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Fiscal year ended March 2016
ANNUAL REPORT 2016
Contents
11 Music Business
4 Dear Fellow Stakeholders
9 New Management Structure
10 At a Glance
1 Avex Snapshot
2 Avex History
11 Review of Operations
12 Video Business
13 Management & Live Business
14 Other Businesses
15 The Avex Group’s CSR Activities
16 Compliance Policy
17 Corporate Governance
20 Directors, Auditors and Corporate Executives
22 Financial Section
21 Corporate Data and Investor Information
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Net Sales
(¥ billion)
Operating Income Margin
(%)
Operating Income
(¥ billion)
ROE
(%)
Net Income Attributable to Owners of the Parent
(¥ billion)
Shareholders’ Equity Ratio
(%)
Net Income per Share
(¥)
Equity per Share
(¥)
Cash Dividends
(¥)
Performance Indicators Per ShareRevenue and earnings decreased in the fiscal year ended March
31, 2016. This was largely attributable to a downturn in the number
of live performances at large venues, a drop in album production
sales in the Music Business, and an upswing in expenses in line with
the revamp of video distribution service in the Video Business.
The operating income margin and ROE declined in the fiscal year
ended March 31, 2016. This largely reflected the downturn in earn-
ings across all businesses. Despite this downturn, the shareholders’
equity ratio remains stable, exceeding 40%. Looking ahead, the
Avex Group will continue to strengthen its financial base.
The Avex Group has identified payout ratio and minimum dividend
payment targets of at least 35% and ¥50 per share, respectively.
Turning to the fiscal year under review, the annual dividend was ¥50
per share and the payout ratio 50.1%.
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Avex Snapshot (Fiscal years ended March 31)
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Avex History
April 1988Founded in Machida, Tokyo as a record importer and wholesaler
May 1993Relocated to Minami-Aoyama in Tokyo’s Minato Ward
September 1990Started music
production and established the record
label, “avex trax”
’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02
February 1990Released a dance compilation album
SUPER EUROBEAT VOL. 1
Since its foundation in 1988, the Avex Group has been
considering changes in its business environment as
opportunities and has been providing people with ex-
citement through entertainment.
Although there was a phase during which growth
leveled off, the Avex Group was able to sustain its ever-
increasing growth by the implementation of structural
reforms heralded as its Second Takeoff.
May 2016 saw the announcement of the “avex group
growth strategy 2020—towards an innovative future of en-
tertainment.” Positioning the formulation of the strategy as
its Third Takeoff, the Avex Group will work to further im-
prove its corporate value by implementing Companywide
reforms relating to strategy, organization and principles.
October 2001Opened Avex Artist Academy
in Harajuku, Tokyo
July 1995Went into the artist
management business
October 1997Established an in-house music package distribution company
October 1998Began trading on the OTC market (currently JASDAQ)
December 1999Listed on the First Section of the Tokyo Stock Exchange
January 2000Current logo (corporate identity) adopted
February 1992JULIANA’S TOKYO dance compilation album became a major hit
August 199350,000 people turned out for the free “avex rave ’93” dance event that for one night only turned the Tokyo Dome into a disco
Consolidated Net Sales (¥ billion)
(Fiscal years ended March 31)
*
* Seven-month fiscal period(Fiscal years ended August 31 in 1994 and earlier)
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0’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’15 ’16’14
August 2002Started the “a-nation” nationwide circuit live music event
April 2005Second Takeoff. Implementation of structural reforms, ramp up 360-degree strategy
October 2004Shifted to a holding company system
April 2009Established Avex Broadcasting & Communications Inc. as
a joint venture with NTT DOCOMO, Inc.
November 2013Plans for rebuilding Avex
headquarters building announced
Planned for completion in 2017
November 2011Launched the “d-VIDEO” video distribution service
December 2007Gained top share of music software
market for both Japanese and International music
May 2009Launched the “BeeTV” video distribution
service that provides original programing
February 2013Launched UULA, the video and music entertainment distribution service developed for smartphones
April 2015Redesigned and renamed “d-VIDEO” as “dTV
May 2015Launched subscription music streaming service “AWA”
September 2014Due to the reconstruction, headquarters location changed to Roppongi 1-chome, Minato Ward (Izumi Garden Tower)
December 2014Established AWA Co. Ltd. as a joint venture with CyberAgent, Inc.
The Avex Group will promote “avex group
growth strategy 2020—towards an innovative
future of entertainment,” while working to
maximize Group value and providing its cus-
tomers with more surprises and excitement.
May 2016
Announced “avex group growth strategy 2020”
4
Implementing Companywide reforms based on a new growth strategy
Dear Fellow Stakeholders
Masato MatsuuraRepresentative Director, CEO
Dear Fellow Stakeholders
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1,500
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Annual contraction in market
(35% smaller than in 2007)
Roughly doubled in size over past four years
About 1.3x larger in size over past four years
About 1.9x larger in size over past four years
Music (software, distribution) market*1 Live event market*2 Anime market*3 Digital (video distribution) market*4
*1 Source: Recording Industry Association of Japan *2 Source: All Japan Concert & Live Entertainment Promoters Conference
*3 Source: The Association of Japanese Animations *4 Source: Nomura Research Institute, Ltd.
For the fiscal year ended March 31, 2016, the Avex Group reported net sales of
¥154,122 million (down 8.9% from the previous fiscal year), operating income of
¥7,277 million (down 16.1%) and net income attributable to owners of the parent
totaling ¥4,292 million (down 28.2%).
The decrease in revenue and earnings was attributable to a variety of factors. Major
factors including a downturn in the number of live performances at large venues in the
Management & Live Business, a drop in album sales in the Music Business, and an
upswing in expenses in line with the revamp of a video distribution service in the
Video Business.
Net income attributable to owners of the parent contracted owing to the decline
in operating income and investments made in new digital music distribution services.
Regarding shareholder returns, Avex has a policy of paying a minimum annual
dividend of ¥50 per share while targeting a consolidated payout ratio of at least 35%.
In accordance with this policy, the Company distributed a dividend of ¥50 per share
for the fiscal year ended March 31, 2016, for a consolidated payout ratio of 50.1%.
Since its founding, the Avex Group has been considering changes in its business
environment as opportunities and has been providing people with excitement
through entertainment.
Although there was a phase during which growth leveled off, the Avex Group was
able to sustain its ever-increasing growth by the implementation of structural reforms
heralded as its Second Takeoff in 2005.
Over the past few years, the operating environment for the Avex Group has been
characterized by a shrinking market for music software but a growing market for
entertainment centered on live events, anime and digital content. As indicated by our
recent performance, however, the Avex Group has not been able to keep pace with
all the changes in the business environment.
In order to overcome the issues that arose while advancing our Mid-Term
Strategy 2018 announced in the previous year and accelerate growth further, we
decided to reset the timeframe of our management plan, and unveiled a new growth
strategy in May 2016 called “avex group growth strategy 2020—towards an innova-
tive future of entertainment.” Positioning the formulation of the strategy as its Third
Takeoff, the Avex Group will work to further improve its corporate value by imple-
menting Companywide reforms relating to strategy, organization and principles.
Market Conditions and Identified IssuesFiscal Year Results and Shareholder Returns
(¥ billion) (¥ billion) (¥ billion) (¥ billion)
6
Packaged products
Music publishing
Education
OtherManagement
Digital content
Live events
Anime
CreatorsContent
Artists
New
Live events
Merchandise/Fun Club
Selection and Concentration in Growth Markets
1
New Measures to Create Hits
3Thorough Optimization of Companywide Operations
2
Merchandise/Fan Club
The Avex Group has identified growth markets in live entertainment, anime and
digital content, and will aggressively develop business in these markets. Avex aims
to expand business while thoroughly optimizing Companywide operations in order
to generate synergies between businesses. Leveraging our unique 360-degree
business foundation, we will implement measures to create new hits.
Strengthening the Growth Strategy
Defining and Clarifying Key Business Fields
Position and Outline of Growth Strategy
Positioned as its “Third Takeoff,” the Avex Group has created the new “avex
group growth strategy 2020” with plans to implement Companywide reforms to
strengthen its growth strategy, reform the organization and review its princi-
ples. Avex is focusing on creating new hits while working to enhance profit-
ability without relying solely on the hits.
avex group growth strategy 2020—towards an innovative future of entertainment
1 Increase the number of live events by expanding our library
In areas where it is unable to act on its own, the Avex Group aims to increase the
number of both Japanese and International live music events that it produces
and manages on consignment, by eyeing partnerships with external parties. In
addition, we are aggressively expanding content, including major festivals over-
seas, as well as theatrical shows and musicals.
2 Strengthen businesses peripheral to live events and maximize earnings
per live event by entering new fields
The Avex Group will reinforce operations peripheral to the live event business,
including fan clubs, merchandise sales, ticket sales and sponsorship acquisi-
tions. Eyeing the “flow of people” to live events, the Avex Group intends to enter
travel agency business, in a bid to increase earnings across all businesses that
begin with live events, instead of just for live events.
3 Aggressively expand content as a platform provider
We aim to cover a broad range of genres by proactively offering platforms for mer-
chandise and ticket sales in sports and other fields. In the live performance market,
we aim to increase earnings opportunities by expanding content through the de-
velopment of business that addresses the needs of content owners.
The Avex Group will tap into growth in the live event market and
peripheral markets by leveraging its expertise as a leading producer
of live events in Japan and partnerships with external parties.
Selection and Concentration in Growth Markets1
7
Digital content
Anime
1 Maximize sales with hit content
We aim to improve the monetization of content and create a winning formula, by
increasing sales of merchandise and through game apps that feature popular
content, while moving into other IP*.
2 Acquisition of new IP* and expansion of rights
We intend to develop and acquire rights to original anime and expand secondary
usage channels such as overseas licensing business, distribution, merchandise
sales, and game apps.
3 Reinforce the content procurement business, centered on The Anime
Times Company
We aim to strengthen further synergy effect with “dTV” and “GEO CHANNEL,” and
also enhance our ability to provide anime content to external distribution services.
* IP: Intellectual property
The Avex Group aims to increase sales of content by expanding
our 360-degree business in anime to include growing markets
such as game apps, merchandising and digital distribution.
Pushing ahead the digitization of
entertainment business.
1 Establishing a growing presence as a video distribution platform
The Avex Group has established an advantage over domestic and foreign competi-
tors, having solidified its position as the largest video distribution platform in Japan.
2 Synergies among digital services and higher value added
We aim to increase the value added of all our services by creating synergies
within the Avex Group in video distribution, fan clubs, e-commerce and other
digital services.
3 Aggressively tap into digital-related business opportunities outside the
music and distribution businesses
We aim to accelerate the expansion of business opportunities in live event ticket
sales, fan clubs and merchandise sales by advancing the digitization of the en-
tertainment business.
Systems for thoroughly optimizing Companywide operations
Framework for sharing information, resources and best practices
Maximize Group synergies by thoroughly
optimizing Companywide operations
As we moved to expand business domains and strengthen each
business, we have optimized each business unit as a separate en-
tity, and in the process fell short of realizing the full potential of the
Avex Group. We accordingly believe there is considerable scope for
further monetization and cost reductions. In order to fully optimize
Companywide operations, we are working to maximize Group syn-
ergies by rolling out a framework for sharing information, resources
and best practices throughout the organization.
Selection and Concentration in Growth Markets
Thorough Optimization of Companywide Operations2
8
New Measures to Create Hits3
Avex Group Holdings is building a structure for carrying out its growth strategy by
revising its personnel evaluation system and working to invigorate the organization
and employees. The Company is changing its structure, where representative direc-
tors were also in charge of business execution, to one that delegates authority to
corporate executives in charge of each business field, clarifying the division of deci-
sion-making and supervision by the Board of Directors of the Company, and busi-
ness execution by the corporate executives. Corporate executives in charge of each
business of the Group will be appointed by the Company and clarified as managers
responsible for business execution. These changes will create a structure that im-
proves the speed of decision-making, clarifies responsibilities, fosters next-genera-
tion managers, and advances Companywide optimization.
Organizational ReformsInvigorating organizations and employees / designing a personnel evaluation
system
With the aim of maximizing Group value, Avex has decided to completely rewrite its
management philosophy and code of conduct in order to orient employees in the
same direction and provide customers with pleasant surprises and excitement. We
are redefining our management philosophy into one where the same values are
shared by management and employees. By improving and encouraging internal
communications, and ensuring increased awareness, we aim to ultimately enhance
the value we provide to our customers.
The Avex Group is making every effort to provide customers with more surprises
and excitement with the aim of maximizing Group value while advancing the “avex
group growth strategy 2020—towards an innovative future of entertainment.” We
appreciate the continued support of our shareholders and investors as we move
forward on these initiatives.
July 2016
Masato MatsuuraRepresentative Director, CEO
Revisions to Our PrinciplesRedefining our management philosophy and code of conduct
The Avex Group is implementing new measures to supplement
methods used to date for creating hit content. We aim to dis-
cover and nurture talent via new methods while making diverse,
groundbreaking content.
1 Initiatives for diverse content
We are going back to the origins of the Avex Group in discovering and nurturing
talented performers, with the aim of discovering artists and creators able to im-
pact the entire world. We aim to maximize earnings opportunities centered on
creators by providing them with the opportunities and resources needed to spur
their growth, while leveraging the business foundation of the Avex Group.
2 Overseas business development
Looking ahead, the Avex Group is laying the groundwork for greater involvement
in overseas markets, moving beyond its limited involvement to date, namely the
import of content from Europe and the U.S. into Japan, and the export of content
from Japan to Asia. We are building an organization that will be able to discover,
import and export content that aligns with the preferences and desires of local
consumers, while strengthening coordination between Japan, the U.S., and Asia
from a central hub in North America. We aim to enhance our presence in Asia,
especially in China, while adding momentum to the export of Japanese content,
mainly manga and anime.
3 Venture capital model
We will invest in talented individuals who have the ambition to succeed in the
entertainment industry, with the aim of creating new hits and invigorating the
entertainment industry. We will provide these talented individuals with the re-
sources and support systems to nurture their growth and development. As the
factors behind hit content grow increasingly diverse amid changes in consumer
tastes and media, the Avex Group aims to create new hits in ways that break with
tradition, through co-creation using its resources and functions, as well as open
innovation using external resources.
9
Outside Director
Hiroyuki Ando
Representative Director, CEO
Masato Matsuura
Director (Part-time)
Toru Kenjo
Outside Director
Kiichiro Kobayashi*Director, Corporate Executive, COO
Shinji Hayashi
Director, Corporate Executive
Richard Blackstone
* The assignment of independent officers tasked with safeguarding the interests of ordinary shareholders is mandated by the Tokyo Stock Exchange.
New Management Structure (As of July 1, 2016)
Takahiro Miura Yasuhiro Yamamoto Hiroaki Ito Yoshiki Terashima
Seiichi Hatamoto Tomoaki Sato Katsumi Kuroiwa Hideo Katsumata
Masahiro Anan Shintaro Higuchi Toshiro Hayashi Hisaou Wakaizumi
Hajime Shibata Akira Akutsu Yoshihito Aoki Shinta Yoshida
Kimitaka Kato
Corporate Executives
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38% 26% 34% 2%
38% 23% OthersMusic Video Management & Live 37% 2%
¥169.2 billion
¥154.1 billion
50 100 150 200
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Net Sales Composition by Business
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At a Glance (Fiscal years ended March 31)
As of March 31, 2016
(¥ billion)
Management & Live Business
Group Companies
Other Businesses
Group CompaniesGroup Companies
Video BusinessMusic Business
Group Companies
• Avex Music Creative Inc.
• Avex Management Inc.
• Avex Vanguard Inc.
• Avex Live Creative Inc.
• Avex Sports Inc.
• Avex Classics International Inc.
• Avex Planning & Development Inc.
• Avex Nico Inc.
• Avex Digital Inc.
• Avex Music Creative Inc.
• Avex Pictures Inc.
• Avex Broadcasting & Communications Inc.
• UULA Inc.
• The Anime Times Company
• Avex Digital Inc.
• Avex Music Creative Inc.
• Avex Music Publishing Inc.
• Avex Taiwan Inc.
• Avex Hawaii, Inc.
• Avex Shanghai Co., Ltd.
Sales (¥ billion)
Sales (¥ billion)
Sales (¥ billion)
Sales (¥ billion)
Operating Income (¥ billion)
Operating Income (¥ billion)
Operating Income (¥ billion)
Operating Loss (¥ billion)
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Albums2,853 3,035 Average Price (Yen)
7,050 4,978 Units (Thousands)
Singles971 829 Average Price (Yen)
9,048 7,876 Units (Thousands)
DVDs /Blu-ray Discs
5,334 5,333 Average Price (Yen)
2,221 2,382 Units (Thousands)
*Indicators of music packages do not include back catalog sales.
Music Publishing and Others
Music Package Market*1 (¥ billion)
Digital Music Distribution Market*1
(¥ billion)
Subscription Market*2
(¥ billion)
Digital Music Distribution
Music Package
254.1
80
60
40
20
0
43.6
7.8
254.4
47.0
12.3
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Music BusinessThe Music Business plans, produces, sells and distributes music content, and operates music publishing.
Music Business:Market Size and Sales Breakdown(Fiscal years ended March 31)
Indicators of Music Packages*(Fiscal years ended March 31)
Review of Operations
Amid a growing shift toward enjoying music through digital devices such as smartphones and tablets, the Avex Group is actively pro-
posing new avenues to enjoy music that meet the diverse needs of its users with the aim of invigorating the entire music market.
As one such new avenue, Avex pushed into the growing subscription music streaming market by launching AWA in May 2015 and
LINE MUSIC in June 2015. Aiming to vitalize the market further, Avex is making available its musical content not only to its related ser-
vices, but also to other competing streaming services so that users of other streaming ser-
vices can also enjoy its music catalog.
The Avex Group has launched the “Sumapura Movie” and the “Sumapura Music” ser-
vices as new ways of enjoying the content for customers purchasing CD and DVD/Blu-ray
packages. Using a free app with this service, customers can immediately enjoy their pur-
chased content from smartphones and tablets via download and/or streaming. The service
also offers 360-degree panoramic videos, a new form of entertainment that conventional
disc media could not offer.
Also from the perspective of its copyright business, the Avex Group merged its equity-
method affiliated companies e-License Inc. and Japan Rights Clearance Inc. in February
2016 in an effort to flexibly address the changing needs of users. The surviving company’s
name was subsequently changed to NexTone, Inc. NexTone aims to contribute to the further
development of the music industry and culture by realizing an approach to copyright man-
agement appropriate for a new era.
The Avex Group will flexibly adapt to the evolution of user audio/visual environments
and technology in the years ahead while working to create hit content under “avex group
growth strategy 2020.”
Key Initiatives in the Fiscal Year Ended March 31, 2016 and Future Aims
In the fiscal year ended March 31, 2016, the Music Business generated sales of ¥61.2 billion, a decrease of 9.5% compared with the
previous fiscal year. In the Music Package sales fell 12.5% year on year to ¥41.9 billion, reflecting a decline in album sales, and Digital
Music Distribution sales decreased 5.6% to ¥11.8 billion.
The gross margin improved by 8.6 percentage points for Digital Music Distribution, owing to a higher ratio of back catalog sales,
but worsened by 2.9 percentage points for Music Package. Accordingly, operating income in the Music Business contracted by 16.1%
to ¥6.5 billion.
Overview of the Fiscal Year Ended March 31, 2016
Net Sales(¥ billion)
*1 Source: Recording Industry Association of Japan (One-year period up to December of the previous year)
*2 Part of the digital music distribution market
NexTone, Inc.
Sumapura Movie /
Sumapura Music
12
50
229.9
218.1
40
30
20
10
0
Video Package
Video Distribution
Video Package Market* (¥ billion)
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d-VIDEO+BeeTV466 475 ARPU (Yen)
5.36 5.51 Subscribers (Millions)
UULA467 467 ARPU (Yen)
1.57 0.88 Subscribers (Millions)
DVDs /Blu-ray Discs*
5,476 5,228 Average Price (Yen)
861 801 Units (Thousands)
*Indicators of DVDs / Blu-ray discs do not include back catalog sales.
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* Source: Japan Video Software Association (One-year period up to December of the previous year)
Video BusinessThe Video Business plans, produces, sells and distributes video content, and distributes films.
Net Sales(¥ billion)
The video entertainment world is undergoing significant changes driven by technological
innovation such as the development of distribution infrastructure and devices that allow
users to enjoy audio/visual content anytime, anywhere. Against this backdrop, all eyes have
turned to the video distribution market as the leading edge of mobile digital entertainment.
In light of these market conditions, Avex Digital Inc. (ADG) provided know-how related
to systems development and content procurement and organization to Geo Corporation
for its GEO CHANNEL subscription video distribution service, which launched in February
2016. ADG will work to further enhance convenience and content as Japan’s largest video
distribution service provider, which includes “dTV” and “UULA.” In addition, ADG will under-
take initiatives to generate additional business opportunities in the digital business field
promoted under “avex group growth strategy 2020” by incorporating the latest technology
and identifying user needs.
Moreover, Group company Avex Pictures Inc. (API) engages in such activities as the
production and sale of anime and other video content. API has made a major contribution
to the Group’s earnings growth owing to sales of packaged videos of anime TV series “Mr.
Osomatsu,” which has become a major hit in all categories, including video distribution, live
events, merchandising, and game apps.
Leveraging its experience and know-how cultivated through such hit content to create
new hits, API focuses on developing and acquiring new rights, and will also take steps to
maximize content sales.
Key Initiatives in the Fiscal Year Ended March 31, 2016 and Future Aims
In the fiscal year ended March 31, 2016, sales in the Video Business increased 4.9% to
¥41.8 billion, reflecting an increase in the number of subscribers to video distribution ser-
vices and the anime “Mr. Osomatsu” becoming a big hit. Video Distribution sales rose 2.0%
to ¥32.1 billion, and Video Package sales expanded 43.7% to ¥14.4 billion.
Operating income declined 95.3% year on year to ¥0.8 billion due to expenditures to
procure content as well as higher spending on advertising for the revamp of the dTV video
distribution service.
