ANNUAL REPORT

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Columbia Music Entertainment, Inc. • Headquarters: Japan • Industry: Media and Entertainment – Music Entertainment Segment • Tokyo Stock Exchange ticker: 6791.T • Total Shares Outstanding: 260,870,117 • RHJI ownership as of March 31, 2009: 25.5% (66,503,000 shares) • Contribution price per share (March 23, 2005): JPY 118 • Closing share price on March 31, 2008: JPY 60 • Closing share price on March 31, 2009: JPY 23 Overview of Activities CME (www.columbia.co.jp) is engaged in music production and entertainment in Japan. Music production and entertainment is the production, marketing and distribution of music. CME seeks to capitalize on its substantial music catalog, which generates cash flow from the sale of its content and the continuous addition of content to the catalog to ensure it remains dynamic, both in the high-growth music genres such as Japanese- Pop/Rock as well as in Enka, Japanese country music. The Columbia brand name is one of the most widely recognized brand names in music entertainment in Japan, which helps attract new artists. CME has a strong national Japanese sales force and established relationships with leading retailers in Japan. CME also distributes music from third party labels providing both profits and additional marketing and retail strength to its operations. Key figures Condensed consolidated income statement for the fiscal year ended March 31 (1) (In millions) JPY EUR 2009 2008 2009 2008 Revenue 18,170 18,569 138.5 141.6 Gross profit 7,061 6,920 53.8 52.8 Gross margin 38.9 % 37.3 % 38.9 % 37.3 % EBITDA (43) (984) (0.3) (7.5) EBITDA margin (0.2)% (5.3)% (0.2)% (5.3)% Operating loss (693) (1,508) (5.3) (11.5) Loss from continuing operations (707) (1,627) (5.4) (12.4) Profit from discontinued operations (net of income tax) 188 292 1.4 2.2 Loss for the year (519) (1,335) (4.0) (10.2) (1) Excluding the effect of the purchase price allocation carried out in connection with the contribution of the ownership interests to the Company at March 31, 2005. Consolidated cash and financial debt for the fiscal year ended March 31 (In millions) JPY EUR 2009 2008 2009 2008 Cash 1,832 2,506 14.0 19.1 Financial debt 1,457 517 11.1 3.9 20
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW The continuous contraction of CME’s music entertainment market requires further structural reform under a new management structure During the fiscal year ended March 31, 2009, CME reported revenue of JPY 18,170 million, compared to JPY 18,569 million a year earlier. Excluding sales from Creative Core, acquired in November 2007, and contributing for a full fiscal year for the first time, CME’s revenue for the fiscal year ended March 31, 2009, amounted to JPY 15,046 million, down 11.2% compared to the previous fiscal year. Increased sales of CME’s custom sales business and the growing digital business were offset by decreasing sales from J-Pop titles as CME considerably reduced the number of J-Pop artists in an attempt to eliminate unprofitable business in a shrinking CD market. The operating loss of JPY 693 million during the fiscal year ended March 31, 2009, compared to JPY 1,508 million a year earlier, was favorably affected by the reversal of estimated royalty payments (JPY 456 million). CME’s net loss for the fiscal year ended March 31, 2009, amounted to JPY 519 million and included JPY 434 million restructuring costs associated with early termination of artist contracts and retirement allowances. business. Finally, CME is implementing a new voluntary retirement program and cutting back on its temporary work force to reduce staff by 78 people. In addition to the net loss reported in the table on the previous page, the Company reviewed the recoverable amount of certain intangible assets recorded in its consolidated financial statements following the purchase price allocation upon the contribution of CME in March 2005. In view of the deteriorated financial performance, the reduced scale of CME’s business and the uncertainty around the economic recovery and the impact thereof on CME’s business, the Company recorded an impairment charge of JPY 7,645 million in its consolidated income statement for the fiscal year ended March 31, 2009, on certain intangible assets recognized as a result of the initial purchase price allocation. This impairment charge is only recorded in the Company’s consolidated financial statements and not reflected in CME’s results shown in the table on the previous page. Throughout the fiscal year ended March 31, 2009, CME continued to implement cost rationalization measures to mitigate the effects of a declining CD market. Several structural reform measures were initiated and will continue to be implemented during the fiscal year ending March 31, 2010. Among such measures, the number of J-Pop artists was drastically reduced and the J-Pop organization was downsized accordingly. CME further sharpened its focus on historically profitable segments such as Enka music products and future growth areas such as digital music and the games business. CME rationalized its organizational structure to the scale of its business by consolidating its sales-and marketing organization and radically downsizing Creative Core’s educational software CME’s management expects to return to profitability and publicly disclosed forecasts for the fiscal year ending March 31, 2010, prepared under J-GAAP, which included sales of JPY 18,500 million, operating profit of JPY 100 million and net profit of JPY 400 million. The projected net income includes an early lease termination gain of JPY 590 million, associated with planned relocation of CME’s head office in September, 2009. 21
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PART III CORPORATE GOVERNANCE
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CORPORATE GOVERNANCE The Belgian Co
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CORPORATE GOVERNANCE The following
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CORPORATE GOVERNANCE (1997 to 2000)
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CORPORATE GOVERNANCE INVESTMENT AND
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CORPORATE GOVERNANCE Mr. Fischer ha
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CORPORATE GOVERNANCE OTHER TERMS RH
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CORPORATE GOVERNANCE STATUTORY AUDI
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PART IV SHAREHOLDERS’ INFORMATION
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Co-ordination and Production : IPAC
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ANNUAL REPORT

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