HMV Group plc

HMV Group plc HMV Group plc

Shelley House
2-4 York Road
Annual report and accounts 2009
Maidenhead
Berkshire SL6 1SR
Telephone 01628 818300
Email enquiries@hmvgroup.com
Website www.hmvgroup.com

Annual report and accounts 2009

 Contents

G HMV comes to Live G Inspirational brands

HMV and Fopp

Our 408 specialist entertainment stores in the UK & Ireland,
Canada, Hong Kong and Singapore offer the widest range of
music, film and games in their markets, combined with a rapidly
growing range of related products. These stores and the people
who work in them strive to be always passionate and inspirational
about the products we sell, deliver great service and value and
ensure that our customers get closer to the entertainment they
love. Our local territory websites reflect our core brand virtues,
combined with direct and efficient delivery.
Waterstone’s G Overview
We operate from 314 specialist book stores, predominantly
in the UK & Ireland. Our market-leading brand is widely 1 Introduction
recognised for the breadth and quality of range offered
2 Chairman’s statement
and knowledgeable bookseller advice. Our rapidly-growing
Business and financial review:
transactional website for the UK, waterstones.com, is being
continuously enriched to assist customers in their discovery 4 Strategic review
of books, and provides useful online tools such as Ask a 8 Bringing content to life
Bookseller and the ability to collect orders and confirm stock 10 Our business and markets
availabilities at local branches. 12 Group performance

G Governance
G Engaged with customers and suppliers
Live music is of strong interest to HMV’s core customers and 18 Board of Directors
has the potential for powerful synergies with our current retail Our core brands have developed attractive loyalty schemes 20 Corporate governance
product offering. for the benefit of building long-term and profitable customer 24 Directors’ remuneration report
This year the Group took its first steps into the UK’s fast-growing relationships. The programmes we operate are truly multi- 35 Corporate responsibility
live music and ticketing market by investing in a new 50:50 joint channel, available to customers wherever and however they 40 Directors’ report
venture with MAMA Group plc, the UK’s second largest multiple choose to shop with us. In addition, product availabilities are 44 Statement of directors’ responsibilities
live music venue operator. key to our business and the quality of our customer service.
45 Independent auditors’ report to the members
We operate best-in-class systems to manage our fast moving of HMV Group plc
The joint venture company contains 11 MAMA Group live chart and deeper range inventories, and in main categories
venues, attracting around 2 million concert-goers each year. maintain high-quality, direct relationships with major suppliers.
In combination with our new in-store and online ticketing G Financial statements
offer, hmvTickets, the Group’s strategy for live music includes:
Leveraging HMV’s in-store and online traffic to market
live events 46 Consolidated income statements
48 Statements of recognised income and expense
Driving additional event-related footfall to HMV stores 49 Balance sheets
and hmv.com
50 Cash flow statements
Creating opportunities for combined merchandising 51 Notes to the financial statements
in venues, stores and online 92 Group financial record
Driving greater value from HMV’s new loyalty card through the
provision of content and access to ‘money can’t buy’ rewards.
G Additional information
93 Store directory
Front cover: Franz Ferdinand at the HMV Apollo, Hammersmith, 96 Shareholder information
London. March 2009 96 Company information

Design and production:

Radley Yeldar www.ry.com
Introduction

We made good progress in Year Two G A year of progress

of our three-year transformation plan,
by continuing to revitalise our stores
business, drive growth from new channels £1,956.7m
Total sales of £1,956.7m up 4.4% on 2008
and generate substantial cost savings
through Group efficiencies. £70.3m
Operating profit of £70.3m up 6.4% (2008: £66.2m from
Cognisant that we must adapt with the structural
continuing operations)
changes taking place in our core entertainment categories,
HMV’s product offering has further evolved. To support
these initiatives, we have continued to enhance the appeal
of our stores and the way in which our brand engages
+11.5%
Profit before tax and exceptional items up11.5% to £63.0m
with customers. Significant changes to the competitive (2008: £56.6m from continuing operations)
structure of the UK entertainment market have created
new opportunities for HMV, which we are making every
effort to maximise over the medium and long term. 11.1p
Adjusted earnings per share of 11.1p, up 10.3% on 10.1p from
Waterstone’s loyalty programme has rapidly achieved continuing operations in 2008. Basic earnings per share of10.8p
meaningful scale, enriching the knowledge we have about (2008: 22.1p)
our customers and the quality of our relationships with them.
Furthermore, our ranges of complementary and related
products are being successfully extended. 7.4p
Final dividend of 5.6p, making a total dividend of 7.4p (2008: 7.4p)
Our brands have a rapidly growing presence online, where we
have enhanced the service, content and communication provided
to customers. We have progressed our digital offerings in music
as well as books, and are positioning ourselves to grow faster in
£6.5m
Net debt of £6.5m
these and other categories.
We have maintained our focus to drive significant cost
savings by working more efficiently as a Group and with
our business partners.
In a tough economy, the Group’s financial performance
this year has been pleasing. We have made good progress
on current strategy, whilst taking our first steps beyond the
transformation plan. We expect to unfold new initiatives for
successful long-term growth, and remain resolute about
achieving our current objectives.
4

1 1

Sales by 2
Operating profit
business 2009 by business 2009
3 1 HMV UK & Ireland £1,154.6m 1 HMV UK & Ireland £53.7m
2 HMV International £253.8m 2 HMV International £6.4m
3 Waterstone’s £548.3m 3 Waterstone’s £10.0m
4 Joint venture £0.2m

HMV Group plc

Annual report and accounts 2009 1
Chairman’s statement

This is my first report to you as

Chairman of HMV Group since taking
up my appointment in February 2009.
I thought I would start with a few
first impressions.
The Group has the leading position in its markets in both
HMV and Waterstone’s. The markets for both businesses
are undergoing long-term structural change. Building from its
strengths, the Group’s Chief Executive Simon Fox and his team
set out a comprehensive plan in March 2007 to transform the
Group over three years. This requires changes in many aspects
of the businesses. It was fundamental to my decision to join
the Group that there is a senior management team in place
with the necessary open-mindedness and intensity to make
these plans a reality.
I have been impressed by the passionate commitment and
knowledge of staff at all levels of HMV and Waterstone’s.
They care about what they do and are proud of the organisations
for which they work. It will not be simple to transform the business
against the backdrop of rapid changes in digital technology,
online channels and competition from the major supermarkets.
In the absence of effective government action we must also
face up to competition from the free illegal digital market.
Nonetheless, I believe that shareholders can be reassured that Robert Swannell
the business has a determined team and a clear strategy to Chairman
enhance shareholder value, building on our clear strengths
as the only specialist retailer of scale in our markets.
The Group has had a year of pleasing financial performance,
at a time when the conditions for consumer businesses
could not be more testing. In the autumn of last year markets
were convulsed by the problems in the banking sector and
businesses suffered the greatest shock in living memory as
economies across the world headed for recession. That said,
our transformation plans set out two years ago and, in particular,
the initiatives to drive cost efficiencies have helped to underpin
this year’s resilience. A number of the strategies to protect
and revitalise our store businesses and to grow in new channels
have also made a successful contribution.

HMV Group plc

2 Annual report and accounts 2009
HMV UK & Ireland continues to make good progress in adapting
to the structural changes taking place in the entertainment
market, and has been the principal driver of this year’s improved
profit performance. HMV’s reinvigorated market positioning is
clear not only to customers of the brand today, but is pointing
towards a strategy for our engagement with them over the
longer term. The step we have made this year to invest in live
music venues and ticketing is the first beyond the current plan,
and shareholders can expect further new initiatives to follow.
The HMV International division had a more difficult year,
and here our focus is on accelerating the path to transformation.
Waterstone’s has made a robust defence of its leading high
street position against the backdrop of a difficult book market
this year, and is continuing to adapt its business online and
to differentiate itself from the competition. As it becomes
fully operational, the new book hub is expected to enhance
Waterstone’s routes to market as well as the overall financial
performance of the business.
I am, therefore, pleased to report that results for the Group
for the year ended 25 April 2009 saw a 11.5% increase in profit
before tax and exceptional items to £63.0m, on revenue which
grew by 4.4% to £1,956.7m. Our adjusted earnings per share
rose by 10.3% to 11.1p and the Board has recommended a final
dividend of 5.6p per Ordinary Share. Together with the interim
dividend of 1.8p per share, the total dividend for the year is
7.4p, the same as last year.
Shareholders should be assured by the maintenance of a strong
capital structure albeit, like all retailers with a predominantly
leasehold portfolio, we have significant inherent gearing through
our store leases. The Group successfully secured new funding
to September 2011 via a £220m revolving credit facility, which
the Board believes is adequate to meet the Group’s current
cash requirements. An equity placing of 5% of our share capital
in January 2009 was strongly supported by institutional investors,
and provided all of the funding for our new strategic investments.
At the end of the year, our underlying net borrowings were
just £6.5m.
Progress on so many fronts would not, of course, have been
possible without the commitment and experience of many
people to whom I offer my thanks: the people across our
business world-wide; and Simon Fox and his senior management Chairman
team. This isn’t just token appreciation. As I mentioned earlier, 29 June 2009
I am particularly impressed by the commitment that people
at all levels apply to their work in our businesses.
HMV Group plc
Annual report and accounts 2009
This year there have been several changes to the composition
of the Board, including my own appointment. I was delighted
to join the Group as Chairman on 2 February 2009, succeeding
Lesley Knox. On behalf of the Board, I would like to thank Lesley
for her leadership during an interim period from September 2008
after Carl Symon stepped down. As our new Senior Independent
Director the Board continues to benefit from Lesley’s experience.
The Board would also like to thank Carl for his considerable
contribution in his term as Chairman over the years from 2006,
during which Simon Fox was recruited and the transformation
plan was set out.
Roy Brown, a Non-Executive and Senior Independent Director
since the Group’s IPO in May 2002, retired from the Board
in April 2009 and I would also like to place on record the
Board’s great appreciation for his contribution and enormous
commitment to the business during this period.
I am delighted that Andy Duncan, Chief Executive of Channel 4,
joined our Board in March 2009. He brings a wealth of relevant
experience, particularly in media businesses and their online and
digital applications and in marketing and communications more
generally; this will be a real asset as we address the next part
of our strategic agenda.
In summary, this year the Group’s performance has been
robust in economic conditions that have been volatile and
negative. We have delivered profit growth in this difficult
environment and made good progress on our continuing
transformation plan. Significant steps too have been taken
to develop the business for the long term, whilst tight control
over our finances has been maintained. We know there is
a great deal that remains to be done, and that our markets
continue to undergo profound change, but we are determined
to use our inherent strengths as the leading retailer in our
markets to create an enduring and growing business.
Robert Swannell
3
Business and financial review
Strategic review

Simon Fox
Chief Executive Officer

HMV Group plc

4 Annual report and accounts 2009
Against a difficult economic environment,
the Group delivered sales and profit
growth, driven by good trading in our
largest business, HMV UK & Ireland.
The performance of both HMV International
and Waterstone’s was more adversely
impacted by weak trading conditions,
and key initiatives are underway to improve
the operating effectiveness and financial
performance of these businesses.
I am pleased to report, below, that good
progress continues to be made on the
Group’s three-year transformation plan,
such that we have been able to take our
first steps into a new, long-term strategy
to extend HMV’s brand and activities
into live music and entertainment
venues and ticketing. This is being funded
by the proceeds from a successful
5% equity placing, which raised £24m.
Combined with a new £220m bank
facility to 2011, this provides for the
maintenance of a strong and prudent
balance sheet.
G Driving cost efficiency
To date, we have delivered annual savings of £16m from the
initiatives that were laid out in March 2007.
Waterstone’s book hub, which simplifies our supply chain by
consolidating orders from multiple publishers into one delivery
per store, became operationally live in February with the
take-on of fulfilment for waterstones.com and an initial tranche
of stores. The migration of the balance of stores is expected
to be complete in the first quarter of the new financial year.
In HMV UK & Ireland, games and technology suppliers were
successfully transferred to a dedicated, centralised distribution
centre, which is enhancing availability and service levels for
these product categories.
Savings from consolidating the procurement of goods not
for resale and the consolidation of HMV UK & Ireland and
Waterstone’s back office continue to be delivered as planned.
G Protecting and revitalising our stores
G HMV
Our stores traded robustly this year, and we have continued
to evolve the mix of products to take account of the structural
changes taking place in our markets and to better reflect the
entertainment-related interests of HMV customers.
Games and technology products now represent almost a quarter
of HMV UK & Ireland’s sales, up from 20% in the prior year, and in
HMV Canada this category has increased to 12% from 7%. Our games
business in the UK and rapidly growing credentials as a category
specialist have been enhanced by the successful national roll-out
of Re/Play, a pre-played games offer. This enables customers to
trade-in software against new games titles or, uniquely among UK
retailers, any of the products sold in our stores.

4 1 4 1

3
HMV UK & Ireland’s evolving
product mix – the beginning of
the transformation plan to the
end of year two
2007 2009
1 Music 37% 1 Music 28%
2 Visual 47% 3 2 Visual 45%
3 Games and technology 14% 3 Games and technology 24%
4 Other 2% 4 Other 3% 2

HMV Group plc

Annual report and accounts 2009 5
Business and financial review continued
Strategic review continued

HMV has responded quickly to the opportunity to develop

Blu-ray, the high definition video format, which has potential to
provide value growth to the visual market. Blu-ray departments
containing a wide range of software have been rolled out
to all HMV stores, and on a number of this year’s key titles
Blu-ray’s share of the visual category has exceeded 20%.
In total, HMV UK & Ireland’s visual sales volumes grew by
7% in a market that grew 2%.
The UK music market was more resilient than expected,
with volume decline of approximately 3% last year, and HMV
UK & Ireland outperformed the market with unit sales up 5.0%.
Music is now 28% of HMV UK & Ireland’s sales, down from over
30% in the prior year. In HMV International, music still accounts
for 38% of sales and here our focus is on increasing the
representation of games, technology and related products.
The HMV ‘next generation’ store format has been rolled out
to a total 15 stores in the UK. This format contains improved
display and merchandising for the new product categories
and increased interactivity for our customers. A number of the
key features and learning were rolled out as ‘quick wins’ to all
existing stores in HMV UK & Ireland, including merchandising of
technology, clothing and other entertainment-related accessories
and books, and further opportunities have been identified for
roll out during the new financial year. We have also continued
to fit out new stores in the ‘next generation’ format, which this
year included Liverpool One and London Westfield.
HMV’s highly recognised brand and prime high street
locations are also being further leveraged to offer customers
related entertainment experiences. HMV UK & Ireland this
year acquired the assets and recruited the key personnel of
Gamerbase, the operator of a multi-player games concession in
HMV Trocadero in London. Further such pay-to-play areas have
since been opened in HMV stores in Manchester and Edinburgh,
with additional locations planned for the new financial year.
Furthermore, in partnership with Curzon Artificial Eye, operator
of the Curzon cinema chain, a new multi-screen digital cinema is
being piloted, commencing in autumn 2009, utilising non-trading
space above the HMV Wimbledon store. Some additional
cinemas may follow, depending upon the learning of the trial
and further location analysis.
As the first step in a new partnership with Orange, the leading
mobile phone operator’s products and services will be sold
in selected HMV UK stores during our new financial year,
with a focus on music, games and video mobile handsets
and services.
G Entry into live music and ticketing
The value in the music market has increasingly transferred to live
performance. This is an area of strong interest to HMV’s core customers
and has the potential for powerful synergies with our current product offering.
In January 2009, the Group announced the beginning of a new strategy to
enter the UK’s approximately £1bn live music and ticketing market, by acquiring
a 50% investment in Mean Fiddler Group, a new 50:50 joint venture with
MAMA Group plc, the UK’s second largest multiple live music venue operator.
The joint venture company contains 11 live venues, attracting around
two million concert-goers each year. These include the 5,100-capacity
Hammersmith Apollo, Edinburgh’s Picture House and Forum in London,
all of which were rebranded HMV during the year. The further venues are
London’s Heaven, Garage, Jazz Café, Borderline, G-A-Y and G-A-Y Late,
Birmingham’s Institute and Moshulu in Aberdeen.
The Group has invested an initial cash consideration of £20.0m (including
fees), with a further adjustment of up to, plus or minus, £3.3m depending
upon the profitability of the joint venture. MAMA Group’s management expertise
has been retained to operate the venues, and the joint venture will actively
consider expansion where high-quality venues become available. We believe
this is a low-risk entry strategy into the live music market, which is expected to
provide synergies of approximately £1m per annum and be earnings neutral
and cover the Group’s cost of capital in its first full year of operation.
HMV UK & Ireland also entered into a separate ticketing arrangement with
Seatem, a leading UK ticket agency, to sell tickets through our stores and
online via hmv.com to events at the joint venture and other MAMA Group
venues, as well as a wide range of other events and venues, including theatre
tickets, music and entertainment performances and some sports. By the end
of the year, dedicated hmvTickets counters had been rolled out to 25 stores.
Our entry into live music and ticketing provides significant new operational
and brand synergies, which include:
Leveraging HMV’s in-store and online traffic to market live events
Driving additional event-related footfall to HMV stores and hmv.com
Creating opportunities for combined merchandising in venues,
stores and online
Driving greater value from HMV’s loyalty card through the provision
of content and access to ‘money can’t buy’ rewards

HMV Group plc

6 Annual report and accounts 2009
Following a successful two-region pilot, HMV UK’s multi-channel G Growing revenue from new channels
loyalty card, purehmv, launched nationally after the end of the
year. The scheme targets HMV’s most loyal customers and
enables them to redeem points accumulated from purchases
made in-store or online against ‘money-can’t-buy’ rewards. An MP3 music downloads offer was launched via hmv.com,
comprised of over four million tracks, priced from £0.69 for
Following the administration of the high street entertainment single track downloads and £6.99 for albums, which are now
retailer Zavvi in early 2009, we have now acquired 25 of its stores compatible with any digital music player, including the Apple iPod.
in the UK and Republic of Ireland. These stores are located In addition, the same music catalogue is now available to stream
predominantly in towns and cities where there was no overlap for a monthly subscription of £5.99. Further enhancements were
with HMV and will deliver incremental profit. Our existing eight made to hmv.com’s search, site navigation and categorisation
Fopp stores continued to trade well. These stores offer a tailored and, during the period, sales from the website increased by
range of music, video and books from secondary retailing over 16% on the prior year.
locations, and there is potential to increase Fopp’s footprint
in the new financial year. waterstones.com is continuing to benefit from the multi-channel
loyalty card, as well as fulfilment from the new book hub, and
G Waterstone’s grew by over 60% on the prior year. The website also became
the exclusive source for UK customers to download e-books
Waterstone’s multi-channel loyalty scheme, which launched for the Sony Reader, with an encouraging consumer response
in the prior year, had by the end of the period attracted 2.8 million since the September 2008 launch.
members, exceeding our original three-year target for 1.5 million
cardholders. A significant proportion of transactions in branches
and online at waterstones.com are made through the card, G Outlook
enabling us to provide more targeted communication to
our customers.
Our related product offer was enhanced by good sales of the We are working hard to maximise both the market share
Sony Reader, a portable electronic device on which to download opportunity that has arisen from the withdrawal of competitors,
and store books in digital format, which was launched in the and the investments that have been made over the last two
UK exclusively through Waterstone’s, and we are pleased with years to improve performance.
the associated download sales of ebooks from waterstones.com. Whilst we are cautious about the economic environment,
We are also maximising Waterstone’s customers’ interest in at this very early stage in the year we are confident of our
knowledge-based games by merchandising Nintendo DS software plans for the current financial year, as well as our new initiatives
and related hardware, and high-quality gift stationery ranges have to deliver growth beyond the life of the current three-year
now been rolled out to all stores. In total, Waterstone’s related transformation plan.
products increased to 4.6% of sales from 3.1% a year ago.
Eight former Books Etc stores in London were taken on and
successfully rebranded as Waterstone’s, thereby strengthening
our representation in the capital. Waterstone’s contribution to
specialist bookselling was recognised by the industry, when it
was named both High Street Retailer of the Year and Bookselling
Company of the Year at the Bookseller Retail Awards. In addition, Simon Fox
the successful brand campaign the Writer’s Year was named Chief Executive Officer
Book Marketing Campaign of the Year. 29 June 2009
The new book hub is changing the way Waterstone’s operates
for the long term, and a number of business benefits are being
created. With the supply chain tasks removed from our stores,
our booksellers are able to focus their skills and knowledge on
customer service and sales. Enabling our stores to return books
to the hub, rather than our suppliers, allows Waterstone’s to
recycle slower moving stock within the chain, thereby reducing
returns and creating significant efficiencies for book publishers
and us. Since relocating fulfilment for waterstones.com to the
hub, our Internet sales have grown further and the number of
titles available to our customers has increased.

HMV Group plc

Annual report and accounts 2009 7
Business and financial review continued
Bringing content to life

The music, film, games and books we G Social gaming

sell play an important part in the lives of
our customers. By providing imaginative Gamerbase multi-player, pay-to-play gaming zones are being
interactive experiences, HMV and rolled out to selected HMV stores. The concept promotes social
gaming for individuals and groups and, as a driver of HMV’s
Waterstone’s are bringing this exciting games sales and customer loyalty, is a productive use of space.
content to life for our customers and
creating new opportunities for sales
and loyalty…

HMV Group plc

8 Annual report and accounts 2009
 G Neighbourhood cinema G Book-related events

In partnership with Curzon Artificial Eye, hmvcurzon aims to
bring quality, multi-screen digital cinema to the heart of local
communities via selected HMV stores. Utilising non-trading
areas of the store, the first hmvcurzon cinema in Wimbledon,
London will provide film and non-film programming in an
intimate and high quality environment and creates further
opportunities for entertainment sell-through.
Waterstone’s stores hold thousands of events each year,
ranging from events with first-time published authors to some
of the best-known celebrities in the UK today. In addition to
store events, Waterstone’s is proud to be associated with
15 literary festivals, including the Cheltenham Literary Festival,
which features approximately 400 events over its 10-day programme,
and the Bath Children’s Literary Festival. Waterstone’s also has
a full programme of children’s events and activities, with many
stores holding fun days and storytelling throughout the year.

G Live music and tickets

By extending the HMV brand into the growing live music and
entertainment market, our customers will be able as never
before to access and experience music in all of its forms via
HMV. Our new JV venues and ticketing offer provide valuable
opportunities to cross-sell merchandise packages of tickets,
CDs, download, DVDs, games and band-related merchandise.
The purehmv loyalty scheme provides a powerful database
of purchasing activity, while privileged access to events at our
venues are important rewards for purehmv loyalty card holders.

HMV Group plc

Annual report and accounts 2009 9
Business and financial review continued
Our business and markets
G Visual
33% of total Group sales
Visual (DVD & Blu-ray), remains the Group’s leading product category,
providing over 45% of HMV sales. During 2008/09, the UK market grew
by 2%, including the effect of retail capacity withdrawal, with the total market
worth over £2bn. For HMV, this remained an important growth category,
with UK volumes up 7%, reflecting strong market share gains.
In the medium term, the visual packaged media market is anticipated
to remain stable, with growth of high-definition Blu-ray offsetting a decline
in the mature DVD market. Over and above this, the total market is expected
to benefit from growth in the currently underdeveloped paid-for online
delivery channels.
G Games, technology and other
18% of total Group sales
The UK market for games hardware and software surpassed expectation
in 2008, with strong hardware growth contributing to the UK games software
market reaching £2bn. Whilst growth in 2009 has slowed, the installed console
base (excluding handheld units) is still expected to reach 18 million during
the year, with the Nintendo Wii in particular driving a broadening demographic.
Consequently, continued games software growth is anticipated, with the market
forecast to exceed £3bn by 2012. A particular characteristic of the games
market is the importance of used or ‘pre-played’ games. During the year
HMV UK developed a strong pre-played games offer, and rolled this out across
the store estate. Technology products, predominantly MP3/MP4 players and
related accessories, have also developed into an important component of the
HMV offer, representing almost 5% of HMV UK & Ireland sales for the year.
HMV Group plc
10 Annual report and accounts 2009
G Music
21% of total Group sales
As reflected in the Group’s medium-term and long-term plan, sales of music
via physical media are in structural decline. However, the physical market
remains significant, worth over £1bn, which is approximately 85% of the total
UK retail market. Furthermore, 2008/09 market performance was robust,
with market volumes down 3% for the year, although down 10% in the last
four months as retail capacity withdrawal impacted. The Group continues
to plan for over 10% per annum declines in the packaged music market,
offset in part by growth in digital distribution. Music, however, remains core
to the HMV brand, whether through the sale of product and merchandise
or via the new investments in venue management and ticketing.
G Books
28% of total Group sales
The total UK book market has a history of steady but modest growth,
although 2008/09 proved challenging, with a total market decline of 2% after
adjusting for the prior year publication of Harry Potter and the Deathly Hallows.
The outlook remains for a stable, yet highly competitive and promotional market,
inclusive of continued growth from online channels, which are anticipated to
account for a quarter of the market by 2012. An embryonic market for digital
books developed also during 2008/09, with Waterstone’s successfully launching
the Sony Reader for e-books. Although this new market is currently constrained
by a limited catalogue of digital books, the market has potential to become
up to 10% of online sales by 2012.
 G Our business and markets

G Stores and online G Competition

The Group has an attractive portfolio of 722 stores, all of The product markets in which we operate are structurally
which are: changing and, therefore, in the Group’s opinion, market
leadership is critical. In all the territories and markets in which
leasehold and located in prime retail locations
we operate we face competition from supermarkets, particularly
tailored in size to meet the requirements of local markets, but in the segment defined as new release, chart or bestsellers,
always provide the widest available ranges in core categories and from online players, which provide an extensive range.
inspiring environments in which to shop, supported by In entertainment, the market in which there is the most
knowledgeable service and advice. profound structural change, specialist retailing capacity has
been withdrawing from the market. Here, there are opportunities
for us to maximise our leading market position. In books,
As online continues to develop as a key channel to
Waterstone’s remains the market leader on the high street,
market for our product categories, the Group is making
though independent bookselling remains a more vibrant
the necessary investments to compete by replicating its
part of the market than is the case in entertainment. Online,
specialist brand credentials via transactional websites.
Amazon.co.uk is an established and clear market leader of
Recent developments include:
our product categories. As a specialist retailer, both through
55 million visits to hmv.com and 18 million to waterstones.com our stores and websites, we seek to differentiate HMV and
during 2008/09 Waterstone’s by:
integration of MP3 music downloads into the hmv.com offer, providing the widest ranges and availabilities, driven by
and launch of streaming service to access over 4 million digital best-in-class inventory management systems
music tracks on subscription
offering customers superior product campaigns utilising
waterstones.com migrated to in-house fulfilment for enhanced high-quality merchandising skills, direct supplier relationships
customer service and range expertise
early entry into emerging market for e-books for download the authoritative product knowledge and advice offered
via waterstones.com by our employees
provision to our customers of added value experiences,
including special events to meet artists and authors and
G Economic environment
to attend live performances at our stores
During the year under review, the Group has faced challenging
innovative CRM to drive and maintain customer loyalty,
economic conditions in all of the geographical territories in
including in HMV UK access to rewards which are not
which it operates. The Group is not immune to macro economic
usually available for purchase.
trends: a significant proportion of our sales are made on
impulse, meaning footfall on the high street is an important
driver; and the products we sell can be deemed to be
‘discretionary’. However, our businesses and product markets
exhibit the following characteristics:
the products we sell are relatively low ticket items to purchase
music, filmed entertainment, games and books are attractive
gifts. Typically, 40% of the Group’s sales and the majority of the
operating profit are made in its third financial quarter (November,
December, January), which includes the key Christmas season
many of our customers, as with our colleagues, are passionate
about, and committed to our markets, whether music, video,
games or books. Consequently, sales of our products are often
more resilient than other consumer items.

HMV Group plc

Annual report and accounts 2009 11
Business and financial review continued
Group performance

G Financial review

The period under review is the 52 weeks ended 25 April 2009,

whilst the prior period covers the 52 weeks to 26 April 2008.
Following the disposal of HMV Japan during the prior period,
the Group’s comparatives shown below exclude HMV Japan
to reflect continuing operations only, except where specified.

Key Performance Indicators 2009 2008 Growth

£m £m %

Continuing operations:
Sales 1,956.7 1,874.9 4.4%
Like for like sales – %1 (0.4)% 7.3%
Operating profit (before exceptional items) 70.3 66.2 6.4%
Exceptional items (1.7) (4.6)
Profit before tax (before exceptional items) 63.0 56.6 11.5%
Profit before tax 61.3 52.0
Discontinued activities – HMV Japan – 51.7
Adjusted basic earnings per share (continuing operations) 11.1p 10.1p 10.3%
Basic earnings per share (continuing operations) 10.8p 9.2p 17.4%
Total dividend per share declared 7.4p 7.4p
Underlying net debt2 6.5 0.2
Free cash flow3 12.3 87.4
Store numbers (continuing operations) 722 692
Average trading square footage (continuing operations) 3.77m 3.68m 2.4%
1. HMV Group’s like for like sales performance is calculated at constant exchange rates and measures stores that were open at the beginning of the previous financial year (ie open at the beginning of May 2007)
and that have not been resized, closed or resited during that time. It includes sales from internet sites and is only ever the net amount received.
2. Underlying net debt is stated before unamortised deferred financing fees.
3. Free cashflow is cashflow from operating activities after capital expenditure and net interest.

HMV Group plc

12 Annual report and accounts 2009
Total sales from the Group’s continuing operations increased
by £81.8m or 4.4% to £1,956.7m, including a 0.4% decline
in like for like sales. At constant exchange rates, total sales
grew by 2.4%. Beneficial exchange rate movements, primarily
in the Euro and Canadian dollar, increased sales by £37.7m
and operating profit by £1.7m.
Operating profit from continuing operations before exceptional
charges increased by £4.1m or 6.4% to £70.3m. The improvement in connection with the review of the combined Waterstone’s
on last year reflects the strong sales performance of HMV UK
& Ireland, partially offset by the impact of a decline in like for like of certain assets due to current market trading conditions and
sales in HMV International and Waterstone’s. The result also
reflected good management of gross margin and tight control
of operating costs, including the benefit of cost saving initiatives,
particularly Group buying synergies and the consolidation of back
office functions. The joint venture entered into in January 2009
contributed £0.2m to operating profit.
Net finance charges fell from £9.6m to £7.3m, reflecting lower
base interest rates and the annualised benefit of the prior year
HMV Japan disposal, partially offset by an increased interest
margin following the refinancing.
The profit before tax and exceptional items for continuing
operations was £63.0m, up 11.5% on the prior period.
A net exceptional charge before taxation of £1.7m (2008: £4.6m)
was incurred in the year. This included an exceptional past service
credit of £5.6m arising on changes to the Group’s defined benefit
pension scheme, partially offsetting exceptional operating costs
totalling £7.3m (2008: £4.6m). The exceptional costs were incurred
store portfolio, following the acquisition of Ottakar’s, impairment
store restructuring costs as a result of the implementation of
the Waterstone’s book hub.
Discontinued operations in the prior period, reflecting the trading
and disposal of HMV Japan, generated a profit after tax of £51.7m.
Underlying net borrowings at £6.5m (2008: £0.2m) were £6.3m
higher than last year, reflecting higher levels of capital investment
and the reversal of prior year end favourable working capital
timing differences.
The Board is proposing a final dividend of 5.6p, making a total
dividend for the year of 7.4p (2008: 7.4p).

Sales Constant
exchange Like for like
Year on year growth sales growth
2009 2008 growth1 (decline)2 (decline)
£m £m % % %

HMV UK & Ireland 1,154.6 1,079.0 7.0 6.1 1.9

HMV International 253.8 231.6 9.6 (0.5) (3.4)
Total HMV 1,408.4 1,310.6 7.5 4.9 1.0
Waterstone’s 548.3 564.3 (2.8) (3.6) (3.8)
Total continuing operations 1,956.7 1,874.9 4.4 2.4 (0.4)
Discontinued operation – HMV Japan – 61.2
Total HMV Group 1,956.7 1,936.1

Operating profit Constant

(before exceptional items) Year on year exchange
growth growth
2009 2008 2009 2008 (decline)1 (decline)2
£m £m % of sales % of sales % %

HMV UK & Ireland 53.7 41.4 4.7 3.8 29.6 28.1

HMV International 6.4 8.5 2.5 3.7 (24.0) (32.4)
Total HMV 60.1 49.9 4.3 3.8 20.5 17.8
Waterstone’s 10.0 16.3 1.8 2.9 (38.5) (40.7)
Share of post-tax profit of joint venture 0.2 –
Total continuing operations 70.3 66.2 3.6 3.5 6.4 3.8
Discontinued operation – HMV Japan – 0.1
Total HMV Group 70.3 66.3
1. Year on year growth for the 52 week period compared with the corresponding period last year is based on results translated at the actual exchange rates being the weighted average exchange rates
for the year ended 25 April 2009 and year ended 26 April 2008 respectively.
2. Constant exchange growth for the 52 week period compared with the corresponding period last year is based on the weighted average exchange rates for the year ended 26 April 2008.