Overview of the Fiscal Year Ended March 31, 2016Video Business:Market Size and Sales Breakdown(Fiscal years ended March 31)
Indicators of Video Business(Fiscal years ended March 31)
GEO CHANNEL
Top screen of the GEO CHANNEL app
© Fujio Akatsuka/ Mr. Osomatsu Project
“Mr. Osomatsu”
13
Fan Club and Others
Merchandising
Management
Live Concerts
274.9
80
60
40
20
0
318.6Live Concert Market* (¥ billion)
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Concert Ticket 9,234 9,025 Average Price (Yen)
Audience 3.55 2.46 (Million people)
Fan Club 1,309 1,426Subscribers (Thousands)
Management & Live BusinessThe Management & Live Business involves the management of artists and talents, merchandising, operation of fan clubs, as well as the planning, production and operation of concerts and events.
’15 ’16
* Source: All Japan Concert & Live Entertainment Promoters
Conference (One-year period up to December of the previous year)
Net Sales(¥ billion)
The live event market continues to expand as consumers become more interested in ac-
tual “experiences”. Avex Live Creative Inc. (ALC) in charge of the Live Concert Business,
has focused on expanding content amid these business conditions. With the aim of further
enhancing its content and library, ALC will expand into other non-music categories by le-
veraging its know-how cultivated to date mainly in the music-oriented areas of live perfor-
mance productions, ticket sales, merchandising, and fan clubs operations.
To strengthen initiatives involving “Yahoo! Ticket,” a ticket sales service operated
through its alliance with Yahoo Japan Corporation, ALC and Yahoo Japan Corporation
jointly established Passrevo Corporation in May 2016. In addition to music events, we plan
to diversify into other types of event tickets in such areas as the leisure field, which consists
of sports and theme parks, etc.
In the Management business, we manage and nurture a diverse range of people,
from celebrities to athletes. While drawing out each and every person’s unique traits and
individuality, we aim to discover and foster talented entertainers that meets diversified
likes and tastes.
By pursuing these initiatives, Avex will work to further expand earnings generated from
live events, promoted as a growth market under “avex group growth strategy 2020.” At the
same time, Avex will work with talented individuals to help with the creation of hit content.
Key Initiatives in the Fiscal Year Ended March 31, 2016 and Future Aims
In the fiscal year ended March 31, 2016, the Management & Live Business recorded sales
of ¥55.7 billion, a year-on-year decrease of 14.7%. Sales of Live Concerts fell 24.9% to
¥32.1 billion, owing to a decline in the number of live events. As areas with high synergies
with Live Concerts, sales decreased 10.3% and 0.2% in Merchandising and Fan Club op-
erations, to ¥11.3 billion and ¥4.6 billion, respectively. Management services reported sales
of ¥17.0 billion, unchanged from the previous fiscal year.
Operating income dropped 42.7% to ¥1.5 billion as a result of a decline in audiences,
owing to a decrease in the number of shows at large venues.
Overview of the Fiscal Year Ended March 31, 2016Management & Live Business:Market Size and Sales Breakdown(Fiscal years ended March 31)
Indicators of Management & Live Business(Fiscal years ended March 31)
a-nation stadium fes.
ULTRA JAPAN
Passrevo Corporation
14
Other BusinessesOther Businesses discover and nurture new artists, operate schools, run a restaurant business, and manage and maintain real estate.
The scope of the dance industry is expected to continue expanding owing to the impact of dance
classes becoming mandatory in the physical education curriculums of junior high schools in Japan.
With this optimistic outlook, Avex Planning & Development Inc. (APD) aims to grow the dance and
school businesses with a system of skill-based classes for students from novices to advanced danc-
ers, through Avex Artist Academy, which operates in four locations in Japan.
In order to target an even broader age range, APD launched the “avex life design lab” in Octo-
ber 2015 to give adults an opportunity, place and time to learn and socialize in a relaxed atmo-
sphere. We will hold unique classes featuring lessons by the individuals on the front-lines of their
profession.
Moreover, to lay the groundwork for growth in new business fields, we established Avex Nico Inc.
(ANC) in June 2015 to provide various hands-on programs for assisting mothers with small children
as well as working women. ANC will proactively provide “cotsumic—its proprietary method of pelvic
exercises for women after childbirth—and introduce the “bambeat!” hands-on music play program for
preschoolers at nursery schools, kindergartens, local governments, and companies.
In addition, we established Avex Travel Creative Inc. in June 2016 with the aim of helping to maxi-
mize profitability in the “Live events” under the “avex group growth strategy 2020.” Eyeing the travel
business peripheral to entertainment as a growth opportunity, the new company will provide new ways
of enjoying travel by utilizing the Group’s content and live entertainment platform.
Key Initiatives in the Fiscal Year Ended March 31, 2016 and Future Aims
In Other Businesses, the Avex Group operates schools, a dance business, restaurants, and a real
estate business.
In the fiscal year ended March 31, 2016, sales in Other Businesses fell 9.3% to ¥2.9 billion.
Operating losses totaled ¥0.7 billion, basically unchanged from the previous fiscal year.
Overview of the Fiscal Year Ended March 31, 2016
Avex Artist Academy in Tokyo avex life design lab
“cotsumic” pelvic exercises for women after childbirth
“bambeat!” hands-on music play program for preschoolers
Based on the concept of “travel and watch,” we offer a new
form of travel for pleasure by combining live events with
sightseeing under a new “music trip” brand.
15
At the Avex Group, we engage in CSR activities through our business of providing entertainment
with the aim of “becoming a company that creates an exciting experience.”
The Avex Group’s CSR Activities
Support for Para-Sports—Actively hiring physically challenged athletes
Since 2008, Avex has been actively recruiting top athletes who, despite their disabilities, are at the forefront
of sports. Today, we support 11 athletes and 1 team competing in 8 different sports. In April 2015, Avex
concluded an official partnership agreement with the Japanese Para-Sports Association. Avex was certified
as a Fiscal 2015 Tokyo Sports Promotion Company in recognition of its social contribution initiatives in the
sports field, which include lending forward-looking support for training areas tailored to physically challenged
athletes, disseminating information on physically challenged athletes in-house, and holding yoga lessons for
employees. Looking ahead, we will promote various activities to enable physically challenged athletes to
reach their dreams and provide excitement through their performances.
Reconstruction Assistance—Cooperating with the Parent/Child Exercise Fukushima Genki Up Project
Driven by our corporate mission to bring excitement and dreams
to life via entertainment, we are making an ongoing effort to help
out in the areas devastated by the Great East Japan Earthquake.
Avex has held the Parent/Child Exercise dance events in coopera-
tion with the Fukushima Minyu Shimbun newspaper at six loca-
tions in Fukushima Prefecture since March 2015. This event gives
children a chance to get the exercise they need while deepening
bonds between parents and children who have been living apart
since being evacuated. At all seven events, around 1,740 parents
and children had a fun time dancing together.
— Dance Lessons for Elementary and
Junior High School Students in Disaster-Hit Areas
We have been donating 4-5 music CDs to 21 elementary and junior
high schools in Minami-Soma every month since January 2014 and
engaging in a number of other activities. In June 2014, we started
dispatching professional dancers to these areas. We launched this
dance program with an eye to not only providing kids with an op-
portunity to get some exercise, but also to give them some insights
into the world of entertainment in order to enrich their lives. We will
continue this initiative onward with the hope of bringing joy to the
lives of more elementary and junior high school children.
Kento Masaki Yui Kamiji Airi Ike
photo by ShugoTAKEMIphoto by ShugoTAKEMI
Avex athletes / team (As of May 2016)
Yuji Takada Keiichi Sato Chika Uemura Yui Kamiji
Yuka Kiyama Kento Masaki Hiroki Saegusa Saki Takakuwa
Airi Ike Shizuka Hangai Yoshikazu Kanaji Minemura Para Swim Squad
Activities and achievements(Fiscal year ended March 31, 2016)
Avex Group Holdings concluded an official partnership agreement with the Japanese Para-Sports Association (April)
Yui Kamiji certified as the youngest female wheelchair tennis player to reach the Grand Slam in the Guinness World Records (September)
Yuka Kiyama and Saki Takakuwa won bronze medals at the IPC Athletics World Championships (October)
Avex and Aeon Mall co-sponsored the Let’s Try Para Sports with World Top Athletes Ice Sledge Hockey trial event (December)
Avex Group Holdings certified as a Fiscal 2015 Tokyo Sports Promotion Company (December)
Avex was a sponsor for the International Women’s Wheelchair Basketball Friendship Games (February)
JuneHaramachi Dai-san Elementary School, Odaka Elementary School
JulyOomika Elementary School,Haramachi Dai-san Elementary School
AugustHaramachi Dai-ni Elementary School, Haramachi Dai-ichi Junior High School
SeptemberIshigami Junior High School,Kashima Junior High School
OctoberYasawa Elementary School,Haramachi Dai-san Junior High School
NovemberHaramachi Dai-ichi Junior High School, Kashima Junior High School
DecemberOoda Elementary School,Ishigami Dai-ichi Elementary School
JanuaryOdaka Elementary School,Ishigami Junior High School
FebruaryTakahira Elementary School,Ishigami Dai-ichi Elementary School
12 schools in total
Track record of dispatching dancers (Fiscal year ended March 31, 2016)
16
Don’t steal from others.Protect intellectual property rights of the company,
and respect that of others.
Don’t rely on power.1. Do not associate with anti-social forces or groups that pose a threat
to order and safety in civil society.
2. Build highly transparent relationships with politics and government.
Don’t be selfish.1. Be conscious of the support received from colleagues and the
need to reciprocate.
2. Refrain from insider trading.
Don’t betray your colleagues.1. Do not speak or behave in ways that damage trust, credibility or honor.
2. Manage corporate secrets and personal information appropriately,
and avoid unauthorized disclosure and leakage.
Take pride in the team1. Create a working environment where employees find it
comfortable to work.
2. Actively contribute to society as a good corporate citizen.
Don’t cheat.1. Engage in fair, transparent and open competition.
2. Do not contradict the legitimate interests of the company to
promote your own or a third party's interests.
3. Do not employ dishonest means in business activities.
Don’t be wasteful.Recognize the importance of environmental issues and
make effective use of company assets.
Don’t bully.1. Respect human rights and do not engage in acts of discrimination.
2. Interact with business partners in a proper, honest, fair,
and open manner.
Don’t play around with other people’s money.Do not socialize with business partners in ways that depart from
sound commercial practice or common sense.
Don’t lie.1. Disclose accurate information.
2. Engage in proper promotion and advertising.
Don’t be arrogant.Comply with laws and regulations, and respect social norms.
Above all, love and admire talent.(Never be jealous.)
At Avex, the following compliance policy is positioned as the cornerstone of all actions and judgments to
conduct business activities.
Compliance Policy
17
The Avex Group is acting in a united manner towards “an innovative future of entertainment,” by focusing on the growth markets of “Live,” “Anime,” and “Digital,”
in accordance with the newly formulated “avex group growth strategy 2020,” working to thoroughly optimize the Company as a whole, and implementing measures
for the creation of new hits.
To push forward with these growth strategies, the Group recognizes that it is essential to build a more robust corporate governance framework in order to properly
meet the expectations and trust placed in us by our shareholders and all other stakeholders.
The Group’s basic philosophy of corporate governance is to build a management framework that provides the functions of accurate managerial decision-making, and
prompt and appropriate business execution, and the adequate monitoring of these functions, while at the same time working to maintain and improve corporate ethics.
Overview of Corporate Governance Structure
The Avex Group uses the corporate auditor system. There is a Board of Auditors with
4 members, including 2 outside auditors, that monitors the performance of the directors. In
addition, there is a Board of Directors with 6 members, including 2 outside directors, which
meets once a month, as a general rule, to decide on the main issues facing Avex and its Group
companies. Comprising corporate executives and charged with ensuring the control and flex-
ibility of Group management, Management Meetings are, as a general rule, convened weekly
to discuss significant matters related to the management and business execution of the Avex
Group. Furthermore, to ensure proper business operations by Avex and its Group companies,
the Internal Affairs Department conducts monitoring in the form of operational audits. Mean-
while, management control staff members are dispatched to all Group companies to carry out
appropriate monitoring of the state of their business activities in an effort to maintain and im-
prove the Group’s governance system.
Furthermore, with the aim of ensuring the effectiveness and soundness of business opera-
tions, the Group has established 3 committees, details of which are outlined on page 19.
Other Matters Relating to Corporate Governance
The 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 sys-
tem, the Group sets a compliance policy that underlies its corporate ethics stance, and all
executives and employees are made aware of and fully understand the importance of strict
compliance with laws and regulations. Furthermore, the Group has established an Internal
Reporting System (“Helpline”) and allocated external lawyers and industry counselors to the
Helpline to continually strive to guard against infractions of laws and regulations, unfair prac-
tices, and ethical transgressions occurring within Avex.
As regards the risk control structure, the Group has developed a structure to provide risk
management by establishing risk management regulations, specifying divisions bearing execu-
tive responsibility for risk, designating risks that may be faced by Avex and Group companies
and preparing their countermeasures, and appointing directors with responsibility for risk con-
trol to manage the comprehensive risks that face the Group as a whole.
Furthermore, concerning this risk management approach, we have arranged that the Inter-
nal Affairs Department conducts audits of the risk control situation facing the Company and its
Group companies and reports its findings to the representative director and CEO and to the
auditors. When potential issues are found, the Department takes steps to resolve them in part-
nership with the Risk Management Division and other relevant divisions. This system ensures
that the risk control structure remains robust, and is constantly maintained and improved.
Internal Audits and Auditors’ Audits
Reporting directly to the representative director and CEO, the Internal Affairs Department is
responsible for the Company’s internal audits. This department is made up of 6 staff includ-
ing the department general manager. In addition to certified public accountants, department
members also comprise personnel with experience in business operations including key
positions at the Company and Group subsidiaries. The Internal Affairs Department oversees
operational audits of the Company and Group subsidiaries. After detailed deliberations with
departments responsible for putting in place the Group’s internal control structure and sys-
tems, the Internal Affairs Department checks the status of control for each operation. In the
event that an issue is identified, the Department puts forward recommendations for reme-
dial action and improvement while also engaging in the necessary follow-up. Moreover, the
Internal Affairs Department exchanges opinions with the independent auditor on a timely
basis and submits reports to the representative director and CEO as well as auditors. In
Corporate Governance
18
Total Amount of Remuneration for Directors and Auditors
Classification
Total remuneration
(Millions of yen)
Remuneration breakdown (Millions of yen)
Total number of payees
Basic remuneration Stock options Bonus
Directors (Excluding outside directors)
1,051 543 141 366 5
Auditors (Excluding outside auditors)
39 36 — 3 2
Outside directors and auditors
22 22 — — 4
(Fiscal year ended March 2016)
addition to ensuring that information is shared among all relevant parties, the Department is
actively engaged in bringing about an early resolution to any issues.
Auditors’ audits are carried out by 2 full-time auditors and 2 outside auditors. Full-time
auditors boast considerable knowledge in the conduct of business operations having held key
management positions at either the Company or its Group subsidiaries as well as the positions
of director and representative director at Group subsidiaries. Moreover, auditors consistently
attend meetings of the boards of directors of the Company and Group subsidiaries as well as
other important meetings while monitoring management from a fair and objective perspective.
In principle, the Board of Auditors meets once a month and also works diligently to enhance
auditing operations with the vigorous exchange of information with the independent auditor.
Outside Directors and Outside Auditors
Avex appoints 2 outside directors and 2 outside auditors. When these outside directors and
auditors are selected, Avex stipulates the Independent Assessment Standards stated on page
19 and assesses their independence. In an effort to strengthen the management and corporate
governance framework of Avex, these outside officers are selected on the basis of their charac-
ter and insight in addition to their experience. The current outside officers hold qualifications as
certified public accountants or hold a Ph.D. in management studies, and possess the knowl-
edge required to execute their professional duties. These attributes serve the officers well in
their work to bolster and enhance Avex’s management and corporate governance structure.
The outside directors attend the meetings of Avex’s Board of Directors, which are held
once a month as a general rule. Along with monitoring the status of management, the outside
directors render advice and exchange opinions when necessary with respect to business deci-
sions. 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 Avex and its Group com-
panies. 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 correc-
tions to and ensure the appropriateness of the Group’s business operations.
Pursuant to Article 427, Paragraph 1 of the Companies Act of Japan, Avex has entered
into contracts with all of the non-executive directors and outside auditors to limit the liability of
each non-executive director/outside auditor to Avex 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 limitations of liability are prefaced on
good faith on the part of the non-executive directors and outside auditors, as well as the ab-
sence of any substantial losses pertaining to their respective duties.
Executive Compensation
Avex has adopted a three-person Compensation Committee chaired by an outside director
and with an additional outside director and a director as members. The committee reviews
the contents of the executive compensation system and its procedures for determining
compensation. This has resulted in a highly transparent executive compensation system that
incorporates an objective, external viewpoint.
Executive compensation under this system is composed of basic remuneration, perfor-
mance-linked compensation and stock options. The performance-linked compensation is
paid to directors (excluding part-time and outside directors) and linked to the consolidated
net income attributable to owners of the parent for each business term. Avex also offers
stock options for directors (excluding part-time and outside directors) who are judged to
have made significant contributions to performance.
Financial Audits
Avex has a contract with Deloitte Touche Tohmatsu LLC to conduct financial audits as stipu-
lated in the Companies Act and Japan’s Financial Instruments and Exchange Law.
Status of IR Activities
Having in place an IR system to work on its sustainable growth and medium- to long-term
improvements in its corporate value, Avex proactively provides forums for dialog with its share-
holders and investors to gain their understanding of the Company’s management strategies
and performance. Avex holds financial result briefings for analysts and institutional investors
after the announcements of these financial reports and the second-quarter earnings. Also
proactively holding smaller-scale meetings, Avex is working to improve communications with
analysts and institutional investors.
19
Board of Directors
Management Meetings
Oversight of performance
Board of AuditorsReport of ethical judgment of
products and content
Confirms suitability of compensation for directors and corporate auditors
Report
Report
Independent Accountant
Opinions and reports
Questions/consulting
1 Compliance Committee
Director for Compliance
Compliance Committee Office
Helpline
Instructions Report
Instructions Report
Report
Financial auditing
Group Companies
Internal Affairs
Monitoring
CEO
Global IP International Strategic Development
Global Artist Development Office of the CEO
Corporate Planning Legal AffairsGeneral Affairs & Personnel Administration
Management Information Administration
Extensive
collaboration
General Shareholders’ Meeting
2 Production Ethics Committee
3 Compensation Committee
Structure of Corporate Governance Units and Internal Control System (As of July 1, 2016)
1 Compliance Committee
The Compliance Committee, which includes members from outside
the Company such as lawyers, 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.
2 Production Ethics Committee
The Production Ethics Committee is comprised of members of the
Management Meetings 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.
3 Compensation Committee
The Compensation Committee consists mainly of independent
directors, who examine the propriety of executive compensation
from an objective standpoint.
“Independence Assessment Standards” for Outside Directors and Outside Auditors
Avex deems that the outside officer (outside director and outside auditor) is independent if he/she does not meet any of the following criteria.
a Executive of the Company or its subsidiary (hereinafter the "Group").
b Major client of the Group (client with annual total amount of transactions exceeding 1% of the Group's con-
solidated net sales) or an executive thereof, or major supplier of the Group (supplier with total amount of
transactions exceeding 1% of their consolidated net sales) or an executive thereof.
c Consultant, accountant or legal professional who receives a large amount of monetary consideration or
other property (annual total amount of transactions exceeding 1% of their consolidated net sales) from the
Group besides compensation as director/auditor, or who has concluded an advisory contract (or a person
who belongs to such organization and is directly in charge of the Group if the entity receiving the assets is
an organization such as a legal entity or an association).
d The major shareholder of the Company*1
(or an executive of said major shareholder if the shareholder is a legal entity).
e An executive of the Group's major lender*2
f Those that correspond to any of the items (a) to (e) during the past 10 years.
g Relatives (spouse or relatives within the second degree of kinship) of those who correspond to any of the
items (a) to (f), (excluding insignificant persons).
*1 A major shareholder is a shareholder who possesses more than 10% of the voting rights held by all shareholders, under his/her name or another’s name.
*2 A major lender is a group of financial institutions from which the Group receives loans (those related to the consolidated group to which the actual lender belongs), where the total amount of loans made by the Group to the said group of financial institution, as of the end of the previous fiscal year, exceeded 5% of the Group's total consolidated assets.
20
Directors, Auditors and Corporate Executives (As of June 27, 2016)
MASATO MATSUURA [ Representative Director, CEO ]
Apr. 1988 Founded the company; named Director
Mar. 1991 Named Senior Managing Director
Sep. 2004 Named Representative Director, President
Apr. 2010 Named Representative Director, CEO, Avex Group Holdings Inc. (current)
Oct. 2013 Named Representative Director, Chairman, Avex Management Inc. (current)
Dec. 2014 Named Representative Director, Chairman, AWA Co. Ltd. (current)
SHINJI HAYASHI [ Director, Corporate Executive, COO ]
May 1990 Joined the company
Apr. 1993 Named Director
Jun. 1996 Named Managing Director
Apr. 2010 Named Representative Director, CBO (Chief Business Administration Officer),
Director in charge of compliance, Avex Group Holdings Inc. (current)
Jun. 2016 Named Director, Corporate Executive, COO, Compliance Committee Chairman, Compensation
Committee member, Director in charge of risk management, Avex Group Holdings Inc. (current)
RICHARD BLACKSTONE [ Director, Corporate Executive ]
Jun. 1987 Attorney-at-law, Marshall, Morris & Wattenberg
Aug. 1989 Director of Business Affairs, Zomba Enterprises
Jun. 1997 Head of Creative & Head of Business Affairs, Zomba Enterprises
Aug. 2003 President of Zomba/BMG, North America
May 2005 Worldwide Chairman/CEO of Warner Chappell Music Publishing
Sep. 2010 Chief Creative Officer of BMG Rights Management (U.S.)
Feb. 2012 Executive Vice President of Creative & Business Development, BMG (U.S.)
Jan. 2015 CEO of Blackstone Entertainment (current)
Feb. 2016 Named Corporate Executive, Avex Group Holdings Inc.
