AN

A
NU

LR

RT
EPO

2014

BANDAI NAMCO
Group

The BANDAI NAMCO Group develops entertainment-related products and services in a wide range of fields, including
toys, arcade game machines, home video game software, visual content, network content, and amusement facilities.
In accordance with our Mid-term Plan, which includes the vision of “Empower, Gain Momentum, Accelerate Evolution,”
we are aiming to be No. 1 with strong conviction. On that basis, we are committed to being “the Leading Innovatorin Global Entertainment” and recording strong growth.

R
OU

M

ON
ISSI

STATEMENT

Dreams,Fun and
Inspiration
Through our entertainment products and services,
BANDAI NAMCO will continue to provide “Dreams, Fun and Inspiration”
to people around the world, based on our boundlesscreativity and enthusiasm.

Forward-Looking Statements
The forward-looking statements in this annual report are based on the information available tomanagement as of August 2014 and include various risks and uncertainties. Accordingly, actual
results may differ materially from these projections for a variety of reasons. Major factors that could
influence actual results include changes in the BANDAI NAMCO Group’s operating environment,
market trends, and exchange rate fluctuations.

Notes
1. All figures in this annual report are rounded to the nearest unit.
2. FY2014.3 and the year under review represent the one-year period ended March 31, 2014.
3. Figures in this annual report are as of August 2014.

N

N

As an entertainment leader across the ages, BANDAI NAMCO isconstantly exploring new areas and heights in entertainment.
We aim to be loved by people who have fun and will earn their trust as“the Leading Innovator in Global Entertainment.”

CO

IO

VIS
OU R

The Leading
Innovator
in Global
Entertainment

TE

S
T
N
02 Overview of the BANDAI NAMCO Group
04 The Strengths of the BANDAI NAMCO Group
06 Board of Directors and Audit & Supervisory Board Members
08 Consolidated Financial Highlights (FY2014.3)
10 Mid-term Plan
12 Top Message
16 Special Feature:		Maximizing IP Value with the IP Axis Strategy—Targeting Further Progress by Creating and Nurturing IP

23 Review of Strategic Business Unit (SBU) Operations and Focus Strategies
26	‌The BANDAI NAMCO Group’s CSR Initiatives
28 Corporate Governance
33 Financial Section
69 Corporate Data
70 Overview of Main Group Companies

01

Overview of the BANDAI NAMCO GroupFY2014.3

ROE:

Net Sales:

9.7

507.7

¥

%

billionOperating Income:

¥

44.7

Number of Employees:

billion

7,151

Group Organization

Strategic Business Units (SBUs)BANDAI NAMCO
Holdings

Core Company

Toys and Hobby

BANDAI

Content

BANDAI NAMCO Games

Amusement Facility

NAMCO

Affiliated Business Companies (supporting the Group)

Net Sales by Segment

Reference: Contributions to Net Salesby Geographic Region

Note: Percentage figures are calculated based on sales before
elimination of internal transactions.

Note:	Percentage figures are calculated based on external sales.
Figures are estimates based on management accounting.

Other

Amusement Facility

Europe

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Content

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02

Asia, excluding Japan

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Americas

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Japan

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The BANDAI NAMCO Group comprises BANDAI NAMCO Holdings Inc., which is a pure holding company,
three strategic business units (SBUs), and affiliated business companies that support the work of the SBUs.
The SBUs, which encompass the operating companies in each field, formulate and implement business strategies
and provide a diverse range of entertainment in Japan and overseas.

TOYS AND HOBBY
MID-TERM
VISIONNet sales

SEGMENT Income¥ billion¥ billion

True Globalization
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Towards globalization, we are striving to become the premiercompany in the character merchandising business.
Toys

Plastic
modelsApparel

Candy
toys

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Vending
machinecapsule
toys

Cards

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CONTENT
MID-TERM
VISION��������

net sales¥ billion

Become the No. 1 Content Company
in Japan and Borderless Development

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Prizes forLive
performances amusement
machines
Distributionof video on
demand(VOD)content

Web

Music
content

Arcadegamemachines

Home
video
game
software

Visualcontent

AMUSEMENT FACILITY
MID-TERM
VISION

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¥ billion

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We are implementing borderless operations, targeting a range ofexits, including overseas markets.
Network
content

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net sales����

SEGMENT income(LOSS)¥ billion

Become an Overwhelming Leader
in the Market¥ billion

We provide amusement facilities that leverage BANDAI NAMCO’s
distinctive strengths in order to provide value.
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facilities

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For the fiscal years ended March 31

03

The Strengths of the BANDAI NAMCO GroupIn a wide range of business areas, the BANDAI NAMCO Group is conducting speedy development of
its IP*, which has fans around the world. The full potential of our IP is brought out by our advancedplanning and development capabilities, our high levels of technical skill, and our employees, who are
passionate about entertainment. Leveraging these distinctive strengths of the Group, we will strive torealize sustained growth in the years ahead.
* IP: Characters and other intellectual property

Strength to conduct wide-ranging
development in diverse areas
with strong IP (content) as an axis

TOYS

MOVIESTechnology

Human
Resources

Strong IP(Content)
04

PLASTICMODELS

Planning
andDevelopment

LIVE
ENTERTAINMENT

Maximizing the Valueof Strong IP

VIDEO ON DEMAND(VOD) CONTENTHOMEVIDEO GAMESOFTWARE

NEW DEVICESNETWORKCONTENTCARDSCAPSULE TOYSAPPAREL

ARCADE GAMEMACHINES

VISUAL PACKAGESOFTWARE

Note: This illustration shows one example of IP axis development.

