mar. 2000 Joined Chuo Consulting Co., Ltd.Nov. 2006 Opened Sato Yuichi Accounting Firm (current)Jun. 2010 Outside Auditor, Shimojima Co., Ltd. (current)

Named Director, Avex Group Holdings Inc. (current)May 2011 Compensation Committee Chair (current)

shInkIChI Iwata | Auditor (Standing) |

Apr. 1993 Joined the companyMar. 1995 Named DirectorJun. 2002 Named Representative Director, President, Avex Network Inc.*3

Jun. 2005 Named Auditor, Avex Group Holdings Inc. (current)

kenjI nOMura | Auditor (Standing) |

Jun. 1999 Joined Howdy International Co., Ltd.*3, named Senior Managing DirectorJun. 2002 Named Representative Director, President, Howdy International Co., Ltd. *3

Jun. 2005 Named Auditor, Avex Group Holdings Inc. (current)

akIhIrO taMakI | Auditor (External) | Certified Public Accountant in the U.S. |

Apr. 2005 External Auditor, Essentia Corp. (current)Jun. 2006 Establishment of PSY-fa Co., Ltd., Representative Director (current)Jun. 2008 Auditor, Avex Group Holdings Inc. (current)Jun. 2010 Outside Director, SBI Holdings Inc. (current)

tOMOhIrO tOyaMa | Director (External) | Attorney at Law |

Oct. 1990 Co-founding partner of TMI Associates (current)Nov. 1999 Named External Auditor, Nippon Shikizai Inc. (current)Jun. 2010 Named Director, Compliance Committee member,

Avex Group Holdings Inc. (current) Named External Director, Sosei Group Corporation (current)

May 2011 Compensation Committee member (current)

tOshIakI katsushIMa

Feb. 1990 Representative, Deloitte Touche Tohmatsu*4

Oct. 2003 Opened Katsushima Toshiaki Certified Public Accountant and Tax Accountant Office as Principal Proprietor (current)

Jun. 2006 Named Auditor, Avex Group Holdings Inc. (current)Apr. 2007 Corporate Auditor (Non-Standing), SKY Perfect JSAT Holdings Inc. (current)Jun. 2007 Named Compliance Committee member, Avex Group Holdings Inc. (current)Sep. 2007 External Director, Japan Post Insurance Co., Ltd. (current)

| Auditor (External) || Certified Public Accountant, Certified Tax Accountant |



Apr. to Dec. 2011

Data from the Recording Industry Association of Japan

DOwn 17.8%

paID DOwnlOaD sales

Apr. 2011 to Mar. 2012Data from the Recording Industry Association of Japan

DOwn 1.2%

prODuCtIOn value OF MusIC sOFtware

the environment surrounding the entertainment industry is moving headlong toward a major transition. japan’s online music distribution market, centered on services for conventional mobile phones such as full- and partial-song ringtones, was one of the few successful examples of its type in the world. In recent years, though, the rapid spread of smartphones has radically altered how users access the entertainment they seek. at the same time, the opposing end of the digital spectrum, the market for live entertainment, continues to expand each year. this trend suggests that users want something more than just the data that digital content offers alone.

Market Data




Apr. 2011 to Mar. 2012

Data from the Motion Picture Producers Association of Japan, Inc.

DOwn 13.7%

tOtal revenue

FrOM western anD

japanese MOvIes

Apr. 2011 to Mar. 2012Data from the Japan Video Software Association (JVA)

DOwn 1.0%

Apr. to

Dec

. 201

1

Data fr

om th

e ALL

JAPA

N CONCERT &

LIVE E

NTERTA

INMENT P

ROMOTERS C

ONFERENCE

up 24

.7%

nuMBer OF

COnCertgOers /

sales

Overall vIDeO sOFtware sales



In the digital area, due to the issue of illegal downloading and considerable changes in the way users enjoy their music, business conditions have become quite challenging, particularly in the paid music download market. however, we expect the mobile Internet field in particular, aided by the rapid increase in the use of smartphones, to spark new ways of enjoying entertainment and demand for content. Furthermore, at the opposite end of the spectrum from digital, in the area of live entertainment, user needs around sharing the same moment with each other and with their favorite artists are likely to continue increasing.

Core Business Data

MusIC paCkages sOlD annually* (millions)

mu-mo suBsCrIBers (millions)OnlIne MusIC DOwnlOaDs (10 million downloads)

In fiscal 2011, the number of packages sold and the total amount of sales increased, due to growth in new artists from other labels, as well as albums released.*New releases only

similar to music downloading, the increase in the use of smartphones has resulted in a decline in subscribers of music content distribution site mu-mo.

although there was an increase in the number of downloads through pC distribution, growth in the use of smartphones resulted in a significant decline in full- and partial-song ringtone downloads.