HMV Group plc

Annual report and accounts 2009 13
Business and financial review continued
Group performance continued

G Operations G HMV International

HMV International now comprises 129 HMV stores in Canada
and seven stores in Hong Kong and Singapore, with HMV’s
G HMV UK & Ireland business in Japan sold in August 2007 and disclosed as a
discontinued operation in the comparative period.
HMV UK & Ireland, operating through 272 stores and online,
traded well with total sales at statutory exchange rates up Sales were £253.8m, a decrease of 0.5% on last year at
by 7.0%, including like for like sales up 1.9%. The year was constant exchange rates, including like for like sales down
characterised by significant volatility in HMV’s markets, with a 3.4%. Total reported sales growth was 9.6%, reflecting beneficial
solid first half being followed by difficult conditions as the credit exchange rate movements. The year reflected a solid first
crisis deepened, leading to the failure before Christmas of half performance, with like for like sales up 1.7%, followed
Woolworths, followed by specialist competitor Zavvi. Total sales by a significant deterioration in trading conditions as the
growth was boosted by: the acquisition of 19 ex-Zavvi stores world-wide economic crisis impacted, particularly in Hong Kong
(14 in the UK, five in Ireland) from the administrator for £2.0m, and Singapore, where our largest stores are located in the
including stock; a further six former Zavvi stores secured directly financial district.
from landlords; and a strong contribution from seven Fopp stores
Market share performance was strong throughout, albeit against
acquired plus one new opening in the prior period. Like for like
weak underlying markets, particularly music. The sales strategy
sales performance further benefited from underlying market
has focused on developing the games and technology offer
share gains, the withdrawal from the market of significant retail
(up to 12% of sales from 7%) to reduce the historically high
capacity and continuing growth in hmv.com.
mix of music sales, which remain 38% of sales (from 43%).
Market share increased in all product categories. Games and Visual sales remain the predominant category, at 46% of the
technology continued to be the key growth category in the mix and continue to evolve towards the growing Blu-ray format.
period accounting for 24% of HMV’s sales, up from 20% in
During the period HMV Canada opened eight stores and resited
the prior period. In a buoyant games market, HMV gained 0.4%
a further five stores. One store was closed in Hong Kong.
share, and sales performance also benefited from the successful
roll-out from the Autumn of the ‘Re/Play’ pre-played games Overall, the operating profit of HMV International fell to £6.4m,
offer. In music (28% of sales), the market was more robust reflecting the like for like sales decline and the higher mix of
than anticipated, down only 3.4% in volume, with HMV gaining lower margin products, offset by tight control of operating costs.
2.5% of market share. In the visual category (45% of sales), In addition, exceptional non-cash impairment costs of £2.2m
HMV increased share by 1.2% in a market in which volume have been charged following a review of certain assets in current
grew 2.4%. market trading conditions.
Gross margin rate was maintained year on year, as rate
improvements offset the increased mix of lower margin products.
With operating costs well controlled, including the delivery of
planned strategic cost saving initiatives, operating profit increased
by 29.6% to £53.7m, with the operating margin up to 4.7%
from 3.8%.
Non-cash exceptional impairment costs of £2.1m have been
charged in the period, partially offset by a £0.9m reversal of
previous asset impairments, following a review of the carrying
value of certain assets in the current market trading conditions.
In addition, an exceptional past service credit of £3.5m has been
reflected in the income statement due to changes in benefits
receivable under the Group’s defined benefit pension scheme.

HMV Group plc

14 Annual report and accounts 2009
 Growth in games G Waterstone’s
Games pods are being rolled out to Waterstone’s total sales decreased by 3.6% for the period at
HMV stores so that customers can
try the latest software before they
constant exchange rates, including a like for like sales decline
buy. They are helping to increase of 3.8% (3.0% after adjusting for the prior year release of
both footfall and sales of games in Harry Potter and the Deathly Hallows). The sales performance
our stores. reflected a challenging and highly competitive book market,
which contracted by 2% (after adjusting for Harry Potter).
Waterstone’s share of the high street market grew, reflecting in
part the success of the multi-channel loyalty scheme, which had
Focus on Kids 2.8 million members by the period end. The loyalty scheme
Filmed entertainment for children also contributed to a 60% growth in sales for waterstones.com,
and families is an increasing priority though its current share of a fast-growing online market resulted
for HMV stores, and this is being in an overall 0.4% dilution of total market share.
supported with prominent and
attractive product offers and display Waterstone’s operating profit of £10.0m was £6.3m lower than
in store and online. last year, reflecting the sales decline, a 10 basis points reduction
in gross margin due to the higher mix of online sales, and £2.0m
of book hub start-up costs, partially offset by cost control
measures, including bonus savings.
We are MP3 Exceptional store closure costs of £1.6m (2008: £4.6m) were
hmv.com has launched an MP3 incurred in connection with the review of the combined store
download offer comprised of over
4m music tracks, which can be
portfolio following the acquisition of Ottakar’s and a further £2.3m
played on any digital music player, has been charged to exceptional costs for restructuring due to
including the iPod. The same the implementation of the book hub. Offsetting these costs is an
library is available for streaming exceptional credit of £2.1m due to changes in benefits receivable
for a monthly subscription fee. under the Group’s defined benefit pension scheme.
During the period, three new stores were opened, eight former
Books Etc stores were integrated into the portfolio, and 10 stores
Fopp on a roll closed, resulting in a total estate of 314 stores at the end of
Our eight Fopp entertainment the period.
stores continue to trade extremely
well, and there are opportunities to
increase the brand’s store presence
in the new financial year.

Year of the e-book

Waterstone’s successfully
launched the Sony Reader in the
UK and has seen pleasing sales of
associated e-books for download
via waterstones.com

Hub marks a new chapter

Waterstone’s centralised book
hub at Burton-upon-Trent has taken
on fulfilment to stores and Internet
customers, making the way the
business operates over the medium
and long term more efficient.

HMV Group plc

Annual report and accounts 2009 15
Business and financial review continued
Group performance continued

G Financial G Earnings per share

Adjusted earnings per share from continuing operations,
excluding the effect of exceptional items was 11.1p, an increase
G Net finance charges of 10.3% on last year. Basic earnings per share was 10.8p,
compared with 22.1p in 2008, which included the 12.9p per
Net finance costs decreased from £9.6m to £7.3m. This reflected share profit on disposal of HMV Japan.
lower market rates offset by a higher interest margin as a result
of the new revolving credit facility agreed in October 2008 G Dividend
(see net debt below), and reduced average net debt due to The Board is recommending a final dividend of 5.6p per share
the annualisation of the disposal of HMV Japan in August 2007. in addition to the 1.8p per share interim dividend already paid,
Following the refinancing, associated arrangement fees of £1.1m bringing the total dividend for the year to 7.4p (2008: 7.4p).
have been capitalised and will be amortised over the three year By maintaining the dividend level, dividend cover has increased
facility term. to 1.50x from 1.37x.
Subject to shareholder approval at the Annual General Meeting
G Taxation on 3 September 2009, the final dividend will be paid on
The effective tax rate on continuing operations before 13 October 2009 to shareholders on the register at the close
exceptional items is 28% (2008: 28%). The total tax expense of business on 4 September 2009. Shares will be quoted
in the current year includes a credit of £0.5m (2008: £1.1m) ex-dividend from 2 September 2009.
in relation to the exceptional items from continuing operations
of £1.7m (2008: £4.6m). The prior period also included a charge G Cash flow and net debt
of £0.9m in relation to the profit on disposal of HMV Japan. Closing net debt of £6.5m was £6.3m higher than last year.
This reflected increased capital investment, higher tax payments
and a working capital outflow. Free cash inflow was £12.3m
(2008: £87.4m).

2009 2008
£m £m

EBITDA1 112.9 108.1

Capital expenditure2 (57.6) (36.8)
Working capital (outflow) inflow (15.6) 36.6
Exceptional charges and provision utilisation (2.8) (6.1)
Other 1.3 4.2
Net interest paid (6.6) (9.3)
Taxation (19.3) (9.3)
Free cash flow 12.3 87.4
Net proceeds from equity share placing/disposal of HMV Japan 24.0 65.9
Investment in joint venture (20.0) –
Dividends paid (29.7) (29.8)
Other 7.1 6.9
Net cash (outflow) inflow (6.3) 130.4
Underlying opening net debt (0.2) (130.6)
Underlying closing net debt (6.5) (0.2)
1. EBITDA is earnings before interest, taxation, depreciation, amortisation and exceptional items.
2. Capital expenditure includes £6.1m (2008: £nil) of assets purchased using finance lease funding.

HMV Group plc

16 Annual report and accounts 2009
The Group has secured funding to September 2011 via a
new £220m revolving credit facility, which the Board believes is
adequate to meet current cash requirements. Reflecting current
credit markets, margin for the new facility increased to 250bps
from 175bps. There are no changes to banking covenants
associated with the new facility. As a result of the refinancing,
fees of £1.1m were incurred and will be amortised over the
three-year term.
G Working capital
Working capital outflow of £15.6m (2008: inflow of £36.6m)
reflects the reversal of favourable payment timing differences at
the prior year end. Stock levels were well managed, down 4.5%
on a comparable per sq ft basis. However, reflecting the sales
performance, group stock turn fell to 5.4 times (2008: 5.6 times).
G Capital expenditure
Capital expenditure in the period was £57.6m (2008: £36.8m).
This included one-off investment of £11.3m on supply chain
projects, £6.1m of which was finance lease funded. Underlying
capital spend reflected £13.9m on new stores and resites,
£12.4m on store refurbishment, and £9.6m on IT projects,
including e-commerce development.
G Mean Fiddler Group – joint venture
In January 2009, the Group acquired 50% of the Mean Fiddler
Group, a 50:50 joint venture with MAMA Group plc, which
operates live music and entertainment venues in the UK.
The transaction required the Group to make an initial cash
investment of £20.0m (including fees), with up to £3.3m further
consideration payable or refundable based on an assessment
of the joint venture’s EBITDA for the year to October 2009.
The investment included a £5.5m loan note granted by the
joint venture to each partner, which converts to Ordinary Shares
if not redeemed by 20 July 2009, subject to further extension.
The Group’s share of Mean Fiddler Group’s post tax income
in the period since acquisition amounted to £0.2m.
G Equity placing
On 15 January 2009 in order to fund the Mean Fiddler Group
acquisition outlined above, together with the purchase of
ex-Zavvi stores, the Group conducted a placing of 20,168,524
Ordinary Shares, representing 5% of equity share capital.
The net proceeds raised from the placing, after fees incurred,
were £24.0m.
HMV Group plc
Annual report and accounts 2009
G Discontinued operation
The Group completed the disposal of its HMV Japan business
on 25 August 2007 for £70.6m on a cash and debt free basis,
giving rise to a post-tax profit on disposal of £51.8m. Prior to
disposal, HMV Japan made a loss after tax of £0.1m, giving a
total profit after tax for discontinued operations of £51.7m.
The results of HMV Japan have been presented as comparative
figures in the income statement as a discontinued operation.
G Operating leases
All the Group’s stores are held under operating leases. In HMV UK
and Waterstone’s the majority of leases are on typical institutional
lease terms, which are subject to five year upwards only rent
reviews. The majority of the Group’s international stores and a
minority of UK leases operate through turnover related leases,
usually with minimum rent guarantees, and lease terms of five
to 10 years.
The Group’s net operating lease rentals were £154.3m in
the financial year (2008: £151.1m). The total future rental
commitment at the balance sheet date amounted to £1.2bn,
or £0.8bn at net present value, while the existing portfolio has an
average remaining lease period of 10 years. Retaining a portfolio
of good quality real estate, in prime retail areas, at commercially
reasonable rates remains critical to the performance of the
Group. Where a store location becomes surplus to requirements,
the Group’s policy of occupying prime, highly marketable
locations serves to limit any lease exposure.
G Pensions
The Group has a number of pension schemes in operation.
These primarily include various defined contribution arrangements
and a defined benefit scheme for approximately 600 employees
which was generally closed to new joiners from 1 January 2002.
In respect of the defined benefit scheme, the latest actuarial
valuation as at 30 June 2007 was finalised during the year.
The result of the valuation was a level of asset cover of 94%,
representing a funding deficit of £5.1m, which is being funded
by three special contributions of £2.17m on 31 October 2008,
1 May 2009 and 1 May 2010. Inherent in the valuation, were
a number of scheme changes, including a cap on future
increases to pensionable salaries and pensions and increases
to employee contribution rates. The Company has also taken
direct responsibility for the administrative costs of the scheme.
Under IAS 19 ‘Employee Benefits’, the HMV defined benefit
scheme had a deficit, net of deferred tax, of £15.2m (2008:
£11.8m) at 25 April 2009. The changes to future benefits noted
above in the form of a cap on pensionable pay increases resulted
in a reduction in the liability of £5.6m which has been recognised
in the income statement as a past service cost exceptional credit.
17
Board of Directors

G Simon Fox Andy Duncan

Non-Executive Director
Chief Executive Officer and
Managing Director HMV UK & Ireland
Aged 48
Simon Fox was appointed to the Board with effect from 4 September 2006
and became Chief Executive Officer on 28 September 2006 and additionally
Managing Director of HMV UK and Ireland on 1 February 2007. He was previously
Chief Operating Officer for Kesa Electricals plc with responsibility for Comet in Neil Bright
the UK, Kesa’s subsidiaries in Continental Europe and e-commerce developments. Group Finance Director
Prior to his appointment as COO of Kesa, he was Managing Director of Comet,
which he led through its demerger from Kingfisher. Prior to this he founded
Office World, the UK’s first out-of-town office supplies retailer. He began his
career as a graduate trainee at Security Pacific Bank and thereafter worked
at Boston Consulting Group and Sandhurst Marketing plc.

G Neil Bright
Group Finance Director Philip Rowley
Aged 46 Non-Executive Director
Neil Bright was appointed to the Board as Group Finance Director in March
1998. He joined HMV in August 1996 as Group Finance Director from its then
parent company, Thorn EMI plc where he was Group Planning Manager. He is
a Chartered Accountant, having trained and qualified with Coopers & Lybrand
in London. He was appointed a non-executive director of Holidaybreak plc Simon Fox
on 27 November 2008 and became Chairman of their Audit Committee on Chief Executive
1 January 2009.

G Gerry Johnson
Managing Director Waterstone’s
Aged 48
Gerry Johnson was appointed to the Board with effect from 26 July 2007.
He joined Waterstone’s as Managing Director on 1 October 2005, and led
Waterstone’s through its acquisition and successful integration of Ottakar’s.
He is a career retailer having started his working life at Tesco in 1978, holding a
variety of roles over 11 years, latterly as Superstore Manager. He spent five years
at Asda Group’s Allied Maples Division before moving to Wickes PLC in 1994.
In 2001 he was appointed Managing Director of Booker and was a main board
director of its parent company, Big Food Group PLC.

G Andy Duncan
Non-Executive Director
Aged 46
Andy Duncan was appointed to the Board on 13 March 2009. He is Chief
Executive of Channel 4, a position he has held since July 2004. Prior to this he
was a member of the BBC’s Executive Board from 2001 to 2004 as a Director
of Marketing, Communications and Audiences. He also led the project to launch
Freeview and was Chairman of the joint venture with BBC, Sky and Crown Castle
for its first two years. Prior to that, from 1984 to 2001, he worked at Unilever where
he held a series of Senior Director positions. He has also been Chairman of the
Media Trust since 2006.
Member of the Audit, Nomination and Remuneration Committees

HMV Group plc

18 Annual report and accounts 2009
Robert Swannell G Lesley Knox
Chairman
Non-Executive Director and Senior Independent Director
Aged 55
Lesley Knox was appointed to the Board on 23 April 2002 and appointed as Senior
Independent Director and Chairman of the Remuneration Committee on 22 April
2009. She was a founder director of British Linen Advisors, a specialist merchant
bank focusing on growth companies. Prior to that she was Corporate Finance
Gerry Johnson Director then Head of Institutional Asset Management at Kleinwort Benson Group.
Managing Director, She is Chairman of Alliance Trust PLC and Senior Independent Director of Hays plc
Waterstone’s and is a member of the Board of Governors of the Museum of London. She was
formerly a non-executive director of Signet Jewelers Ltd and a director of the arts
charity, The Federation of British Artists Limited.
Chairman of the Remuneration Committee
Member of the Nomination and Remuneration Committees

G Christopher Rogers
Lesley Knox
Non-Executive Director and Non-Executive Director
Senior Independent Director Aged 49
Christopher Rogers was appointed to the Board on 1 October 2006. He is
Group Finance Director of Whitbread plc, having been appointed in May 2005.
Previously he was Group Finance Director of Woolworths Group plc and Chairman
of the Woolworths Group Entertainment and Wholesale Publishing businesses.
He qualified as an accountant with Price Waterhouse and joined Kingfisher Group
as Corporate Finance Manager in 1988. Subsequent appointments included
Group Financial Controller at Kingfisher plc and Finance Director and Commercial
Christopher Rogers Director of Comet Group plc.
Non-Executive Director
Chairman of the Audit Committee
Member of the Nomination and Remuneration Committees

G Philip Rowley
Non-Executive Director
Aged 56
Philip Rowley was appointed to the Board on 1 October 2007. He was
Chairman and CEO of AOL Europe until February 2007. He is a qualified
chartered accountant and was Group Finance Director of Kingfisher plc from
1998 to 2001. Prior to that his roles included Executive Vice President and
Chief Financial Officer of EMI Music Worldwide, and Chief Operating Officer
and CFO of Golden Books Family Entertainment, the largest children’s book
publisher in the US. He was also the co-founder and Managing Director of
Tribeca Technologies, a New York-based technology company and a former
non-executive director of Tradus plc (previously QXL ricardo plc) until its delisting
in March 2008. He is currently a non-executive director of each of ARM Holdings
Plc and Misys plc, Chairman of Skinkers Ltd and is on the Board of trustees of
Scidev.net, the science and development network.
Member of the Audit, Nomination and Remuneration Committees

G Robert Swannell
Chairman
Aged 58
Robert Swannell was appointed to the Board as Chairman on 2 February 2009.
He is a senior advisor of Citi Europe and formerly Chairman of Citi’s European
Investment Bank and Vice-Chairman, Citi Europe. He is a Non-Executive
Director of The British Land Company PLC and 3i Group PLC and a member
of the Takeover Appeal Board.
Chairman of the Nomination Committee

HMV Group plc

Annual report and accounts 2009 19
Corporate governance

Compliance with the Code The Senior Independent Director acts as an alternative channel of
The Company has complied throughout the year with the communication for shareholders and oversees senior executives’
provisions set out in Section 1 of the June 2006 FRC Combined remuneration and remuneration policy as chairman of the
Code on Corporate Governance (the ‘Combined Code’). Remuneration Committee. The Chief Executive Officer has overall
The following paragraphs, together with the Directors’ responsibility for running the Company’s business.
remuneration report on pages 24 to 34, provide a description
The Board has a schedule of matters specifically reserved to it for
of how the Combined Code has been applied.
decision. These include the following major matters:
The Board – approval of any material investments, capital expenditure,
There were a number of changes to the composition of the Board acquisitions and disposals by Group companies;
during the year under review. Carl Symon retired as Chairman of
– substantial alteration in the general nature of the business;
the Board on 5 September 2008 and Lesley Knox was appointed
interim Chairman until the appointment of Robert Swannell on – approval of the operating plan and the three year strategic
2 February 2009 as Non-Executive Chairman. Carl Symon was plan;
not involved in the selection or appointment of his successor
– setting of financial and dividend policies;
Chairman. During her tenure as interim Chairman of the Board,
Mrs Knox was appointed chairman of the Nomination Committee – consideration of interim and final dividends;
and ceased to be a member of the Audit and Remuneration
– change of auditors, accounting policies and practices;
Committees, but resumed membership of these two Committees
on 2 February 2009. Andy Duncan was appointed to the Board – changes to the share capital of the Company;
as a Non-Executive Director on 13 March 2009 and Roy Brown
– appointment and removal of all Directors and senior
retired from the Board at the close of business on 22 April 2009.
management; and
On that date Lesley Knox was appointed Senior Independent
Director and chairman of the Remuneration Committee. – corporate governance and corporate social responsibility of
As at the end of the year under review the Board comprised the Company.
four independent Non-Executive Directors, the Chairman, and
In accordance with the Combined Code at least half the Board,
three Executive Directors being the Chief Executive Officer,
excluding the Chairman, comprise independent Non-Executive
the Group Finance Director and the Managing Director of
Directors. Non-Executive Directors are appointed for an initial
Waterstone’s Booksellers. The biographical details of the
term of three years and the Articles of Association include a
members of the Board are set out on pages 18 and 19.
requirement that all Directors submit themselves for re-election
The Board considers that each of Andy Duncan, Lesley Knox,
by the shareholders at the first Annual General Meeting following
Christopher Rogers and Philip Rowley are independent.
appointment and thereafter every third calendar year. Details of
In addition, the Board determined that Robert Swannell was
those Directors who will stand for re-election at the forthcoming
independent at the time of his appointment as Chairman on
Annual General Meeting can be found on page 41. Each of these
2 February 2009. The Company used external search consultants
Directors has been subject to evaluation, as indicated below,
in respect of the appointment of both Mr Swannell and
and continue to demonstrate commitment to the role and be an
Mr Duncan.
effective member of the Board. Accordingly, the Board believes
Whilst the Board is collectively responsible for the success of the these Directors should be re-elected.
Company, the Chairman manages the Board to ensure that: On appointment to the Board, Directors are given a formal
induction and thereafter receive further guidance and training as
– the Company has appropriate objectives and an effective
and when required. There are also procedures for the Directors
strategy;
to take independent professional advice at the cost of the
– there is a Chief Executive Officer with a team to implement Company, if appropriate. All Directors have access to the advice
the strategy; and services of the Company Secretary who is responsible to the
Board for ensuring that Board procedures and applicable rules
– there are procedures in place to inform the Board of
and regulations are followed. The appointment and removal of the
performance against objectives; and
Company Secretary is a matter for the Board as a whole.
– the Company is operating in accordance with the principles
of Corporate Governance.
The Chairman’s other significant commitments are noted on
page 19. The Board considers that these are not a constraint on
the Chairman’s agreed time commitment to the Company.

20 HMV Group plc

Annual report and accounts 2009
Performance evaluation Christopher Rogers, chairman of the Committee, is a qualified
The Board has an established process for evaluating the individual Chartered Accountant, and Finance Director of Whitbread plc
Directors, the Board as a whole and each of the Board and, thus, has recent relevant financial experience. The Board
Committees. This evaluation process involves an objective and believes that the other Committee members have relevant
comprehensive evaluation of the balance of skills, knowledge experience to serve on this Committee.
and experience of the Board and any development plans for the The Committee is required to meet a minimum of three
Board. The evaluation process for the Board as a whole and times a year and details of members’ attendance at the
for each of its Committees was conducted by means of detailed Committee can be found on page 22. Both the Head of Internal
questionnaires completed by all Directors. The results of the Audit and the external auditors have direct access to the chairman
evaluation of each of the Board Committees were reviewed and of the Committee outside the formal Committee meetings.
discussed by each of the relevant Committees and then reported
The main duties of the Committee are as follows:
to the Board as a whole, together with the results of the appraisal
of the Board itself. A number of recommendations were agreed – monitoring the integrity of and reviewing the financial
for the Board and its Committees and these will be implemented statements;
during 2010.
– the appointment of and the review of the effectiveness and
The Chairman appraises the performance of the individual
independence of the external auditors;
Board members through discussion with all Directors individually.
The Senior Independent Director is responsible for the evaluation – approval of the scope of the Company’s risk management
of the Chairman and the views of the other Directors are programme and review of the risk management process;
canvassed. The results of the performance evaluation for each
– reviewing the operation and effectiveness of the internal audit
of the Directors and the Chairman were reported to the Board.
function; and
The development plans for the Board and the performance
evaluation process will continue to be reviewed annually. – to oversee the establishment and maintenance of good
The Non-Executive Directors met on several occasions business practices throughout the Group.
without the Executive Directors being present during the year
During the period under review, the Committee met on three
under review. They also met on several occasions without the
occasions in order to review a wide range of financial matters,
presence of the Chairman.
including annual and half year profit figures, financial statements,
trading statements and other regulatory information disclosed
Board Committees
to the public, to conduct a review of the internal audit function
There are three principal Board Committees, each of which
and to receive regular reports from internal audit, before making
regularly reports to the Board and each of which has clear terms
appropriate recommendations to the Board.
of reference which can be found on the Company’s website
www.hmvgroup.com. Each Committee has and will keep under
Nomination Committee
review its terms of reference and its effectiveness and make
During the year under review Robert Swannell was appointed as
recommendations to the Board of any appropriate changes.
chairman of the Nomination Committee on his appointment as
The chairman of each of the Board Committees will be available
Chairman of the Board on 2 February 2009. Andy Duncan was
to answer shareholders’ questions at the forthcoming Annual
appointed a member of the Committee on his appointment to the
General Meeting.
Board on 13 March 2009. Carl Symon and Roy Brown ceased to
be members of the Committee on their retirement from the
Audit Committee
Board at the close of business on 5 September 2008 and 22 April
During the year under review Andy Duncan was appointed a
2009 respectively. As at the end of the year under review the
member of the Audit Committee with effect from 13 March 2009
Nomination Committee comprised Robert Swannell (chairman),
and Roy Brown ceased to be a committee member on his
Lesley Knox, Christopher Rogers, Philip Rowley and Andy Duncan
retirement from the Board at the close of business on 22 April
who were appointed to the Committee on 2 February 2009, 23
2009. As at the end of the financial year the Audit Committee
April 2002, 1 October 2006, 1 October 2007 and 13 March 2009
comprised Christopher Rogers (chairman), Andy Duncan,
respectively.
Lesley Knox and Philip Rowley. Mr Rogers was appointed to the
The Company Secretary is the Secretary to the Committee.
Committee on 1 October 2006, and Mrs Knox, Mr Rowley and
The Committee meets as and when required and during the
Mr Duncan were appointed to the Committee on 23 April 2002,
period under review the Committee met on four occasions.
1 October 2007 and 13 March 2009 respectively. The Chairman,
These meetings were to evaluate the Committee’s own
Chief Executive Officer, Group Finance Director, the Head of
performance and to deal with succession planning issues.
Internal Audit, and the external auditors were invited and attended
meetings of the Audit Committee.

HMV Group plc

Annual report and accounts 2009 21
Corporate governance continued

Members’ attendance at meetings of the Committee during Knox was appointed chairman of the Committee in his place.
the period under review is set out below. The Committee is Andy Duncan was appointed a member of the Committee
responsible for identifying and nominating executive and non- on 13 March 2009. As at the end of the year under review, the
Committee comprised Lesley Knox (chairman), Christopher
executive candidates for approval by the Board to fill vacancies
as and when they arise and to put in place succession plans forRogers, Philip Rowley and Andy Duncan who were appointed
Directors and other senior managers. The Committee has access to the Committee on 23 April 2002, 1 October 2006, 1 October
to such information and advice both from within the Group and 2007 and 13 March 2009 respectively. No person other than the
members of the Committee is entitled to be present at meetings
externally, at the cost of the Company, as it deems appropriate.
External consultants are used to assist in identifying suitablebut others may be invited by the Committee to attend. No Director
external candidates based on a written specification for each is present when the Committee considers matters relating to him
appointment. Committee members prepare a shortlist of or her or acts in matters relating to them.
candidates for consideration by the Board. The final candidate is The Remuneration Committee is required to meet at least
then subject to formal nomination by the Committee and approvaltwice a year and is responsible for approving the terms of service
by the Board. In addition, the Committee will review the Board and setting the remuneration for the Executive Directors and
structure, size and composition and from time to time make any other senior managers of the Group in accordance with a
relevant recommendations to the Board. remuneration policy which is approved by the Board. It is also
responsible for determining the fees of the Chairman and the
Remuneration Committee terms upon which the service of Executive Directors is terminated,
During the year under review Roy Brown ceased to be the having regard to a severance policy adopted by the Board.
chairman of the Remuneration Committee on his retirement from It also prepares for approval by the Board the annual report on
the Board at the close of business on 22 April 2009 and Lesley Directors’ remuneration (set out on pages 24 to 34).
A record of members’ attendance at the Board and Committee meetings is as follows:
Board Audit Remuneration Nomination
Roy Brown 11(12) 3(3) 3(4) 4(4)
Neil Bright 12(12) 3* 1* –
Andy Duncan 1(1) 1(1) 1(1) –
Simon Fox 12(12) 3* 3* 2*
Gerry Johnson 12(12) – 1* –
Lesley Knox 12(12) 2(2)Ψ 3(3)Ψ 4(4)
Christopher Rogers 12(12) 3(3) 3(3) 4(4)
Philip Rowley 12(12) 3(3) 3(3) 4(4)
Carl Symon 4(4) 1* 1(1) 1(1)
Robert Swannell 4(4) 1* 1* 3(3)
Figures in brackets denote the maximum number of meetings that each Director could have attended.
*Not a Committee member but invited to attend all or part of the number of meetings indicated.
Ψ
In addition to the number of meetings noted Mrs Knox attended one meeting whilst interim Chairman of the Board.
The one instance of non-attendance was where the Director had a conflict with another meeting.