05

board of directors and audit & supervisoryboard members
As of June 23, 2014

From left:
Yuji Asako, Hitoshi Hagiwara,
Kazunori Ueno, Satoshi Oshita,
Shukuo Ishikawa, and Shuji Ohtsu

BOARD OF DIRECTORS
President and CEO,
Representative Director

Shukuo Ishikawa

Director (Part-time)

Hitoshi Hagiwara(President and Representative Director,
NAMCO LIMITED)

Executive Vice President,
Representative Director

Director (Outside)

Kazunori Ueno

Nobuo Sayama(President and Representative Director,
BANDAI Co., Ltd.)

Director (Outside)

Director

Shuji Ohtsu
Director

Tomohisa Tabuchi
Director (Outside)

Yuzuru Matsuda

AUDIT & SUPERVISORY
BOARD MEMBERS
Audit & Supervisory Board Member(Full-time)

Kazuo Asami

Yuji Asako

Audit & Supervisory Board Member(Full-time, Outside)

Director (Part-time)

Katsuhiko Kohtari

Satoshi Oshita(President and Representative Director,
BANDAI NAMCO Games Inc.)

Audit & Supervisory Board Member(Outside)

Osamu Sudoh
Audit & Supervisory Board Member(Outside)

Katsuhiko Kamijo

06

From left:
Nobuo Sayama,
Tomohisa Tabuchi,
and Yuzuru Matsuda

Newly Appointed Officers
Director (Part-time), Head of Amusement Facility Strategic Business Unit

Audit & Supervisory Board Member (Full-time)

Hitoshi Hagiwara

Kazuo Asami
Apr. 1978: 	‌Joined NAMCO LIMITED(currently BANDAI NAMCO Games Inc.)
Apr. 2011:	Director in charge and General Manager of Amusement Sales Headquarters of
BANDAI NAMCO Games Inc.
Apr. 2013: 	Managing Director in charge of Business Management and General Managerof Amusement Machine Business Management Group of
BANDAI NAMCO Games Inc.
Apr. 2014:	Executive Officer in charge of Amusement Facility Strategic Business Unit of
the Company (current position)
		Director of BANDAI NAMCO Games Inc. (current position)
		President and Representative Director of NAMCO LIMITED (current position)
June 2014: 	Director, Head of Amusement Facility Strategic Business Unit (current position)


Apr. 1978: Joined NAMCO LIMITED		(currently BANDAI NAMCO Games Inc.)
Apr. 2005:	Executive Officer and General Manager of Corporate Headquarters of
NAMCO LIMITED
Apr. 2006:	Director and General Manager of Corporate Headquarters of
BANDAI NAMCO Games Inc.
Apr. 2008:	Executive Officer and Deputy Division General Manager of the Group
Administrative Headquarters of the Company
		Director in charge of the Administrative Headquarters and General Manager of
Administrative Headquarters of NAMCO LIMITED
Apr. 2014: Advisor of the Company
June 2014:	Full-time Audit & Supervisory Board Member of the Company (current position)

Director (Outside)

Audit & Supervisory Board Member (Outside)

Yuzuru Matsuda

Katsuhiko Kamijo
Apr. 1977:	Joined Kyowa Hakko Kogyo Co., Ltd. (currently Kyowa Hakko Kirin Co., Ltd.)
June 2000:	Executive Officer and Head of Pharmaceutical Research Institute of
Kyowa Hakko Kogyo Co., Ltd.
June 2002:	Managing Director and General Manager of Comprehensive Planning Officeof Kyowa Hakko Kogyo Co., Ltd.
June 2003:	President and Representative Director of Kyowa Hakko Kogyo Co., Ltd.
Oct. 2008:	Executive Director of the Board, President and Chief Executive Officer of
Kyowa Hakko Kirin Co., Ltd.
Mar. 2012: Advisor of Kyowa Hakko Kirin Co., Ltd.
June 2012:	Head of Kato Memorial Bioscience Foundation (current position)
June 2014:	Outside Director of KUBOTA Corporation (current position)		Outside Director of BANDAI NAMCO Holdings Inc. (current position)


Apr. 1978: Joined National Tax Agency
July 1986: District Director of Suzuka Tax Office
July 2001:	Manager of Second Taxation Department of Tokyo Regional Taxation Bureau
July 2005:	Director (Information System Management) of National Tax Agency
July 2008:	Regional Commissioner of Okinawa Regional Taxation Office
July 2009: Commissioner of Nagoya National Tax Tribunal
July 2011: Retired from National Tax Agency
Sep. 2011:	Professor at Faculty of Law of Teikyo University (current position)
June 2013:	Outside Audit & Supervisory Board Member of HASEKO Corporation(current position)
June 2014:	Outside Audit & Supervisory Board Member of the Company (current position)

07

Consolidated Financial Highlights (FY2014.3)
BANDAI NAMCO Holdings Inc. and Consolidated Subsidiaries
For the Fiscal Years Ended March 31

Net Sales

507.7
billion¥

Net Sales

Operating Income
Up

4.2%
YOY

Overseas Sales Proportion¥ billion / %

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Operating Income Margin

8.8%

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44.7billion

Down

8.2%

FY2013.3

10.0%

Operating Income
Operating Income Margin¥ billion / %

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Gross ProfitUp¥ 190.8 billion
Gross Profit

4.2%
YOY

Gross Profit Margin¥ billion / %

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Return on Equity (ROE)

9.7%



FY2013.3

14.1%

Total Net Assets

ROE

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¥ 25.1 billion

22.6%
YOY

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FY2013.3

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ROA

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Cash Flows from Operating
Activities¥ 41.3 billion

Sales of Major Characters (Group total)
Up

13.4%
YOY



Mobile Suit Gundam series¥ 80.2 billion
Free Cash Flows*

KAMEN RIDER series¥ billion¥ 30.7 billion

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* Free cash flows = Net cash provided by operating activities +Net cash used in investing activities

Power Rangers series¥ 25.3 billion
Interest-Bearing Debt
Debt/Equity Ratio*

Aikatsu!