2010/3 2011/3 2012/3

15.4 13.0 17.3

2010/3 2011/3 2012/3

1.3 1.1 0.72010/3 2011/3 2012/3

9.0 8.4 6.5




vIDeO DIstrIButIOn suBsCrIBers (millions)

COnCertgOers (millions)

Fan CluB MeMBershIp (millions)

key BusInesses arpu (jpy)

In addition to Beetv, we launched video store in november 2011, and video distribution subscribers has been strong.

In fiscal 2011, there was an increase in concertgoers attrib-utable to major tours and an increase in performances by artists belonging to other artist agencies.

In fiscal 2011, there was a drop in paying members as some fan clubs went from being paid to free, but we expect the number of members to once again grow due to the launch of multiple new fan clubs.

Because entertainment is strongly a matter of preferences and tastes, we do not believe in simply lowering prices to increase sales volume. rather, we think that users are glad to pay premium prices as long as they receive value-added products and services in return. as a result, arpu is rising.

2010/3 2011/3

1.1 1.52012/3

2.42010/3 2011/3 2012/3

0.9 1.0 0.8

2010/3 2011/3 2012/3

1.2 1.2 1.4 2010/3 2011/3 2012/3300

Video distribution average unit price

300 315

2,194 2,108 2,470

7,852 7,6018,375

Concert ticket average unit price

Music CD albums average unit price



sales

(JPY mn) (JPY mn) (%) (JPY mn) (%)

OperatIng InCOMe / OperatIng InCOMe MargIn

net InCOMe (lOss) / net InCOMe MargIn

Consolidated Financial highlightsAvex Group Holdings Inc. and Consolidated Subsidiaries Fiscal Year

(JPY mn)2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

For the year:Sales 82,455 80,983 73,896 75,418 89,783 101,626 104,639 117,819 118,142 111,561 121,027 Operating income 9,797 7,154 7,015 4,269 8,650 8,691 8,510 6,480 5,566 11,343 12,263 Net income (loss) 4,443 3,118 3,648 836 4,478 3,063 909 (905) 975 5,308 4,934 Cash flows from operating activities 7,428 4,629 4,813 5,867 3,450 1,210 7,293 1,718 9,093 11,335 13,171 Cash flows from investing activities (23,969) (570) (1,027) 653 (11,644) (18,156) (980) (3,508) (2,572) (2,422) (2,403)Free cash flow (16,541) 4,059 3,786 6,520 (8,194) (16,946) 6,313 (1,790) 6,521 8,913 10,768 Cash flows from financing activities 13,251 (8,932) (4,769) (4,745) 8,275 17,929 (2,552) 5,067 (9,982) (7,541) (7,370)

at year-end:Cash and cash equivalents, end of period 9,510 4,556 3,539 5,357 5,486 6,371 10,093 13,166 9,717 11,039 14,422 Net assets 34,101 30,876 32,713 30,076 33,446 33,699 32,812 29,760 30,266 33,547 36,932 Total assets 73,530 64,723 62,956 64,981 83,826 105,894 102,124 107,013 94,593 93,315 99,258 Current assets 32,520 27,080 26,127 29,141 37,521 45,069 45,819 52,748 39,999 40,377 49,271 Current liabilities 23,914 21,745 21,060 28,744 42,232 57,543 40,117 42,089 33,095 35,977 51,466 Interest-bearing liabilities 16,500 13,500 10,500 9,501 19,500 39,000 38,175 45,069 34,813 29,053 23,698

amounts per share (yen):Net income (loss) 141.40 63.49 76.95 10.22 93.79 71.33 21.17 (21.09) 22.72 123.60 115.06 Net assets 738.83 693.89 735.28 691.34 768.32 772.31 751.05 684.89 668.82 747.13 821.97 Cash dividends 63.00 35.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00

key ratios (%):Operating income margin 11.9 8.8 9.5 5.7 9.6 8.6 8.1 5.5 4.7 10.2 10.1 Net income margin 5.4 3.9 4.9 1.1 5.0 3.0 0.9 (0.8) 0.8 4.8 4.1 ROE 13.5 9.6 11.5 2.7 14.1 9.2 2.8 (2.9) 3.4 17.5 14.7 ROA 6.7 4.5 5.7 1.3 6.0 3.2 0.9 (0.8) 1.0 5.6 5.0 Current ratio 136.0 124.5 124.1 101.4 88.8 78.3 114.2 125.3 120.9 112.2 95.7 Shareholders’ equity ratio 46.4 47.7 52.0 46.3 39.9 31.3 31.6 27.5 30.4 34.4 35.4 D/E ratio (times) 0.5 0.4 0.3 0.3 0.6 1.2 1.2 1.5 1.2 0.9 0.6

