Financial Summary
Consolidated Financial Results for the Fiscal Year Ended
March 31, 2007

May 9, 2007

DISCLAIMER- NAMCO BANDAI Holdings Inc. provides this translation for your reference and convenience only and without
any warranty as to its accuracy or otherwise. In the event of any discrepancy, the original “Kessan Tanshin” inJapanese shall prevail.
- This document has been prepared as a guide to non-Japanese investors and contains forward-looking
statements that are based on management’s estimates, assumptions and projections at the time of publication.
A number of factors could cause actual results to differ materially from expectations.
- This document does not include the non-consolidated financial statements of NAMCO BANDAI Holdings Inc.

1

Stock Listing: Tokyo Stock Exchange
Code Number: 7832
(URL: http://www.bandainamco.co.jp/)
May 9, 2007

Consolidated Financial Report for the Fiscal Year Ended March 31, 2007
Representative:
Contact:
Date of General Meeting of Stockholders:
Scheduled starting date for dividend payments:
Scheduled filing date of the annual security report:

Takeo Takasu, President and Representative Director
Keiji Tanaka, Director
June 25, 2007
June 26, 2007
June 26, 2007

1. Consolidated Results for the Fiscal Year Ended March 31, 2007
(April 1, 2006 ~ March 31, 2007)(1) Consolidated Operating Results
Net sales

Fiscal Year Ended
March 31, 2007
Fiscal Year Ended
March 31, 2006

Recurring income¥ million
459,132%
1.8¥ million
42,224%18.4¥ million
45,615%22.9

450,829−

35,669−37,122−

Net income

Fiscal Year Ended
March 31, 2007
Fiscal Year Ended
March 31, 2006

Operating income

Net income per share

Net income per share(diluted)¥ million
24,252

%
71.4

¥
95.73

¥
95.67

14,149

−

54.39

54.37

ROE
(Net income / Net
assets)ROA(Recurring income /Total assets)

Operating Margin(Operating income /Net sales)%%
Fiscal Year Ended
9.4
11.5
March 31, 2007
Fiscal Year Ended
5.8
9.6
March 31, 2006
(Reference)
Gain or loss from the equity method: 191 million yen (FY 2007.3), 27 million yen (FY 2006.3)

%
9.2
7.9

(2) Consolidated Financial Position
Total assets

Net assets¥ million
Fiscal Year Ended
408,490
March 31, 2007
Fiscal Year Ended
386,651
March 31, 2006
(Reference)
Shareholder's equity: 274,169 million yen (FY 2007.3)

Equity ratio

Net asset per
share¥ million
284,254%67.1¥
1,063.29

243,60763.0

961.362

(3) Consolidated Statement of Cash Flows
Operatingactivities

Fiscal Year Ended
March 31, 2007
Fiscal Year Ended
March 31, 2006

Investingactivities

Financing
activities¥ million
42,493¥ million(15,253)¥ million(18,856)

Cash and cash
equivalents at
year-end¥ million
124,155

31,808(24,406)(19,965)

113,186

2. Dividend

Dividend record dates

End of
1Q

Dividend per share
End ofEnd
FiscalInterimof 3Q Year-end

Total

Payout Ratio

Total
dividend
payment

Dividend /Net Assets(Consolidated)(Consolidated)(Full Year)

Fiscal Year Ended
March 31, 2006
Fiscal Year Ended
March 31, 2007
(Projection)
Fiscal Year Ending
March 31, 2008 *2

¥
−

*1 −

¥

¥
−

¥
12

¥
12

¥ million
3,126

%
22.1

%
1.2

−

12

−

16

28

7,254

29.2

2.8

−

12

−

12

24

6,190

23.4

2.3

*1 On December 19, 2005, NAMCO BANDAI Holdings Inc. paid 18 yen per Bandai share and 12 yen per Namco share in theaggregate sum of ¥3,097,276,824 to the respective final stockholders of Bandai and Namco as of September 28, 2005, theday immediately preceding the date for executing the share-for-share exchange, in lieu of interim dividends of Bandai andNamco for the year ending March 31, 2006.
*2 The stable portion of the period-end dividend is given in the projection based on the company’s basic policy regarding
appropriation of profits. Thus, the actual period-end dividend will be decided according to the consolidated financial results.
3. Consolidated Projections for Fiscal Year ending March 2008
(April 1, 2007 ~ March 31, 2008)
Net sales
Operatingincome¥ million% ¥ million%
Interim Period
210,000
1.6
13,000 (24.7)
Full Year
480,000
4.5
45,000
6.6

Recurringincome¥ million%
14,000 (24.6)
47,000
3.0

Net income¥ million
7,500
26,500%(31.9)
9.3

Net income
per share¥
29.09
102.77

4. Other Information(1) Significant changes in scope of consolidation: Yes
New: 1 subsidiary (NAMCO BANDAI Games Europe S.A.S.)
Note: Please refer to P14 (“The BANDAI NAMCO Group”) for details.
(2) Changes in accounting policiesa) Changes due to changes in accounting standard: Yesb) Other changes: Yes
Note: Please refer to P45 (“Changes in important Information Constituting the Basis for Preparation of the Consolidated
Financial Statements”) for details.
(3) Number of shares issueda) Number of shares issued at the fiscal year end (including treasury stocks)
Fiscal Year ended March 31, 2007
260,580,191
Fiscal Year ended March 31, 2006
260,580,191b) Number of treasury stocks at the fiscal year end
Fiscal Year ended March 31, 2007
2,731,047
Fiscal Year ended March 31, 2006
7,616,892
Note: Please refer to P73 (“Per share data”) for the number of shares used to calculate “Net income per share”.

3【Reference】 Non-consolidated Financial Statements

1. Non-consolidated Results for the Fiscal Year Ended March 31, 2007
(April 1, 2006 ~ March 31, 2007)(1) Non-consolidated Operating Results
Ordinary Revenue

Fiscal Year Ended
March 31, 2007
Fiscal Year Ended
March 31, 2006

Recurring income¥ million
6,239%(77.5)¥ million
3,764%(85.8)¥ million
3,877%(85.3)

27,747−

26,428−26,365−

Net income

Fiscal Year Ended
March 31, 2007
Fiscal Year Ended
March 31, 2006

Operating income

Net income per share

Net income per share(diluted)¥ million
5,085%(80.7)

¥
19.57

¥
19.56

26,365−101.62−(2) Non-consolidated Financial Position
Total assets¥ million
Fiscal Year Ended
291,923
March 31, 2007
Fiscal Year Ended
283,397
March 31, 2006
(Reference)
Shareholder's equity: 264,709million yen (FY 2007.3)

Net assets

Equity ratio

Net asset per
share¥ million
265,286%
90.7¥
1,026.20

271,44195.8

1,041.71

2. Non-consolidated Projections for Fiscal Year ending March 2008
(April 1, 2007 ~ March 31, 2008)
NAMCO BANDAI Holdings Inc. is the holdings company and its non-consolidated revenue is eliminated in the process of
consolidation. Thus, we omit the non-consolidated projections, which are insignificant to investors.

Notes:*Figures are in millions of yen, rounded down, except where noted.
*Qualitative information regarding forward-looking statements:
Forward-looking statements that have been released prior to this document are based on management’s estimates,
assumptions, projections and information available at the time of its publications. A number of factors could cause actual results
to differ materially from expectations.

41. Results of Operations(1) Analysis on Results of Operations
a. Summary for the Fiscal Year (April 1, 2006 to March 31, 2007)
Despite the fact that global crude oil prices continued to soar, the worldwide economic
climate tended towards recovery during this fiscal year. Gradual growth also continued within
Japan where corporate earnings continued to perform well.
The entertainment industry experienced increasingly intense global competition, due to the
diffusion and expansion of networked environments resulting from technological innovation.
Furthermore, the field of home video games was between-seasons as, with the focus of
popularity on portable video game consoles, next-generation video game consoles werereleased.
In this setting, the Group pushed ahead with strengthening, enriching, and expanding its
portfolio management, based on the 3-Year Medium-Term Management Plan launched in thecurrent fiscal year.
In the Toys & Hobby Business, “DATA CARDDASS” performed well in Japan, while
overseas “POWER RANGERS” toys for boys and “Tamagotchi” were popular. In the
Amusement Facility Business in Japan, along with an expansion in sales due to the opening of
new large-scale stores such as “NAMCO Wonder Park Hero’s Base” (Kawasaki City,
Kanagawa Prefecture), which pursued group synergy and got off to a good start, cost reduction
was attempted by optimizing the operation of existing stores. In the home video game software
field of the Game Contents Business, in addition to strengthening sales of software for portablevideo game consoles, software for next-generation video game consoles was released. And, in
coin-operated game machines, “Mobile Suit Gundam: Senjo no Kizuna” became extremely
popular. In the Network Business, despite the field of games in mobile content performing well,a reduction in the number of fee-paying subscribers for wallpaper and ring tones had a huge
impact and the business struggled. In the Visual & Music Content Business, group synergy wasdisplayed in the “Mobile Suit Gundam” series, and new products such as “CODE GEASS:
Lelouch of the Rebellion” became really popular.
As a result, the consolidated performance of the fiscal year was 459,132 million yen in net
sales (year-on-year increase of 1.8%), 42,224 million yen in operating income (year-on-yearincrease of 18.4%), and 45,615 million yen in recurring income (year-on-year increase of
22.9%). Also, due to reporting of gain on sales of investments in Tohato Inc. and impairment
losses concerning fixed assets (due to the integration of domestic Group company bases, Namco
Namjatown, etc.), net income this financial year was 24,252 million yen (year-on-year increaseof 71.4%).

5

An overview of each business is presented as follows.
Results by Business Segment(¥ million)
Net Sales
FY07.3Operating Income

FY06.3changeFY07.3

FY06.3change185,586

181,007

4,578

17,40319,085(1,682)

88,196

81,294

6,901

4,004

1,888

2,115

139,187

130,774

8,412

11,509

9,707

1,802

Network

12,48912,521

(31)

880

1,835

(955)

Visual & Music
Content

43,00643,328

(321)

9,496

6,187

3,309

Other

20,90020,804

96

1,017

1,187

(169)

Toys & Hobby
Amusement
Facility
Game
Contents* The proportion of overhead cost borne by the Toys and Hobby, Amusement Facility, and Game Contents segments
has increased compared to the same period last year due to organizational restructuring accompanying
management integration.
* Figures following rearrangement have been used for the prior interim period. Details of the rearrangement are givenin the segment information.

Toys and Hobby BusinessIn the Toys & Hobby Business, domestically, “DATA CARDDASS”, whose
development centered on characters from “Dragon Ball Z” and “Tamagotchi”, became
popular with boys and girls in the lower grades of elementary schools, andlong-established popular character toys for boys such as “Boukenjar (POWER
RANGERS)” showed solid performance. However, girls’ toys faced a tough battle amidsluggishness in the entire industry caused by the popularity of portable video game
consoles. Overseas, the “Tamagotchi” and “POWER RANGERS” series performed wellthroughout the world and, in the Americas, character toys for boys of thelocally-developed character “BEN10” became popular.
As a result, net sales in the Toys & Hobby Business were 185,586 million yen(year-on-year increase of 2.5%) and operating income was 17,403 million yen(year-on-year decrease of 8.8%).

Amusement Facility BusinessIn the Amusement Facility Business, domestically, there was an increase in thenumber of store visits by families due to the popularity of card games such as “DATACARDDASS” and crane game machines. In addition, “Mobile Suit Gundam: Senjo no
Kizuna”, introduced sequentially from October, became extremely popular, mainly
among core users. As a result, sales at existing stores were 101.1% compared to theprevious fiscal year. New large-scale stores also contributed to sales, for example, agood start was made by “NAMCO Wonder Park Hero’s Base” (Kawasaki City,
Kanagawa Prefecture), which pursued group synergy. In addition, cost reduction was
implemented by optimizing the operation of existing stores.
Overseas, development was promoted according to regional characteristics. In
Europe, stores integrated with facilities such as bowling alleys were developed, mainly in
the U.K., and performance was good. In the Americas, various measures were taken in6

an effort to improve profitability, such as expanding revenue-sharing locations byworking with major mass retailers and withdrawing from stores with low profitability.
As a result, net sales in the Amusement Facility Business were 88,196 million yen(year-on-year increase of 8.5%) and operating income was 4,004 million yen(year-on-year increase of 112.0%).
Facilities as of March 31, 2007
Directly-managed
facilities

Revenue-sharing
facilities

Theme parks

Spa Resort

Total

453

1,202

6

3

1,664

Game Contents BusinessIn the Game Contents Business, among home video game software, attention
focused on portable video game consoles with the popularity, both domestically andoverseas, of the “Tekken: Dark Resurrection” for the PlayStation Portable and the“Tamagotchi Connection: Corner Shop” for the Nintendo DS. Also, “Dragon Ball Z:
Sparking NEO” for the PlayStation 2 and Wii performed well both domestically andoverseas, while “Mobile Suit Gundam: SEED Destiny Rengo vs. Z.A.F.T.II Plus” and“Tales of Destiny” for the PlayStation 2 performed well in Japan. In addition, amulti-platform strategy was pushed ahead with the release of software fornext-generation game machines, etc.; however, overall performance was steady due tothe scheduled release of some products being changed from the current fiscal year to
the following fiscal year and a slump in local titles in America. In coin-operated gamemachines, the cockpit-style game machine, “Mobile Suit Gundam: Senjo no Kizuna”,
which brings together the Group’s know-how to enable online play throughout Japan,
became popular domestically and synergy effects were displayed. Also, the expansionof new game contents for mobile devices, such as mobile phones, resulted in a steady
growth in the number of fee-paying subscribers.
As a result, net sales in the Game Contents Business were 139,187 million yen(year-on-year increase of 6.4%) and operating income was 11,509 million yen(year-on-year increase of 18.6%).

Network BusinessIn the Network Business, within mobile content business, the field of games
performed well due to the popularity of high value-added content, such as “Mobile Suit
Gundam: Senjo no Kizuna” content for mobile phones originated from the coin-operated
game machine, and the comprehensive mini game site, “Simple 100 Series”, etc.
However, a reduction in the number of fee-paying subscribers for wallpaper and ringtones had a huge impact and the business struggled.
Also, the provision of new technology for mobile phones, such as the “3D Engine”,
and solutions services for corporations, including system development for mobile sites,
showed solid performance.
As a result, net sales in the Network Business were 12,489 million yen (year-on-year
decrease of 0.3%) and operating income was 880 million yen (year-on-year decrease of
52.0%).

7

Visual and Music Content BusinessIn the Visual & Music Content Business, the “Mobile Suit Gundam” series performed
extremely well, particularly the DVD-BOX of the TV animation and new original video
animations, and group synergy was displayed. Also, among visual software packages,
in addition to popular series such as “Ghost in the Shell: STAND ALONE COMPLEX
Solid State Society”, new works such as the TV animation “CODE GEASS: Lelouch of
the Rebellion” and the original animation “FREEDOM” were also popular. In addition,
DVD-Video sales to rental outlets contributing to performance, the music software
package related to the TV animation “The Melancholy of Haruhi Suzumiya” by Lantis
Co., Ltd., who joined the Group during the current fiscal year, also performed well.
As a result, net sales in the Visual & Music Content Business were 43,006 million yen(year-on-year decrease of 0.7%) and operating income was 9,496 million yen(year-on-year increase of 53.5%).

Other Business
Other Business consists of companies that provide support to the Group’s strategic
business units through operations that include logistics, leasing, and building
management. During the fiscal year under review, the business remained focused in its
efforts at efficient operations of these group support services.
As a result of the foregoing, the Other Business booked net sales of ¥20,900 million,
an increase of 0.5% compared to the prior fiscal year, and operating income of ¥1,017
million, a decrease of 14.3% compared to the prior fiscal year.

Operating Results By Geographic Segment(¥ million)
Net Sales

Operating Income (Loss)

FY07.3

FY06.3changeFY07.3

FY06.3changeJapan

367,447

374,320(6,872)

33,127

37,614(4,487)

Americas53,98944,103

9,885

3,376

(3,284)

6,660

Europe37,76331,244

6,519

5,253

4,330

923

Asia

37,06032,112

4,948

2,730

2,270

459

* The proportion of overhead cost borne by the Japan segment has increased compared to the same period last year due
to organizational restructuring accompanying management integration.

Japan
In Japan, in the Toys & Hobby Business, “DATA CARDDASS” was popular with boys
and girls in the lower grades of elementary schools and long-establishes popularcharacter toys for boys, such as “Boukenjar (POWER RANGERS)”, performed strongly;
however, competition proved intense for girls’ toys.
In the Amusement Facility Business, due to the popularity of card game and cranegame machines, as well as “Mobile Suit Gundam: Senjo no Kizuna”, etc. sales atexisting stores were 101.1% compared to the previous fiscal year. Also, along with thecontribution to sales by new large-scale stores, cost reduction was implemented by
optimizing the operation of existing stores.
In the Game Contents Business, among home video game software, in addition to8

releasing titles for next-generation game consoles, a multiplatform strategy was pushedforward with attention also given to software for portable game machines and existing
game machines, etc. and there was a trend towards recovery. However, a change inthe scheduled release of some products from the current fiscal year to the following
fiscal year had an impact, and performance did not reach that of the previous fiscal year.
The coin-operated game machines, centering on sales of “Mobile Suit Gundam: Senjo
no Kizuna”, performed well.
In the Network Business, despite the field of games in mobile content performing well,a reduction in the number of fee-paying subscribers for wallpaper and ring tones had ahuge impact and the business struggled.
In Visual & Music Content, group synergy effects were displayed through the “Mobile
Suit Gundam” series, and new works such as “CODE GEASS: Lelouch of the Rebellion”
were also popular.
As a result, net sales in Japan were 367,447 million yen (year-on-year decrease of
1.8%) and operating income was 33,127 million yen (year-on-year decrease of 11.9%).

Americas
In the Americas, in the Toys & Hobby Business, the “POWER RANGERS” and“BEN10” character toys for boys and “Tamagotchi” were popular. In the Amusement
Facility Business, various measures were taken in an effort to improve profitability, suchas expanding revenue-sharing locations by working with major mass retailers andwithdrawing from stores with low profitability. In the Visual & Music Content Business,efforts were made to increase profitability by reviewing marketing. In the Game
Contents Business, despite some home video game software hits, such as “Tekken:
Dark Resurrection” for the PlayStation Portable and “Naruto: Ultimate Ninja” for the
PlayStation 2, the business struggled due to a slump in local titles. Game contents formobile devices, such as mobile phones, performed well due to an expansion in newcontent.
As a result, net sales in the Americas were 53,989 million yen (year-on-year increaseof 22.4%) and operating income was 3,376 million yen, a substantial improvementcompared to the previous fiscal year (operating loss of 3,284 million yen).

EuropeIn Europe, in the Toys & Hobby Business, “Tamagotchi” and “POWER RANGERS”
boys’ character toys were popular. In the Amusement Facility Business, stores
integrated with facilities such as bowling alleys were developed. In the Game Contents
Business, with regard to home video game software for PlayStation 2 such as “Dragon
Ball Z Budokai Tenkaichi 2” and “Tekken 5 Platinum” were popular.
As a result, net sales in Europe were 37,763 million yen (year-on-year increase of
20.9%) and operating income was 5,253 million yen (year-on-year increase of 21.3%).