Jun. 2016 Named Director, Corporate Executive, Avex Group Holdings Inc.;
Representative Director, President, Avex International Inc.;
Representative Director, Vice President, Avex International Holding Corporation (current)
TORU KENJO [ Director (Part-time) ]
Nov. 1993 Established Gentosha Inc., named Representative Director, President (current)
May 2009 Named Chief Advisor, Avex Broadcasting & Communications Inc. (current)
Jun. 2010 Named Director, Avex Group Holdings Inc. (current)
KIICHIRO KOBAYASHI [ Outside Director ]
Apr. 1980 Joined Mitsukoshi, Ltd. (now Isetan Mitsukoshi Holdings Ltd.)
Mar. 1989 Obtained MBA from Keio Business School
Apr. 1989 Senior Researcher, Management Consulting Division of Mitsubishi Research Institute, Inc.
Sep. 1996 Obtained Ph.D. in Business Administration from Keio Business School
Apr. 1997 Visiting Scholar of Harvard Business School
Apr. 2006 Professor of Keio University Graduate School of Business Administration /
Business School (current)
Jun. 2016 Named Outside Director, Compensation Committee Chairman, Avex Group Holdings Inc. (current)
HIROYUKI ANDO [ Outside Director ]
Apr. 1986 Joined HOYA Corporation
Jan. 1992 Joined Sanno Institute of Management as a Researcher of Headquarters for Consulting and Training
Apr. 2004 Concurrent faculty staff of Sanno Institute of Management
Sep. 2005 Obtained Master of Science from University of Wales, U.K.
Apr. 2006 Principal Researcher, Headquarters for Consulting and Training of Sanno Institute of Management
Apr. 2008 Professor, Graduate School (MBA Course) of Sanno Institute of Management
Nov. 2009 Senior Consultant of Keio Academic Enterprise. Co., Ltd. (Keio Marunouchi City Campus)
May 2013 Retired from Keio Academic Enterprise. Co., Ltd. and was appointed as a full-time consultant
of Keio Marunouchi City Campus (current)
Jun. 2016 Named Outside Director, Avex Group Holdings Inc. (current)
SHINKICHI IWATA [ Auditor (Standing) ]
Apr. 1993 Joined the company
Mar. 1995 Named Director
Jun. 2002 Named Representative Director, President, Avex Network Inc.*1
Jun. 2005 Named Auditor, Avex Group Holdings Inc. (current)
NOBUYUKI KOBAYASHI [ Auditor (Standing) ]
Oct. 1998 Joined Avex Distribution, Inc.*1
Apr. 2004 Named Executive Director, Avex Distribution, Inc.*1
Jul. 2011 Named Corporate Executive, Head of Administration Division, Avex Marketing Inc.*1
Jun. 2013 Named Auditor, Avex Group Holdings Inc. (current)
TOSHIAKI KATSUSHIMA [ Outside Auditor ] [ Certified Public Accountant ] [ Certified Tax Accountant ]
Feb. 1990 Representative, Deloitte Touche Tohmatsu*2
Oct. 2003 Opened Katsushima Toshiaki Certified Public Accountant and
Tax Accountant Office as Principal Proprietor (current)
Jun. 2006 Named Outside Auditor, Avex Group Holdings Inc. (current)
Apr. 2007 Outside Corporate Auditor, SKY Perfect JSAT Holdings Inc. (current)
Jun. 2007 Named Compliance Committee member, Avex Group Holdings Inc. (current)
AKIHIRO TAMAKI [ Outside Auditor ] [ Certified Public Accountant in the U.S. ]
Jun. 2006 Establishment of PSY-fa Co., Ltd., Representative Director (current)
Jun. 2008 Outside Auditor, Avex Group Holdings Inc. (current)
Jun. 2010 Outside Director, SBI Holdings Inc. (current)
Dec. 2014 Compensation Committee member, Avex Group Holdings Inc. (current)
The assignment of independent officers tasked with safeguarding the interests of ordinary shareholders is mandated by the Tokyo Stock Exchange.
*1 Currently Avex Music Creative Inc. *2 Currently Deloitte Touche Tohmatsu LLC
21
Number of shares held
T'S Capital Inc. 2,250,000
Max 2000 Inc. 2,050,000
CyberAgent, Inc. 2,000,000
GOLDMAN, SACHS & CO. REG 1,992,800
Toshio Kobayashi 1,157,818
Japan Trustee Services Bank, Ltd. (Trust account) 1,119,300
The Master Trust Bank of Japan, Ltd. (Trust account) 1,114,900
Daiichikosho Co., Ltd. 1,020,000
Masato Matsuura 857,924
THE BANK OF NEW YORK-JASDEC TREATY ACCOUNT 810,200
Treasury stock2,059,724 shares
4.58%
Japanese financial institutions
6,981,284 shares15.51%
Japanese securities companies
1,015,809 shares2.26%
Japanese individual investors and others14,971,419 shares33.27%
Foreign investors11,795,249 shares26.21%
Other Japanese corporations8,176,515 shares18.17%
Total
45,000,000shares
Corporate Data (As of March 31, 2016)
Company name: Avex Group Holdings Inc.
Established: April 11, 1988
Paid-in capital: ¥4,229.6 million
Number of employees: 271 (Number of Group employees 1,453)
Headquarters: 1-6-1, Roppongi, Minato-ku, Tokyo 106-6036, Japan
URL: http://www.avex.co.jp/e_site/
Stock Information (As of March 31, 2016)
Number of shares issued: 45,000,000
Stock exchange listing: First Section of Tokyo Stock Exchange
Stock code: 7860
Trading unit: 100 shares
General Shareholders’ Meeting: June
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 available on the Company’s website.
(http://www.avex.co.jp/e_site/ir/)
Top 10 Shareholders (As of March 31, 2016) Breakdown of Shareholders (As of March 31, 2016)
Notes: 1. In addition to the above table, there are 2,059,724 shares of treasury stock owned by the Company.
2. Representative Director, CEO Masato Matsuura serves as a Representative Director of Max 2000 Inc.
Corporate Data and Investor Information
22
11-Year Summary 23
Management Discussion and Analysis 24
Risk Factors 26
Consolidated Balance Sheet 27
Consolidated Statement of Income/
Consolidated Statement of Comprehensive Income 28
Consolidated Statement of Changes in Equity 29
Consolidated Statement of Cash Flows 30
Segment Information 31
Financial Section
23
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
For the year
Net sales 89,783 101,626 104,639 117,819 118,142 111,561 121,027 138,764 156,935 169,256 154,122
Operating income 8,650 8,691 8,510 6,480 5,566 11,343 12,263 14,029 10,427 8,675 7,277
Net income (loss) attributable to owners of the parent
4,478 3,063 909 (905) 975 5,308 4,934 7,322 6,791 5,975 4,292
Cash flows from operating activities 3,450 1,210 7,293 1,718 9,093 11,335 13,171 10,115 6,451 11,337 8,169
Cash flows from investing activities (11,644) (18,156) (980) (3,508) (2,572) (2,422) (2,403) 2,495 1,780 (1,330) (6,778)
Free cash flow (8,194) (16,946) 6,313 (1,790) 6,521 8,913 10,768 12,610 8,231 10,007 1,391
Cash flows from financing activities 8,275 17,929 (2,552) 5,067 (9,982) (7,541) (7,370) (9,038) (7,382) (3,040) (5,969)
At year-end
Cash and cash in banks 5,486 6,371 10,093 13,166 9,717 11,039 14,422 17,974 18,757 25,699 21,107
Equity 33,446 33,699 32,812 29,760 30,266 33,547 36,932 48,878 53,347 53,394 52,392
Total assets 83,826 105,894 102,124 107,013 94,593 93,315 99,258 108,756 114,390 117,564 111,208
Current assets 37,521 45,069 45,819 52,748 39,999 40,377 49,271 54,004 60,112 69,160 63,620
Current liabilities 42,232 57,543 40,117 42,089 33,095 35,977 51,466 53,369 55,723 59,460 55,478
Interest-bearing liabilities 19,500 39,000 38,175 45,069 34,813 29,053 23,698 15,846 11,319 10,205 9,220
Amounts per share (yen)
Net income (loss) 93.79 71.33 21.17 (21.09) 22.72 123.60 115.06 172.69 161.51 141.90 99.88
Equity 768.32 772.31 751.05 684.89 668.82 747.13 821.97 1,059.45 1,150.22 1,131.29 1,144.82
Cash dividends 40.00 40.00 40.00 40.00 40.00 40.00 40.00 55.00 60.00 50.00 50.00
Key ratios (%)
Operating income margin 9.6 8.6 8.1 5.5 4.7 10.2 10.1 10.1 6.6 5.1 4.7
Net income (loss) margin 5.0 3.0 0.9 (0.8) 0.8 4.8 4.1 5.3 4.3 3.5 2.8
ROE 14.1 9.2 2.8 (2.9) 3.4 17.5 14.7 18.4 14.6 12.2 8.7
ROA 6.0 3.2 0.9 (0.8) 1.0 5.6 5.1 7.0 6.1 5.2 3.8
Current ratio 88.8 78.3 114.2 125.3 120.9 112.2 95.7 101.2 107.9 116.3 114.7
Shareholders’ equity ratio 39.9 31.3 31.6 27.5 30.4 34.4 35.4 40.9 42.4 41.9 44.2
D/E ratio (times) 0.6 1.2 1.2 1.5 1.2 0.9 0.6 0.3 0.2 0.2 0.2
(Millions of yen)
11-Year Summary
Fiscal years ended March 31
24
Operating results
During the fiscal year ended March 31, 2016, the
Japanese economy continued to trace a modest
recovery path, albeit with a certain amount of weak-
ness in evidence. Looking ahead, the economy is
expected to continue recovering modestly, helped
along by continued improvements in the employ-
ment and income environments, and the effects of
various government policies.
In the environment surrounding the entertainment
industry, to which the Group belongs, production of
music software, including music videos, increased
0.1% year on year to ¥254,449 million (January to De-
cember 2015; according to a survey by the Recording
Industry Association of Japan), while sales of paid
digital music distribution increased 7.7% year on year
to ¥47,073 million (January to December 2015; ac-
cording to a survey by the Recording Industry Asso-
ciation of Japan). In the video-related market, sales of
video software fell 5.1% year on year to ¥218,113 mil-
lion (January to December 2015; according to a sur-
vey by the Japan Video Software Association). The
digital video distribution market on the other hand in-
creased in scale by 11.1% year on year to ¥149.5 bil-
lion (January to December 2015; according a survey
by Nomura Research Institute, Ltd.), and is expected
to continue increasing in the future, thanks to develop-
ments such as new digital video distribution services
entering the market, from both Japan and overseas.
The live entertainment market also continued to per-
form strongly, increasing in scale by 15.9% to
¥318,634 million (January to December 2015; ac-
cording to a survey by the All Japan Concert & Live
Entertainment Promoters Conference).
In the midst of this business environment, the
Avex Group has been working to achieve medium-
term growth, by focusing on strengthening content,
evolving digital services and expanding its live busi-
ness, and by establishing a continuous cycle linking
content and platforms. Specifically, the Group has
partnered with an external production company, in-
vested in the copyright management business, and
launched digital services with a new external partner.
The Group is also looking into groupwide reform, in
an effort to map out scenarios for further growth in
line with the changing environment.
Consequently, the Group’s consolidated net sales
totaled ¥154,122 million (down 8.9% year on year),
due in part to a decline in the number of live perfor-
mances at large venues and a drop in sales of albums
in the Music Business. Along with factors such as an
increase in expenses due to rebranding of digital vid-
eo distribution service to make it more competitive,
operating income came to ¥7,277 million (down
16.1%). Net income attributable to owners of the par-
ent totaled ¥4,292 million (down 28.2%), due in part to
equity in losses of associated companies as a result of
investment in digital music distribution services.
Status of consolidated assets, liabilities,
and net assets
At the end of the consolidated fiscal year under re-
view, total assets had decreased by ¥6,356 million
compared to the end of the previous consolidated fis-
cal year, to ¥111,208 million. This was mainly due to
decreases of ¥4,592 million in cash and cash in
banks, ¥1,055 million in other current assets, and
¥881 million in programs and works in progress.
Liabilities decreased by ¥5,353 million compared
to the end of the previous consolidated fiscal year, to
¥58,816 million. This was mainly the result of decreas-
es of ¥2,634 million in accounts payables—other,
¥1,031 million in other current liabilities and ¥625 million
in long-term loans payable (including current portion).
Total equity fell by ¥1,002 million compared to the
end of the previous consolidated fiscal year, to
¥52,392 million. This was mainly due to an increase of
¥1,667 million in treasury stock (decrease in net as-
sets), and decreases of ¥665 million in noncontrolling
interests and ¥458 million in the total of defined retire-
ment benefit plans, in spite of a ¥2,014 million increase
in retained earnings.
Cash flows
The balance of cash and cash equivalents at the
end of the consolidated fiscal year under review
was ¥21,107 million (¥25,699 million a year earlier).
Segmented cash flows according to respective
business activities were as follows:
Management Discussion and Analysis
25
Cash flows from operating activities
Net cash provided by operating activities stood at
¥8,169 million (¥11,337 million a year earlier).
This was mainly attributable to reductions in net
cash, due to ¥3,328 million in income taxes—paid
and a ¥2,775 million decrease in other accounts
payable, offset by increases in net cash due to
¥7,938 million in income before income taxes,
¥3,300 million in depreciation, and ¥1,553 million in
income taxes refunded.
Cash flows from investing activities
Net cash used in investing activities was ¥6,778
million (¥1,330 million a year earlier).
This was mainly due to factors that decreased
net cash, including ¥3,349 million for the purchases
of intangible assets, ¥1,000 million for the purchases
of marketable securities, and ¥829 million for the
purchases of investment securities.
Cash flows from financing activities
Net cash used in financing activities stood at
¥5,969 million (¥3,040 million a year earlier).
This chiefly reflected factors decreasing net
cash, including ¥2,201 million for the purchase of
treasury stock, ¥2,163 million in dividends paid,
and ¥762 million in dividends paid to noncontrolling
shareholders.
Source of capital and liquidity
Currently, the Avex Group secures debt finance main-
ly from financial institutions to fund its working capital,
capital expenditure, and business investment needs.
For its short-term funding requirements, the Group
has executed current account overdraft and commit-
ment line agreements to a maximum amount of
¥14,500 million with five banks.
As of March 31, 2016, cash and cash in banks
stood at ¥21,107 million, down ¥4,592 million com-
pared with the end of the previous fiscal year. Despite
reporting income before income taxes of ¥7,938 mil-
lion, this decrease was mainly due to the downturn in
cash flows from investing activities attributable to
such factors as purchases on non-current assets,
and the drop in cash flows from financing activities
mainly reflecting the purchase of treasury stock and
dividends paid. The consolidated current ratio as of
the end of the period was 114.7%, a decrease of 1.6
percentage points from 116.3% as of March 31,
2015. In addition to the balance of cash and cash in
banks, which stood at ¥21,107 million as of March
31, 2016, the Avex Group maintains current account
overdraft and commitment line agreements to a max-
imum amount of ¥14,500 million with banks (with an
unused portion of ¥6,000 million as of the end of the
fiscal year under review). Taking each of the afore-
mentioned into consideration, the Group believes that
it maintains an appropriate level of liquidity. Plans are
in place to redeem the current portion of bonds main-
ly through the use of operating cash flows. Avex is
confident in its ability to secure cash on hand through
the drawdown of short-term loans payable utilizing its
available funding agreements.
Basic profit distribution policy and dividend
payout for the period under review
One of our most important management tasks is to
ensure comprehensive, long-lasting profit distribution
to our shareholders. In determining the amount of
dividends, we thoroughly evaluate factors such as
performance, cash flows, and future funding require-
ments. The level of performance-linked dividends is a
dividend ratio of 35% on a consolidated basis or
more. The minimum level of the annual dividend per
share is ¥50.
Based on our basic policy to achieve a dividend
ratio of more than 35% on a consolidated basis, the
Company paid a year-end dividend of ¥25 per share
for the fiscal year ended March 31, 2016. Combined
with the interim dividend of ¥25 per share, the annual
dividend was ¥50 per share.
26
Trends in major titles, artists and talents
The Avex Group utilizes the rights that it holds as a
content holder in its various businesses. Consequent-
ly, 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
talents, contract duration, and growth of new artists
and talent.
Operations in overseas markets
The major markets for our overseas businesses are in
Southeast Asia where significant growth is expected
in the future.
In the event that an unexpected incident occurs in
any of the overseas markets due to a change in po-
litical or economic conditions or legal or regulatory
elements, disadvantageous taxes, or social disorder
caused by terrorist attacks, war, or the like, it is pos-
sible that our overseas operations and performance
may be affected.
Impairment loss
When market values of the assets held by the Group
decrease significantly, or business profitability deterio-
rates, an impairment loss in noncurrent assets may
be recorded by applying impairment accounting,
which would affect the Group’s businesses and finan-
cial position.
Fundraising
The Group raises some of the funds used to acquire
real estate through borrowings from financial institu-
tions and the issuing of bonds. If interest rates
change, the Group’s performance may be affected.
In addition, certain of the borrowings have a finan-
cial restriction clause. Infringement of the clause may
affect the business performance and financial posi-
tion of the Group. For example, the borrowing interest
rate will be raised, and/or the benefit of time will be
forfeited, etc.
Business in the digital domain
The Group is actively expanding business in the
digital domain, but there is the undeniable possibil-
ity of risks arising in the process of execution of this
business due to a sudden change in the business
environment, such as technical innovation and
emergence of competition, or an unforeseeable
problem which materializes afterwards, and this
may affect the Group’s performance.
Dependency on the specific corporate manager
Representative Director, CEO Masato Matsuura, one
of the founders of Avex, has been playing the core
role in formulating and determining Group manage-
ment strategies and concluding contracts with impor-
tant business partners and artists. In the event that
Mr. Matsuura leaves the Group for any reason, the
performance of the Group may be affected.
Risk Factors
27
Millions of YenThousands ofU.S. Dollars
2016 2015 2016
ASSETS
CURRENT ASSETS:
Cash and cash in banks ............................................................. ¥ 21,107 ¥ 25,699 $ 187,318
Marketable securities .................................................................. 1,003 8,901
Notes and accounts receivable—trade ....................................... 21,271 21,209 188,773
Inventories:
Merchandise and finished products ....................................... 1,300 1,168 11,537
Programs and work in process .............................................. 6,616 7,497 58,714
Raw materials and supplies ................................................... 610 372 5,413
Deferred tax assets .................................................................... 3,742 4,129 33,209
Advance payments—trade ......................................................... 1,226 1,143 10,880
Prepaid expenses ....................................................................... 1,280 1,151 11,359
Prepaid royalties ......................................................................... 2,002 2,340 17,767
Other .......................................................................................... 3,711 4,766 32,933
Allowance for doubtful accounts................................................. (252) (319) (2,236)
Total current assets .................................................. 63,620 69,160 564,607
PROPERTY, PLANT AND EQUIPMENT:
Land .......................................................................................... 29,770 29,770 264,199
Buildings and structures—net..................................................... 1,492 1,939 13,241
Other property—net ................................................................... 891 1,019 7,907
Total property, plant and equipment .......................... 32,154 32,728 285,356
INVESTMENTS AND OTHER ASSETS:
Investment securities .................................................................. 5,310 5,501 47,124
Long-term prepaid expenses ...................................................... 147 436 1,304
Intangible assets ........................................................................ 5,457 4,471 48,429
Deferred tax assets .................................................................... 1,943 2,779 17,243
Other assets .............................................................................. 2,839 2,785 25,195
Allowance for doubtful accounts (263) (298) (2,334)
Total investments and other assets ........................... 15,434 15,675 136,971
TOTAL .............................................................................................. ¥ 111,208 ¥ 117,564 $ 986,936
Note: The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers
outside Japan and have been made at the rate of ¥112.68 to $1, the approximate rate of exchange at March 31, 2016.
Millions of YenThousands ofU.S. Dollars
2016 2015 2016
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Notes and accounts payable—trade .......................................... ¥ 2,020 ¥ 1,601 $ 17,926
Short-term bank loans ................................................................ 8,500 8,500 75,434
Current portion of long-term loans .............................................. 250
Current portion of long-term bonds ............................................ 720 360 6,389
Accounts payables—other ......................................................... 24,356 26,990 216,151
Accrued royalties ........................................................................ 8,748 9,224 77,635
Income taxes payable................................................................. 865 680 7,676
Provision for bonuses ................................................................. 1,066 1,536 9,460
Provision for sales returns ........................................................... 4,163 4,247 36,945
Other .......................................................................................... 5,038 6,070 44,710
Total current liabilities ................................................ 55,478 59,460 492,350
LONG-TERM LIABILITIES:
Long-term bonds ....................................................................... 720
Long-term loans ......................................................................... 375
Liability for retirement benefits .................................................... 2,126 2,121 18,867
Other .......................................................................................... 1,210 1,492 10,738
Total long-term liabilities ............................................ 3,337 4,709 29,614
COMMITMENTS AND CONTINGENT LIABILITIES
EQUITY:
Shareholders’ equity:
Common stock—authorized, 184,631,000 shares;
issued, 45,000,000 shares in 2016 and 2015 ..................... 4,229 4,229 37,531
Capital surplus ....................................................................... 4,999 5,001 44,364
Retained earnings .................................................................. 44,906 42,891 398,526
Treasury stock—at cost, 2,059,724 shares in 2016
and 1,417,596 shares in 2015 ............................................ (4,033) (2,365) (35,791)
Total .......................................................................... 50,102 49,756 444,639
Accumulated other comprehensive loss:
Unrealized gain on available-for-sale securities ....................... 55 90 488
Deferred (loss) gain on derivatives under hedge accounting .... (1) 8 (8)
Foreign currency translation adjustments ............................... (139) (152) (1,233)
Defined retirement benefit plans ............................................. (857) (398) (7,605)
Total .......................................................................... (943) (451) (8,368)
Stock acquisition rights .......................................................... 643 835 5,706
Noncontrolling interests ......................................................... 2,589 3,255 22,976
Total equity ................................................................ 52,392 53,394 464,962
TOTAL .............................................................................................. ¥ 111,208 ¥ 117,564 $ 986,936
See notes to consolidated financial statements.