Operating income (left) Operating income margin (right)

Net income (loss) (left) Net income margin (right)

0

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90,000

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07 08 09 10 11 (FY) 0

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07 08 09 10 11 (FY)



(JPY mn) (%) (JPY mn) (%) (%) (Times)

net assets / rOe tOtal assets / rOa sharehOlDers’ equIty ratIO /D/e ratIO

(JPY mn)2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

For the year:Sales 82,455 80,983 73,896 75,418 89,783 101,626 104,639 117,819 118,142 111,561 121,027 Operating income 9,797 7,154 7,015 4,269 8,650 8,691 8,510 6,480 5,566 11,343 12,263 Net income (loss) 4,443 3,118 3,648 836 4,478 3,063 909 (905) 975 5,308 4,934 Cash flows from operating activities 7,428 4,629 4,813 5,867 3,450 1,210 7,293 1,718 9,093 11,335 13,171 Cash flows from investing activities (23,969) (570) (1,027) 653 (11,644) (18,156) (980) (3,508) (2,572) (2,422) (2,403)Free cash flow (16,541) 4,059 3,786 6,520 (8,194) (16,946) 6,313 (1,790) 6,521 8,913 10,768 Cash flows from financing activities 13,251 (8,932) (4,769) (4,745) 8,275 17,929 (2,552) 5,067 (9,982) (7,541) (7,370)

at year-end:Cash and cash equivalents, end of period 9,510 4,556 3,539 5,357 5,486 6,371 10,093 13,166 9,717 11,039 14,422 Net assets 34,101 30,876 32,713 30,076 33,446 33,699 32,812 29,760 30,266 33,547 36,932 Total assets 73,530 64,723 62,956 64,981 83,826 105,894 102,124 107,013 94,593 93,315 99,258 Current assets 32,520 27,080 26,127 29,141 37,521 45,069 45,819 52,748 39,999 40,377 49,271 Current liabilities 23,914 21,745 21,060 28,744 42,232 57,543 40,117 42,089 33,095 35,977 51,466 Interest-bearing liabilities 16,500 13,500 10,500 9,501 19,500 39,000 38,175 45,069 34,813 29,053 23,698

amounts per share (yen):Net income (loss) 141.40 63.49 76.95 10.22 93.79 71.33 21.17 (21.09) 22.72 123.60 115.06 Net assets 738.83 693.89 735.28 691.34 768.32 772.31 751.05 684.89 668.82 747.13 821.97 Cash dividends 63.00 35.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00

key ratios (%):Operating income margin 11.9 8.8 9.5 5.7 9.6 8.6 8.1 5.5 4.7 10.2 10.1 Net income margin 5.4 3.9 4.9 1.1 5.0 3.0 0.9 (0.8) 0.8 4.8 4.1 ROE 13.5 9.6 11.5 2.7 14.1 9.2 2.8 (2.9) 3.4 17.5 14.7 ROA 6.7 4.5 5.7 1.3 6.0 3.2 0.9 (0.8) 1.0 5.6 5.0 Current ratio 136.0 124.5 124.1 101.4 88.8 78.3 114.2 125.3 120.9 112.2 95.7 Shareholders’ equity ratio 46.4 47.7 52.0 46.3 39.9 31.3 31.6 27.5 30.4 34.4 35.4 D/E ratio (times) 0.5 0.4 0.3 0.3 0.6 1.2 1.2 1.5 1.2 0.9 0.6

Net assets (left) ROE (right)

Total assets (left) ROA (right)

Shareholders’ equity ratio (left) D/E ratio (right)

–10,000

0

10,000

20,000

30,000

40,000

–5

0

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07 08 09 10 11 (FY) –40,000

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Business and Other risks

The items discussed below are some matters that are deemed to have a significant potential impact on investor decision-making from among the information regarding business and accounting conditions found in this Investors’ Guide.

Please be aware that forward-looking state-ments found in this guide reflect the judgment of the Avex Group (Avex Group Holdings and its consolidated subsidiaries) as of the end of the fiscal year under review.

1. trends in Major titles, artists and talent

The Group’s business performance can be affected by whether or not the Group has any hit artists and hit content, and by the popularity of major artists and talent, contract duration, and growth of new artists and talent.