Asia
In Asia, the Toys & Hobby Business reported good performance for boys’ toys in the
POWER RANGERS series and plastic models in the Mobile Suit GUNDAM series. In
the Amusement Facility Business, initiatives surrounding prize games and Group
products continued to do well.
As a result, in Asia, net sales came to ¥37,060 million (an increase of 15.4% on theyear), with operating income of ¥2,730 million, a 20.2% increase on the year.
9b. Outlook for the Fiscal Year ending March 2008
Although the economic climate is expected to continue to experience gradual overall
growth due to improved corporate earnings and increased capital expenditure, there isconcern about the continuing rise in crude oil prices and climbing interest rates. In theentertainment business environment which surrounds the Group, amid a continuing
consumer trend towards increased diversification, it is expected that the game industry
in particular will undergo huge changes caused by future trends in portable game
consoles and next-generation game consoles, and it is forecasted that the outlook willcontinue to be unclear.
In this setting, the Group will push ahead with strengthening, enriching, andexpanding its portfolio management, based on the 3-Year Medium-Term Management
Plan launched in April 2006.
In the Toys & Hobby Business, in Japan, new contents will be added to the popular“DATA CARDDASS” with the aim of further widening its target market. Also, in addition
to long-established popular boys’ character series such as “Juken Sentai Gekiranger”
and “Masked Rider Den-O”, products for girls, which struggled in the current fiscal year,
will be stepped up, with the focus on “YES! Pretty Cure 5”. Overseas, as well as
continuing to focus on “POWER RANGERS” character toys for boys and “Tamagotchi”,
we will expand the “BEN10” region, which is mainly popular in America.
In the Amusement Facility Business, we will endeavor to draw a wide range ofcustomers with our ever-attractive game machines and by holding various events.
Moreover, as well as enlarging the scope of sales by opening large-scale stores, we will
expand profits by sharing administration know-how for low cost operations.
In the Game Contents Business, amid extremely uncertain circumstances in the
between-seasons home video game software industry, we will continue to develop
software for each game console in a balanced manner according to our multiplatform
strategy. We aim to enlarge our share of the coin-operated game machine market byreleasing popular titles such as “WANGAN MIDNIGHT MAXIMUM TUNE 3” as well as
investing in large-scale medal machines.
In the Network Business, we plan to strengthen our profit base by developing varied,
profit-oriented content. We will also continue to focus attention on the provision of newtechnology for mobile phone handsets and solutions for corporations, such as systemdevelopment for mobile sites.
In the Visual & Music Content Business, amid predictions of increasing demand fornext-generation disk-related products, we will focus on development of compatible
products. In Japan, we plan to release approximately 30 items including “AKIRA” and“Mobile Police Patlabor Theatrical Version” in each format (HDDVD, Blu-ray Disc). Also,
overseas, we will develop and release products consecutively, beginning with
“FREEDOM”.
As a result of the above, we expect the consolidated performance for the fiscal year
ending March 2008 to be 480,000 million yen in net sales (year-on-year increase of
4.5%), 45,000 million yen in operating income (year-on-year increase of 6.6%), 47,000
million yen in recurring income (year-on-year increase of 3.0%), and 26,500 million yen
in net income this financial year (year-on-year increase of 9.3%).
Forward-looking statements
This document contains forward-looking statements based on information currently
available to the Company and Group, and as such, include inherent risks and uncertainties.
Actual results may differ materially from forecasts for a variety of reasons.
Significant factors that may actually affect actual results include but are not limited to,changes in the Company and Group’s operating environment, market trends and exchange
rate fluctuations.
10(2) Financial Positiona. Asset, Debt, and Equity
Assets climbed to 408,490 million yen, an increase of 21,839 million yen compared tothe end of the previous consolidated fiscal year. This was largely due to an increase inaccounts receivable accompanying strong sales in the Americas and an increase ininventories, such as work-in-progress for home video games. Also, liabilities fell to124,236 million yen, a decrease of 10,170 million yen compared to the end of theprevious consolidated fiscal year. This was largely due to repayment of short-termborrowings.
Net assets, including minority interests, increased by 32,010 million yen. This was
mainly due to 24,252 million yen in net income and 8,095 million yen in disposal oftreasury stock. In the end, the stockholders’ equity ratio rose from 63.0% in the previous
consolidated fiscal year to 67.1%.

b. Cash FlowsAt the end of the current consolidated fiscal year, the balance of cash and cash
equivalents (hereafter, “capital”) was 124,155 million yen, an increase of 10,969 million
yen compared to the end of the previous consolidated fiscal year. Cash flows were as
follows:(Cash flows from operating activities)
Operating activities provided capital of 42,493 million yen (year-on-year increase of
33.6%). This was due mainly to 43,713 million yen in net income (this term) before
income taxes and minority interests.
(Cash flows from investment activities)
Investment activities used capital of 15,253 million yen (year-on-year decrease of
37.5%). This was due to expenses such as 14,520 million yen in expenses for theacquisition of tangible and intangible fixed assets, 7,594 million yen in expenses for theacquisition of investments in securities in Kadokawa Group Holdings Inc. and Toei Co.,
Ltd., etc., and 1,248 million yen in expenses for purchasing bowling business in Europe;
despite 6,165 million yen in income from the sale of investments in securities in TohatoInc. etc. and the fact that collection on loans exceeded expenses by 3,240 million yen.
(Cash flows from financing activities)
Financing activities used capital of 18,856 million yen (year-on-year decrease of
5.5%).This was due to a decrease of 13,112 million yen in short-term borrowings, aswell as 5,000 million yen in redemptions of corporate bonds, 2,434 million yen in
long-term debt repayments, and 6,073 million yen in dividends paid, etc.; as well as
8,095 million yen in income from disposal of treasury stocks.

(Reference) Cash Flow Indices
FY2006.3

FY2007.3

Equity ratio (%)

63.0

67.1

Equity ratio (market capitalization basis) (%)

105.5

116.1

Cash flows to interest bearing debt ratio (%)

102.0

53.8

Interest coverage ratio (times)

90.4

180.1

11

Stockholders’ equity ratio: Total stockholders’ equity/Total assets
Stockholders’ equity ratio (market capitalization basis): Market capitalization/Total assets
Ratio of interest-bearing debt to cash flow: Interest-bearing debt/Cash flow
Interest coverage ratio: Cash flow/Interest expenses(Note 1) All calculations are performed using consolidated financial figures.
(Note 2) Market capitalization is calculated on the basis of the number of issued shares excluding treasury stock.
(Note 3) Operating cash flow is used for cash flow.
(Note 4) Interest-bearing debt covers all debt reported in the consolidated balance sheet for which interest is paid.

c. Fundamental Policy on Profit Sharing
The Company positions the return of profits to stockholders as one of its highest
management priorities. The fundamental policy is to maintain a stable dividend and increase
corporate value while becoming an even more competitive Group, and preserving a soundfinancial position. In concrete terms, the Company plans to maintain the consolidated
dividend payout ratio at a level of 30%, based on stable annual dividend payments of ¥24 pershare.
The Company plans to use retained earnings for more efficient asset management as wellas actively investing in areas that will boost corporate value going forward, including thedevelopment of new business fields and M&A.

d. Business Risks
Risk factors related to the Group’s businesses that may significantly affect decisions madeby the investment community, include, but are not limited to, those listed below. Thesestatements on risk are based on information available to the Group as of May 9, 2007, thefiling date for the NAMCO BANDAI Holdings Inc.’s financial report (Kessan Tanshin) for the
Fiscal Year ended March 31, 2007.
Risks associated with the core business model
The BANDAI NAMCO Group’s businesses are centered on products and services based oncontent, including various characters. The Group's operating results may be affected bychanges in the popularity of specific content or related trends. Therefore, the Group is
working to achieve stable earnings by strengthening, enriching, and expanding its portfolio
management through three-dimensional and multi-lateral business administration. This
portfolio compromises a business portfolio, in which the Group conducts operations in adiverse array of business domains; a contents portfolio, consisting of many different
characters and content; and a regional portfolio, where businesses are conducted in various
regions around the world. In each business, the Group works to develop new content, andconducts marketing activities designed to cultivate and develop that content over the longterm.
Risks associated with overseas business expansion
The Group is aggressively expanding its business overseas. This initiative exposes theGroup to a variety of risks, including business risks associated with regional characteristics,
such as local media and distribution systems; risks associated with intellectual property rights,
such as those related to counterfeit products; and risks associated with fluctuations in
exchange rates. Operationally, the Group conducts sufficient research to minimize theserisks and formulates countermeasures before proceeding with overseas business expansion.
With respect to intellectual property rights, the Group cooperates with local government
agencies and other authorities to identify counterfeit products, promote enhanced recognitionof genuine products, etc. In addition, for foreign exchange risks, the Group uses forward
contracts to lower the risks from short-term fluctuations in the exchange rates for major
currencies.
12Retaining and developing key personnel
In the fast-changing entertainment industry, it is essential for the Group to retain anddeveloping personnel who can respond effectively to rapid changes. In addition todeveloping a compensation system that will facilitate the retention of these employees,
the Group actively delegates authority. To develop the next generation of employees, theGroup is devoting resources to training seminars and other development programs.
Furthermore, we will actively adopt personnel exchanges with the aim of reinforcing
cooperation between each Strategic Business Unit.
Risk associated with Game Contents BusinessIn the game contents business, titles are a significant cause of fluctuations in profits, andthere is a risk that changes in the timing of product launches will affect earnings in a given
period. The Group tightly controls software development schedules for every game while
striving to diversify risks by flexibly developing multiple products with different software
characteristics and development periods. Moreover, the launch of next-generation gameplatforms and diversification of customer needs lead to market conditions remain marked byuncertainty. The Group tries to respond quickly to customer needs by putting more emphasison balanced titles among various platforms.
Risks associated with advances in and new generations of platforms
In developing game content, visual content, and network content, the Group faces the risk ofdelays in responding to advances in and new generations of content-provision platforms andthe risk of delays in changing its business models in response to these developments. The
Group conducts research into new technologies and works to develop competitive content
that is in step with the latest advances. At the same time, the Group actively works toaccumulate expertise on new business models. Additionally, the Group takes steps to further
develop the content that it has created and to acquire rights to new content.
Decline in domestic birthrate
In the future, an ongoing decline in the domestic birthrate might affect the financial results of
the Group. Accordingly, the Group has been expanding the scope and target of its businessactivities in Japan and is aggressively taking steps to expand its operations in overseas
markets.
Concentration of production in China
In the Group’s Toys and Hobby SBU, approximately 90% of the toys are manufactured in
China. The Group faces the risk of higher production costs from the revaluation of the yuan
and country risk stemming from the regional concentration of production. In response, theGroup is working to reduce production costs and to diversify its production bases into
Southeast Asia and other regions.
Risks from higher crude oil prices
The Group faces the risk that higher crude oil prices could lead to higher production costs
from increased product raw material prices and to higher transportation costs. Accordingly,
the Group is working to standardize the metal casts and molds used for character toys
marketed worldwide and to reduce costs by enhancing the efficiency of processes, ranging
from production to distribution.
Additional risks include disasters, such as natural disasters or accidents, changes in laws
and regulations, defective or deficient products or services, leaks of customer information,and litigation associated with business activities. The Group maintains risk management
systems and works to strengthen its management foundation in order to minimize the effects
on its results in the unlikely event that any of these risks should materialize.

13

2. The BANDAI NAMCO Group(1) Business Overview
The BANDAI NAMCO Group (the Group) comprises NAMCO BANDAI Holdings Inc. (The Company),
80 subsidiaries and 5 affiliates. Operations primarily encompass the manufacture and sale of toys andplastic models, the core activity of the character merchandising business; amusement facility operations;coin-operated game machines and other related products; the production and sale of home videogame
software; mobile content; and the production and sale of video-related products. The Group is also
engaged in distribution, planning, development and the provision of other services related to the above
areas of business.
The Group’s businesses and the relationships among NAMCO BANDAI Holdings Inc. and its
subsidiaries and affiliates with business segments are outlined below. Business classifications
correspond directly to the classifications for business segment information.
Business
Business Outline

RegionMajor Companies

Segment
Bandai Co., Ltd., Megahouse Corp., Popy Co., Ltd.,

Domestic
Toys and

Toys, candy toys, products for vending

Hobbymachines, cards, plastic models, apparel,

Businesssundries, stationery and other products

Seika Co., Ltd., Seeds Co., Ltd., Plex Co., Ltd.,
Sunlink Co., Ltd., CCP Co. Ltd., People Co., Ltd., and4 other companies
BANDAI AMERICA INC., BANDAI S. A.,
BANDAI U.K. LTD., BANDAI ESPANA S.A.,BANDAI (H.K.) CO., LTD., BANDAI ASIA CO. LTD.,

Overseas

BANDAI INDUSTRIAL CO., LTD.,BANDAI KOREA CO., LTD.,
CREATIVE B WORKS CO. LTD.,and 4 other companies
NAMCO LIMITED, Pleasure Cast Co., Ltd.,

Domestic

Hanayashiki Co. Ltd., NAMCO SPA RESORT LTD.,
Yunokawa Kanko Hotel Co., Ltd.

Amusement

NAMCO CYBERTAINMENT INC.,

Amusement facility operations, andFacility

NAMCO OPERATIONS EUROPE LTD.,

other operations
Business

Overseas

NAMCO OPERATIONS SPAIN S.L.,
NAMCO ENTERPRISES ASIA LTD.,XS ENTERTAINMENT INC. *1,
SHANGHAI NAMCO LTD.
NAMCO BANDAI Games Inc., Banpresto Co., Ltd.,Bec Co., Ltd., Banpresto Sales Co., Ltd.,

Domestic

Banpresoft Co., Ltd., Monolith Software Inc.,
NAMCO TALES STUDIO LTD.,

Software for home videogames,and 2 other company

Gamecoin-operated game machines, prizes

NAMCO BANDAI Games America Inc.,

for amusement machines, and other

NAMCO AMERICA INC.,

Contents
Business
products

NAMCO NETWORKS AMERICA INC.,

Overseas

NAMCO EUROPE LTD.,
NAMCO BANDAI Games Europe S.A.S.,BANPRESTO (H.K.) LTD.,and 2 other company

14

Business
Business Outline

RegionMajor Companies

Domestic

Bandai Networks Co., Ltd., VIBE Inc.

Segment
Network
Mobile content and other services
Business
Visual andVisual works, visual software,Music Content

on-demand video distribution and other

Business

products and services

Bandai Visual Co., Ltd., Sunrise Inc.,

Domestic

Bandai Channel Co., Ltd., Lantis Co., Ltd.,and 3 other companies

Overseas

BANDAI ENTERTAINMENT INC.,
and 3 other companies
Bandai Logipal Inc., Banalex Corp.,

Transportation and warehousing ofproducts, leasing, real estate
Other

Artpresto Co., Ltd., NAMCO ECOLOTECH LTD.,

Domestic

management, printing, development

NAMCO TRADING LTD., Happinet Corp.,
Sotsu Agency Co.,Ltd., Italian Tomato Ltd.

Businessand sale of environmental equipment,
and other activities

NAMCO SUPPORTERS LTD.,and 6 other companies

Overseas

2 companies

Overseas

NAMCO BANDAI Holdings (USA) Inc.

Management of regional businessCorporatecompanies*1: Not operational as of March 31, 2007.

15

Chart of business system is as follows:
END USERJAPANOVERSEAS

BANDAI AMERICA INC.
BANDAI S.A.
BANDAI U.K. LTD.
BANDAI ESPANA S.A.

Megahouse Corp.
Popy Co., Ltd.

Seeds Co., Ltd.

Bandai Co., Ltd.

Plex Co., Ltd.

Plan
and
Work

Production
Seika Co., Ltd.
C.C.P. Co., Ltd.
People Co., Ltd. *Toys and Hobby Business

Sunlink Co., Ltd.

Product Sale

CREATIVE B WORKS
CO., LTD.

BANDAI KOREA
CO., LTD.

BANDAI ASIA
CO., LTD.

Production
BANDAI (H.K.) CO., LTD.
Production BANDAI INDUSTRIAL
CO.,LTD.

Product Sale

Product Sale

SHANGHAI NAMCO LTD.*

NAMCO LIMITED
Product Sale

Pleasure Cast Co., Ltd.
Hanayashiki Co., Ltd.

NAMCO SPA RESORT LTD.
Yunokawa Kanko Hotel, Co., Ltd.

Amusement Facility Business

Product Parts Sale

NAMCO OPERATIONSEUROPE LTD.
NAMCO OPERATIONSSPAIN S.L.

NAMCO ENTERPRISESASIA LTD.
NAMCO CYBERTAINMENT INC.

Licenses
Product Sale

Product Sale

Plan andWork

NAMCO BANDAI Games Inc.

Banpresto Co., Ltd.

NAMCO TALES STUDIO LTD.
Monolith Software Inc.
Bec Co., Ltd.
Banpresoft Co., Ltd.

Banpresto Sales
Co., Ltd.

Product Sale

Game Contents Business

Plan andWork

Intellectual properties license
NAMCO BANDAI Games
America Inc.
(Mobile)distribution license
NAMCO NETWORKSAMERICA INC.
Production license,
selling license

NAMCO AMERICA INC.
Licenses, Product sale
NAMCO EUROPE LTD.

Production
BANPRESTO(H.K.) LTD.

Licenses

NAMCO BANDAI Games
Europe S.A.S.

NetworkBusiness

Bandai Networks Co., Ltd.
VIBE Inc.

Sunrise Inc.

Visual and Music
Content Business

Lantis Co., Ltd.
Bandai Channel Co., Ltd.
Provide content

Plan and WorkBANDAI ENTERTAINMENT INC.

Bandai Visual Co., Ltd.
Plan and Work

Other Business

NAMCO SUPPORTERS LTD.
NAMCO ECOLOTECH LTD.
NAMCO TRADING LTD.
Italian Tomato Ltd.*

Bandai Logipal Inc.
Banalex Corp.
Artpresto Co., Ltd.
Happinet Corp.*
Sotsu Agency Co., Ltd.*

Opening of amusement facilities, Product sale
NAMCO BANDAI Holdings (USA) Inc.

NAMCO BANDAI Holdings Inc.
*Affiliated companies accounted for by the equity method.

16

(2) Associated Companies (Subsidiaries and Affiliated Companies)

Name

Address

Capital (In millionsof yen, rounded
down except
where noted)

Main Business% of Voting
Rights orEquityOwned by
NAMCO
BANDAI
Holding Inc.

DescriptionofRelationship

Note(Consolidated subsidiaries)
Bandai Co., Ltd.

Taito-ku,
Tokyo

24,664

Toys & Hobby

100.0

A: 1

4, 5, 9Megahouse Corp.

Taito-ku,
Tokyo

10

Toys & Hobby

100.0(100.0)--Popy Co., Ltd.

Taito-ku,
Tokyo

10

Toys & Hobby

100.0(100.0)-12

Seika Co., Ltd

Chiyoda-ku,
Tokyo

10

Toys & Hobby

87.3(87.3)--

Seeds Co., Ltd

Shimotsuga-gun,Tochigi

100

Toys & Hobby

100.0(100.0)--Plex Co., Ltd.

Chuo-ku,Tokyo

40

Toys & Hobby

100.0(100.0)-12Sunlink Co., Ltd.

Bunkyo-ku,
Tokyo

480

Toys & Hobby

100.0(100.0)--

CCP Co., Ltd.

Kawaguchi,
Saitama

300

Toys & Hobby

100.0(100.0)

A: 1-

BANDAI AMERICA INC.

California,
U.S.A.

US$
24.6 million

Toys & Hobby

100.0(100.0)-4

BANDAI S.A.

CERGYPONTOISE,FRANCEEuro
9 million

Toys & Hobby

100.0

-

-

BANDAI U.K. LTD.

Southampton,
U.K.

Stg £.
5 million

Toys & Hobby

100.0

-

-

BANDAI ESPANA S.A.

Madrid ,
Spain

Euro
4,808
thousandToys & Hobby

100.0

-

-

BANDAI (H.K.) CO., LTD.

Central,Hong KongHK$
103 million

Toys & Hobby

100.0

-

4

BANDAI ASIA CO., LTD.

Central,Hong KongHK$
7 million

Toys & Hobby

100.0(100.0)--BANDAI INDUSTRIAL
CO., LTD.

Chacheongsao,
ThailandToys & Hobby

100.0(100.0)--BANDAI KOREA CO.,LTD.

Seoul,
Korea

Toys & Hobby

66.7

-

-

CREATIVE B WORKS
CO., LTD.

Seoul,
Korea

Toys & Hobby

100.0(100.0)--

NAMCO LIMITED

Ota-ku,Tokyo

Amusement
Facilities

100.0

A: 2

4, 10

Bart
396,500
thousandWON
1,500
millionWON
50
million
10,00017Name

Address

Capital (In millionsof yen, rounded
down except
where noted)

Main Business% of Voting
Rights orEquityOwned by
NAMCO
BANDAI
Holding Inc.

DescriptionofRelationship

Note

Pleasure Cast Co., Ltd.

Taito-ku,
Tokyo

480

Amusement
Facilities

100.0(100.0)--Hanayasiki Co., Ltd

Taito-ku,
Tokyo

480

Amusement
Facilities

100.0(100.0)--

NAMCO SPA･RESORTLTD.