Consolidated Balance Sheet
AVEX GROUP HOLDINGS INC. and SubsidiariesMarch 31, 2016
28
Millions of YenThousands ofU.S. Dollars
2016 2015 2016
NET SALES ..................................................................................... ¥ 154,122 ¥ 169,256 $ 1,367,784
COST OF SALES............................................................................. 107,867 118,503 957,286
Gross profit ............................................................... 46,255 50,752 410,498
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES .............. 38,978 42,077 345,917
Operating income ..................................................... 7,277 8,675 64,581
OTHER INCOME (EXPENSES):Interest income ........................................................................... 15 5 133Dividend income ......................................................................... 14 52 124Interest expense ......................................................................... (40) (72) (354)Commission fee ......................................................................... (10) (15) (88)Foreign exchange gain (loss) ...................................................... 77 (88) 683Gain on adjustment of accrued royalties ..................................... 35 110 310(Loss) gain on investments in partnership ................................... (178) 40 (1,579)Equity in losses of associated companies ................................... (1,158) (179) (10,276)
Gain on cancellation ................................................................... 2,000 17,749
Gain on reversal of subscription rights to shares ......................... 329 2,919
Gain on change in equity ............................................................ 44 390
Gain on sales of investment securities ........................................ 3,512 Loss on impairment of long-lived assets ..................................... (199) (779) (1,766)Expenses related to rebuilding .................................................... (244) (280) (2,165)Loss on valuation of investment securities .................................. (38) (337)Loss on disposal of noncurrent properties .................................. (9) (16) (79)Other—net ................................................................................. 22 82 195
Other income—net .................................................... 661 2,371 5,866
INCOME BEFORE INCOME TAXES ............................................... 7,938 11,046 70,447
INCOME TAXES:Current ....................................................................................... 2,155 4,673 19,124Deferred ..................................................................................... 1,395 (222) 12,380
Total income taxes .................................................... 3,551 4,450 31,514
NET INCOME 4,387 6,595 38,933
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS ............................................... 95 620 843
NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT ......................................................... ¥ 4,292 ¥ 5,975 $ 38,090
Yen U.S. Dollars
2016 2015 2016
PER SHARE OF COMMON STOCK:
Basic net income ...................................................................... ¥ 99.88 ¥ 141.90 $ 0.89
Diluted net income ................................................................... 99.28 140.60 0.88
Cash dividends applicable to the year ...................................... 50.00 50.00 0.44
See notes to consolidated financial statements.
Millions of YenThousands ofU.S. Dollars
2016 2015 2016
NET INCOME ................................................................................. ¥ 4,387 ¥ 6,595 $ 38,933
OTHER COMPREHENSIVE LOSS:
Unrealized loss on available-for-sale securities ............................ (32) (4,980) (283)
Deferred (loss) gain on derivatives under hedge accounting ........ (11) 4 (97)
Foreign currency translation adjustments .................................... 5 (65) 44
Defined retirement benefit plans ................................................. (452) (129) (4,011)
Share of other comprehensive (loss) income in associates .......... (1) 179 (8)
Total other comprehensive loss ................................. (492) (4,991) (4,366)
COMPREHENSIVE INCOME .......................................................... ¥ 3,895 ¥ 1,604 $ 34,566
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent .................................................................. ¥ 3,800 ¥ 986 $ 33,723
Noncontrolling interests .............................................................. 94 618 834
See notes to consolidated financial statements.
Consolidated Statement of Income Consolidated Statement of Comprehensive Income
AVEX GROUP HOLDINGS INC. and SubsidiariesYear Ended March 31, 2016
AVEX GROUP HOLDINGS INC. and SubsidiariesYear Ended March 31, 2016
29
Millions of Yen
Shareholders’ Equity Accumulated Other Comprehensive Loss
Stock Acquisition
RightsNoncontrolling
InterestsTotal
EquityCommon
StockCapitalSurplus
RetainedEarnings
Treasury Stock Total
Unrealized Gain on
Available-for-Sale
Securities
Deferred (Loss) Gain
on Derivatives under Hedge Accounting
Foreign Currency
Translation Adjustments
Defined Retirement
Benefit Plans Total
BALANCE, MARCH 31, 2014
(APRIL 1, 2014, as previously reported) ................. ¥ 4,229 ¥ 5,001 ¥ 39,326 ¥ (4,596) ¥ 43,961 ¥ 5,070 ¥ 2 ¥ (202) ¥ (332) ¥ 4,538 ¥ 656 ¥ 4,191 ¥ 53,347
Cumulative effect of accounting change ............. 16 16 16
BALANCE, APRIL 1, 2014 (as restated) .................... 4,229 5,001 39,343 (4,596) 43,977 5,070 2 (202) (332) 4,538 656 4,191 53,364
Net income attributable to owners of the parent ... 5,975 5,975 5,975Cash dividends, ¥50 per share ........................... (2,087) (2,087) (2,087)Purchase of treasury stock ................................. (1,789) (1,789) (1,789)Disposal of treasury stock .................................. (371) 4,020 3,648 3,648Transfer to capital surplus from retained earnings .......... 371 (371)Change of scope of consolidation ...................... 31 31 31Net change in the year ....................................... (4,979) 6 50 (66) (4,989) 178 (936) (5,747)
BALANCE, MARCH 31, 2015 ................................... 4,229 5,001 42,891 (2,365) 49,756 90 8 (152) (398) (451) 835 3,255 53,394
Net income attributable to owners of the parent ... 4,292 4,292 4,292Cash dividends, ¥50 per share ........................... (2,160) (2,160) (2,160)Purchase of treasury stock ................................. (2,200) (2,200) (2,200)Disposal of treasury stock .................................. (148) 533 385 385Transfer to capital surplus from retained earnings ... 148 (148)Change of scope of consolidation ...................... 30 30 30Change in treasury shares of the parent arising from
transactions with noncontrolling shareholders ........ (1) (1) (1)Net change in the year ....................................... (35) (10) 12 (458) (491) (191) (665) (1,348)
BALANCE, MARCH 31, 2016 .................................. ¥ 4,229 ¥ 4,999 ¥ 44,906 ¥ (4,033) ¥ 50,102 ¥ 55 ¥ (1) ¥ (139) ¥ (857) ¥ (943) ¥ 643 ¥ 2,589 ¥ 52,392
Thousands of U.S. Dollars
Shareholders’ Equity Accumulated Other Comprehensive Loss
Stock Acquisition
RightsNoncontrolling
InterestsTotal
EquityCommon
StockCapitalSurplus
RetainedEarnings
Treasury Stock Total
Unrealized Gain on
Available-for-Sale
Securities
Deferred (Loss) Gain
on Derivatives under Hedge Accounting
Foreign Currency
Translation Adjustments
Defined Retirement
Benefit Plans Total
BALANCE, MARCH 31, 2015 ................................. $ 37,531 $ 44,382 $ 380,644 $ (20,988) $ 441,569 $ 798 $ 70 $ (1,348) $ (3,532) $ (4,002) $ 7,410 $ 28,887 $ 473,855
Net income attributable to owners of the parent ... 38,090 38,090 38,090Cash dividends, $0.44 per share ........................ (19,169) (19,169) (19,169)Purchase of treasury stock ................................. (19,524) (19,524) (19,524)Disposal of treasury stock .................................. (1,313) 4,730 3,416 3,416Transfer to capital surplus from retained earnings .......... 1,313 (1,313)Change of scope of consolidation ...................... 266 266 266Change in treasury shares of the parent arising from
transactions with noncontrolling shareholders ........ (8) (8) (8)Net change in the year ....................................... (310) (88) 106 (4,064) (4,357) (1,695) (5,901) (11,963)
BALANCE, MARCH 31, 2016 .................................. $ 37,531 $ 44,364 $ 398,526 $ (35,791) $ 444,639 $ 488 $ (8) $ (1,233) $ (7,605) $ (8,368) $ 5,706 $ 22,976 $ 464,962
See notes to consolidated financial statements.
Consolidated Statement of Changes in Equity
AVEX GROUP HOLDINGS INC. and SubsidiariesYear Ended March 31, 2016
30
Millions of YenThousands ofU.S. Dollars
2016 2015 2016
OPERATING ACTIVITIES:
Income before income taxes ...................................................... ¥ 7,938 ¥ 11,046 $ 70,447
Adjustments for:
Depreciation .......................................................................... 3,300 5,618 29,286
Loss on impairment of long-lived assets ................................ 199 779 1,766
Interest and dividend income ................................................. (30) (58) (266)
Interest expense .................................................................... 40 72 354
Gain on sales of investment securities ................................... (3,512)
Loss (gain) on investments in partnership .............................. 178 (40) 1,579
Equity in losses of associated companies .............................. 1,158 179 10,276
Gain on cancellation .............................................................. (2,000) (17,749)
Gain on reversal of subscription rights to shares .................... (329) (2,919)
Expenses related to rebuilding ............................................... 244 280 2,165
Loss on valuation of investment securities ............................. 38 337
Share-based compensation expenses ................................... 300 291 2,662
Changes in assets and liabilities:
Increase in trade accounts receivable ................................. (80) (1,249) (709)
Decrease in inventories ....................................................... 509 939 4,517
(Increase) decrease in advance payments—trade ............... (83) 108 (736)
Decrease (increase) in prepaid royalties .............................. 336 (813) 2,981
Increase (decrease) in trade accounts payable .................... 424 (392) 3,762
(Decrease) increase in other accounts payable ................... (2,775) 5,604 (24,627)
(Decrease) increase in accrued royalties ............................. (409) 848 (3,629)
Decrease in provision for bonuses ...................................... (470) (249) (4,171)
(Decrease) increase in provision for sales returns .................... (83) 262 (736)
Decrease in provision for expenses related to rebuilding ......... (500)
(Decrease) increase in liability for retirement benefits ........... (626) 283 (5,555)
Other—net ............................................................................ 137 (28) 1,215
Subtotal .................................................................... 7,919 19,470 70,278
Interest and dividends received .............................................. 65 147 576
Interest paid........................................................................... (41) (75) (363)
Proceed from cancellation ..................................................... 2,000 17,749
Income taxes—refund ........................................................... 1,553 766 13,782
Income taxes—paid ............................................................... (3,328) (8,972) (29,534)
Net cash provided by operating activities .................. ¥ 8,169 ¥ 11,337 $ 72,497
Millions of YenThousands ofU.S. Dollars
2016 2015 2016
INVESTING ACTIVITIES:
Purchases of property, plant and equipment ............................... (367) (1,809) (3,257)
Payments for retirement of property, plant and equipment .......... (524) (4,650)
Purchases of intangible assets ................................................... (3,349) (2,346) (29,721)
Proceeds from sales of intangible assets .................................... 12 106
Purchases of marketable securities ............................................ (1,000) (8,874)
Purchases of investment securities ............................................. (829) (1,411) (7,357)
Proceeds from sales of securities ............................................... 5,029
Payments of loans receivable ..................................................... (500) (10) (4,437)
Proceeds from collection of loans receivable .................................. 11
Payments for lease and guarantee deposits ............................... (11) (803) (97)
Proceeds from collection of lease and guarantee deposits ......... 21 12 186
Other—net ................................................................................. (230) (1) (2,041)
Net cash used in investing activities .......................... (6,778) (1,330) (60,152)
FINANCING ACTIVITIES:
Repayments of long-term loans .................................................. (625) (754) (5,546)
Repayments of lease obligations ................................................ (86) (47) (763)
Proceeds from stock issuance to noncontrolling shareholders .... 44
Redemption of bonds ................................................................. (360) (360) (3,194)
Purchase of treasury stock ......................................................... (2,201) (1,790) (19,533)
Disposal of treasury stock .......................................................... 229 3,557 2,032
Dividends paid............................................................................ (2,163) (2,090) (19,195)
Dividends paid to noncontrolling shareholders ............................ (762) (1,599) (6,762)
Net cash used in financing activities .......................... (5,969) (3,040) (52,973)
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS ........................................... (13) (23) (115)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .... (4,592) 6,942 (40,752)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ............... 25,699 18,757 228,070
CASH AND CASH EQUIVALENTS, END OF YEAR ........................... ¥ 21,107 ¥ 25,699 $ 187,318
See notes to consolidated financial statements.
Consolidated Statement of Cash Flows
AVEX GROUP HOLDINGS INC. and SubsidiariesYear Ended March 31, 2016
31
Millions of Yen
2016 Reportable Segment
Other Total Reconciliations ConsolidatedMusic
BusinessVideo
BusinessManagement/Live Business Total
Sales: ...........................................................................................................
Sales to external customers ...................................................................... ¥ 58,871 ¥ 41,361 ¥ 51,195 ¥ 151,428 ¥ 2,694 ¥ 154,122 ¥ 154,122
Intersegment sales or transfers .................................................................. 2,353 440 4,561 7,355 281 7,637 ¥ (7,637)
Total ............................................................................................................. ¥ 61,224 ¥ 41,801 ¥ 55,756 ¥ 158,783 ¥ 2,976 ¥ 161,759 ¥ (7,637) ¥ 154,122
Segment profit .............................................................................................. ¥ 6,583 ¥ 85 ¥ 1,583 ¥ 8,252 ¥ (779) ¥ 7,473 ¥ (195) ¥ 7,277
Segment assets ............................................................................................ 19,366 22,463 10,936 52,765 705 53,471 57,737 111,208
Other:
Depreciation .............................................................................................. 903 1,265 881 3,050 83 3,134 166 3,300
Investment in associated companies accounted for by equity method................ 2,670 1,467 4,138 4,138 4,138
Increase in property, plant and equipment and intangible assets ................ 287 2,126 518 2,932 69 3,002 1,216 4,218
Millions of Yen
2015 Reportable Segment
Other Total Reconciliations ConsolidatedMusic
BusinessVideo
BusinessManagement/Live Business Total
Sales: ...........................................................................................................
Sales to external customers ...................................................................... ¥ 65,463 ¥ 39,620 ¥ 61,482 ¥ 166,566 ¥ 2,690 ¥ 169,256 ¥ 169,256
Intersegment sales or transfers .................................................................. 2,164 210 3,852 6,227 592 6,819 ¥ (6,819)
Total ............................................................................................................. ¥ 67,628 ¥ 39,831 ¥ 65,334 ¥ 172,793 ¥ 3,282 ¥ 176,076 ¥ (6,819) ¥ 169,256
Segment profit .............................................................................................. ¥ 7,849 ¥ 1,832 ¥ 2,765 ¥ 12,447 ¥ (716) ¥ 11,731 ¥ (3,055) ¥ 8,675
Segment assets ............................................................................................ 15,585 18,485 16,017 50,088 1,075 51,164 66,400 117,564
Other:
Depreciation .............................................................................................. 732 1,299 1,007 3,038 461 3,500 2,118 5,618
Investment in associated companies accounted for by equity method................ 3,142 1,013 4,155 4,155 4,155
Increase in property, plant and equipment and intangible assets ................ 220 738 180 1,139 80 1,219 3,014 4,233
Thousands of U.S. Dollars
2016 Reportable Segment
Other Total Reconciliations ConsolidatedMusic
BusinessVideo
BusinessManagement/Live Business Total
Sales: ...........................................................................................................
Sales to external customers ...................................................................... $ 522,461 $ 367,066 $ 454,339 $ 1,343,876 $ 23,908 $ 1,367,784 $ 1,367,784
Intersegment sales or transfers .................................................................. 20,882 3,904 40,477 65,273 2,493 67,776 $ (67,776)
Total ............................................................................................................. $ 543,343 $ 370,970 $ 494,817 $ 1,409,149 $ 26,411 $ 1,435,560 $ (67,776) $ 1,367,784
Segment profit .............................................................................................. $ 58,422 $ 754 $ 14,048 $ 73,233 $ (6,913) $ 66,320 $ (1,730) $ 64,581
Segment assets ............................................................................................ 171,867 199,352 97,053 468,272 6,256 474,538 512,397 986,936
Other:
Depreciation .............................................................................................. 8,013 11,226 7,818 27,067 736 27,813 1,473 29,286
Investment in associated companies accounted for by equity method................ 23,695 13,019 36,723 36,723 36,723
Increase in property, plant and equipment and intangible assets ................ 2,547 18,867 4,597 26,020 612 26,641 10,791 37,433
Segment Information
AVEX GROUP HOLDINGS INC. and SubsidiariesYear Ended March 31, 2016
A
http://www.avex.co.jp/
Avex Group Holdings Inc.1-6-1, Roppongi, Minato-ku, Tokyo 106-6036, Japan
AVEX GROUP HOLDINGS INC.
and Subsidiaries
Consolidated Financial Statements for the Year Ended March 31, 2016, and Independent Auditor's Report
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of AVEX GROUP HOLDINGS INC.:
We have audited the accompanying consolidated balance sheet of AVEX GROUP HOLDINGS INC. and its
subsidiaries as of March 31, 2016, and the related consolidated statements of income, comprehensive income,
changes in equity, and cash flows for the year then ended, and a summary of significant accounting policies and
other explanatory information, all expressed in Japanese yen.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with accounting principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of AVEX GROUP HOLDINGS INC. and its subsidiaries as of March 31, 2016, and
the consolidated results of their operations and their cash flows for the year then ended in accordance with
accounting principles generally accepted in Japan.
Convenience Translation
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 accordance with the basis stated in Note 1 to the consolidated financial
statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.
June 27, 2016
- 2 - (Continued)
AVEX GROUP HOLDINGS INC. and Subsidiaries
Consolidated Balance Sheet
March 31, 2016
Millions of Yen
Thousands of
U.S. Dollars
(Note 1)
ASSETS 2016 2015 2016
CURRENT ASSETS:
Cash and cash in banks (Notes 14 and 17) ¥ 21,107 ¥ 25,699 $ 187,318
Marketable securities (Notes 3 and 14) 1,003 8,901
Notes and accounts receivable—trade (Note 14) 21,271 21,209 188,773
Inventories:
Merchandise and finished products 1,300 1,168 11,537
Programs and work in process 6,616 7,497 58,714
Raw materials and supplies 610 372 5,413
Deferred tax assets (Note 10) 3,742 4,129 33,209
Advance payments—trade 1,226 1,143 10,880
Prepaid expenses 1,280 1,151 11,359
Prepaid royalties 2,002 2,340 17,767
Other 3,711 4,766 32,933
Allowance for doubtful accounts (252 ) (319 ) (2,236 )
Total current assets 63,620 69,160 564,607
PROPERTY, PLANT AND EQUIPMENT (Notes 4 and 5):
Land 29,770 29,770 264,199
Buildings and structures—net 1,492 1,939 13,241
Other property—net 891 1,019 7,907
Total property, plant and equipment 32,154 32,728 285,356
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 3 and 14) 5,310 5,501 47,124
Long-term prepaid expenses 147 436 1,304
Intangible assets 5,457 4,471 48,429
Deferred tax assets (Note 10) 1,943 2,779 17,243
Other assets 2,839 2,785 25,195
Allowance for doubtful accounts (263 ) (298 ) (2,334 )
Total investments and other assets 15,434 15,675 136,971
TOTAL ¥ 111,208 ¥ 117,564 $ 986,936
- 3 - (Concluded)
AVEX GROUP HOLDINGS INC. and Subsidiaries
Consolidated Balance Sheet
March 31, 2016
Millions of Yen
Thousands of
U.S. Dollars
(Note 1)
LIABILITIES AND EQUITY 2016 2015 2016
CURRENT LIABILITIES:
Notes and accounts payable—trade (Note 14) ¥ 2,020 ¥ 1,601 $ 17,926
Short-term bank loans (Notes 5 and 14) 8,500 8,500 75,434
Current portion of long-term loans (Notes 5 and 14) 250
Current portion of long-term bonds (Notes 5 and 14) 720 360 6,389
Accounts payables—other (Note 14) 24,356 26,990 216,151
Accrued royalties (Note 14) 8,748 9,224 77,635
Income taxes payable (Note 14) 865 680 7,676
Provision for bonuses 1,066 1,536 9,460
Provision for sales returns 4,163 4,247 36,945
Other 5,038 6,070 44,710
Total current liabilities 55,478 59,460 492,350
LONG-TERM LIABILITIES:
Long-term bonds (Notes 5 and 14) 720
Long-term loans (Notes 5 and 14) 375
Liability for retirement benefits (Note 6) 2,126 2,121 18,867
Other 1,210 1,492 10,738
Total long-term liabilities 3,337 4,709 29,614
COMMITMENTS AND CONTINGENT LIABILITIES
(Notes 13 and 15)
EQUITY (Notes 7, 8 and 9):
Shareholders' equity:
Common stock—authorized, 184,631,000 shares;
issued, 45,000,000 shares in 2016 and 2015 4,229 4,229 37,531
Capital surplus 4,999 5,001 44,364
Retained earnings 44,906 42,891 398,526
Treasury stock—at cost, 2,059,724 shares in 2016
and 1,417,596 shares in 2015 (4,033 ) (2,365 ) (35,791 )
Total 50,102 49,756 444,639
Accumulated other comprehensive loss:
Unrealized gain on available-for-sale securities 55 90 488
Deferred (loss) gain on derivatives under hedge
accounting (1 ) 8 (8 )
Foreign currency translation adjustments (139 ) (152 ) (1,233 )
Defined retirement benefit plans (857 ) (398 ) (7,605 )
Total (943 ) (451 ) (8,368 )
Stock acquisition rights 643 835 5,706
Noncontrolling interests 2,589 3,255 22,976
Total equity 52,392 53,394 464,962
TOTAL ¥ 111,208 ¥ 117,564 $ 986,936
See notes to consolidated financial statements.
