avex group holdings inc. a e grouavex group holdings inc. 22nd semiannual business report from april...

Avex Group Holdings Inc.22nd Semiannual Business Report From April 1, 2008 to September 30, 2008

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Avex Group Holdings Inc.�22nd Semiannual Business Report

From April 1, 2008 to September 30, 2008

Avex Group Holdings Inc. Avex bldg.,

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

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

This booklet uses soybean oil ink certified by the American Soybean Association.

e Grou22nd Semiannual From April 1, 2008 to September 30, 2008

A

©avex marketing

02

Mid-Term Vision of the Avex Group

To evolve into the “Entertainment Brand Company”with the strongest creative and communication capabilities in Asia

The Avex Group is p leased to inform

shareholders of its results for the six-month

period ended September 30, 2008 in this

Semiannual Business Report.

Although the music industry as a whole

had a hard time over this six-month period,

sales of our music packages increased by

approximately 40% over the same period

last year, buoyed by hits from our major

artists and outstanding performances by the

newer artists we have signed and cultivated

since the structural reforms of April 2005.

In addi t ion, other income streams,

including merchandising, fan clubs and live

concerts, have been steadily increasing.

Notwithstanding the sudden bursting onto

the scene of the concept known as the

“360-degree model”—a strategy that calls

for every pro� t-earning opportunity of each

artist to be taken advantage of—we take

pride in the fact that we have had much

success in growing these income streams

through our management company, which

has been a par t of the Group since its

foundation. Through the brand management

sys tem adopted by the management

company, we have established our own

3 6 0 - d e g r e e m o d e l a n d h a v e b e e n

maximizing the value of our artists for the

last three and a half years.

In January 2009, we will spin off our

artist /talent management division into a

separate company. This will allow us to

consolidate management resources and

expertise on these other revenue streams,

which will help us to broaden and expand

our music sales at a time when the global

music industry is at a major turning point.

As part of our overall medium- to long-

term strategy for becoming a comprehensive

entertainment company, we will adopt a

“mobile broadcasting stat ion model”—

essentially, establishing a Web platform and

do ing our own program p lanning and

cast ing—as the core strategy for our

domestic visual content business. Our plans

for the Asian arm of this business are based

on a core s t rategy o f leverag ing our

established networks to co-produce films

with leading players in the various regions.

In addition, we have already commenced

d eve l o p m e n t o f a n ew b lu e p r i n t f o r

achieving hits after having implemented a

fundamental review of our business models,

governance system, branding strategies

and so on for our music business in Asia.

This wi l l enable us to bet ter adapt to

changes in the entertainment market in

Greater China and overcome current

difficulties.

The Group � rmly believes that ensuring a

long-term overall return of profit to our

shareholders is one of the most important

management policies of the Group. We stand

by our policy of paying the interim dividend of

20.0 yen per share for the 22nd term.

We would like to express our sincere

appreciation for the support shown by our

many shareholders and stakeholders again

this year, the year in which we celebrated

the 20th anniversary of the Avex Group. We

ask for your continued understanding and

support in the future.

December 2008

Masato MatsuuraCEO

Avex Group Holdings Inc.

To Our Shareholders

1988 2001

2004

2006

2008

2007

2005

2002

1991

1992

1993

1994

1997

1998

1999

2000

1990

Twenty Years of Progress

H i s t o r y o f A v e x

03

Avex Artist Academy, Osaka School

avex WORLDAUDITION2008

Namie Amuro“BEST FICTION”Jul. 30, ’08

EXILE“CATCHY BEST”Mar. 26, ’08

Kumi Koda“BEST~first things~”Sep. 21, ’05

Ayumi Hamazaki“ BEST” Mar. 28, ’01

Avex Artist Academy, Tokyo School

Red Cliff Part I©2008 Three Kingdoms Ltd. ©Bai Xiaoyan

Blue Man Group in Japan ©BMP

Avex’s second logo

“JULIANA'S TOKYO TECHNO RAVE PARTY” Feb. 21, ’92

Ai Otsuka“Sakuranbo” Dec. 17, ’03

BoA“LISTEN TO MY HEART” Jan. 17, ’02

Avex’s current logo

“SUPER EUROBEAT VOL.1”Jan. 21, ’90

avex rave’93

trf (currently TRF)“EZ DO DANCE”Jun. 21, ’93

Namie Amuro“CAN YOU CELEBRATE?”Feb. 19, ’97

hitomi“CANDY GIRL”Apr. 21, ’95

velfarre

Every Little Thing“Time goes by”Feb. 11, ’98

Ayumi Hamazaki“poker face”Apr. 8, ’98

Avex’s first logo

Twenty Years of Progress 22nd Semiannual Business Report

•BeganasarecordimportandwholesalebusinessinMachidaCity,Tokyo

•OpenedtheAvexArtistAcademyinHarajuku,Tokyo

•Establishedholdingcompanysystem

•EstablishedAvexChinaCo.,Ltd.inBeijing,China

•OpenedOsakaSchoolofAvexArtistAcademy

•Celebratedthe20thanniversaryofAvexGroupwithanumberofspecialevents

•Achievedbiggestshareinthemusicsoftwaremarketforthefirsttime

•EstablishedtheTalentManagementDivisionwiththeaimofenhancingartistmanagement

•ImplementedstructuralreformsoftheGroupandfullycommencedvisualcontentbusinessandbusinessdevelopmentsinAsia