Internal control compliance controls as well as risk management, and that

The Board attaches considerable importance to, and
acknowledges its responsibility for, the Group’s system of internal
control and risk management and carries out regular reviews of
their effectiveness. A system of internal control is designed to
manage rather than eliminate risk of failure to achieve business
objectives and can only provide reasonable and not absolute
assurance against material misstatement or loss. The Audit
Committee reviews the effectiveness of the risk management
process and significant risk issues are referred to the Board for
consideration. The Board confirms it has reviewed the Group’s
system of internal controls including financial, operational and
these accord with the guidance on internal controls set out in
the Internal Control: Revised Guidance for Directors on the
Combined Code, issued by the Financial Reporting Council in
October 2005, and that such controls have been in place during
the year under review and up to the date of approval of the
Annual Report and Accounts and that there are satisfactory
ongoing processes for identifying, evaluating and managing the
significant risks faced by the Group. The systems of internal
control and the processes used by the Board to review the
effectiveness of those systems include:

22 HMV Group plc

Annual report and accounts 2009
Group
– an internal audit function, which carries out a programme of
audits covering the management of significant corporate risks
and reports directly to the Audit Committee and the Board on
the effectiveness of key internal controls;
– detailed risk registers, which describe the significant risks and
control strategies in each area of the business and which are
reviewed annually;
– a comprehensive system of financial reporting, which
includes an annual budget process, monthly reporting with
rolling forecasts, and half year and annual reporting to enable
the Group to meet its public financial reporting requirements;
– regular performance monitoring, with remedial action taken
where necessary;
– regular Board meetings, with a formal schedule of matters
reserved to the Board for decision;
– established procedures for planning, approving and
monitoring major projects;
– a policies and procedures manual, which sets out, inter alia,
authority limits and guidelines for capital expenditure, which
include annual budgets and appraisal and review procedures.
All operating businesses have to confirm compliance with the
manual on an annual basis;
– certain centralised functions, that are staffed by appropriately
qualified individuals who draw on external professional advice.
These functions include finance, tax, treasury, management
information systems, legal, company secretarial and internal
audit; and
– clearly defined organisational structures and appropriate
delegated authorities.
Audit Committee
– approving the scope of the annual Group risk management
programme;
– reviewing the results of the risk identification process;
– providing input on risks and internal controls into the annual
Board strategy discussions;
– reviewing the effectiveness of the risk management process
and discussing significant risk issues with the Board;
– considering reports from internal and external audit on the
system of internal control and any material control
weaknesses;
– reviewing the internal audit and external audit work plans; and
– at the year end, before producing the Statement of Directors’
Responsibilities in the Annual report and accounts, the Board,
through the Audit Committee, considers reports generated
from the internal and external auditors on any major
problems that have occurred during the year.
HMV Group plc
Annual report and accounts 2009
Relations with shareholders
The Board places high importance on maintaining good
relationships with both institutional and private investors and
ensures, through its investor relations programme, that
shareholders are kept informed of significant Group
developments. Shareholders can access further information
on the Group via the Company’s website at www.hmvgroup.com.
The Chief Executive Officer and Group Finance Director meet
regularly with institutional shareholders and analysts. Major
institutional shareholders are given the opportunity to meet with
the Chairman and the Senior Independent Director. In addition,
the Directors welcome the opportunity to meet with private
investors at the Company’s general meetings, where shareholders
are invited to ask questions and express views on the Company’s
business. The views of shareholders are reported to the Board as
and when appropriate.
Accountability and audit
The Board is aware of its responsibility to present a clear and
balanced assessment of the Group’s financial position and
prospects. This assessment is provided in the statement of the
Chairman on pages 2 and 3 and the Business and Financial
Review on pages 4 to 17.
The Audit Committee reviews the independence and
objectivity of the external auditors with a view to confirming that, in
its view, the maintenance of objectivity on the one hand and value
for money on the other has been kept appropriately in balance.
The external auditors have in place processes to ensure their
independence is maintained including safeguards to ensure that
where they provide non-audit services their independence is not
threatened. In this context, the Audit Committee considers that it
is appropriate for the external auditors to provide to the Group,
tax advice and other accounting services, including those in
connection with supporting and reporting on financial
representations in public documentation.
During the year under review the auditors were used for tax
advice work and the Company foresees using the auditors for this
advice in the future. The provision of other services is considered
on an ad hoc case-by-case basis. Details of the fees paid to the
auditors in the year, for audit and non-audit services, are given on
page 59.
By order of the Board
Elaine Marriner
Company Secretary
29 June 2009
23
Directors’ remuneration report
The Board presents its Remuneration Report to the members
of the Company. In preparing this report and establishing its
policy the Board has given full consideration to, and follows the
provisions of, the Combined Code, the Companies Act 2006 and
the relevant parts of the Listing Rules of the UK Listing Authority.
In accordance with the Companies Act, the tables setting
out Directors’ remuneration, benefits under long-term incentive
schemes, interests in the share incentive plan, pension
arrangements and Directors’ interests in share options of the
Company on pages 29 to 32 have been audited. The information
on pages 24 to 28, 33 and 34 the Directors’ interests in shares on
page 30 are not required to be audited.
Constitution of the Remuneration Committee
During the year under review, Roy Brown ceased to be the
chairman of the Remuneration Committee on his retirement
from the Board at the close of business on 22 April 2009 and
Lesley Knox succeeded him as chairman of the Committee.
The Remuneration Committee also comprises Christopher
Rogers, Philip Rowley and Andy Duncan (all of whom the Board
considers to be independent). The Committee meets as required
(not normally fewer than three times a year) on behalf of the
Board. Its remit is to determine the Company’s policy for executive
remuneration (having regard to pay and employment conditions
elsewhere in the Group, especially when determining annual
salary increases), to determine the remuneration packages of the
Chairman, the Executive Directors, the Company Secretary and
certain other senior executives that report to Board members,
including pension rights and compensation payments, and to
oversee the implementation and operation of share incentive
schemes. The Committee’s terms of reference are available
on the Company’s website, www.hmvgroup.com.
Advisers
The Remuneration Committee has appointed Towers Perrin
as its advisers in respect of executive salaries, incentives and
employee share schemes. Towers Perrin provides no other
services to the Company. In addition, the Company appointed
the following advisers:
(a) Capita Share Plan Services and Simmons & Simmons,
Solicitors on employee share schemes;
(b) Watson Wyatt LLP and Bluefin Insurance Services Limited
on pension matters; and
(c) Reynolds Porter Chamberlain LLP, solicitors, on employment
contracts and associated legal issues.
The Remuneration Committee also received advice from the
Human Resources Director of HMV UK Limited, who assisted the
Remuneration Committee by providing recommendations on the
grants under the various incentive schemes and reviewing
incentive arrangements.
24 HMV Group plc
Annual report and accounts 2009
The Chairman of the Board, the Chief Executive Officer and the
Human Resources Director of HMV UK Limited are normally
invited by the Remuneration Committee to attend meetings of the
Committee but are not present for any discussion about their own
remuneration.
General policy
The Company’s remuneration policy aims to align the interests
of Executive Directors and other senior executives with those of
its shareholders. It is the Remuneration Committee’s policy that
variable performance-related pay and incentives should account
for a significant proportion of the overall remuneration package
of Executive Directors so that the remuneration of Executive
Directors is aligned with the Group’s performance. Generally, for
target performance the performance-related element accounted
for about half of the total package. For superior performance
this would rise to almost three-quarters of the total package.
These figures exclude pension values, which can vary significantly
from person to person and from year to year. The Committee
confirms that there are appropriate policies and procedures in
place to monitor the size of potential awards.
In setting the Company’s remuneration policy, therefore,
the Remuneration Committee believes that the Company
should provide:
(a) competitive rewards, which will attract and retain high calibre
management necessary to enable the Company to operate in
the highly competitive retail sector and which reflect individual
responsibilities and experience; and
(b) incentive arrangements which are subject to challenging
performance targets reflecting the Company’s objectives
and which motivate executives to focus on both annual and
longer term performance.
Performance targets set for the incentive schemes are designed
to provide maximum awards for exceptional performance and
to place emphasis on the successful delivery of short-term
performance goals as well as ensuring that the Company’s
long-term initiatives are less dependent on annual performance.
The Remuneration Committee intends that Executive Directors’
basic salaries should be positioned at or around the median
level in the marketplace with the incentive arrangements
(provided performance targets are met) set in order to bring
overall remuneration into the upper quartile for the marketplace.
When assessing the marketplace, the Remuneration
Committee refers to survey data supplied by Towers Perrin,
focusing on the companies in their database with broadly similar
revenues. Salaries are however, currently below median. As
described below, base salaries were frozen in the first year of
the transformation plan and have been increased only modestly
since then.
It is the Company’s policy that no Executive Director should have
a fixed term service contract or notice period exceeding one
year, and that no Non-Executive Director should have a letter of
appointment for a term of more than three years. All the current
Directors’ service contracts or letters of appointment comply with
this policy. Further details are found on page 33.
Changes to remuneration policy
The Remuneration Committee intends that remuneration policy
should be, as far as possible, enduring, but also believes that
it is appropriate to keep it under review. The 2009/10 financial
year is the last year of HMV’s three-year transformation plan.
The structural changes in the entertainment markets in which
the Group operates have meant the Group needs both to deliver
operational excellence in the short term but also to develop new
products and activities to drive the growth of the Group over the
medium and longer term. Following consultation with our major
shareholders, the Remuneration Committee has decided to make
some interim changes to the Executive Directors’ remuneration
for the 2009/10 financial year only. The Remuneration Committee
believes the combination of the changes described below
balance the need to deliver the operational improvements for the
final year of the transformation plan (which should be reflected
through the PANI target) with the development of new streams of
future activities (which should be reflected in share price growth
and performance against other retailers). In relation to the short-
term bonus scheme, the increased deferral of bonus into shares
together with the existing equity holdings of Executive Directors,
clearly align the interest of Executive Directors with those of
shareholders.
Details of the changes are given on pages 26 and 27
and can be found in the accompanying letter to shareholders.
The Remuneration Committee will during the course of
the year revisit the Company’s incentive arrangements for the
Executive Directors and senior employees and will seek
shareholder approval for any proposed changes at the 2010
Annual General Meeting.
Components of the Executive Directors’ remuneration
Executive Directors’ remuneration is provided in the form of a
combination of basic salary, an annual cash bonus, a proportion
of which is deferred for three years and paid in shares, and
an award of shares under the HMV Performance Share Plan
(further details of each are given on page 26).
The main components of the Executive Directors’ remuneration
for the financial year under review were as follows:
HMV Group plc
Annual report and accounts 2009
Salary
The Remuneration Committee, taking into account each
Executive Director’s performance, experience and responsibilities,
determines the basic salary for each Executive Director. Salaries
are usually reviewed with effect from 1 July each year. During the
three-year transformation plan, Executive Directors’ salaries were
frozen in 2007, and with effect from 1 July 2008 their salaries
were increased by 3%, which was in line with other Group
employees. With effect from 1 July 2009 salaries are expected
to increase by 2%, again in line with other Group employees.
Benefits in kind
Benefits in kind include provision of a car allowance, pension,
medical and life insurance, permanent health insurance and
staff discount.
HMV Group plc Incentive Plan for Senior Executives
(the ‘HIPS’)
The HIPS comprises two elements – (i) an annual non-
pensionable performance-related cash bonus, a proportion of
which is deferred and paid in shares; and (ii) an award of shares
under The HMV Performance Share Plan. The HIPS is designed
to provide an incentive for senior management to achieve and
exceed targets set by the Remuneration Committee.
Annual bonus The annual bonus (the ‘annual award’) awarded
to each Executive Director is equivalent to 60% of base salary for
on target performance and 120% at maximum, dependent on the
performance of the Group and the achievement of key business
objectives (‘KBOs’). The annual award comprises a payment in
cash of two-thirds of the earned bonus, which is paid after the
end of the financial year to which the performance relates, with
the remaining one-third payable in shares, the vesting of which is
deferred for three years provided that the Executive Director
remains in the employ of the Group.
The performance targets are determined each year by the
Remuneration Committee. For the year under review the
performance targets were profit after notional interest (‘PANI’),
which for Simon Fox and Neil Bright is Group profit before
interest and tax and for Gerry Johnson is a combination of HMV
Group and Waterstone’s profit before interest and tax, each
reduced by a 10% notional interest rate applied to the Group’s
average capital employed, as well as the achievement of
KBOs. These performance targets were chosen because the
Remuneration Committee believe they bring incentive levels
closer to market norms and place greater emphasis on short-
term operating performance which will grow shareholder value
in the long term.
25
Directors’ remuneration report continued

If the target PANI is reached then, for the Executive Directors, a Re-balancing changes for 2009/10
sum equivalent to 45% of their salary is awarded and a further The Remuneration Committee has, after consultation with major
15% of salary is awarded if the KBO’s are met. No KBO payment shareholders, decided to make some changes to the structure of
can be made to an Executive if the PANI performance is less than remuneration for 2009/10. The overriding objective of these
90% of target. The Remuneration Committee has carried out the changes is to support the delivery of improvements over the next
assessment of whether these performance targets have been met 12 months and the development of new streams of activities to
by reference to the audited accounts for the 52 weeks to 25 April drive growth thereafter. The changes are as follows:
2009. The bonus threshold of 90% of PANI had been exceeded
– the maximum annual bonus opportunity will be increased
so that the bonus associated with KBO achievement could be
from 120% to 150% of salary and the on-target bonus
awarded. As the PANI target was not met, no other bonus was
opportunity will increase from 60% to 70% of salary. However,
payable. Annual bonuses for Executive Directors, therefore,
the proportion of bonus compulsorily deferred into shares for
ranged from nil to 15% of salary.
three years will increase from the present one third to 43%.
Performance share awards At the 2006 Annual General Meeting, The cash amount which can be received at target thus
the shareholders approved The HMV Performance Share Plan remains the same under both the old and the new schemes;
(the ‘Plan’). Awards under the Plan are usually made in August
– bonus payments will be based exclusively on PANI
each year. Apart from exceptional circumstances, the Executive
performance in 2009/10;
Directors are granted an award of shares under the Plan at a level
no greater than 200% of base salary as at the date of the award. – annual awards under the HMV Performance Share Plan will
The awards vest after three years provided that the preset be reduced from 150% to 120% of salary, with the proportion
performance criteria are met. The Remuneration Committee sets of the award vesting on minimum target performance
the performance criteria each year. For the awards made in July reduced from 30% to 25%;
2008, an award will vest on the satisfaction of a target based on
– the Remuneration Committee has selected a new
basic adjusted earnings per share (‘EPS’). If the EPS in the
performance measure to determine the vesting of shares
financial year 2010/11 is less than 15.3p the award will not vest.
under the HMV Performance Share Plan (‘PSP’). It has
Mid point EPS is 17.0p at which point 65% of the award will vest. If
chosen HMV’s relative Total Shareholder Return. Shares will
EPS is above 19.6p the award will vest in full. The award will vest
only vest if HMV’s TSR is relatively strong against a basket of
on a straight-line basis from 15.3p to 17.0p and then from 17.0p
competitors and other retailers. TSR reflects the development
to 19.6p, with 30% of the award vesting on the achievement of the
of the Group’s longer term initiatives and balances the PANI
minimum target. These performance targets were selected
target used for the annual bonus. HMV’s relative TSR will be
because the Remuneration Committee believes they align the
measured against an industry peer group of UK-listed
interests of the Executive Directors with those of the Company’s
companies. Some shareholders have requested the
shareholders and place emphasis on the successful delivery of
Committee to consider an appropriate underpinning
short-term performance goals, as well as ensuring that the
measure to support the TSR measure. The Committee
Company’s long-term initiatives are less dependent on annual
understands this concern and will ensure that when
performance.
assessing the Company’s relative performance and deciding
Details of the awards made to the Executive Directors
on the proportion of awards that should vest at the end of the
appear on page 31.
performance period, the Group’s absolute performance over
Share options No options were granted during the year under the period will also be taken into account.
review and the outstanding options held by the Executive
Directors are set out on page 32.

26 HMV Group plc

Annual report and accounts 2009
– The peer group companies, in alphabetical order, are: The maximum incentive opportunity, when short-term and long-
Arriva plc term incentives are taken together, for Executive Directors will,
Carpetright plc therefore, remain the same. These interim changes will provide
Debenhams plc additional focus on operational performance over the next 12
Domino’s Pizza UK & IRL plc months and at the same time reflect the development of new
DSG international plc streams of business to drive growth in the longer term.
Dunelm Group plc
Enterprise Inns plc Share Incentive Plan
GAME Group plc The HMV Group plc Share Incentive Plan (the ‘SIP’) is intended
Greene King plc to allow the Company to align the interests of its UK employees
Halfords Group plc (including the Executive Directors, all of whom are eligible to
Home Retail Group Plc participate) more closely with the interests of shareholders.
J D Wetherspooon plc Under the SIP, UK employees may acquire Ordinary Shares
Kesa Electricals plc in three ways. Firstly, the Company can use the SIP as part of
Kingfisher plc its broad incentive arrangements by awarding free shares to
Marks and Spencer Group plc employees; in this regard an award of 120 free shares was made
Marston’s PLC to every eligible employee, including Mr Bright, on the Initial
Millenium & Copthorne Hotels plc Public Offering. There have not been any further awards of free
Mothercare plc shares and there are no plans to award further free shares to any
N Brown Group plc employees. The free shares are held by a UK employee benefit
Next plc trust (the ‘Trust’), subject to the rules of the SIP. Secondly, the
Sports Direct International plc Company may invite UK employees to purchase Ordinary Shares,
The Carphone Warehouse Group PLC known as Partnership Shares, and thirdly, the Company may,
The Go-Ahead Group plc if it wishes, agree to match the shares purchased with additional
The Restaurant Group plc shares, known as Matching Shares. The Company has matched
Whitbread PLC on a one-for-one basis since the inception of the SIP and
WH Smith PLC these Matching Shares do not vest until the employee has
completed one year’s service from the date of the award.
– Threshold or median performance will trigger the vesting of
All shares held in the Trust attract dividend shares which, except
25% of the PSP award, rising to full vesting at upper quartile
in exceptional circumstances, are retained in the Trust for a
and above on a straight-line basis. No award will vest for TSR
period of three years. With effect from the next financial year
performance below the median or threshold.
dividends will be paid in cash to members of the SIP rather than
by way of further shares.
All Executive Directors participate in the SIP and their awards
are set out on page 31.

HMV Group plc

Annual report and accounts 2009 27
Directors’ remuneration report continued

The Company reviews the awards of shares made under the various all-employee and executive share plans in terms of their effect
on dilution limits and seeks to comply with the dilution limits recommended by the Association of British Insurers. At the end of the
financial year under review, the Company was within the dilution limits for the issue of new shares for all of its share plans, as set out
in the rules of those share plans.
The Company operates a shareholding policy which requires the Executive Directors, and other senior executives, to build and
retain a shareholding in HMV Group plc equivalent in value to 100% of their salary.

Performance graphs
The graphs below show the percentage change in the total shareholder return from 24 April 2004 to the end of the financial year
against both the FTSE 250 and the FTSE General Retailers Index, both of which the Board considers to be appropriate peer groups
for the Company as the Company is a constituent member of both these indices.

Total Shareholder Return Graphs

For the period 24 April 2004 to 25 April 2009

28 HMV Group plc

Annual report and accounts 2009
Pension arrangements
For each Executive Director, only basic salary is pensionable.
Simon Fox, Neil Bright and Gerry Johnson are members of the
HMV Group Pension Scheme, which is a contracted-out defined
benefit scheme, providing them with benefits of up to one-thirtieth
of final pensionable pay for each year of service. They are subject
to the Company’s salary ‘capping’ which was introduced in April
2006, which is currently £117,600. The HMV Group Pension
Scheme, therefore, provides Mr Fox, Mr Bright and Mr Johnson
with benefits of up to one-thirtieth of their respective ‘capped’
salaries for each year of service.
The Company made a contribution to a Self Invested Pension
Plan (‘SIPP’) for each Executive Director in lieu of pension
contribution above the cap.
In the event of death during employment, the dependants of
the Executive Directors would receive a pension and a lump sum.

Name Simon Fox Neil Bright Gerry Johnson

Age as at 25 April 2009 48 46 48
Accrued pension at 25 April 2009 – £000 pa 10 39 14
Increase in accrued pension during the period or from date of appointment – £000 pa 4 4 4
Increase in accrued pension during the period or from date of appointment
(net of inflation) – £000 pa 4 4 4
Transfer value of accrued pension at 25 April 2009 – £000 78 305 129
Transfer value of accrued pension at 26 April 2008 or date of appointment – £000 46 195 61
Directors’ contributions during the period or from date of appointment – £000 9 9 9
Increase (decrease) in transfer value over the year or from date of appointment
(net of Directors’ contributions) – £000 23 101 59
Transfer value of increase in accrued pension during the period or from the date of
appointment (net of inflation and Directors’ contributions) – £000 22 20 30
Notes:
(i) Pension accruals shown are the amounts which would be paid annually on retirement based on service to the end of the year.
(ii) Transfer values have been calculated in accordance with guidance note GN11 issued by the Institute of Actuaries.
(iii) The value of the net increase or decrease represents the incremental value to the Director of his service during the year or from the date of his appointment, as appropriate,
calculated on the assumption that service is terminated at the year end. It is based on the accrued pension increase or decrease after an adjustment for inflation.
(iv) The change in the transfer value includes the effect of fluctuations in the transfer value due to factors beyond the control of the Company and Directors, such as stock market
movements. It is calculated after deducting the Directors’ contributions.
(v) Voluntary contributions paid by Directors and resulting benefits are not shown.
(vi) The figures above exclude contributions of £48,483 paid into Mr Bright’s SIPP, £92,519 paid into Mr Fox’s SIPP and £45,113 paid into Mr Johnson’s SIPP.

HMV Group plc

Annual report and accounts 2009 29
Directors’ remuneration report continued

Details of Directors’ remuneration

Base salary,
benefits in Total Total
kind and fees Annual bonus remuneration remuneration
2009 2009 2009 2008
£000 £000 £000 £000
Executive Directors
Simon Fox 506 73 579 992
Neil Bright 326 23 349 717
Gerry Johnson 312 – 312 595
Non-Executive Directors
Carl Symon 67 – 67 190
Robert Swannell 50 – 50 –
Roy Brown 49 – 49 65
Andy Duncan 5 – 5 –
Lesley Knox 97 – 97 40
Christopher Rogers 45 – 45 45
Philip Rowley 40 – 40 23
Total 1,497 96 1,593 2,667
Notes:
(i) Taxable benefits in kind consist of private healthcare during the financial year under review.
(ii) At the end of the period under review the base salary for the Executive Directors was Simon Fox £489,250, Neil Bright £309,000 and Gerry Johnson £298,700.
(iii) Carl Symon, Andy Duncan and Robert Swannell did not serve as Directors for the full 2008/09 financial year and their remuneration above reflects this accordingly.
(iv) One-third of the annual bonus earned in the year is deferred for three years and will be payable in shares. See deferred annual bonus table on page 32.
(v) The fees earned by Andy Duncan in respect of his Non-Executive directorship are waived by Mr Duncan and paid direct to charity. The amount paid to charity for the year under
review was £5,334.
(vi) £76,487 of the fees noted above for Mrs Knox relate to Mrs Knox’s Chairmanship of the Board for the period from 5 September 2008 to 1 February 2009 inclusive.

Directors’ interests in shares

The Directors who held office at the end of the financial period had the following interests (beneficial and non-beneficial) in the share
capital of the Company in addition to the interests in executive share options and other employee share schemes set out on page 31
and 32:
Ordinary Shares
26 April 2008 or
as at the date
25 April 2009 of appointment
Executive Directors
Simon Fox 432,819 340,152
Neil Bright 314,368 307,800
Gerry Johnson 38,000 38,000
Non-Executive Directors
Robert Swannell 70,000 40,000
Andy Duncan – –
Lesley Knox 32,312 32,312
Christopher Rogers 5,580 5,580
Philip Rowley 17,150 17,150
For those Directors who served at the end of the financial year there have been no changes to the shareholdings since 25 April 2009
subject only to the participation by the Executive Directors in the SIP, details of which can be found on page 31.

30 HMV Group plc

Annual report and accounts 2009
Share Incentive Plan
The Directors who served as Directors at the end of the year under review and who held shares under the SIP as at 25 April 2009 are
as follows:
Matching Shares
Partnership awarded on a
Shares monthly basis at Dividend Shares
purchased by prices between purchased
Total participants on a 110p–144p using dividends Total
SIP shares monthly basis at which will vest paid on Free, SIP shares
held at prices between one year after the Partnership and held at
26 April 2008 110p–144p date of purchase Matching Shares 25 April 2009
Simon Fox 3,202 1,180 1,180 240 5,802
Neil Bright 11,733 1,180 1,180 730 14,823
Gerry Johnson 5,074 1,180 1,180 347 7,781
Notes:
(i) Simon Fox, Neil Bright and Gerry Johnson have continued to acquire Partnership Shares and be awarded Matching Shares on a monthly basis between 25 April 2009 and
29 June 2009 in accordance with the terms of the SIP. These total 200 Partnership Shares and 200 Matching Shares each for Mr Fox and Mr Bright and 201 Partnership
Shares and 201 Matching Shares for Mr Johnson.

Performance Share Plan

The following Performance Share Plan awards are being held for the following Directors:
Number
Interests in of shares Interests in
shares as at conditionally Market price of Performance shares as at
Executive Directors 26 April 2008 Date of award awarded shares at award period ending 25 April 2009
Simon Fox 586,419 6 October 2006 586,419 162.25p 25 April 2009 586,419
2,060,737 7 August 2007 2,060,737 115.25p 24 April 2010 2,060,737
– 8 July 2008 678,571 108.15p 30 April 2011 678,571
Neil Bright 277,777 6 October 2006 277,777 162.25p 25 April 2009 277,777
520,607 7 August 2007 520,607 115.25p 24 April 2010 520,607
– 8 July 2008 428,571 108.15p 30 April 2011 428,571
Gerry Johnson 163,580 6 October 2006 163,580 162.25p 25 April 2009 163,580
503,253 7 August 2007 503,253 115.25p 24 April 2010 503,253
– 8 July 2008 414,285 108.15p 30 April 2011 414,285
Notes:
(i) The 2006 awards were subject to performance conditions based on the achievement of EPS and e-commerce revenue targets in 2008/09. Neither of these targets have been
met and therefore the awards will not vest.
(ii) For the awards made in August 2007, an award will vest on the satisfaction of a target based on adjusted earnings per share (‘EPS’). The EPS targets were set based on the
Group’s performance without the contribution of HMV Japan, which was sold during the 2007/08 financial year. If the EPS in the financial year 2009/10 is less than 14.4p the
award will not vest. Mid point EPS is 16.0p at which point 65% of the award will vest. If EPS is above 18.4p the award will vest in full. The award will vest on a straight-line basis
from 14.4p to 16.0p and then from 16.0p to 18.4p with 30% of the award vesting on the achievement of the minimum target, except where an award exceeds 150% of base
salary, when only 25% of the award will vest on achieving the minimum target and 62.5% of the award will vest on the achievement of the mid point. Following the share placing
and the acquisition of 50% of Mean Fiddler Group which took place in the financial period under review, the minimum, mid point and maximum vesting EPS targets where
amended to 14.1p, 15.6p and 18.0p respectively.
(iii) To support the three-year transformation plan launched in March 2007, the Committee, on a one-off basis for 2007, made some changes to the way in which remuneration
arrangements were applied. The changes required Mr Fox to purchase shares to the value of one times’ salary. After three years, he may receive up to five shares for every
one share purchased dependent on the achievement of the EPS performance target. Mr Fox’s co-investment arrangement was made under the rules of the Plan and replaced
the regular 2007 Plan award. As part of these arrangements, the share options granted to Mr Fox shortly after his appointment in September 2006 lapsed. In addition, the
Committee made an enhanced award under the Plan of 200% of base salary, this being within the limits of the Plan, to Mr Bright, Mr Johnson and other senior management to
emphasise the importance of, and to further support the delivery of, the three-year transformation plan.
(iv) No shares vested in the year under review.
(v) The performance conditions for the 2008 awards are set out on page 26..

HMV Group plc

Annual report and accounts 2009 31
Directors’ remuneration report continued

Deferred annual bonus

The following deferred bonus awards held by each person who was a Director of the Company at the end of the financial year under
review are as follows:
Number of Number of Number of
shares held Number of shares vested shares held
conditionally shares in the year and Number of conditionally
as at conditionally Market price of Performance market price on shares lapsed as at
Executive Directors 26 April 2008 awarded Date of award shares at award period ending vesting date in the year 25 April 2009
Simon Fox – 153,721 8 July 2008 106.25p 30 April 2011 – – 153,721
11,169
Neil Bright 44,677 – 8 July 2005 242p 26 April 2008 112.5p 33,508 –
– 110,957 8 July 2008 106.25p 30 April 2011 – – 110,957
Gerry Johnson – 80,443 8 July 2008 106.25p 30 April 2011 – – 80,443
Notes:
(i) These awards are linked to the annual bonus award which operated prior to the annual bonus award which was implemented during the previous financial year. The deferred
share awards usually vest three years following their grant, subject to the achievement of cumulative budgeted profit before interest and tax, after notional interest charged over
capital employed over the three-year period and the performance of the individual over the same three-year period.
(ii) The release of shares to Mr Bright was made in accordance with the rules of the plan.

Executive share options

The share options held by each person who was a Director of the Company as at the end of the financial year under review are
as follows:
Number of
options at
26 April 2008 Number of
Exercise or date of Granted Lapsed Exercised options at Exercisable Exercisable
Date of grant price appointment in year in year in year 25 April 2009 from to
Neil Bright 22 May 2002 167p 485,030 – – – 485,030 22 May 2005 22 May 2012
8 July 2005 242p 179,752 – 179,752 – – 8 July 2008 8 July 2015
5 October 5 October 5 October
Gerry Johnson 2005 242p 154,958 – 154,958 – – 2008 2015
Notes:
(i) Options to acquire shares under the HMV Group plc 2002 Executive Share Option Scheme (the ‘2002 Scheme’) were previously granted on an annual basis, thus ensuring
reward was spread over a number of years and was allied to the long-term growth in shareholder value. The rules of the 2002 Scheme permit the granting of options to
Executive Directors to a maximum of 300% of basic salary per annum. Options were granted at the five-day average of the market value of the Company’s shares on the
date of grant. Options granted under the 2002 Scheme can normally only be exercised after three years and then subject to the achievement of EPS targets imposed by the
Remuneration Committee at the date of grant. 40% of the option shall be exercisable if the Company’s adjusted basic EPS exceeds the growth in the Retail Prices Index by
at least 3% per annum. 100% of the option shall be exercisable if the Company’s adjusted basic EPS growth exceeds the growth in the Retail Prices Index by at least 7% per
annum. For all options granted to date, EPS was assessed on an adjusted UK GAAP basis. Vesting will occur on a straight-line basis between these two points. EPS was
determined by the Remuneration Committee to be the appropriate criterion given its clear linkage with shareholder value as well as providing a clearly definable target for
executives. The Remuneration Committee assesses whether these performance conditions have been met by reference to the audited accounts. There is no Remuneration
Committee discretion to re-test the performance criteria in the event that they are not met.
(ii) No share options have been exercised in the year ended 25 April 2009 or between that date and the date of this report by any of the Directors who served at the end of the
year under review.
(iii) The options granted in 2005 lapsed during the financial year.
(iv) The market price of an Ordinary Share as at 25 April 2009 was 144.5p, the highest market price for the year under review being 149.25p and the lowest market price being
86.25p.

32 HMV Group plc

Annual report and accounts 2009
Service agreements
No Executive Director has a service agreement containing a notice period exceeding one year.
The Remuneration Committee has considered the notice periods and termination arrangements set out below in light of the
Combined Code, and continues to believe they are appropriate for the Executive Directors given their seniority and value
to the Company.
The service contracts in respect of the Executive Directors who served at any time during the period under review are
summarised below:
Date of Notice period Notice period
service contract from Company from individual
Simon Fox 18 July 2006 12 months 12 months
Neil Bright 23 April 2002 12 months 12 months
Gerry Johnson 8 September 2005 12 months 12 months
Note:
(i) The service contract under which Mr Johnson was appointed as Managing Director of Waterstone’s Booksellers Limited was the new model service contract as mentioned
below and, therefore, remained in place on his appointment to the Board.

The Chairman and Non-Executive Directors do not have service
agreements but have been engaged under letters of appointment.
All are terminable by the Company without liability for
compensation. All Non-Executive appointments are for an initial
period of three years and can be extended for a subsequent
period of three years. The period of appointment for Lesley Knox
is until 22 April 2010, to 30 September 2009 for Christopher
Rogers, to 30 September 2010 for Philip Rowley, to 1 February
2012 for Robert Swannell and to 12 March 2012 for Andy
Duncan.
Robert Swannell, Andy Duncan and Lesley Knox, who are
standing for re-election at the forthcoming Annual General
Meeting, have letters of appointment as Non-Executive Directors
and Neil Bright, who is also standing for re-election at the
forthcoming Annual General Meeting, has a service contract
which provides for a notice period of 12 months.
Copies of the Executive Directors’ service agreements and
the letters of appointment for the Chairman and each of the Non-
Executive Directors are available at the registered office of the
Company and will be available at the Annual General Meeting.
During the period under review, the Board carried out
a process for evaluating the individual Directors, the Board
as a whole and each of the Board Committees. Details of
this performance evaluation process can be found in the
Corporate Governance Report on page 21.
Compensation for early termination
The arrangements for early termination of an Executive Director’s
service agreement are decided by the Remuneration Committee
and will be made in accordance with the service agreement
provisions of each of the Executive Directors. Each service
agreement provides for a payment in lieu of notice on early
termination to the Executive Director, which shall consist of base
salary and the cash equivalent of all other benefits. In the case of
Mr Bright this would also include accrued bonus to date, if any.
The Remuneration Committee may exercise discretion over
deferred bonus entitlement and/or awards made under the
performance share plan in accordance with the rules of the
appropriate schemes.
In addition, Mr Bright’s service agreement contains provisions
that in the case of termination in breach of contract by the
Company or termination by the Executive Director following
material breach of contract by the Company within one year of a
change of control of the Company, Mr Bright is entitled to
compensation calculated on the same basis as set out above
save that, in addition, he shall be entitled to an amount equal to
the annual bonus he would have received for the 12 months after
termination calculated on the basis of the Group’s latest forecasts
prior to the date of termination; the immediate vesting of all
outstanding deferred bonus awards, the enhancement of pension
arrangements by increasing his pensionable salary by 12 months,
the provision of all other benefits to which Mr Bright is entitled for
a period of 12 months (or the financial equivalent thereof) and,
subject to the discretion of the Remuneration Committee, the
vesting of any unexercised share options and awards made under
the performance share plan.