¥ 15.9 billion¥ billion / times

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* Debt/equity ratio = Interest-bearing debt / Total shareholders’ equity

Arcade Game Machines and Prizes¥ 77.0 billion
Home Video Game Software

Cash Dividends per Share

¥35

Down

¥10
YOY

¥ 84.9 billion
Network Content

Net Income per Share (Basic)¥ 114.05

Down¥33.35YOY¥ 68.4 billion


Visual and Music Content

¥ 37.1 billion

Cash Dividends per Share

Yen

45

35
24

24

26

2010

2011

2012

Sales of Existing Amusement Facilities
in Japan
2013

2014

Down 6.2% YOY

93.8 %

09

Mid-term Plan

Mid-term Plan of the BANDAI NAMCO Group (From April 2012 to March 2015)
The BANDAI NAMCO Group aims at the vision of becoming “the Leading Innovator in Global Entertainment” under a mission
to bring “Dreams, Fun and Inspiration” to the world. Since the management integration in 2005, we have promoted the development of our management base under the Mid-term Plan from April 2006 to March 2009 and of a business base for global
growth under the Mid-term Plan from April 2009 to March 2012.
In the new Mid-term Plan from April 2012 to March 2015, we aim to increase our profit both in Japan and overseas bysticking to our vision of “Empower, Gain Momentum, Accelerate Evolution” in all aspects of our business, including our products and services, business model, operations, and numerical targets.

Mid-term
VisionStrive to achieve
record profit

Attain growth ofrecord sales

Enhance our business model
to maximize our IP value

Focus Strategies under the Mid-term Plan
Under the Mid-term Plan, we promote five Focus Strategies. These consist of three Business Area Strategies, which are applied toeach respective business, and two Functional Strategies, which are applied commonly across all businesses.
Business Area Strategies
Toys and Hobby SBU

Basic Business Area
Achieve profitable expansion
in basic business area

Profit Recovering Area
Achieve recovery in low-profit
and loss-making businesses

New Growth Area
Create and develop new
growth areaJapan

U.S. &EU

Asia

Toys and Hobby[Japan]Content SBU

Content[Japan]Amusement Facility
SBU
Amusement Facility[Japan]Arcade games / Network /Visual & Music

Toys and Hobby

Video Game Software[U.S. & EU][Worldwide]

Toys and Hobby

Arcade Games

Amusement Facility[Asia][Asia][Asia]

Functional Strategies

Groupwide Network Strategy

10

Human Resources Strategy

Key Points of the Mid-term Plan
Net Sales and Operating Income
Previous Mid-term Plan

¥ billion

Current Mid-term Plan

Implementing the Restart Plan
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For the fiscal
years ended
March 31

Operating income

Return on Equity (ROE)
%

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For the fiscal
years ended
March 31

Key Progress in FY2014.3

 et sales set a record high for the second consecutive year, surpassing ¥500.0 billion for the first time since the management
N
integration.
Favorable results in the domestic Toys and Hobby Business and the Content Business offset businesses and regions with weaker results.
In addition to typical development investment and advertising expenses, we also implemented investment for future growth.

Basic Business Area
Japan

‌In the Toys and Hobby Business, results were favorable as the Power Rangers series and other establishedIP registered favorable performances, and the vertical development of the new Aikatsu! IP also madea strong contribution.
‌In the Content Business, favorable performances were recorded in each business area, including home video
game software, arcade game machines, and visual and music content. In addition, network content becamea new business pillar. Consequently, the scale of operations expanded.
‌In the Amusement Facility Business, revenues were down 6.2% at existing facilities in Japan. To ensure a favorable
start to FY2015.3, a special loss was recorded, due in large part to the closure of unprofitable facilities.

Profit Recovering Area
U.S. &EU

New Growth Area
Asia

‌In the Toys and Hobby Business in the U.S. and Europe, the Power Rangers series recorded solid results,
but other IP faced challenging conditions.
‌In the Content Business in the U.S. and Europe, DARK SOULS II, which is available worldwide, was a hit
product in the home video game software category.
‌Through business development initiatives linked with Japan, favorable results were registered in Asia as
popularity was earned by toys, plastic models, collectable toys for adults, cards and related products, andarcade game machine sales.

11Top Message

We will enhance the IP
one of our key strength“Empower, Gain Mom
Results Overview

Second consecutive year of record-high net sales;
Operating income down due largely to influenceof investments
In FY2014.3, the BANDAI NAMCO Group’s consolidated net sales
were up 4.2% year on year, to ¥507.7 billion, for the second
consecutive year of record-high net sales. This means that our sales
have surpassed ¥500.0 billion for the first time since the management
integration. This is an accomplishment that has given our employees
great confidence.
On the other hand, operating income was down 8.2%, to ¥44.7
billion. This decline was primarily attributable to upfront investment
targeting future growth. As a result, our investment in the past year
was about ¥5.0 billion more than in a typical year. In addition, theToys and Hobby SBU registered weak results in the U.S. and Europe
and recorded an inventory reserve of about ¥1.0 billion. Excludingthese types of special factors, we were able to achieve a new record
high in profits, and accordingly we consider these factors to be theresult of forward-looking initiatives.

Clear differences in results by businesssegment and region
An analysis of our results by business segment and region showsa clear distinction between segments and regions that are achieving
favorable results and those that are not. By segment, the Toys andHobby SBU and the Content SBU did extremely well, while theAmusement Facility SBU faced challenges. By region, in addition to
the domestic market—our earnings foundation—results were strongin Japan and other Asian markets but weaker in the U.S. and Europe.
In this way, there were clear differences by business and region,but overall our extensive business portfolio was able to offset the

Shukuo Ishikawa
President and CEO,
Representative Director
BANDAI NAMCO Holdings Inc.