- 4 - (Continued)
AVEX GROUP HOLDINGS INC. and Subsidiaries
Consolidated Statement of Income
Year Ended March 31, 2016
Millions of Yen
Thousands of
U.S. Dollars
(Note 1)
2016 2015 2016
NET SALES ¥ 154,122 ¥ 169,256 $ 1,367,784
COST OF SALES 107,867 118,503 957,286
Gross profit 46,255 50,752 410,498
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
(Note 11) 38,978 42,077 345,917
Operating income 7,277 8,675 64,581
OTHER INCOME (EXPENSES):
Interest income 15 5 133
Dividend income 14 52 124
Interest expense (40 ) (72 ) (354 )
Commission fee (10 ) (15 ) (88 )
Foreign exchange gain (loss) 77 (88 ) 683
Gain on adjustment of accrued royalties 35 110 310
(Loss) gain on investments in partnership (178 ) 40 (1,579 )
Equity in losses of associated companies (1,158 ) (179 ) (10,276 )
Gain on cancellation 2,000 17,749
Gain on reversal of subscription rights to shares 329 2,919
Gain on change in equity 44 390
Gain on sales of investment securities 3,512
Loss on impairment of long-lived assets (Note 4) (199 ) (779 ) (1,766 )
Expenses related to rebuilding (244 ) (280 ) (2,165 )
Loss on valuation of investment securities (38 ) (337 )
Loss on disposal of noncurrent properties (Note 12) (9 ) (16 ) (79 )
Other—net 22 82 195
Other income—net 661 2,371 5,866
INCOME BEFORE INCOME TAXES 7,938 11,046 70,447
INCOME TAXES (Note 10):
Current 2,155 4,673 19,124
Deferred 1,395 (222 ) 12,380
Total income taxes 3,551 4,450 31,514
NET INCOME 4,387 6,595 38,933
NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS 95 620 843
NET INCOME ATTRIBUTABLE TO
OWNERS OF THE PARENT ¥ 4,292 ¥ 5,975 $ 38,090
- 5 - (Concluded)
AVEX GROUP HOLDINGS INC. and Subsidiaries
Consolidated Statement of Income
Year Ended March 31, 2016
Yen U.S. Dollars
2016 2015 2016
PER SHARE OF COMMON STOCK (Notes 2.v and 19):
Basic net income ¥ 99.88 ¥ 141.90 $ 0.89
Diluted net income 99.28 140.60 0.88
Cash dividends applicable to the year 50.00 50.00 0.44
See notes to consolidated financial statements.
- 6 -
AVEX GROUP HOLDINGS INC. and Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2016
Millions of Yen
Thousands of
U.S. Dollars
(Note 1)
2016 2015 2016
NET INCOME ¥ 4,387 ¥ 6,595 $ 38,933
OTHER COMPREHENSIVE LOSS (Note 16):
Unrealized loss on available-for-sale securities (32 ) (4,980 ) (283 )
Deferred (loss) gain on derivatives under hedge accounting (11 ) 4 (97 )
Foreign currency translation adjustments 5 (65 ) 44
Defined retirement benefit plans (452 ) (129 ) (4,011 )
Share of other comprehensive (loss) income in associates (1 ) 179 (8 )
Total other comprehensive loss (492 ) (4,991 ) (4,366 )
COMPREHENSIVE INCOME ¥ 3,895 ¥ 1,604 $ 34,566
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent ¥ 3,800 ¥986 $ 33,723
Noncontrolling interests 94 618 834
See notes to consolidated financial statements.
- 7 - (Continued)
AVEX GROUP HOLDINGS INC. and Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2016
Millions of Yen
Accumulated Other Comprehensive Loss
Shareholders' Equity
Unrealized
Gain on
Deferred
(Loss) Gain
on Derivatives
Foreign
Currency
Defined
Retirement Stock
Common
Stock
Capital
Surplus
Retained
Earnings
Treasury
Stock Total
Available-for-
Sale Securities
under Hedge
Accounting
Translation
Adjustments
Benefit
Plans Total
Acquisition
Rights
Noncontrolling
Interests
Total
Equity
BALANCE, MARCH 31, 2014 (APRIL 1, 2014,
as previously reported) ¥ 4,229 ¥ 5,001 ¥ 39,326 ¥ (4,596 ) ¥ 43,961 ¥ 5,070 ¥ 2 ¥ (202 ) ¥ (332 ) ¥ 4,538 ¥ 656 ¥ 4,191 ¥ 53,347
Cumulative effect of accounting change 16 16 16
BALANCE, APRIL 1, 2014 (as restated) 4,229 5,001 39,343 (4,596 ) 43,977 5,070 2 (202 ) (332 ) 4,538 656 4,191 53,364
Net income attributable to owners of
the parent 5,975 5,975 5,975
Cash dividends, ¥50 per share (2,087 ) (2,087 ) (2,087 )
Purchase of treasury stock (1,789 ) (1,789 ) (1,789 )
Disposal of treasury stock (371 ) 4,020 3,648 3,648
Transfer to capital surplus from retained
earnings 371 (371 )
Change of scope of consolidation 31 31 31
Net change in the year (4,979 ) 6 50 (66 ) (4,989 ) 178 (936 ) (5,747 )
BALANCE, MARCH 31, 2015 4,229 5,001 42,891 (2,365 ) 49,756 90 8 (152 ) (398 ) (451 ) 835 3,255 53,394
Net income attributable to owners of
the parent 4,292 4,292 4,292
Cash dividends, ¥50 per share (2,160 ) (2,160 ) (2,160 )
Purchase of treasury stock (2,200 ) (2,200 ) (2,200 )
Disposal of treasury stock (148 ) 533 385 385
Transfer to capital surplus from retained
earnings 148 (148 )
Change of scope of consolidation 30 30 30
Change in treasury shares of the parent
arising from transactions with
noncontrolling shareholders (1 ) (1 ) (1 )
Net change in the year (35 ) (10 ) 12 (458 ) (491 ) (191 ) (665 ) (1,348 )
BALANCE, MARCH 31, 2016 ¥ 4,229 ¥ 4,999 ¥ 44,906 ¥ (4,033 ) ¥ 50,102 ¥ 55 ¥ (1 ) ¥ (139 ) ¥ (857 ) ¥ (943 ) ¥ 643 ¥ 2,589 ¥ 52,392
- 8 - (Concluded)
AVEX GROUP HOLDINGS INC. and Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2016
Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Loss
Shareholders' Equity
Unrealized
Gain on
Deferred
(Loss) Gain
on Derivatives
Foreign
Currency
Defined
Retirement Stock
Common
Stock
Capital
Surplus
Retained
Earnings
Treasury
Stock Total
Available-for-
Sale Securities
under Hedge
Accounting
Translation
Adjustments
Benefit
Plans Total
Acquisition
Rights
Noncontrolling
Interests
Total
Equity
BALANCE, MARCH 31, 2015 $ 37,531 $ 44,382 $ 380,644 $ (20,988 ) $ 441,569 $ 798 $ 70 $ (1,348 ) $ (3,532 ) $ (4,002 ) $ 7,410 $ 28,887 $ 473,855
Net income attributable to owners
of the parent 38,090 38,090 38,090
Cash dividends, $0.44 per share (19,169 ) (19,169 ) (19,169 )
Purchase of treasury stock (19,524 ) (19,524 ) (19,524 )
Disposal of treasury stock (1,313 ) 4,730 3,416 3,416
Transfer to capital surplus from
retained earnings 1,313 (1,313 )
Change of scope of consolidation 266 266 266
Change in treasury shares of the
parent arising from transactions
with noncontrolling shareholders (8 ) (8 ) (8 )
Net change in the year (310 ) (88 ) 106 (4,064 ) (4,357 ) (1,695 ) (5,901 ) (11,963 )
BALANCE, MARCH 31, 2016 $ 37,531 $ 44,364 $ 398,526 $ (35,791 ) $ 444,639 $ 488 $ (8 ) $ (1,233 ) $ (7,605 ) $ (8,368 ) $ 5,706 $ 22,976 $ 464,962
See notes to consolidated financial statements.
- 9 - (Continued)
AVEX GROUP HOLDINGS INC. and Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2016
Millions of Yen
Thousands of
U.S. Dollars
(Note 1)
2016 2015 2016
OPERATING ACTIVITIES:
Income before income taxes ¥ 7,938 ¥ 11,046 $ 70,447
Adjustments for:
Depreciation 3,300 5,618 29,286
Loss on impairment of long-lived assets 199 779 1,766
Interest and dividend income (30 ) (58 ) (266 )
Interest expense 40 72 354
Gain on sales of investment securities (3,512 )
Loss (gain) on investments in partnership 178 (40 ) 1,579
Equity in losses of associated companies 1,158 179 10,276
Gain on cancellation (2,000 ) (17,749 )
Gain on reversal of subscription rights to shares (329 ) (2,919 )
Expenses related to rebuilding 244 280 2,165
Loss on valuation of investment securities 38 337
Share-based compensation expenses 300 291 2,662
Changes in assets and liabilities:
Increase in trade accounts receivable (80 ) (1,249 ) (709 )
Decrease in inventories 509 939 4,517
(Increase) decrease in advance payments—trade (83 ) 108 (736 )
Decrease (increase) in prepaid royalties 336 (813 ) 2,981
Increase (decrease) in trade accounts payable 424 (392 ) 3,762
(Decrease) increase in other accounts payable (2,775 ) 5,604 (24,627 )
(Decrease) increase in accrued royalties (409 ) 848 (3,629 )
Decrease in provision for bonuses (470 ) (249 ) (4,171 )
(Decrease) increase in provision for sales returns (83 ) 262 (736 )
Decrease in provision for expenses related to
rebuilding (500 )
(Decrease) increase in liability for retirement
benefits (626 ) 283 (5,555 )
Other—net 137 (28 ) 1,215
Subtotal 7,919 19,470 70,278
Interest and dividends received 65 147 576
Interest paid (41 ) (75 ) (363 )
Proceed from cancellation 2,000 17,749
Income taxes—refund 1,553 766 13,782
Income taxes—paid (3,328 ) (8,972 ) (29,534 )
Net cash provided by operating activities—
(Forward) ¥8,169 ¥ 11,337 $ 72,497
- 10 - (Concluded)
AVEX GROUP HOLDINGS INC. and Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2016
Millions of Yen
Thousands of
U.S. Dollars
(Note 1)
2016 2015 2016
Net cash provided by operating activities—(Forward) ¥ 8,169 ¥ 11,337 $ 72,497
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (367 ) (1,809 ) (3,257 )
Payments for retirement of property, plant and equipment (524 ) (4,650 )
Purchases of intangible assets (3,349 ) (2,346 ) (29,721 )
Proceeds from sales of intangible assets 12 106
Purchases of marketable securities (1,000 ) (8,874 )
Purchases of investment securities (829 ) (1,411 ) (7,357 )
Proceeds from sales of securities 5,029
Payments of loans receivable (500 ) (10 ) (4,437 )
Proceeds from collection of loans receivable 11
Payments for lease and guarantee deposits (11 ) (803 ) (97 )
Proceeds from collection of lease and guarantee deposits 21 12 186
Other—net (230 ) (1 ) (2,041 )
Net cash used in investing activities (6,778 ) (1,330 ) (60,152 )
FINANCING ACTIVITIES:
Repayments of long-term loans (625 ) (754 ) (5,546 )
Repayments of lease obligations (86 ) (47 ) (763 )
Proceeds from stock issuance to noncontrolling
shareholders 44
Redemption of bonds (360 ) (360 ) (3,194 )
Purchase of treasury stock (2,201 ) (1,790 ) (19,533 )
Disposal of treasury stock 229 3,557 2,032
Dividends paid (2,163 ) (2,090 ) (19,195 )
Dividends paid to noncontrolling shareholders (762 ) (1,599 ) (6,762 )
Net cash used in financing activities (5,969 ) (3,040 ) (52,973 )
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS (13 ) (23 ) (115 )
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (4,592 ) 6,942 (40,752 )
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 25,699 18,757 228,070
CASH AND CASH EQUIVALENTS, END OF YEAR (Note 17) ¥ 21,107 ¥ 25,699 $ 187,318
See notes to consolidated financial statements.
- 11 -
AVEX GROUP HOLDINGS INC. and Subsidiaries
Notes to Consolidated Financial Statements
Year Ended March 31, 2016
1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in
accordance with accounting principles generally accepted in Japan ("Japanese GAAP"), which are different in
certain respects as to the application and disclosure requirements of International Financial Reporting
Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which is
more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2015
consolidated financial statements to conform to the classifications used in 2016.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which AVEX
GROUP HOLDINGS INC. (the "Company") is incorporated and operates. The translations of Japanese yen
amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have
been made at the rate of ¥112.68 to $1, the approximate rate of exchange at March 31, 2016. Such translations
should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at
that or any other rate.
Japanese yen figures less than a million yen are rounded down to the nearest million yen, except for per share
data.
U.S. dollar figures less than a thousand dollars are rounded down to the nearest thousand dollars, except for per
share data.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Consolidation—The consolidated financial statements as of March 31, 2016, include the accounts of the
Company and its 19 significant (21 in 2015) subsidiaries (together, the "AVEX Group").
Under the control and influence concepts, those companies in which the Company, directly or indirectly, is
able to exercise control over operations are fully consolidated, and those companies over which the AVEX
Group has the ability to exercise significant influence are accounted for by the equity method.
(Consolidated Subsidiaries)
Avex Digital Inc.*1
Avex Music Creative Inc.
Avex Pictures Inc.
Avex Management Inc.*1
Avex Vanguard Inc.
Avex Live Creative Inc.
Avex Planning & Development Inc.
Avex Sports Inc.
Avex Music Publishing Inc.
- 12 -
Avex Nico Inc.*2
Avex Broadcasting & Communications Inc.
UULA Inc.
The Anime Times Company
Avex Classics International Inc.
Avex Asia Pte. Ltd.*3
Avex Taiwan Inc.
Avex Hawaii Inc.
Avex Shanghai Co., Ltd.
Avex International Holdings Ltd.
*1 For the year ended March 31, 2016, ET Square Inc. was merged into Avex Digital Inc. and Avex
Vibe Production Inc. was merged into Avex Management Inc. in absorption-type merger. ET Square
Inc. and Avex Vibe Production Inc. were excluded from the scope of consolidation in the year ended
March 31, 2016.
*2 Avex Nico Inc. was included in the scope of consolidation from the year ended March 31, 2016, due
to its establishment.
*3 For the year ended March 31, 2016, the company name of Avex International Holdings Singapore
Pte. Ltd. was changed to Avex Asia Pte. Ltd.
*4 Avex Hong Kong Ltd. was excluded from the scope of consolidation in the year ended March 31,
2016, due to its liquidation.
Investments in eight (six in 2015) associated companies are accounted for by the equity method.
(Associated Companies Accounted for by Equity Method)
Memory-Tech Holdings Inc.
AWA Co. Ltd.
NexTone, Inc.*2
LINE MUSIC Corporation
RecoChoku Co., Ltd.
Asia Cross Inc.*1
Asia Promotion Inc.*1
Orange Sky Entertainment Group (International) Holding Co., Ltd.
*1 Japan Rights Clearance Inc., Asia Cross Inc. and Asia Promotion Inc. were included in the scope of
equity method from the year ended March 31, 2016, due to acquisition of their shares.
*2 For the year ended March 31, 2016, e License Inc. merged Japan Rights Clearance Inc. in
absorption-type merger and changed its name to NexTone, Inc.
Investments in the remaining associated companies are stated at cost. If the equity method of accounting
had been applied to the investments in these companies, the effect on the accompanying consolidated
financial statements would not be material.
(Main Associated Company Not Accounted for by Equity Method)
East Empire International Holding Ltd.
- 13 -
The excess of the cost of acquisition over the fair value of the net assets of an acquired subsidiary at the
date of acquisition is amortized over 5 to 10 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the AVEX Group is also eliminated.
Accounts of subsidiaries whose year-ends differ from March 31 have been consolidated using pro forma
financial information prepared as of March 31.
b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial
Statements—In May 2006, the Accounting Standards Board of Japan (the "ASBJ") issued ASBJ Practical
Issues Task Force ("PITF") No. 18, "Practical Solution on Unification of Accounting Policies Applied to
Foreign Subsidiaries for the Consolidated Financial Statements" which was subsequently revised in
February 2010 and March 2015 to reflect revisions of the relevant Japanese GAAP or accounting standards
in other jurisdictions. PITF No. 18 prescribes that the accounting policies and procedures applied to a
parent company and its subsidiaries for similar transactions and events under similar circumstances should
in principle be unified for the preparation of the consolidated financial statements. However, financial
statements prepared by foreign subsidiaries in accordance with either International Financial Reporting
Standards or generally accepted accounting principles in the United States of America (Financial
Accounting Standards Board Accounting Standards Codification) tentatively may be used for the
consolidation process, except for the following items that should be adjusted in the consolidation process
so that net income is accounted for in accordance with Japanese GAAP, unless they are not material:
(a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been
recorded in equity through other comprehensive income; (c) expensing capitalized development costs of
R&D; and (d) cancellation of the fair value model of accounting for property, plant and equipment and
investment properties and incorporation of the cost model of accounting.
c. Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method—
In March 2008, the ASBJ issued ASBJ Statement No. 16, "Accounting Standard for Equity Method of
Accounting for Investments" which was subsequently revised in line with the revisions to PITF No. 18
above. The standard requires adjustments to be made to conform the associate's accounting policies for
similar transactions and events under similar circumstances to those of the parent company when the
associate's financial statements are used in applying the equity method unless it is impracticable to
determine such adjustments. In addition, financial statements prepared by foreign associated companies in
accordance with either International Financial Reporting Standards or generally accepted accounting
principles in the United States of America tentatively may be used in applying the equity method if the
following items are adjusted so that net income is accounted for in accordance with Japanese GAAP,
unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or
loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing
capitalized development costs of R&D; and (d) cancellation of the fair value model of accounting for
property, plant and equipment and investment properties and incorporation of the cost model of
accounting.
d. Business Combinations—In October 2003, the Business Accounting Council issued a Statement of
Opinion, "Accounting for Business Combinations," and in December 2005, the ASBJ issued ASBJ
Statement No. 7, "Accounting Standard for Business Divestitures" and ASBJ Guidance No. 10, "Guidance
for Accounting Standard for Business Combinations and Business Divestitures."
- 14 -
In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ
Statement No. 21, "Accounting Standard for Business Combinations." Major accounting changes under the
revised accounting standard are as follows: (1) The revised standard requires accounting for business
combinations only by the purchase method. As a result, the pooling-of-interests method of accounting is no
longer allowed. (2) The previous accounting standard required research and development costs to be
charged to income as incurred. Under the revised standard, in-process research and development costs
(IPR&D) acquired in the business combination are capitalized as an intangible asset. (3) The previous
accounting standard provided for a bargain purchase gain (negative goodwill) to be systematically
amortized over a period not exceeding 20 years. Under the revised standard, the acquirer recognizes the
bargain purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming
that all of the assets acquired and all of the liabilities assumed have been identified after a review of the
procedures used in the purchase price allocation. The revised standard was applicable to business
combinations undertaken on or after April 1, 2010.
In September 2013, the ASBJ issued revised ASBJ Statement No. 21, "Accounting Standard for Business
Combinations," revised ASBJ Guidance No. 10, "Guidance on Accounting Standards for Business
Combinations and Business Divestitures," and revised ASBJ Statement No. 22, "Accounting Standard for
Consolidated Financial Statements." Major accounting changes are as follows:
(a) Transactions with noncontrolling interest—A parent's ownership interest in a subsidiary might
change if the parent purchases or sells ownership interests in its subsidiary. The carrying amount of
noncontrolling interest is adjusted to reflect the change in the parent's ownership interest in its
subsidiary while the parent retains its controlling interest in its subsidiary. Under the previous
accounting standard, any difference between the fair value of the consideration received or paid and
the amount by which the noncontrolling interest is adjusted is accounted for as an adjustment of
goodwill or as profit or loss in the consolidated statement of income. Under the revised accounting
standard, such difference is accounted for as capital surplus as long as the parent retains control over
its subsidiary.
(b) Presentation of the consolidated balance sheet—In the consolidated balance sheet, "minority interest"
under the previous accounting standard is changed to "noncontrolling interest" under the revised
accounting standard.
(c) Presentation of the consolidated statement of income—In the consolidated statement of income, "net
income before minority interest" under the previous accounting standard is changed to "net income"
under the revised accounting standard, and "net income" under the previous accounting standard is
changed to "net income attributable to owners of the parent" under the revised accounting standard.
(d) Provisional accounting treatments for a business combination—If the initial accounting for a business
combination is incomplete by the end of the reporting period in which the business combination
occurs, an acquirer shall report in its financial statements provisional amounts for the items for which
the accounting is incomplete. Under the previous accounting standard guidance, the impact of
adjustments to provisional amounts recorded in a business combination on profit or loss is recognized
as profit or loss in the year in which the measurement is completed. Under the revised accounting
standard guidance, during the measurement period, which shall not exceed one year from the
acquisition, the acquirer shall retrospectively adjust the provisional amounts recognized at the
acquisition date to reflect new information obtained about facts and circumstances that existed as of
the acquisition date and that would have affected the measurement of the amounts recognized as of
that date. Such adjustments shall be recognized as if the accounting for the business combination had
been completed at the acquisition date.
- 15 -
(e) Acquisition-related costs—Acquisition-related costs are costs, such as advisory fees or professional
fees, which an acquirer incurs to effect a business combination. Under the previous accounting
standard, the acquirer accounts for acquisition-related costs by including them in the acquisition costs
of the investment. Under the revised accounting standard, acquisition-related costs shall be accounted
for as expenses in the periods in which the costs are incurred.
The above accounting standards and guidance for (a) transactions with noncontrolling interest,
(b) presentation of the consolidated balance sheet, (c) presentation of the consolidated statement of income,
and (e) acquisition-related costs are effective for the beginning of annual periods beginning on or after
April 1, 2015. Earlier application is permitted from the beginning of annual periods beginning on or after
April 1, 2014, except for (b) presentation of the consolidated balance sheet and (c) presentation of the
consolidated statement of income. In the case of earlier application, all accounting standards and guidance
above, except for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated
statement of income, should be applied simultaneously.
Either retrospective or prospective application of the revised accounting standards and guidance for
(a) transactions with noncontrolling interest and (e) acquisition-related costs is permitted. In retrospective
application of the revised standards and guidance, the accumulated effects of retrospective adjustments for
all (a) transactions with noncontrolling interest and (e) acquisition-related costs which occurred in the past
shall be reflected as adjustments to the beginning balance of capital surplus and retained earnings for the
year of the first-time application. In prospective application, the new standards and guidance shall be
applied prospectively from the beginning of the year of the first-time application.