•AnnouncedtheMid-termvisiontobecomethestrongestentertainmentcompanyinAsia

•Launchedmembershiponlinedistributionwebsite“mu-mo”

•Launchedafull-scaleonlinedistributionbusiness LaunchedChaku-Utaservice

•Heldfirstnationwideliveopen-airconcerttour,“a-nation”

•BeganproducingJapanesemusic

•DancecompilationCD“JULIANA’STOKYO”wasabighit

•RelocatedtoMinami-Aoyama,Minato-ku,Tokyo

•Heldafreedanceevent“avexrave’93”attheTokyoDome,attracting50,000people

•Openedoneoftheworld’slargestdanceclubs,velfarre

•Beganself-distributionofpackagedproducts

•Beganover-the-countertradingofourstock

•ListedonthefirstsectionoftheTokyoStockExchange

•Adoptedthecurrentlogo(CI)

•Establishedthefirstmusicproductiondivision,avextrax

•ReleasedadancecompilationCD titled“SUPEREUROBEATVOL.1”

★ The accounting standards have changed since this consolidated accounting year. The � gures for the previous terms are listed only for reference.

435

1,221

3,075

386 497

2,054

04

Semiannual Financial Highlights

Semiannual Financial Highlights

Operating Income Ordinary Income

Interim Net Income Interim Net Income Per Share

According to a survey by the Recording

Industry Association of Japan (RIAJ), the

value of recorded music, including music

videos, produced during the period from April

2008 to September 2008 decreased by 1.9%

from the same period last year.

In the online distribution market, the most

recent data shows that sales for fee-based

online distribution during the period from

April 2008 to June 2008 increased by 27.7%

from the same period last year, according to

another RIAJ survey, indicating the expansion

of this market is continuing steadily.

RIAJ figures also indicate overall sales of

DVDs during the period from April 2008 to

September 2008 decreased by 6.2% from the

same period last year. Sales of next-generation

Blu-ray Discs, however, have been on the

increase, and the visual contents market is

expected to grow rapidly in the future.

Against this backdrop, driven by increased

sales of packaged music of major artists and

brisk sales of concer t merchandise, the

Group’s consolidated sales and operating

income for the six months ended September

30, 2008 respectively stood at 56.323 billion

yen (a 23.7% increase on a year-on-year

basis) and 3.075 bi l l ion yen (a 151.8%

increase on a year-on-year basis).

3,500

3,000

2,500

2,000

1,500

1,000

500

0

Sales

Cost of sales

Gross profit

Selling, general and administrative expenses

Advertising expenses

Sales promotion expenses

Employee salaries and bonuses

Others

Operating income

Non-operating revenues

Interest income

Dividend income

Others

Non-operating expenses

Interest expenses

Investment loss by equity method

Others

Ordinary income

Special profits

Gain on revision of previous year’s results

Gain on reversal of allowance for shareholder special benefit

Reversal of allowance for closing of businesses

Return of lease payments due to closing of busineses

Gain on adjustments to balance sheet accounts for the previous fiscal years

Others

Special losses

Loss on sale and disposition of fixed assets

Loss on revaluation of investment securities

Impairment losses

Others

Net income before income taxes and minority interests

Income taxes—current

Income taxes—deferred

Minority shareholders’ income (loss)

Net income (loss)

■ Operating Income/Ordinary Income

56,323

45,54541,437

60,000

50,000

40,000

30,000

20,000

10,000

0

■ Sales

Consolidated Statement of Income Consolidated Performance(Unit: millions of yen) (Unit: millions of yen)

Reference: Interim period ended September 30, 2007

Interim period ended September 30, 2008

From April 1, 2007through September 30, 2007


45,545

29,489

16,056

14,835

4,878

824

2,827

6,304

1,221

110

25

7

77

835

271

450

113

497

381

—

—

142

113

68

56

262

7

186

—

67

615

151

772

(54)

(254)

56,323

37,022

19,301

16,226

4,908

851

2,977

7,487

3,075

59

17

16

25

1,080

358

627

94

2,054

104

39

29

—

—

—

34

116

10

72

32

0

2,041

1,198

462

(88)

468

20th Interim

20th Interim

21st Interim

21st Interim

22nd Interim

22nd Interim

10.91

(12.19)(5.92)

1,500

1,000

20

500

10

00

-500-10

-1,000 -20

■ Interim Net Income/Interim Net Income Per Share

(523) (254)

468

20th Interim 21st Interim 22nd Interim

(yen)

★ The accounting standards have changed since this consolidated accounting year. The � gures for the previous terms are listed only for reference. 05

82,318

98,167722.54 734.42

103,352742.87

31,137 32,100 32,443

22nd Semiannual Business Report

40,117

29,194

69,312

32,223

4,229

5,001

28,460

(5,468)

30

112

(82)

250

307

32,812

102,124

38,078

32,830

70,909

31,832

4,229

5,001

28,070

(5,468)

69

173

(103)