12

weaker areas. Of course, we recognize that a rapid recovery in theweaker businesses and regions is a key issue for future growth.

axis strategy,
hs, as we continue tomentum, Accelerate Evolution.”
Final Year of the Mid-term Plan

Future-focused investment in the second yearof the Mid-term Plan

Aiming to be a group that can steadily generate
net sales of ¥500.0 billion andoperating income of ¥50.0 billion

We positioned FY2014.3, the second year of the Mid-term Plan, as a

In the first year of the three-year Mid-term Plan that was commenced

year of upfront investment targeting future growth. The results of ourin April 2012, the BANDAI NAMCO Group achieved record highs ininvestments include the generation of new IP and the establishment

net sales and operating income. In FY2014.3, the second year of theof a development studio overseas, which had been planned since

Mid-term Plan, we set another record when net sales surpassed ¥500.0

the beginning of the period, as well as the rapid implementation ofbillion for the first time since the management integration. I believe

additional investment related to application development that was

this is the result of the adoption throughout the Group of the IP axis

undertaken during the term in response to changes in the operating

strategy, which is one of our key strengths, and the ability of employ-environment. The additional investment related to application

ees to use the strategy flexibly and make it their own. In the future, todevelopment was effective, and sales of network content in FY2014.3

succeed in global competition we will need to be able to consistently

increased about ¥9.0 billion, to about ¥68.4 billion. This is a goodachieve this level of performance—net sales of ¥500.0 billion andexample of how rapid investment decision making produced results.

operating income of ¥50.0 billion. To that end, in FY2015.3 it is essen-

In FY2015.3, I believe that we will need to continue to react promptly

tial that we build a solid foundation for the next mid-term plan.

to changes in the operating environment and to implement prepara-

In FY2015.3, the final year of the current Mid-term Plan, we aretions for the next mid-term plan. In regard to investment decisions

targeting net sales of ¥500.0 billion and operating income of ¥45.0

and amounts, our policy will be to conduct aggressive investment

billion, about the same as in the previous year. These targets arewith the proper timing and take care not to miss opportunities, after

based on our product lineups and sales plans as of the beginning ofcarefully examining our options internally.

the fiscal year. In addition, they were prepared with consideration for

R&D Investment & Capital INVESTMENT

Preparing for the Next Mid-Term Plan

Millions of yen

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Establish stable foundation that will succeed
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(Forecasts)

For the fiscal years ended March 31

13

Top Message

the uncertain operating environment, including the speed of change
in user preferences and technologies and the after-effects of theincrease in the consumption tax rate in Japan. Of course, personally
I would like to aim for growth. However, given the results and challenges of the current Mid-term Plan’s second year, we have instead
positioned FY2015.3 as a period for preparation and foundation

Reviving Amusement Facility Operations

Striving to increase efficiency and bolster
front-line capabilities as we work to develop
the new business formats that will become
the pillars of our business in the futurebuilding for the next mid-term plan. We must achieve recovery in

The Amusement Facility Business, which is a point of direct contact

businesses and regions that are struggling and reinforce the platforms

with customers, plays an indispensable role in the Group’s valuethat will support each business and the Group under the next plan. To

chain. In FY2014.3, existing domestic facilities recorded weak results,

that end, we will implement the IP axis strategy, a key strength, evenand we recorded a special loss of about ¥3.3 billion due to the closure

more dynamically, and enthusiastically aim to expand our market

of unprofitable facilities and other measures. However, as a result of

share. In addition, we will do our utmost to revive the Toys and Hobby

these measures the Amusement Facility Business got off to a favor-

SBU in the U.S. and Europe and the Amusement Facility SBU. In theseable start in FY2015.3, and we are aiming to achieve a recovery inways, the BANDAI NAMCO Group will aim for the next stage.

results for the year. In addition, in April 2014 Hitoshi Hagiwara
became the president and representative director of NAMCO, thecore company in the Amusement Facility SBU. Mr. Hagiwara has

Advancing our Strategy of Having an Overwhelming
No. 1 Position in Japan

Advancing the IP axis strategy by expanding our
IP lineup and responding rapidly to change
In the domestic Toys and Hobby Business and the Content Business,considerable experience in arcade game machines, which have many
points in common with amusement facilities. Leveraging that experience, he will be able to work to strengthen collaboration within theGroup. Furthermore, he has a focus on the front lines and a senseof urgency, and consequently I believe that he is the right person
to rebuild this business.

we will not be satisfied with the status quo. Rather, we will continue

Under the new system, the Amusement Facility Business is alreadyworking to achieve overwhelming No. 1 positions in each target andtaking steps to strengthen the front lines and increase efficiency, such

each category.

as consolidating overlapping functions within the SBU’s organization

In the domestic Toys and Hobby Business, for preschoolers weand increasing front-line personnel to bolster sales capabilities. In

will further strengthen the business model of collaborative, linked

addition, the SBU is moving forward with steps to create amusement

activities for development of such established IP as Power Rangers,

facilities that will encourage customers to visit repeatedly, such as

KAMEN RIDER, and PRETTY CURE! We will also take steps to addressannual campaigns using prizes. Moreover, to develop new pillars of its

customer groups for which we have not yet earned strong market

business the SBU is developing theme parks and amusement facilities

shares. To that end, we will launch strong IP for each target, suchthat utilize IP. In the domestic market, the increase in the consumption

as infants or adults, to expand market share in the same way thattax rate has had an adverse effect, but we are working to build a foun-

Aikatsu! and Yokai Watch have increased our market share among

dation for the next mid-term plan. The entire Group will work together

schoolchildren. In this way, in Japan we will continue working toto rebuild the Amusement Facility Business.

launch new IP and enhance our IP lineup in order to further demonstrate the strengths of our IP axis strategy.
The Content Business has been successful in the traditional
content outlets, such as home video game software, arcade gamemachines, and visual and music content. Moreover, due to rapid
response to the social networking service (SNS) and app markets,