HMV Group plc

Annual report and accounts 2009 33
Directors’ remuneration report continued

If payments for termination are dealt with in accordance with the Shareholder approval
above provisions the restrictive covenants contained in Mr Bright’s A resolution to approve the Remuneration Report is being
service agreement in favour of the Company will continue to proposed at the Annual General Meeting.
apply.
For and on behalf of the Board
A new model service agreement was introduced in 2006
which does not include any change of control provisions and
Lesley Knox
requires the Executive Director to mitigate his loss. This service
Chairman of the Remuneration Committee
agreement was used for the appointment of Messrs Fox and
Johnson and will be used for any future appointments of 29 June 2009
Executive Directors.

Outside directorships
No Executive Director may accept a non-executive directorship
without the prior approval of the Board to ensure that they
do not give rise to conflicts of interest. During the period under
review Neil Bright was appointed as a Non-Executive Director
and chairman of the Audit Committee of Holidaybreak plc.
Mr Bright receives Non-Executive Directors fees of £38,500 for
this directorship which he retains. No other Executive Director
held any non-executive appointments.

Chairman and Non-Executive Directors’ remuneration

The Chairman and the Executive Directors determine the
remuneration of the Non-Executive Directors for their services
as members of the Board and its Committees in accordance
with the Company’s Articles of Association. The Remuneration
Committee determines the remuneration of the Chairman.
A review takes place in January every two to three years.
The policy is to pay fees at a market competitive level in
comparison with companies of broadly similar size in terms
of market capitalisation. The Company takes into account each
individual’s responsibilities and time commitments when setting
fee levels. The Chairman, Robert Swannell, receives a basic fee of
£200,000 pa. The Non-Executive Directors receive a basic fee of
£40,000 pa. Christopher Rogers receives an additional £5,000 pa
for chairing the Audit Committee. Lesley Knox receives an
additional £5,000 pa for acting as Senior Independent Director
and for chairing the Remuneration Committee.
The Chairman and Non-Executive Directors do not participate
in any of the incentive or benefit schemes of the Group other than
the provision of staff discount cards.

34 HMV Group plc

Annual report and accounts 2009
 Corporate responsibility
We define our Corporate Responsibility (CR) programme
into three main areas: Environment, People and Community.
Our Corporate Responsibility Report 2009 contains a full
discussion of our activities and is available from the Group’s
website at www.hmvgroup.com
We made good progress in CR during the year. Our three
main business units have introduced CR committees chaired by
their respective Managing Directors. Each of these committees,
which comprise representatives from all areas of operations,
including stores and head offices, meet quarterly and there are
forums for each of our business units to share and develop best
practice. A Group CR Committee, chaired by the Chief Executive,
meets quarterly and reports progress to the Board.
CR now has a crucial role to play in our transformation plan
to improve the Group’s performance, and numerous of these
initiatives are successfully aligned with our business objectives.
Environment
We have identified the following as the principal areas for
potential environmental impact by our businesses:
– Energy usage
– Waste/recycling
– Supply chain
– Packaging
– Green purchasing policies of goods not for resale
– Green build initiatives
– Health and safety
We are managing these through the following initiatives:
Industry and environmental partners
The Group’s businesses in the UK work with a number of
specialist organisations to help minimise our impacts on the
environment, including the Carbon Trust, British Safety Council,
Adam Energy Management Systems and Biffa Waste Services.
In addition, through our involvement in various trade bodies we
are helping to manage the environmental impacts made by the
entertainment and book industries. HMV UK & Ireland partners
the music industry initiative Julie’s Bicycle, which aims to reduce
the sector’s greenhouse gas (GHG) emissions. Although the focus
for Julie’s Bicycle is the entire recorded music industry, and not
exclusively retailing, the Oxford University-affiliated Environmental
Change Institute in 2007 identified CD packaging as the recorded
music industry’s single most important source of GHG emissions.
Energy usage
Total HMV UK and Waterstone’s Total kWh
2006/07 92,481,368
2007/08 89,599,549
2008/09 86,856,010
35 HMV Group plc
Annual report and accounts 2009
Whilst it is not a supplier or manufacturer of recorded music, HMV
UK & Ireland is the leading retailer of these products and as such
was pleased to support such an initiative.
Waterstone’s works with the Booksellers’ Association, the
Publishers’ Association Environmental Action Group to ensure
that industry-wide initiatives are implemented within its stores.
This group considers all aspects of the trade including packaging,
book miles, paper sourcing and returns.
Waterstone’s also works with the British Safety Council (BSC)
to consider wider measures of environmental impact than just the
company’s carbon footprint. In 2008, following an audit, the BSC
awarded Waterstone’s three out of a maximum five stars for its
commitment to managing its environmental impacts. The BSC
provided recommendations for further improvement, focusing on
purchasing policies for materials and equipment used in new and
refit stores; suggested retro-fitting changes to the existing store
estate where practical; and development of a Green Blueprint for
the design, layout and construction of new and refit stores. Good
progress on meeting these recommendations has been made by
Waterstone’s, with the aim of upgrading the BSC rating to four
stars during 2009/10.
Carbon reduction commitment
The Group has engaged the Carbon Trust to prepare its
businesses in the UK for the introduction of the Carbon
Reduction Commitment (CRC), an emissions trading scheme with
the aim of cost-effectively reducing emissions in the service,
public and other less energy-intensive sectors by 1.2 million
tonnes by 2020. The CRC will be a mandatory emissions trading
scheme (ETS), targeting large organisations whose emissions are
currently not included in the EU ETS or Climate Change
Agreements.
During 2008/09 detailed site surveys took place of a number
of HMV UK and Waterstone’s stores, sampling a variety of sizes
and formats. The results have indicated potential environmental
savings, with the primary aim of reducing the energy consumption
in our businesses.
Energy usage
As the table below demonstrates, energy usage in our UK
businesses has decreased in each of the last two years. However,
our commitment is to further reduce the amount of energy
consumed and a number of initiatives have been introduced to
assist in this.
Electricity Gas Total
Total CO2 Total kWh Total CO2 Total kWh Total CO2
49,664 1,329,345 246 93,810,713 49,910
48,117 1,305,943 242 90,905,492 48,359
46,643 1,114,062 202 87,970,072 46,845
Corporate responsibility continued

Environmental Champions Energy management trial

A member from each of our store teams has been appointed
as an Environmental Champion to ensure that environmental
best practice is followed in all of our store locations. Ideas and
initiatives are shared through the CR committees to maximise
the engagement of our stores.
Smart meters
The installation of smart meters leads to improved site-by-site
monitoring, allowing detailed reports that can be analysed to
discover unusual energy use patterns or excessive out of hours
energy use. Smart meters are fitted to all new and refit stores, and
a programme of retro-fitting is being rolled-out across the HMV
UK and Waterstone’s estates.
HMV Group
Energy management trial
A substantial initiative is underway to reduce energy usage in
our UK stores through the implementation of a new energy
management system. This enables systems for heating, air
conditioning and lighting to be pre-programmed for use and
to ensure maximum efficiencies. Following a trial in 17 HMV UK
and Waterstone’s stores during November and December 2008,
in which energy savings of over 14% were achieved (see table
below), roll-out of this new energy management system is
commencing during 2009/10.
CO2 Saving
Control Control KWh saving % Saving (tonnes)

HMV 152,301 124,640 27,661 18.2 16.0

Waterstone’s 177,020 157,459 19,561 11.1 10.8
Total 329,321 282,099 47,222 14.3 26.8
When store openings and closures are factored in, energy usage per square metre is below:
Total CO2 Retail
Group Total kWh (tonnes) Sq metres KWH/m2 CO2 /m2
2006/07 93,810,713 49,910 3,145,627 321 0.17
2007/08 90,905,492 48,359 3,149,382 311 0.17
April 08–March 09 (CRC Reporting Period) 87,970,072 46,845 3,318,261 285 0.15

Waste and recycling Supply chain

During the year HMV UK and Waterstone’s have been working
with specialists to improve waste management and recycling
rates. Average recycling wastes across both businesses increased
by 12% on the prior year to 37%.
Recycling average
HMV UK
2007/08 19%
2008/09 28%
Figures do not include shopping centre locations, where waste and recycling is carried
out by centre management, rather than individual stores.
Water usage
Measures are being taken where possible to reduce the amount
of water used in our store and distribution locations. Waterstone’s
participates in The Ripple Effect, an initiative that assists
companies to reduce water consumption, while the new book hub
distribution centre is equipped with recycled grey water systems.
In stores, Environment Champions are advised to carry out a – large reduction in suppliers’ packaging and transportation
series of regular audits of customer and store facilities to ensure
effective management of water consumption.
Following an internal environmental audit this year, HMV UK’s
central distribution centres adopted new waste management and
recycling recommendations. Recycling levels at these locations
are due to be significantly improved following the appointment of
new waste management services in 2009.
During 2008/09 a new book hub enabling centralised
distribution for Waterstone’s stores and online customers became
Waterstone’s
live. This major project delivers a number of environmental
31% benefits for both the company and its suppliers, including:
46% – returns of slower-moving stock made to the hub, rather than
to suppliers, for sale elsewhere in Waterstone’s. Potential for
a proportion of book returns to be absorbed back into stores
via the hub, reducing the volume of books destined for
pulping;
– environmentally improved solution vastly reduces card and
paper usage in the supply chain. This could, in time, be
further improved by supplier deliveries utilising pre-agreed
Waterstone’s totes to reduce packaging usage;
requirements, driven by replacement of deliveries to over
300 store locations with shipments to a single destination.
Potential to reduce use of carton packaging by 70%–80%.

36 HMV Group plc

Annual report and accounts 2009
Goods not for resale (GNFR)
Part of the Group’s three-year transformation programme is to
save significant costs through more effective procurement of
goods and services not for resale. This programme is also
helping to enhance our environmental credentials.
Paper
Most paper used by the Group’s operations in the UK is supplied
from FSC-certified sources, with a mixture of recycled and non-
recycled paper. The green credentials of suppliers of our in-store
point of sale materials are also carefully scrutinised.

Carrier bags
HMV Waterstone’s Group
2007/08 2008/09 2007/08 2008/09 2007/08 2008/09
Transactions 57,255,347 59,849,852 37,584,346 35,798,874 94,839,693 95,648,726
Bags used 50,544,746 44,587,830 27,474,000 18,643,500 78,018,746 63,231,330
% 88.3% 74.5% 73.1% 52.1% 82.3% 66.1%

The Group’s businesses work hard to reduce the amount of
carrier bags distributed annually by our stores to customers.
Our stores employ a policy of asking customers individually or
through point of sale if a bag is required for their purchases.
In Waterstone’s, loyalty cardholders are offered ‘Eco Points’
each time they decline a bag, thereby rewarding customers
with money-off future purchases.
A responsible approach to sourcing of carrier bags is
maintained by all of our main businesses.
Stores in HMV UK and HMV Canada provide degradable,
single-use carrier bags made from 30% recycled plastic. The bags
degrade in landfill sites in the presence of light, oxygen, heat and
stress within 12 to 24 months. In addition, HMV UK has introduced
a ‘bag for life’ manufactured 100% from recycled plastic – mostly
recycled water bottles.
Waterstone’s stores provide single-use carriers manufactured
from 100% post-consumer recycled plastic. In addition,
Waterstone’s offers a ‘bag for life’, manufactured from 100%
certified Fairtrade organic cotton.
In the Republic of Ireland, where local legislation prohibits
the use of plastic carrier bags, HMV and Waterstone’s provide
customers who request them with bags made from recycled craft
paper.
Online products ordered from hmv.com are shipped using
recycled packaging materials. Following the transfer of fulfilment
for waterstones.com to the new book hub, similar packaging is
being rolled-out for books customers.
Green build
We strive to ensure that both the new stores we open and those
we refit are as green as possible. As well as the roll-out of smart
meters and energy management systems to new stores, any new
timber used in store builds is FSC-certified and only energy-
efficient PCs and appliances are deployed. We also, wherever
possible, recycle fixtures and fittings, respray browser units and
stands and refurbish metallic merchandising fixtures.
Health and safety
For the benefit of the tens of millions of customers who visit our
stores every year and our colleagues who work within them, the
Group maintains a strong commitment to health and safety.
Our initiatives and progress this year include:
HMV UK
– Trips, slips and falls reduced by 8%
– Conflict management training for in-store Loss Prevention
Officers.
Waterstone’s
– Reduction in RIDDOR accidents by 10%
– Further improvement in annual health and safety compliance
audit to 86%
– Regional champions appointed to promote colleagues
engagement and compliance with health and safety.
People
Our businesses recognise the importance of attracting and
retaining dedicated and motivated people. There are numerous
initiatives to promote the engagement of our colleagues, to
celebrate success, provide a range of attractive benefits, and
to develop the careers of individuals.

HMV Group plc

Annual report and accounts 2009 37
Corporate responsibility continued

Recruitment policies For colleagues in Waterstone’s stores who wish to progress along
Our businesses are committed to providing equality of the career ladder, fast track training programmes are provided.
opportunity and to maximising the talents of our people. Three such schemes are available: Lead Bookseller to Assistant
Our recruitment decisions are made only on the basis of Manager, Assistant Manager to Branch Manager and Branch
qualifications, skills and ability to do the job. This commitment to Manager to Regional Manager. All are designed to help ease
equal opportunities includes: colleagues to the next career phase and provide a network of
support of head office colleagues and other course delegates.
– the promotion of equality of opportunity in employment;
In 2008/09, 100 people took part in fast track programmes, with
– the development, implementation, regular monitoring and 73% going on to achieve promotions. Waterstone’s head office
review of employment policies with the aim of ensuring that colleagues attended a variety of workshops, including managing
colleagues receive fair and consistent treatment; performance, motivation, delegation and influencing skills.
– a continuing programme of action to make the policy and its
Green benefits package
implementation fully effective, including training and
Our people are encouraged to choose from a menu of benefits
guidance;
that directly promote green issues, including:
– the elimination of discrimination of any kind.
– loans of up to £1,000 to purchase a bicycle for travel to and
The law sets out that our policies must at least ensure that current from work;
and potential colleagues are offered the same opportunities
– season ticket loans to encourage travel to and from work
regardless of gender, colour, race, religion or belief, national or
using public transport;
ethnic origin, age, disability, sexual orientation, marital status, part-
time or fixed term status. Our stance is that the promotion of – Give As You Earn (GAYE) scheme to make regular, pre-tax
equal opportunities is essential and therefore all colleagues donations to chosen charities through payroll. We are proud
should be treated with respect, whether they are specifically that our colleagues donated approximately £15,000 during
protected by legislation or not. the year through this scheme.
In addition, Waterstone’s offers colleagues the opportunity to
Colleague progression
participate in the Day for Good, which enables our people to take
The Group’s businesses are committed to nurturing talent and
paid time off to carry out voluntary work. Colleagues can request
promoting from within, where possible. Various internal training
one day of paid time in any year to volunteer for their chosen
programmes are available, as well as assistance to gain
organisation.
professional qualifications where relevant. The programmes we
operate enable our businesses to have well-developed
Community
succession plans and to fill any gaps in individuals’ knowledge
We recognise that both the products we sell and, therefore, the
before promotion. Examples of these programmes include:
HMV and Waterstone’s brands, have an important part to play in
HMV UK & Ireland provides an induction-training programme,
the lives of our customers. Our commitment to the hundreds of
Get Started, for all colleagues. This includes a Company DVD, Get
communities in which we operate is to extend our engagement
Closer days for all new starters and one month’s free access to
with them in ways which, we hope, can help to make even more
HMV Jukebox (a streaming online music service). Colleagues are
of a difference.
reviewed at regular intervals during their first six months to ensure
all parties remain happy. Since 2000, HMV UK & Ireland has
The customer experience
had Investors in People accreditation, which was renewed in
We believe it is our responsibility to provide our customers with
April 2009 following a review. This demonstrates the Company’s
the best possible experience. Our people are therefore equipped
commitment to developing its people so they are better able to
with high quality and extensive training and our most prestigious
deliver strategic objectives. Over the past three years, more than
company awards recognise excellent customer service as a key
700 people have completed one of the four levels of fast track
criteria.
programmes available.
As the standards expected of us increase, we must strive to
HMV Canada offers its people post-induction entry into an
deliver an ever more rewarding customer experience. In support
Education Assistance Programme. Its purpose is to encourage
of this, we carry out regular research and brand tracking surveys
full-time, salaried employees to upgrade the skills they would use
with our customers and employ ‘mystery shopper’ programmes.
in their day-to-day jobs for the benefit of the employee and the
Results from these initiatives are fed back to all parts of our
Company, and to financially assist employees in furthering their
businesses and, where appropriate, adaptations to policy or
education and careers. Professional qualifications, such as those
training are made.
for accountancy, are included.

38 HMV Group plc

Annual report and accounts 2009
Rewarding loyalty HMV UK donated all of the proceeds from the sale of the X
In the UK, both of our main brands have programmes to reward Factor’s Hero CD single, one of the biggest selling singles of the
customers for their loyalty. In both HMV and Waterstone’s points last decade, to the Help for Heroes Fund and Royal British Legion.
can be earned from shopping with us in-store or online. In the This raised approximately £100,000, which was divided equally
case of the purehmv loyalty card, points are also redeemable between the two charities in support of British servicemen and
online from a dedicated customer area on the hmv.com website. women.
The Waterstone’s Card enjoyed its first full year of trading in Waterstone’s charity partner since 2005 is Dyslexia Action.
2008/09, and has already won two retail industry awards. During the year, our stores and head office teams initiated
The data we collect from customers’ participation in our numerous activities in support of Dyslexia Action. In total, funds
schemes enables us to provide carefully targeted and relevant donated by and through Waterstone’s to Dyslexia Action during
communication. The right to privacy and security of customer the year were approximately £93,000.
data is taken very seriously. Customers can opt in or out of
communication at any time and the information we use is not Events
sold, rented or passed on to others for marketing purposes Among the important added value experiences our local stores
without the express consent of customers. All of the information are uniquely placed to provide, is the opportunity for our
provided to us by customers is treated securely and strictly in customers to meet their favourite artists and authors from the
accordance with the Data Protection Act 1998. entertainment and literary worlds at live performances, signings
and other special events.
Responsible selling During the year, HMV UK and HMV Canada hosted over
As specialist retailers, we are committed to providing the widest 300 personal appearances by some of the biggest names in the
ranges of products available either on the high street or online. music and filmed entertainment industries. In addition, HMV UK
Sometimes, for all sorts of reasons, certain of the products we supports a number of events for breakthrough and young
sell in stores or online can be of a sensitive nature. Therefore, we performers as part of our commitment to grass-roots music and
adopt a responsible approach to selling. Where appropriate, we engagement with young musicians in particular. This year we
liaise with trading standards and other external bodies and listen promoted through our stores the Make It, Break It Awards 2009, a
to our customers and our colleagues. national song-writing competition for young musicians aged 14-16
Within the boundaries of existing legislation and industry and 17-19, hosted by Paul McCartney’s Liverpool Institute for the
regulation applied to our product categories, including the Public Performing Arts.
Order Act and British Board of Film Classification ratings, we Waterstone’s ran over 9,000 events during the year, including
maintain a strictly non-censorial approach to selling. In support nearly 4,000 author appearances and over 1,000 reading groups.
of this, the people in our stores are provided with training and These took place in stores as well as at numerous local
regular communication to ensure that, if appropriate, sensitive community venues. First-time authors as well as household
product is clearly identified and/or is sold only to customers who names launched their new books, with signings, talks, readings
are entitled to purchase it. and even impromptu stand-up comedy and acoustic music
HMV believes that it is inappropriate to restrict or censor performances.
the choice that it makes available to customers. However, we Of the nearly 5,000 events held for children, Waterstone’s ran
recognise the importance of merchandising and displaying activity and story-time sessions with themes as varied as fairy and
stock in a responsible manner, which is consistent with trading pirate parties, Horrid Henry parties, treasure hunts, mask-making,
standards and retail practice and sensitive to prevailing public Christmas card-making, The Tales of Beedle the Bard launch
concerns. parties and, for older children, launch activities for Stephanie
Waterstone’s believes that it should not act as censor and Meyer’s Breaking Dawn series.
that customers should have the right to choose whatever they Waterstone’s also supports, through activities in its stores,
want to read. The only circumstances under which we would trade-wide initiatives such as World Book Day, and honours the
remove a book from sale are on the advice of the police or the vouchers that permit every child in the UK to a free book. The Big
publisher. We understand that we share a responsibility with Book Bank is an award-winning Waterstone’s initiative that enables
parents to ensure that inappropriate material is not sold to minors. children to bring a favourite book to school to share with other
While many books for children and teenagers include no printed children and, in return, they receive a voucher from the school
direct age guidance, our booksellers can both offer advice or that they exchange for a free new book from a selected range at
decline a sale if they believe a particular title should not be sold Waterstone’s.
to a minor. Waterstone’s is also involved in nearly 20 literary festivals,
offering varying levels of support and sponsorship. These include:
Charitable support the Times Cheltenham Festival of Literature, UEA Spring Literary
HMV UK’s charity of choice since September 2008 is CLIC Festival, Stratford Literary Festival, Daphne du Maurier Festival
Sargent, which supports the families of children with cancer. in Fowey, Aye Write! in Glasgow, Durham Book Festival and
During the year, scores of fundraising initiatives took place Theakston’s Old Peculiar Crime Festival in Harrogate.
and HMV and Fopp stores raised £25,000 from sales of ‘bags for
life’. In total, £175,000 was raised during the seven-month period.
HMV Group plc
Annual report and accounts 2009 39
Directors’ report

The Directors submit their report and audited financial statements Growth of digital entertainment
for the 52 weeks ended 25 April 2009, which were approved on Physical entertainment media is a key driver of footfall to
behalf of the Board on 29 June 2009. the Group’s stores and of online customers to its various
Internet sites. Technological advances and changing consumer
Principal activities and business review preferences have given rise to new methods of digital delivery,
The principal activities of the Group are the retailing of pre- both legal and illegal, of music, film, electronic games and books,
recorded music, video, electronic games and related thereby reducing the purchase of physical media formats.
entertainment products under the HMV and Fopp brands and The Group has responded to these challenges by the launch
the retailing of books principally under the Waterstone’s brand. of its own websites and continued investment to grow these
The Group has operations in seven countries, with the principal businesses, however further unforeseen technological
markets being those of the UK and Canada. developments could have a further adverse impact on the
During the period under review the Company entered into Group’s future profitability and cash flows.
a joint venture agreement with MAMA Group plc whereby the
Company became a 50% shareholder in Mean Fiddler Group Seasonality
Limited, a company which operates medium sized live music The business of the Group is highly seasonal with the Christmas
venues in the United Kingdom. The consideration paid in respect season being the most important trading period in terms of sales,
of this transaction was £20.0m including fees. In addition, the profitability and cash flow. Lower than expected performance
Company purchased 19 stores which previously traded under the in this period may have an adverse impact on results for a full
Zavvi brand for the sum of £2.0m including stock. At the same financial year.
time as these transactions, the Company completed a successful
£24.0m equity fundraising, details of which are set out on page External factors
17. Retail markets are sensitive to economic conditions and if the
Commentary on the strategy of the Company, the current economic downturn is prolonged this could further
performance of the Group during the year, likely future reduce consumer spending on the high street which could affect
developments and details of the Mean Fiddler Group Limited joint revenue and profit. Other external factors which could affect the
venture and acquisition of the formerly branded Zavvi stores, can Group include acts of terrorism or war or an outbreak of a
be found in the Chairman’s Statement on pages 2 and 3, and pandemic disease which could reduce the number of customers
the Business and Financial Review on pages 4 to 17, which are visiting the Group’s stores, causing a decline in revenue and profit.
deemed to be incorporated by reference in (and shall be deemed
to form part of) this report. Credit risk and liquidity
The Group has adequate medium-term financing in place to
Risks and uncertainties support its business operations. The Board regularly reviews
The Board has a policy of continuous identification and review and stress tests its liquidity and covenant headroom to ensure
of key business risks and uncertainties. It oversees the compliance with its facilities. In view of the global economic and
development of processes to ensure that these risks are financial conditions, the Board has assessed its exposure to
managed appropriately and operational management are counterparty risk and its treasury policies have been amended to
delegated with the tasks of implementing these processes and restrict counterparties with which deposits, investments and other
reporting to the Board on their outcomes. The key risks identified transactions may be made.
by the Board are as follows:
Failure of supply
Competition The Group has agreements with key suppliers and an interruption
The Group operates in highly competitive markets where, for or loss of supply of core category products from these suppliers
certain of its product ranges at certain times in the product life would affect the Group’s ability to trade.
cycle, the Group must adapt and invest in strategies to remain
competitive with supermarket and pure Internet retailers. Damage to reputation or brands
In addition, such is the competitive nature of its markets that The HMV and Waterstone’s brands are material assets of the
at times in the past, pressure has been brought to bear on the Group and maintaining their reputation is key to the success of
Group’s weaker competitors which has led to one-off closing or the Group. Failure to protect these brands, an event that materially
liquidation activity for a limited period of time. In the past, such damaged the reputation of these brands and/or a failure to
competitor actions have adversely impacted the Group’s pricing, sustain their appeal to customers could have an adverse impact
margins and profitability which in the future, may also have an on the financial performance of the Group.
adverse impact on the Group’s business and financial condition.
Information Technology systems
The Group relies on a number of important IT systems, both
for its stores and its Internet sites. Any significant system
performance problems could affect the Group’s ability to trade
as well as its profitability.

40 HMV Group plc

Annual report and accounts 2009
Key personnel With regards to the appointment and replacement of Directors,
The performance of the Group depends on its ability to continue the Company is governed by its Articles of Association, the
to attract, motivate and retain key head office and store staff. Combined Code, the Companies Act and related legislation.
The retail sector is very competitive and the Group’s people The Articles themselves may be amended by special resolution of
are frequently targeted by other companies for recruitment. the shareholders. The powers of the Directors are detailed in the
Corporate Governance Report on page 20.
Retail store network The Directors’ interests in the shares of the Company,
Retaining a portfolio of good quality real estate, in prime retail together with their remuneration (where applicable) and further
areas and at commercially reasonable rates remains critical to details of their service agreements are detailed in the Directors’
the performance of the Group. All of the Group’s stores are held Remuneration Report on pages 24 to 34.
under operating leases and consequently the Group is exposed No Director, at any time during the period under review, had
to the extent that any stores become unviable as a result of a material interest in any contracts with the Company or any of
rental inflation. Where a store location becomes surplus to its subsidiary undertakings, other than the Executive Directors
requirements, the Group’s policy of occupying prime, highly who had such an interest through their service agreements with
marketable locations serves to limit such lease exposure. the Company, details of which are summarised on page 33.
None of the Directors or their families at any time during the
Strategic initiatives period under review, or subsequently, were interested in any
In March 2007, a new strategic plan was laid out for the shares of the Company’s subsidiary undertakings.
transformation of the Group, which included a number of key Each Director has been given an unlimited indemnity from
initiatives for improving the financial performance of the Group the Company in respect of certain losses which they may incur to
over a three-year period. Good progress was made during the third parties in the course of acting as Directors of the Company
year on the transformation programme, which remains on track. and any subsidiary undertaking in which they hold a directorship.
However, the failure of one or more of these initiatives could
result in an adverse impact on the profitability and cash flows Principal shareholders
of the Group. As at 25 June 2009 the Company had been advised of the
following holdings representing 3% or more in its issued
Results and dividends Ordinary Shares:
The consolidated profit after deducting taxation amounted to
Number of Percentage
£44.2m (2008: £89.0m). The Board of Directors recommends a Ordinary of issued
final dividend of 5.6p per Ordinary Share. This together with the Shares share capital
interim dividend of 1.8p, already declared and paid, makes a total UBS Global Asset Management 51,120,722 12.07
for the year of 7.4p per Ordinary Share (2008: 7.4p per Ordinary
Share). Subject to approval at the forthcoming Annual General Standard Life Investments Ltd 38,503,508 9.09
Meeting the final dividend will be paid on 13 October 2009 to Schroders plc 37,074,869 8.75
those shareholders whose names are on the register of members
Barclays PLC 29,206,752 6.90
on 4 September 2009.
Tameside Metropolitan Borough
Directors Council 27,137,485 6.41
Carl Symon and Roy Brown retired as Directors of the Company Blackrock Inc 23,253,362 5.49
with effect from the close of business on each of 5 September
2008 and 22 April 2009 respectively. Carl Symon was not involved Prudential plc 21,706,205 5.12
in the selection or appointment of his successor as Chairman. JPMorgan Chase & Co 21,161,383 5.00
Robert Swannell was appointed Non-Executive Chairman of the Fidelity International Ltd 20,297,195 4.72
Company on 2 February 2009 and Andy Duncan was appointed
as a Non-Executive Director on 13 March 2009. All other Directors Legal & General Investment
served throughout the year under review and details for all Management Ltd 19,667,751 4.63
present Directors are listed, together with their biographical Morgan Stanley Securities Ltd 17,956,590 4.24
details, on pages 18 and 19. In accordance with the Articles of Deutsche Bank AG 17,764,232 4.19
Association of the Company, Robert Swannell and Andy Duncan
will offer themselves for re-election at the forthcoming Annual
General Meeting. The Company’s Articles of Association require
one-third of the Directors to retire by rotation at each Annual
General Meeting and in any event, each Director must offer
himself or herself for re-election at least once every three years.
Accordingly, Lesley Knox and Neil Bright will offer themselves for
re-election at the forthcoming Annual General Meeting.

HMV Group plc

Annual report and accounts 2009 41
Directors’ report continued

Policy on payment of creditors Share capital

The Group does not impose standard payment terms on its At the Annual General Meeting held in September 2008,
suppliers but agrees specific terms with each and ensures that shareholders authorised the Company to purchase up to a
each supplier is made aware of such terms. It is the Group’s maximum of 40.3 million of its own Ordinary Shares, representing
policy to pay its suppliers in accordance with the terms that they 10% of the issued share capital of the Company. During the
have agreed. The Group had 59 days purchases outstanding at period under review the Company did not purchase any of its
25 April 2009 (2008: 61 days), based on the trade creditors at that own shares for cancellation.
date and purchases made during the year. The Company is a Details of the Company’s share capital can be found in
holding company and therefore has no trade creditors. Note 28 which is incorporated by reference and deemed to be
part of this report. Since the end of the period under review the
Financial instruments Company has not increased its issued share capital.
The Group’s Treasury Department is principally responsible for The Company has one class of Ordinary Shares which carry
managing financial risks to which the Group is exposed, such as no right to fixed income. Each share carries the right to one vote
funding risk, liquidity risk, interest rate risk, credit risk and foreign at general meetings of the Company. The percentage issued
exchange risk. Treasury manages these risks using policies nominal value of the Ordinary Shares is 100% of the total
approved by the Board. issued nominal value of all share capital. There are no specific
Details of the Group’s financial risk management policies can restrictions on the size of a holding nor on the transfer of shares,
be found in Note 26 to the Accounts, a breakdown of the Group’s which are both governed by the general provisions of the
net debt position is found in Note 27 and interest charges can be Articles of Association of the Company and prevailing legislation.
found in Note 10 to the Accounts. The Directors are not aware of any agreements between holders
of the Company’s shares that may result in restrictions on the
Employee policies transfer of securities or on voting rights. No person has any
The Group aims to employ and develop the best people, putting special rights of control over the Company’s share capital and
them in the right positions with a significant level of delegated all issued shares are fully paid.
authority and supporting them with the infrastructure and Details of the employee share schemes are set out in
technology required to perform at the highest levels and at the Note 29 and in the Directors’ remuneration report on pages
lowest costs with the quickest response time. 24 to 34 both of which are incorporated by reference in (and
Responsibility for employment rests primarily with each shall be deemed to form part of) this report.
business operation under the general guidance of central policy
and procedural guidelines. Group companies are committed to Charitable donations
the maintenance of a work environment free of discrimination The Group made charitable donations of £18,000 in the period
on the grounds of age, gender, nationality, ethnic or racial origin, under review (2008: £12,000). It is Group policy not to make
non-job related disability, sexual orientation or marital status. donations to political parties or independent election candidates
The Group gives full consideration to applications from and therefore no political donations were made during the period.
disabled persons where a disabled person can adequately fulfil The Group is also involved in charitable fundraising, details of
the requirements of the job. Where existing employees become which can be found in the Corporate Responsibility Statement
disabled, it is the Group’s policy, wherever practicable, to provide on page 39.
continuing employment under normal terms and conditions
and to provide training, career development and promotion to
disabled employees wherever appropriate.
In order to promote employee involvement in the Group,
regular meetings are held between local management and
employees to allow a free flow of information and ideas.
The Company encourages staff involvement in the Group’s
performance via a combination of employee bonus and share
schemes. The Group has established a Share Incentive Plan,
details of which are set out on page 27, in which the UK
employees are entitled to participate provided they meet certain
service conditions.