326

215

32,443

103,352

Assets

Current assets

Fixed assets

Property and equipment

Intangible fixed assets

Investments and other assets

Total assets

Liabilities

Current liabilities

Long-term liabilities

Total liabilities

Net assets

Shareholders’ equity

Common stock

Capital reserve

Accumulated earnings

Treasury stock

Valuation and translation adjustments

Net unrealized again on available-for-sale securities

Foreign currency translation adjustments

Stock warrants

Minority shareholders’ interests

Total net assets

Total liabilities and net assets

Cash flow from operating activities

Cash flow from investing activities

Cash flow from financing activities

Foreign exchange differences on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Increase (decrease) in cash and cash equivalents due to changes in the scope of consolidation

Cash and cash equivalents at the end of the interim period



Reference: End of the previous consolidated accounting year

Reference: End of the previous consolidated accounting year

End of this interim period End of this interim period



As of March 31, 2008 As of March 31, 2008As of September 30, 2008 As of September 30, 2008

45,819

56,305

35,004

1,236

20,064

102,124

47,387

55,965

35,058

1,095

19,811

103,352

Consolidated Balance Sheet (Unit: millions of yen)

Consolidated Statement of Cash Flows (Unit: millions of yen)

(668)

(396)

1,734

55

724

6,371

(4)

7,091

730

(816)

2,538

(37)

2,416

10,093

—

12,509

Total Assets Net Assets

120,000

100,000

80,000

800

60,000

600

40,000

400

20,000

200

0 0

■ Changes in Total Assets/Net Assets (Unit: millions of yen) ■ Changes in Net Assets Per Share (Unit: yen)

22nd Interim21st Interim22nd Interim21st Interim20th Interim 20th Interim

Kumiko Aizawa

Seara KojoYusaku Kiyama

Satomi Takasugi

TRIPLANE

moumoon

Hisayo Inamori

Kunio Tago

BoA

MAY

UZUMAKI

2BACKKA

Ayumi Hamasaki

Hiroki Maekawa

RUSHMORE

Every Little Thing

Makoto Saito

Tomiko Van

misono

LOVE

Ai Otsuka

THE LOOSE DOGS

hitomi

GIRL NEXT DOOR

Tadashi Hirosawa

miray Shion Miyawaki

Good Dog Happy Men

Kumi Koda Maki Goto

Tokyo Purin

mink

SEAMO

URATA NAOYA

SHORT LEG SUMMER

BOO BEE BENZ

TRF

AAA

TenjochikiJ-Min Ami Suzuki

TOHOSHINKI

BRIGHT

m.o.v.e

TSUYOSHI nangi mihimaru GT

Do As In� nity

T h e F a c e s

A r t i s t s M a n a g e d b y A v e x G r o u p

Major artists managed by Avex Group, including CD releases and online distribution(As of September 30, 2008) (In Japanese alphabetical order)

Artists for whom Avex

Group conducts

management only

★ For details, please refer to Avex’s entertainment portal website. http://avexnet.jp/06

Artists Managed by Avex Group

07

Shidou Nakamura Koyuki Shinobu Otake Saki Takaoka Ryo Ishibashi

Ami Suzuki Yuri Nakamura Narumi Konno Mitsuki Ooishi Misako Uno Miho Kanazawa

GIRL NEXT DOOR Hiroki Aiba Aki Shibuya Miho Sugiura Maimi Okuwa

Kazuma Yamane Sawa Yamaguchi Hiroya Matsumoto Rina Okamoto Rihoko Shimomiya Tomokazu Yoshida

Erika Ami Takeishi Sairi Itoh Shion Umezawa(Child star)

Tohko Miura(Child star)

Kumi Takeshita

Mai Masaki Miro Ebato(Newcomer)

Misaki Yonemura(Newcomer)

Manami Enosawa(Newcomer)

Mizuki Sashide(Newcomer)

Ai Sugiura(Newcomer)

ZOE(Newcomer)

Rina Saito(Newcomer)

Yurika Tanaka(Newcomer)

Shota Miyazaki(Newcomer)

Kazushi Murakami(Newcomer)

Daisuke Miura(Professional baseball)

Hiroyasu Shimizu(Speed skating)

Yu Darvish(Professional baseball)

Yudai(Kickboxing)

Keisuke Honda(Soccer)

SEAN(Beach debut producer)

Sekijyo Kaneda(Calligrapher)

T h e F a c e s

Ta l e n t s M a n a g e d b y A v e x G r o u p

Major artists and sports personalities managed by and contracted to Avex Group(As of September 30, 2008)

TalentsSports

&Culture

★ For details, please refer to Avex’s talent portal website. http://aei-geinou.jp/index.html

Fumie Suguri(Figure skating)

Talents Managed by Avex Group 22nd Semiannual Business Report

Nanase Aikawa

AFRA & INCREDIBLE BEATBOX BAND Aly & AJ

AOKI takamasa

RIKI

Hibiki Inamoto

AA=

AKANE

Namie Amuro

UNCHAIN

Eriko Imai (elly)

AKINA

ala

Takako Uehara

EXILE

Ak'SenT

alan

Yuko Ando

UKAWANIMATION!