Overseas Business Development

Doing our utmost to achieve recovery in the Toysand Hobby Business in the U.S. and Europe

network content has grown into a new pillar of our business andOur highest priority challenge overseas is the reform of our businessboosted earnings for the Group as a whole. Recently, IP-themed livein the U.S. and Europe. In particular, we will take steps to improve

events have begun to grow into a new outlet integrating the real andefficiency in the Toys and Hobby Business, such as reevaluating our

virtual worlds. In this field, where the operating environment changes

organizational system and our revenue structure, strengthening the

rapidly, we need to keep a constant watch on customer trends and to

mainstay Power Rangers series, and enhancing our IP lineup throughrespond rapidly to change. In addition, we will work to generate athe introduction of new IP. One initiative that has further strength-

new IP that will follow Mobile Suit Gundam and Aikatsu! as a major

ened the Power Rangers series was the launch in North America

hit, centered on visual and music content.

in February 2014 of a remake of Kaizoku Sentai Gokaiger as a new

In the domestic Toys and Hobby Business and the Content

program. In the future, we will continue to use promotions and other

Business, in each market we will continue to aggressively advancemeans to aggressively promote merchandise while continuing to draw

the IP axis strategy, a key strength of the BANDAI NAMCO Group,

attention. To enhance our IP lineup, we will strive to foster stable

to expand our share.

portfolio development through multiple IP assets. To that end, we will
introduce and nurture multiple new IP, including IP with track records

14

in Japan and locally originated IP. Through these initiatives, we expect

the IP axis strategy—our biggest strength. As a business model,

to be able to further reduce the scale of the loss in FY2015.3. Moreover,it constitutes a powerful tool that cannot be used by competitors.

we are working to achieve full-scale recovery and growth in the U.S.

Going forward, we will continue to enhance the IP axis strategy,

and Europe under the next mid-term plan.

which will maintain its central position in the Group’s operations.
In this way, we will demonstrate our maximum potential.
Of course, the core of the IP axis strategy is the IP itself. In the

Working to further increase speed in Asia,
where results are favorable

future, we will continue working with partner companies to aggressively

While conditions are difficult in the U.S. and North America, businesscreate Group original IP, as symbolized by the success of Aikatsu! With

development initiatives in Asia are proceeding favorably and revenues

Aikatsu!, the enthusiasm of front-line employees has captivated thehave expanded to about ¥30.0 billion. In the Mid-term Plan we posi-

entire Group, and this wellspring of enthusiasm has facilitated rapid

tioned the Asia region as a new growth area, and we have implemented

vertical development. This activation of the front lines is indispensablea strategy of strengthening Japan-originated business activities

for an entertainment company such as BANDAI NAMCO.

simultaneously in Asia. Key factors in our favorable results include theturn powerful IP into products, and will also take steps to dynamically

The IP axis strategy is a tool, and the key to its use is the individual

countries in Asia with customer preferences that are similar to thosestrengths of the employees who implement it. One of my manage-in Japan, strong demand for Japan-originated IP, and our initiatives

ment policies is to create “a group centered on human resource

to identify local market characteristics and needs and closely share

management with unique strengths in entertainment and imagination.”

information with Japan. In addition, in Hong Kong, which can be

The phrase “unique strengths in entertainment and imagination”

thought of as the control tower for Asia, we consolidated the offices

refers to an approach to developing interesting ideas while enjoyingof seven Group companies into a single location. This move has had aone’s own work and taking on challenges. When I thought about our

number of positive effects. For example, communication has become

employees’ enthusiasm and commitment to providing people withmore dynamic and people on the front lines can now instituteentertainment and our distinctive characteristics as an entertainment

cooperative systems that cross organizational boundaries.

company, I knew that we could not succeed in difficult competition

In the future, we will take steps to further speed up the pace of

without a focus on “entertainment and imagination.” That is thedevelopment in Asia, such as expanding business categories and IP.

reason why I am always telling employees to “go all out!” By that,

From 2014, Aikatsu! TV broadcasts and merchandise sales began inwhat I mean is to not hold back, freely exchange opinions, andAsia. In addition, we are advancing the IP axis strategy across organiza-

continue to take on challenges.

tional boundaries in the same way as in Japan. We will also continue
to implement active collaboration with local media and to conductbusiness development of locally originated IP aligned with local preferences, such as Indonesia’s BIMA SATRIA GARUDA. In addition, the Toysand Hobby Business currently accounts for a large share of business in
Asia. Moving forward, however, the Toys and Hobby Business will work

To Our Shareholders and Investors

Creating new entertainment by linking one
success to the next

together with the Content Business, which is planning to strengthen

FY2015.3, the final year of the current Mid-term Plan, will be a year

arcade game machines and to develop network content. In this way, weof “linking” as we prepare for the next mid-term plan. To this point,

will strive to achieve further growth by leveraging the comprehensive

we have developed operations in a cross-organizational manner withstrengths of the entire Group.

a focus on IP. Going forward, we will transcend the boundaries ofbusiness fields and organizational units, move freely in all directions,and create a “linked sequence” of forward progress. As one link leads

IP Axis Strategy: The Group’s Driving Force

Maximizing the potential of the IP axis strategy
with a “linked sequence” of enthusiasm

to the next, much like a chemical reaction, we will create new products,
services, and business models in an ongoing manner. That is theobjective of the BANDAI NAMCO Group.
Moving forward, we will maintain a sense of pride and responsi-

For the BANDAI NAMCO Group to continue to grow 10 years or 20

bility for our mission of providing “Dreams, Fun and Inspiration.” We

years into the future, we must have a foundation that can succeed inwill strive to be “a group centered on human resource management

global competition. To that end, as I mentioned above, we will buildwith unique strengths in entertainment and imagination,” and toa strong foundation that can consistently achieve net sales of ¥500.0

continually create new entertainment. The BANDAI NAMCO Groupbillion and operating income of ¥50.0 billion, which are now record-

will continue to provide “Dreams, Fun and Inspiration,” and I wouldhigh levels for the Company, and then we will aim for the next stage.