The revised accounting standards and guidance for (b) presentation of the consolidated balance sheet and
(c) presentation of the consolidated statement of income shall be applied to all periods presented in
financial statements containing the first-time application of the revised standards and guidance.
The revised standards and guidance for (d) provisional accounting treatments for a business combination
are effective for a business combination which occurs on or after the beginning of annual periods
beginning on or after April 1, 2015. Earlier application is permitted for a business combination which
occurs on or after the beginning of annual periods beginning on or after April 1, 2014.
The Company applied the revised accounting standards and guidance for (a) transactions with
noncontrolling interest, (b) presentation of the consolidated balance sheet, (c) presentation of the
consolidated statement of income, and (e) acquisition-related costs above, effective April 1, 2015, and
(d) provisional accounting treatments for a business combination above for a business combination which
occurred on or after April 1, 2015. The revised accounting standards and guidance for (a) transactions with
noncontrolling interest and (e) acquisition-related costs were applied prospectively.
With respect to (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated
statement of income, the applicable line items in the 2015 consolidated financial statements have been
accordingly reclassified and presented in line with those in 2016.
The impact from these accounting changes on the accompanying consolidated financial statements for the
year ended March 31, 2016, was not material.
The impact on per share information for the year ended March 31, 2016, was not material.
- 16 -
e. Cash Equivalents—Cash equivalents are short-term investments that are readily convertible into cash and
that are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits, certificate of deposits, commercial paper and bond funds, all of
which mature or become due within three months of the date of acquisition.
f. Inventories—Merchandise, finished products and supplies are stated at the lower of cost, determined by
the moving average cost method, or net selling value.
Raw materials are stated at the lower of most recent purchase price which approximates cost determined by
the first-in, first-out method, or net selling value.
Programs and work in process (including the right to use of audiovisual) are stated at the lower of cost,
determined by the specific identification method, or net selling value.
Valuation losses due to declines in profitability included in cost of sales for the years ended March 31,
2016 and 2015, were ¥2,788 million ($24,742 thousand) and ¥1,347 million, respectively.
g. Marketable and Investment Securities—Marketable and investment securities classified as
available-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicable
taxes, reported in a separate component of equity.
Compound financial instruments that incorporate derivative transactions which do not separate the fair
value of the embedded derivatives are included in marketable and investment securities with measuring
them as a whole at fair value. Unrealized gains (losses) are charged to current earnings.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method.
For other-than-temporary declines in fair value, investment securities are reduced to net realizable value by
a charge to income.
Investments in limited partnerships are accounted for by the equity method.
h. Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation of
property, plant and equipment of the Company and its consolidated domestic subsidiaries is computed by
the declining-balance method based on the estimated useful lives of the assets, while the straight-line
method is applied to buildings (excluding accompanying facilities) acquired after April 1, 1998.
Depreciation of property, plant and equipment of consolidated foreign subsidiaries is computed by the
straight-line method.
The range of useful lives is principally from 3 to 43 years for buildings and structures and from 2 to 20
years for other.
Accumulated depreciation of property, plant and equipment as of March 31, 2016 and 2015, was
¥5,954 million ($52,839 thousand) and ¥12,166 million, respectively.
i. Long-Lived Assets—The AVEX Group reviews its long-lived assets for impairment whenever events or
changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable.
An impairment loss is recognized if the carrying amount of an asset or asset group exceeds the sum of the
undiscounted future cash flows expected to result from the continued use and eventual disposition of the
asset or asset group. The impairment loss would be measured as the amount by which the carrying amount
of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the
continued use and eventual disposition of the asset or the net selling price at disposition.
- 17 -
j. Intangible Assets—Intangible assets are amortized by the straight-line method over the estimated useful
life (2–5 years).
k. Leases—The AVEX Group leases certain studio facilities and vehicles as finance leases that do not
transfer ownership of the leased property to the lessee. Finance leases that do not transfer ownership of the
leased property to the lessee are depreciated by the straight-line method over the terms of the respective
leases with no residual value.
l. Allowance for Doubtful Accounts—The allowance for doubtful accounts is stated in amounts considered
to be appropriate based on the companies' past credit loss experience and a valuation of potential losses in
the receivables outstanding.
m. Provision for Bonuses—Provision for bonuses is provided for the bonus payments to employees in
estimated bonus amounts attributable to the current fiscal year.
n. Provision for Sales Returns—Provision for sales return is provided for estimated losses arising from sales
return based on the experiences in the past years.
Such estimated losses are directly charged to sales and the amount of sales return is reduced from
provision for sales return.
o. Retirement and Pension Plans—The AVEX Group (excluding certain consolidated subsidiaries) has
defined benefit pension plans.
Additional retirement benefits are paid in certain circumstances.
Effective April 1, 2000, the Company adopted a new accounting standard for retirement benefits and
accounted for the liability for retirement benefits based on the projected benefit obligations and plan assets
at the balance sheet date. The projected benefit obligations are attributed to periods on a straight-line basis.
Actuarial gains and losses are amortized on a straight-line basis over 1 year within the average remaining
service period. Past service costs are amortized on a straight-line basis over 11 years within the average
remaining service period.
In May 2012, the ASBJ issued ASBJ Statement No. 26, "Accounting Standard for Retirement Benefits"
and ASBJ Guidance No. 25, "Guidance on Accounting Standard for Retirement Benefits," which replaced
the accounting standard for retirement benefits that had been issued by the Business Accounting Council in
1998 with an effective date of April 1, 2000, and the other related practical guidance, and were followed
by partial amendments from time to time through 2009.
(a) Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to
be recognized in profit or loss are recognized within equity (accumulated other comprehensive
income), after adjusting for tax effects, and any resulting deficit or surplus is recognized as a liability
(liability for retirement benefits) or asset (asset for retirement benefits).
(b) The revised accounting standard does not change how to recognize actuarial gains and losses and past
service costs in profit or loss. Those amounts are recognized in profit or loss over a certain period no
longer than the expected average remaining service period of the employees. However, actuarial gains
and losses and past service costs that arose in the current period and have not yet been recognized in
profit or loss are included in other comprehensive income, and actuarial gains and losses and past
service costs that were recognized in other comprehensive income in prior periods and then
recognized in profit or loss in the current period, are treated as reclassification adjustments (see
Note 16).
- 18 -
(c) The revised accounting standard also made certain amendments relating to the method of attributing
expected benefit to periods, the discount rate, and expected future salary increases.
With respect to (c) above, the Company changed the method of attributing the expected benefit to periods
from a straight-line basis to a benefit formula basis, the method of determining the discount rate from using
the period which approximates the expected average remaining service period to using a single weighted
average discount rate reflecting the estimated timing and amount of benefit payment.
p. Stock Options—In December 2005, the ASBJ issued ASBJ Statement No. 8, "Accounting Standard for
Stock Options" and related guidance. The new standard and guidance are applicable to stock options newly
granted on and after May 1, 2006. This standard requires companies to measure the cost of employee stock
options based on the fair value at the date of grant and recognize compensation expense over the vesting
period as consideration for receiving goods or services. The standard also requires companies to account
for stock options granted to non-employees based on the fair value of either the stock options or the goods
or services received. In the balance sheet, the stock options are presented as a stock acquisition right as a
separate component of equity until exercised. The standard covers equity-settled, share-based payment
transactions, but does not cover cash-settled, share-based payment transactions. In addition, the standard
allows unlisted companies to measure options at their intrinsic value if they cannot reliably estimate fair
value.
q. Employee Stockownership Plan—In December 2013, the ASBJ issued PITF No. 30, "Practical Solution
on Transactions of Delivering the Company's Own Stock to Employees etc. through Trusts." This PITF is
effective for the beginning of annual periods beginning on or after April 1, 2014, with earlier application
permitted from the beginning of annual periods first ending after the date of issuance of this PITF, and
applied retrospectively.
In accordance with the PITF, upon transfer of treasury stock to the employee stockownership trust (the
"Trust") by the entity, any difference between the book value and fair value of the treasury stock shall be
recorded in capital surplus. At year-end, the entity shall record (1) the entity stock held by the Trust as
treasury stock in equity, (2) all other assets and liabilities of the Trust on a line-by-line basis, and (3) a
liability/asset for the net of (i) any gain or loss on delivery of the stock by the Trust to the employee
shareholding association, (ii) dividends received from the entity for the stock held by the Trust, and
(iii) any expenses relating to the Trust.
The Company applied this PITF effective April 1, 2014, while trust agreements entered into before April 1,
2014, are treated under previously used accounting methods.
r. Income Taxes—The provision for income taxes is computed based on the pretax income included in the
consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets
and liabilities for the expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently
enacted income tax rates to the temporary differences.
The AVEX Group files a tax return under the consolidated corporate-tax system, which allows companies
to base tax payments on the combined profits or losses of the parent company and its wholly owned
domestic subsidiaries.
s. Foreign Currency Transactions—All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance
sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated
statement of income to the extent that they are not hedged by forward exchange contracts.
- 19 -
t. Foreign Currency Financial Statements—The balance sheet accounts of the consolidated foreign
subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except
for equity, which is translated at the historical rate. Differences arising from such translation are shown as
"Foreign currency translation adjustments" under accumulated other comprehensive income in a separate
component of equity. Revenue and expense accounts of consolidated foreign subsidiaries are translated
into yen at the average exchange rate.
u. Derivatives and Hedging Activities—The AVEX Group uses derivative financial instruments to manage
its exposures to fluctuations in foreign exchange. Foreign exchange forward contracts are utilized by the
AVEX Group to reduce foreign currency exchange risks. The AVEX Group does not enter into derivatives
for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as follows: (1) all derivatives are
recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative
transactions are recognized in the consolidated statement of income; and (2) for derivatives used for
hedging purposes, if such derivatives qualify for hedge accounting because of high correlation and
effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are
deferred until maturity of the hedged transactions.
Foreign currency forward contracts applied for forecasted transactions are measured at fair value but the
unrealized gains/losses are deferred until the underlying transactions are completed.
v. Per Share Information—Basic net income per share is computed by dividing net income attributable to
common shareholders by the weighted-average number of common shares outstanding for the period,
retroactively adjusted for stock splits.
Diluted net income per share reflects the potential dilution that could occur if securities were exercised or
converted into common stock. Diluted net income per share of common stock assumes full conversion of
the outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an
applicable adjustment for related interest expense, net of tax, and full exercise of outstanding warrants.
Cash dividends per share presented in the accompanying consolidated statement of income are dividends
applicable to the respective fiscal years, including dividends to be paid after the end of the year.
w. New Accounting Pronouncements
Tax Effect Accounting—On December 28, 2015, the ASBJ issued ASBJ Guidance No. 26, "Guidance on
Recoverability of Deferred Tax Assets," which included certain revisions of the previous accounting and
auditing guidance issued by the Japanese Institute of Certified Public Accountants. While the new
guidance continues to follow the basic framework of the previous guidance, it provides new guidance for
the application of judgment in assessing the recoverability of deferred tax assets.
The previous guidance provided a basic framework which included certain specific restrictions on
recognizing deferred tax assets depending on the company's classification in respect of its profitability,
taxable profit and temporary differences, etc.
- 20 -
The new guidance does not change such basic framework but, in limited cases, allows companies to
recognize deferred tax assets even for a deductible temporary difference for which it was specifically
prohibited to recognize a deferred tax asset under the previous guidance, if the company can justify, with
reasonable grounds, that it is probable that the deductible temporary difference will be utilized against
future taxable profit in some future period.
The new guidance is effective for the beginning of annual periods beginning on or after April 1, 2016.
Earlier application is permitted for annual periods ending on or after March 31, 2016. The new guidance
shall not be applied retrospectively and any adjustments from the application of the new guidance at the
beginning of the reporting period shall be reflected within retained earnings or accumulated other
comprehensive income at the beginning of the reporting period.
The Company expects to apply the new guidance on recoverability of deferred tax assets effective April 1,
2016, and is in the process of measuring the effects of applying the new guidance in future applicable
periods.
x. Changes in Presentation
Consolidated Balance Sheet—"Accrued consumption taxes" of ¥1,589 million and "Deposits received" of
¥453 million for the year ended March 31, 2015, which were presented separately in prior periods, have
been reclassified into "Other" in current liabilities to conform to the current year's presentation.
Consolidated Statement of Income—"Loss on sales and disposal of noncurrent properties" of
¥(16) million in other income (expenses) for the year ended March 31, 2015, has been presented as "Loss
on disposal of noncurrent properties" since the AVEX Group has not recorded loss on sales of noncurrent
properties for the year ended March 31, 2016 or 2015.
Consolidated Statement of Cash Flows—"Loss on sales and disposal of noncurrent properties" of
¥16 million for the year ended March 31, 2015, which was presented separately in prior periods, has been
reclassified into "Other—net" in operating activities to conform to the current year's presentation.
y. Additional Information
Employee Stockownership Plan—In September 2010, the Company introduced Employee
Stockownership Plan (the "ESOP") as an incentive plan (the "Plan") for employees of the AVEX Group in
order to generate employees' motivation and promote participation in the AVEX Group's management and
raise a corporate value over the medium to long term.
Under the Plan, the ESOP purchases beforehand the planned amount of the stocks of the Company that the
Trust purchases, and sells them to the Trust over five years. For the year ended March 31, 2016, sales of
the stocks of the Company held by the ESOP have been completed.
Upon purchase and transfer of treasury stock by the ESOP, any difference between the book value and fair
value of the treasury stock shall be recorded in capital surplus. In the year ended March 31, 2016, the
Company recorded (1) the entity stock held by the ESOP as treasury stock in equity, (2) all other assets and
liabilities of the ESOP, and (3) a liability/asset for the net of (i) any gain or loss on delivery of the stock by
the ESOP to the Trust, (ii) dividends received from the Company for the stock held by the ESOP, and
(iii) any expenses relating to the ESOP.
- 21 -
The Company applied PITF No. 30, "Practical Solution on Transactions of Delivering the Company's Own
Stock to Employees etc. through Trusts" effective April 1, 2014, while trust agreements entered into before
April 1, 2014, are treated under previously used accounting methods.
Details of the stock held by the ESOP are as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Book value of the stock ¥ 6
The book value of the stock held by the ESOP was recorded as treasury stock in equity.
Thousands of Shares
2016 2015
Number of shares at the end of the year 5
Average number of shares 21
The number of shares at the end of fiscal year and the average number of shares during fiscal year were
included in treasury stock, which is excluded from the calculation of per-share data.
3. MARKETABLE AND INVESTMENT SECURITIES
The costs and aggregate fair values of marketable and investment securities at March 31, 2016, were as follows:
Millions of Yen
March 31, 2016 Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Securities classified as available-for-sale—
Debt securities ¥ 1,000 ¥ 3 ¥ 1,003
Thousands of U.S. Dollars
March 31, 2016 Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Securities classified as available-for-sale—
Debt securities $ 8,874 $ 26 $ 8,901
Securities classified as available-for-sale—debt securities are compound financial instruments that incorporate
derivative transactions which do not separate the fair value of the embedded derivatives.
The compound financial instruments are included in marketable and investment securities with measuring them
as a whole at fair value. Unrealized gains (losses) are charged to current earnings.
The costs and aggregate fair values of marketable and investment securities at March 31, 2015, are not
disclosed since their fair value cannot be reliably determined.
The information for available-for-sale securities which were sold during the year ended March 31, 2016, is not
disclosed since the AVEX Group did not sell any available-for-sale securities.
- 22 -
The information for available-for-sale securities which were sold during the year ended March 31, 2015, is as
follows:
Millions of Yen
March 31, 2015 Proceeds
Realized
Gains
Realized
Losses
Available-for-sale—Equity securities ¥ 4,939 ¥ 3,488
Investments in associated companies included in investment securities at the years ended March 31, 2016 and
2015, were as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Equity securities ¥ 4,155 ¥ 4,172 $ 36,874
4. LONG-LIVED ASSETS
The AVEX Group performs asset groupings in units that facilitate the ongoing assessment of earnings based on
reportable segment classifications for business assets, as a minimum unit that generates independent cash flow.
For the year ended March 31, 2016, revising down the book value of asset groups to their recoverable value, the
Company records impairment loss of ¥199 million ($1,766 thousand) as other expense for the amount of this
downward revision for business assets in the video business, due to persistent losses arising from business
activities.
The Company measures recoverable amounts based on the value in use. Residual value is used to evaluate
business assets in the video business, due to the likelihood of negative future cash flow.
Details of impairment loss for the year ended March 31, 2016, were as follows:
Purpose of Use Location Type of Assets
Millions
of Yen
Thousands of
U.S. Dollars
Business use (video
business)
Tokyo Tools, furniture
and fixtures
¥ 40 $ 354
Software 158 1,402
For the year ended March 31, 2015, revising down the book value of asset groups to their recoverable value, the
Company records impairment loss of ¥779 million as other expense for the amount of this downward revision
for business assets in the music business, due to the emergence of unrecoverable investments, and in the other
business, due to persistent losses or projected losses arising from business activities.
The Company measures recoverable amounts based on the value in use. Residual value is used to evaluate
business assets in the music business, due to the difficulty of reasonably estimating future cash flow, and in the
other business, owing to the likelihood of negative future cash flow.
- 23 -
Details of impairment loss for the year ended March 31, 2015, were as follows:
Purpose of Use Location Type of Assets
Millions
of Yen
Business use (music business) Tokyo Software ¥ 443
Business use (other business) Tokyo and Facilities attached to buildings 245
other 3 groups Tools, furniture and fixtures 5
of assets Software 12
Impairment losses other than the aforementioned are not disclosed since they are immaterial.
5. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans and long-term debt at March 31, 2016 and 2015, consisted of the following:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Short-term bank loans, with weighted-average
rate of 0.25% (2016) and 0.42% (2015) ¥ 8,500 ¥ 8,500 $ 75,434
Long-term loans:
Current portion of long-term loans, with
weighted-average rate of 2.75% (2015) 250
Long-term loans excluding current portion,
due serially to 2017 with weighted-average
rate of 2.75% (2015) 375
Lease obligation:
Current portion of lease obligations 83 87 736
Lease obligations excluding current portion 82 110 727
Total ¥ 8,666 ¥ 9,322 $ 76,908
Long-term bonds—2nd unsecured 0.71%
(floating rate) bond, due 2016 ¥ 720 ¥ 1,080 $ 6,389
Less current portion 720 360 6,389
Long-term bonds, less current portion ¥ 720
Annual maturities of long-term debt at March 31, 2016, were as follows:
Millions of Yen
Year Ending
March 31
Long-Term
Bonds
Long-Term
Loans
Lease
Obligation
2017 ¥ 720 ¥ 83
2018 72
2019 5
2020 3
2021 and thereafter 1
- 24 -
Thousands of U.S. Dollars
Year Ending
March 31
Long-Term
Bonds
Long-Term
Loans
Lease
Obligation
2017 $ 6,389 $ 736
2018 638
2019 44
2020 26
2021 and thereafter 8
The carrying amounts of assets pledged as collateral as of March 31, 2016 and 2015, were as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Land ¥ 18,613
Total ¥ 18,613
The obligations collateralized by the above assets as of March 31, 2016 and 2015, were as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Current portion of long-term loans ¥ 250
Long-term loans, excluding current portion 375
Total ¥ 625
For the purpose of obtaining working funds effectively, for the years ended March 31, 2016 and 2015, the
AVEX Group has entered into overdraft agreements and the commitment line with five financial institutions.
Information of overdraft agreements and loan commitment agreement was as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Contract amounts ¥ 14,500 ¥ 14,000 $ 128,682
Borrowings outstanding 8,500 8,500 75,434
Unused balance ¥ 6,000 ¥ 5,500 $ 53,248
There are financial covenants attached to the commitment line, which has a maximum limit of ¥9,500 million
($84,309 thousand) that the Company has with its three main banks. These financial covenants are based on
certain indicators calculated using figures in equity of the consolidated balance sheets and operating income on
the consolidated statements of income for each quarter and fiscal year.
- 25 -
As of the years ended March 31, 2016 and 2015, the balance of debt subject to these financial covenants was as
follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Short-term bank loans by the commitment line ¥ 6,000 ¥ 5,000 $ 53,248
6. RETIREMENT AND PENSION PLANS
The AVEX Group (excluding certain consolidated subsidiaries) has defined benefit pension plans.
Additional retirement benefits are paid in certain circumstances.
(1) The changes in defined benefit obligation for the years ended March 31, 2016 and 2015, were as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Balance at beginning of year (as previously
reported) ¥ 4,035 ¥ 3,356 $ 35,809
Cumulative effect of accounting change (24 )
Balance at beginning of year (as restated) 4,035 3,332 35,809
Current service cost 477 436 4,233
Interest cost 60 50 532
Actuarial losses (gains) 470 (68 ) 4,171
Benefits paid (88 ) (58 ) (780 )
Past service cost 344
Balance at end of year ¥ 4,952 ¥ 4,035 $ 43,947
(2) The changes in plan assets for the years ended March 31, 2016 and 2015, were as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Balance at beginning of year ¥ 1,913 ¥ 1,622 $ 16,977
Expected return on plan assets 38 337
Actuarial (losses) gains (65 ) 127 (576 )
Contributions from the employer 1,027 203 9,114
Benefits paid (88 ) (39 ) (780 )
Balance at end of year ¥ 2,825 ¥ 1,913 $ 25,070
- 26 -
(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined
benefit obligation and plan assets
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Funded defined benefit obligation ¥ 4,952 ¥ 2,412 $ 43,947
Plan assets (2,825 ) (1,913 ) (25,070 )
Total 2,126 498 18,867
Unfunded defined benefit obligation 1,622
Net liability arising from defined benefit obligation ¥ 2,126 ¥ 2,121 $ 18,867
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Liability for retirement benefits ¥ 2,126 ¥ 2,121 $ 18,867
Net liability arising from defined benefit obligation ¥ 2,126 ¥ 2,121 $ 18,867
(4) The components of net periodic benefit costs for the years ended March 31, 2016 and 2015, were as
follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Service cost ¥ 477 ¥ 436 $ 4,233
Interest cost 60 50 532
Expected return on plan assets (38 ) (337 )
Recognized actuarial gains (195 ) (81 ) (1,730 )
Amortization of prior service cost 99 71 878
Net periodic benefit costs ¥ 405 ¥ 476 $ 3,594
(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans for the years ended March 31, 2016 and 2015
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Prior service cost ¥ 99 ¥ 272 $ 878
Actuarial gains (731 ) (114 ) (6,487 )
Total ¥ (631 ) ¥ 158 $ (5,599 )
- 27 -
(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of
defined retirement benefit plans as of March 31, 2016 and 2015
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Unrecognized prior service cost ¥ 704 ¥ 804 $ 6,247
Unrecognized actuarial losses (gains) 535 (195 ) 4,747
Total ¥ 1,240 ¥ 608 $ 11,004
(7) Plan assets
a. Components of plan assets
Plan assets consisted of the following:
2016 2015
General insurance account 33 % 31 %
Debt investments 25 26
Equity investments 19 20
Alternative investments 17 22
Others 6 1
Total 100 % 100 %
Alternative investments are mainly investment funds.
b. Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return
which are expected currently and in the future from the various components of the plan assets.