Kishiwada,
Osaka

100

Amusement
Facilities

100.0(100.0)

A:1-

Yunokawa Kanko Hotel
Co., Ltd.

Hakodate,
Hokkaido

100

Amusement
Facilities

93.6(93.6)

A:1

-

NAMCO
CYBERTAINMENT INC.

Illinois,
U.S.A.

US$
2,800

Amusement
Facilities

100.0(100.0)

A:1-

NAMCO OPERATIONSEUROPE LTD.

London,U.K.

Stg £.
23 million

Amusement
Facilities

100.0(100.0)

A:1

4, 14

NAMCO OPERATIONSSPAIN S. L.

Madrid ,
Spain

Euro
500,000

Amusement
Facilities

100.0(100.0)-14

NAMCO ENTERPRISESASIA LTD.

Causeway Bay,
Hong KongHK$
47 million

Amusement
Facilities

100.0

A:1

-

XS ENTERTAINMENT
INC.

Florida,U.S.A.

US$
10

Amusement
Facilities

100.0(100.0)-15

NAMCO BANDAI GamesInc.

Ota-ku,Tokyo

15,000Game Contents

100.0

A: 1

4, 11

Banpresto Co., Ltd.

Taito-ku,
Tokyo

3,020

Game Contents

100.0

-

4

Bec Co., Ltd.

Taito-ku,
Tokyo

166

Game Contents

100.0(100.0)--Banpresto Sales Co., Ltd.

Taito-ku,
Tokyo

200

Game Contents

100.0(100.0)--Banpresoft Co., Ltd.

Taito-ku,
Tokyo

200

Game Contents

100.0(100.0)--Monolith Software Inc.

Meguro-ku,
Tokyo

75

Game Contents

96.7(96.7)--

NAMCO TALES STUDIO
LTD.

Toshima-ku,
Tokyo

100

Game Contents

94.0(94.0)--

NAMCO BANDAI Games
America Inc.

California,
U.S.A.

US$
100

Game Contents

100.0(100.0)

A: 1-

NAMCO AMERICA INC.

Illinois,
U.S.A.

US$
10

Game Contents

100.0(100.0)--

NAMCO NETWORKSAMERICA INC.

California,
U.S.A.

US$
10

Game Contents

100.0(100.0)

-

-

18

Name

Address

Capital (In millionsof yen, rounded
down except
where noted)

Main Business% of Voting
Rights orEquityOwned by
NAMCO
BANDAI
Holding Inc.

DescriptionofRelationship

Note

NAMCO EUROPE LTD.

London,U.K.

Stg £24.5 million

Game Contents

100.0

-

4, 14

NAMCO BANDAI Games
Europe S.A.S.

CERGYPONTOISE,FRANCE

Euro 14,241
thousandGame Contents

100.0(100.0)-4

BANPRESTO (H.K.) LTD.

New Territories,
Hong KongHK$
32 million

Game Contents

100.0(100.0)--

Bandai Networks Co., Ltd.

Minato-ku,
Tokyo

1,113

Network

69.8-

4, 5, 7

VIBE Inc.

Minato-ku,
Tokyo

352

Network

99.3(99.3)--

Bandai Visual Co., Ltd.

Minato-ku,
Tokyo

2,182

Visual & Music
Content

63.2
(0.8)

-

4, 5, 6Sunrise Inc.

Suginami-ku,
Tokyo

49

Visual & Music
Content

99.1
(7.6)

-

-

Bandai Channel Co., Ltd.

Minato-ku,
Tokyo

30

Visual & Music
Content

94.5

-

-

Lantis Co., Ltd.

Shibuya-ku
Tokyo

420

Visual & Music
Content

50.6(50.6)--BANDAI
ENTERTAINMENT INC.

California,
U.S.A.

US$
100,000

Visual & Music
Content

100.0(100.0)--

Bandai Logipal Inc.

Katsushika-ku,
Tokyo

1,424

AffiliatedBusiness

100.0

-

4

Banalex Corp.

Taito-ku,
Tokyo

1,305

AffiliatedBusiness

100.0(100.0)-4, 13Artpresto Co., Ltd

Taito-ku,
Tokyo

30

AffiliatedBusiness

100.0(100.0)--

NAMCO ECOLOTECHLTD.

Ota-ku,Tokyo

225

AffiliatedBusiness

89.6

-

-

NAMCO SUPPORTERS
LTD.

Ota-ku,Tokyo

100

AffiliatedBusiness

100.0(100.0)-13

NAMCO TRADING LTD.

Ota-ku,Tokyo

40

AffiliatedBusiness

100.0(100.0)--

North America
Region Business.
Management ofcompanies’
operations

100.0

A: 1

-

(Companies accounted for by the equity method)
Shanghai,
RMB 26,724
SHANGHAI NAMCO LTD.
thousand
China

Amusement
Facilities

70.0(70.0)

A: 1-

People Co., Ltd

Chuo-ku, Tokyo

Toys & Hobby

20.4

-

5, 7

Happinet Corp.

Taito-ku,Tokyo

AffiliatedBusiness

24.9
(0.5)

-

5, 6

NAMCO BANDAI
Holdings (USA) Inc.

California,
U.S.A.

US$
10

238
2,751

19

Name

Address

Capital (In millionsof yen, rounded
down except
where noted)

Main Business% of Voting
Rights orEquityOwned by
NAMCO
BANDAI
Holding Inc.

DescriptionofRelationship

Note

Sotsu Agency Co., Ltd.

Chuo-ku,
Tokyo

414

AffiliatedBusiness

16.1-

5, 7, 8Italian Tomato Ltd.

Minato-ku,
Tokyo

759

AffiliatedBusiness

30.6(30.6)--* The value of ‘A’ represents the number of directors and auditors at the company in question who are also
directors, auditors, or employers of NAMCO BANDAI Holdings Inc.
Notes:
1) In the “Main business” column, the name of the relevant type-of-business segment is given.
2) In “% of Voting Rights or Equity Owned by NAMCO BANDAI Holding Inc.”, amounts within parenthesis
represent indirect ownership.
3) NAMCO BANDAI Holdings Inc. manages and provides guidance to BANDAI NAMCO Group
companies, except for certain affiliated companies.
4) These companies are “tokutei kogaisha” (specified subsidiaries).
5) These companies file their “yuka shoken houkokusho" (securities reports)
6) These companies in question are listed on the Tokyo Stock Exchange, first section.
7) These companies in question are listed on JASDAQ.
8) Although less than 20% of the equity is owned, the company in question is classified as an affiliatedcompany because NAMCO BANDAI Holdings Inc. has effective leverage over the company.
9) Although the percentage of net sales (excluding inter-segment sales among consolidated subsidiaries)
of Bandai Co., Ltd. exceeds 10% of the consolidated net sales, key financial data for this company has
been omitted because it is disclosed in the securities reports.
10) The percentage of net sales (excluding inter-segment sales among consolidated subsidiaries) of
NAMCO LIMITED exceeds 10% of the consolidated net sales.
Key financial data
(millions of yen)
(1) Net sales
63,278(2) Recurring income
3,323(3) Net income25(4) Net assets
38,323(5) Total assets
48,674
11) The percentage of net sales (excluding inter-segment sales among consolidated subsidiaries) of
NAMCO BANDAI Games Inc. exceeds 10% of the consolidated net sales.
Key financial data
(millions of yen)
(1) Net sales
88,052(2) Recurring income
11,485(3) Net income
5,922(4) Net assets
46,565(5) Total assets
64,30812) On March 1, 2007, Plex Co., Ltd. and Popy Co., Ltd. merged, with Plex Co., Ltd. the surviving company.
13) On March 1, 2007, Banalex Corp. (surviving company) and NAMCO SUPPORTERS LTD. merged, andthe company name was changed to NAMCO BANDAI Business Services Inc.
14) As part of the Group’s restructuring in Europe, in January 2007, the role of NAMCO EUROPE LTD.
changed to that of a holding corporation and its name was changed to NAMCO Holdings UK Ltd. The
Game Contents Business conducted by the old NAMCO EUROPE LTD. was simultaneouslytransferred to NAMCO BANDAI Networks Europe Ltd. and the new NAMCO EUROPE LTD., which
was established as a subsidiary of NAMCO Holdings UK Ltd.
15) Business activities ceased as of March 31, 2007.

20

3. Management Policies
1. Fundamental Management Policy
Guided by our vision of becoming “The World’s Most Inspiring Entertainment Group,” theBANDAI NAMCO Group’s mission is to offer “Dreams, Fun and Inspiration” throughentertainment to people around the world.
Moreover, based on the “entertainment hub concept” referenced in the Medium-Term
Management Plan, the Group, across its wide group-internal business expanse will engage ininitiatives involving content derived from a host of products and services and content madeavailable to the Group by content and partner companies. At the same time, we will
strengthen the Group’s relations with external business partners in this ever changing andcompetitive entertainment industry, expand and cultivate our operations, and continually aim
to achieve higher corporate value.

2. Policy on Reducing the Investment Unit
The Company recognizes that widening the stockholder base and promoting share liquidity
are important aspects of its capital policy. The Company will therefore examine measures
such as reducing its investment unit while taking into account future market trends andoperating results.

3. Targets and Management Performance Indicators
The Group has adopted return on assets (ROA) and return on equity (ROE) as medium-term
management performance indicators. The Group’s aim is to create a robust and stable
management base over the medium term by ensuring all assets are always utilized tomaximum efficiency and by effectively using our equity. For this purpose, the Company has
decided on a basic policy for the application of cash. Specifically, with regard to reserve funds
after deduction of working capital and outlays for forward capital investments related tooperations, the Company considers acquisition of treasury stock for return to shareholders
and other purposes, after taking into account an overall assessment of expected earnings forthe current and next term as well as capital expenditure items, etc. Based on this policy, theCompany announced the acquisition of its own shares (up to 10,000 million yen or up to
5,000,000 shares) on April 18, 2007.
The Group aims to attain consolidated ROA of 13.5% and consolidated ROE of 10.0% in thefiscal year ending March 2009, which is the last fiscal year of the Medium-Term Management
Plan launched in April 2006, and will work to enhance management efficiency in parallel withbusiness expansion.

16.0%
12.0%

13.5%
11.5%

9.4%

9.5%

9.6%

8.0%
4.0%

11.5%

10.0%
ROA
ROE

5.8%

0.0%
FY06.3

FY07.3

FY 08.3 (Plan) FY09.3(Target)

21

4. Medium- to Long-term Management Strategy
The Group aims to achieve maximum enterprise value through “strengthening,enhancement, and expansion” of its portfolio-management, while implementing the 3-year
Medium-Term Management Plan initiated in April 2006.
In order to promote attainment of the Medium-Term Management Plan, the Company, as thegroup holding company, implements management strategies spanning across the entire
Group, while the promotion of business strategies is centered on the five Strategic Business
Units (Toys and Hobby, Amusement Facility, Game Contents, Network, and Visual and Music
Content) formed by agglomerations of the Group’s business operating companies.
(1) Portfolio Management of the GroupIn order to generate stable earnings, the Group has combined three portfolios comprising a“business portfolio” engulfing multiple areas of business initiatives, a “content portfolio”
encompassing initiatives based on various content including character-based content
offerings, and a “geographic portfolio” comprising business initiatives in locations worldwide,with portfolio management implemented through a three-dimensional and multi-layered
administration. Under the Medium-Term Management Plan, together with reinforcing theseportfolios and through creating new businesses going forward; the company will generate
growth from inter-portfolio synergy effects, and work to strengthen, enrich, and expand overall
portfolio management.
(2) Management Strategies
a. Strengthening Corporate Governance
Aiming to become a Group that features heightened management transparency, trusted bysociety, and capable of sustained contributions to society, we will promote brand strategies,
enhance CSR and compliance arrangements, and advance appropriate corporate disclosure,and in this way work to reinforce governance systems.
b. Effectively Utilizing Human Resources
In order to realize the maximum potential of human resources, the foremost among
management resources, the Group will provide employees with opportunities and venues forself realization by introducing efficient and flexible systems such as personnel exchange
within the Group, reinforcement of personnel training programs, and adoption of new hiringrules.
c. Building Optimal Management System
While aiming to enhance the efficiency of group management through organizational
integration, etc. in the case of mature markets and markets that need to be approached with
the Group’s comprehensive strength, in growth markets we will implement initiatives throughmultiple organizations in order to mobilize the principles of competition. Moreover, we will
implement measures towards continued dynamic change to organizational structures such as
consolidation of back office functions with a view to enhanced efficiency.
(3) Business Strategies
a. Entertainment Hub Concept
The entertainment hub function, which forms the Group’s business model, is equipped withcomprehensive capabilities reaching from content creation to product development and sales,
capable of providing products and services across a wide range of businesses. Together with
our partner companies and creators in and outside Japan, we will make active mutual use of
the entertainment hub function to create new businesses as well as products and services,and provide further strengthening in the process.
b. Strengthening Overseas BusinessIn overseas business initiatives, we have established the regional holdings companies in theAmericas, Europe, and Asia, and each Strategic Business Unit works to expand operations
though optimized business portfolios and content portfolios according to regional
characteristics.
22

As numeric targets, through the pursuit of these management and business strategies, theGroup aims to reach net sales of 550 billion yen and operating income of 58 billion yen for the
fiscal year ending March 2009.
(million yen)
Fiscal Year ended
March 2006

Net Sales
Operating Income

Fiscal Year ended
March 2007

450,829
35,669Fiscal Year ending Fiscal Year ending
March 2008
March 2009
(Plan)(Target)459,132
42,224

480,000
45,000550,000
58,0005. Issues to be Addressed
The Group and this industry must address many important, long-term issues, including “theincreasing diversification of consumer preferences” and “changes in the market and theenvironment”. In response, the Group is working to reinforce its portfolio management further,based on the “Entertainment Hub Concept” laid out in its medium-term management plan.
Operationally, the Group placed “Strategic Business Units (SBUs)”, which grouped all thebusiness the Group is engaged in, at the core, and is working to enrich its cross functional
capabilities across each of the SBUs.
(1) Common issues faced by all SBUs
Domestic business expansion
The Group will maximize utilization of the managerial resources it owns—contents,
technologies, and locations—to create markets and attract new customer segments inorder to expand its domestic operations. The implementation of strategies spanning
across the Group, the use of alliances with outside partners and M&A will further
contribute to expanding its operations. In addition, in response to the changing
environment for the entertainment industry, the Group will also engage in building new
business models free from the constraints imposed by existing business practices andmodels.
Overseas business expansion
The Group is strengthening cooperation among regions and examining concepts
towards building the optimal business model for expanding operations overseas. In
addition, we have established the regional holdings companies in the Americas, Europe,and Asia, and are working to expand operations according to regional characteristics
Corporate Social Responsibility
The Group’s stated mission is to provide “Dreams, Fun and Inspiration” to people
around the world through entertainment. To continue to achieve that goal, it is committed
to addressing the following three areas of responsibility:• Legal and ethical responsibilities (compliance)• Environmental and social responsibilities (safety/quality, environmental
conservation, social support activities)• Economic initiatives
In order to promote initiatives towards these social responsibilities, we will hold various
timely committee meetings centered on the Group’s directors, and we will tackle
problems across the Group.

23

(2) Issues specific to each SBU
Toys and Hobby SBU
This unit’s industry is facing a “shrinking domestic market due to the falling birthrate”
and “diversifying consumer needs”. It is addressing those challenges by expanding its
target population segment and creating new businesses in Japan as well as actively
expanding operations in overseas markets. For speedy implementation of its plans, thisunit will also actively build cooperative relationships with external partners.
Amusement Facility SBU“Changes in business revenue structures”, “diversifying consumer needs”, and “revisionof consumption tax rate” are among the issues for this unit’s industry. To address them, theAmusement Facility SBU is working to enhance profitability by improving its cost structure
as well as working in conjunction with other SBUs to develop and provide highly
valued-added, distinctive facilities that target a broad range of customer segments. The
Amusement Facility SBU is also working proactively to build new major revenue sources,develop overseas operations, and pioneer new business formats.
Game Contents SBU
Due to the launch of next generation game platforms, the industry is facing issues suchas “diversifying consumer needs” and “soaring content development costs”. In response,
this business unit is reviewing and revising the content development process throughsharing know-how and technologies between the amusement machines, home video
game software, and mobile content businesses, to build a flexible development system.
Those initiatives will enable the Game Contents SBU to develop the optimal number of
titles across each platform and to respond swiftly to changing customer preferences.
Network SBU
The issues for this industry include “responding to the rapid generational transition in
mobile phone handsets” as well as “responding to a broader and more highly evolved
network environment”. In the mobile content business, which is the foundation of thisbusiness unit’s income, the Network SBU will work aggressively to plan and develop
captivating content as well as to reinforce its capacity to propose and develop the newtechnologies that will lead the industry. With ever increasing fierce competition in theindustry, the Network SBU is working proactively with the development of new businessdomains with growth potential going forward, along with the creation of a solid foundation
for income through enhanced efficiency.
Visual and Music Content SBU
This industry’s issues include the “emergence of next-generation media” as well as“adapting to new high-performance hardware”. In order to respond to these problems, aswell as focusing our attention on the creation of superior content, we will expand intomusic/publishing content development and will endeavor to increase business
opportunities. Furthermore, along with applying content owned by the Group to new
hardware, quickly and to the maximum extent, we will also construct business models
using new media, such as network delivery.