like to ask our shareholders, investors, and other stakeholders for

It is the IP axis strategy that will be the driving force in these endeav-

their continued support and guidance of the Group in the years ahead.

ors. In the past, the BANDAI NAMCO Group experienced a significant
decline in results, but the Group has successfully recovered byAugust 2014

delegating authority to the front lines and aggressively advancing

15Special
FeatureMaximizing
IP Value with
the IP Axis Strategy—Targeting Further Progress by Creating
and Nurturing IPNtu urriIP ng

BANDAI NAMCO’s Groupwide IP axis strategy has generated
significant results. In FY2013.3 the Group set new record highs
for consolidated net sales and operating income since themanagement integration, and in FY2014.3 net sales increased
to another new record high. Rather than approaching IP
strategy on the basis of content outlets, such as products
and services, the IP axis strategy is a simpler approach thatinvolves using the optimal outlet at the optimal time, with IP
as an axis. This is a strategy that can only be implemented with
BANDAI NAMCO’s distinctive know-how. In the years ahead,
the Group will be able to achieve strong, sustained growththrough the ongoing uptake, rigorous implementation,and continual refinement of the IP axis strategy, which is
the Group’s largest competitive advantage.

Creating
IP

16This special feature section introduces the Group’s initiatives
in the creation and nurturing of IP, which plays the central rolein the IP axis strategy.

Nurturing
IP

Implementing the IP Axis Strategy throughCollaboration Across Organizational Boundaries

Collaborating Across Organizational Boundaries, Centered on Linked Items“Collaborating across organizational boundaries” is a strategy for collaboration in the development of products across a wide range of categories
within the Group, centered on key items. Key items play an extremely important role in this strategy. While collaborating in the area of key items,
we use the Group’s many touchpoints to develop products. In this way, it is possible to coordinate all of the Group’s content outlets.
“Collaborating across organizational boundaries” serves as a business model that is aimed at expanding the scale of the Group’s merchandiseand services and fully drawing out the appeal of powerful IP.

dlishe
Estab PI
KAMEN RIDER Series
Amusement
facilities

The KAMEN RIDER series is a popular IP

Apparelthat has been loved by fans for morethan 40 years, and we have expanded
our KAMEN RIDER touchpoints throughthe development of a wide range ofCandy toys
Card
games

products and services, centered on key
items. These include the transformation

Linked item

belt, which is the core product. Dueto the effectiveness of these initiatives,
sales have increased substantially

SundriesToyssince 2009, and in FY2014.3 sales
related to the KAMEN RIDER series

Network
content

totaled ¥30.7 billion.

Example of Business Modelthat Extends Across Operationsdlishe
Estab PI
PRETTY CURE! Series

NewIP	‌Yokai Watch for Elementary School Boys

The PRETTY CURE! series is a popular IP for girls that

The Yokai Watch is an IP that originated in game software and has

was first broadcast on TV in 2004. A wide range of

expanded its popularity to include comics and TV animation. Aiming

products and services have been developed and earned

to increase its market share among elementary school students,

stable popularity, centered on PRETTY CURE! Cards key

BANDAI developed this IP for toys and DATA CARDDASS, working initems. These include a mirror, which is the core product.

conjunction with the start of broadcasts. Centered on the key item—
Yokai Medal—we established a wide range of category touchpoints.
In this way, Bandai is working to implement activities acrossReina Fukuoka
BANDAI Co., Ltd.

VOICEHappiness Charge PRETTY CURE! products are developed in accordancewith the keyword “stylish,” which is very popular with girls. The Cards,
which are key items, are linked to a wide range of products.
We are developing Cards in every category,including not only toys but also DATACARDDASS, candy toys, capsule vending
machine products, apparel, and other categories. In this way, we are expanding
category touchpoints.

organizational boundaries.
Hiroki Matsui
BANDAI Co., Ltd.

VOICEIn developing Yokai Watch products, we referred to an
analysis of previous products that were hits with elementary school boys. We focused on making the key item—
Yokai Medal—something that could be enjoyed repeatedly,
not just through acquiring the products but also throughlinks with game software and smartphones. We worked toachieve a balance between a reasonable price and enjoyment,
and as a result I think that we were able to propose a new type ofentertainment. Moving forward, we will strive to develop productsthat sustain their popularity for long periods of time.

17Special Feature: Maximizing IP Value with the IP Axis Strategy—Targeting Further Progress by Creating and Nurturing IP

NurturingIP

Leveraging Comprehensive Strengths on

a Groupwide Basis

Implementing Groupwide Business Development through Close Information Sharing
Recent successes include Aikatsu!, which is an original IP for

The main point of the IP axis strategy is to maintain the value ofelementary school girls. Starting with collaboration with card opera-

powerful IP. Accordingly, it is important to conduct business development initiatives with consideration for nurturing IP over extended

tions and visual products, the development of Aikatsu! has leveraged

periods of time. The Mobile Suit Gundam series is a representativesynergies through Groupwide activities and sales have grown at a paceexample of nurturing IP for a long time. This series has continued

that has exceeded our expectations. This success is the result of ourto steadily generate earnings over many years. We are nurturing it

implementation of the IP axis strategy in accordance with our shared

as a Groupwide IP, and have a sense of shared purpose in working

purpose of using the Group’s comprehensive strengths to nurture IP

together toward a common goal. Accordingly, we are actively

so that it can maintain its popularity over an extended period of time.

sharing information.

This approach has enabled us to fully draw out the appeal of our IP.