(8) Assumptions used for the years ended March 31, 2016 and 2015, were set forth as follows:
2016 2015
Discount rate 0.6% 1.5%
Expected rate of return on plan assets 2.0 0.0
- 28 -
7. EQUITY
Japanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant
provisions in the Companies Act that affect financial and accounting matters are summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to
the year-end dividend upon resolution at the shareholders' meeting. Additionally, for companies that meet
certain criteria including (1) having a Board of Directors, (2) having independent auditors, (3) having an
Audit & Supervisory Board, and (4) the term of service of the directors being prescribed as one year rather
than the normal two-year term by its articles of incorporation, the Board of Directors may declare
dividends (except for dividends-in-kind) at any time during the fiscal year if the company has prescribed so
in its articles of incorporation. However, the Company does not meet all the above criteria.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if
the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations
on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the
amount available for distribution to the shareholders, but the amount of net assets after dividends must be
maintained at no less than ¥3 million.
b. Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal
reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus),
depending on the equity account charged upon the payment of such dividends, until the aggregate amount
of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act,
the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The
Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital
surplus and retained earnings can be transferred among the accounts within equity under certain conditions
upon resolution of the shareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury
stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the
amount available for distribution to the shareholders which is determined by a specific formula. Under the
Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies
Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock.
Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly
from stock acquisition rights.
- 29 -
8. INFORMATION RELATED TO CONSOLIDATED CHANGES IN EQUITY
Changes in the outstanding number of shares of common stock and treasury stock for the years ended March 31,
2016 and 2015, were as follows:
Shares
2016 2015
Issued—Common stock:
Balance at beginning of year 45,000,000 45,000,000
Balance at end of year 45,000,000 45,000,000
Treasury stock—Common stock:
Balance at beginning of year 1,417,596 2,834,946
Increase 921,828 1,000,350
Decrease 279,700 2,417,700
Balance at end of year 2,059,724 1,417,596
Notes: 1. As of April 1, 2015 and 2014, treasury stock included 5,800 shares and 35,900 shares held by the
ESOP, respectively.
2. As of March 31, 2015, treasury stock included 5,800 shares held by the ESOP.
3. For the year ended March 31, 2016, the major breakdown of changes in treasury stock was as
follows:
March 31, 2016 Shares
Increase—Purchase of shares based on the resolution of
the Board of Directors 921,400
Decrease:
Exercise of stock options 273,900
Sales of treasury stock owned by the ESOP to the Trust 5,800
4. For the year ended March 31, 2015, the major breakdown of changes in treasury stock was as
follows:
March 31, 2015 Shares
Increase—Purchase of shares based on the resolution of
the Board of Directors 1,000,000
Decrease:
Allocation of treasury stock to third-parties based on
the resolution of the Board of Directors 2,000,000
Exercise of stock options 387,600
Sales of treasury stock owned by the ESOP to the Trust 30,100
- 30 -
Dividends paid to shareholders for the years ended March 31, 2016 and 2015, were as follows:
Amount*
Amount
per Share
March 31, 2016 Type of Shares
Millions
of Yen Yen Record Date Effective Date
Resolution approved by:
Annual general meeting of shareholders held on
June 19, 2015 Common stock ¥ 1,089 ¥ 25.00 March 31, 2015 June 22, 2015
The Board of Directors' meeting held on
November 5, 2015 Common stock 1,070 25.00 September 30, 2015 December 7, 2015
March 31, 2015
Resolution approved by:
Annual general meeting of shareholders held on
June 24, 2014 Common stock ¥ 1,055 ¥ 25.00 March 31, 2014 June 25, 2014
The Board of Directors' meeting held on
November 6, 2014 Common stock 1,032 25.00 September 30, 2014 December 5, 2014
Amount*
Amount
per Share
March 31, 2016 Type of Shares
Thousands of
U.S. Dollars
U.S.
Dollars Record Date Effective Date
Resolution approved by:
Annual general meeting of shareholders held on
June 19, 2015 Common stock $ 9,664 $ 0.22 March 31, 2015 June 22, 2015
The Board of Directors' meeting held on
November 5, 2015 Common stock 9,495 0.22 September 30, 2015 December 7, 2015
* Dividends paid to the ESOP (excluding dividends approved by the Board of Directors' meeting held on November 5, 2015) were included in the amounts of dividends paid in the
above table.
Dividends declared after the fiscal year ended March 31, 2016, were as follows:
Amount*
Amount
per Share
March 31, 2016 Type of Shares
Millions
of Yen Yen Record Date Effective Date
Resolution approved by—Annual general meeting
of shareholders held on June 24, 2016 Common stock ¥ 1,073 ¥ 25.00 March 31, 2016 June 27, 2016
Amount*
Amount
per Share
March 31, 2016 Type of Shares
Thousands of
U.S. Dollars
U.S.
Dollars Record Date Effective Date
Resolution approved by—Annual general meeting
of shareholders held on June 24, 2016 Common stock $ 9,522 $ 0.22 March 31, 2016 June 27, 2016
- 31 -
9. STOCK OPTIONS
Expenses related to stock options for the years ended March 31, 2016 and 2015, are as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Selling, general and administrative expenses ¥ 300 ¥ 291 $ 2,662
Gains on cancellation of vested stock options for the years ended March 31, 2016 and 2015, are as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Gains on reversal of subscription rights to shares ¥ 329 $ 2,919
The stock options outstanding as of March 31, 2016, are as follows:
1st Stock Option 2nd Stock Option
Date of resolution April 28, 2006 May 29, 2006
Persons granted 6 directors of the Company 84 outside contractors of the
26 employees of the Company Company and subsidiaries
133 directors and employees of
subsidiaries
Number of options granted 760,000 shares 229,500 shares
Date of grant April 28, 2006 June 6, 2006
Exercise price ¥3,400 ¥3,405
Exercise period From July 1, 2008 to June 25, 2015 From July 1, 2008 to June 25, 2015
4th Stock Option 5th Stock Option
Date of resolution September 27, 2010 September 26, 2011
Persons granted 40 employees of the Company 4 directors of the Company
9 directors of subsidiaries
130 employees of subsidiaries
Number of options granted 493,000 shares 107,600 shares
Date of grant October 18, 2010 October 17, 2011
Exercise price ¥1,239 ¥1
Exercise period From September 28, 2012 to
September 30, 2015
From October 18, 2014 to
September 30, 2021
6th Stock Option 7th Stock Option
Date of resolution September 26, 2011 September 24, 2012
Persons granted 47 employees of the Company 4 directors of the Company
9 directors of subsidiaries
126 employees of subsidiaries
Number of options granted 502,000 shares 101,400 shares
Date of grant October 17, 2011 October 16, 2012
Exercise price ¥1,008 ¥1
Exercise period From October 18, 2013 to October
17, 2016
From October 17, 2015 to
September 30, 2022
- 32 -
8th Stock Option 9th Stock Option
Date of resolution September 24, 2012 September 30, 2013
Persons granted 46 employees of the Company 4 directors of the Company
7 directors of subsidiaries
123 employees of subsidiaries
Number of options granted 468,000 shares 60,100 shares
Date of grant October 16, 2012 October 17, 2013
Exercise price ¥1,601 ¥1
Exercise period From October 17, 2014 to October
16, 2017
From October 18, 2016 to
September 30, 2023
10th Stock Option 11th Stock Option
Date of resolution September 30, 2013 September 29, 2014
Persons granted 41 employees of the Company 4 directors of the Company
7 directors of subsidiaries
128 employees of subsidiaries
Number of options granted 463,000 shares 105,100 shares
Date of grant October 17, 2013 October 17, 2014
Exercise price ¥3,003 ¥1
Exercise period From October 18, 2015 to October
17, 2018
From October 18, 2017 to
September 30, 2024
12th Stock Option 13th Stock Option
Date of resolution September 29, 2014 September 28, 2015
Persons granted 54 employees of the Company 4 directors of the Company
5 directors of subsidiaries
118 employees of subsidiaries
Number of options granted 465,000 shares 101,500 shares
Date of grant October 17, 2014 October 16, 2015
Exercise price ¥1,773 ¥1
Exercise period From October 18, 2016 to October
17, 2019
From October 17, 2018 to
September 30, 2025
14th Stock Option
Date of resolution September 28, 2015
Persons granted 55 employees of the Company
6 directors of subsidiaries
117 employees of subsidiaries
Number of options granted 462,000 shares
Date of grant October 16, 2015
Exercise price ¥1,608
Exercise period From October 17, 2017 to October
16, 2020
- 33 -
The stock option activity is as follows:
Shares
Year Ended March 31, 2016
1st
Stock
Option
2nd
Stock
Option
4th
Stock
Option
5th
Stock
Option
Non-vested
March 31, 2015—Outstanding
Granted
Canceled
Vested
March 31, 2016—Outstanding
Vested
March 31, 2015—Outstanding 485,500 229,500 38,000 14,000
Vested
Exercised (25,000) (14,000)
Canceled (485,500) (229,500) (13,000)
March 31, 2016—Outstanding
Exercise price ¥3,400 ¥3,405 ¥1,239 ¥1
($30 ) ($30 ) ($10 ) ($0 )
Average stock price at exercise ¥1,703 ¥2,128
($15 ) ($18 )
Fair value price at grant date ¥1,422.40 ¥208 ¥689
($12 ) ($1 ) ($6 )
Shares
Year Ended March 31, 2016
6th
Stock
Option
7th
Stock
Option
8th
Stock
Option
9th
Stock
Option
Non-vested
March 31, 2015—Outstanding 101,400 60,100
Granted
Canceled
Vested (101,400)
March 31, 2016—Outstanding 60,100
Vested
March 31, 2015—Outstanding 160,500 360,000
Vested 101,400
Exercised (47,600) (101,400) (85,900)
Canceled (2,000) (4,000)
March 31, 2016—Outstanding 110,900 270,100
Exercise price ¥1,008 ¥1 ¥1,601 ¥1
($8 ) ($0 ) ($14 ) ($0 )
Average stock price at exercise ¥2,074 ¥1,457 ¥2,182
($18 ) ($12 ) ($19 )
Fair value price at grant date ¥125 ¥1,236 ¥188 ¥2,550
($1 ) ($10 ) ($1 ) ($22 )
- 34 -
Shares
Year Ended March 31, 2016
10th
Stock
Option
11th
Stock
Option
12th
Stock
Option
13th
Stock
Option
Non-vested
March 31, 2015—Outstanding 444,000 105,100 462,000
Granted 101,500
Canceled (2,000) (4,000)
Vested (442,000)
March 31, 2016—Outstanding 105,100 458,000 101,500
Vested
March 31, 2015—Outstanding
Vested 442,000
Exercised
Canceled (2,000)
March 31, 2016—Outstanding 440,000
Exercise price ¥3,003 ¥1 ¥1,773 ¥1
($26 ) ($0 ) ($15 ) ($0 )
Average stock price at exercise
Fair value price at grant date ¥559 ¥1,282 ¥220 ¥1,464
($4 ) ($11 ) ($1 ) ($12 )
Shares
Year Ended March 31, 2016
14th
Stock
Option
Non-vested
March 31, 2015—Outstanding
Granted 462,000
Canceled (2,000)
Vested
March 31, 2016—Outstanding 460,000
Vested
March 31, 2015—Outstanding
Vested
Exercised
Canceled
March 31, 2016—Outstanding
Exercise price ¥1,608
($14 )
Average stock price at exercise
Fair value price at grant date ¥397
($3 )
- 35 -
The Assumptions Used to Measure the Fair Value of the September 28, 2015 Stock Options
13th Stock Option 14th Stock Option
Date of resolution September 28, 2015 September 28, 2015
Estimate method Black-Scholes option
pricing model
Black-Scholes option
pricing model
Volatility of stock price 43.768% 42.817%
Estimated remaining outstanding period 3.0 years 3.5 years
Estimated dividend ¥50 ($0.44) per share ¥50 ($0.44) per share
Risk free interest rate 0.020% 0.025%
10. INCOME TAXES
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in
the aggregate, resulted in normal effective statutory tax rates of approximately 33.1% and 35.6% for the years
ended March 31, 2016 and 2015, respectively.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at March 31, 2016 and 2015, are as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Deferred tax assets:
Provision for sales returns ¥ 1,227 ¥ 1,331 $ 10,889
Depreciation 855 2,018 7,587
Tax loss carryforwards 816 1,973 7,241
Programs and work in process 670 667 5,946
Liability for retirement benefits 654 683 5,804
Loss on valuation of shares of associated company 493 540 4,375
Merchandise and finished products 490 490 4,348
Advance payments—trade 374 393 3,319
Provision for bonuses 323 503 2,866
Deposits received 289 439 2,564
Other 1,886 2,048 16,737
Subtotal 8,081 11,089 71,716
Less valuation allowance (2,346 ) (4,074 ) (20,820 )
Total 5,735 7,015 50,896
Deferred tax liabilities:
Unrealized gain on available-for-sale securities (28 ) (43 ) (248 )
Asset retirement obligations (27 ) (52 ) (239 )
Other (44 )
Total (56 ) (140 ) (496 )
Net deferred tax assets ¥ 5,678 ¥ 6,875 $ 50,390
- 36 -
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in
the accompanying consolidated statement of income for the year ended March 31, 2016, with the corresponding
figures for 2015, is as follows:
2016 2015
Normal effective statutory tax rate 33.1 % 35.6 %
Expenses not deductible for income tax purposes 6.2 4.2
Equity in earnings or losses of associated company 4.8 0.6
Adjustment to deferred tax assets and liabilities from
changes in the statutory tax rate 2.3 4.5
Valuation allowance (2.6) (4.0)
Other—net 0.9 (0.6)
Actual effective tax rate 44.7 % 40.3 %
New tax reform laws enacted in 2016 in Japan changed the normal effective statutory tax rate for the fiscal year
beginning on or after April 1, 2016, to approximately 30.9% and for the fiscal year beginning on or after April
1, 2018, to approximately 30.6%. The effect of these changes was to decrease deferred tax assets, net of
deferred tax liabilities, by ¥190 million ($1,686 thousand) and increase accumulated other comprehensive
income for unrealized gain on available-for-sale securities by ¥1 million ($8 thousand) and defined retirement
benefit plans by ¥(10) million ($(88) thousand) in the consolidated balance sheet as of March 31, 2016, and to
increase income taxes—deferred in the consolidated statement of income for the year then ended by
¥181 million ($1,606 thousand).
11. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the years ended March 31, 2016 and 2015, consisted of the
following:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Advertising expenses ¥ 9,665 ¥ 8,972 $ 85,773
Promotion expenses 1,812 2,056 16,080
Provision of allowance for doubtful accounts (53 ) (470 )
Salaries and bonuses for employees 6,440 6,499 57,152
Provision for bonuses 1,066 1,536 9,460
Net periodic retirement benefit costs 405 476 3,594
Depreciation 1,728 3,868 15,335
Commission fee 4,728 4,993 41,959
Other 13,185 13,675 117,012
Total ¥ 38,978 ¥ 42,077 $ 345,917
12. OTHER INCOME (EXPENSES)
Loss on disposal of noncurrent properties for the years ended March 31, 2016 and 2015, consisted of the
following:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Loss on disposal of noncurrent properties:
Property, plant and equipment—other property ¥ 8 ¥ 4 $ 70
Intangible assets 1 12 8
Total ¥ 9 ¥ 16 $ 79
- 37 -
13. LEASES
Obligations and future minimum payments under non-cancelable operating leases as of the years ended March
31, 2016 and 2015, were as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Due within one year ¥ 1,114 ¥ 1,102 $ 9,886
Due after one year 752 1,839 6,673
Total ¥ 1,866 ¥ 2,941 $ 16,560
14. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
(1) AVEX Group Policy for Financial Instruments
The AVEX Group uses financial instruments, mainly long-term debt including bank loans for working
capital. Cash surpluses, if any, are invested in short-term time deposits, etc. Derivatives, including
compound financial instruments that incorporate derivative transactions, are used, not for speculative
purposes, but to manage exposure to financial risks as described in (2) below.
(2) Nature and Extent of Risks Arising from Financial Instruments and Risk Management for Financial
Instruments
Receivables, such as trade notes and trade accounts, are exposed to customer credit risk.
The AVEX Group manages its credit risk from receivables on the basis of internal guidelines, which
include monitoring of payment terms and balances of customers.
Marketable and investment securities mainly consist of compound financial instruments that incorporate
derivative transactions, investment in partnerships and others and equity instruments of customers and
suppliers of the AVEX Group.
Compound financial instruments that incorporate derivative transactions comprise equity-linked bonds that
are in turn exposed to the risk of fluctuations in the Nikkei stock average. In order to manage this risk, the
AVEX Group takes steps to properly identify and deliberate on all foreseeable risks while restricting its
investment activities to financial institutions that exhibit a high credit standing. In addition, every effort is
made to continuously monitor trends in the Nikkei stock average and to gather information on market
values provided by financial institutions together with other pertinent data.
Investment in partnerships and others whose fair value is not readily determinable is managed by
monitoring its financial condition on a regular basis. The results thereof are reported to the Director in
charge.
The AVEX Group has no equity instruments exposed to the risk of market price fluctuations.
Equity instruments whose fair value is not readily determinable are managed by monitoring its financial
condition on a regular basis.
- 38 -
Payment terms of payables, such as notes and accounts payable—trade, accounts payable—other, accrued
royalties and income tax payable are less than one year. Although some payables related to licenses of
video works in foreign currencies are exposed to the market risk of fluctuation in foreign currency
exchange rates, those risks are hedged by using foreign currency forward contracts.
The AVEX Group uses short-term bank loans mainly for working capital.
Derivative transactions are approved by the Director in charge or the Board of Directors based on the
internal guidelines which prescribe the authority and the limits for each transaction. Because the
counterparties to these derivatives are limited to major financial institutions, the AVEX Group does not
anticipate any losses arising from credit risk.
Payables and loans are subject to liquidity risk (the risk of not being able to make payments on the date
that they are due). The AVEX Group, however, finances the borrowing needs of its domestic consolidated
subsidiaries (excluding some subsidiaries) through a cash pooling system (CPS) in order to efficiently
manage liquidity based on the cash management plans drawn up by each subsidiary every month.
(3) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is not
available, another rational valuation technique is used instead.
(a) Fair value of financial instruments
Millions of Yen
March 31, 2016
Carrying
Amount
Fair
Value
Unrealized
Gain/Loss
Assets:
(1) Cash and cash in banks ¥ 21,107 ¥ 21,107
(2) Notes and accounts receivable—trade 21,271
Allowance for doubtful accounts (40 )
21,231 21,231
(3) Marketable securities—Available-for-sale 1,003 1,003
Total ¥ 43,341 ¥ 43,341
Liabilities:
(1) Notes and accounts payable—trade ¥ 2,020 ¥ 2,020
(2) Short-term bank loans 8,500 8,500
(3) Accounts payables—other 24,356 24,356
(4) Accrued royalties 8,748 8,748
(5) Income taxes payable 865 865
(6) Long-term bonds 720 720
Total ¥ 45,210 ¥ 45,210
Derivatives ¥ (99 ) ¥ (99 )
- 39 -
Millions of Yen
March 31, 2015
Carrying
Amount
Fair
Value
Unrealized
Gain/Loss
Assets:
(1) Cash and cash in banks ¥ 25,699 ¥ 25,699
(2) Notes and accounts receivable—trade 21,209
Allowance for doubtful accounts (90 )
21,119 21,119
Total ¥ 46,819 ¥ 46,819
Liabilities:
(1) Notes and accounts payable—trade ¥ 1,601 ¥ 1,601
(2) Short-term bank loans 8,500 8,500
(3) Accounts payables—other 26,990 26,990
(4) Accrued royalties 9,224 9,224
(5) Income taxes payable 680 680
(6) Long-term bonds 1,080 1,080
(7) Long-term loans 625 639 ¥ (14 )
Total ¥ 48,702 ¥ 48,716 ¥ (14 )
Derivatives ¥ 152 ¥ 152
Thousands of U.S. Dollars
March 31, 2016
Carrying
Amount
Fair
Value
Unrealized
Gain/Loss
Assets:
(1) Cash and cash in banks $ 187,318 $ 187,318
(2) Notes and accounts receivable—trade 188,773
Allowance for doubtful accounts (354 )
188,418 188,418
(3) Marketable securities—Available-for-sale 8,901 8,901
Total $ 384,637 $ 384,637
Liabilities:
(1) Notes and accounts payable—trade $ 17,926 $ 17,926
(2) Short-term bank loans 75,434 75,434
(3) Accounts payables—other 216,151 216,151
(4) Accrued royalties 77,635 77,635
(5) Income taxes payable 7,676 7,676
(6) Long-term bonds 6,389 6,389
Total $ 401,224 $ 401,224
Derivatives $ (878 ) $ (878 )
- 40 -
Assets
(1) Cash and Cash in Banks
The carrying values of cash and cash in banks approximate fair value because of their short
maturities.
(2) Notes and Accounts Receivable—Trade
The carrying values of notes and accounts receivable approximate fair value because they are settled
in the short term.
(3) Marketable Securities
The fair values of marketable securities are measured at the quoted price obtained from the financial
institution.