NG HEAD m-flo

Acid Black Cherry

ARIA

Yuko Ishida

ASIA ENGINEER

Itsco“E” qual

ASIAN2

ELLIOTT YAMIN Shinichi Osawa (MONDO GROSSO)

T h e F a c e s

A r t i s t s o n t h e A v e x L a b e l

Major artists whose CD releases and online distribution are managed by Avex Group(As of September 30, 2008) (In Japanese alphabetical order)

08

Artists on the Avex Label

Lisa Ono

COLOR

Q;indivi

Kumiko

COIL

Aural Vampire

Tsuyoshi Kawakami and His Moodmakers

Cutie Mommy

kotringo

Ari Onishi

OLIVIA

kiyo

CLARABELL

Hideaki Konno

Ai Okumura

GANGA ZUMBA

KIRITO

Katie MeluaKei

Hatsune Okumura

KATTENI-SHIYAGARE

KAT Caravan

Seikyo Kim

KEN THE 390

Misako Sakazume Ryuichi Sakamoto

Ossan

kannivalism

Genki Rockets

Natsu Kai

Yutaka Sado

camino

★ For details, please refer to Avex’s entertainment portal website. http://avexnet.jp/ 09


SPEEDSPEECH

the pillows

C-999

J

JAMOSA

JONTE

THE CHILL

J Soul Brothers

Janne Da Arc sweetbox

The Phanky OKstra

the do-nuts

Hitomi Shimatani

Jesse McCartney

GEORGE

Swing Out Sister sugiurumn

THE YOUNG PUNX!

THE BACILLUS BRAINS

SUGARCULT

the generous

Jonas Brothers

schadaraparr

THE REBOOT

Shin Seung Hunshuji

Jackson vibe

SUPER JUNIOR

ZAN

THE BLACK GHOSTSTHE BOOM

JANEL

GTS

10


Soma

Hiroshi Tamaki

Akira Terao

Dave Rodgers

twenty4-7

SLY MONGOOSE Song for Memories

DA PUMP

D

DE DE MOUSE

TOKYO SKA PARADISE ORCHESTRA

Seventh Tarz Armstrong

Katsunori Takahashi

Demon Kogure

TOKYO No.1 SOUL SET

Tackey & Tsubasa

Nobuyuki Tsujii

D’ERLANGER

Tokyo 60 WATTS

Sembello

Shinji Tanimura

Anna Tsuchiya Tiesto

DJ EMMA

Asako Toki Joji Tokoro

SOFFet

Nana Tanimura

DJ OZMA

Dream

Tomita Lab Keisuke Toyama TRICERATOPS



Miyuki Hatakeyama

Vanessa Hudgens

Mai Fukui

MICRON’STUFF

Honey L Days

PANG

FAT PROP

Toko Furuuchi

Miley Cyrus

BAZRA

HITOE

V6

My Little Lover

dorlis

100s

Fantastic Plastic Machine

PLAIN WHITE T’S

Noriyuki Makihara

BACK-ON

Ataru Nakamura

Hilary Duff hiro/Coco d’Or

5050

Nanase Hoshii

MAX

Vanilla Mood

Natural Radio Station

FERRY CORSTEN

BOREDOMS

MASH

Ai Haruna

Fukumimi

Ken Matsudaira

12


MEGARYU

Yokai Project

LISA

LEZ ZEPPELIN

Kayoko Mine

MONKEY MAJIK

YOJI BIOMEHANIKA

lecca Leyona

Dan Miyakawa

Luxis

Rickie-G

LOW IQ 01

Kazuyuki Matsumoto

Kazufumi Miyazawa Yayoi

RASCAL FLATTS Remark Spirits

Rockamenco

Daichi Miura

you U-DOU & PLATY

LOVEFIXER

RYO the SKYWALKER

YMCK Masaya Wada Warp-generation

Alisa Mizuki Yutaka Mizutani

Lambsey

Ryohei

Marie Digby

LUNASEA

WRENCH



14

L i n e u p

V i s u a l W o r k s

The main visual works

A spectacular action adventure film joint ly produced by John Woo, the director of “M:I-2,” and the “Pirates of the Caribbean” team, this 1,800-year-old legend of love and courage has finally been brought to the big screen. Hollywood giant, John Woo, who also directed the 10 billion-yen film, spent

18 years developing the concept. As a result, despite those who said it would be impossible to film, the Battle of Red Cli f f, the most famous bat tle in the Three Kingdoms story, has been finally been made into a movie that features state-of-the-art technology and draws upon the expertise of Hollywood’s best.

“Red Cliff Part I”

The film based on wildly popular TV series “Sex and the City,” which was and still is beloved by women all over the world and even extended beyond the screen to become a kind of social phenomenon. What happened to the

characters after the happy endings of the final season? Four years after the series end, the movie picks up the story of the world’s four most famous New Yorkers, featuring the original cast plus Jennifer Hudson of “Dreamgirls.”

“Sex and the City: The Movie”

★ For details, please refer to Avex’s visual works portal website. http://avexmovie.jp/

©2008 Three Kingdoms Ltd. ©Bai Xiaoyan

SEX AND THE CITYTM is a registered trademark of Home Box Office, Inc. Sex and the City ©2008 IFP Westcoast Erste GmbH & Co. KG.TM New Line Productions, Inc. Supplementary Material Compilation ©2008 New Line Productions, Inc. All rights reserved. “Dolby” and the symbol are trademarks of Dolby Laboratories Licensing Corporation.

©DRM Media, GOLDENTHUMB

©feng/Shiritsu Amitie Gakuen Tozanbu 2008

©2009 “Waiting for Goods News” production committee

©“Shugotenshi” production committee

©2008 Walker George Films (Young at Heart) Limited.