24

4. Consolidated Financial Statements(1) Consolidated Balance Sheets

Note

Prior fiscal year

Current fiscal year

As of March 31, 2006

As of March 31, 2007

Millions of yen

Share (%)

Millions of yen

vs. Priorfiscalyear

Share (%)

Change63.0

16,574

18.3

882

4.8

2,474

(Assets)
I

Current assets:

1. Cash and time deposits*2109,513

113,710

2. Trade receivables*5

70,91078,429

3. Short-term investments

5,546

12,191

4. Inventories

27,52932,291

5. Deferred tax assets

7,037

5,717

6. Other current assets

21,602

16,816

7. Allowance for doubtful receivables(1,506)(1,947)

Total current assets

240,634II

62.2

257,209

Fixed assets

1. Property, plant and equipment(1) Buildings and structures

32,150

Accumulated Depreciation

17,689(2) Amusement facilities and machines

14,46018,27787,047

Accumulated Depreciation(3) Land

30,285

63,136*4(4) Other property, plant and equipment

85,262
23,91059,13822,094

41,534

Total Property, plant and equipment

26,123
20,59755,141

Accumulated Depreciation

12,00765,093
13,606
74,07348,86719.2

16,22674,955

2. Intangible assets(1) Consolidation adjustment accounts

7,668

-

-

9,739

(3) Other intangible assets

9,326

9,729

Total Intangible assets

16,994(2) Goodwill

4.4

19,468

3. Investments and other assets(1) Investment securities*1

22,521

28,817(2) Guarantee money deposited

24,91621,022(3) Deferred tax assets

3,901

4,141

(4) Other investments and assets

4,821

4,171

(5) Allowance for doubtful receivables(1,211)(1,296)

Total Investments and other assets

54,94814.2

56,857

13.9

1,908

Total fixed assets

146,01637.8

151,281

37.0

5,264

Total assets

386,651

100.0

408,490

100.0

21,83925

NotePrior fiscal year

Current fiscal year

As of March 31, 2006

As of March 31, 2007

Millions of yen

Share (%)

Millions of yen

vs. Priorfiscalyear

Share (%)

Change

27.1

3,301

(Liabilities)
I Current Liabilities
1. Trade payables*5

40,56147,097

2. Short-term borrowings*2

14,8882,169

3. Bonds—current portion

5,000

10,0004. Accounts payable—other

23,767

22,334

5. Accrued income taxes

6,827

10,875

-

651

147

-

8. Other current liabilities

16,33517,701

Total current liabilities

107,527

6. Provision for directors’ bonus
7.Provisionforlossesfrom

business

restructuring

27.8

110,829

II Long-term Liabilities
1. Bonds

10,000-2. Long-term debt

2,542

1,133

3. Deferred tax liabilities

6,592

5,194

690

591

2,065

2,223

904

525

7. Other long-term liabilities

4,084

3,738

Total long-term liabilities

26,8797.0

13,407

3.3(13,472)

Total liabilities

134,40734.8

124,23630.4(10,170)

8,636

2.2

-

-

-

4. Deferred tax liabilities, land revaluationdifference
5. Accrued retirement and severance benefits
6. Directors’ and auditors’ retirement andseverance benefits*4(Minority Interests)
Minority Interests

26

Prior fiscal year

Current fiscal year

As of March 31, 2006

As of March 31, 2007

Note

Millions of yen

Share (%)

Millions of yen*6

10,0002.6

II Additional paid-in capital

95,772

III Retained earnings

vs. Priorfiscalyear

Share (%)

Change

-

-

-

24.8

-

-

-

164,503

42.5

-

-

-

(21,459)

(5.6)

-

-

-

V Other securities valuation difference

4,145

1.1

-

-

-

VI Translation adjustment

1,801

0.5

-

-

-

(11,156)

(2.9)

-

-

-

243,607

63.0

-

-

-

386,651

100.0

-

-

-

69.9

-

(Stockholders’ Equity)
I Common stock

IV Land revaluation difference

VII Treasury stock*4*7

Total stockholders’ equity
Total liabilities, minority interests andstockholders’ equity(Net Assets)
I Stockholders’ Equity
1. Common stock-

10,0002. Additional paid-in capital-

97,142

3. Retained earnings-

182,389

4. Treasury stock-(3,952)

Total stockholders’ equity--

285,578

II. Valuation difference and translation
adjustments

1. Other securities valuation difference

-

4,100

2. Deferred gains or losses on hedges

-

91

-

(21,286)-

5,684

3. Land revaluation difference*4

4. Translation adjustment
Total valuation difference and translation--(11,409)(2.8)-

III. Stock subscription rights

-

-

577

0.2

-

IV. Minority Interests

-

-

9,507

2.3

-

Total net assets--

284,254

69.6-

Total liabilities and net assets--

408,490

100.0-

adjustments27

(2) Consolidated Income Statements
Current fiscal year
(April 1, 2006 ~March 31, 2007)

Prior fiscal year
(April 1, 2005 ~March 31, 2006)
Note

Millions of yen

I Net sales
II Cost of sales*1

Gross profit
III Selling, general and administrative
expenses*2 *3Operating income

Share (%)

Millions of yen

vs. priorfiscalyear

Share (%)

Change450,829100.0

459,132

100.0

8,303

294,26365.3

291,052

63.4(3,211)

156,56534.7

168,079

36.6

11,514

120,89626.8

125,855

27.4

4,959

35,6697.942,224

9.2

6,554

4,032

0.9

1,518

641

0.2

(420)

45,615

9.9

8,493

5,837

1.3

1,100

IV Non-operating income
1. Interest income

820

1,448

2. Dividend income

140

639

3. Rental income

248-

4. Gain on valuation of derivatives329-

5. Operation consignment income

266

-

-

573

6. Foreign exchange gain709

7. Other non-operating income

2,514

0.5

1,371

V Non-operating expenses
1. Interest expense

292

237

2. Amortization of goodwill

485-

3. Loss on valuation of derivatives-

246

4. Other non-operating expenses

283

Recurring income

1,061

0.2

37,122

8.2

157

VI Extraordinary income
1. Gain on sale of property, plant andequipment

1,270

160

480

498

2,592

4,917

4. Compensation for eviction

300-

5. Reversal of allowance for doubtfulreceivables

58

145

6. Government subsidy income-

102

7. Other extraordinary income

35

2. Gain on sale of investment securities
3. Gain on sale of investments inaffiliated companies

*4

4,737

28

1.1

13

Current fiscal year
(April 1, 2006 ~March 31, 2007)

Prior fiscal year
(April 1, 2005 ~March 31, 2006)
Note

Millions of yen

*5

799

20

*6

538

406

*7

3,001

5,069

-

246

651

-

6. Litigation settlement903

7. Loss on business restructuring296-

8. Loss on liquidation of affiliates

-

38

147

-

244

690

-

587

16

10

13. Loss on changes in equity interests

21-

14. Provision for allowance of doubtfulreceivables

480

343

15. Office relocation expenses-

221

16. Loss for deferring income tax ofdepreciation of property, plant andequipment-

100

17. Other extraordinary loss

2

Share (%)

Millions of yen

vs. priorfiscal year

Share (%)

ChangeVII Extraordinary loss
1. Loss on sale of property, plant andequipment
2. Loss on disposal of property, plant andequipment
3. Loss on impairment of fixed assets
4. Extraordinary depreciation of fixed
assets
5. Lump-sum amortization of
consolidation goodwill

9. Provision for loss on businessliquidation
10. Loss on valuation of investment
securities
11.Loss on sale of investment in affiliatedcompanies
12. Loss on valuation of investments inaffiliated companies

Net income before income taxes andminority interests
Corporate income, inhabitant andenterprise taxes

*8

6,290

1.4

35,5697.9

14,468

7,739

1.7

1,449

43,7139.5

8,143

17,5693.8(1,712)

17,822

19,282

4.3

Minority interests

2,137

0.5

1,891

0.4

(245)

Net income

14,1493.1

24,252

5.3

10,102

Deferred income taxes

4,813

1

29

(253)

Consolidated Statement of Retained Earnings andConsolidated Statement of Changes in Net Assets
For the fiscal year ended March 31, 2007 (April 1, 2006 to March 31, 2007)
Consolidated Statement of Retained Earnings
Ref: Prior fiscal year
consolidated statements ofretained earnings(April 1, 2005 ~March 31, 2006)

Note

Millions of yen(Additional paid-in capital)
I Consolidated additional paid-in capitalat the beginning of the period

92,033

II Increase in consolidated additional
paid-in capital
1. Increase in additional paid-in capital by
exercise of rights to subscribe for new
shares396

2. Increase in additional paid-in capital for
issuance of new shares

3,341

III Consolidated additional paid-in capitalat the end of the period

3,738
95,772(Retained Earnings)
I Consolidated retained earnings at the
beginning of the period

158,181

II Increase in retained earnings
1. Net income

14,1492. Increase in retained earnings resulting
from exclusion of subsidiaries from thescope of consolidation29

3. Increase in retained earnings resulting
from the new application of the equity
method15

4. Reversal of land revaluation difference

303

14,497

III Decrease in retained earnings
1. Cash dividends

4,415

2. Share transfer payments

3,013

3. Bonuses to directors and corporate
auditors

559

4. Decrease in retained earnings resulting
from exclusion of subsidiaries from thescope of consolidation

186

V Consolidated retained earnings at theend of the period

8,174

164,50330

Consolidated Statement of Changes in Net Assets
For the fiscal year ended March 31, 2008 (April 1, 2006 to March 31, 2007)
Stockholders’ equity

Balance, March 31, 2006 (¥ million)

Common stock

Additional paid-in
capitalRetained earnings

Treasury stock

Total stockholders’equity10,00095,772

164,503(11,156)

259,119

Changes during the period
Cash dividends (*)(3,036)(3,036)

Cash dividends(3,036)(3,036)

(417)

(417)

24,252

24,252

Directors’ bonuses (*)
Net income
Purchase of treasury stock
Disposal of treasury stock

867

Acquisition of treasury stock from

(23)

(23)

7,227

8,095

502

consolidated subsidiaries
Changes in the scope of
consolidation (increase in

502

30

30

(28)

(28)

295

295

(173)

(173)

consolidated subsidiaries)
Decrease in retained earnings onmerger of consolidated
subsidiaries
Changes in the scope of
application of the equity method(decrease in companies to which
the equity method applies)
Reversal of land revaluationdifference
Net changes other than forchanges in stockholders’ equity
Total changes during the period(¥ million)
Balance, March 31, 2007 (¥ million)

-

1,369

17,885

7,203

26,45810,00097,142

182,389(3,952)285,578(*) Item for appropriation of earnings at the Ordinary General Meeting of Shareholders

31Valuation difference and translation adjustments
Other
securities
valuationdifference
Balance, March 31, 2006 (¥ million)

4,145

Deferred
gains orlosses onhedges-Land
revaluationdifference(21,459)

Translation
adjustment

Totalvaluationdifferenceandtranslation
adjustments

Stocksubscripti
on rights

Minority
interests

Total net
assets

1,801(15,512)-8,636

252,243

Changes during the period
Cash dividends (*)(3,036)

Cash dividends(3,036)

Directors’ bonuses (*)(417)

Net income

24,252

Purchase of treasury stock(23)

Disposal of treasury stock

8,095

Acquisition of treasury stock from502

consolidated subsidiaries
Changes in the scope of
consolidation (increase in30

consolidated subsidiaries)
Decrease in retained earnings onmerger of consolidated(28)

subsidiaries
Changes in the scope of
application of the equity method295(decrease in companies to which
the equity method applies)
Reversal of land revaluation(173)

difference
Net changes other than forchanges in stockholders’ equity
Total changes during the period(¥ million)
Balance, March 31, 2007 (¥ million)

(44)

91

173

3,882

4,103

577

870

5,551

(44)

91

173

3,882

4,103

577

870

32,0104,100

91-21,286

5,684(11,409)

577

9,507

284,254(*) Item for appropriation of earnings at the Ordinary General Meeting of Shareholders

32

(4) Consolidated Statements of Cash Flows

Note

Prior fiscal year
(April 1, 2005 ~March 31, 2006)

Current fiscal year
(April 1, 2006 ~March 31, 2007)

vs. priorfiscalyear

Millions of yen

Millions of yen

ChangeI Cash Flows from Operating Activities
Income before income taxes and minority interests

35,56943,713

Depreciation and amortization

19,144

20,954

-

246

3,001

5,069

753

-

-

2,399

Increase (decrease) in allowance for doubtful receivables

260

473

Increase (decrease) in allowance for loss on business restructuring

147

(147)

-

649

174

72

(92)

(387)

Interest and dividend income(960)(2,087)

Interest expense

292

237

Foreign exchange loss (gain)

(41)

5

Equity in loss (gain) of affiliated companies

(27)

(191)

Loss on disposal of property, plant and equipment

538

406

Loss (gain) on sale of property, plant and equipment

(470)

(139)

Loss on disposal of amusement facilities and machines

1,347

1,129

Gain on sale of investment securities(3,073)(4,826)

Loss on valuation of investment securities

260

700

Decrease (increase) in trade receivables

4,454(3,111)

Decrease (increase) in inventories

5,841(3,636)

Investment for amusement facilities and machines(10,892)(10,601)

Increase (decrease) in trade payables(2,678)3,465

Increase (decrease) in accounts payable—other

3,254(2,574)

Increase (decrease) in consumption tax payables

(90)

777

Bonuses to directors

(627)

(448)

(8,134)2,175

47,95254,322

Interest and dividends received

1,348

2,077

Interest paid

(352)

(235)

Income taxes paid

(17,140)(13,670)

Net cash provided by operating activities

31,80842,493Extraordinary depreciation of fixed assets

Loss on impairment of fixed assets
Amortization of consolidated adjustment account
Amortization of goodwill

Increase in provision for directors’ bonus
Increase in accrued retirement and severance benefits
Decrease in directors’ and auditors’ retirement and severance
benefits

Other
Subtotal

33

6,369

10,684

Note

Prior fiscal year
(April 1, 2005 ~March 31, 2006)

Current fiscal
year(April 1, 2006 ~March 31, 2007)

vs. priorfiscalyear

Millions of yen

Millions of yen

ChangeII Cash Flows from Investing Activities
Payments for deposit in time deposits(954)(1,413)

Proceeds from withdrawal from time deposits

603

1,546

Proceeds from sales of short-term investments

499-

Purchases of property, plant and equipment(9,924)(9,730)

Proceeds from sales of property, plant and equipment

4,387

568

Purchases of intangible assets(3,203)(4,789)Purchases of investment securities(2,063)(7,594)

783

6,165

(18,032)(1,102)

349

-

*2

(1,780)

(416)

*3

5,439

445

150

-

Advances of loans receivable(528)(11,701)

Collection of loans receivable581

14,941

Guarantee money deposited(883)(2,577)

Proceeds from collection of guarantee money deposited

1,963

1,556

Sales of investment securities
Acquisition of shares in consolidated subsidiaries, net of cash
acquired
Proceeds from sales of shares in consolidated subsidiaries
Acquisition of subsidiary shares related to changes in scope of
consolidation
Proceeds from sale of subsidiary shares related to changes in scopeof consolidation
Proceeds from decrease in capital at
non-consolidated subsidiaries

Net of cash used for business transfer*4(1,500)-

Cost of business acquisition*5-(1,248)(293)

98(24,406)(15,253)

Other
Net cash used in investing activities

34

9,153

Note

Prior fiscal year
(April 1, 2005 ~March 31, 2006)

Current fiscal
year(April 1, 2006 ~March 31, 2007)

vs. priorfiscalyear

Millions of yen

Millions of yen

ChangeIII Cash Flows from Financing Activities
Net increase (decrease) in short-term borrowings

10,847(13,112)

Proceeds from long-term debt

575-

Repayment of long-term debt

(2,398)(2,434)

Repayment of bond

(11,000)(5,000)396-

Proceeds from issuance of shares
Proceeds from capital paid by minority interests
Purchases of treasury stock
Proceeds from disposal of treasury stock
Dividends paid
Dividends paid to minority interests
Other

20

-

(10,552)

(11)

1

8,095

(4,415)(6,073)

(426)

(319)

(3,013)-(19,965)(18,856)

1,109

1,675

2,548

872

V Net increase (decrease) in cash and cash equivalents(10,887)

10,932

21,820

VI Cash and cash equivalents at the beginning of the period

124,923

113,186(11,737)

10

15

5

-

21

21

(860)

-

860

113,186

124,155

10,969Net cash used in financing activities
IV Effect of exchange rate changes on cash and cash
equivalents

VII Net increase in cash and cash equivalents due to additional
consolidation of subsidiaries
VIII Increase in cash and cash equivalents due to merger of*6

subsidiaries
IX Decrease in cash and cash equivalents due to exclusion of
consolidated subsidiaries

X Cash and cash equivalents at the end of the period*135

(5) Important Information Constituting the Basis for Preparation of Consolidated Financial Statements(April 1, 2006 ~ March 31, 2007)

Prior fiscal year
(April 1, 2005 ~March 31, 2006)
1. Information Concerning
the Scope ofConsolidation

Current fiscal year
(April 1, 2006 ~March 31, 2007)(1) Consolidated subsidiaries:
There are 52 consolidated subsidiaries.
The major consolidated subsidiaries areomitted because they are listed in “TheBANDAI NAMCO Group” “AssociatedCompanies (Subsidiaries and AffiliatedCompanies)”.
Beginning with the fiscal year underreview, added to the consolidation were
newly established NAMCO SPARESORT LTD and Bandai Games Inc.,as well as VIBE Inc. which became asubsidiary due to acquisition of its stock.
Removed from consolidation were
PalBox Co., Ltd. following completion ofliquidation, and BRENT LEISURE LTD.
in liquidation proceedings, which is underadministration. Also removed fromconsolidation were Italian Tomato Ltd.
and Nikkatsu Corporation, which ceased
to be subsidiaries due to the sale of theirequities.
Moreover, effective April 1, 2005, Banwave
Co., Ltd. and Banpocket Co., Ltd. merged,
with Banwave Co., Ltd. as the surviving
entity. Banwave Co., Ltd. subsequently
changed its corporate name to Banpresto
Sales Co., Ltd.
Additionally, effective March 31, 2006,
NAMCO LIMITED implemented a spin-off,with the divested operations re-incorporated
as NAMCO LIMITED and the name of thedivesting entity changed to NAMCO
BANDAI Games Inc.
Assets and liabilities of the newly
established entity NAMCO LIMITED were
freshly consolidated.

36(1) Consolidated subsidiaries:
There are 54 consolidated subsidiaries.
The major consolidated subsidiaries are listed in “TheBANDAI NAMCO Group” “Associated Companies(Subsidiaries and Affiliated Companies)”.

Four companies were added to the scope of
consolidation from the current period under review:
NAMCO NETWORKS AMERICA INC., a newly
established company, and Lantis Co., Ltd and C.C.P.
Co. Ltd. which became a subsidiaries following thepurchase of stock and CREATIVE B WORKS CO.
LTD., due to increase in significance.
On the other hand, St. Tropez Ltd. and NAMCO
IRELAND LTD have been removed from theconsolidation, the former because it no longer counts
as a subsidiary owing to the sale of its shares, and thelatter due to its liquidation.
Moreover, effective April 1, 2006, NAMCO
HOMETEK INC. and BANDAI GAMES INC. merged,
with NAMCO HOMETEK INC. as the surviving entity.
NAMCO HOMETEK INC. subsequently changed its
corporate name to NAMCO BANDAI Games AmericaInc.
Due to above, BANDAI GAMES, has been excluded
from the scope of consolidation from the current
period under review．
Additionally, BHK TRADING LTD. changed its
corporate name to BANDAI ASIA CO. LTD.
NAMCO BANDAI Games Europe S.A.S, which started
operating in July 2006, was newly included in the
consolidation, associated with the concentration ofhome video game software operations.

2. Information Concerning
Application of the Equity
MethodPrior fiscal year
(April 1, 2005 ~March 31, 2006)

Current fiscal year
(April 1, 2006 ~March 31, 2007)(2) Non-consolidated subsidiaries:
Including SHANGHAI NAMCO LTD, 21of the Company’s subsidiaries are
excluded from the scope of
consolidation, because total assets, net
sales, interim net income(corresponding to equity therein) andretained earnings (corresponding toequity therein) for each company would
not have a material impact on theinterim consolidated financial
statements of the Company.

(2) Non-consolidated subsidiaries:
Including SHANGHAI NAMCO LTD, 26 of theCompany’s subsidiaries are excluded from thescope of consolidation, because total assets, net
sales, net income (corresponding to equity
therein) and retained earnings (corresponding toequity therein) for each company would not havea material impact on the interim consolidated
financial statements of the Company.

(1) Application of equity method:
1 non-consolidated subsidiary,
SHANGHAI NAMCO LTD.,is accounted for by the equity method.
Five affiliates are accounted for by theequity method:
Happinet Corp.,
Sotsu Agency Co., Ltd., Tohato Inc.,
People Co., Ltd. andItalian Tomato Ltd.
People and Italian Tomato became
equity-method affiliates from thecurrent period under review.

(1) Application of equity method:
1 non-consolidated subsidiary,
SHANGHAI NAMCO LTD.,is accounted for by the equity method.
Four affiliates are accounted for by the equity
method:Happinet Corp.,
Sotsu Agency Co., Ltd.,
People Co., Ltd. andItalian Tomato Ltd.
Tohato Inc. has been excluded as an equity
method affiliate due to sale of its shares andtherefore the equity method was not applied forthe current period under review.

(2) Non-consolidated subsidiaries andaffiliates to which the equity method is
not applied
The equity method was not applied to
20 non-consolidated subsidiaries
including SUNLINK KYUSHU CO. LTD.
as well as 5 affiliates such as
Primeworks Corporation because thesecompanies would have only a minimal
impact on the Company’s consolidated
net income and retained earnings, as
their significance is minimal as a whole.

(2) Non-consolidated subsidiaries and affiliates towhich the equity method is not applied
The equity method was not applied to 25 nonconsolidated subsidiaries including SUNLINKKYUSHU CO. LTD. as well as an affiliate, EUROVISUAL S.A.S., because these companies would
have only a minimal impact on the Company’s
interim consolidated net income and retained
earnings, as their significance is minimal as awhole.

37

Prior fiscal year
(April 1, 2005 ~March 31, 2006)
3. Information Concerning
the Settlement Date forConsolidated
Subsidiaries

Current fiscal year
(April 1, 2006 ~March 31, 2007)

Consolidated subsidiaries with fiscal
years to March 31st.
Bandai Co., Ltd.
NAMCO BANDAI Games Inc.
(formerly NAMCO LIMITED)NAMCO LIMITED (the newly
established entity)
Banpresto Co., Ltd.
Bandai Networks Co., Ltd.
Banpresoft Co., Ltd.
NAMCO TALES STUDIO LTD.
VIBE Inc.

Consolidated subsidiaries with fiscal years to
March 31st.
Bandai Co., Ltd.
NAMCO LIMITEDNAMCO BANDAI Games Inc.
Banpresto Co., Ltd.
Bandai Networks Co., Ltd.
Banpresoft Co., Ltd.
NAMCO TALES STUDIO LTD.
VIBE Inc.