42 HMV Group plc

Annual report and accounts 2009
Significant agreements
The Company’s Senior Bank Facility agreement, details of which
can be found in Note 26 to the financial statements, contains
provisions entitling the counterparties to exercise termination or
other rights in the event of a change of control of the Company.
The rules of the Company’s share plans set out
consequences of a change of control of the Company on the
employee’s rights under the plans. All outstanding awards on the
change of control will vest immediately to employees to the extent
that any performance conditions are satisfied and, unless the
Remuneration Committee otherwise decides, will be pro-rated to
the extent that the vesting period for each outstanding award has
been completed at that time.
Details of payments to the Executive Directors under their
service contracts as a result of a change of control can be found
in the Directors’ Remuneration Report on page 33 and are
deemed to be incorporated by reference in (and shall be deemed
to form part of) this report.
Auditors
The Directors who were members of the Board at the time of
approving the Directors’ report are listed on pages 18 and 19.
Having made enquiries of fellow Directors and of the Company’s
auditors, each of these Directors confirms that:
– to the best of each Director’s knowledge and belief, there is
no information relevant to the preparation of their report of
which the Company’s auditors are unaware; and
– each Director has taken all steps a director might reasonably
be expected to have taken to be aware of relevant audit
information and to establish that the Company’s auditors
are aware of that information.
A statement of the Directors’ responsibility for the consolidated
and Company financial statements can be found on page 44,
which is deemed to be incorporated by reference in (and shall
be deemed to form part of) this report.
Ernst & Young LLP have indicated their willingness to
continue in office and ordinary resolutions reappointing them as
auditors and authorising the Directors to fix their remuneration
will be proposed at the forthcoming Annual General Meeting.
HMV Group plc
Annual report and accounts 2009
Going concern
The Group’s business activities, together with the factors likely
to affect its future development, performance and position are
set out in the Business and Financial Review on pages 4 to 17.
In addition, this report describes the management of risks and
uncertainties, including credit risk and liquidity, with further
information on the Group’s borrowing facilities detailed in the
financial statements.
The Directors report that having reviewed current
performance and forecast they have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future. For this reason they continue
to adopt the going concern basis in preparing the financial
statements.
Annual General Meeting
The Annual General Meeting of the Company will be held at
2.30pm on 3 September 2009 at Nomura House, 1 St Martin’s-le-
Grand, London EC1A 4NT. The special business to be proposed
at that meeting will be the renewal of the Directors’ authority to
allot new Ordinary Shares and to disapply pre-emption rights
in certain circumstances; the renewal of the Directors’ authority
to buy back the Company’s shares in the market; to avoid an
inadvertent breach of Companies Act 2006, the renewal of the
Group’s authority to make political donations; the deletion of
certain provisions of the Company’s Memorandum of Association
which are no longer required; the passing of a resolution to
ensure that going forward the Company can continue to call
general meetings (other than Annual General Meetings) on
14 days notice; and, certain amendments to the incentive
arrangements. The Notice of Meeting and details of the special
business to be proposed can be found in the accompanying
letter to shareholders.
By order of the Board
Elaine Marriner
Company Secretary
29 June 2009
Shelley House, 2–4 York Road, Maidenhead, Berkshire SL6 1SR
43
Statement of Directors’ responsibilities

The following statement, which should be read in conjunction The Directors are responsible for keeping proper accounting
with the Auditors’ statement of their responsibilities on page 45, is records which disclose with reasonable accuracy at any time, the
made with a view to distinguishing for shareholders the respective financial position of the Company and of the Group and enable
responsibilities of the Directors and the Auditors in relation to the them to ensure that the financial statements comply with the
financial statements. Companies Acts 1985 and 2006 as well as Article 4 of the IAS
The Directors are responsible for preparing the Annual Regulation. They are also responsible for safeguarding the assets
Report and the financial statements in accordance with applicable of the Group and hence for taking reasonable steps for the
United Kingdom law, the Disclosure and Transparency Rules, the prevention and detection of fraud and other irregularities.
Listing Rules of the UK Listing Authority and those International
We confirm that, to the best of our knowledge:
Financial Reporting Standards as adopted by the European
Union. (i) the financial statements, prepared in accordance with
International Financial Reporting Standards, present fairly the
The Directors are required to prepare financial statements for
assets, liabilities, financial position and profit of the Group
each financial year which present a true and fair view of the
taken as a whole; and
financial position of the Company and of the Group and the
financial performance and the cash flows of the Company and of (ii) the Directors’ Report includes a fair review of the
the Group for that period. In preparing those financial statements, development and performance of the business and the
the Directors are required to: position of the Group, together with a description of the
principal risks and uncertainties that the Group may face.
(i) select suitable accounting policies and then apply
them consistently; By order of the Board
(ii) present information, including accounting policies, in a
Simon Fox Neil Bright
manner that provides relevant, reliable, comparable and
Chief Executive Officer Group Finance Director
understandable information;
29 June 2009
(iii) provide additional disclosures when compliance with the
specific requirements in IFRS is insufficient to enable users
to understand the impact of particular transactions, other
events and conditions on the entity’s financial position and
financial performance; and
(iv) state that the Company and the Group have complied with
IFRS, subject to any material departures disclosed and
explained in the financial statements.

44 HMV Group plc

Annual report and accounts 2009
Independent Auditor’s Report to the Members of HMV Group plc

We have audited the financial statements of HMV Group plc for – the Parent Company financial statements have been properly
the 52 weeks ended 25 April 2009 which comprise the income prepared in accordance with IFRSs as adopted by the
statement, the statements of recognised income and expense, European Union and as applied in accordance with the
the balance sheets, the cash flow statements, and the related provisions of the Companies Act 2006; and
notes 1 to 37. The financial reporting framework that has been
– the financial statements have been prepared in accordance
applied in their preparation is applicable law and International
with the requirements of the Companies Act 2006 and, as
Financial Reporting Standards (IFRSs) as adopted by the
regards the Group financial statements, Article 4 of the
European Union and, as regards the Parent Company financial
IAS Regulation.
statements, as applied in accordance with the provisions of the
Companies Act 2006.
Opinion on other matters prescribed by the Companies
This report is made solely to the Company’s members, as
Act 2006
a body, in accordance with Sections 495, 496 and 497 of the
In our opinion:
Companies Act 2006. Our audit work has been undertaken so
that we might state to the Company’s members those matters – the part of the Directors’ Remuneration Report to be audited
we are required to state to them in an auditor’s report and for has been properly prepared in accordance with the
no other purpose. To the fullest extent permitted by law, we do Companies Act 2006; and
not accept or assume responsibility to anyone other than the
– the information given in the Directors’ Report for the financial
Company and the Company’s members as a body, for our audit
year for which the financial statements are prepared is
work, for this report, or for the opinions we have formed.
consistent with the financial statements.
Respective responsibilities of Directors and auditors
Matters on which we are required to report by exception
As explained more fully in the Directors’ Responsibilities
We have nothing to report in respect of the following:
Statement set out on page 44, the Directors are responsible for
the preparation of the financial statements and for being satisfied Under the Companies Act 2006 we are required to report to you
that they give a true and fair view. Our responsibility is to audit if, in our opinion:
the financial statements in accordance with applicable law
– adequate accounting records have not been kept by the
and International Standards on Auditing (UK and Ireland).
Parent Company, or returns adequate for our audit have not
Those standards require us to comply with the Auditing Practices
been received from branches not visited by us; or
Board’s (APB’s) Ethical Standards for Auditors.
– the Parent Company financial statements and the part of the
Scope of the audit of the financial statements Directors’ Remuneration Report to be audited are not in
An audit involves obtaining evidence about the amounts and agreement with the accounting records and returns; or
disclosures in the financial statements sufficient to give
– certain disclosures of Directors’ remuneration specified by
reasonable assurance that the financial statements are free
law are not made; or
from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies – we have not received all the information and explanations we
are appropriate to the Group’s and the Parent Company’s require for our audit.
circumstances and have been consistently applied and
Under the Listing Rules we are required to review:
adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the overall – the Directors’ statement, set out on page 43, in relation to
presentation of the financial statements. going concern; and
– the part of the Corporate Governance Statement relating to
Opinion on financial statements
the Company’s compliance with the nine provisions of the
In our opinion:
2006 Combined Code specified for our review.
– the financial statements give a true and fair view of the state
of the Group’s and of the Parent Company’s affairs as at
25 April 2009 and of the Group’s profit for the 52 weeks John Flaherty (Senior statutory auditor)
then ended; for and on behalf of Ernst & Young LLP
Birmingham
– the Group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union; 29 June 2009

HMV Group plc

Annual report and accounts 2009 45
Consolidated income statement
For the 52 weeks ended 25 April 2009 and 26 April 2008

Before
exceptional Exceptional
items items Total
2009 2009 2009
Notes £m £m £m
Continuing operations
Revenue 3,4 1,956.7 – 1,956.7
Cost of sales (1,799.5) (4.5) (1,804.0)
Gross profit 157.2 (4.5) 152.7
Administrative expenses (87.1) 2.8 (84.3)
Group trading profit 3 70.1 (1.7) 68.4
Share of post-tax profits of joint venture accounted for using the equity
method 18 0.2 – 0.2
Group operating profit 3,5 70.3 (1.7) 68.6
Finance revenue 10 1.2 – 1.2
Finance costs 10 (8.5) – (8.5)
Profit before taxation 63.0 (1.7) 61.3
Taxation 11 (17.6) 0.5 (17.1)
Profit from continuing operations 45.4 (1.2) 44.2
Discontinued operation
Profit after tax from discontinued operation 12 – – –
Profit for the period attributable to shareholders of the Parent Company 45.4 (1.2) 44.2
Earnings per share for profit attributable to shareholders 13
– Basic 11.1p (0.3)p 10.8p
– Diluted 11.0p (0.3)p 10.7p
Earnings per share for profit from continuing operations attributable
to shareholders 13
– Basic 11.1p (0.3)p 10.8p
– Diluted 11.0p (0.3)p 10.7p
See Accounting Policies on pages 51 to 55 for the description of the 2009 reporting period.
For details of the exceptional items included above, see Note 7.

46 HMV Group plc

Annual report and accounts 2009
 Before
exceptional Exceptional
items items Total
2008 2008 2008
Notes £m £m £m
Continuing operations
Revenue 3,4 1,874.9 – 1,874.9
Cost of sales (1,718.1) (4.6) (1,722.7)
Gross profit 156.8 (4.6) 152.2
Administrative expenses (90.6) – (90.6)
Group trading profit 3 66.2 (4.6) 61.6
Share of post-tax profits of joint venture accounted for using the
equity method – – –
Group operating profit 3,5 66.2 (4.6) 61.6
Finance revenue 10 1.6 – 1.6
Finance costs 10 (11.2) – (11.2)
Profit before taxation 56.6 (4.6) 52.0
Taxation 11 (15.8) 1.1 (14.7)
Profit from continuing operations 40.8 (3.5) 37.3
Discontinued operation
(Loss) profit after tax from discontinued operation 12 (0.1) 51.8 51.7
Profit for the period attributable to shareholders of the Parent Company 40.7 48.3 89.0
Earnings per share for profit attributable to shareholders 13
– Basic 10.1p 12.0p 22.1p
– Diluted 10.0p 12.0p 22.0p
Earnings per share for profit from continuing operations attributable
to shareholders 13
– Basic 10.1p (0.9)p 9.2p
– Diluted 10.1p (0.9)p 9.2p
See Accounting Policies on pages 51 to 55 for the description of the 2008 reporting period.
For details of the exceptional items included above, see Note 7.

HMV Group plc

Annual report and accounts 2009 47
Statements of recognised income and expense
For the 52 weeks ended 25 April 2009 and 26 April 2008

Group Group Company Company

2009 2008 2009 2008
Notes £m £m £m £m
Profit for the period attributable to shareholders of the
Parent Company 44.2 89.0 51.6 33.1
Foreign exchange translation differences 6.4 5.5 0.1 0.2
Foreign exchange recycled to the income statement on
discontinued operation 12 – (0.1) – –
Gain (loss) on forward foreign exchange contracts 0.1 (0.4) – –
Transfers to the income statement on cash flow hedges
(cost of sales) 0.4 – – –
Actuarial (loss) gain on defined benefit pension schemes 33 (11.0) 7.3 (11.1) 7.5
Tax on items recognised directly in equity 11 5.7 (2.2) 4.0 (2.3)
Net income (expense) recognised directly in equity 1.6 10.1 (7.0) 5.4
Total recognised income and expense for the period
attributable to shareholders of the Parent Company 45.8 99.1 44.6 38.5

48 HMV Group plc

Annual report and accounts 2009
Balance sheets

Group as at Group as at Company as at Company as at

25 April 2009 26 April 2008 25 April 2009 26 April 2008
Notes £m £m £m £m
Assets
Non-current assets
Property, plant and equipment 15 161.9 149.4 0.2 0.3
Intangible assets 16 73.0 73.1 – –
Investments in subsidiaries and joint venture 17 – – 673.6 657.7
Investments accounted for using the equity method 18 14.7 – – –
Deferred income tax asset 11 26.1 20.6 9.8 6.2
Trade and other receivables 19 1.2 0.9 – –
276.9 244.0 683.6 664.2
Current assets
Inventories 20 213.9 205.4 – –
Trade and other receivables 19 71.6 58.9 75.4 28.4
Derivative financial instruments 25 0.1 – – –
Current income tax recoverable 1.3 1.7 – –
Cash and short-term deposits 21 52.7 35.5 15.8 4.1
339.6 301.5 91.2 32.5
Total assets 616.5 545.5 774.8 696.7
Liabilities
Non-current liabilities
Deferred income tax liabilities 11 (0.1) (0.1) – –
Retirement benefit liabilities 33 (21.0) (16.3) (20.7) (15.9)
Interest-bearing loans and borrowings 23 (5.0) (0.5) – –
Provisions 24 (0.2) (0.2) – –
(26.3) (17.1) (20.7) (15.9)
Current liabilities
Trade and other payables 22 (415.5) (409.5) (201.0) (121.0)
Current income tax payable (17.2) (21.2) (2.3) –
Interest-bearing loans and borrowings 23 (53.3) (35.0) (75.1) (123.7)
Derivative financial instruments 25 – (0.4) – –
Provisions 24 (4.6) (3.5) – –
(490.6) (469.6) (278.4) (244.7)
Total liabilities (516.9) (486.7) (299.1) (260.6)
Net assets 99.6 58.8 475.7 436.1
Equity
Equity share capital 30 347.1 323.1 347.1 323.1
Other reserve – own shares 30 (2.7) (2.0) (2.7) (2.0)
Hedging reserve 30 0.1 (0.4) – –
Foreign currency translation reserve 30 14.0 7.6 – –
Capital reserve 30 0.3 0.3 0.3 0.3
Retained earnings 30 (259.2) (269.8) 131.0 114.7
Total equity 30 99.6 58.8 475.7 436.1
The financial statements were approved by the Board of Directors on 29 June 2009 and were signed on its behalf by:

Simon Fox Neil Bright

Chief Executive Officer Group Finance Director

HMV Group plc

Annual report and accounts 2009 49
Cash flow statements
For the 52 weeks ended 25 April 2009 and 26 April 2008

Group Group Company Company

2009 2008 2009 2008
Notes £m £m £m £m
Cash flows from operating activities
Profit (loss) before tax from continuing operations 61.3 52.0 (21.5) (29.2)
Profit before tax from discontinued operation – 52.6 – –
Profit (loss) before tax 61.3 104.6 (21.5) (29.2)
Gain on disposal of discontinued operation – (52.7) – –
Net finance costs 7.3 9.8 16.1 15.1
Share of post tax profits of joint venture accounted for (0.2) – – –
using the equity method
Depreciation 15 42.5 41.9 0.1 0.1
Net impairment charges 15 3.4 – – 6.9
Profit on disposal of property, plant and equipment (0.5) (0.1) – –
Equity-settled share-based payment charge 30 1.7 2.6 0.3 0.8
Pension contributions less income statement charge (6.8) 1.3 (6.8) 1.3
108.7 107.4 (11.8) (5.0)
Movement in inventories (3.6) (13.3) – –
Movement in trade and other receivables (6.5) 2.2 (39.7) 21.2
Movement in trade and other payables (5.4) 47.7 78.1 30.4
Movement in provisions 1.1 (1.5) – –
Cash generated from operations 94.3 142.5 26.6 46.6
Income tax (paid) received (19.3) (9.3) 6.8 5.9
Net cash flows from operating activities 75.0 133.2 33.4 52.5
Cash flows from investing activities
Purchase of property, plant and equipment (51.5) (36.8) – –
Purchase of intangible asset 16 – (0.1) – –
Proceeds from sale of property, plant and equipment 1.5 0.4 – –
Interest received 1.2 1.6 13.3 3.6
Payments to acquire investment in joint venture 17, 18 (20.0) – (20.0) –
Disposal costs 12 – (4.7) – (0.1)
Proceeds from sale of business, net of cash disposed 12 – 70.6 – 1.5
Dividends received from subsidiaries – – 67.1 55.0
Net cash flows from investing activities (68.8) 31.0 60.4 60.0
Cash flows from financing activities
Movements in short-term facilities 11.0 (88.0) 11.0 (62.0)
Repayment of term debt – (80.0) – (80.0)
Costs of raising debt (1.1) – (1.1) –
Proceeds of issue of equity shares, net of costs 28 24.0 0.1 24.0 0.1
Purchase of own shares 31 (1.0) – (1.0) –
Interest paid (7.8) (10.9) (26.4) (18.3)
Equity dividends paid to shareholders 14 (29.7) (29.8) (29.7) (29.8)
Repayment of capital element of finance leases (0.8) (0.3) – –
Net cash flows from financing activities (5.4) (208.9) (23.2) (190.0)
Net increase (decrease) in cash and cash equivalents 0.8 (44.7) 70.6 (77.5)
Opening cash and cash equivalents 27 35.5 73.9 (84.8) (7.3)
Effect of exchange rate changes 27 9.2 6.3 – –
Closing cash and cash equivalents 21, 27 45.5 35.5 (14.2) (84.8)

50 HMV Group plc

Annual report and accounts 2009
Notes to the financial statements
1. Authorisation of financial statements and statement
of compliance with IFRS
The Group and Company financial statements of HMV Group plc
for the period ended 25 April 2009 were authorised for issue by
the Board of Directors on 29 June 2009, and the balance sheets
were signed on the Board’s behalf by Simon Fox and Neil Bright.
HMV Group plc is a public limited company incorporated and
domiciled in England and Wales. The Company’s Ordinary Shares
are traded on the London Stock Exchange.
The financial statements of the Group and the Company
have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European
Union and as applied in accordance with the provisions of the
Companies Act 2006. The principal accounting policies adopted
by the Group and the Company are set out below.
The Company has taken advantage of the exemption
permitted by Section 408 of the Companies Act 2006 not to
publish its individual income statement and related notes.
2. Accounting policies
Basis of preparation
The consolidated financial statements of the Company and its
subsidiaries are made up to the Saturday on or immediately
preceding 30 April each year. Consequently, the financial
statements for the current period cover the 52 weeks ended
25 April 2009, whilst the comparative period covered the
52 weeks ended 26 April 2008. The financial statements are
prepared in accordance with applicable accounting standards
and specifically in accordance with the accounting policies set
out below.
The financial statements are presented in Pounds Sterling
and are rounded to the nearest tenth of a million except where
otherwise indicated. They are prepared on the historical cost
basis, except for certain financial instruments, share-based
payments and pensions that have been measured at fair value.
The preparation of financial statements requires
management to make estimates and assumptions that affect the
amounts reported for assets and liabilities as at the balance sheet
date and the amounts reported for revenues and expenses during
the year. The nature of estimation means that actual outcomes
could differ from those estimates.
HMV Group plc
Annual report and accounts 2009
Key sources of estimation uncertainty
The key sources of estimation uncertainty that have a significant
risk of causing material adjustment to the carrying amounts
of assets and liabilities within the next financial year are the
measurement and impairment of goodwill, the measurement
of defined benefit pension obligations, the measurement of
impairment of property, plant and equipment, the impairment
of the investment in joint ventures and the measurement of the
deferred tax asset. The Group determines whether goodwill is
impaired on an annual basis and this requires an estimation of the
value in use of the cash-generating units to which the goodwill is
allocated. This involves estimation of future cash flows and
choosing a suitable discount rate (see Note 16). Measurement of
defined benefit pension obligations requires estimation of future
changes in salaries and inflation, as well as mortality rates, the
expected return on assets and the selection of a suitable discount
rate (see Note 33). Measurement of the impairment of property,
plant and equipment requires the estimation of the assets’
recoverable amount and selection of a suitable discount rate
(see Note 15). Measurement of the deferred tax asset requires an
assessment of the likely timing and level of future taxable profits
(see Note 11).
For the Company, key areas of estimation uncertainty are
those listed above for the Group and the measurement and
impairment of investments in subsidiaries and joint ventures
(see Notes 17 and 18).
Basis of consolidation
The consolidated financial statements comprise the accounts
of the Company and its subsidiaries. All intra-group transactions,
balances, income and expenses are eliminated on consolidation.
The results of subsidiaries acquired or disposed of during a
period are included from the date that effective control passed
or up to the effective date of disposal, as appropriate.
51
Notes to the financial statements continued

2. Accounting policies continued Foreign currencies

Transactions denominated in foreign currencies are recorded
Interests in joint ventures at the rates of exchange ruling at the date of the transactions.
A joint venture is a contractual arrangement with other parties Monetary assets and liabilities denominated in foreign currencies
to undertake an economic activity that is subject to joint control. are retranslated into Sterling at period end rates. The resulting
The Group recognises its interest in the joint venture company foreign exchange differences are dealt with in the determination
(a jointly controlled entity) using the equity method of accounting. of profit (loss) for the period.
Under the equity method, the interest in the joint venture is On consolidation, average exchange rates are used to
carried in the balance sheet at cost plus post-acquisition changes translate the results of overseas companies and businesses, and
in the Group’s share of its net assets, less distributions received the assets and liabilities of overseas companies and businesses
and less any impairment in value. The Group income statement are translated into Sterling at period-end rates. Differences on
reflects the share of the jointly controlled entity’s results after tax. translation are recognised as a separate equity reserve, which
The Group statement of recognised income and expense reflects was set to zero on transition to IFRS. On disposal of an overseas
the Group’s share of any income and expense recognised by the company or business, the cumulative exchange differences for
jointly controlled entity outside profit and loss. that entity are recognised in the income statement as part of the
Any goodwill arising on the acquisition of a jointly controlled profit or loss on disposal.
entity, representing the excess of the cost of the investment
compared to the Group’s share of the net fair value of the entity’s Exceptional items
identifiable assets, liabilities and contingent liabilities, is included The Group presents as exceptional items on the face of the
in the carrying value of the jointly controlled entity and is not income statement those material items of income and expense
amortised. which, because of the nature or expected infrequency of the
The accounting reference date of the jointly controlled entity events giving rise to them, merit separate presentation to allow
is 31 July therefore additional financial statements are prepared shareholders to better understand the elements of financial
to the Group’s balance sheet date for consolidation purposes. performance in the year, so as to facilitate comparison with prior
Where necessary, adjustments are made to bring the accounting periods and to better assess trends in financial performance.
policies used into line with those of the Group. The Group ceases Exceptional items recognised in arriving at operating profit include
to use the equity method on the date from which it no longer has (but are not limited to) those costs associated with integrating
joint control over, or significant influence in, the joint venture. a newly acquired business, impairment losses, reversal of
impairments and costs associated with restructuring the business.
Investments in subsidiaries
In its separate financial statements, the Company recognises Goodwill
its investments in subsidiaries at cost less impairments On transition to IFRS, the Group utilised the exemption available
booked. Income is recognised from these investments only in in IFRS 1 whereby IFRS 3 Business Combinations has not been
relation to distributions received from post-acquisition profits. applied retrospectively to past business combinations. Goodwill
Distributions received in excess of post-acquisition profits are arising on acquisitions prior to 25 April 1998 was set off directly
deducted from the cost of the investment. against reserves. This goodwill has not been reinstated on the
balance sheet on the transition to IFRS. Furthermore, it will not be
Revenue transferred to the income statement if the subsidiary is disposed
Revenue represents the value of goods supplied, less discounts of or if the investment in the subsidiary becomes impaired.
given, and is recognised when goods are delivered and title has On transition to IFRS, this goodwill was frozen at its carrying value
passed. It also includes commission earned on ticket sales and on the date of transition, 25 April 2004, subject to impairment
similar activities. Revenue excludes value added tax (‘VAT’) and testing at that date. Positive goodwill arising on acquisitions since
similar sales-related taxes. the Group’s transition to IFRS is also capitalised, classified as an
Interest income is accrued on a time basis, by reference to asset on the balance sheet and is not amortised. Goodwill is
the principal outstanding and the applicable effective interest calculated as the excess of the cost of the business combination
rate. Dividend income is recognised when the right to receive over the Group’s interest in the net fair value of the identifiable
payment is established. Rental income from sublet properties assets, liabilities and contingent liabilities. All capitalised goodwill
is recognised on a straight-line basis over the period of is reviewed for impairment annually or more frequently if events
the sublease. or changes in circumstances indicate that the carrying value may
be impaired.

52 HMV Group plc

Annual report and accounts 2009
2. Accounting policies continued Impairment of assets
The Group assesses at each reporting date whether there are
Property, plant and equipment indicators that an asset may be impaired. Assets are grouped for
The capitalised cost of property, plant and equipment includes impairment assessment purposes at the lowest level at which
only those costs that are directly attributable to bringing an asset there are identifiable cash inflows that are largely independent of
to its working condition for its intended use. the cash inflows of other groups of assets (cash-generating units).
Depreciation of property, plant and equipment is calculated If any indicator of impairment exists, or when annual impairment
on cost, at rates estimated to write off the cost, less the estimated testing is required, the Group makes an estimate of the asset’s
residual value, of the relevant assets by equal annual amounts recoverable amount, being the higher of its fair value less costs
over their estimated useful lives. to sell and its value in use. Value in use is the present value of
the future cash inflows expected to be derived from the asset.
The annual rates used are:
Where the asset does not generate cash inflows that are
Leasehold improvements Shorter of useful life and
independent from other assets, the recoverable amount of the
period of the lease
1 cash-generating unit to which the asset belongs is estimated.
Plant, equipment and vehicles 10 to 33 /3%
Where the carrying amount of an asset or cash-generating unit
The carrying values of property, plant and equipment are reviewed exceeds its recoverable amount, an impairment loss is recognised
for material impairment in periods if events or changes in in the income statement.
circumstances indicate the carrying value may not be recoverable. If there is an indication at the reporting date that previously
Useful lives and residual values are reviewed annually and where recognised impairment losses no longer exist or may have
adjustments are required these are made prospectively. decreased, the recoverable amount is again estimated. To the
extent that the recoverable amount has increased, the previously
Leased assets recognised impairment loss is reversed. An impairment loss in
In respect of property operating leases, benefits received and respect of goodwill is not reversed.
receivable as an incentive to sign a lease, such as rent-free
periods, premiums payable and capital contributions, are spread Inventories
on a straight-line basis over the lease term. All other operating Inventories are stated at the lower of cost and net realisable
lease payments are charged directly to the income statement on value on a first-in, first-out basis. Net realisable value is based
a straight-line basis over the lease term. The Group has a number on estimated selling prices less further costs to be incurred
of lease agreements in which the rent payable is contingent on to disposal.
revenue, which is expensed in the period in which it is incurred.
Assets held under finance leases, which transfer to the Group Taxation
substantially all the risks and benefits of ownership of the leased Current tax Current tax assets and liabilities for the current
assets, are capitalised at the inception of the lease, with a and prior periods are measured at the amount expected to be
corresponding liability being recognised for the lower of the fair recovered from, or paid to, the taxation authorities, based on tax
value of the leased asset and the present value of the minimum rates and laws that are enacted or substantively enacted by the
lease payments. Lease payments are apportioned between the balance sheet date.
reduction of the lease liability and finance charges in the income
Deferred tax Deferred income tax is recognised on all temporary
statement so as to achieve a constant rate of interest on the
differences at the balance sheet date between the tax bases of
remaining balance of the liability. Assets held under finance leases
assets and liabilities and their carrying amounts for financial
are depreciated over the shorter of the estimated useful life of the
reporting purposes.
asset and the lease term.
Deferred tax liabilities are generally recognised for all
temporary differences and deferred income tax assets are
Intangible assets
recognised to the extent that it is probable that taxable profit will
Intangible assets are valued at cost and amortised over their
be available against which the deductible temporary differences
useful life unless the asset can be demonstrated to have an
can be utilised. The carrying amount of deferred income tax
indefinite life. Intangible assets with finite lives are reviewed for
assets is reviewed at each balance sheet date and reduced to the
impairment if there is any indication that the carrying value may
extent that it is no longer probable that sufficient taxable profit will
not be recoverable. Intangible assets with an indefinite useful life
be available to allow all or part of the deferred income tax asset to
are tested for impairment annually or more frequently if events
be utilised.
indicate that the carrying value may be impaired.
Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition
(other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit
nor the accounting profit.

HMV Group plc

Annual report and accounts 2009 53
Notes to the financial statements continued

2. Accounting policies continued Actuarial gains and losses are recognised directly in equity
in full in the period in which they occur and are presented in the
Deferred tax liabilities are not recognised for temporary
statement of recognised income and expense. Other income
differences associated with investments in subsidiaries, branches,
and expenses associated with the defined benefit scheme are
and joint ventures as the Group has determined that undistributed
recognised in the income statement.
profits will not be distributed in the foreseeable future.
The defined benefit scheme provides benefits to a number of
Deferred income tax assets and liabilities are measured at
Group companies. There is no agreement or policy for allocating
the tax rates that are expected to apply to the year when the asset
a share of the defined benefit obligation to each participating
is realised or the liability settled, based on tax rates and laws that
entity. Consequently, the Company, as sponsoring employer
have been enacted or substantively enacted at the balance sheet
of the defined benefit scheme, recognises the net pension
date, and are not discounted.
obligation for the scheme. The other participating members
Taxation is charged or credited directly to equity if it relates to
of the scheme account for their relevant pension costs on
items that are themselves charged or credited directly to equity,
a defined contribution basis.
otherwise it is recognised in the income statement.
Contributions to the defined contribution scheme are
Deferred tax assets and deferred tax liabilities are offset, if a
charged in the income statement as they become payable
legally enforceable right exists to set off current tax assets against
in accordance with the rules of the scheme.
current tax liabilities and the deferred taxes relate to the same
taxable entity and the same taxation authority.
Share-based payments
The cost of equity-settled transactions with employees granted
Cash and cash equivalents
on or after 7 November 2002, which had not vested by 1 January
Cash and short-term deposits comprise cash at bank and in hand
2005, is measured by reference to the fair value at the date at
and short-term deposits with an original maturity of three months
which they are granted and is recognised as an expense over
or less. For the purposes of the cash flow statement, cash and
the vesting period, which ends on the date on which the relevant
cash equivalents consist of cash and short-term deposits less
employees become fully entitled to the award. Fair value is
bank overdrafts that are payable on demand.
determined by using an appropriate pricing model.
At each balance sheet date before vesting, the cumulative
Interest-bearing loans and borrowings
expense is calculated, representing the extent to which the vesting
Interest-bearing loans and borrowings are initially recognised
period has expired and management’s best estimate of the
at fair value less directly attributable transaction costs and are
achievement or otherwise of non-market performance conditions,
subsequently measured at amortised cost using the effective
and hence the number of equity instruments that will ultimately
interest rate method.
vest. The movement in cumulative expense since the previous
balance sheet date is recognised in the income statement, with
Provisions
a corresponding entry in equity. No expense is recognised for
A provision is recognised when the Group has a legal or
awards that do not ultimately vest.
constructive obligation as a result of a past event and it is
probable that an outflow of economic benefits will be required to
Treasury Shares
settle the obligation. If the effect is material, expected future cash
HMV Group plc shares held by the Group’s Employee Benefit
flows are discounted using a current pre-tax rate that reflects the
Trust are classified in shareholders’ equity as ‘other reserve – own
risks specific to the liability.
shares’ and are recognised at cost. No gain or loss is recognised
in the financial statements on the purchase, sale, issue or
Pension costs
cancellation of equity shares.
The Group operates both defined benefit and defined
contribution pension schemes, the funds of which are held in
Derivative financial instruments
separate, trustee administered funds.
The Group may from time to time use derivative financial
The cost of providing benefits under the defined benefit
instruments for hedging purposes, including forward foreign
scheme is determined using the projected unit credit method,
exchange contracts. The Group does not enter into derivative
with actuarial valuations being carried out at each balance sheet
financial instruments for speculative purposes.
date. The net retirement benefit obligation recognised in the
Derivative financial instruments are stated at their fair value.
balance sheet represents the present value of the liabilities of the
The fair value of forward foreign exchange contracts is their
defined benefit scheme as reduced by the market value of the
quoted market value at the balance sheet date, being the present
defined benefit scheme assets.
value of the quoted forward price.