“Bad Love—Ai ni oborete” is a new drama series which sees Kwon Sang Woo —who achieved longstanding popularity in the Korean TV d r a m a s “ S t a i r w a y t o Heaven” and “S ad Love Story”—back in a starring r o l e a f t e r a t h r e e - y e a r break. The story follows the l i v e s o f t wo men and a woman as they attempt to hold on to love they believe

in. Said to be the greatest story of love and hate in history of Korean TV, it also features Kim Sung Soo (“Full House”) and Lee Yo Won (“Surgeon Bong Dal Hee”) and was written by Lee Yu Jin (“Phoenix”).

Sales of the original game reached 50,000 units and the animation was the most reproduced video on the “N i cor a j i ” s ec t ion o f popu l a r Japanese video sharing website, Nico Nico Douga. Firmly placed in the “Tsundere” genre (a story that has as i ts main protagonist an archetypal Japanese character who starts off with a conceited, spiky and combative personality but eventually discovers the value of modesty and caring for others), this wildly popular

romantic adventure game became an animated TV series that scored a huge coup when it landed Aya Hirano, Japan’s most popular anime voice actor, and the reigning queen of Tsundere, Rie Kugimiya. A fresh, new romantic comedy that follows the unique cast of characters through their times of joy, sadness and (sometimes) delusion.

This entertaining f i l m h a s b e e n brought to us by the director and team responsible for the blockbust-er film “Kisaragi.” A l a c k l u s t e r m i d d l e - a g e d man falls in love at first sight with

a neatly dressed high school girl on his way to work one day. To protect her from the rampant evil in the world, he transforms himself into a hero. Can he save her? How will this romance play out? Cast members include Cunning Takeyama, Kuranosuke Sasak i , Shinjiro Atae (AAA), Shinobu Terashima.

“Young@Heart” is the story of a c h o r u s g r o u p with the average age of 80 based in a small United States city. The t w i s t ? T h e y p e r f o r m t h e s o n g s o f r o c k b a n d s l i k e

C o l d p l a y, S o n i c Yo u t h a n d R a d i o h e a d . T h i s documentary focuses on the six weeks before the groups’ big live concert and provides an inspiring look into the world of a group of people who believe “Singing is living, living is singing.” A feel-good movie that has aroused a lot of attention.

T h e J a p a n L o v e S t o r y Aw a r d c o - sponsored by TAKA-R A JIM A SH A In c . and the Avex Group is a li terary award that created a buzz when it was launch-ed by o f fe r ing to m a k e t h e p r i z e -winning work into a

film. The movie based on the first winner is finally about to be released. “Kafu” means “good news” or “happiness” in the dialect of Okinawa, where this moving story, likely to bring a tear to the eye, is set. Cast members include Tetsuji Tamayama, MAIKO, Ryo Katsuji, Saki Takaoka and Ikki Sawamura.

“Bad Love—Ai ni oborete”(Korean TV drama)

“Akaneiro ni Somaru Saka”(TV animation)

“Kafu wo Machiwabite (Waiting for Good News)”(Scheduled for theater release)

“Shugotenshi (Guardian Angel)”(Scheduled for theater release)

“Young@Heart”(Released in theaters in November 2008)

Visual Works

15

News & Topics 22nd Semiannual Business Report

N e w s & T o p i c s

The Avex Group and NTT DOCOMO INC. have decided to establish a joint venture, Avex Broadcast ing & Communicat ions Inc., to develop video content and distr ibute it via mobile phones.

The mobile phone has grown far beyond its or iginal role of a communicat ions device, becoming a personal media player for every day use. Mobi le content, inc luding music and games, forms a tremendous market. Demand for video content is expected to grow sharply with innovations in both telecommunications infrastructure and handsets.

Ex is t ing v ideo d is t r i bu t ion bus iness , however, mainly deals with content developed for cinema and DVD, with only a small amount

developed solely for the mobile platform. It can therefore be said that the mobile video content market is still in its early stages.

The new company wi l l c reate content primarily designed to be viewed on a small screen, which assumes a viewing style that is completely dif ferent to that adopted for the existing video media such as � lm and television. The medium by which the content is to be viewed will inform everything from the planning, scriptwriting, editing and � lming.

Drawing up on Avex’s longstanding expertise i n v i d eo p ro d u c t i o n c o m b ine d w i t h ou r experience in ar t ist management, the new company will mainly create original music-related content featuring ar tists like Ayumi

Hamasaki and EXILE. In addition, the company has agreed to form par tnerships with f ive companies, including Fuji Television Network Inc., which will create content for viewing via outlets other than their own. The joint venture will actively seek the establishment of other collaborative relationships with leading video production partners for the creation of suitable content.

Avex Broadcasting & Communications Inc. will be established in February 2009 and the service will be launched in March, 2009. The new service will provide a completely new way to enjoy video, so please watch out for it!

Plans for the launch of video content creation and distribution services for mobile phones in collaboration with NTT DOCOMO

Tentative name of the new service: BeeTV

We held the 21st regular General Shareholders Meeting at Saitama Super Arena (Saitama City, Saitama Prefecture) on June 22, 2008, with 8,910 shareholders attending. This was the � rst time in Japan for a general shareholders meeting to be held in such a large venue and records were broken for both the number of participants and the attendance rate.