Consolidated subsidiaries with fiscal
years to January 31:
Artpresto Co., Ltd.

Consolidated subsidiaries with fiscal years to
January 31:
Artpresto Co., Ltd.

St. Tropez Ltd.
Consolidated subsidiaries with fiscal
years to December 31st:.
BANDAI AMERICA INC.
NAMCO CYBERTAINMENT INC.
NAMCO HOMETEK INC.
BANDAI GAMES INC.
NAMCO AMERICA INC.
BANDAI ENTERTAINMENT INC.
NAMCO BANDAI Holdings (USA) Inc.
BANDAI S.A.
BANDAI U.K. LTD.
BANDAI ESPANA S.A.
BANDAI (H.K.) CO., LTD.
BANPRESTO (H.K.) LTD.
BHK TRADING LTD.
BANDAI INDUSTRIAL CO., LTD.
BANDAI KOREA CO., LTD.

Consolidated subsidiaries with fiscal years to
December 31st:.
NAMCO BANDAI Holdings (USA) Inc.
BANDAI AMERICA INC.
NAMCO CYBERTAINMENT INC.
NAMCO BANDAI Games America Inc.
NAMCO AMERICA INC.
NAMCO NETWORKS AMERICA INC.
BANDAI ENTERTAINMENT INC.
BANDAI S.A.
BANDAI U.K. LTD.
BANDAI ESPANA S.A.
NAMCO EUROPE LTD.
NAMCO OPERATRIONS EUROPE LTD.
NAMCO OPERATRIONS SPAIN S.L.
NAMCO BANDAI Games Europe S.A.S.
BANDAI (H.K.) CO., LTD.
BANPRESTO (H.K.) LTD.
BANDAI ASIA CO., LTD. (Formerly BHKTRADING LTD.)
NAMCO ENTERPRISES ASIA LTD.
BANDAI INDUSTRIAL CO., LTD.
BANDAI KOREA CO., LTD.
CREATIVE B WORKS CO., LTD.

XS ENTERTAINMENT INC.
Consolidated subsidiaries other than those Consolidated subsidiaries other than those above
have fiscal years to the end of February.
above have fiscal years to the end of
February.
All of the above settlement dates fall within three
All of the above settlement dates fallmonths of the consolidated settlement date.
within three months of the consolidated
Consequently, the results of the above
settlement date. Consequently, theconsolidated subsidiaries are reflected in the
results of the above consolidated
consolidated financial statements.
subsidiaries are reflected in the
However, necessary adjustments are made to theconsolidated financial statements.
consolidated financial statements for material
However, necessary adjustments aretransactions occurring between the subsidiarymade to the consolidated financial
settlement dates and the consolidated settlement
statements for material transactions
date.
occurring between the subsidiary
settlement dates and the consolidated
settlement date.

38

Prior fiscal year
(April 1, 2005 ~March 31, 2006)
4. Information Concerning
Capital Consolidation
Related to the Stock
Transfer

Current fiscal year
(April 1, 2006 ~March 31, 2007)(1) NAMCO BANDAI Holdings Inc., theparent company of Bandai Co., Ltd. and
NAMCO LIMITED, was establishedthrough a transfer of stock.
Management integration through-capital consolidation is being carried out
based on the pooling-of-interests
method in accordance with “Accounting
for the Consolidation of a Holding
Company Established by Stock
Exchange or Stock Transfers” (JICPA
Accounting Committee Research
Report No.6).
(2) Based on comprehensive analysis of
the operations and financial position ofeach wholly owned subsidiary, thepooling of interests was judged to be theappropriate method for carrying out
management integration to allow eachwholly owned subsidiary to continuously
share the risks and benefits of the
NAMCO BANDAI Group

5. Information Concerning
Accounting Policies(1) Valuation basis and methods for
significant assets:-(1) Valuation basis and methods for significant
assets:(i)Short-term investments:(i)Short-term investments:

Bonds to be held to maturity

Bonds to be held to maturity

Stated at amortized cost (straight-line
method)Other securities

Same as left column
Other securities

Securities with market values:

Securities with market values:

Stated at market value using,among others, market prices atperiod end settlement dates.
(Valuation differences are reflected
directly in stockholder’s equity andthe cost of securities sold is
calculated by the moving-averagemethod).

Stated at market value using, among others,market prices at period end settlement dates.

(Valuation differences are reflected directly in
net assets and the cost of securities sold is
calculated by the moving-average method).

Securities without market values:

Securities without market values:

Stated at cost based on themoving-average method. However,with respect to investments inlimited liability partnerships forinvestment businesses and similar
partnerships, the amountcorresponding to the equity holdingof the partnership’s assets is statedas investment in securities, and theamount corresponding to the profit
or loss derived from the operationsof the partnership is stated as profit
or loss for the fiscal year.

Same as left column(ii) Derivative trading:Same as left column(ii) Derivative trading:Stated using the market pricemethod39

Prior fiscal year
(April 1, 2005 ~March 31, 2006)

Current fiscal year
(April 1, 2006 ~March 31, 2007)(iii) Inventories:
Domestic consolidated subsidiaries
Game software and other work inprogress:(iii) Inventories:
Domestic consolidated subsidiaries
Game software and other work in progress:
Same as left column

Stated at cost using the specific cost
methodOther inventories:
Same as left column

Other Inventories:
Generally stated at cost using themoving- average method
Overseas consolidated subsidiaries:

Overseas consolidated subsidiaries:

Game software and other work inprogress

Game software and other work in progress
Same as left column

Stated at cost using the specific cost
methodOther inventories:
Generally stated at the lower of costor market using the first-in, first-out
method(2) Depreciation methods for significant
depreciable assets:(i) Property, plant and equipment:

Other inventories:
Same as left column(2) Depreciation methods for significant depreciable
assets:(i) Property, plant and equipment:

The Company and its domestic
consolidated subsidiaries
Generally the declining-balancemethod is used.
However, for buildings (excluding
equipment attached thereto) acquiredon or after April 1, 1998, and certain
amusement facilities and equipment,
the straight-line method is used.
The useful life of buildings andstructures is 2 to 50 years.
The useful life of amusement facilities
and equipment is 3 to 15 years.

The Company and its domestic consolidated
subsidiaries
Same as left column

Overseas consolidated subsidiaries

Overseas consolidated subsidiaries

The straight-line method is used.

Same as left column

The useful life of buildings andstructures is 5 to 50 years.
The useful life of amusement facilities
and equipment is 2 to 7 years(ii) Intangible assets:(ii) Intangible assets:

The straight-line method is used.
The useful life of software usedinternally is 2 to 5 years.
Goodwill at domestic consolidated
subsidiaries is amortized equally over a
period of five years in accordance with
enforcement regulations of the JapaneseCommercial Code. Goodwill at overseas
consolidated subsidiaries is treated inaccordancewiththeaccounting
regulations of the country of domicile.

40

The straight-line method is used.
The useful life of goodwill is 5 years.
Goodwill at overseas consolidated
subsidiaries is treated in accordance withthe accounting regulations of the country of
domicile.
The useful life of software used internally is 1
to 5 years.

Prior fiscal year
(April 1, 2005 ~March 31, 2006)

Current fiscal year
(April 1, 2006 ~March 31, 2007)(3) Basis of recognition for significant
provisions:(3) Basis of recognition for significant provisions:(i) Allowance for doubtful receivables:(i) Allowance for doubtful receivables:

The Company provides for potential losses
due to bad debts using historical credit loss
ratios for ordinary receivables. Projecteduncollectible amounts are also recorded forreceivables clearly at risk and receivablesfrom companies under bankruptcy orreorganization processes, based on
individual consideration of the account's
potential for collection.

(ii)

−

Same as left column(ii) Provision for directors’ bonus
The portion of the amount expected to bepayable for directors’ bonus in the current fiscal
year that is attributable to the current
accounting period is booked by the Company
and its domestic consolidated subsidiaries
against the bonus payment.
Changes in Accounting Policies:
The Accounting Standard for Directors’ Bonus(Corporate Accounting Standard No.4,
November 29, 2005) applies from the current
interim accounting period.
As a result of this, operating income,recurring income, and net income before
income taxes and minority interests are eachreduced by ¥657 million.

(iii) Provisions for losses from businessrestructuring
The Company provides for losses frombusiness restructuring by recognizing
provisions in the expected loss amounts
to be absorbed by domestic consolidated
subsidiaries.

(iii) −

(iv) Allowance for retirement andseverance benefits:
The Company provides for retirement
and severance benefits for employees
based on estimated retirement benefit
obligations and pension assets as of
the consolidated fiscal year-end.
Actuarial gain/loss is amortized inequal amounts in each fiscal year overa fixed period (10 to 17 years) from thefollowing consolidated fiscal year within
the average remaining period of service
for affected employees.
At certain domestic consolidated
subsidiaries, past service obligations
are amortized over a fixed period (10years) within the average remaining
period of service for affected employees
when incurred.

(iv) Allowance for retirement and severance
benefits:
The Company provides for retirement andseverance benefits for employees based on
estimated retirement benefit obligations andpension assets as of the consolidated fiscal
year-end.
Actuarial gain/loss is amortized in equalamounts in each fiscal year over a fixed period(9 to 17 years) from the following consolidated
fiscal year within the average remaining periodof service for affected employees.
At certain domestic consolidated subsidiaries,
past service obligations are amortized over a
fixed period (10 to 11years) within the averageremaining period of service for affected
employees when incurred.

41

Prior fiscal year
(April 1, 2005 ~March 31, 2006)

Current fiscal year
(April 1, 2006 ~March 31, 2007)(v) Directors’ and auditors’ retirement andseverance benefits:(v) Directors’ and auditors’ retirement andseverance benefits:

Certain domestic consolidated subsidiaries
record provisions for retirement andseverance benefits payable at the end of
the fiscal year in accordance with internal
rules.

Same as left column(4) Accounting policies for translation ofsignificant assets and liabilities into
Japanese currency(4) Accounting policies for translation of significant
assets and liabilities into Japanese currency

Receivables and payables denominated inforeign currencies are translated at spot
exchange rates prevailing at the end of eachfiscal year, and resulting gains or losses areincluded in income.
Assets and liabilities of overseas
subsidiaries are translated at spot
exchange rates prevailing at the end ofeach fiscal year, while revenues andexpenses of the same are translated at the
average rates for the period. The
differences resulting from such translations
are recorded in minority interests and instockholders’ equity under translation
adjustment.

Receivables and payables denominated inforeign currencies are translated at spot exchange
rates prevailing at the end of each fiscal year, andresulting gains or losses are included in income.
Assets and liabilities of overseas subsidiaries
are translated at spot exchange rates prevailing at
the end of each fiscal year, while revenues andexpenses of the same are translated at the
average rates for the period. The differences
resulting from such translations are recorded inminority interests and in translation adjustment
under net assets.

(5) Accounting standards for recording
income and expenses
Videogame software production costs:
The production of videogame software
involves the complex combination of both
software and content. Consequently, it isdifficult to treat these constituent items as
separate components for accounting
purposes.
The Company judges the main componentof videogame software to be content, which
includes visual image and music data,
including the game itself.
Based on the above, videogame software
production costs are recorded as either
inventories or advance payments effectivefrom the point an internal decision is madeto commercialize a product. For software
production costs recorded under assets,cost of sales is recorded based on
estimated sales volume.

(5) Accounting standards for recording income andexpensesSame as left column(6) Accounting policies for significant lease(6) Accounting policies for significant leasetransactionstransactions
Same as left column
The Company and its consolidated
subsidiaries account for financing leasetransactions, other than those in which titles
to leased property are transferred to lessees,by applying accounting treatment applicableto ordinary lease transactions.
However, overseas consolidated
subsidiaries follow the accounting
standards in the country of domicile andtherefore treat financing lease transactionsin accordance with accounting treatment
applicable to ordinary sale and purchasetransactions

42

Prior fiscal year
(April 1, 2005 ~March 31, 2006)

Current fiscal year
(April 1, 2006 ~March 31, 2007)(7) Significant accounting policies forhedging(i) Accounting for hedging
The Company uses deferred hedge
accounting.

(7) Significant accounting policies for hedging(i) Accounting for hedging:
Same as left column

The allocation method is used for forward
exchange contracts when appropriate. The
special method is used for interest rate swaps
when appropriate.

(ii) Hedging instruments and hedged items:(ii) Hedging instruments and hedged items:

Hedging instruments:

Hedging instruments:

Forward exchange contracts, interest
rate swaps, etc.
Hedged items:
Foreign currency-denominated liabilities
and scheduled transactions, andinterest on debt.

Same as left column
Hedged items:
Same as left column(iii) Hedging policies:(iii) Hedging policies:
Hedging is implemented for the purposeof reducing risks arising fromfluctuations in exchange rates andinterest rates involved in operationaland financing activities.
(iv) Method of assessing the effectivenessof hedging:
The effectiveness of a hedging
transaction is in principle determined bycomparing the cumulative change in the
cash flows or market movement of thehedged item and that of the hedging
instrument from the start of hedging to
the time of assessing the effectivenessthereof.
However, if important conditions arecommon for the hedging instrument andthe hedged asset, liability, or scheduledtransaction, no such determination ismade because it is apparent that 100%
effectiveness in hedging was achieved.
(8) Other important information constituting
the basis of preparation of interim financial
statements
Accounting treatment of consumption tax:
Consumption tax is accounted forseparately and is not included in eachaccount.

43

Same as left column(iv) Method of assessing the effectiveness ofhedging:
Same as left column(8) Other important information constituting thebasis of preparation of interim financial statements
Accounting treatment of consumption tax:
Same as left column

6.

Valuation
Liabilities

ofAssetsofConsolidated

andPrior fiscal year
(April 1, 2005 ~March 31, 2006)
Assets and liabilities of consolidated

Current fiscal year
(April 1, 2006 ~March 31, 2007)
Same as left column

subsidiaries are uniformly valued at market.

Subsidiaries

7. Amortization of
consolidated adjustment
account

The consolidated adjustment account is−amortized in even amounts over a period offive years.
−

8. Amortization of positive andnegative goodwill

Goodwill is amortized over a five-year period
according to the straight-line method.
Goodwill at overseas consolidated subsidiaries istreated in accordance with the accounting
regulations of the country of domicile.

9. Treatment of earnings
appropriations

The consolidated statement of retained−

earnings is prepared on the basis of
earnings appropriation of consolidated
companies as established during the fiscal
year.

10.. Scope of Cash and Cash

Cash and cash equivalents include cash

Equivalents in Interimon hand, deposits on demand, and short-

Consolidated Statements ofterm, highly liquid investments with

Cash Flows

maturities of three months or less from thedate of acquisition that are readily
convertible to cash and are subject to only
insignificant risk of changes in value.

44

Same as left column

(6)Changes in Important Information Constituting the Basis for Preparation of theConsolidated Financial Statements (April 1, 2006 ~ March 31, 2007)

Prior fiscal year
(April 1, 2005 ~ March 31, 2006)-

Current fiscal year
(April 1, 2006 ~ March 31, 2007)
Accounting Standard For Presentation of Net Assets
From the current consolidated accounting period, “Accounting Standard
for Presentation of Net Assets” (Corporate Accounting Standard No.5,
December 9, 2005) and “Guidance on the Accounting Standard for
Presentation of Net Assets” (Guidance on Corporate Accounting Standard
No.8, December 9, 2005) are adopted.
The amount corresponding to total stockholders’ equity until now has
been ¥274,077 million.
In line with this revision in the standards for consolidated financial
statements, this method was applied in the net assets section of theconsolidated balance sheets for the current consolidated accounting
period.

-Accounting Standard for Share-based Payment
From the current consolidated accounting period, “Accounting Standard
for Share-based Payment”(Corporate Accounting Standard No.8,
December 27, 2005) and the “Guidance on the Accounting Standard for
Share-based Payment” (Guidance on Corporate Accounting Standard
No.11, May 31, 2006) are adopted.
As a result of this, operating income, recurring income, and net income
before income tax and minority interests are each reduced by ¥577 million.
The effect of this on segment information is set out in that section.
Accounting Standard for Business Combinations
From this consolidated fiscal year, Accounting Standards for Business
Combinations(Business

Accounting

Council,

October31,2003),

Accounting Standards for Business Divestitures (Corporate AccountingStandard No. 7, December 27, 2005), and Guidance on AccountingStandards for Business Combinations and Accounting Standards for
Business Divestitures (Guidance on Corporate Accounting Standard No.
10, December 27, 2005) apply.

45

(7) Changes in Display of Accounting Categories
Prior fiscal year
(April 1, 2005 ~ March 31, 2006)−

Current fiscal year
(April 1, 2006 ~ March 31, 2007)
Consolidated balance sheet
Amounts recorded in “Other (business rights) (¥2,248 million in the priorconsolidated accounting period)” under Intangible assets in the previous
consolidated balance sheet are presented as “Goodwill" from the current
consolidated accounting period. Also, amounts recorded in the “Consolidation
adjustment accounts” are presented as "Goodwill” or “Other (Negative goodwill)”under long-term liabilities.

−

Consolidated statements of income
1. Rental income (¥250 million in the current consolidated accounting period), which
has been recorded under independent item in the consolidated statement ofincome up until the previous consolidated accounting period, has been changed
to be included in “Other non-operating income” as it does not exceed 10/100 ofnon- operating income.
2. Operation consignment income (¥349 million in the current consolidated
accounting period), which has been recorded under independent item in the
consolidated statement of income up until the previous consolidated accounting
period, has been changed to be included in “Other non-operating income” as it
does not exceed 10/100 of non- operating income.
3. “Foreign exchange gain”, which has been included in “Other non-operating income
until the previous consolidated fiscal year, has been changed to be recorded
under the category in the current consolidated fiscal year as it exceeds 10/100 ofnon- operating income.
“Foreign exchange gain” included in “Other non-operating income” in the previous
consolidated accounting period was ¥17 million.
4. Amounts recorded in the previous consolidated accounting period as “Amortizationof goodwill” are presented from the current consolidated fiscal year as “Selling,
general and administrative expenses”.

−

Statement of Cash Flows
Amortization of business rights (¥610 million in the previous term) which waspreviously included in depreciation, and stated amortization of consolidation goodwill
are, beginning with the current term, presented as amortization of acquired goodwill.

(8)

Supplemental information
Prior fiscal year
(April 1, 2005 ~ March 31, 2006)−

Current fiscal year
(April 1, 2006 ~ March 31, 2007)
Change of useful life of fixed assets
Previously, Data Carddass hardware and software was depreciated basedon a useful life of five (5) years but, because product cycles were shortened
due to escalating competition, the useful life for hardware was changed tothree (3) years and one (1) year for software from this consolidated fiscal
period.
Due to this change, depreciation of ¥560 million was added to selling,
general and administrative expenses and an “Extraordinary Depreciation of
Fixed Assets” of ¥246 million was added to extraordinary loss for past fiscal
years. Accordingly, by comparison, operating income and recurring income
decreased respectively by ¥560 million and net income before-tax for thisfiscal term decreased by ¥806 million.

46

(9) Notes to Consolidated Financial Statements
Consolidated Balance Sheet
Prior fiscal year

Current fiscal year

As of March 31, 2006
*1. Shares of non-consolidated subsidiaries and shares of

As of March 31, 2007
*1. Shares of non-consolidated subsidiaries and shares ofaffiliates

affiliates

Investment securities (shares)

9,283 million yen

Investment securities (shares)

9,056 million yen*2. Secured assets and secured loans
The following assets are accompanied by collateral (security). .
Cash and time deposits: 54 million yen
Obligations secured by the above collateral
Short-term borrowings 28 million of yen*2. Secured assets and secured loans
The following assets are accompanied by collateral (security). .
Cash and time deposits: 54 million yen
Obligations secured by the above collateral
Short-term borrowings 23 million of yen

3. Guarantees for loans
Guarantees for lease agreements concluded with trading
partners of overseas subsidiaries: 85 million yen

3. Guarantees for loans
Guarantees for lease agreements concluded with trading
partners of overseas subsidiaries: 86 million yen*4. Land revaluation
Due to revaluation of land used for operations in accordancewith the Law Concerning Revaluation of Land (Law No. 34,
promulgated March 31, 1998), the Company booked a land
revaluation reserve in capital accounts.