54 HMV Group plc

Annual report and accounts 2009
2. Accounting policies continued
The Group has not adopted early the requirements of the
following accounting standards and interpretations, which have
Hedge accounting
an effective date (shown in brackets) after the date of these
Changes in the fair value of derivative financial instruments that
financial statements:
are designated and effective as hedges of future cash flows
are recognised directly in equity and any ineffective portion is – IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset
recognised immediately in the income statement. Amounts taken Minimum Funding Requirements and their Interaction,
to equity are transferred to the income statement when hedged effective for periods beginning on or after 1 January 2008.
transactions affect profit or loss, such as when a forecast sale or
– Amendments to IFRS 1 and IAS 27 Cost of an investment
purchase occurs.
in a subsidiary, joint-controlled entity or associate
Hedge accounting is discontinued when the hedging
(1 January 2009)
instrument expires or is sold, terminated or exercised, or no
longer qualifies for hedge accounting. At that time any cumulative – Amendment to IFRS 2 Share-based Payment vesting
gain or loss on the hedging instrument previously recognised in conditions and cancellations (1 January 2009)
equity is retained in equity until the hedged transaction occurs.
– IFRS 3 (R) Business Combinations (revised 2008)
If the hedged transaction is no longer expected to occur, the net
(1 July 2009)
cumulative gain or loss recognised in equity is then transferred to
the income statement. – Amendment to IFRS 7 Improving disclosures about financial
Changes in the fair value of derivative financial instruments instruments (1 January 2009)
that do not qualify for hedge accounting are recognised in the
– IAS 1 Presentation of Financial Statements (revised 2007)
income statement as they arise.
(1 January 2009)
Customer loyalty schemes – IAS 23 Borrowing Costs (1 January 2009)
The fair value of loyalty points awarded is deferred until the
– IAS 27 Consolidated and Separate Financial Statements
awards are redeemed, after adjustment for the number of points
(revised 2008) (1 July 2009)
expected never to be redeemed. Fair value is determined by
reference to the value for which the points can be redeemed. – IAS 32 and IAS 1 Financial Instruments Puttable at Fair Value
and Obligations Arising on Liquidation (1 January 2009)
New accounting standards
– IAS 39 Eligible Hedged Items (1 January 2009)
The Group and the Company have adopted the following new
accounting standards, amendments to accounting standards and – Amendments to IFRIC 9 and IAS 39 Embedded Derivatives
interpretations, which are either mandatory for the first time for (June 2009)
the financial year ending 25 April 2009 or have been adopted
– Amendment to IAS 39 and IFRS 7 Reclassification of
early as appropriate.
Financial Assets (1 July 2008)
– IFRS 8 Operating Segments, effective for periods beginning
– Amendment to IAS 39 and IFRS 7 Reclassification of
on or after 1 January 2009. This new accounting standard
Financial Assets: effective date and transition (1 July 2008)
had no effect on reported income or net assets and liabilities.
The required disclosures based on information presented to – IFRIC 15 Agreements for the Construction of Real Estate
the Board are given in Note 3. There have been no changes (1 January 2009)
to the reportable segments as a result of this accounting
– IFRIC 16 Hedges of a Net Investment in a Foreign Operation
standard.
(1 October 2008)
The following have been adopted but have no material impact
– IFRIC 17 Distribution of Non-cash Assets to Owners
on the Group or Company:
(1 July 2009)
– IFRIC 12 Service Concession Arrangements, effective for
– IFRIC 18 Transfer of Assets from Customers (1 July 2009)
periods beginning on or after 1 January 2008, subject to
endorsement in the EU. – Improvements to IFRS (Various effective dates)
The Directors do not anticipate that the adoption of these
standards and interpretations will have a material impact on
the Group’s financial statements.
The effective dates stated are those given in the original
IASB/IFRIC standards and interpretations. As the Group prepares
its financial statements in accordance with IFRS as adopted
by the European Union, the application of new standards and
interpretations will be subject to their having been endorsed
for use in the EU via the EU endorsement mechanism.
HMV Group plc
Annual report and accounts 2009 55
Notes to the financial statements continued

3. Segmental information
For both management and financial reporting purposes the Group is organised into three operating businesses – HMV UK & Ireland,
HMV International, comprising HMV Canada, HMV Hong Kong and HMV Singapore, and Waterstone’s.
HMV is the pre-recorded music, video and electronic games retailing division that primarily trades under the HMV brand.
Waterstone’s is the book retailing division of HMV Group, primarily trading under the Waterstone’s brand. Segment information about
these businesses is presented below. Finance costs, finance income and income taxes are managed on a Group basis.
The following tables present revenue (all from third parties), profit, employee numbers and certain asset information regarding
the Group’s reportable segments, for the periods ended 25 April 2009 and 26 April 2008.
52 weeks ended 25 April 2009
HMV HMV Total Total
UK & Ireland International HMV Waterstone’s operations
£m £m £m £m £m
Segment revenue 1,154.6 253.8 1,408.4 548.3 1,956.7
Segment trading profit before exceptional items 53.7 6.4 60.1 10.0 70.1
Operating exceptional items:
Store closure costs – – – (1.6) (1.6)
Impairment charge (2.1) (2.2) (4.3) – (4.3)
Reversal of impairment charge 0.9 – 0.9 – 0.9
Restructuring costs – – – (2.3) (2.3)
Defined benefit pension scheme past service credit 3.5 – 3.5 2.1 5.6
2.3 (2.2) 0.1 (1.8) (1.7)
Segment operating profit 56.0 4.2 60.2 8.2 68.4
Share of post-tax profits of joint venture 0.2
Net finance costs (7.3)
Profit before taxation 61.3
Taxation (17.1)
Profit for the period 44.2
Average employees (number) 6,020 2,404 8,424 5,377 13,801
Assets 233.8 53.7 287.5 270.7 558.2
Unallocated assets 58.3
Total assets 616.5
Depreciation 22.0 4.2 26.2 16.3 42.5
Unallocated assets include balances relating to cash, taxation and investment in joint venture, which are managed on a Group basis.

56 HMV Group plc

Annual report and accounts 2009
3. Segmental information continued
52 weeks ended 26 April 2008
Discontinued
Continuing operations operation

HMV HMV Total HMV Total

UK & Ireland International HMV Waterstone’s Total Japan operations
£m £m £m £m £m £m £m
Segment revenue 1,079.0 231.6 1,310.6 564.3 1,874.9 61.2 1,936.1
Segment trading profit
before exceptional items 41.4 8.5 49.9 16.3 66.2 0.1 66.3
Operating exceptional
items:
Store closure costs – – – (4.6) (4.6) – (4.6)
Segment operating profit 41.4 8.5 49.9 11.7 61.6 0.1 61.7
Net finance costs (9.6) (0.2) (9.8)
Profit before taxation 52.0 (0.1) 51.9
Taxation (14.7) – (14.7)
Profit after tax on disposal of
discontinued operation – 51.8 51.8
Profit for the period 37.3 51.7 89.0
Average employees
(number) 5,576 2,354 7,930 5,211 13,141 477* 13,618
Assets 205.5 48.2 253.7 266.0 519.7 – 519.7
Unallocated assets 25.8
Total assets 545.5
Depreciation 20.3 3.6 23.9 16.4 40.3 1.6 41.9
Unallocated assets include balances relating to cash and taxation.
* HMV Japan was owned by the Group for four months of the year under review and average employee numbers have been pro-rated accordingly. The average for those four
months was 1,431 employees.

HMV Group plc

Annual report and accounts 2009 57
Notes to the financial statements continued

3. Segmental information continued

The following tables present revenue and certain asset information regarding the Group’s geographic locations for the periods ended
25 April 2009 and 26 April 2008.
52 weeks ended 25 April 2009
United Rest of
Kingdom Europe Asia Canada Total
£m £m £m £m £m
Segment revenue from third party customers 1,616.1 86.8 32.5 221.3 1,956.7
Non-current assets 217.5 5.5 2.7 10.4 236.1
Unallocated non-current assets 40.8
Total non-current assets 276.9

52 weeks ended 26 April 2008

United Rest of
Kingdom Europe Asia Canada Total
£m £m £m £m £m
Segment revenue 1,564.2 79.1 91.0 201.8 1,936.1
Non-current assets 205.3 5.1 2.4 10.6 223.4
Unallocated non-current assets 20.6
Total non-current assets 244.0
Non-current assets for this purpose consist of property, plant and equipment, intangible assets, investment in a joint venture and trade
and other receivables.

4. Revenue
Revenue disclosed in the consolidated income statement is analysed as follows:
2009 2008
£m £m
Sale of goods – continuing operations 1,956.7 1,874.9
Sale of goods – discontinued operation – 61.2
Sale of goods 1,956.7 1,936.1
Financial revenue (Note 10) 1.2 1.6
Total revenue 1,957.9 1,937.7

58 HMV Group plc

Annual report and accounts 2009
5. Group operating profit
2009 2008
£m £m
Total Group operating profit is stated after charging (crediting):
Depreciation of property, plant and equipment 42.5 41.9
Impairment of property, plant and equipment 4.3 –
Reversal of impairment of property, plant and equipment (0.9) –
Amortisation of intangible assets 0.1 –
Cost of inventories recognised as expense 1,276.3 1,267.8
Write down of inventories 3.4 4.7
Operating lease rentals
– Minimum rentals 154.5 148.3
– Contingent rentals 3.6 5.9
– Sublease rentals (3.8) (3.1)
Net operating lease rentals 154.3 151.1
The Group leases stores under non-cancellable operating lease agreements that are generally subject to periodic rent review.
These agreements provide for either or both minimum rentals and percentage rentals based on sales performance.

6. Fees to auditors
2009 2008
£m £m
Audit of the Group financial statements 0.2 0.2
Other fees to auditors:
Local statutory audits for subsidiaries 0.2 0.2
Other services pursuant to legislation 0.1 –
Tax services 0.1 0.2
Services relating to corporate finance transactions 0.3 0.1
0.9 0.7

7. Exceptional items (before taxation)

2009 2008
£m £m
Continuing operations
Recognised in arriving at operating profit:
Acquisition of Ottakar’s: Store closure costs (1.6) (4.6)
Impairment of property, plant and equipment (4.3) –
Reversal of impairment of property, plant and equipment 0.9 –
Restructuring costs (2.3) –
Defined benefit pension scheme past service credit 5.6 –
Total exceptional items – continuing operations (1.7) (4.6)

Discontinued operation
Gain on disposal of HMV Japan – 52.7
Total exceptional items (1.7) 48.1

HMV Group plc

Annual report and accounts 2009 59
Notes to the financial statements continued

7. Exceptional items continued

Included within cost of sales are exceptional costs of £1.6m (2008: £4.6m) in connection with the review of the combined
Waterstone’s store portfolio and associated store closures following the acquisition of Ottakar’s, £4.3m (2008: £nil) of impairment
of certain assets, partially offset by a £0.9m (2008: £nil) reversal of previous asset impairments, based on current market trading
conditions in HMV UK and HMV Canada and store restructuring costs of £2.3m (2008: £nil) as a result of the implementation of the
Waterstone’s book hub. A tax credit of £2.0m (2008: £1.1m) arose in respect of these costs. Partially offsetting these charges is an
exceptional credit totalling £5.6m (£2.8m within cost of sales and £2.8m within administrative expenses), which represents a past
service credit as a result of changes to the Group’s defined benefit pension scheme with effect from 1 November 2008. A tax charge
of £1.5m (2008: £nil) arose in respect of this credit.
During the previous period the Group disposed of its HMV Japan business, giving rise to a profit on disposal after costs of
£52.7m and a tax charge of £0.9m. See Note 12 for further details.

8. Directors’ emoluments
2009 2008
£m £m
Directors’ emoluments 1.6 2.7
Number of Directors accruing benefits under defined benefit pension schemes 3 3
Full details of Directors’ remuneration and interests are set out in the Directors’ Remuneration Report on pages 24 to 34.

9. Employee costs
2009 2008
£m £m
Employee costs, including Executive Directors’ emoluments:
Wages and salaries 214.5 211.0
Social security costs 16.9 16.3
Other pension costs (see Note 33) 5.1 5.3
236.5 232.6
The average monthly number of employees during the period is disclosed in Note 3.

60 HMV Group plc

Annual report and accounts 2009
10. Net finance costs
2009 2008
£m £m
Finance revenue
Bank interest receivable 0.9 1.2
Other interest receivable 0.3 0.4
Total finance revenue 1.2 1.6
Finance costs
Bank loans and overdrafts 7.5 10.9
Amortisation of deferred financing fees 0.5 0.2
Other finance expense – pensions (see Note 33) 0.5 0.1
Total finance costs 8.5 11.2
Net finance costs 7.3 9.6
Included within the total net finance costs are net non-cash charges totalling £1.0m (2008: £0.3m). These comprise the amortisation
of deferred financing fees and other finance costs relating to pensions.
In addition to the above in 2008 a net finance charge of £0.2m was included in the result of the discontinued operation
(see Note 12).

11. Taxation
2009 2008
Group £m £m
Taxation recognised in the income statement:
United Kingdom, current year:
Corporation tax – continuing operations 16.2 13.8
Corporation tax – discontinued operation – 0.9
Over provision in prior periods (1.0) (3.3)
15.2 11.4
Overseas tax, current year:
Corporation tax – continuing operations 1.3 2.5
Under provision in prior periods – 0.4
Total current tax 16.5 14.3
Deferred tax:
United Kingdom 1.2 1.4
Overseas – continuing operations (0.6) (0.1)
Total deferred tax 0.6 1.3
Total taxation expense in the income statement 17.1 15.6

HMV Group plc

Annual report and accounts 2009 61
Notes to the financial statements continued

11. Taxation continued

The tax expense in the income statement is disclosed as follows:
2009 2008
£m £m
Income tax expense on continuing operations 17.1 14.7
Income tax expense on discontinued operations – 0.9
Total taxation expense in the income statement 17.1 15.6
The effective tax rate on continuing operations before exceptional items is 28% (2008: 28%). The tax expense in the current year
includes a net credit of £0.5m (2008: £1.1m) in relation to the exceptional items from continuing operations of £1.7m (2008: £4.6m).
2008 also included a charge of £0.9m in relation to the profit on disposal of HMV Japan, details of which can be found in Note 12.
The tax charge is reconciled with the standard rate of UK corporation tax as follows:
2009 2008
£m £m
Profit from continuing operations before tax 61.3 52.0
Less: share of post-tax profits of joint venture (0.2) –
Loss from discontinued operation before tax – (0.1)
Gain on disposal of discontinued operation – 52.7
Profit before taxation 61.1 104.6
Corporation tax at UK average statutory rate of 28% (2008: 29.83%) 17.1 31.2
Effects of:
Income not taxable/permanent disallowables 1.1 1.5
Overseas income taxed at different rates (1.0) (1.1)
Permanent disallowables on exceptional items – continuing operations 0.1 0.3
Permanent disallowables on exceptional items – discontinued operation – (14.9)
Net prior period over provision (1.0) (2.9)
Temporary differences relating to prior periods 0.8 0.4
Deferred tax rate change – 1.1
Total tax charge 17.1 15.6
Key factors affecting the tax charge are:
(i) The tax charge is reduced by the release of prior year provisions relating to UK tax returns.
(ii) The tax charge is increased by non-deductible expenses including non-qualifying depreciation.
Tax relating to items charged or credited directly to equity in the Group is as follows:
2009 2008
£m £m
Deferred tax relating to defined benefit pension schemes (3.1) 2.6
Deferred tax relating to share-based payments (1.6) (0.3)
Current tax on forward foreign exchange contracts (1.0) (0.1)
Tax (credit) charge in the statement of recognised income and expense (5.7) 2.2

62 HMV Group plc

Annual report and accounts 2009
11. Taxation continued
The deferred tax included in the Group balance sheet is as follows:
2009 2008
£m £m
Deferred tax liability
Other temporary differences (0.1) (0.1)
(0.1) (0.1)
Deferred tax asset
Accelerated depreciation for tax purposes 14.8 13.6
Other temporary differences 2.2 1.0
Defined benefit pension scheme obligations 5.8 4.5
Share-based payments 3.3 1.5
26.1 20.6
The deferred tax asset on the balance sheet is largely in respect of UK and Canadian temporary differences.
Unrecognised tax losses
There are no capital losses available for offset against the Group’s future capital gains.
Deferred tax in the income statement
The deferred tax included in the Group income statement is as follows:
2009 2008
£m £m
Accelerated depreciation for tax purposes (1.2) (0.5)
Tax losses – 1.9
Other 0.2 1.0
Share-based payments (0.2) (0.7)
Defined benefit pension scheme obligations 1.8 (0.4)
0.6 1.3

Company
Tax relating to items charged or credited directly to equity in the Company is as follows:
2009 2008
£m £m
Deferred tax relating to defined benefit pension schemes (3.1) 2.6
Deferred tax relating to share-based payments (0.9) (0.3)
Tax (credit) charge in the statement of recognised income and expense (4.0) 2.3

HMV Group plc

Annual report and accounts 2009 63
Notes to the financial statements continued

11. Taxation continued

The deferred tax included in the balance sheet of the Company is as follows:
2009 2008
£m £m
Deferred tax asset
Other temporary differences 2.3 0.9
Defined benefit pension scheme obligations 5.8 4.5
Share-based payments 1.7 0.8
9.8 6.2

12. Discontinued operation

There are no discontinued operations in the current period. In the prior period, on 25 August 2007 the Group announced the
completion of the sale of its HMV Japan business for Yen17bn (£70.6m) on a debt and cash free basis. Its results for the prior period
to the date of disposal are presented in this Annual Report as a discontinued operation.
Profit and cash flows for the prior period from the discontinued operation are as follows:
2009 2008
£m £m
Revenue – 61.2
Cost of sales – (58.4)
Gross profit – 2.8
Administrative expenses – (2.7)
Operating profit – 0.1
Finance costs – (0.2)
Loss before tax from a discontinued operation – (0.1)
Exceptional gain on disposal of a discontinued operation – 52.7
Tax expense – (0.9)
Profit after tax for the period from discontinued operation – 51.7
The tax expense is analysed as follows:
On loss on ordinary activities – –
On the gain on disposal – (0.9)
– (0.9)
The exceptional gain on disposal in the prior period was calculated as follows:
2008
£m
Net cash consideration received 52.4
Net liabilities disposed of 0.2
Foreign exchange recycled from the translation reserve 0.1
52.7

64 HMV Group plc

Annual report and accounts 2009
12. Discontinued operation continued
Cash flows for discontinued operation were as follows:
2009 2008
£m £m
Operating cash flows – 0.6
Investing cash flows – (0.8)
Financing cash flows – (0.2)
Net cash flows excluding disposal proceeds – (0.4)
Cash inflow on sale:
2008
£m
Gross consideration received 70.6
Cash disposed of with the business 8.2
Debt disposed of with the business (21.7)
57.1
Transaction costs incurred (4.7)
Net cash consideration received 52.4
Net liabilities sold comprised the following assets and liabilities:
Total
£m
Property, plant and equipment 13.5
Inventory 21.5
Trade and other receivables 15.4
Taxation 6.3
Cash 8.2
64.9
Trade and other payables (43.4)
Debt (21.7)

Total net liabilities sold (0.2)

13. Earnings per share

The following reflects the income and share numbers data used in the basic and diluted earnings per share calculations:
2009 2008
£m £m
Profit attributable to shareholders 44.2 89.0
Discontinued operation trading after tax – 0.1
Profit on disposal of discontinued operation after tax – (51.8)
Profit from continuing operations 44.2 37.3
Exceptional items, less tax thereon (see Note 7) 1.2 3.5
Adjusted profit from continuing operations 45.4 40.8

HMV Group plc

Annual report and accounts 2009 65
Notes to the financial statements continued

13. Earnings per share continued

2009 2008
Number Number
Million Million
Weighted average number of Ordinary Shares – Basic 408.5 402.0
Dilutive share options 4.9 1.7
Weighted average number of Ordinary Shares – Diluted 413.4 403.7
Earnings per Ordinary Share is calculated as follows:
2009 2008
Pence Pence
Total operations
Basic 10.8 22.1
Adjusted 11.1 10.1
Basic diluted 10.7 22.0
Adjusted diluted 11.0 10.0
Continuing operations
Basic 10.8 9.2
Adjusted 11.1 10.1
Basic diluted 10.7 9.2
Adjusted diluted 11.0 10.1
Discontinued operation
Basic – 12.9
Basic diluted – 12.8
The adjusted earnings per Ordinary Share is shown in order to highlight the underlying performance of the Group.
The weighted average number of shares excludes shares held by an Employee Benefit Trust and has been adjusted for the
issue of shares during the period. The diluted earnings per share calculations reflect the weighted average dilutive effect of employee
share awards outstanding during the year of 4.9m (2008: 1.7m). At the year end 1.6m anti-dilutive share awards were in issue
(2008: 5.1m).
In the prior period, earnings per share for the discontinued operation was derived from the profit attributable to shareholders of
the parent from discontinued operations of £51.7m, divided by the weighted average number of Ordinary Shares for both basic and
diluted amounts as per the table above.

14. Dividends paid and proposed

2009 2008
£m £m
Ordinary final dividend of 5.6p per share for 2008 (2007: 5.6p) 22.5 22.5
Ordinary interim dividend of 1.8p per share for 2009 (2008: 1.8p) 7.2 7.3
29.7 29.8
The Directors have proposed a final dividend of 5.6p per share (2008: 5.6p), which, in line with the requirements of IAS 10 Events after
the Balance Sheet Date, has not been recognised within these results. This results in a full year dividend for 2009 of 7.4p (2008: 7.4p).
The proposed final dividend for 2009 of £23.7m (2008: £22.6m), subject to approval by shareholders at the Annual General
Meeting, will be paid on 13 October 2009 to shareholders on the Register at the close of business on 4 September 2009. Shares will
be quoted ex-dividend from 2 September 2009.

66 HMV Group plc

Annual report and accounts 2009
15. Property, plant and equipment
Plant,
Leasehold equipment
improvements and vehicles Total
Group £m £m £m
Cost at 28 April 2007 11.8 430.7 442.5
Currency retranslation – 8.2 8.2
Disposals – (10.7) (10.7)
Additions 0.4 36.4 36.8
Disposal of business – (46.6) (46.6)
Cost at 26 April 2008 12.2 418.0 430.2
Currency retranslation 2.7 12.5 15.2
Disposals – (5.1) (5.1)
Additions 0.7 56.9 57.6
Cost at 25 April 2009 15.6 482.3 497.9
Depreciation and impairment at 28 April 2007 5.9 267.4 273.3
Currency retranslation – 6.0 6.0
Charge for period 0.6 41.3 41.9
Disposals – (7.3) (7.3)
Disposal of business – (33.1) (33.1)
Depreciation and impairment at 26 April 2008 6.5 274.3 280.8
Currency retranslation 2.7 10.2 12.9
Charge for period 0.9 41.6 42.5
Impairment loss – 4.3 4.3
Reversal of previous impairment – (0.9) (0.9)
Disposals – (3.6) (3.6)
Depreciation and impairment at 25 April 2009 10.1 325.9 336.0
Net book value at 25 April 2009 5.5 156.4 161.9
Net book value at 26 April 2008 5.7 143.7 149.4
Net book value at 28 April 2007 5.9 163.3 169.2
At 25 April 2009, the Group’s property, plant and equipment has been written down by £4.3m (2008: £nil) and a £0.9m impairment
charge recorded in previous years has been reversed, following an impairment review of the carrying value of certain retail assets
based on prevailing market trading conditions. The recoverable amounts of assets were determined from value in use calculations
that incorporated seven-year cash flow estimates discounted at an appropriate pre-tax discount rate of 10%. The cash flows reflected
management’s best estimates of revenue, margin and operating costs over the forecast period.
The carrying value of plant, equipment and vehicles held under finance leases at 25 April 2009 was £6.7m (2008: £0.7m), of
which £6.1m (2008: £0.7m) is included within additions during the year. Leased assets are pledged as security for the related finance
lease.

HMV Group plc

Annual report and accounts 2009 67
Notes to the financial statements continued

15. Property, plant and equipment continued

Plant,
Leasehold equipment
improvements and vehicles Total
Company £m £m £m
Cost at 28 April 2007 – 2.8 2.8
Disposals – (0.8) (0.8)
Cost at 25 April 2009 and 26 April 2008 – 2.0 2.0
Depreciation at 28 April 2007 – 2.4 2.4
Charge for period – 0.1 0.1
Disposals – (0.8) (0.8)
Depreciation at 26 April 2008 – 1.7 1.7
Charge for period – 0.1 0.1
Depreciation at 25 April 2009 – 1.8 1.8
Net book value at 25 April 2009 – 0.2 0.2
Net book value at 26 April 2008 – 0.3 0.3
Net book value at 28 April 2007 – 0.4 0.4

16. Intangible assets

Trademarks Goodwill Total
Group £m £m £m
Cost at 28 April 2007 2.0 71.0 73.0
Additions 0.1 – 0.1
Cost at 25 April 2009 and 26 April 2008 2.1 71.0 73.1
Amortisation at 26 April 2008 and 28 April 2007 – – –
Charge for period 0.1 – 0.1
Amortisation at 25 April 2009 0.1 – 0.1
Net book value at 25 April 2009 2.0 71.0 73.0
Net book value at 26 April 2008 2.1 71.0 73.1
Net book value at 28 April 2007 2.0 71.0 73.0
Intangible assets include the various trademark registrations and applications for the acronym ‘HMV’ and the dog and trumpet
trademark. They are considered to have an indefinite life as they can be renewed at minimal costs and therefore no amortisation
has been charged. Non-amortisation is supported by an annual impairment review.
During the prior year various trademarks and domain names pertaining to the Fopp brand were purchased for £0.1m.
These are considered to have a useful life of 10 years and amortisation is being charged over this period.
Goodwill of £71.0m arising on the purchase of Ottakar’s plc on 3 July 2006 has been capitalised. The carrying value of the
goodwill is subject to an annual impairment review so as to ensure that the carrying amount is not greater than the recoverable
amount. The recoverable amount is determined from a value in use calculation with regard to the portfolio of stores acquired.
The value in use incorporates cash flow projections based on budgets approved by senior management over a five year period.
Cash flows beyond the five years have been extrapolated using a 1% growth rate (2008: 1%). This rate does not exceed the average
long-term growth rate for the relevant market. The pre-tax discount rate applied to cash flow projections is 10% (2008: 10%) based
on an adjusted WACC for the Group. On the basis of the impairment review undertaken, no impairment of the capitalised goodwill
was required. The calculation of value in use is sensitive to assumptions made with respect to sales forecasts, gross margin and
discount rates. To illustrate, the recoverable amount would reduce to a value equal to the carrying amount if sales reduce 7%, gross
margin rate reduces by 3% or the discount rate increases by 3%.
The Company had no intangible assets.

68 HMV Group plc

Annual report and accounts 2009
17. Investments in subsidiaries and joint venture

Subsidiary undertakings
Cost Provision Net book value
Company £m £m £m
At 28 April 2007 794.2 (130.0) 664.2
Impairment charge – (6.9) (6.9)
Share-based payment award under IFRIC 11 (see Note 29) 1.8 – 1.8
Disposal (1.4) – (1.4)
At 26 April 2008 794.6 (136.9) 657.7
Share-based payment award under IFRIC 11 (see Note 29) 1.4 – 1.4
At 25 April 2009 796.0 (136.9) 659.1
On 25 August 2007 the Group disposed of its HMV Japan business. This comprised the Company’s investment in HMV Japan KK,
various trademarks and a Group subsidiary company, HMV Retail Ltd, which included the HMV Japan branch. Details of the disposal
are disclosed in Note 12.
An impairment charge was made during the previous year against the carrying value of investments in various Group subsidiaries.
The following information relates to those subsidiaries whose results or financial position, in the opinion of the Directors, principally
affect the figures of the Group. All subsidiaries are 100% owned.
Name of undertaking Country of incorporation
Fopp Entertainments Limited England and Wales
Get Closer Limited England and Wales
HMV Canada Inc Canada
HMV Guernsey Limited Guernsey
HMV Hong Kong Limited Hong Kong
HMV (IP) Limited England and Wales
HMV Ireland Limited1 Ireland
HMV Music Limited England and Wales
HMV Overseas Limited (formerly Ottakar’s Limited)1 England and Wales
HMV Singapore Pte Limited Singapore
HMV USA LP1 USA
Rustico Holdings Limited Ireland
Waterstone’s Academic Bookstores Limited1 England and Wales
Waterstone’s Booksellers Amsterdam BV Netherlands
Waterstone’s Booksellers Belgium SA Belgium
Waterstone’s Booksellers Ireland Limited1 Ireland
Waterstone’s Booksellers Limited England and Wales
1. Not directly held by the Company.

All subsidiaries listed above are included in the consolidation. The principal activity of all subsidiaries in the HMV Group is the retailing
of music, video and electronic games or books.

HMV Group plc

Annual report and accounts 2009 69
Notes to the financial statements continued

17. Investments in subsidiaries and joint venture continued

Joint venture
During the year the Company entered into a joint venture operation in Mean Fiddler Group Limited, further details of which are given
in Note 18. The Company’s investment in the joint venture is as follows:
2009
£m
Cost of investment, satisfied by cash 12.8
Professional fees incurred 1.7
Investment in joint venture 14.5
Loan note issued 5.5
Total cash investment 20.0

18. Investments accounted for using the equity method

Group
During the year the Group entered into a joint venture operation through a 50% equity interest in Mean Fiddler Group Limited.
The principal activity of the company, which is incorporated in England and Wales, is the operation of live music and entertainment
venues in the UK. The Group accounts for its interest in Mean Fiddler Group Limited using the equity method.
The Group’s investment in the joint venture is summarised as follows:
2009
£m
Cost of investment, satisfied by cash 12.8
Professional fees incurred 1.7
Share of joint venture’s profit 0.2
Investment accounted for using the equity method 14.7
In addition, the Group paid a further £5.5m in cash in return for a loan note granted by the joint venture, which converts to ordinary
shares if not redeemed by 20 July 2009, subject to further extension (see Note 19). This brings the Group’s total cash investment in
the joint venture to £20.0m.
Further consideration of up to £3.3m is payable or refundable based on an assessment of the joint venture’s EBITDA for the year to
October 2009. No adjustment has been made to the cost of investment as at 25 April 2009 as payment or receipt of this contingent
consideration is not considered to be probable at the balance sheet date.
The Group’s share of the joint venture’s balance sheet at 25 April 2009 and result for the period are shown below. The fair values
are expected to be finalised prior to publication of the Group’s Interim Financial Statements for the period to 24 October 2009.
The Group has paid an amount in excess of the fair value of the net assets based on the expected future profitability and cash
generation of the business as well as a number of synergy benefits.
As at 25 April 2009
£m
Share of joint venture’s balance sheet
Non-current assets 10.0
Current assets 2.6
Share of gross assets 12.6
Share of current liabilities (8.5)
Share of net assets 4.1

70 HMV Group plc

Annual report and accounts 2009
18. Investments accounted for using the equity method continued
2009
£m
Share of joint venture’s results
Revenue 2.4
Cost of sales (1.1)
Administrative expenses (1.0)
Profit before taxation 0.3
Taxation (0.1)
Profit for the period 0.2

19. Trade and other receivables

Group Group Company Company
2009 2008 2009 2008
£m £m £m £m
Non-current
Other receivables 1.2 0.9 – –
1.2 0.9 – –
Current
Trade receivables 9.9 8.2 – –
Amounts owed by subsidiary undertakings – – 69.0 28.3
Amounts owed by joint venture 5.5 – 5.5 –
Other receivables 10.1 9.5 –
Prepayments and accrued income 46.1 41.2 0.9 0.1
71.6 58.9 75.4 28.4
The carrying value of trade and other receivables approximates to fair value.
Group trade receivables are stated net of a provision for impairment of £0.6m (2008: £1.2m). Credit risk is limited as the Group
has minimal levels of trade receivables due to the nature of its retailing business. See Note 26 for further discussion of credit risk.
Trade and other receivables are non-interest bearing and are generally on 30 day terms.
The Company has no trade receivables and no provisions for impairment of any financial assets.