2. Operations in Overseas MarketsThe Avex Group is expanding its music and video businesses in East Asia. In the event that an unexpected incident occurs in any of the overseas markets represented due to a change in political or economic conditions or legal or regulatory elements, disadvantageous taxes, or social disor-der caused by terrorist attacks, war, or the like, it is possible that the Group’s performance may be affected.

3. Impairment lossWhen market values of the assets held by the Group decrease significantly, or business profit-ability deteriorates, an impairment loss in noncur-rent assets may be recorded by applying impairment accounting, which would affect the Group’s performance and financial position.

4. Fund procurementThe Group has mostly procured funds through borrowings from financial institutions and the issuing of bonds. The funds have been used to acquire investment securities and real estate, and for investing in the video business. If current interest rates change, the Group’s performance may be affected.

In addition, certain of the borrowings have a financial restriction clause. Infringement on the clause could, for example, cause the borrowing interest rate to be raised, and/or the benefits of term to be forfeited. Such change, in turn, may affect the financial position and business perfor-mance of the Group.

5. new BusinessesThe Group is actively becoming involved in new areas to further consolidate its position in the entertainment business, but there is the undeni-able possibility of risks arising in the process of execution of new business due to a sudden change in the business environment or an unfore-seeable problem which materializes afterwards, and this may affect the Group’s performance.

6. Dependency on a specific Corporate Manager

CEO Masato Matsuura, one of the founders of Avex, has been playing the core role in formulat-ing and determining Group management strate-gies and concluding contracts with important business partners and artists. In the event that Mr. Matsuura leaves the Group for any reason, the performance of the Group may be affected.


Corporate DataCompany name: Avex Group Holdings Inc.

Established: April 11, 1988

Paid-in capital: JPY4,229.6 mn

Number of employees: 1,385

Headquarters: 3-1-30, Minami-Aoyama, Minato-ku, Tokyo 107-8577, Japan

Phone: +81-3-5413-8550 (reception desk)

URL: http://www.avex.co.jp/e_site/

Corporate Data and Investor Information (As of March 31, 2012)

Number of shares held Percentage of shares held (%)

Max 2000 Inc. 2,050,000 4.79

T’S Capital Inc. 2,050,000 4.79

The Master Trust Bank of Japan, Ltd. (Trust account) 2,035,600 4.76

BBH Lux. Fidelity Funds Japan Advantage 1,604,400 3.75

Japan Trustee Services Bank, Ltd. (Trust account) 1,472,900 3.44

Masato Matsuura 1,357,924 3.17

Toshio Kobayashi 1,357,818 3.17

Trust & Custody Services Bank, Ltd. (Securities investment trust account) 1,008,900 2.36

Daiichikosho Co., Ltd. 920,000 2.15

Ryuhei Chiba 787,250 1.84

Notes: 1. In addition to the above table, there are 3,364,398 shares of treasury stock owned by the Company. 2. CEO Masato Matsuura serves as a Representative Director of Max 2000 Inc. 3. Percentage of shares held calculated after deduction of treasury stock.

Stock InformationNumber of shares issued: 46,157,810

Stock exchange listing: First Section of Tokyo Stock Exchange

Stock code: 7860

Trading unit: 100 shares

General Shareholders’ Meeting: June each year

Transfer agent: Mitsubishi UFJ Trust and Banking Corporation, Corporate agency division 7-10-11 Higashisuna, Koto-ku, Tokyo 137-8081, Japan

IR data is also posted on the Company’s website.(http://www.avex.co.jp/e_site/ir/)

Japanese financial institutions9,867,984 shares

21.38%

Japanese securities companies576,629 shares

1.25%

Other Japanese corporations5,432,774 shares

11.77%

Foreign investors5,766,597 shares

12.49%

Total46,157,810

sharesJapanese individual investors and others21,149,428 shares

45.82%

Treasury stock3,364,398 shares

7.29%

BReAkDOwn OF SHAReHOLDeRS

Top 10 Shareholders

2012 Investors’ Guide 33

OpeRATIOnAL ReVIew MAnAGeMenT ORGAnIzATIOn FACTS & FIGUReS

Avex Group Holdings Inc.3-1-30, Minami-Aoyama, Minato-ku, Tokyo 107-8577, JapanURL http://www.avex.co.jp/e_site/

Documents

Accelerating Sensational Growth€¦ · Accelerating Sensational Growth. Founded in 1988, the Avex Group has grown over the years by consistently transforming its business model