*4. Land revaluation
Due to revaluation of land used for operations in accordancewith the Law Concerning Revaluation of Land (Law No. 34,
promulgated March 31, 1998), the Company booked a land
revaluation reserve in capital accounts.

Revaluation

In order to calculate the land prices that

Revaluation

methodprovide the basis of calculation for the ratable

methodprovide the basis of calculation for the ratablevalues for land value taxation stipulated invalues for land value taxation stipulated in

Article 16 of the Land Value Tax Law (Law

Article 16 of the Land Value Tax Law (Law

No. 69, promulgated May 2, 1991) in

No. 69, promulgated May 2, 1991) inaccordance with Article 2, Clause 4, of theaccordance with Article 2, Clause 4, of the

Enforcement order for the Law Concerning

Enforcement order for the Law Concerning

Revaluation of Land (Cabinet Order No. 119,

Revaluation of Land (Cabinet Order No. 119,

promulgated March 31, 1998), reasonablepromulgated March 31, 1998), reasonableadjustments for property depth have beenadjustments for property depth have been

made to road side values based on prices

made to road side values based on prices

established in accordance with the methods

established in accordance with the methods

prescribed and published by the National Tax

prescribed and published by the National Tax

Agency.

Agency.

Revaluationdate

In order to calculate the land prices that

Revaluation
March 31, 2002

date

March 31, 2002

The market value of the revalued land at the end of the fiscal
year under review was 883 million yen lower than the statedbook value after revaluation.
*5. -*5. Notes due at the end of the consolidated accounting period
Notes due at the end of the consolidated accounting period
are settled on the appropriate note transfer date. However, thefinal day of the current consolidated accounting period
coincided with a holiday for financial institutions. Therefore, thefollowing notes due at the end of the consolidated accounting
period are included in the balance sheet of the consolidated
accounting period.

*6. The total number of shares Issued
The number of shares issued by the Company
Shares of common stock: 260,580,191 shares*6. -*7. Treasury stock
Treasury stock held by consolidated companies and affiliatedfor under the equity method
The company’s number of treasury stock is as follows:
Shares of common stock: 7,616,892 shares

*7. -

47

Notes receivable¥683 million

Notes payable¥1,891 million

Consolidated Income Statements
Prior fiscal year
(April 1, 2005 ~Current fiscal year
(April 1, 2006 ~March 31, 2007)

March 31, 2006)*1 110 million yen of inventory valuation loss ofby cost or

market method is included*2. Major components of selling, general and administrative
expenses
Advertising expenses:*1 88 million yen of inventory valuation loss ofby cost or market

method is included*2. Major components of selling, general and administrative
expenses¥31,055 million

Officers’ remuneration and employee salaries and benefits:

Advertising expenses:¥31,031 million

Officers’ remuneration and employee salaries and benefits:¥28,219 million¥29,425 million

Provision for employee retirement and severance benefits:

Provision for employee retirement and severance benefits:¥1,124 million¥1,163 million

Provision for officers’ retirement and severance benefits:

Provision for directors’ bonus: ¥657 million¥186 million

Provision for officers’ retirement and severance benefits:

Research and development expenses:¥20,239 million
Allowance for doubtful receivables: ¥797 million*3. Research and development expenses included in selling,
general and administrative expenses: 20,239 million yen*4. Gains from sale of property, plant and equipment related
mainly to the sales of land
*5. Losses from sales of property, plant and equipment related
mainly to the sales of buildings and structures and sales ofland.
*6. Losses from disposal of property, plant and equipment
related mainly to the disposal of tools, furniture and fixtures:¥138 million
Research and development expenses: ¥18,004 million
Allowance for doubtful receivables: ¥397 million*3. Research and development expenses included in selling,
general and administrative expenses: 18,004 million yen*4. Gains from sale of property, plant and equipment related mainly
to the sales of land
*5. Losses from sales of property, plant and equipment related
mainly to the sales of land.
*6. Losses from disposal of property, plant and equipment related
mainly to the disposal of buildings and structures and disposal oftools, furniture and fixtures:*7. Loss on impairment of property, plant and equipment*7. Loss on impairment of fixed assets

In order to identify assets for impairment, the Company and

In order to identify assets for impairment, the Company andits consolidated subsidiaries group their fixed assets according

its consolidated subsidiaries group their fixed assets according

to management accounting classifications based on eachto management accounting classifications based on eachbusiness unit, except for important idle assets, assets to bebusiness unit, except for important idle assets, assets to bedisposed of and lease assets. Within that, because assets aredisposed of and lease assets.

spread across Japan and abroad, assets in the amusement

To establish a sounder financial base, the Company has

facility business are grouped mainly by geographical region.

reduced the book value of the following intangible assets andWith the following assets, excluding reusable assets, bookassets to be disposed of in the period under review to a level
deemed recoverable, and recorded the reduction undervalues were reduced to the collectable amount and the amountextraordinary loss as a loss on impairment of property, plantof reduction was appropriated as an impairment loss underand equipment.

extraordinary losses.

48

Prior interim period(April 1, 2005 ~ September 30, 2005)

Items

Location

Minato-ku,
TokyoMatsudo-shi,
Chiba
Ota-ku, Tokyo

Current interim period(April 1, 2006 ~ September 30, 2006)

Classifi-

Impairment

cationloss (¥ million)

Impairment

Classification−

adjust-ment

1,619

Amusemeaccounts
Suburb-an
Culturalfacility

Buildings,
structures, etc.

Land

Internet

Other

Taito-ku,

content andintangibleTokyo

administrati

assetsloss(¥ million)

Consolidation

Parking lot

Toshima-ku,

nt facility

Tokyo (Note 1)(themepark)

825
Sapporo City,
Hokkaido

530(Note 2)
Hakodate City,

25

Hokkaido

ve software

Total

Items

Location(Note 3)
3,001

Amusement facility
Amusement

facility(touristhotel)

Amusement
facility and1,543

machines, etc.
Amusement
facility and160

machines, etc.
Buildings &structures,

1,338

and landOther

YokohamaLANintangible

City,

entertainm

fixed assets;

Kanagawa

ent

other

(Note 4)business

investments,

219

etc.
ManagemOta-ku, Tokyo,
etc. (Note 5)

ent, Sales,

Buildings &Production

structures,control,and land

1,160

R&D
Idle assets
Shimotsukagun

and assets

Buildings &, Tochigi, etc.

scheduledstructures,(Note 6)

forand land, etc.

486

disposalIbaragi City,

Assets for

Osaka (Note 7)

lease, etc.

Total

49

Buildings &structures,

160

and land, etc.
5,069

Prior interim period(April 1, 2005 ~ September 30, 2005)

Current interim period(April 1, 2006 ~ September 30, 2006)
Notes

1. This asset was separated from its current grouping
and registered as a loss because it was decided tochange the primary management objective fromgenerating income via sales to concentrating on its
advertising value, and it was considered a different
category of investment decision from the group, which
consisted of facilities that aimed at generating income.
The collectible amount was calculated using a value of
use of "zero".
2. Because it was judged that the collectable amount from this
fixed asset would decrease greatly due to the decision toclose the facility, this asset was separated from its group andregistered as a loss. The collectible amount was calculatedusing a value of use of "zero".
3. A loss was registered because it was predicted that the bookvalue of this fixed asset could not be collected due to thedecrease in business profitability. The collectible amount wasmeasured by the net sale value and assessed based on theappraised real estate value.
4. Assets used for unprofitable businesses slated for closing
were registered as losses. The collectible amounts were
calculated using a value of use of "zero".
5. Assets that had no foreseeable use due to integration or
relocation of subsidiary bases were registered as losses. The
collectible amounts for real estate were measured by the net
sale value and assessed based on the appraised real estatevalue. Collectible amounts of other assets were calculatedusing a value of use of "zero".
6. Assets that had no foreseeable use because of integration ofsubsidiary bases were registered as losses. The collectible
amounts for real estate were measured by the net sale value
and assessed based on the appraised real estate value,planned sales price, etc. Collectible amounts of other assets
were calculated using a value of use of "zero".

7. Assets scheduled for sale and leased assets of noforeseeable use were registered as losses. Collectible
amounts for assets scheduled for sale were assessed
based on the planned sales price. Collectible amounts
for leased assets added income from the remainder ofthe lease to the land value as frontage property.
*8. A special loss from lump sum amortization of goodwill relates towrite-downs on shares in subsidiaries at domestic consolidated
subsidiaries.

50

*8. -

Consolidated Statement of Changes in Net Assets
For the fiscal year ended March 31, 2007
(April 1, 2006 to March 31, 2007)
1. Matters concerning the total number and category of shares in issue and the total number and category of treasury stock.
Number of shares at
Increase in number ofthe end of the previous shares in the current
fiscal period
periodDecrease in number of Number of shares atshares in the current
the end of the current
periodperiodIssued shares
Common stock

260,580,191--

260,580,191

Total

260,580,191--

260,580,191

Treasury Stock
Common stock

7,616,892

14,2774,900,122

2,731,047

Total

7,616,892

14,2774,900,122

2,731,047

1.The increase in treasury stock (shares of common stock) of 14,277 shares consists of an increase of 6,191 sharesfrom the repurchase of fractional shares, an increase of 17 shares as a result of an increase in the shareholding ratio inrespect of affiliates to which the equity method applies, and 8,069 shares being the company’s portion of treasury stockacquired by affiliated companies to which the equity method applies.
2.The decrease in treasury stock (shares of common stock) of 4,900,122 shares consists of decrease of 122 shares fromthe sale of fractional shares and 4,900,000 shares from the disposal of treasury stock through private placements.

2. Notes to stock subscription rights and treasury stock subscription rights

Category

Number of shares covered by stock subscription rights
Type of stock
for stock
Details of stock subscription rights
At end ofsubscription
Increase in
Decrease in At end of
previous fiscal
rightscurrent period current period period
periodThe

Series 1

CompanyStocksubscription

Balance at
end of period(¥ million)

-

-

-

-

-

195

-

-

-

-

-

232

-

-

-

-

-

149

-

-

-

-

-

577

rightsStocksubscription
rights as stock
options(Note 1)

Series 2
Stocksubscription
rightsSeries 3
Stocksubscription
rights

Total

Note 1: Exercise periods have not started for any of the stock acquisition rights tabulated above.

51

3. Matters concerning dividends(1)Dividend payment amount
Share category

Total dividend
amount(millions of yen)

Common stock

3,036

12

March 31, 2006

Common stock

3,036

12

September 30, 2006

Resolved

Dividend pershare (¥)

Date of record

Annual general meeting ofshareholders
June 26, 2006
Board of Directors
October 26, 2006

Effective dateJune 27, 2006
(Note 2)

December 8, 2006

1. Information is stated net of dividends on treasury stock held by affiliates. Amounts before deductions are ¥3,126 million
with respect to the annual general meeting of shareholders held June 26, 2006, and ¥3,126 million with respect to theboard meeting held October 26, 2006.
2. The effective date denotes the payment start date.
(2) Out of dividends whose record date concerns the current term, the following resolution is planned concerning dividends
whose effective date falls into the next term.
Share category
Resolved

Total dividend
amount(millions of yen)

Assetsunderlying
dividend

Dividend pershare (¥)

Date of record

Effective date16

March 31, 2007

June 26, 2007

Annual general
meeting ofshareholders

Common Stock

4,127

Retained
Earnings

June 25, 200752

Consolidated Statements of Cash Flows
Prior Fiscal year
(April 1, 2005 ~ March 31, 2006)

Current fiscal year
(April 1, 2006 ~ March 31, 2007)*1 Relationship between cash and cash equivalents at the end*1 Relationship between cash and cash equivalents at theof the period under review and the amounts accounted forend of the interim period and the amounts accounted foron the consolidated balance sheets:on the consolidated balance sheets:(millions of yen)(millions of yen)

Cash and time deposits

109,513

Cash and time deposits

Short-term investments

5,546

Short-term investments

Total
Time deposits with maturities
exceeding 3 months
Cash and cash equivalents

115,060

113,710
12,191

Total

125,901

Time deposits with maturities(1,874)(1,746)exceeding 3 months

113,186

Cash and cash equivalents

124,155*2 Key assets and liabilities of companies newly
consolidated as subsidiaries due to acquisition of their*2

Key assets and liabilities of companies newly

equity.

consolidated as subsidiaries due to acquisition of their

VIBE Inc.

equity.

Main assets and liabilities of VIBE Inc. at the time of

Lantis Co. Ltd.

its new consolidation due to the acquisition of its

Main assets and liabilities of Lantis Co.Ltd. at the timeshares by the Company related as follows to theof its new consolidation due to the acquisition of its

share acquisition price and net acquisition cost.

shares by the Company related as follows to the share(millions of yen)acquisition price and net acquisition cost.
(millions of yen)

Current assets

596

Fixed assets

92

Current assets

Consolidation adjustment accounts

1,610

Fixed assets

159

Current liabilities(252)

Goodwill

578

Long-term liabilities(38)

Current liabilities(548)

Minority interests(8)Long-term liabilities(207)

Cost of share acquisition

2,000

Minority interests(411)

Cash and cash equivalents(219)

Cost of share acquisition

259

Difference: Net acquisition cost

1,780

Cash and cash equivalents

(160)

687

Difference: Net acquisition cost98

CCP Co. Ltd.
Main assets and liabilities of CCP Co. Ltd. at the timeof its new consolidation due to the acquisition of its
shares by the Company related as follows to the shareacquisition price and net acquisition cost.
(millions of yen)
Current assets

53

2,399

Fixed assets

322

Goodwill

416

Current liabilities(2,464)Long-term liabilities(104)

Cost of share acquisition

568

Cash and cash equivalents(249)

Difference: Net acquisition cost318

Prior Fiscal year

Current fiscal year

(April 1, 2005 ~ March 31, 2006)(April 1, 2006 ~ March 31, 2007)*3 Principal assets and liabilities of companies removed-

from the consolidation due to the sale of the Company’s
shareholdings
St. Tropez Ltd.
St. Tropez Ltd. was removed from the consolidation
owing to the sale of the Company’s shareholdings.
Assets and liabilities at the time of removal from theconsolidation, the sales price of the shares, and thenet effect on income were as follows.
(millions of yen)

*4

Current assets

607

Fixed assets

6,477

Current liabilities(508)

Long-term liabilities(4,674)

Minority interests(551)

Book value of the shares

1,351

Loss on sale of shares(480)

Proceeds from sale of shares

871

Cash and cash equivalents(426)

Difference: Net received

98

Breakdown of increases in assets and liabilities due-to the absorption spin-off
NAMCO SPA RESORT LTD.
Assets and liabilities assumed from Kishiren Co., Ltd.
in an absorption spin-off and the cost of businesssuccession are as follows.
(millions of yen)Fixed assets

1,525

Long-term liabilities
Difference:

(25)

Cost

of

succession

business

1,500*5 Principal asset increases due to business acquisitions
NAMCO OPERATIONS EUROPE LTD.
The acquisition of bowling alley operations in Europe
entailed the following expenses.
(millions of yen)54

Fixed assets

1,248

Cost of business acquisition

1,248

1. Lease Transactions
Descriptions are omitted as information is considered to be not important.
2. Marketable Securities
1). Bonds held to maturity with market values
millions of yen

Typei. Government
and local
government
bonds, etc.
ii. Corporate
bondsiii. Other items
Subtotali. Government
and local(Market pricegovernment
does notbonds, etc.
exceedii. Corporate
balance sheet
bonds
amount)iii. Other items
Subtotal
Total
Bonds held tomaturity(Market priceexceeds
balance sheet
amount)Prior fiscal year

Current fiscal year

As of March 31, 2006

As of March 31, 2007

Book valueon theconsolidated balance
sheet

MarketPrice

DifferenceBook valueon theconsolidated balance
sheet

MarketPrice

Difference

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

9

9

-

6,017

6,016

-

-

-

-

-

-

-

9
9

9
9

-

6,017
6,017

6,016
6,016

-

2). Other securities with market values
millions of yen
Prior fiscal year

Current fiscal year

As of March 31, 2006

As of March 31, 2007

Type
Acquisition
Cost

Other
securities(Balance
sheet amountexceeds
acquisition
cost)(i) Equity
securities(ii) Bonds
Corporate bonds(iii) Other
Sub-total(i)Equity(Balance
securities
sheet amount(ii) Bonds
does notexceedCorporate bonds
acquisition(iii) Other
cost)
Sub-total
Total

Book valueon theconsolidate Differenced balance
sheet

Acquisition
Cost

Book valueon theconsolidate Differenced balance
sheet

2,561

10,878

8,316

8,980

17,239

8,259

149
2,711

211
11,090

61
8,378

149
9,130

195
17,435

45
8,304

409

281

(128)

395

274

(120)

100
82
592
3,303

98
79
458
11,548

(2)
(3)
(134)
8,244

100
72
568
9,699

98
69
442
17,878

(1)
(3)
(125)
8,178

55

Note: Stocks and other securities with market values included in Other Securities were recognized as 200 million yen forthe prior period and 547 millions yen for the current period as impairment losses. These were:
Stocks whose market value declined 50% or more:

All stocks

Stocks whose market value declined more than 30% but lessthan 50%:

Stocks for which no recovery in value is
expected

3. Other marketable securities sold during the current year
(April 1, 2006 to march 31, 2007)
millions of yen
Prior fiscal year

Current fiscal year

As of March 31, 2006

As of March 31, 2007

Proceeds of sale

Total gains on sale Total loss on sale

783

488

Proceeds of sale Total gains on sale Total loss on sale

-

533

498

1

4. Principal securities holdings without market value(¥ million)

1. Bonds held to maturity

Prior fiscal year

Current fiscal year

As of March 31, 2006
Book value on consolidated balance
sheet
36

As of March 31, 2007
Book value on consolidatedbalance sheet
37

36

37

2. Other marketable securities

7,189

8,018

i) Unlisted stocks

1,579

1,762

ii) MMF

5,046

5,706

iii) Other

563

549

Unlisted bonds

5. Redemption amounts for other marketable securities with maturities and bonds which
are to be held to maturity
Prior fiscal year

Current fiscal year

As of March 31, 2006

As of March 31, 2007

One yearor lessMore
thanone, upto five
years

More
than
five, upto tenyears

More thanten years

One
year or
less

More
than
one, upto five
years

More thanfive, up toten years

More thanten years

Government and local
government bonds, etc.

-

9

-

-

5,996

20

-

-

Corporate bonds

-

-

134

-

-

-

37

-

-

9

134

-

5,996

20

37

-

Bonds

Total

6. Derivative Transactions
Descriptions are omitted as information is considered to be not important.

56

Retirement and Severance Benefits
1. Retirement plan types
The Company

The Company has established a fixed benefit plan for lump sum
retirement awards and a comprehensive employee’s pension fund.

Domestic consolidated subsidiaries

Domestic consolidated subsidiaries have established as fixed benefit(excluding some consolidated

types, qualified retirement benefit plans, retirement lump-sum grants,

subsidiaries)

or comprehensive employees’ pension funds. Additional benefits may
also be paid at retirement.

Foreign consolidated subsidiaries

Some foreign consolidated subsidiaries have established defined
contribution types or retirement lump-sum grants.

2. Retirement benefit liabilities(millions of yen)i. Projected benefit obligations

Fiscal Year Ended

Fiscal Year Ended

March 2006

March 2007(as of March 31, 2006)(as of March 31, 2007)(14,275)(15,381)ii. Plan assets at fair value

11,231

12,811

iii. Projected benefit obligation in excess of plan assets(3,043)(2,569)iv. Unrecognized transition liability--

v. Unrecognized actuarial gain/loss

1,180

524

(10)

(41)

(1,873)(2,086)191

137(2,065)(2,223)(i + ii)vi. Unrecognized prior service liability (reduction in
liability)vii. Net retirement and severance benefits recognizedon the balance sheets (iii + iv + v + vi)
viii. Prepaid pension expense
ix. Accrued retirement and severance benefits(vii + viii)

Notes:
1. In addition to the plan assets shown above, there are 1,099 million yen for the prior fiscal year and 1,191
million yen for the current fiscal year in plan assets under the employee’s pension fund (accounted for by
the ratio of contribution).
2. To calculate retirement benefit liabilities, some subsidiaries have adopted the simplified method.

