Risk Factors

(as of May 10, 2018)

This section describes the major risk factors that may have an effect on the results of operations and financial position of the Avex Group.

1. Trends in major titles, artists and talents

The Group utilizes the rights that it holds as a content owner in its various businesses. Consequently, 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.

2. 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 political or economic conditions or legal or regulatory elements, disadvantageous taxes, or social disorder caused by terrorist attack, war, or the like, it is possible that our overseas operations and performance may be affected.

3. Impairment loss

When market values of the assets held by the Group decrease significantly, or business profitability deteriorates, an impairment loss in noncurrent assets may be recorded by applying impairment accounting, which would affect the Group's businesses and financial position.

4. Fundraising

The Group raises some of the funds used to acquire real estate through borrowings from financial institutions and the issuing of bonds. If interest rates change, the Group's performance may be affected.

In addition, certain of the borrowings have a financial restriction clause. Infringement on the clause may affect the business performance and financial position of the Group. For example, the borrowing interest rate will be raised, and/or the benefit of time will be forfeited, etc.

5. Business in the digital domain

The Group is actively expanding business in the digital domain, but there is the undeniable possibility 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 competitions, or an unforeseeable problem which materializes afterwards, and this may affect the Group's performance.

6. 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 management strategies and concluding contracts with important business partners and artists. In the event that Mr. Matsuura leaves the Group for any reason, the performance of the Group may be affected.