20. Inventories
Inventories primarily comprise finished goods and goods for resale. The replacement cost of inventories is considered to be not
materially different from the balance sheet value.

HMV Group plc

Annual report and accounts 2009 71
Notes to the financial statements continued

21. Cash and short-term deposits

Group Group Company Company
2009 2008 2009 2008
£m £m £m £m
Cash at bank and in hand 52.1 35.0 15.8 4.1
Short-term deposits 0.6 0.5 – –
52.7 35.5 15.8 4.1
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods
of between one day and three months depending on the cash requirements of the Group, and earn interest at the respective
short-term deposit rates.
Cash balances are deposited through the year with counter parties that have a strong credit rating, with an agreed limit for each
counterparty, so as to limit the risk of loss arising from a failure. Counterparties include AAA-rated liquidity funds, as well as banks.
For the purpose of the cash flow statement, cash and cash equivalents comprise the following:
Group Group Company Company
2009 2008 2009 2008
£m £m £m £m
Cash at bank and in hand 52.1 35.0 15.8 4.1
Short-term deposits 0.6 0.5 – –
Bank overdrafts (7.2) – (30.0) (88.9)
45.5 35.5 (14.2) (84.8)

22. Trade and other payables

Group Group Company Company
2009 2008 2009 2008
£m £m £m £m
Current
Trade payables 235.7 237.2 – –
Amounts owed to subsidiary undertakings – – 192.6 111.4
Other payables 91.9 89.4 6.1 7.1
Accruals and deferred income 87.9 82.9 2.3 2.5
415.5 409.5 201.0 121.0
The carrying value of trade and other payables approximates to fair value. Trade payables are not interest-bearing and are generally
settled on 30–60 day terms. Other payables and accruals are not interest-bearing.

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Annual report and accounts 2009
23. Interest-bearing loans and borrowings
Group Group Company Company
2009 2008 2009 2008
£m £m £m £m
Finance leases – non-current 5.0 0.5 – –
Finance leases – current 1.0 0.2 – –
Current borrowings 45.1 34.8 45.1 34.8
Bank overdrafts 7.2 – 30.0 88.9
Current loans and borrowings 53.3 35.0 75.1 123.7
Total external loans and borrowings 58.3 35.5 75.1 123.7
Loans from subsidiary undertakings – – 192.4 88.1
Total loans and borrowings 58.3 35.5 267.5 211.8
Current borrowings fall due within one year of the balance sheet date. They reflect amounts drawn down from the Group’s
multi-currency revolving credit facility (see Note 26) and the short-term element of finance leases. Bank overdrafts are repayable
on demand. The maturity of non-current finance leases is shown in Note 35.
Interest-bearing loans and borrowings analysed by currency are as follows:
Group Group Company Company
2009 2008 2009 2008
£m £m £m £m
Sterling – revolving credit facility 45.1 34.8 45.1 34.8
– overdraft 6.6 – 30.0 88.9
– finance leases 6.0 0.7 – –
Canadian Dollars – overdraft 0.6 – – –
External loans and borrowings 58.3 35.5 75.1 123.7
Sterling – loans from subsidiary undertakings – – 154.1 88.1
Euro – loans from subsidiary undertakings – – 38.3 –
Total loans and borrowings 58.3 35.5 267.5 211.8
All loans and borrowings of the Group and Company as at 25 April 2009 and 26 April 2008 bear interest at variable rates.
The rates are set in advance for periods ranging from overnight to six months by reference to a relevant benchmark rate.

HMV Group plc

Annual report and accounts 2009 73
Notes to the financial statements continued

24. Provisions
Total
Group £m
At 26 April 2008:
Current 3.5
Non-current 0.2
3.7
Currency retranslation 0.1
Provisions utilised (2.9)
Charged during the year 3.9
At 25 April 2009 4.8
Analysed as:
Current 4.6
Non-current 0.2
4.8
Provisions almost entirely consist of amounts in respect of store closures and restructuring. The utilisation of provisions in the current
year largely reflects store closures and the rental costs, net of sublet income, of previously closed stores. Of the £3.9m provision
created in the year £1.6m (2008: £4.6m) was in respect of store closures in the combined Waterstone’s store portfolio following
the acquisition of Ottakar’s and £2.3m (2008: £nil) was in respect of store restructuring costs as a result of the implementation of
the Waterstone’s book hub. The remaining provisions are expected to be largely utilised in the next two years.
The Company did not have any provisions at either 25 April 2009 or 26 April 2008.

25. Derivatives and financial instruments

Currency derivatives
The Group uses derivative instruments in order to manage foreign currency exchange risk arising on expected future purchases of
internationally sourced products in the Group’s subsidiaries. In all cases the implementation of these derivative instruments has been
negotiated to match expected purchases and qualify for hedge accounting. The fair value of cash flow hedges in place at 25 April
2009 is £0.1m asset (2008: £0.4m liability), which has been recognised in the hedging reserve.

Interest rate hedging

Based on its current debt levels, the Group moves to a net cash position during its third quarter and therefore interest rate exposure
is limited. Consequently, no interest rate hedging instruments have been utilised. Interest rate exposures continue to be monitored in
accordance with the Group’s treasury policies.

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Annual report and accounts 2009
25. Derivatives and financial instruments continued

Fair values
The fair values of each category of the Group’s financial instruments and their carrying values in the Group’s balance sheet, excluding
trade and other receivables and trade and other payables, are as follows:
25 April 2009 26 April 2008
Carrying Carrying
amount Fair value amount Fair value
£m £m £m £m
Financial assets
Cash and short-term deposits 52.7 52.7 35.5 35.5
Foreign exchange forward contracts 0.1 0.1 – –
Financial liabilities
Short-term borrowings (45.1) (46.0) (34.8) (35.0)
Foreign exchange forward contracts – – (0.4) (0.4)
Bank overdrafts (7.2) (7.2) – –
Finance leases (6.0) (6.0) (0.7) (0.7)
The fair values of each category of the Company’s financial instruments and their carrying values in the Company’s balance sheet,
excluding trade and other receivables and trade and other payables, are as follows:
25 April 2009 26 April 2008
Carrying Carrying
amount Fair value amount Fair value
£m £m £m £m
Financial assets
Cash and short-term deposits 15.8 15.8 4.1 4.1
Foreign exchange forward contracts 0.1 0.1 – –
Financial liabilities
Short-term borrowings (45.1) (46.0) (34.8) (35.0)
Foreign exchange forward contracts (0.1) (0.1) – –
Bank overdrafts (30.0) (30.0) (88.9) (88.9)
The fair value of cash and short-term deposits and overdrafts is based on the carrying amount as a result of their short maturity.
The fair value of borrowings is based on the carrying amount, adjusted for unamortised deferred financing fees, as a result of their
short maturity. The fair value of finance lease obligations represents the present value of minimum lease payments (Note 35).
For both the Group and the Company the carrying value of trade receivables, other receivables, trade payables and other
payables equates to the fair value. The fair value of foreign exchange forward contracts is determined using foreign exchange spot
rates prevailing at the balance sheet date.
The total notional amount of outstanding foreign currency contracts to which the Group and Company were committed at the balance
sheet date is as follows:
Group Group Company Company
2009 2008 2009 2008
£m £m £m £m
Commercial activities:
Euro 4.6 8.2 4.6 7.2
US Dollar 1.3 0.9 1.3 0.9
5.9 9.1 5.9 8.1

HMV Group plc

Annual report and accounts 2009 75
Notes to the financial statements continued

26. Financial risk factors

The Company’s and Group’s business exposes it to certain limited financial risks, such as liquidity risk, interest rate risk, credit risk and
foreign exchange risk. The Group’s Treasury department is principally responsible for managing these risks using policies approved
by the Board.

Liquidity risk
The Company’s and Group’s strategy to managing liquidity risk is to ensure that the Company and Group has sufficient funds and
facilities available to satisfy its current requirements. Liquidity forecasts are prepared on a regular basis to ensure the optimal use of
facilities and although covenant compliance is tested every six months, forecast compliance is reviewed on a monthly basis. Longer
term projections are also made to assess strategic funding requirements.
During the period under review, the Company secured a £220m multi-currency revolving credit facility, with a final maturity date
of 9 October 2011, which replaced the previous facility. The facility amortises by £20m on 1 January 2010 and a further £20m on
1 January 2011. The Group also has some locally arranged bank facilities, which do not have a fixed maturity date but are reviewed
annually.
Total available at
26 April 28 April
2009 2008
£m £m
Multi-currency revolving credit facility 220.0 260.0
Local facilities 5.2 2.5
Total 225.2 262.5
Fees totalling £1.1m incurred in arranging the new facility have been deferred and are being amortised over the three year term of the
facility to October 2011.
Reflecting current credit markets, interest on the new facility is payable at a rate equal to LIBOR plus a margin of 2.50%
compared with a margin of 1.75% on the previous facility. There are no changes to banking covenants associated with the new facility.
Of the £220.0m (2008: £260.0m) revolving credit facility, £46.0m (2008: £35.0m) had been drawndown at 25 April 2009. Analysis of
the availability of undrawn committed facilities available to the Group is shown below:
2009 2008
£m £m
Expiring within one year 20.7 32.5
Expiring in more than one year but not more than two years 20.0 195.0
Expiring between two and five years 134.0 –
Total 174.7 227.5
Analysis of the maturity profile of the Group’s financial liabilities at 25 April 2009 is shown below:
Less than More than
On demand 3 months 3 to 12 months 1 to 5 years 5 years Total
£m £m £m £m £m £m
Bank overdrafts 7.2 – – – – 7.2
Current borrowings – 45.1 – – – 45.1
Finance lease – – 1.0 3.1 1.9 6.0
Trade and other payables – 415.5 – – – 415.5
At 25 April 2009 7.2 460.6 1.0 3.1 1.9 473.8
Bank overdrafts – – – – – –
Current borrowings – 34.8 – – – 34.8
Finance lease – – 0.2 0.5 – 0.7
Trade and other payables – 409.5 – – – 409.5
At 26 April 2008 – 444.3 0.2 0.5 – 445.0

76 HMV Group plc

Annual report and accounts 2009
26. Financial risk factors continued
Analysis of the maturity profile of the Company’s financial liabilities at 25 April 2009 is shown below:
Less than More than
On demand 3 months 3 to 12 months 1 to 5 years 5 years Total
£m £m £m £m £m £m
Bank overdrafts 30.0 – – – – 30.0
Current borrowings – 45.1 – – – 45.1
Finance lease – – – – – –
Trade and other payables – 201.0 – – – 201.0
At 25 April 2009 30.0 246.1 – – – 276.1
Bank overdrafts 88.9 – – – – 88.9
Current borrowings – 34.8 – – – 34.8
Finance lease – – – – – –
Trade and other payables – 121.0 – – – 121.0
At 26 April 2008 88.9 155.8 – – – 244.7

Security
The borrowings under both the previous and the new Facility Agreement are secured by the Guarantors that comprise HMV Group
plc and any wholly-owned subsidiaries of the Company who accede to the Facility Agreement as guarantors. As a condition of the
Agreement, the aggregate gross assets, revenue and earnings before interest and tax of the Guarantors must comprise not less than
70% of the total gross assets, revenue and earnings before tax and interest of the Company and its subsidiaries. The Guarantors
currently comprise HMV Group plc, HMV Music Limited, Waterstone’s Booksellers Limited, HMV (IP) Limited, HMV UK Limited, HMV
Ireland Limited, Waterstone’s Booksellers Ireland Limited and HMV Guernsey Limited. The Company has granted security comprising
first-ranking, fixed and floating charges over all the assets and undertakings of the Guarantors.
Under their banking arrangements, overdraft and cash balances of the Company and of certain subsidiaries are pooled or offset
and cross-guaranteed. Such pooling and offset arrangements are reflected in the Group balance sheet as appropriate.

Interest rate risk

The Company and Group is exposed to interest rate risk from its borrowings and cash deposits. However, without core longer term
borrowings (as is currently the position) the strong seasonality to its trading patterns provides that, with the onset of peak trading in
December, the Group moves into a net cash position for around three months before reverting to a net debt position until the
following December. As both debt and cash deposits attract a floating rate of interest, this seasonality provides a natural hedge
against interest rate risk. The net exposure is monitored on a regular basis, with consideration given to the supplemental use of
interest rate hedging instruments.

Credit risk
The Group’s credit risk arises from its cash and cash equivalents, deposits, and outstanding receivables.
The Group deposits cash balances with counterparties that have a strong credit rating, with an agreed limit for each counterparty,
so as to limit the risk of loss arising from a failure. Counterparties include banks forming the Group’s syndicated banking facility.
Trade and other receivables are regularly monitored and are limited in size due to the nature of the Group’s business as a retailer
dealing predominantly in cash and cash equivalents. Allowances are made for doubtful debts based on the age of the debt and the
customer’s financial circumstances.
The Company does not have any trade receivables.

HMV Group plc

Annual report and accounts 2009 77
Notes to the financial statements continued

26. Financial risk factors continued

Foreign exchange risk

The Company and Group are exposed to foreign exchange risk from its investing, financing and operating activities.
Forward foreign exchange contracts are used to hedge the foreign exchange risk of imports where volumes are significant.
However, the Group’s operating businesses generally source the majority of their products from suppliers within their country of
operation and so the foreign exchange exposure is limited. No speculative positions are entered into by the Group. Details of foreign
currency contracts outstanding at the balance sheet date are given in Note 25.
The Group is also exposed to foreign currency translation risk through its investment in overseas subsidiaries, which is partially
offset by foreign currency translation risk in local debt. Generally, the Group does not hedge any net translation exposure of overseas
earnings, although it may in certain circumstances implement hedges to secure short-term financial objectives.

Sensitivity analysis
The following sensitivity analysis illustrates the sensitivity to changes in market variables of the Group’s and Company’s financial
instruments and show the impact on profit and shareholders’ funds.

Interest rate sensitivity

Based on the Group’s net debt position at the year end, a 100 basis points movement in interest rates would affect the Group’s profit
before tax and shareholders’ equity by approximately £0.1m (2008: £0.2m). The impact on the Company would have been £0.6m
(2008: £1.2m).

Foreign exchange rate sensitivity

The Group maintains stores in Canada, Europe and Asia. Based on the performance of the overseas businesses in the year to April
2009, a 10% change in the value of local currencies against Sterling would affect the Group’s profit before tax by £1.4m (2008: £1.6m)
and the shareholders’ equity by £4.7m (2008: £4.1m).
There would not have been any impact on the Company.

27. Additional cash flow information

Movements in the Group’s net debt position are as follows:
At 26 April Other non-cash Exchange At 25 April
2008 Cash flow changes1 movements 2009
£m £m £m £m £m
Cash and short-term deposits 35.5 8.0 – 9.2 52.7
Bank overdrafts – (7.2) – – (7.2)
Cash and cash equivalents 35.5 0.8 – 9.2 45.5
Loans and borrowings – non-current (0.5) – (4.5) – (5.0)
Loans and borrowings – current (35.0) (9.1) (2.0) – (46.1)
Total loans and borrowings (35.5) (9.1) (6.5) – (51.1)
Net debt – (8.3) (6.5) 9.2 (5.6)

At 28 April Other non-cash Exchange At 26 April

2007 Cash flow changes1 movements 2008
£m £m £m £m £m
Cash and short-term deposits 77.9 (48.7) – 6.3 35.5
Bank overdrafts (4.0) 4.0 – – –
Cash and cash equivalents 73.9 (44.7) – 6.3 35.5
Loans and borrowings – non-current (0.8) 0.3 – – (0.5)
Loans and borrowings – current (203.3) 168.0 (0.2) 0.5 (35.0)
Total loans and borrowings (204.1) 168.3 (0.2) 0.5 (35.5)
Net debt (130.2) 123.6 (0.2) 6.8 –
1. Represents finance lease funding obtained and issue costs incurred in connection with the raising of debt. The issue costs have been offset against the relevant debt instrument.

78 HMV Group plc

Annual report and accounts 2009
27. Additional cash flow information continued
Movements in the Company’s net debt position are as follows:
At Other At
26 April non-cash Exchange 25 April
2008 Cash flow changes1 movements 2009
£m £m £m £m £m
Cash and short-term deposits 4.1 11.7 – – 15.8
Bank overdrafts (88.9) 58.9 – – (30.0)
Cash and cash equivalents (84.8) 70.6 – – (14.2)
Loans and borrowings – non-current – – – – –
Loans and borrowings – current (34.8) (9.9) (0.4) – (45.1)
Total loans and borrowings (34.8) (9.9) (0.4) – (45.1)
Net debt (119.6) 60.7 (0.4) – (59.3)

At Other At
28 April non-cash Exchange 26 April
2007 Cash flow changes1 movements 2008
£m £m £m £m £m

Cash and short-term deposits – 4.1 – – 4.1

Bank overdrafts (7.3) (81.6) – – (88.9)
Cash and cash equivalents (7.3) (77.5) – – (84.8)
Loans and borrowings – non-current – – – – –
Loans and borrowings – current (176.6) 142.0 (0.2) – (34.8)
Total loans and borrowings (176.6) 142.0 (0.2) – (34.8)
Net debt (183.9) 64.5 (0.2) – (119.6)
1. Represents issue costs incurred in connection with the raising of debt. The issue costs have been offset against the relevant debt instrument.

28. Share capital

2009 2008 2009 2008
Group and Company Number Number £m £m
Authorised
Ordinary Shares of 1p each 518,590,111 518,590,111 5.2 5.2

Group and Company Number £m

Allotted, called up and fully paid Ordinary Shares of 1p each
At 28 April 2007 402,737,033 4.0
Issued on exercise of share options 633,461 –
At 26 April 2008 403,370,494 4.0
Issue of new shares for cash 20,168,524 0.2
Issued on exercise of share options 48,039 –
At 25 April 2009 423,587,057 4.2
During the period 48,039 (2008: 633,461) Ordinary Shares were issued in the Company to satisfy options exercised under the
Company’s share option schemes, for which consideration of £nil (2008: £0.1m) was received. A further 20,168,524 (2008: nil)
Ordinary Shares were issued in the Company via a Placing Agreement for cash consideration, net of issue costs, of £24.0m
(2008: £nil).

HMV Group plc

Annual report and accounts 2009 79
Notes to the financial statements continued

28. Share capital continued

In the event of a winding-up of the Company or other return of capital, the assets available for distribution to shareholders would
be applied in the following order after payment of all debts and liabilities:
(i) Repaying pari passu the amounts subscribed (1p per share) for the Ordinary Shares.
(ii) Distributing pari passu any balance among the holders of the Ordinary Shares.

Capital management
The capital of HMV Group plc is the total equity on the Group’s balance sheet. The objective of the Group’s capital management is
to grow its retailing business and deliver improving returns for its shareholders. The management of the Group’s capital is performed
by the Board of Directors, taking into account economic conditions and strategic requirements. The Group may adjust the dividend
payment to shareholders, return capital to shareholders or issue new shares. During the year, 20,168,524 new shares were issued to
raise funds for strategic initiatives, as discussed on page 17. No changes were made to dividend policy, which is currently to declare
two payments each year, one at the Half Year of approximately 25% of the total expected dividend and the second at the Full Year
(paid in October). There are no externally imposed capital requirements.

29. Share-based payments

Equity-settled share option plan

The Company has a number of share option schemes under which options to subscribe for the Company’s Ordinary Shares have
been granted to certain Directors and management, details of which are given in the Directors’ Remuneration Report on page 32.
Options were granted at the five-day average of the market value of the Company’s shares on the date of grant. The options can
normally only be exercised after three years and are subject to the achievement of earnings per share targets imposed at the date
of grant. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Options are forfeited
if the employee leaves the Group before the option vests or before vested options are exercised.
The charge for share options in respect of employee services during the period ended 25 April 2009 was £nil (2008: £nil).
The movements in the number of share options during the year are detailed in the table below. The options outstanding at
25 April 2009 had a weighted average exercise price of 167p (2008: 203p) and a weighted average remaining contractual life of
3.1 years (2008: 5.7 years). The weighted average share price at the date of exercise for share options exercised during the period
was 131p (2008: 122p).
2009 2008
Weighted Weighted
2009 average 2008 average
Options exercise price Options exercise price
Group Number Pence Number Pence
Outstanding at beginning of period 5,221,834 203 12,974,872 198
Exercised during the period (48,039) 19 (633,461) 19
Lapsed during the period (3,534,214) 223 (7,119,577) 210
Outstanding at end of the period1 1,639,581 167 5,221,834 203
Exercisable at end of the period 1,639,581 167 2,501,384 161
1. Included within this balance are options over 1,639,581 (2008: 2,501,384) shares that have not been recognised in accordance with IFRS 2 as the options were granted
on or before 7 November 2002. These options have not been subsequently modified and therefore do not need to be accounted for in accordance with IFRS 2.
2009 2008
Weighted Weighted
2009 average 2008 average
Options remaining Options remaining
outstanding contractual life outstanding contractual life
Group Number Years Number Years
1998 Senior Executive Share Option Scheme
Exercise price 18.73p – – 96,078 3.4
2002 Executive Share Option Scheme
Exercise price 167p 1,639,581 3.1 2,405,306 4.1
Exercise price 242p – – 2,720,450 7.2
1,639,581 3.1 5,221,834 5.7

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Annual report and accounts 2009
29. Share-based payments continued
2009 2008
Weighted Weighted
2009 average 2008 average
Options exercise price Options exercise price
Company Number Pence Number Pence
Outstanding at beginning of period 1,285,754 207 4,008,709 159
Exercised during the period – – (633,461) 19
Lapsed during the period (684,199) 242 (2,268,250) 178
Transfer from other Group companies – – 178,756 235
Outstanding at end of the period1 601,555 167 1,285,754 207
Exercisable at end of the period 601,555 167 601,555 167
1. Included within this balance are options over 601,555 (2008: 601,555) shares that have not been recognised in accordance with IFRS 2 as the options were granted on or before
7 November 2002. These options have not been subsequently modified and therefore do not need to be accounted for in accordance with IFRS 2.
2009 2008
Weighted Weighted
2009 average 2008 average
Options remaining Options remaining
outstanding contractual life outstanding contractual life
Company Number Years Number Years
2002 Executive Share Option Scheme
Exercise price 167p 601,555 3.1 601,555 4.1
Exercise price 242p – – 684,199 7.2
601,555 3.1 1,285,754 5.7
The fair value of equity-settled share options granted is estimated as at the date of grant using the Black Scholes model. There were
no grants of share options during the period under review or the prior period.

Equity-settled deferred annual bonus

As part of the HMV Group plc Incentive Plan for Senior Executives (HIPS), as discussed more fully in the Directors’ Remuneration
Report on page 25, the Company makes deferred awards to certain Directors and senior management. These awards are made in
shares and the number of shares awarded is determined by reference to the market value of shares at the time the award is made,
not when it is paid. The deferred award normally vests following the third anniversary of the end of the financial year in which the
award is made, subject to the performance of the individual.
The charge in respect of deferred awards during the period ended 25 April 2009 was £0.4m (2008: £0.2m).
The number and weighted average fair values of, and movements in, deferred share awards during the year are as follows:
2009 2008
2009 Weighted 2008 Weighted
Share average Share average
awards fair value awards fair value
Group Number Pence Number Pence
Outstanding at beginning of period 532,692 203 1,052,872 207
Granted during the period 910,579 108 21,986 115
Vested during the period (133,593) 242 (157,531) 226
Forfeited during the period (28,294) 108 (196,974) 165
Lapsed during the period (143,904) 242 (187,661) 237
Outstanding at end of the period 1,137,480 120 532,692 203

HMV Group plc

Annual report and accounts 2009 81
Notes to the financial statements continued

29. Share-based payments continued

2009 2008
2009 Weighted 2008 Weighted
Share average Share average
awards fair value awards fair value
Company Number Pence Number Pence
Outstanding at beginning of period 177,200 226 368,777 232
Granted during the period 389,336 108 – –
Vested during the period (46,796) 242 (42,580) 237
Lapsed during the period (92,945) 242 (148,997) 237
Outstanding at end of the period 426,795 120 177,200 226
Of the outstanding balance, the assessment of performance conditions at 25 April 2009 will result in 156,177 (2008: 143,904) share
awards lapsing after the period end (Company: 9,365, 2008: 92,945), whilst a further 77,032 (2008: 133,593) share awards will vest
(Company: 28,094, 2008: 46,796). The vesting awards will be settled by shares held in an Employee Benefit Trust (see Note 31) and
will be transferred to employees in July 2009.

Equity-settled Performance Share Plan (PSP)

Under the PSP the Executive Directors and certain employees are granted an award of shares, which vest after three years provided
that preset performance criteria, set by the Remuneration Committee, are met. The number of shares awarded is determined by
reference to the market value of shares and the fair value of the award is adjusted for expected dividend income during the vesting
period. The charge in respect of the PSP during the year ended 25 April 2009 was £1.3m (2008: £2.4m).
The number and weighted average fair values of, and movements in, PSP awards during the year are as follows:
2009 2008
2009 Weighted 2008 Weighted
Share average Share average
awards fair value awards fair value
Group Number Pence Number Pence
Outstanding at beginning of period 11,362,008 131 4,661,594 162
Granted during the period 4,166,712 108 7,821,277 115
Vested during the period (20,214) 162 (65,770) 162
Lapsed during the period (665,450) 130 (1,055,093) 148
Outstanding at end of the period 14,843,056 125 11,362,008 131

2009 2008
2009 Weighted 2008 Weighted
Share average Share average
awards fair value awards fair value
Company Number Pence Number Pence
Outstanding at beginning of period 4,836,783 127 1,237,249 162
Granted during the period 1,628,946 108 3,546,189 115
Transfer from other Group companies 17,063 162 62,751 162
Lapsed during the period (200,770) 130 (9,406) 162
Outstanding at end of the period 6,282,022 122 4,836,783 127

82 HMV Group plc

Annual report and accounts 2009
29. Share-based payments continued

Share Incentive Plan

The HMV Group plc Share Incentive Plan (the ‘SIP’), as discussed more fully in the Director’s Remuneration Report on page 27,
provides share-based incentives to eligible employees. Under the SIP, employees may acquire Ordinary Shares in three ways.
Firstly, the Company can use the SIP as part of its broad incentive arrangements by awarding free shares to employees; in this regard
an award of 120 free shares was made to every eligible employee on the Initial Public Offering in May 2002. There have not been
any further awards of free shares and there are no plans to award further free shares to any employees. Secondly, the Company may
invite UK employees to purchase Ordinary Shares, known as Partnership Shares, and thirdly, the Company may, if it wishes, agree to
match the shares purchased with additional shares, known as Matching Shares. The Company has matched on a one-for-one basis
since the inception of the SIP.
The charge in respect of the SIP during the year ended 25 April 2009 was £0.4m (2008: £0.4m).

30. Reconciliation of movements in equity

Foreign
Equity currency
share Own Hedging translation Capital Retained
capital shares reserve reserve reserve earnings Total
Group £m £m £m £m £m £m £m
At 28 April 2007 323.0 (2.5) – 2.2 0.3 (336.2) (13.2)
Total recognised income
and expense for the period – – (0.4) 5.4 – 94.1 99.1
Ordinary dividend – – – – – (29.8) (29.8)
Issue of equity shares 0.1 – – – – – 0.1
Share-based payment
awards – 0.5 – – – (0.5) –
Charge for share-based
payments – – – – – 2.6 2.6
At 26 April 2008 323.1 (2.0) (0.4) 7.6 0.3 (269.8) 58.8
Total recognised income
and expense for the period – – 0.5 6.4 – 38.9 45.8
Ordinary dividend – – – – – (29.7) (29.7)
Issue of equity shares 24.7 – – – – – 24.7
Share issue costs (0.7) – – – – – (0.7)
Purchase of own shares
(see Note 31) – (1.0) – – – – (1.0)
Share-based payment
awards – 0.3 – – – (0.3) –
Charge for share-based
payments – – – – – 1.7 1.7
At 25 April 2009 347.1 (2.7) 0.1 14.0 0.3 (259.2) 99.6
The cumulative amount of goodwill eliminated against retained earnings at 25 April 2009 is £645.5m (2008: £645.5m).

HMV Group plc

Annual report and accounts 2009 83
Notes to the financial statements continued

30. Reconciliation of movements in equity continued

Equity
share Own Capital Retained
capital shares reserve earnings Total
Company £m £m £m £m £m

At 28 April 2007 323.0 (2.5) 0.3 103.9 424.7

Total recognised income and expense for the period – – – 38.5 38.5
Ordinary dividend – – – (29.8) (29.8)
Issue of equity shares 0.1 – – – 0.1
Share-based payment award – 0.5 – (0.5) –
Charge for share based payments – – – 0.8 0.8
Share-based payment award under IFRIC 11 – – – 1.8 1.8
At 26 April 2008 323.1 (2.0) 0.3 114.7 436.1
Total recognised income and expense for the period – – – 44.6 44.6
Ordinary dividend – – – (29.7) (29.7)
Issue of equity shares 24.7 – – – 24.7
Share issue costs (0.7) – – – (0.7)
Purchase of own shares (see Note 31) – (1.0) – – (1.0)
Share-based payment award – 0.3 – (0.3) –
Charge for share-based payments – – – 0.3 0.3
Share-based payment award under IFRIC 11 – – – 1.4 1.4
At 25 April 2009 347.1 (2.7) 0.3 131.0 475.7
The Company has taken advantage of the exemption permitted by Section 408 of the Companies Act 2006 not to publish its individual
income statement and related notes. The profit for the period after taxation, dealt with in the accounts of the Company is £51.6m
(2008: £33.1m).

Equity share capital

The balance classified as equity share capital includes the total net proceeds (both nominal value and share premium) on issue of
the Company’s equity share capital, comprising 1p Ordinary Shares. At 25 April 2009, equity share capital included share premium
of £342.9m (2008: £319.1m).

Other reserve – own shares

The own shares reserve represents the Company’s shares that are held by an Employee Benefit Trust. Further details on this reserve
can be found in Note 31.

Hedging reserve
The hedging reserve is used to record changes in the fair value of derivative financial instruments that are designated and effective
as hedges of future cash flows.

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements
of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operations.

Capital reserve
The capital reserve is utilised on cancellation of shares. No shares have been cancelled by the Company in the current or previous
period.

84 HMV Group plc

Annual report and accounts 2009
31. Other reserve – own shares
Number Cost
Group and Company of shares £m
Ordinary Shares:
Balance at 28 April 2007 1,249,873 2.5
Shares vested (223,301) (0.5)
Balance at 26 April 2008 1,026,572 2.0
Shares vested (153,807) (0.3)
Shares purchased 900,000 1.0
Balance at 25 April 2009 1,772,765 2.7
The own shares deducted from shareholders’ equity represent the Company’s shares held by an Employee Benefit Trust (‘the Trust’).
At 25 April 2009, the Trust held 1,772,765 (2008: 1,026,572) shares with a nominal value of £17,728 (2008: £10,266) and a market
value of £2.6m (2008: £1.3m). This shareholding represented 0.3% (2008: 0.3%) of the total shares of the Company. The Trust has
waived any entitlement to the receipt of dividends in respect of all of its holding of the Company’s Ordinary Shares. The Trust’s waiver
of dividends may be revoked or varied at any time. All shares held by the Trust have been financed by loans from the Company, which
at 25 April 2009 amounted to £2.4m (2008: £1.8m).
The Trust holds shares to satisfy vested awards of the deferred annual bonus element of the HMV Group Incentive Plan for
Senior Executives (‘HIPS’) and the Performance Share Plan (see Note 29). During the period, 153,807 shares were released to
employees to satisfy the vesting of awards. It is expected that a further 77,032 shares will vest and be transferred to employees
in July 2009.
The Group also has UK and Overseas Trusts which hold the Company’s shares in connection with the HMV Group plc Share
Incentive Plan, details of which are provided in the Directors’ Remuneration Report on page 27. At 25 April 2009, the UK and Overseas
Trusts held 3,520,679 shares (2008: 3,331,471) with a nominal value of £35,207 (2008: £33,315). The shares within these Trusts are
not held as own shares by the Group or the Company as neither has de facto control over the shares.

32. Contingent liabilities

The management of HMV Group is not aware of any legal or arbitration proceedings pending or threatened against any member of
HMV Group which may result in any liabilities significantly in excess of provisions in the financial statements. HMV Group plc has given
a parent guarantee to support local borrowing facilities, details of which are given in Note 26.