57

3. Retirement benefit expenses(millions of yen)
Prior fiscal year

Current fiscal year

As of March 31, 2006

As of March 31, 2007

i. Service cost for benefits earned – net of employee

1,415

1,545

ii. Interest cost on projected benefit obligation

251

271

iii. Estimated return on plan assets

(188)

(245)

-

-

v. Amortization of unrecognized actuarial gain

291

197

vi. Amortization of prior service cost

17

16

1,787

1,785

contributions

iv. Transition liability charged offvii. Net periodic cost (total i-vi)

Notes:
1. In addition to the retirement benefit expenses shown above, there is also 80 million for the prior fiscal
year and 102 million for the current fiscal year in contributions to the employees’ pension fund charged tothe cost of sales and selling, general and administrative expenses. Additional benefits are 174 million yen
for the prior fiscal year and 109 million for the current fiscal year.
2. Retirement benefit expenses for the subsidiaries which have adopted the simplified methods areincluded in (i) service cost above.
3. A portion of overseas defined contribution values related to the establishment of a defined contribution
pension plan has been recorded as (i) service cost.

4. Key factors in calculation of retirement benefit liabilities
Fiscal Year Ended March 2006
Method of the benefit attribution:

Benefit/year of service

Fiscal Year Ended March 2007
Benefit/year of service

Discount rate:

1.3% – 2.0%

1.3% – 2.0%

Estimated rate of return on plan

2.0% – 3.0%

1.5% – 3.0%

10 years

10 – 11 years

Period of amortization ofAmortized in equal amounts overAmortized in equal amounts over aunrecognized actuarial gain ora given number of years (10-17)

given number of years (9-17) from

loss:

from the following consolidated

the following consolidated fiscal

fiscal year (within the average

year (within the average remaining

remaining period of service for

period of service for affectedaffected employees)

employees)

assets:Period of amortization of priorunrecognized service cost

58

Concerning stock options, etc.
Fiscal Year to March 2007 (from April 1, 2006 to March 31, 2007)
1. Item and amount of stock option expenses in the consolidated fiscal year
Selling, general and administrative expenses: ¥577 million

2. Types, sizes and changes of stock options(1) Types of Stock Option
2006 Stock Options
Series 1
Stock subscription rights

Series 2
Stock subscription rights

Directors of theCompany (8)Directors of subsidiaries(14)

Common stock 126,300

Common stock 149,700

Common stock
1,838,000

Grant dateConditions for exercisingrightsJuly 18, 2006

July 18, 2006

July 18, 2006

(Note 2)

(Note 3)(Note 4)

Required tenure

Not specified

Not specified

Applicable period forexercising rightsfrom July 10, 2009
to June 30, 2014

from July 10, 2009
to June 30, 2014

Position and Number ofbeneficiaries
Type and number ofshares (Note 1)

Series 3
Stock subscription rights
Employees of theCompany andsubsidiaries (603)from July 18, 2006
to July 9, 2008
from July 10, 2008
to June 30, 2010

(Notes) 1. The number of stock options is given in that of shares.
2. If, after subscription rights are allocated, the Company's stock price growth rate up to the start ofthe period for exercising those rights does not exceed the TOPIX (Tokyo Stock Price Index) growthrate, those subscription rights cannot be exercised. The Company's stock price growth rate shallbe calculated as the average closing price for common shares of the Company on the Tokyo Stock
Exchange on each of the days within the previous three months prior to the month in which thestarting date for the period for exercising the subscription rights falls (except if there is no trading)
divided by the average closing price for common shares of the Company on the Tokyo Stock
Exchange on each of the days within three months prior to the month in which the allotment datefalls (except if there is no trading). The TOPIX growth rate is calculated in the same way theCompany’s stock price growth rate.
3. The annual target of business performance and evaluation period (3 years from the time of theissuance of rights to the time it is possible to exercise those rights) shall be determined, with thesales and operating income, etc. of the strategic business unit – to which the subsidiary officer
who is the target of the allotment belongs (hereinafter referred to as “Subscription Right Holder”)
at the time of issuance of the subscription rights – used as the evaluation index, and the ratio ofachievement of that target shall be measured for each fiscal year during that evaluation period. If
the ratio of achievement at the end of evaluation period is above 50% on average during the59evaluation period, those rights may be exercised.
However, even in that case, the number of shares that can be acquired by exercising those rights
shall be based on a ratio equivalent to the average ratio of achievement (maximum of 100%).
4. (i) Any person receiving an allotment of subscription rights (hereinafter referred to as "Holder(s) of
Subscription Rights") must be an employee of the Company or of its Group Companies at thetime those rights are issued.
(ii) Regardless of the regulation in (i), if the Holder of Subscription Rights leaves the Company
due to his or her own personal reasons, that person may only possess and exercise thecorresponding rights up to 6 months from the time of leaving. However, he or she may notpossess and exercise the corresponding rights beyond the period for exercising those rights.
In addition, if that person leaves upon the Company's request or for any other reason that theCompany accepts, those rights and the period for exercising those rights shall remainunchanged.

(2)

Stock Option Sizes and Changes
Information is given only for stock options that were available within this consolidated fiscal year. The
number of stock options is given in that of shares.

(i) Number of Stock Options (Shares)

2006 Stock Options
Series 1
Stock subscription
rights

Beforeeffective

rightsSeries 3
Stock subscription
rights(shares)(shares)(shares)becomeEnd of previous consolidated

Series 2
Stock subscription
rights

---

---

---

126,300----126,300

149,700----149,700

1,838,000
21,000--1,817,000

---

---

---

---------------------------

term

GrantedExpiredOffered rights
Unoffered
After offer (shares)
End of previous consolidated
term

Offered rights
Exercised rights
Expired
Unexercised60

(ii) Price Information

2006 Stock Options
Series 1
Stock subscription
rightsSeries 2
Stock subscription
rightsSeries 3
Stock subscription
rights

1

1

1,754

Average stock pricewhen exercised (Yen)

---

---

---

Fair market price on
grant date (Yen)

1,550.90

1,550.90

219.07

Exercise price of option
(Yen)

3.

Method for Estimating Fair Market Price for Stock Options
The method for estimating a fair market price for stock options offered in this fiscal year is as follows.
(i) Valuation Formula … Black-Scholes Model(ii) Basic figures and Estimation Method

2006 Stock Options
Series 1
Stock subscription
rightsSeries 2
Stock subscription
rightsSeries 3
Stock subscription
rightsStock price fluctuation (Note 1)

24.17%

24.17%

24.17%

Estimated remaining life (Note 2)

5.464 years

5.464 years

2.964 years

Estimated dividends (Note 3)

1.04%

1.04%

1.04%

No-risk interest rate (Note 4)

1.424%

1.424%

0.959%(Notes)1. Stock price fluctuation is based on stock prices over the period from the company’s founding to
the grant date (from September 29, 2005 to July 18, 2006).
2. The remaining life of the stock options could not be rationally estimated due to a lack of data.
Estimates are therefore based on the assumption that options would be exercised at the midpointof the applicable period for exercising rights.
3. Estimated dividends estimates were based on actual dividends over the period from thecompany’s founding to grant date (from September 29, 2005 to July 18, 2006).
4. The no-risk interest rate is the rate of yield on government bonds for the period corresponding to
the estimated remaining life.

4.

Method for estimating the number of effective rights of stock options

Basically, it is difficult to rationally estimate the number of expired options at a future date. The number ofpreviously expired options was therefore used.

61

Tax effect accounting(millions of yen)

Prior fiscal year (April 1, 2005 ~ March 31, 2006)
1. Significant components of deferred tax assets and liabilities
Deferred tax assets:
Excess depreciation on fixed assets
Losses carried forward
Valuation loss on advance money
Inventory valuation loss
Accrued employee bonuses
Excess allowance for doubtful accounts
Accrued enterprise taxes etc.
Employee retirement and severance benefits
Excess depreciation of deferred assets
Loss on impairment of fixed assets
Research and development expenses
Other
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Retained earnings of foreign consolidated subsidiaries
Other securities valuation difference
Deduction for inventories
Reserve for deferred income tax on fixed assets
Other
Total deferred tax liabilities
Net deferred tax assets(4,511)(3,388)(1,198)(163)(39)(9,301)
3,044

Net deferred tax assets are reported on the consolidated balance sheet as:
Current assets — Deferred tax assets
Fixed assets — Deferred tax assets
Current liabilities — Other (deferred tax liabilities)
Long-term liabilities — Deferred tax liabilities

7,037
3,901
1,301
6,592

3,387
3,261
1,891
1,785
1,525
1,357
844
775
764
655
497
4,452
21,197(8,851)
12,346

In addition to the above, deferred tax assets and liabilities due to land revaluation recorded as “deferred
tax liabilities – land revaluation” are as follows:
Deferred tax assets due to land revaluation
9,323
Valuation allowance(9,122)
Total deferred tax assets
200
Deferred tax liabilities due to land revaluation(890)
Total deferred tax liabilities(690)
Principle reasons for significant differences between normal effective statutory tax rate and the effective
tax rate after application of tax effect accounting:
Effective statutory tax rate
40.6%
(Adjustments)
Increase in valuation allowance related to deferred tax assets
9.5
Loss on impairment of property, plant and equipment (consolidated adjustment)

1.8

Permanent nondeductible expense such as entertainment expense
Amortization of consolidated adjustment accountInhabitants tax lump-sum payments
Other
Actual effective tax rate after application of tax effect accounting

1.2
0.9
0.7
(0.5)
54.2

62

(millions of yen)

Current fiscal year (April 1, 2006 ~ March 31, 2007)
1. Significant components of deferred tax assets and liabilities
Deferred tax assets:
Excess depreciation on fixed assets
Losses carried forward
Loss on impairment of fixed assets
Inventory valuation loss
Accrued employee bonuses
Valuation loss on advance money
Accrued enterprise taxes etc.
Employee retirement and severance benefits
Research and development expenses
Excess allowance for doubtful accounts
Other
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Retained earnings of foreign consolidated subsidiaries
Other securities valuation difference
Deduction for inventories
Reserve for deferred income tax on fixed assets
Other
Total deferred tax liabilities
Net deferred tax assets
Net deferred tax assets are reported on the consolidated balance sheet as:
Current assets — Deferred tax assets
Fixed assets — Deferred tax assets
Current liabilities — Other (deferred tax liabilities)
Long-term liabilities — Deferred tax liabilities

4,588
3,387
1,889
1,626
1,348
1,269
1,066
824
442
321
5,058
21,822(10,520)
11,302(3,652)(3,324)
(867)
(147)
(105)
(8,096)
3,205

5,717
4,141
1,458
5,194

In addition to the above, deferred tax assets and liabilities due to land revaluation recorded as “deferred
tax liabilities – land revaluation” are as follows:
Deferred tax assets due to land revaluation
9,185
Valuation allowance(8,993)
Total deferred tax assets
192
Deferred tax liabilities due to land revaluation(783)
Total deferred tax liabilities(591)
2. Principle reasons for significant differences between normal effective statutory tax rate and theeffective tax rate after application of tax effect accounting:
Effective statutory tax rate
40.6%
(Adjustments)
Increase in valuation allowance related to deferred tax assets
1.6
Amortization of goodwill

1.7

Permanent nondeductible expense such as entertainment expense
Inhabitants tax lump-sum payments
Reversal of deferred tax liabilities for retained income of foreign subsidiaries
Other
Actual effective tax rate after application of tax effect accounting

1.0
0.6
(5.1)
(0.2)
40.2

63

Segment Informationa. By Business Segment(¥ million)

Prior fiscal year (April 1, 2005 ~ March 31, 2006)
Toys & Amusement Game
Network
Hobby
Facility
Contents
Business
Business Business BusinessNet sales andoperating income
Net sales(1) To externalcustomers(2) Inter-segment
sales and transfers
Total
Operating expenses
Operating income(loss)(ii) Assets,
depreciation andamortization,
impairment loss, andcapital expenditure
AssetsDepreciation andamortization
Impairment loss
Capital expenditure

176,474

78,792 128,104

Visual &Music
Content
Business

AffiliatedBusiness

Total

Eliminations
andCorporate

Consolidated

12,19642,27912,981 450,829

2,326

324

1,048

10,08918,914(18,914)-

181,007
161,922

79,384 130,430
76,878 119,979

12,521
10,68543,32837,141

23,071 469,744
23,242 429,849(18,914)(14,689)

450,829
415,160

19,0852,506 10,451

1,835

6,187

(171)

39,894(4,225)35,669136,692

57,910 113,799

10,57836,927

23,211 379,120

7,531

386,651

4,533

591

-

450,829

5,055

9,163

2,107

151

527

1,445

18,450693

19,144825
8,456

10,979

556
1,404

1,619
252

1,594

753

3,001
23,441578

3,001
24,020Notes:
1. Business segment classifications are in accordance with classifications adopted for internal management purposes.
2. Principal products and business in each business segment:(1) Toys and Hobby Business:

Toys, candy toys, products for vending machines, cards, plastic models, apparel,sundries, stationery and other products(2) Amusement Facility Business:

Amusement facility operations, and other operations(3) Game Contents Business:

Software for home videogames, coin-operated game machines, prizes for coinoperated game machines and other products(4) Network Business:

Mobile content and other services(5) Visual and Music Content
Business:

Video titles, visual software, on-demand video distribution and other products andservices

Transportation and warehousing of products, leasing, real estate management,
printing, licensing, restaurant management, human services and nursing care facilities,
development and sale of environmental equipment and other activities
3. Operating expenses include an unallocatable amount of ¥5,812 million under eliminations and corporate. This figure primarily(6) Other Business:consists of expenses related to management divisions at Bandai Co., Ltd. and NAMCO LIMITED (Currently NAMCO BANDAI
Games Inc.).
4. Assets include 24,800 million yen in corporate assets included in eliminations and corporate. This figure primarily consists ofsurplus working capital (cash and deposits), long-term investments (investment securities), and assets, etc. related to
management divisions.

64(¥ million)

Current fiscal year (April 1, 2006 ~ March 31, 2007)
Visual &Music
Content
Business

Toys & Amusement Game
Network
Hobby
Facility
Contents
Business
Business Business BusinessNet sales andoperating income
Net sales(1) To externalcustomers(2) Inter-segment
sales and transfers
Total
Operating expenses
Operating income(ii) Assets,
depreciation andamortization,
impairment loss, andcapital expenditure
AssetsDepreciation andamortization
Impairment loss
Capital expenditure

179,473

Total

12,081

41,954

10,369 459,132

11,798407

1,051

10,530185,586
168,183
17,40388,196 139,187
84,192 127,677
4,004 11,509

12,48911,608880

151,547

65,144 119,102

6,112

87,862 127,389

AffiliatedBusiness

333

Eliminations
andCorporate

Consolidated-

459,132

30,234(30,234)-

43,00633,5099,496

20,900 489,366
19,882 445,054
1,017 44,312(30,234)(28,145)(2,088)459,132
416,908
42,224

11,191

42,26823,571 412,824(4,334)408,490

8,054

8,706

4,422

173

663

1,639

23,660(158)

23,501

486
9,062

3,752
10,678

670
4,220

156

1,436

208
2,368

5,116
27,924

(47)
-

5,069
27,924

Notes:
1. Business segment classifications are in accordance with classifications adopted for internal management purposes.
(Changes in accounting policy)
As part of the group restructuring, a formational-divisive reorganisation was implemented splitting off the Amusement Facility
Management Business from NAMCO LIMITED (currently NAMCO BANDAI Games Inc.) and newly establishing NAMCO LIMITEDon March 31, 2006. With this reorganisation, the structure of each of the Group’s strategic business units has been made clearer
and in order to present details of the Group’s products and services more appropriately, NAMCO LIMITED’s welfare and seniorcitizens facilities business and all the operations of Yunokawa Kanko Hotel Co., Ltd have been moved from “Affiliated Business” to“Amusement Facility Business”. The NAMCO BANDAI Games Inc. incubation business has also been moved from “AffiliatedBusiness" to “Game Contents Business".
Segment information for the previous interim consolidated accounting period and the previous consolidated accounting year
compiled according to the business segments used in the current interim consolidated accounting period is as follows.
(¥ million)

Prior fiscal year (April 1, 2005 ~ March 31, 2006)
Toys & Hobby
Business

Amusement

Game

Facility

Contents

Business

Business

Network

Visual & Music

AffiliatedBusiness

Content BusinessBusiness

Total

Eliminations andConsolidated

Corporate

Net sales and operating
incomeNet sales(1) To external customers(2) Inter-segment sales andtransfers
Total
Operating expenses
Operating income

176,474

80,769128,448

12,19642,27910,661 450,829-

450,829

4,533

525

2,326

324

1,048

10,142

18,901(18,901)-

181,007
161,922
19,08581,294
79,406
1,888

130,774
121,067
9,707

12,521
10,685
1,835

43,32837,141
6,187

20,804 469,730
19,616 429,838
1,187 39,892(18,901)(14,678)(4,222)450,829
415,160
35,669136,692

60,180113,799

10,57836,927

20,742 378,921

7,729

386,651

5,055

9,292

2,240

151

527

1,184

18,450693

19,144825
8,456

11,168

556
1,458

1,619
252

1,594

510

3,001
23,441578

3,001
24,020(ii) Assets, depreciation andamortization, impairment
loss, and capital expenditure
AssetsDepreciation andamortization
Impairment loss
Capital expenditure65

2. Principal products and business in each business segment:(1) Toys and Hobby Business:

Toys, candy toys, products for vending machines, cards, plastic models, apparel,sundries, stationery and other products(2) Amusement Facility Business:

Amusement facility operations, and other operations(3) Game Contents Business:

Software for home videogames, coin-operated game machines, prizes for coinoperated game machines and other products(4) Network Business:

Mobile content and other services(5) Visual and Music Content
Business:

Video titles, visual software, on-demand video distribution and other products andservices(6) Other Business:

Transportation and warehousing of products, leasing, real estate management,
printing, development and sale of environmental equipment and other activities

3. Operating expenses include an unallocatable amount of ¥2,538 million under eliminations and corporate. This figure primarily
consists of expenses related to management divisions the Company and NAMCO BANDAI HOLDINGS (USA) Inc.
4. Assets include 34,674 million yen in corporate assets included in eliminations and corporate. This figure primarily consists ofsurplus working capital (cash and deposits), long-term investments (investment securities), and assets, etc. related to
management divisions.
5. Depreciation includes goodwill amortization. Extraordinary depreciation on fixed assets is not included.
6. Changes in accounting policy
As set out in “Important Information Constituting the Basis for Preparation of Interim Consolidated Financial Statements” 5. (3)(ii), the Accounting Standard for Directors’ Bonuses (Corporate Accounting Standard No. 4, November 29, 2005) applies from thecurrent interim consolidated accounting period. Also, as set out in “Changes in Important Information Constituting the Basis for
Preparation of Interim Consolidated Financial Statements”, the Accounting Standard for Stock Options (Corporate AccountingStandard No. 8, December 27, 2005) and the Application Guideline for the Accounting Standard for Stock Options (Corporate
Accounting Standard Application Guideline No. 11, May 31, 2006) apply from the current interim consolidated accounting period.
These changes had the following effect on Operating Income for each segment.
(¥ million)
Toys & Amusement
Hobby
Facility
Business
Business

Game
Contents
Business

NetworkBusiness

Visual ＆Music Content
Business

Other
Business

Total

Eliminations
Consolidated
andCorporate

Directors’ bonus

(176)

(48)

(99)

-

(162)

(61)

(547)

(110)

(657)

Stock options

(100)

(31)

(99)

-

-

-

(232)

(345)

(577)

Operating income (loss)

(276)

(80)

(199)

-

(162)

(61)

(779)

(455)

(1,235)66

b. By Geographic Segment(¥ million)

Prior fiscal year (April 1, 2005 ~ March 31, 2006)
Eliminations
andConsolidated
corporate

Japan

Americas

Europe

Asia

Total

1) To external customers

365,823

42,76931,231

11,005450,829-

450,829

2) Inter-segment sales andtransfers

8,497

1,334

13

21,10630,951(30,951)-

Total

374,320

44,10331,244

32,112

481,780(30,951)

450,829

Operating expenses

336,705

47,38826,91429,841

440,848(25,688)415,160

Operating income (loss)

37,614(3,284)

4,330

2,270

40,931(5,262)35,669(ii) Assets
Notes:

291,500

32,54334,087

15,898374,028

12,622

386,651(i) Net sales and operating
incomeNet sales

1. Methods for classifying geographic segments and principal countries and regions(1) The Company classifies geographic segments by such factors as degree of geographic closeness, similarities in
economic activities, and mutual relationship of business activities.
(2) Principal countries and regions belonging to each geographic segment
U.S.A. and Canada(i) Americas:
France, U.K. and Spain(ii) Europe:Hong Kong, Thailand and South Korea(iii) Asia:
2. Operating expenses include an unallocatable amount of ¥5,812 million under eliminations and corporate. This figure primarily
consists of expenses related to management divisions at Bandai Co., Ltd. and NAMCO LIMITED (Currently NAMCO BANDAI
Games Inc.).
3. Assets include 24,800 million yen in corporate assets included in eliminations and corporate. This figure primarily consists ofsurplus working capital (cash and deposits), long-term investments (investment securities), and assets, etc. related to
management divisions.