Following the meeting, a selection of Avex’s artists performed at a closed live concert put on especially for shareholders. To celebrate our 20th anniversary, we invited our shareholders to bring one companion to the concert, resulting in an audience that numbered approximately 15,000. Performances were given by 12 artists, a record number for a closed live concert put on for shareholders. The artists’ names were (in Japanese alphabetical order) Namie Amuro, alan, EXILE, Ai Otsuka, Sekijyo Kaneda (calligraphist), Yusaku Kiyama, Kumi Koda, Maki Goto, TRF, TOHOSHINKI, Noriyuki Makihara, and mihimaru GT.

In line with our previously expressed approach, that “we consider general shareholders meetings to be valuable opportunities for dialogue between shareholders and management and make special arrangements to ensure that as many shareholders as possible can attend these meetings,” we have held all of our regular general shareholders meetings on a Sunday since we went public in 1998. This attitude, we believe, along with our other ongoing activities, has resulted in the kind of comments as “A shareholders meeting on Sunday is synonymous with Avex” and “Avex is a company that cares about each of its shareholders.”

Held the largest-ever General Shareholders Meeting at Saitama Super Arena

Regular shareholders meeting

Namie Amuro Kumi Koda

EXILE

16

News & Topics

As part of its 20th anniversary celebrations, Avex Group staged an original musical “Kokoro no Kakera” at Aoyama Theater in Tokyo in the second half of September 2008.

Avex consol idated i ts exper ience and enhanced i ts capabilities in concert production with the establishment in April 2005 of Avex Live Creative Inc., which specializes in the planning, production and staging of concerts and other events. The Group has also been exploring other possibilities in the area of live entertainment, for example, by bringing popular Broadway entertainers the Blue Man Group to Asia for the � rst time.

“Kokoro no Kakera” was developed and staged as a celebration of Avex Group’s unique character and history. With a cast that included Ami Suzuki and Takahiro Nishijima of AAA along with other Avex artists, the performance featured many of the hit songs that have been released by the Group over the last 20 years.

In these days where digital reigns supreme, Avex Group will continue to bring audiences the fun and excitement of live entertainment.

Guan Zhe, an artist signed with our Beijing-based subsidiary, Avex China Co., Ltd., had the honor of singing four songs at the Closing Ceremony of the Beijing Olympics. He was joined onstage by a popular female Chinese singer.

Guan Zhe, who hails from Jilin Province, signed his � rst contract with Avex China in 2008 and released his debut CD in April of that year. One of the songs on that CD was submitted to the Beijing Olympic Songs project organized by the Beijing Organizing Committee for the Games of the XXIX Olympiad to select performers for the Closing Ceremony. Guan Zhe was selected from out of 70,000 applications for the quality of both his song and voice.

T h e t wo s o n g s p e r fo r m e d a t t h e ceremony, “Beij ing Zhu Fu Ni” (Beij ing Blesses You) and “Beijing, Beijing, Wo Ai Beijing” (Beijing, Beijing, I Love Beijing) were writ ten by the singer, with music composed by musical adviser to Avex China, Keisuke Kikuchi, a producer and composer who is active in the Chinese music industry.

On September 6, 2008, JULIANA’S TOKYO, the legendary nightclub that commanded the city’s dance scene in the early 1990s, was revived for one night at Differ Ariake in Ariake, Tokyo. The event titled “CLUB LEGEND” was staged as part of a special project by Avex Group to celebrate the great

dance spots of days past by staging one-night revivals at various Tokyo venues. JULIANA’S TOKYO was chosen to launch the project, with similar revivals planned for other clubs including Twin Star and MAHARAJA.

The original look was recreated both inside and outside the venue, with a stage, chandeliers and stunning entrance. The event attracted around 13,000 guests, dressed in skimpy out� ts and holding colorful retro “JULI-sen” fans. With eager partygoers lining up to get in even before the doors opened, unfortunately some had to be turned away due to lack of space.

Avex will help keep Tokyo’s dance music scene pumping with various other projects and events in the future.

In August 2008, the Avex Group established a film fund to produce films for the Asian market, including the growing C h i n e s e m a r ke t , i n p a r t n e r s h i p w i t h M e d i a A s i a Enter tainment Group, one of Hong Kong’s leading film production and distribution companies.

With the growing acceptance in Asia and East Asian countries in particular—including China, Hong Kong, Taiwan, South Korea and Japan—of the entertainment produced by their neighbors, cross-border hits have been produced in the areas of music and � lm among others.

A g a i n s t t h i s b a c k g r o u n d , w e h a v e a d o p t e d a co-production model as the core strategy of our international visual content business, with the aim of producing pan-Asian hits in collaboration with influential partners in various regions. As part of our efforts under this strategy, we have also set up a � lm fund in collaboration with one of Asia’s top � lm producers, Bill Kong, in March 2008 to provide support for up-and-coming directors. In addition, we plan to secure a base in Hong Kong—arguably the heart of the Asian film industry—from which to co-produce films that have a wide appeal to Asian audiences in partnership with the Media Asia Group, one of the most powerful and in� uential entertainment groups in Greater China.

Commemorating 20 years of Avex with musical “Kokoro no Kakera”

Avex China’s Guan Zhe performed at the Closing Ceremony of the Beijing Olympic Games

One-night revival of JULIANA’S TOKYO

Avex established a � lm fund with Media Asia, a leading Hong Kong � lm studio

17

Avex Entertainment Inc.

Velfarre Entertainment Inc.

Midea Inc.