Mobile Suit Gundam Series IP Axis Business Development

Plastic models

Game software
Distributionof video on
demand (VOD)
content

Arcade gamemachines

Mobile Suit Gundam
seriesVisualsoftwareFacilities
Network content

Card games

Groupwide Information Sharing Framework
For the Mobile Suit Gundam series, we regularly convene theGundam Project Committee. In the same way, we hold regularmeetings of the Aikatsu! Committee to strategically andeffectively coordinate collaborative activities in the Group.
One of the BANDAI NAMCO Group’s unique strengths is theknow-how to generate synergies by sharing comprehensive
policies throughout the Group to advance the developmentof IP, products, and services. Moving forward, we will further
enhance this know-how to drive gains in IP value.

Gundam Project Committee

18

Kazunori Ueno
President and Representative Director, BANDAI Co., Ltd.
Chief Gundam Officer

VOICE

With Mobile Suit Gundam, we continue to expand the worlds of the products and to
generate stable earnings by working on a Groupwide basis in everything from IP creation
to product development. The Gundam Project is one of the horizontal frameworks thatenables us to implement Groupwide collaboration. As the Chief Gundam Officer, I am
responsible for product development from a Groupwide viewpoint. People from throughout the Group participate in the project committee, where we engage
in lively discussions about short- to medium-term business development activities.
In addition, in 2014 we celebrated the 35th anniversary of Mobile
Suit Gundam. The concept of the anniversary project—“RISE! The
world is moving”—incorporates the meaning that we are focused on
the future and are beginning to take on the challenge of thenext stage. Through visual products, events, and new projects, we will strive to nurture Mobile Suit Gundam into an
IP that is supported by customers far into the future.

Expanding and Advancing

NurturingIP

the IP Axis Strategy

Expanding and Advancing Categories that Draw Out the Potential of Powerful IP
Developing Products that Utilize IP
for Adult Customers

Cafe & Bar CHARACRO, a new format
integrating IP, eating, and drinking

Developing products that utilize IP for adult customers,

Cafe & Bar CHARACRO is a new format of character-themed

such as high-quality figures with careful attention to detail,facility that integrates IP, eating, and drinking. The theme of theis a way to draw out new potential from our IP. For example,

first stage is based on

TAMASHII NATIONS has become known as a brand for adultthe Group’s original IP—

customers through events held in Japan and overseas. It is

TIGER & BUNNY—andtargeted mainly at men, but the Company has recently com-its popularity has

menced initiatives targeting adult women as well.

resulted in a rush of

In addition, Creer Beaute, a brand of cosmetics, repre-

reservations.

sents a new cosmetics category that is integrated with theworld of IP. It was launched in commemoration of the 20th
anniversary of PRETTY GUARDIAN SAILOR MOON, and its
sales have substantially exceeded our expectations.

Creer Beaute

Daisuke Kuwahara
NAMCO LIMITEDVOICEThe concept of Cafe & Bar CHARACRO is “crossover between the real and product worlds.” By
providing a range of performances and services
linked with product themes, Cafe & Bar
CHARACRO is not simply a character cafe, it offers
the ability to experience the worlds of products at a
deeper level. We are providing customers with a place toenjoy eating and drinking while surrounded by things thatthey like, and sometimes to sing together and dance enthusiastically. In this way,
I think this cafe & bar makes full use of BANDAI NAMCO’s distinctive strengths.

TAMASHII NATIONSONE PIECE Treasure Cruise—An App Game that
Rapidly Responds to Market Growth

Live Events—A New Outlet for the
IP Axis Strategy

ONE PIECE Treasure Cruise is an app game for smart-

Live events, such as events featuring the voicephones that was downloaded 5 million times in justactors who appear in visual products and game

one month after its release. The market for app games

software, have joined merchandise and services as

is expanding, and the BANDAI NAMCO Group willa new content outlet. These events have garneredtake steps to move forward rapidly in this field. These

popularity because they enable fans to experiencesteps will include conducting aggressive investment

in real life the virtual worlds of IP. In FY2014.3, wein app games, which will join social games as a pillar

held more than 300 events on a variety of themes,of IP utilization.

including THE IDOLM@STER and Love Live! School
idol project. Going forward, we will continue toDaisuke Komoto
BANDAI NAMCO Games Inc.

VOICE

Planning for ONE PIECE Treasure Cruise began with theobjective of responding rapidly to the growing app market.
In developing the game, we endeavored to fully leverage
the appeal of the characters and to provide operability thatmakes people want to play the game. With app games, it isimportant to respond to feedback from users even after the gameis distributed, and accordingly we are striving to conduct stable operations by maintaining our focus and paying keen attention to feedback.

strengthen live events as a new outlet.

Love Live! School idol project live event

19Special Feature: Maximizing IP Value with the IP Axis Strategy—Targeting Further Progress by Creating and Nurturing IP

Creating
IP

Vertical Development of Aikatsu! Original IP
Business development initiatives for Aikatsu! were commenced in October 2012. Aikatsu! is an originalGroup IP for elementary school girls based on the themes of idols and fashion. From the initial planningstages, Aikatsu! was coordinated with DATA CARDDASS and animations, and synergies were achieved
through the inclusion of all Group companies. In this way, the Aikatsu! business expanded at a speed thatexceeded our expectations. In FY2014.3, Groupwide Aikatsu! sales were ¥15.9 billion, demonstrating the
rapid growth that has been achieved in just a year and a half.
From the creation of the original IP to the success with vertical development, Aikatsu! is a representative

VOIC

example of the success of the BANDAI NAMCO Group’s IP axis strategy.