Fair value information for marketable and investment securities by classification is described in
Note 3.
Liabilities
(1) Notes and Accounts Payable—Trade, (2) Short-Term Bank Loans, (3) Accounts Payables—Other,
(4) Accrued Royalties and (5) Income Taxes Payable
The carrying values of these liabilities approximate fair value because they are settled in the short
term.
The fair values of payables are measured at the amount to be paid at maturity discounted at the AVEX
Group's assumed corporate discount rate.
(6) Long-Term Bonds and (7) Long-Term Loans
For long-term bonds and long-term loans with floating interest rates, the carrying values of these
liabilities approximate fair value because their floating rates reflect market interest rates within a short
period.
For long-term bonds and long-term loans with fixed interest rates, the fair values are determined by
discounting the cash flows related to the debt at a discount rate that is the sum of the credit spread and
an appropriate benchmark rate.
Derivatives
Fair value information for derivatives is included in Note 15.
(b) Carrying amount of financial instruments whose fair value cannot be reliably determined
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Investments in equity instruments that do not
have a quoted market price in an active market ¥ 5,310 ¥ 5,501 $ 47,124
For the year ended March 31, 2016, the impairment loss on investments in equity instruments,
unlisted securities and other was ¥38 million ($337 thousand).
- 41 -
(4) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen
March 31, 2016
Due in
1 Year
or Less
Due after
1 Year
through
5 Years
Due after
5 Years
through
10 Years
Due after
10 Years
Cash and cash in banks ¥ 21,107
Notes and accounts receivable—trade 21,271
Marketable securities—Available-for-sale
securities with contractual maturities 1,000
Total ¥ 43,378
Thousands of U.S. Dollars
March 31, 2016
Due in
1 Year
or Less
Due after
1 Year
through
5 Years
Due after
5 Years
through
10 Years
Due after
10 Years
Cash and cash in banks $ 187,318
Notes and accounts receivable—trade 188,773
Marketable securities—Available-for-sale
securities with contractual maturities 8,874
Total $ 384,966
Please see Note 5 for annual maturities of long-term debt.
15. DERIVATIVES
The AVEX Group enters into foreign currency forward contracts to hedge foreign exchange risk associated with
certain payables denominated in foreign currencies.
All derivative transactions are entered into to hedge foreign currency exposures incorporated within the AVEX
Group's business. Accordingly, market risk in these derivatives is basically offset by opposite movements in the
value of hedged assets or liabilities.
Fair value information for derivatives was as follows:
Derivative Transactions to Which Hedge Accounting Is Not Applied
Millions of Yen
March 31, 2016
Contract
Amount
Contract
Amount
Due after
One Year
Fair
Value
Unrealized
Gain/Loss
Foreign currency forward contracts—
Buying U.S.$ ¥ 1,511 ¥(96 ) ¥(96 )
March 31, 2015
Foreign currency forward contracts—
Buying U.S.$ ¥ 1,002 ¥ 139 ¥ 139
- 42 -
Thousands of U.S. Dollars
March 31, 2016
Contract
Amount
Contract
Amount
Due after
One Year
Fair
Value
Unrealized
Gain/Loss
Foreign currency forward contracts—
Buying U.S.$ $ 13,409 $ (851 ) $ (851 )
Compound financial instruments that incorporate derivative transactions are included in marketable securities
with measuring them as a whole at fair value, since it is impossible to measure them separately their fair value
reasonably at the year ended March 31, 2016.
Fair value information for marketable and investment securities by classification is described in Note 3.
The AVEX Group did not have compound financial instruments that incorporate derivative transactions at the
year ended March 31, 2015.
Derivative Transactions to Which Hedge Accounting Is Applied
Millions of Yen
March 31, 2016 Hedged Item
Contract
Amount
Contract
Amount
Due after
One Year
Fair
Value
Foreign currency forward contracts—
Buying U.S.$ Payables ¥71 ¥(2 )
March 31, 2015
Foreign currency forward contracts—
Buying U.S.$ Payables ¥ 676 ¥ 13
Thousands of U.S. Dollars
March 31, 2016 Hedged Item
Contract
Amount
Contract
Amount
Due after
One Year
Fair
Value
Foreign currency forward contracts—
Buying U.S.$ Payables $ 630 $ (17 )
The fair value of derivative transactions is measured at the quoted price obtained from the financial institution.
- 43 -
16. OTHER COMPREHENSIVE LOSS
The components of other comprehensive loss for the years ended March 31, 2016 and 2015, were as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Unrealized loss on available-for-sale securities:
Losses arising during the year ¥ (47 ) ¥ (3,557 ) $ (417 )
Reclassification adjustments to profit or loss (3,488 )
Amount before income tax effect (47 ) (7,045 ) (417 )
Income tax effect 14 2,065 124
Total ¥ (32 ) ¥ (4,980 ) $ (283 )
Deferred (loss) gain on derivatives under hedge
accounting:
Gains arising during the year ¥ 39 ¥ 271 $ 346
Adjustments of acquisition cost of asset (55 ) (264 ) (488 )
Amount before income tax effect (16 ) 6 (141 )
Income tax effect 5 (2 ) 44
Total ¥ (11 ) ¥ 4 $ (97 )
Foreign currency translation adjustments:
Adjustments arising during the year ¥ 6 ¥ (88 ) $ 53
Reclassification adjustments to profit or loss (1 ) 23 (8 )
Amount before income tax effect 5 (65 ) 44
Total ¥ 5 ¥ (65 ) $ 44
Defined retirement benefit plans:
Adjustments arising during the year ¥ (535 ) ¥ (171 ) $ (4,747 )
Reclassification adjustments to profit or loss (96 ) 13 (851 )
Amount before income tax effect (631 ) (158 ) (5,599 )
Income tax effect 179 28 1,588
Total ¥ (452 ) ¥ (129 ) $ (4,011 )
Share of other comprehensive (loss) income in
associates:
Gains arising during the year ¥ 3 ¥ 179 $ 26
Reclassification adjustments to profit or loss (4 ) (35 )
Total ¥ (1 ) ¥ 179 $ (8 )
Total other comprehensive loss ¥ (492 ) ¥ (4,991 ) $ (4,366 )
- 44 -
17. SUPPLEMENTAL CASH FLOW INFORMATION
Reconciliation between cash and cash in banks in the consolidated balance sheets as of March 31, 2016 and 2015, and cash and cash equivalents in the consolidated statements of cash
flows for the years ended March 31, 2016 and 2015, was as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Cash and cash in banks ¥ 21,107 ¥ 25,699 $ 187,318
Cash and cash equivalents ¥ 21,107 ¥ 25,699 $ 187,318
18. RELATED PARTY TRANSACTIONS
The following summarize related party transactions between the Company and related parties for the years ended March 31, 2016 and 2015.
Officers and Individual Major Shareholders
Year Ended March 31, 2016
Description of Ownership Transaction Balance
Name
Business or
Occupation
Ratio of
Voting Rights
Description of
Transaction
Millions
of Yen
Thousands of
U.S. Dollars Account
Millions
of Yen
Thousands of
U.S. Dollars
Touchdown, Co., Ltd.
(Note 2) Publishing company — Consulting fee (Note 3) ¥ 25 $ 221
Notes: 1. The terms and conditions such as prices are decided based on market price.
2. Mr. Toru Kenjo, Director (part-time) of the Company, owns all shares of Touchdown, Co., Ltd.
3. The Company consults Touchdown, Co., Ltd. on business strategy such as secondary use of media contents.
Year Ended March 31, 2015
Ownership Transaction Balance
Name
Description of
Business or Occupation
Ratio of
Voting Rights Description of Transaction
Millions
of Yen Account
Millions
of Yen
Ryuhei Chiba Representative Director, CSO Direct 0.67% Exercise of subscription (Note 2) ¥ 13
Shigekazu Takeuchi Representative Director, CFO Direct 0.02% Exercise of subscription (Note 2) 19
Shinji Hayashi Representative Director, CMO Direct 1.44% Exercise of subscription (Note 2) 13
Touchdown, Co., Ltd. (Note 3) Publishing company — Consulting fee (Note 4) 25
Notes: 1. The terms and conditions such as prices are decided based on market price.
2. The exercise of stock options granted by resolution at the general shareholders' meeting held on June 27, 2010, resolution at the Board of Directors' meeting held on
September 27, 2010, resolution at the general shareholders' meeting held on June 26, 2011, and resolution at the Board of Directors' meeting held on September 26, 2011
The transaction volume is calculated by multiplying the number of shares issued as a result of exercise of the option by the amount paid.
3. Mr. Toru Kenjo, Director (part-time) of the Company, owns all shares of Touchdown, Co., Ltd.
4. The Company consults Touchdown, Co., Ltd. on business strategy such as secondary use of media contents.
- 45 -
The following summarize related party transactions between the consolidated subsidiaries and related parties for the years ended March 31, 2016 and 2015.
Unconsolidated Subsidiaries and Associated Companies
Year Ended March 31, 2016
Description of Ownership Transaction Balance
Name
Business or
Occupation
Ratio of
Voting Rights
Description of
Transaction
Millions
of Yen
Thousands of
U.S. Dollars Account
Millions
of Yen
Thousands of
U.S. Dollars
Associated company
RecoChoku Co., Ltd.
Delivery of
audio/video
content
Indirect 20.00% Digital products
sales
¥ 4,612 $ 40,930 Notes and
accounts
receivable
¥ 1,132 $ 10,046
Note: The terms and conditions such as prices are decided based on market price.
Year Ended March 31, 2015
Description of Ownership Transaction Balance
Name
Business or
Occupation
Ratio of
Voting Rights
Description of
Transaction
Millions
of Yen Account
Millions
of Yen
Associated company
RecoChoku Co., Ltd.
Delivery of audio/video
content
Indirect 20.00% Digital products sales ¥ 4,852 Notes and accounts
receivable
¥ 1,166
Note: The terms and conditions such as prices are decided based on market price.
Officers and Individual Major Shareholders
Year Ended March 31, 2016
Description of Ownership Transaction Balance
Name
Business or
Occupation
Ratio of
Voting Rights
Description of
Transaction
Millions
of Yen
Thousands of
U.S. Dollars Account
Millions
of Yen
Thousands of
U.S. Dollars
Touchdown, Co., Ltd. (Note 2) Publishing company — Consulting fee (Note 3) ¥ 12 $ 106
Notes: 1. The terms and conditions such as prices are decided based on market price.
2. Mr. Toru Kenjo, Director (part-time) of the Company, owns all shares of Touchdown, Co., Ltd.
3. The Company consults Touchdown, Co., Ltd. on secondary use of media contents.
Year Ended March 31, 2015
Description of Ownership Transaction Balance
Name
Business or
Occupation
Ratio of
Voting Rights
Description of
Transaction
Millions
of Yen Account
Millions
of Yen
Touchdown, Co., Ltd. (Note 2) Publishing company — Consulting fee (Note 3) ¥ 12
GENTOSHA INC. (Note 4) Publishing company — Purchase of books 14 Notes and accounts payable
Notes: 1. The terms and conditions such as prices are decided based on market price.
2. Mr. Toru Kenjo, Director (part-time) of the Company, owns all shares of Touchdown, Co., Ltd.
3. The Company consults Touchdown, Co., Ltd. on secondary use of media contents.
4. Mr. Toru Kenjo, Director (part-time) of the Company, owns 59% of shares of GENTOSHA INC.
- 46 -
The condensed financial information of a significant associated company, AWA Co. Ltd., as of the year ended
March 31, 2016, was as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2016
Current assets ¥ 600 $ 5,324
Current liability 1,371 12,167
Long-term liability 41 363
Equity (812 ) (7,206 )
Sales 355 3,150
Loss before income taxes (2,790 ) (24,760 )
Net loss (2,793 ) (24,787 )
AWA Co. Ltd. was recognized as a significant associated company from the year ended March 31, 2016,
because of increased materiality of the company.
19. NET INCOME PER SHARE
Reconciliation of the differences between basic and diluted net income per share ("EPS") for the years ended
March 31, 2016 and 2015, is as follows:
Millions
of Yen
Thousands
of Shares Yen U.S. Dollars
Year Ended March 31, 2016
Net Income
Attributable
to Owners of
the Parent
Weighted-
Average
Shares EPS
Basic EPS—Net income available
to common shareholders ¥ 4,292 42,979 ¥ 99.88 $ 0.89
Effect of dilutive securities—
Stock acquisition right 256
Diluted EPS—Net income for
computation ¥ 4,292 43,235 ¥ 99.28 $ 0.88
Year Ended March 31, 2015
Basic EPS—Net income available
to common shareholders ¥ 5,975 42,113 ¥ 141.90
Effect of dilutive securities—
Stock acquisition right 389
Diluted EPS—Net income for
computation ¥5,975 42,502 ¥ 140.60
Net assets per share as of March 31, 2016 and 2015, were as follows:
Yen U.S. Dollars
2016 2015 2016
Net assets per share ¥ 1,144.82 ¥ 1,131.29 $ 10.16
- 47 -
The bases for calculation of net assets per share for the years ended March 31, 2016 and 2015, were as follows:
Millions
of Yen
Thousands
of Shares Yen U.S. Dollars
Year Ended March 31, 2016
Net
Assets
Number of
Shares of
Common
Stock Net Assets per Share
Total net assets ¥ 52,392
Amounts deducted from total net assets:
Stock acquisition right (643 )
Noncontrolling interests (2,589 )
Net assets as of the year-end attributed
to common shareholders ¥ 49,158 42,940 ¥ 1,144.82 $ 10.16
Year Ended March 31, 2015
Total net assets ¥ 53,394
Amounts deducted from total net assets:
Stock acquisition right (835 )
Noncontrolling interests (3,255 )
Net assets as of the year-end attributed
to common shareholders ¥ 49,304 43,582 ¥ 1,131.29
20. SEGMENT INFORMATION
(1) Description of Reportable Segments
The AVEX Group's reportable segments are those for which separate financial information is available and
regular evaluation by the Company's management is being performed in order to decide how resources are
allocated among the AVEX Group.
The AVEX Group comprises the holding company, the Company, and associated operating companies.
Each operating company engages in business activities centered on music, visual entertainment and
performing artists. Major business activities entail the planning, production, bundled sales and distribution
of music and video content, the management of artistic talent, and the planning, production and
management of merchandising and live concerts.
Accordingly, the AVEX Group reports its operations in music, video and artists as three business segments
comprising the music business, video business, and management/live business.
Therefore, the AVEX Group's reportable segments consist of three reportable segments, music business,
video business and management/live business.
Music business plans, produces, bundle sells and distributes music content.
Video business plans, produces, bundle sells and distributes video content.
Management/live business manages artistic talent, and plans, produces, and manages merchandising and
live concerts.
- 48 -
(2) Methods of Measurement for the Amounts of Sales, Profit, Assets, Liabilities and Other Items for Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, "Summary of Significant Accounting Policies."
(3) Information about Sales, Profit, Assets, Liabilities and Other Items
Millions of Yen
2016
Reportable Segment
Music
Business
Video
Business
Management/
Live Business Total Other Total Reconciliations Consolidated
Sales:
Sales to external customers ¥ 58,871 ¥ 41,361 ¥ 51,195 ¥ 151,428 ¥ 2,694 ¥ 154,122 ¥ 154,122
Intersegment sales or transfers 2,353 440 4,561 7,355 281 7,637 ¥ (7,637 )
Total ¥ 61,224 ¥ 41,801 ¥ 55,756 ¥ 158,783 ¥ 2,976 ¥ 161,759 ¥ (7,637 ) ¥ 154,122
Segment profit ¥ 6,583 ¥ 85 ¥ 1,583 ¥ 8,252 ¥ (779 ) ¥ 7,473 ¥ (195 ) ¥ 7,277
Segment assets 19,366 22,463 10,936 52,765 705 53,471 57,737 111,208
Other:
Depreciation 903 1,265 881 3,050 83 3,134 166 3,300
Investment in associated companies accounted for by equity method 2,670 1,467 4,138 4,138 4,138
Increase in property, plant and equipment and intangible assets 287 2,126 518 2,932 69 3,002 1,216 4,218
Millions of Yen
2015
Reportable Segment
Music
Business
Video
Business
Management/
Live Business Total Other Total Reconciliations Consolidated
Sales:
Sales to external customers ¥ 65,463 ¥ 39,620 ¥ 61,482 ¥ 166,566 ¥ 2,690 ¥ 169,256 ¥ 169,256
Intersegment sales or transfers 2,164 210 3,852 6,227 592 6,819 ¥ (6,819 )
Total ¥ 67,628 ¥ 39,831 ¥ 65,334 ¥ 172,793 ¥ 3,282 ¥ 176,076 ¥ (6,819 ) ¥ 169,256
Segment profit ¥ 7,849 ¥ 1,832 ¥ 2,765 ¥ 12,447 ¥ (716 ) ¥ 11,731 ¥ (3,055 ) ¥ 8,675
Segment assets 15,585 18,485 16,017 50,088 1,075 51,164 66,400 117,564
Other:
Depreciation 732 1,299 1,007 3,038 461 3,500 2,118 5,618
Investment in associated companies accounted for by equity method 3,142 1,013 4,155 4,155 4,155
Increase in property, plant and equipment and intangible assets 220 738 180 1,139 80 1,219 3,014 4,233
Thousands of U.S. Dollars
2016
Reportable Segment
Music
Business
Video
Business
Management/
Live Business Total Other Total Reconciliations Consolidated
Sales:
Sales to external customers $ 522,461 $ 367,066 $ 454,339 $ 1,343,876 $ 23,908 $ 1,367,784 $ 1,367,784
Intersegment sales or transfers 20,882 3,904 40,477 65,273 2,493 67,776 $ (67,776 )
Total $ 543,343 $ 370,970 $ 494,817 $ 1,409,149 $ 26,411 $ 1,435,560 $ (67,776 ) $ 1,367,784
Segment profit $ 58,422 $ 754 $ 14,048 $ 73,233 $ (6,913 ) $ 66,320 $ (1,730 ) $ 64,581
Segment assets 171,867 199,352 97,053 468,272 6,256 474,538 512,397 986,936
Other:
Depreciation 8,013 11,226 7,818 27,067 736 27,813 1,473 29,286
Investment in associated companies accounted for by equity method 23,695 13,019 36,723 36,723 36,723
Increase in property, plant and equipment and intangible assets 2,547 18,867 4,597 26,020 612 26,641 10,791 37,433
- 49 -
Notes: 1. "Other" for the years ended March 31, 2016 and 2015, represents businesses such as school
business and restaurant business, etc., which are not included in reportable segments.
2. "Reconciliations" of segment profit of ¥(195) million ($(1,730) thousand) for the year ended
March 31, 2016, were mainly corporate expenses of ¥(166) million ($(1,473) thousand),
unallocated to each reportable segment, and eliminations of intersegment transaction of
¥(29) million ($(257) thousand).
"Reconciliations" of segment profit of ¥(3,055) million for the year ended March 31, 2015,
were mainly corporate expenses of ¥(3,017) million, unallocated to each reportable segment,
and eliminations of intersegment transaction of ¥(38) million.
3. "Reconciliations" of segment assets for the year ended March 31, 2016, were corporate assets
of ¥57,737 million ($512,397 thousand) unallocated to each reportable segment.
Corporate assets mainly consisted of land and cash and cash in bank held by the Company.
"Reconciliations" of segment assets for the year ended March 31, 2015, were corporate assets
of ¥66,400 million unallocated to each reportable segment.
Corporate assets mainly consisted of land and building of headquarters and cash and cash in
bank held by the Company.
4. "Reconciliations" of depreciation of ¥2,118 million for the year ended March 31, 2015, were
related to corporate assets and unallocated to each reportable segment.
5. "Reconciliations" of increase in property, plant and equipment and intangible assets of
¥1,216 million ($10,791 thousand) for the year ended March 31, 2016, were mainly due to
increase in software and other.
"Reconciliations" of increase in property, plant and equipment and intangible assets of
¥3,014 million for the year ended March 31, 2015, were mainly due to increase in buildings
related to rebuild headquarters and software and other.
6. Segment profit is reconciled to operating income in the consolidated statement of income.
(Related Information)
Information by product and service for the years ended March 31, 2016 and 2015, is not disclosed since
similar information is disclosed as information by reportable segment.
Information by geographical area for the years ended March 31, 2016 and 2015, is not disclosed since sales
to domestic customers exceeded 90% of the sales amount in the consolidated statement of income and
property, plant and equipment in Japan exceeded 90% of that in the consolidated balance sheet.
- 50 -
Information about major customers for the years ended March 31, 2016 and 2015, is as follows:
Millions of Yen
Thousands of
U.S. Dollars
2016 2015 2016
Sales to—NTT DOCOMO, Inc. ¥ 22,859 ¥ 21,649 $ 202,866
Impairment loss on fixed assets by reportable segment for the years ended March 31, 2016 and 2015, was
as follows:
Millions of Yen
2016
Reportable Segment
Music
Business
Video
Business
Management/
Live Business Total Other Eliminated Total
Impairment loss ¥ 199 ¥ 199 ¥ 199
Millions of Yen
2015
Reportable Segment
Music
Business
Video
Business
Management/
Live Business Total Other Eliminated Total
Impairment loss ¥ 516 ¥ 516 ¥ 263 ¥ 779
Thousands of U.S. Dollars
2016
Reportable Segment
Music
Business
Video
Business
Management/
Live Business Total Other Eliminated Total
Impairment loss $ 1,766 $ 1,766 $ 1,766
21. SUBSEQUENT EVENT
Issuance of Stock Acquisition Rights to Certain Employees of the Company and Certain Directors and
Employees of Its Subsidiaries
At the 29th General Meeting of Shareholders held on June 24, 2016, a special resolution was passed to issue
stock acquisition rights as stock options at no cost to certain employees of the Company and certain directors
and employees of its subsidiaries, based on Articles 236, 238 and 239 of the Companies Act.
Overview of the stock options is as follows:
(1) Persons granted Certain employees of the Company and certain directors and
employees of subsidiaries
(2) The upper limit of the number
of granted shares
500,000 shares
(3) Exercise period Three years from the day when two years have passed since the
subsequent day of the allotment of stock acquisition rights
* * * * * *
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