33. Pension arrangements

HMV Group employees are members of a number of pension schemes. The main scheme that covers employees in the United
Kingdom is the HMV Group Pension Scheme (the ‘Scheme’ – established with effect from July 1998). The Scheme has two sections –
the Pension Benefit Section and the Pension Saver Section. There is also a small defined benefit pension arrangement in Ireland,
which is included in the Group amounts disclosed below, but is not included in the Company amounts.

Pension Benefit Section

The Pension Benefit Section is of the defined benefit type and is an Inland Revenue exempt approved scheme for the purpose of
the Income and Corporation Taxes Act 1988. It is contracted out of SERPS.
A valuation is undertaken on at least a triennial basis by a qualified actuary. The most recently completed actuarial valuation was
as at 30 June 2007 and was based on an assumed investment return of 5.0% to 6.75% a year, salary increases of 3.0% a year, and
annual pension increases of 2.5% to 3.0%, and used the projected unit method. The result of the valuation was a level of asset cover
of 94%, representing a funding deficit of £5.1m, which is being funded by three special contributions of £2.17m on 31 October 2008,
1 May 2009 and 1 May 2010. The valuation reflected a number of changes to the Scheme effective from 1 November 2008, as
follows:
– future increases to pensionable salaries are capped at the lower of RPI and 5% pa;
– pension increases in respect of service from 1 November 2008 are capped at the lower of RPI and 2.5% pa;
– regular funding rates increased to 21.2% of pensionable pay from 19.9% previously. The increased regular funding is being met
through higher member contributions, with the previous rate of 5.0% of pensionable pay increasing from 1 November 2008 to
6.5% for non-executive members and 10.0% for executive members, with the Group’s contribution rate moving from 14.9% of
pensionable pay to 14.7% for non-executive members and 22.5% for executive members;
– the Company has agreed to settle directly the administrative costs of the Scheme.
HMV Group plc
Annual report and accounts 2009 85
Notes to the financial statements continued

33. Pension arrangements continued

The curtailment of the Scheme due to the cap on pensionable salary, resulted in a £5.6m past service cost credit which has been
recognised in the income statement as an exceptional item (see Note 7). The next actuarial review will take place no later than 30
June 2010.
The Pension Benefit Section was generally closed to new members with effect from 1 January 2002, with the exception of 543
members who transferred into the Scheme on 31 May 2003 from the EMI Group Pension Fund as a result of the Group’s flotation
on the London Stock Exchange. Actual employer contributions to the Pension Benefit Section for the year ended 25 April 2009 were
£2.5m (2008: £2.6m) excluding the special contribution noted above of £2.17m. The total employer contributions to the defined
benefit plans for the financial year commencing on 26 April 2009 are expected to be £2.5m.

Pension Saver Section

The Pension Saver Section is of the defined contribution type and is open to all permanent and temporary staff of the Group aged
between 18 and 64 years. Members can choose to pay from 2% to 5% of pensionable pay. The Group matches the amount paid
by the member up to a maximum of 5% of pensionable pay. Members have a choice of ways to invest their and the Group’s
contributions in an individual fund to buy pension benefits of their choice. Actual employer contributions to the Pension Saver Section
for the year ended 25 April 2009 were £1.1m (2008: £0.9m). In addition, employer contributions to similar pension arrangements in
HMV’s international businesses totalled £0.6m (2008: £0.5m)

Defined benefit pensions

Amounts reflected in the financial statements in respect of the defined benefit pension scheme are determined with the advice
of independent qualified actuaries, Watson Wyatt LLP, on the basis of annual valuations using the projected unit funding method.
Scheme assets are stated at their market value at the respective balance sheet dates. The major assumptions used in the calculations
are as follows:
As at As at
25 April 2009 26 April 2008
% per annum % per annum
Rate of price inflation 3.6 3.5
Rate of salary increase 3.6 5.0
Rate of increase for pensions in payment 3.4 3.3
Rate used to discount scheme liabilities 6.5 6.2
Expected rate of return on equities 8.2 8.1
Expected rate of return on bonds 6.2 6.2
Expected rate of return on index-linked bonds 4.6 4.6
The expected rate of return on Scheme assets are based on external historical and forecast market information.
The post-retirement mortality assumptions used as at both 25 April 2009 and 26 April 2008 are in line with the actuarial funding
valuation as at 30 June 2007. They reflect the pensioner mortality 00 series tables rated up one year and based on year of use with
allowance for medium cohort improvements applying from 2000 subject to a minimum of 1% per annum. These bases imply the
following life expectancies:
2009 2009 2008 2008
At age 65 for At age 65 for At age 65 for At age 65 for
someone someone someone someone
currently currently currently currently
Life expectancy (years) aged 65 aged 50 aged 65 aged 50
Male 21.4 22.9 21.3 23.1
Female 23.8 25.3 23.6 25.5
Other non-financial assumptions are also consistent with those used in the actuarial valuation of the Scheme as at 30 June 2007.

86 HMV Group plc

Annual report and accounts 2009
33. Pension arrangements continued

Group
On the basis of the above assumptions, the amounts charged or credited to the consolidated income statement and consolidated
statement of recognised income and expense for the period ended 25 April 2009 are set out below:
2009 2008
£m £m
Recognised in the income statement
Current service cost (3.4) (3.9)
Past service credit 5.6 –
Total recognised in arriving at operating profit 2.2 (3.9)
Finance charge
Interest on pension scheme liabilities (6.3) (5.9)
Expected rate of return on assets in the pension scheme 5.8 5.8
Net charge to other finance expense (0.5) (0.1)
Total income statement credit (charge) before deduction for taxation 1.7 (4.0)
Taken to the consolidated statement of recognised income and expense
Actual return on scheme assets (12.2) –
Less: expected return on scheme assets (5.8) (5.8)
(18.0) (5.8)
Other actuarial gains and losses 7.0 13.1
Actuarial (loss) gain recognised in the consolidated statement of recognised income and expense (11.0) 7.3
The assets and liabilities of the Scheme at the end of the period were:
As at As at
25 April 26 April
2009 2008
£m £m
Equities 39.7 44.6
Bonds 19.4 20.7
Index-linked bonds 18.8 20.3
Other 1.1 0.7
Total market value of assets 79.0 86.3
Actuarial value of scheme liabilities (100.0) (102.6)
Deficit in the Scheme (21.0) (16.3)
Deferred tax 5.8 4.5
Net pension liability (15.2) (11.8)
The pension plans have not invested in any of the Group’s own financial instruments nor in properties or other assets used by
the Group.

HMV Group plc

Annual report and accounts 2009 87
Notes to the financial statements continued

33. Pension arrangements continued

Changes in the fair value of the assets are analysed as follows:
2009 2008
£m £m
Total market value of assets at the beginning of the period 86.3 86.9
Employer contributions 4.6 2.6
Employee contributions 0.9 0.9
Benefits paid (1.1) (4.6)
Expected return on plan assets 5.8 5.8
Actuarial loss (18.0) (5.8)
Foreign exchange gain 0.5 0.5
Total market value of assets at the end of the period 79.0 86.3
Changes in the present value of the Scheme liabilities are analysed as follows:
2009 2008
£m £m
Defined benefit pension obligations at the beginning of the period (102.6) (109.1)
Current service cost (3.4) (3.9)
Past service credit 5.6 –
Interest on pension scheme liabilities (6.3) (5.9)
Employee contributions (0.9) (0.9)
Benefits paid 1.1 4.6
Actuarial gain 7.0 13.1
Foreign exchange loss (0.5) (0.5)
Defined benefit pension obligations at the end of the period (100.0) (102.6)

2009 2008 2007 2006 2005

History of experience gains and losses £m £m £m £m £m
Fair value of scheme assets 79.0 86.3 86.9 75.5 55.6
Present value of defined benefit obligation (100.0) (102.6) (109.1) (100.5) (85.6)
Deficit in the Scheme (21.0) (16.3) (22.2) (25.0) (30.0)
Experience adjustments arising on scheme liabilities 0.1 6.6 – – (2.2)
Other actuarial changes 6.9 6.5 1.3 (6.5) (12.5)
Experience adjustments arising on scheme assets (18.0) (5.8) (1.3) 8.7 (0.4)
The cumulative amount of actuarial gains and losses recognised since 25 April 2004 in the Group statement of recognised income
and expense is £(16.6)m (2008: £(5.6)m). The Directors are unable to determine how much of the Scheme deficit of £17.4m,
recognised on transition to IFRS and taken directly to equity in the Group, is attributable to actuarial gains and losses since inception
of the Scheme. Consequently, the Directors are unable to determine the amount of actuarial gains and losses that would have been
recognised in the Group statement of recognised income and expense before 25 April 2004.

88 HMV Group plc

Annual report and accounts 2009
33. Pension arrangements continued

Company
The Company, as sponsoring employer of the UK defined benefit scheme, recognises the net pension obligation for the Scheme.
The other participating members of the Scheme account for their relevant pension costs on a defined contribution basis.
The movement during the period in the defined benefit pension Scheme deficit recognised on the Company balance sheet
is as follows:
2009 2008
£m £m
Deficit in scheme at the beginning of the period (15.9) (22.0)
Contributions paid 4.6 2.5
Current service cost (3.4) (3.8)
Past service credit 5.6 –
Net charge to other finance expense (0.5) (0.1)
Actuarial (loss) gain (11.1) 7.5
Deficit in scheme at the end of the period (20.7) (15.9)
Deferred tax 5.8 4.5
Net pension liability (14.9) (11.4)

2009 2008 2007 2006 2005

History of experience gains and losses £m £m £m £m £m
Fair value of scheme assets 76.4 83.2 84.1 73.0 53.9
Present value of defined benefit obligation (97.1) (99.1) (106.1) (97.8) (83.0)
Deficit in the Scheme (20.7) (15.9) (22.0) (24.8) (29.1)
Experience adjustments arising on scheme liabilities – 6.9 – – (2.3)
Other actuarial changes 5.6 5.8 1.3 (6.7) (12.0)
Experience adjustments arising on scheme assets (16.7) (5.2) (1.3) 8.3 (0.4)
The cumulative amount of actuarial gains and losses recognised since 25 April 2004 in the Company statement of recognised
income and expense is £(16.7)m (2008: £(5.6)m). The Directors are unable to determine how much of the Scheme deficit of
£16.9m, recognised on transition to IFRS and taken directly to equity in the Company, is attributable to actuarial gains and losses
since inception of the Scheme. Consequently, the Directors are unable to determine the amount of actuarial gains and losses that
would have been recognised in the Company statement of recognised income and expenses before 25 April 2004.

34. Capital commitments

2009 2008
Group £m £m
Capital expenditure: contracted but not provided 0.8 2.7
The Company had no capital commitments contracted but not provided at either 25 April 2009 or 26 April 2008.

HMV Group plc

Annual report and accounts 2009 89
Notes to the financial statements continued

35. Obligations under leases

Obligations under operating leases

The Group operates entirely from properties in respect of which commercial operating leases have been entered into. These leases
have an average remaining duration of 10 years. At the end of the period, future minimum rentals payable under non-cancellable
operating leases were as follows:
Land and buildings Other
2009 2008 2009 2008
Group £m £m £m £m
Not later than one year 166.2 150.1 0.4 –
Between two and five years inclusive 534.0 494.1 0.4 –
After five years 529.4 561.2 – –
1,229.6 1,205.4 0.8 –
Group companies other than the parent have sublet space in certain properties. The future minimum sublease payments expected
to be received under non-cancellable sublease agreements as at 25 April 2009 is £19.3m (2008: £24.4m).
Land and buildings Other
2009 2008 2009 2008
Company £m £m £m £m
Not later than one year 0.2 0.2 – –
Between two and five years inclusive 0.7 0.8 – –
After five years – 0.1 – –
0.9 1.1 – –

Obligations under finance leases

The Group has acquired certain plant and equipment using finance lease facilities. These leases have no terms of renewal, purchase
options or escalation clauses. At the end of the period, future minimum payments under finance leases were as follows:
2009 2008
Group £m £m
Not later than one year 1.2 0.3
Between two and five years inclusive 3.8 0.5
After five years 2.5 –
7.5 0.8
Less: finance charges allocated to future periods (1.5) (0.1)
Present value of minimum lease payments 6.0 0.7
The present value of minimum lease payments is analysed as follows:
2009 2008
£m £m
Not later than one year 1.0 0.2
Between two and five years inclusive 3.1 0.5
After five years 1.9 –
6.0 0.7
The Company had no obligations under finance leases.

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Annual report and accounts 2009
36. Related party transactions
During the period the Company entered into transactions in the ordinary course of business with related parties. Transactions entered
into and balances outstanding at the end of the period are as follows:
Dividends Services Amounts Amounts
received from rendered to owed by owed to
related parties related parties related parties related parties
£m £m £m £m
With subsidiaries
2009 67.1 2.5 69.0 192.6
2008 55.0 3.2 28.3 111.4
With joint venture
2009 – – 5.5 –
2008 – – – –
Included within the amounts owed by and to subsidiaries, £6.1m (2008: £4.8m) related to intercompany trading balances and
is settled monthly with no interest charge. The remaining net balance of £129.7m (2008: £88.1m) related to intercompany loans,
on which interest is charged at the Bank of England base rate prevailing at the date of inception and which are repayable on demand.
During the prior year, the Company entered into a guarantee to secure the obligations of a subsidiary company, HMV Canada Inc,
to a supplier, subject to a maximum amount of C$3.5million until 31 July 2009.
At 25 April 2009 the Group had a loan note of £5.5m (2008: £nil) receivable from the joint venture, Mean Fiddler Group Limited
(see Note 18).

Remuneration of key management personnel

The remuneration of the Directors and key management personnel of the Group is set out below:
Group Group Company Company
2009 2008 2009 2008
£m £m £m £m
Short-term employee benefits 1.9 3.5 0.9 2.1
Post-employment benefits 0.3 0.2 0.2 0.2
Share-based payments – 0.1 – –
Termination benefits 0.3 1.5 – –
2.5 5.3 1.1 2.3

37. Going concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out
in the Business and Financial Review on pages 4 to 17. The Directors’ Report also describes the Group’s borrowing facilities, further
information on which is detailed in the financial statements.
The Directors report that having reviewed current performance and forecast they have a reasonable expectation that the Group
has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the
going concern basis in preparing the financial statements.

HMV Group plc

Annual report and accounts 2009 91
Group financial record

52 weeks 52 weeks 52 weeks 52 weeks 52 weeks 53 weeks

ended ended ended ended ended ended
25 April 26 April 28 April 29 April 30 April 30 April
2009 2008 2007 2006 20052 20052
Summarised Profit and Loss Account £m £m £m £m £m £m
Turnover
HMV UK & Ireland 1,154.6 1,079.0 932.2 937.2 986.0 999.4
HMV International1 253.8 231.6 215.1 241.8 234.1 237.7
Total HMV 1,408.4 1,310.6 1,147.3 1,179.0 1,220.1 1,237.1
3
Waterstone’s 548.3 564.3 537.5 418.7 440.0 446.1
Total continuing operations 1,956.7 1,874.9 1,684.8 1,597.7 1,660.1 1,683.2
Discontinued operation4 – 61.2 209.7 228.2 202.4 202.4
Total Group 1,956.7 1,936.1 1,894.5 1,825.9 1,862.5 1,885.6

Trading profit before

exceptional items
HMV UK & Ireland 53.7 41.4 24.3 60.6 93.0 96.9
HMV International1 6.4 8.5 13.4 14.8 9.5 10.2
Total HMV 60.1 49.9 37.7 75.4 102.5 107.1
Waterstone’s3 10.0 16.3 16.3 20.9 25.2 27.5
Share of post-tax profit of joint venture 0.2 – – – – –
Total continuing operations 70.3 66.2 54.0 96.3 127.7 134.6
Discontinued operation4 – 0.1 3.3 6.3 4.5 4.5
Total Group 70.3 66.3 57.3 102.6 132.2 139.1
Operating exceptional items (1.7) (4.6) (24.7) (18.0) – –
Net finance charges before
exceptional items (7.3) (9.8) (9.2) (4.4) (8.4) (8.4)
Exceptional finance charges – – (1.8) – (2.7) (2.7)
Profit before tax 61.3 51.9 21.6 80.2 121.1 128.0
Tax (17.1) (14.7) (5.5) (24.0) (34.3) (36.3)
Profit after tax on disposal
of discontinued operation – 51.8 – – – –
Profit for the financial period 44.2 89.0 16.1 56.2 86.8 91.7
Basic earnings per share 10.8p 22.1p 4.0p 14.0p 22.7p
Adjusted earnings per share 11.1p 10.1p 8.7p 17.4p 22.8p
Diluted basic earnings per share 10.7p 21.8p 4.0p 13.8p 22.3p
Dividend per share 7.4p 7.4p 7.4p 7.4p 6.8p
Total equity 99.6 58.8 (13.2) (2.4) (14.4)
1. HMV International comprises the results of HMV Canada, Hong Kong and Singapore.
2. The financial year ended 30 April 2005 covered 53 weeks. The result is also presented on an adjusted 52-week basis.
3. Waterstone’s includes the results of Ottakar’s since its acquisition on 3 July 2006.
4. Discontinued operation is HMV Japan which was sold on 25 August 2007.

92 HMV Group plc

Annual report and accounts 2009
Store directory

HMV UK & Ireland Eastbourne London: Reading Friar St. Ireland

East Kilbride Bayswater Whiteleys Reading Oracle Blanchardstown
Edinburgh Fort Kinnaird Beckton Redditch Cork
UK Edinburgh Ocean Terminal Brent Cross Rochdale Drogheda
Aberdeen Edinburgh Princes St. Bromley Romford Dublin Grafton Street
Ashford Edinburgh St. James Canary Wharf Rotherham Dublin Henry Street
Ashton under Lyne Enfield Covent Garden Salisbury* Dublin Swords
Aylesbury Epsom Ealing Scarborough Dundalk*
Ayr Exeter Fulham* Scunthorpe Dundrum*
Ballymena Falkirk Hammersmith Sheffield High St. Galway
Banbury Folkestone Hampstead Sheffield Meadowhall Liffey Valley*
Bangor, NI Gateshead Harrods Shrewsbury Limerick
Bangor, Wales Gatwick North Terminal Harrow Slough Limerick Crescent*
Barnsley Gatwick South Terminal Hounslow Solihull Newbridge*
Basildon Glasgow Argyle St. Islington Southampton Tallaght
Basingstoke Glasgow Braehead Kings Road** Southend
Bath Glasgow Buchanan St.* Leadenhall Market Southend Victoria*
Belfast Boucher Rd. Glasgow Fort* Moorgate Southport Fopp
Belfast Donegall Glasgow Sauchiehall St. Oxford Circus Southshields Bristol
Belfast Forestside Glasgow Silverburn* Oxford St. (360) Speke Park Cambridge
Bexleyheath Gloucester Putney St. Albans Covent Garden
Birkenhead Greenwich Richmond St. Helens Edinburgh
Birmingham Bullring Grimsby Selfridges Stafford Glasgow Byres
Birmingham High St. Guernsey Stratford Staines Glasgow Union
Birmingham Pallasades Guildford Trocadero Stansted Manchester
Birmingham The Fort Hanley Victoria Station Stevenage Nottingham
Blackburn Harlow Walthamstow Stirling
Blackpool Harrogate Wandsworth Stockport
Bluewater Hastings* Westfield White City* Stockton-on-Tees
Bolton Hatfield Galleria Wimbledon Stratford
Bolton Middlebrook Heathrow Terminal 1 Wood Green Sunderland
Boston Heathrow Terminal 2 Sutton
Bournemouth Heathrow Terminal 3 Luton Swansea
Bournemouth Castlepoint* Heathrow Terminal 4 Maidstone Swindon
Bracknell Heathrow Terminal 5 Manchester Arndale* Tamworth
Bradford Hemel Hempstead Manchester 21 Market St. Taunton**
Brighton Weston Road High Wycombe Manchester 90 Market St. Teeside*
Brighton Churchill Sq. Horsham Manchester Trafford Centre Telford
Bristol Broadmead* Huddersfield Manchester West One Thanet
Bristol Cribbs Causeway* Hull Mansfield Thurrock
Burton Upon Trent Ilford Merry Hill Truro
Bury St Edmonds** Inverness Middlesbrough Tunbridge Wells
Cambridge Ipswich Milton Keynes Uxbridge
Canterbury Isle of Man Monks Cross Wakefield
Cardiff Isle of Wight Newbury Walsall
Carlisle Jersey Newcastle Walton on Thames**
Chelmsford Kettering Newport Warrington
Cheltenham King’s Lynn Newry Watford
Cheshire Oaks Kingston Newtownabbey** Wellingborough
Chester Kirkcaldy Northampton Wigan
Chesterfield Lancaster Norwich Winchester
Chichester Leamington Spa Norwich Chapelfield Windsor
Clydebank Leeds Birstall Nottingham Listergate Woking
Colchester Leeds Headrow Nottingham Victoria Wolverhampton
Coleraine Leeds White Rose Nottingham Wheelergate* Worcester
Coventry Leicester Nuneaton Workington
Craigavon Lincoln Oldham Worthing*
Crawley Lisburn Orpington Wrexham
Crewe* Liverpool Oxford Yeovil
Croydon Liverpool One* Perth York
Croydon Centrale* Livingstone Peterborough
Cwmbran Llandudno Peterborough Queensgate*
Darlington Llanelli Plymouth
Derby Plymouth Drake Circus*
Derry Poole
Doncaster Portsmouth
Dumfries Portsmouth Gunwharf Quay
Dundee Preston
Durham

HMV Group plc

Annual report and accounts 2009 93
Store directory continued

HMV International Oakville Place Hong Kong Waterstone’s Camberley

Orleans Place D’Orleans Causeway Bay Aberdeen Langstane Cambridge Sidney St.
Oshawa Central Building Aberdeen Union Bridge Canterbury St Margarets
Canada Ottawa Sparks St. Canterbury Rose Lane
Abbotsford Seven Oaks Elements, Union Square Abergavenny
Ottawa Rideau Centre Telford Plaza Aberystwyth Cardiff The Hayes
Barrie Georgian Mall
Ottawa St. Laurent Tsimshatsui Alton Carlisle
Bellville Quinte Mall
Owen Sound Heritage Place* Altrincham Carmarthen
Bramalea
Peterborough Lansdowne Amersham Chatham
Brampton Trinity Common Singapore
Pickering Amsterdam Chelmsford The Meadows
Brantford Lyden Park CityLink
Pointe Claire Andover Chelmsford High St.
Brossard Heeren Centre
Prince George Pine Centre Ashford Cheltenham 33-41
Burlington Mapleview
Quebec Fleur de Lys Aviemore The Promenade
Burnaby Lougheed
Quebec Galeries de la Capitale Aylesbury Chesham
Burnaby Metrotown
Red Deer Bower Place Ayr Chester Eastgate
Burnaby Metrotown II
Regina Cornwall Centre Ballymena Chesterfield
Calgary Chinook
Regina Southland Banbury Chichester
Calgary Marlborough*
Repentigny Rive Nord Barnet Chippenham
Calgary Market Mall
Richmond Centre Barnstaple Chiswick
Calgary North Hill
Richmond Hill Hillcrest Mall Barrow Cirencester
Calgary Signal Hill
Rosemère Basildon Colchester Culver Sq.
Calgary Southcentre
Saint John McAllister Place Basingstoke Colchester High St.
Calgary Sunridge
Saskatoon Lawson Heights Bath Coleraine
Calgary TD Square
Saskatoon Midtown Mall Bedford Cork
Cambridge
Sault Ste Marie Station Mall* Belfast Coventry Cathedral Lanes
Chicoutimi Place du Royaume
Scarborough Berkhamsted Coventry Smithford Way
Coquitlam Centre
Sherbrooke Birkenhead Coventry Academic
Dartmouth Mic Mac Mall Dieppe
St. Bruno Birmingham High St. Crawley County Mall
Champlain Place Edmonton
St. Catharine’s Pen Centre Birmingham New Street Crawley The Martlets
Bonnie Doon
Ste Foy Laurier Birmingham University Crewe
Drummondville*
St Jean-sur-Richelieu Carrefour Bishops Stortford Croydon
Edmonton City Centre
de Richelieu* Blackpool Darlington Cornmill Centre
Edmonton Kingsway
St Jerome Carrefour du Nord* Bluewater Derby
Edmonton Londonderry
St. John’s Avalon Mall Bolton Derby University
Edmonton Mill Woods
Stony Creek Eastgate Boston Doncaster
Edmonton South
Sudbury Bournemouth Arcade Dorchester
Edmonton Southgate
Surrey Guildford Bournemouth Castle Point Dorking
Etobicoke Sherway Gardens
Thornhill Promenade Bournemouth University*** Douglas, Isle of Man
Fredericton Regent Mall
Thunder Bay Intercity Bracknell Drogheda
Gatineau Galaries de Hull
Toronto Bloor Street Bradford University Dublin Dawson St.
Gatineau L’Outaouais
Toronto Eaton Centre Bradford Wool Exchange Dublin Hodges Figgis
Grandview Corners*
Toronto Dufferin Mall Brentwood Dublin Jervis St.
Guelph Stone Road
Toronto Fairview Bridport Dumfries
Halifax Spring Garden Rd
Toronto First Canadian Place Brighton Clock Tower Dunfermline*
Hamilton Limeridge
Toronto Eglinton & Laird Bristol Cribbs Causeway Dundee Commercial St.
Kelowna Orchard Park
Toronto Queen St. Bristol Galleries Durham
Kingston Cataraqui
Toronto Superstore Bristol University Durham University
Kitchener Fairview
Toronto Woodbridge Bromsgrove East Anglia University
Langley Willowbrook
Toronto Yonge & Eglinton Brussels Eastbourne
Lasalle Carrefour Anrignon
Toronto Yorkdale Burton on Trent East Grinstead
Laval
Trois Rivieres Bury East Kilbride
Lethbridge Park Place
Vancouver Oakridge Centre Bury St Edmunds Eastleigh
Levis Galeries Chagnon
Vancouver Superstore Edinburgh Cameron Toll
Lloydminster Lloyd Mall
Vaughan Mills Edinburgh East End
London Masonville
Victoria Hillside Edinburgh George St.
London White Oaks
Victoria Mayfair Edinburgh Ocean Terminal
Markham Markville
Victoriaville Edinburgh West End
Medicine Hat
Ville d’Anjou Elgin
Missisauga Erin Mills
Ville Mount-Royal Rockland Enfield
Missisauga Heartland*
Ville St. Laurent Place Vertu Epsom High St.***
Missisauga Square One
Waterloo Epsom Ashley Centre
Montreal Megastore
West Edmonton Mall Essex University
Montreal Place Versailles
West Vancouver Park Royal Exeter High St.
Nanaimo Woodgrove
Windsor Devonshire Mall Exeter Roman Gate
Nepean Bayshore
Winnipeg Kildonan
Nepean Merivale
Winnipeg Polo Park
Newmarket Upper Canada
Winnipeg Portage Place
Oakville
Winnipeg St. Vital

94 HMV Group plc

Annual report and accounts 2009
Falkirk London: Newbury Taunton * New stores opened in
Fareham Bromley Newcastle Emerson Chambers Teddington 52 weeks ended
Farnham Camden Newport Teesside University 25 April 2009
Folkestone Sandgate Road Canary Wharf Cabot* Newton Abbott Telford ** Opened since
Gateshead Canary Wharf Jubilee* Newton Mearns Tenterden 25 April 2009
Glasgow Argyle St. City University Newry Thanet *** Closed since 25 April 2009
Glasgow Braehead Clapham Northallerton Tiverton
Glasgow Sauchiehall St. Clare Market University Northampton Trowbridge
Gloucester Covent Garden Norwich Royal Arcade Thurrock
Godalming Ealing Broadway Norwich Castle St. Torquay
Grimsby Finchley Nottingham Truro
Guildford North St. Finchley O2* Nuneaton Tunbridge Wells
Guildford High St. Fleet Street* Oban Twickenham
Hanley Gower Street Oldham Uxbridge*
Harrogate Greenwich Ormskirk Wakefield
Harrow Hampstead Orpington Walsall
Hastings Harrods Oxford Walthamstow
Hatfield High Holborn* Perth Walton on Thames
Haywards Heath Islington Peterborough Bridge St. Warrington
Hemel Hempstead Riverside Kensington Petersfield Watford
Hemel Hempstead Marlowes Kings Road Plymouth New George St. Wells
Hereford Leadenhall Market Plymouth Drake Circus Weston-super-Mare
Hexham London Wall* Poole Wigan
High Wycombe Ludgate Circus Portsmouth Wilmslow
Hitchin Notting Hill Gate Preston Winchester High St.
Horsham Oxford Street (421) Reading Broad St. Winchester The Brooks
Huddersfield Kingsgate Piccadilly Reading Oracle Windsor
Huddersfield New St. Piccadilly Hatchards Redhill Witney
Hull Putney Redditch Woking Peacock Centre
Hull University Richmond Romford Woking Wolsey Walk
Ilford Science Museum Salisbury High St. Wolverhampton
Inverness Eastgate Trafalgar Square Scarborough Worcester High St.
Ipswich Wandsworth* Sheffield Meadowhall Arcade Worcester The Shambles
Isle of Wight Wimbledon Bridge Sheffield Meadowhall Worthing
Jersey St Hellier Park Lane Wrexham
Keele University Loughborough Sheffield Orchard Sq. Yeovil
Kendal Lowestoft Shrewsbury York 28 Ousegate
Kettering Luton Slough
King’s Lynn Norfolk St. Lymington Solihull
Kingston University*** Macclesfield Southampton Above Bar
Kingston Bentalls Maidenhead Southampton University***
Kirkcaldy Maidstone Earl St. Southampton West Quay
Knutsford Maidstone Fremlin Walk Southend High St.
Lancaster King St. Manchester Arndale Southport
Lancaster Corn Market Manchester Deansgate St. Albans
Lancaster University Manchester Trafford Centre St. Andrews
Leamington Spa Market Harborough St. Neots
Leeds Merry Hill Stafford Guildhall
Leicester Market St. Middlesbrough Stafford Greengate
Leicester The Shires Milton Keynes Silbury Arcade Staines
Lincoln Exchange Arcade Milton Keynes Midsummer Stevenage
Lincoln High St. Place Stirling Thistle
Lisburn Stockport Merseyway
Liverpool Stratford
Liverpool One* Sunderland
Livingston* Sutton
Llandudno Sutton Coldfield
Swansea
Swansea University
Swindon

HMV Group plc

Annual report and accounts 2009 95
Shareholder information

Financial calendar
Ex-dividend date 2 September 2009
Annual General Meeting 3 September 2009
Record date 4 September 2009
Final dividend payable 13 October 2009
Interim results December 2009
Interim dividend payable February 2010
Announcement of results for year ending 24 April 2010 June 2010

Ordinary Shares
The total number of Ordinary Shares in issue as at 25 April 2009 was 423,587,057 shares, which were held by a total of 3,246
shareholders.

Share price information

The latest information on the HMV Group plc Ordinary Share price is available on www.hmvgroup.com

Registrars
All enquiries relating to Ordinary Shares, dividends and changes of address should be addressed to the Company’s registrar,
Capita Registrars.

Payment of dividends
Shareholders whose dividends are not currently paid to mandated accounts may wish to consider this method of payment,
which has a number of advantages: dividends are paid direct into the shareholder’s nominated account, cleared funds are
provided on the payment date, and the relevant tax voucher is sent to the shareholder’s registered address.

Company information

Registered office Corporate website Auditors Principal bankers Registrars

Shelley House www.hmvgroup.com Ernst & Young LLP Lloyds TSB Bank plc Capita Registrars
2-4 York Road 1 Colmore Square 25 Gresham Street Northern House
Maidenhead Other websites Birmingham B4 6HQ London Woodsome Park
Berkshire SL6 1SR www.hmv.com EC2V 7HN Fenay Bridge
www.hmv.ca Financial advisors Huddersfield
The Royal Bank of
Registered number www.hmv.com.hk Citigroup HD8 0GA
Scotland
3412290 www.waterstones.com Citigroup Centre
135 Bishopsgate
33 Canada Square
London EC2M 3UR
Canary Wharf
London E14 5LB
Lawyers
Nomura Simmons & Simmons
25 Bank Street CityPoint
Canary Wharf One Ropemaker Street
London E14 5LE London EC2Y 9SS

96 HMV Group plc

Annual report and accounts 2009