PiX Inc.

Avex Marketing Inc.

Para. TV Inc.

Hatch Entertainment Inc.

Avex Live Creative Inc.

Avex Planning & Development Inc.

Avex Management Service Inc.

Avex Asia Holdings Limited

Avex Hong Kong Limited

Avex Taiwan Inc.

Avex China Co., Limited

Avex Hawaii, Inc.

Label Mobile Inc.

Memory-Tech Corporation

avex & East, Inc.

Dwango Co., Ltd.

Chengtian Entertainment Group (International) Holding Company Limited

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Corporate name

Avex Group Holdings Inc.

Head office location

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

Date of establishment

April 11, 1988

Capital

¥4,229.6 million

Number of employees

178 (1,322 employees within the Avex Group)

Note: Temporary employees are not included in the number of employees.

Board of directors

Masato Matsuura CEO

Ryuhei Chiba Co-CEO

Takashi Araki COO, Senior Executive Director

Toshio Kobayashi CFO, Senior Managing Director

Shinji Hayashi CIO, Senior Managing Director

Hiroshi Inagaki Managing Director

Hisahiko Iida Managing Director

Hajime Taniguchi Managing Director

Katsuro Oshita Managing Director

Hiroyuki Kishi Managing Director

Shin Ushijima Outside Director

Minoru Onozato Outside Director

Nobuo Kawakami Outside Director

Shinkichi Iwata Full-time Auditor

Kenji Nomura Full-time Auditor

Toshiaki Katsushima Outside Auditor

Akihiro Tamaki Outside Auditor

Operating officers

Kenzo Katakura

Takahiro Miura

Akihiro Terada

Tomoaki Sato

Yuko Suzuki

Masahiro Anan

Entertainment Informationhttp://avexnet.jp/For entertainment information, such as Avex artists and online distribution of music and visual content, please visit the above URL.

Company Information

http://www.avex.co.jp/For more information on Avex Group Holdings Inc., group companies, press releases, and financial statements, visit the above URL.

Website

Avex Group’s organizational chart (As of November 1, 2008)

Company Outline

O u t l i n e o f t h e C o m p a n y(As of September 30, 2008)

Outline of the Company 22nd Semiannual Business Report

18

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

Note: The company owns 3,213,034 treasury shares, and the number of outstanding shares (excluding treasury shares) is 42,944,776.

Mar. 2006 Mar. 2007 Mar. 2008Sep. 2006 Sep. 2007 Sep. 2008

Total 46,157,810 shares

Notes:•Inadditiontotheabovetable,thereare3,213,034treasuryshares(6.96%)ownedbytheCompany.•CEOMasatoMatsuuraandSeniorManagingDirectorToshioKobayashiserveasrepresentativedirectorsofMax2000Inc.andT’SCapitalInc.,respectively.

Shareholder’s name Number of Shares

3,074,600 shares

2,244,824 shares

2,244,818 shares

1,405,179 shares

1,150,000 shares

1,150,000 shares

1,023,000 shares

966,000 shares

920,000 shares

919,400 shares

The Master Trust Bank of Japan, Ltd. (Trust account)

Masato Matsuura

ToshioKobayashi

DeutscheBankAGLondon610

Max2000Inc.

T’SCapitalInc.

JapanTrusteeServicesBank,Ltd.(Trustaccount)

BankofNewYorkGCMClientAccountJPRDACISG(FE-AC)

DaiichikoshoCo.,Ltd.

JapanTrusteeServicesBank,Ltd.(Trustaccount4G)

Authorizednumberofshares

Number of shares outstanding

Oneunitofshares

184,631,000 shares

46,157,810 shares

100 shares

6.96%

20.91%

2.62%

8.61%

14.05%

46.84%

0.00%

0.13%

0.09%

0.50%

0.32%

98.97%

3,213,034

9,653,868

1,210,013

3,973,204

6,485,795

21,621,896

[Number of shareholders]

[Number of shares]

Total 40,649

1

52

35

203

129

40,229

26,233 25,593

33,81035,382

40,716 40,649

Stock Information

Number of Shareholders

Distribution of Shareholding

Top Ten Shareholders

Number of Shareholders and Shares by Region

S t o c k D a t a(AsofSeptember30,2008)

Total 40,64946,157,810 shares

Chugoku region3.86%1.24%

Kyushu region3.55%1.07%

Shikoku region2.30%1.02%

Kinki region18.08%6.26%

Kanto region54.27%71.30%

Overseas0.26%

13.93%

Chubu region14.28%4.24%

Tohoku region2.26%0.63%

Hokkaido region1.12%0.31%

457 144,477 shares

107 6,428,344 shares

5,806 1,958,852 shares

22,05932,911,172 shares

918 291,346 shares

1,571 572,322 shares

1,445491,951 shares

936471,034 shares

7,3502,888,312 shares

Treasury stock

Financial operators

Domestic corporations

Foreign investors

Treasury stock

Domestic securities companies

Financial operators

Domestic corporations

Foreign investors

Japanese individuals and others

Japanese individuals and others

Domestic financial institutions

Stock Data

19

Memo for Shareholders

Important Information Concerning the Implementation of the Electronic Share Certi� cate System to Be Enforced on January 5, 2009

ART DIRECTOR & DESIGNER Masaki Maekawa Design Office EDITOR AVEX PLANNING & DEVELOPMENT INC. PRINTING DIRECTOR TAKARA PRINTING CO.,LTD. ©AVEX GROUP HOLDINGS INC.