(¥ million)

Current fiscal year (April 1, 2006 ~ March 31, 2007)
Eliminations
Consolidated
andcorporate

Japan

Americas

Europe

Asia

Total

1) To external customers

356,248

52,31537,76312,805459,132-

459,132

2) Inter-segment sales andtransfers

11,1991,673-

24,25537,129(37,129)-

Total

367,447

53,98937,76337,060496,261(37,129)

459,132

Operating expenses

334,320

50,61232,51034,330451,773(34,865)

416,908

Operating income

33,127

3,376

5,253

2,730

44,487(2,263)42,224(ii) Assets

310,465

37,36945,763

21,239414,837(6,347)

408,490(i) Net sales and operating
incomeNet sales

67Notes:1. Methods for classifying geographic segments and principal countries and regions(1) The Company classifies geographic segments by such factors as degree of geographic closeness, similarities in
economic activities, and mutual relationship of business activities.
(2) Principal countries and regions belonging to each geographic segment
U.S.A. and Canada(i) Americas:
France, U.K. and Spain(ii) Europe:Hong Kong, Thailand and South Korea(iii) Asia:
2. Operating expenses include an unallocatable amount of ¥2,538 million under eliminations and corporate. This figure primarily
consists of expenses related to management divisions at the Company and NAMCO BANDAI Holdings (USA) Inc.
3. Assets include 34,674 million yen in corporate assets included in eliminations and corporate. This figure primarily consists ofsurplus working capital (cash and deposits), long-term investments (investment securities), and assets, etc. related to
management divisions.
4. Change in accounting policy
As set out in “Important Information Constituting the Basis for Preparation of Interim Consolidated Financial Statements” 5. (3)(ii), the Accounting Standard for Directors’ Bonuses (Corporate Accounting Standard No. 4, November 29, 2005) applies from thecurrent interim consolidated accounting period. Also, as set out in “Changes in Important Information Constituting the Basis for
Preparation of Interim Consolidated Financial Statements”, the Accounting Standard for Stock Options (Corporate AccountingStandard No. 8, December 27, 2005) and the Application Guideline for the Accounting Standard for Stock Options (Corporate
Accounting Standard Application Guideline No. 11, May 31, 2006) apply from the current interim consolidated accounting period.
These changes had the following effect on Operating Income for each segment.
(¥ million)
Japan

Americas

Europe

Asia

Total

Eliminations andCorporate

Consolidated

Directors’ bonus

(547)

-

-

-

(547)

(110)

(657)

Stock Options

(232)

-

-

-

(232)

(345)

(577)

Operating income (loss)

(779)

-

-

-

(779)

(455)

(1,235)68

c. Overseas Sales

Prior fiscal year (April 1, 2005 ~ March 31, 2006)
Americas
I

Overseas sales (¥ million)

II
III

Europe

Asia

Total

43,406

31,537

10,84385,787

Consolidated sales (¥ million)

−

−

−

450,829

Overseas sales as a ratio ofconsolidated sales (%)

9.6

7.0

2.4

19.0

Notes:
1. Overseas sales represent the total of sales generated in countries and regions other than Japan by the Company and its
consolidated subsidiaries.
2. Methods for classifying geographic segments and principal countries and regions(1) The Company classifies geographic segments by such factors as degree of geographic closeness, similarities in
economic activities, and mutual relationship of business activities.
(2) Principal countries and regions belonging to each geographic segment(i) Americas:

U.S.A., Canada and Latin America(ii) Europe:

France, U.K., Spain, the Middle East, and Africa(iii) Asia:

Hong Kong, Singapore, Thailand, South Korea, Australia, China and Taiwan

Current fiscal year (April 1, 2006 ~ March 31, 2007)
Americas
I

Overseas sales (¥ million)

II
III

Europe

Asia

Total

53,71941,267

17,813112,799

Consolidated sales (¥ million)

−

−

−

459,132

Overseas sales as a ratio ofconsolidated sales (%)

11.7

9.0

3.9

24.6

Notes:
1. Overseas sales represent the total of sales generated in countries and regions other than Japan by the Company and its
consolidated subsidiaries.
2. Methods for classifying geographic segments and principal countries and regions(1) The Company classifies geographic segments by such factors as degree of geographic closeness, similarities in
economic activities, and mutual relationship of business activities.
(2) Principal countries and regions belonging to each geographic segment(i) Americas:

U.S.A., Canada and Latin America(ii) Europe:

France, U.K., Spain, the Middle East, and Africa(iii) Asia:

Hong Kong, Singapore, Thailand, South Korea, Australia, China and Taiwan

Related Party Transactions
None

69

Business Integration, etc.
Prior fiscal year

Current fiscal year

(April 1, 2005 ~ March 31, 2006)(April 1, 2006 ~ March 31, 2007)
Transactions under common control, etc.
I. Company Restructuring in North America
1. Names and Business Content of Restructured Companies, Legal Formof Combination and Divestiture and Overview of Business andBusiness Objectives(1) Overview of Business and Business Objectives
With the objective of maximizing group value in North America, North
American subsidiaries were restructured from January 2 to 4, 2006.
As a result, the North American holding company NAMCO BANDAI
Holdings (USA) Inc. controls the five companies listed as [ii] to [vi] in(2) below aswell as the business company of NAMCOCYBERTAINMENT INC. operating amusement facilities, and is now
structured to promote strategies for the North American region.
(2) Names and Business Content of Restructured Companies(i) NAMCO
BANDAI
Holdings(USA) Inc.

…

(ii) BANDAIAMERICA INC.

… Sales of toys(iii) NAMCO
BANDAI Games
America Inc.
(iv) NAMCO
AMERICA INC.
(v) NAMCO
NETWORKSAMERICA INC.

Management administration, instruction andsupporting of business companies in North
America region
Promotion of North America region… Development and sales of home videogame
software… Sales of coin-operated machines… Development and distribution of Mobile
content(vi) BANDAIENTERTAINMENT … Planning, production, sales and copyrights
INC.
(vii) BANDAIGAMES INC.

70

… Development and sales of home
videogame softwarePrior fiscal year

Current fiscal year

(April 1, 2005 ~ March 31, 2006)(April 1, 2006 ~ March 31, 2007)(3) Legal Form of Combination and DivestitureTransaction

in

form

of

combinationordivestiture

in

the

aforementioned restructuring are as follows.
(i)

The Company made an in-kind investment of BANDAIAMERICA INC. in NAMCO BANDAI Holdings (USA) Inc.
(ii) BANDAI AMERICA INC. transferred shares of BANDAIGAMES INC. and BANDAI ENTERTAINMENT INC. to NAMCO
BANDAI Holdings (USA) Inc.
(iii) To spin off the mobile content business of the former NAMCO
AMERICA INC., which sold coin-operated machines anddeveloped and distributed mobile content, the former NAMCO
AMERICA INC. merged with NAMCO BANDAI Holdings (USA)Inc. and remaining business was transferred to the new NAMCO
AMERICA INC. and NAMCO NETWORKS AMERICA INC.
(iv)

BANDAI GAMES INC. merged with NAMCO HOMETEK

INC. (newly created after the merger) and was renamed
NAMCO BANDAI Games America Inc.
2. Overview of Accounting
Accounting process of consolidated financial statements washandled in accordance with the provision in (1) “Business Transactionof Commonly Controlled Entities”, Paragraph 4 “Accounting Process
for Commonly Controlled Entities” in Article 3 of “AccountingStandards for Business Combinations”.
Ⅱ. Making Banpresto Co., Ltd. a wholly owned subsidiary
1. Names and Business Content of Restructured Companies, Legal
Form of Combination and Divestiture and Overview of Business andBusiness Objectives(1) Names and Business Content of Restructured Companies(i) Integrating Company (Parent company after share exchange)
Name:

NAMCO BANDAI Holdings Inc.

Business content:

Planning and implementation ofmanagement strategy andbusiness management andinstruction of the Group

companies(ii) Integrated Company (Wholly owned subsidiary after shareexchange)
Name:

Banpresto Co., Ltd.

Business content:

Planning, development and sales ofamusement machines and prizes
etc.

71

Prior fiscal year

Current fiscal year

(April 1, 2005 ~ March 31, 2006)(April 1, 2006 ~ March 31, 2007)(2) Legal form of Business Combination
In the share exchange, the Company is a parent company andBanpresto Co., Ltd. is a wholly owned subsidiary. In accordance with
Article 358, Paragraph 1 of the former Commercial Code for theCompany and in accordance with Article 12-4, Paragraph 2 of theIndustrial Revitalization Law for Banpresto, Co., Ltd. a simplified shareexchange was conducted without obtaining the approval of the general
meetings of shareholders as stipulated in Article 353, Paragraph 1 of
the former Commercial Code. The share exchange allows the Company
to acquire the remaining shares for cash in accordance with Article 12-9of the Industrial Revitalization Law.
(3) Transaction guideline including transaction objective
The share exchange was undertaken for the purpose of creating anorganization that responds flexibly to the Group’s management strategy
through making Banpresto Co., Ltd. a wholly owned subsidiary. In
accordance with the share exchange agreement concluded on March
29, 2006, the Company paid ¥3,450 for each Banpresto Co., Ltd. stock
owned by the remaining shareholders of Banpresto Co., Ltd., who haveentered or otherwise recorded their shares in the shareholders’ register
as of May 31, 2006, which is the day prior to the effective date of theshare exchange. The share exchange will not apply to those shares
held by the Company.
2. Overview of Accounting
Accounting process of the non-consolidated financial statements andconsolidated financial statements was handled in accordance with theprovision in “(2) Business with Minor Shareholders” in “Accounting for
Commonly Controlled Business” of Article 3, Paragraph 4 of “theAccounting Standards for Business Combinations”.
3. Additional Acquisitions of Subsidiary Companies’ Shares(1) Acquisition Cost and its Breakdown
Price of Acquisition
Cash and deposits············ ¥1,060 million

Amount required directly for acquisition
Acquisition cost

50
1,110

(2) Amount, Source, Method and Period of Depreciation of Goodwill
Incurred(i) Amount of Goodwill:¥555 million(ii) Source
The difference between the cost of additional acquiring shares ofBanpresto CO., LTD. and the decreased amount of minor
shareholders’ holdings was handled as goodwill.
(iii) Method and Period of Depreciation: Straight-line method, 5 years

72Per share data

Prior fiscal year

Current fiscal year

(April 1, 2005 ~ March 31, 2006)(April 1, 2006 ~ March 31, 2007)

Net asset per share¥961.36

Net asset per share¥1,063.29

Net income per share.

¥54.39Net income per share.

¥95.73

Diluted net income pershare¥54.37

Diluted net income pershare¥95.67

Note: The basis of calculation net income per share figure for the interim (current period) and the diluted net income per share figure
interim (current period) is as follows:

Prior fiscal year

Current fiscal year

(April 1, 2005 ~ March 31, 2006)(April 1, 2006 ~ March 31, 2007)

Net income per share
Net income (¥ million)

14,14924,252

Amount not applicable to common
stockholders (¥ million)

417-

Unappropriated directors’ bonus

(417)

(-)

Net income available to common stock(¥ million)

13,731

24,252

252,487,961

253,331,026(4)-[Effect of dilutive shares in certain affiliatedcompanies][ (4) ][-]

Increase in number of common stock

8,377

182,608[ (8,377) ][ (182,608) ]Average number of common stock
outstanding

Diluted net income per share
Net income adjustment (¥ million)[Stock subscription rights]
Summary of potential shares not includedin the calculation of diluted net income pershare as they do not have a diluting effect.

Affiliate

Affiliate

Bandai Networks Co., Ltd.

Bandai Networks Co., Ltd.

Stock options agreed at the annual general
meeting of shareholders on June 23, 2004
(245 stock subscription rights)

Stock options agreed at the annual
general meeting of shareholders on
June 23, 2004 (245 stock subscription
rights)1,225 common stock

1,225 common stock73

Significant Subsequent Events
Prior consolidated fiscal year (April 1, 2005 to March 31, 2006)
1. Simplified share exchange with grant
The Company implemented a share exchange which BANPRESTO Co., Ltd.
(BANPRESTO), became a wholly owned subsidiary on June 1, 2006, based on adecision of the Company’s Board of Directors held on March 29, 2006, and a shareexchange agreement concluded with BANPRESTO on that date. In accordance with
Article 358, Paragraph 1 of the former Commercial Code for the Company and inaccordance with Article 12, Paragraph 4, Clause 2 of the Industrial Revitalization Law for
BANPRESTO, a simplified share exchange was conducted without obtaining theapproval of the general
meetings of shareholders as stipulated in Article 353, Paragraph 1 of the former
Commercial Code. The share exchange allows the Company to acquire the remaining
shares for cash in accordance with Article 12-9 of the Industrial Revitalization Law.
(1) Objective of making BANPRESTO a wholly owned subsidiary through a shareexchange
From February 24, 2006, to March 16, 2006, the Company made a take-over bid for theshares of BANPRESTO with the objective of making BANPRESTO a wholly owned
subsidiary. The Company acquired 97.01% of the 10.8 million shares of BANPRESTO.
Subsequently, on June 1, 2006, through the share exchange, the Company achieved its
final objective of making BANPRESTO a wholly owned subsidiary. BANPRESTO
becoming a wholly owned subsidiary was undertaken for the purpose of creating anorganization that responds flexibly to the Group’s management strategy.
(2) Terms of share exchange agreement
In accordance with the share exchange agreement concluded on March 29, 2006, theCompany will pay ¥3,450 for each BANPRESTO stock owned by the remaining
shareholders of BANPRESTO, who have entered or otherwise recorded their shares inthe shareholders’ register as of May 31, 2006, which is the day prior to the effective dateof the share exchange. The share exchange will not apply to those shares held by theCompany.

74

2. Announcement of Zapf Creation AG take-over bid
On June 13, 2006, the Company decided to make a take-over bid to acquire the shares ofZapf Creation AG (“Zapf”) of Germany through Bandai GmbH of Germany. Bandai GmbH is
a subsidiary of BANDAI S.A., a wholly owned subsidiary of the Company. Zapf’s
Supervisory Board and Management Board have expressed their support for this take-overbid.
(1) Purpose of take-over bid
Under the three-year medium-term management plan (April 2006 to March 2009) being
implemented by the BANDAI NAMCO Group, the key theme is “Strengthening, Enriching,and Expanding the BANDAI NAMCO Group’s portfolio management”, and one of the key
business strategies is to strengthen overseas operations. The take-over bid for Zapf will
enable the Company to achieve one of the strategies in the medium-term management
plan.
Zapf is headquartered in Germany and has an extremely high name recognition in theEuropean markets for large dolls for infants and girls, with a share of more than 60% in
Germany and more than 40% in the United Kingdom. In Europe, the BANDAI NAMCO
Group’s toys and hobby product portfolio is centered on products for boys. Zapf’s productportfolio and the Group’s product portfolio complement each other well. Zapf has
operations not just in Central Europe but also in Eastern Europe, where the Company
does not have a sales network. Zapf and the Company will also complement each otherwell in markets. Accordingly, the Company decided that a capital tie-up with Zapf will
enable the two companies to synergize their products and markets.
(2) Summary of take-over bid
1. Summary of target company
Company name:
Zapf Creation AG
Main business:
Production and sales of toys
Establishment:

1932

Head office:Rödental, Germany

Representative:

Georg Kellinghusen, CFO

Stock exchange listings:

Frankfurt, Stuttgart, Munich

Number of shares issued
and outstanding:
Relationship with theCompany:
Number of employees,
consolidated:
Net sales:

8,000,000 shares of common stock140.7 million euro (year ended December 31, 2005)*

Net loss:

27.0 million euro (year ended December 31, 2005)*

Total assets:

135.6 million euro (as of December 31, 2005)*

Net assets:

11.0 million euro (as of December 31, 2005)*

There are no capital, personal, or trading relationships.
408 (as of December 31, 2005)* Figures for the year ended December 31, 2005, are unaudited.

75

2. Type of shares to be acquired
Shares of common stock
3. Take-over bid period
Approximately a 6-week period from the end of June 2006 is scheduled.
4. Purchase price (per share)
One share of common stock: 10.50 euro
5. Planned total number of shares to be acquiredMore than 75% of shares issued and outstanding
Planned total number of shares to be acquired: 6,000,001 or more
6. Movement of shares owned as a result of tender offer bid
Before take-over bid: 0 shares
After take-over bid: 6,000,001 or more (ownership rate of 75% or more)
7. Public announcement of take-over bid
The take-over bid will be made pursuant to Germany’s regulations, andaccordingly, a local take-over bid public announcement will be made based onGermany’s securities exchange laws. There will be no public announcement inJapan.
8. Take-over bid agent
BNP PARIBAS Securities Services
9. The target company acceptance of the take-over bid
The target company’s Supervisory Board and Management Board have accepted
in principal the take-over bid.
10. Other
In Germany, BANDAI GmbH has not yet submitted the notification of the take-overbid to Deutsche Gesellschaft für Ad-hoc-Publizität mbH, which is responsible forhandling these procedures. There is a possibility that the application may not be
accepted. If the application is not accepted, the take-over bid will not commence.

Current consolidated fiscal year (April 1, 2006 to March 31, 2007)
At the Board of Directors’ Meeting of April 18, 2007, the Company decided to acquire
treasury stocks as follows, based on Article 156 of the Corporation Law and Article 165,
Paragraph 3 of the same Law.
(1) Type of share to be acquired:
Common stock of the Company(2) Total number of shares to be acquired:
5,000,000 shares (maximum)(3) Total amount of share to be acquired:¥10,000 million (maximum)(4) Period of acquisition:
From May 10, 2007 to September 30, 200776

Changes in Officers
1. Changes in Representative Directors
No changes to be reported.

2. Other Changes in Officers (Effective June 25, 2007)(1) Candidates for Directors
Name: Satoshi Oshita
Current position: President and Representative Director of Bandai Networks Co., Ltd.
Name: Kazumi Kawashiro
Current position: President and Representative Director of Bandai Visual Co., Ltd.
Note: Satoshi Oshita and Kazumi Kawashiro will double as President and Representative Director of Bandai
Networks Co., Ltd. and President and Representative Director of Bandai Visual Co., Ltd. respectively.

(2) Retiring Directors
Director: Keiji Tanaka
Director: Junji Senda
Current position: Director of CCP Co., Ltd.
Expected to be assigned Representative Director and Vice President of CCP Co., Ltd. on May 17, 2007

(3) Responsible Area of Directors (Effective June 25, 2007)
Takeo Takasu

President and Representative Director

Masahiro Tachibana

Director, in charge of Corporate Planning Division

Masaatsu Hayakawa

Director, responsible for overseas businesses and affiliated businesses
in charge of Corporate Administration Division and General Affairs & Legal Division

Kazunori Ueno

Director (part time), responsible for Toys and Hobby SBU

Jun Higashi

Director (part time), responsible for Amusement Facility SBU

Shukuo Ishikawa

Director (part time), responsible for Game Contents SBU

Satoshi Oshita

Director (part time), responsible for Network SBU

Kazumi Kawashiro

Director (part time), responsible for Visual and Music Content SBU

Masatake Yone

Director (outside)

Kazuo Ichijo

Director (outside)77