(Notice) Regarding the share transfer agents of the administrator of the shareholder registryFollowing the implementation of the electronic share certi� cate system, the various procedures related to shareholder transactions will be conducted, in principle, by the securities company with which you have an account. For this reason, the system of share transfer agents of the administrator of the shareholder registry will be terminated when the new system is launched.

Mitsubishi UFJ Trust and Banking Corporation, our shareholder registry administrator, will continue to distribute dividends which have not yet been received from its head and branch offices.

1. Special account

(1) Recording of account balances in a special account

Shares owned by shareholders who do not use the central securities custody and book-entry transfer system (JASDEC) will be recorded in a special account to be opened at Mitsubishi UFJ Trust and Banking. (This is scheduled to be conducted on January 26, 2009). Mitsubishi UFJ Trust and Banking will send a notice of the number of shares recorded in the special account and other details to each shareholder’s registered address sometime around mid-February 2009.

(2) Procedures concerning shares recorded in a special account

Following the implementation of the electronic share certi� cate system, you are requested to direct all inquiries regarding procedures concerning shares recorded in special accounts, such as request for transfer to a shareholder’s account, request for purchase of odd-lot shares, noti� cation of change of registered address and instructions for a dividend transfer to the account manager (Mitsubishi UFJ Trust and Banking) at the contact given below. Procedures relating to special accounts will be carried out by Mitsubishi UFJ Trust and Banking at its head office and branch offices throughout the country.

(3) Special account manager

Mitsubishi UFJ Trust and Banking Corporation, as our shareholder registry administrator, will act as the account manager of special accounts.

(4) Commencement date of procedures undertaken by the manager of special accounts

Please note that requests and notifications concerning shares recorded in special accounts, such as request for a transfer to a shareholder’s account and request for purchase of odd-lot shares, will be accepted after Monday, January 26, 2009.

2. Registration of shareholder names and addresses

If shareholder names and addresses include kanji characters not speci� ed by JASDEC, all or part of such names or addresses will be replaced with characters speci� ed by JASDEC and registered as such on the list of shareholders. Please note that in these cases the characters speci� ed by JASDEC will be used when addressing notices to be sent to shareholders.

Shareholder Memo● Accountig year

● Stock exchange where Avex stock is listed

● Account manager

● Media where stock information is posted

● Administrator of shareholder registry

● Share transfer agents

● Contact

● Contact

● Regular general shareholders meeting

● Date for determining shareholders eligible for interim dividend receipt

● Date for determining shareholders eligible for year-end dividend receipt

April 1 to March 31 of the following year

First Section of Tokyo Stock Exchange (Security code No. 7860)

Mitsubishi UFJ Trust and Banking Corporation 1-4-5 Marunouchi, Chiyoda-ku, Tokyo

Via on-line noti� cationURL where stock information is posted:http://www.avex.co.jp/(Stock information is posted in the Nihon Keizai Shimbun newspaper in the event of accidents or other unavoidable incidents that make on-line noti� cation impossible.)

Mitsubishi UFJ Trust and Banking Corporation

Branches of Mitsubishi UFJ Trust and Banking Corp. (Please refer to the following notice.)

Corporate Agency Division, Mitsubishi UFJ Trust and Banking Corp.7-10-11 Higashisuna, Koto-ku, Tokyo 137-8081 TEL: 0120-232-711 (toll free)

Corporate Agency Division, Mitsubishi UFJ Trust and Banking Corp.7-10-11 Higashisuna, Koto-ku, Tokyo 137-8081 TEL: 0120-232-711 (toll free)

June of each year

September 30

March 31

For request for forms concerning shares

Please go to the website or call the 24-hour number below to request a form for procedures related to shareholdings, such as noti� cation of a change of registered address, etc., instructions for a dividend transfer or request to purchase odd-lot shares. Please note that following the implementation of the electronic share certi� cate system, only requests for forms for procedures relating to shares kept in a “tokubetsu kouza” (special account) will be responded to.

TEL: 0120-244-479 (toll free) http://www.tr.mufg.jp/daikou/

<Reference> For more information on the electronic share certi� cate system, please refer to the Q&A section of the Reform Promotion Center For Securities Clearing and Settlement System website (http://www.kessaicenter.com/kaikaku/kabuken10aa.pdf). If you cannot � nd the information you need or have speci� c inquiries, please contact the electronic share certi� cate system call center.*TEL: 0120-77-0915 (toll free, weekdays and Saturdays from 9:00 to 17:00) * The electronic share certi� cate system call center is a consultation service jointly provided by JASDEC, Japan Securities Dealers Association and Tokyo Stock Exchange Group, Inc.

Shareholder Memo 22nd Semiannual Business Report

Avex Group Holdings Inc.22nd Semiannual Business Report From April 1, 2008 to September 30, 2008

● Inquiries about this booklet

Stock Affairs Section,Group Administration Headquarters

0120-39-8550 (Weekdays: 10:00 to 18:00)

Avex Group Holdings Inc.�22nd Semiannual Business Report

From April 1, 2008 to September 30, 2008

Avex Group Holdings Inc. Avex bldg.,

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

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

This booklet uses soybean oil ink certified by the American Soybean Association.

©avex marketing

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