E
rom
age f
Mess ersonp
the ge ofrin cha tsu!
Aika

Taking on the Challenge of Creating Original IP with Eagerness
and Strong Commitment
Prior to the creation of Aikatsu!, Bandai’s digital card IP lineup was centered on products
for men and boys. By offering a product for elementary school girls, a market segmentthat we had not yet addressed, we thought that we would have an opportunity to

Makoto Takahashi
BANDAI Co., Ltd.

further expand our market share. The creation of Aikatsu! began with the idea that indeveloping a product for girls we could leverage the know-how that we cultivated in our
success with products for boys, all while taking on the challenge of original IP. We were
determined that if we were going to take on this challenge, then we had to succeed.
The reason that we chose the concept of “idols” in creating this original new IP isthat many girls aspire to be idols. Furthermore, girls are sensitive to fashion and style,so we thought that we could build on that aspiration through the addition of dress-up
elements. Accordingly, we implemented careful user research, identified which elements
girls would like and be interested in, and created as many product category touchpoints
as possible. In this way, we strove to increase opportunities for customers to enjoy
Aikatsu! IP. We leveraged a wide range of Group categories, including not only DATACARDDASS but also animation, toys, home video game software, apparel, and others.
Our goal was to develop the popularity of the IP through strong Group collaboration.
We initially aimed to nurture Aikatsu! into an original IP with sales of about ¥10.0
billion over the medium to long term, which meant that the participation of the entire
Group, not just the Card Business Department, was essential. For that reason, to generate excitement throughout the Group we enthusiastically made presentations to Group
companies and divisions so that they could know more about Aikatsu! and develop
related products.

Achieving Synergies through Group Collaboration with Linked
Sequence of Enthusiasm
In October 2012, Aikatsu! TV animation broadcasts commenced, and at the same time
DATA CARDDASS development got under way. First, we believed it was important for
the animation and the cards to garner popularity, and saw indications at an early stage

The
History of
Aikatsu!
=SBU

20

Fall 2010

October 2012

Start ofIP planning

Start of TV
animationbroadcastContent

November 2012
Start of DATA CARDDASS
initiative

Launch of toys and other related
products

Launch of Nintendo
3DS software

Toys & Hobby

Toys & Hobby

Content

Launch of Music CD
Content

that Aikatsu! was likely to be a hit. Moreover, in line with initial plans, we expanded
product category touchpoints with toys, home video game software, and amusement
facilities, and increased opportunities for customers to interact directly with Aikatsu! IP.
In this way, the business development benefited from a wide range of synergies, as we
had intended. Consequently, the number of users increased rapidly, and the businessproceeded with a speed and scale that exceeded our expectations. This wave of growth
led to rapid acceleration in the speed of Groupwide product development, and to create

Aikatsu! Sales (Groupwide)

another, larger wave, we launched Aikatsu! products from all categories. The Group’s¥ billions

ability to accelerate its collaborative initiatives at the instant it recognizes the possibili-

��.�

ties of the IP is one of its distinctive strengths. In FY2014.3, Aikatsu! sales reached¥15.9 billion. This success is the result of the Group’s ability to leverage this strength
on a full-scale basis.

Nurturing Aikatsu! into a Long-Established IP

�.�

Aikatsu! still has substantial room to grow. We want to further expand the number andrange of customers, and to continually provide new topics for conversation among fans.

����

����

To develop Aikatsu! into a long-established IP, it is important to continue to implement
user surveys and to respond rapidly to user feedback. We remain focused on product

For the fiscal years ended March 31

and service quality and are working to ensure that customers truly enjoy each category

Group Collaboration through the
Aikatsu! Committee

touchpoint, so that there are always opportunities for new customers to interact
directly with Aikatsu! In summer 2014, to help customers to realize their aspirations,
we held a live event that integrated hologram images and projection mapping. In
December, we plan to release a theatrical version of Aikatsu! In addition, we have started
Aikatsu! development in Asia. Going forward, our objective is to nurture Aikatsu! into along-established IP that can be safely enjoyed by two generations—parents and theirchildren—five years or ten years into the future. To that end, we are creating a wide
range of product category touchpoints that enable customers to interact directly with
the IP. Aikatsu! has a long future ahead of it, and we will take on future challenges witheven greater enthusiasm.

Growing Opportunities to Create Original IP
Currently, people throughout the Group are eagerly working to create the next IP that

The Aikatsu! Committee was originally intended
to foster an understanding among all parts of theGroup of the world of Aikatsu! IP as it related tothe development of products. Accompanying the
growth of the IP, the format of the committeechanged, and it became a venue for the exchange
of information about which products were sellingwell. As a result, the committee works to alignproduct concepts, regularly share the IP world,and ensure that everyone is working in the same
direction. Currently, the committee meets oncea month with about 30 people from throughout
the company, and additional weekly meetings areheld at a wide variety of levels.

matches the success of Aikatsu! The creation of original IP is extremely difficult, but I
believe that we have established an environment in which it is easy to take on new
challenges on a Groupwide basis, drawing on the example of the success of Aikatsu! If
we have IP with potential, the entire Group recognizes that we can conduct collaborative development with the same sense of urgency that drove the progress of Aikatsu!
On that basis, I believe that we could launch a series of new IP development projects
in the years ahead. For those projects, I would like to support other divisions in thosedevelopment initiatives.

December 2012

October 2013

August 2014

December 2014

Opening of first official shop

Start of second
season ofanimation

Live event using hologram images andprojection mapping

Planned release oftheatrical version

Content

Content

Amusement
Facility

Content

21

Special Feature: Maximizing IP Value with the IP Axis Strategy—Targeting Further Progress by Creating and Nurturing IP

Creating
IP

High-Potential Topics

High-Potential Powerful IP
Mobile Suit Gundam:
Simultaneous Development
in Japan and Asia

Love Live! School idol project Original IP for Older Customers

The Company is implementing simultane-music packaged products,

ous development initiatives in Japan andAsia for Mobile Suit Gundam, which is an
original IP that is popular throughout Asia.
Using the Gundam info website, we areproviding video distribution of new visualcontents in multiple languages as well as
product information. In 2013, we held a largescale event in Hong Kong and worked toLove Live! School idol project is a Group original IP. Sunrise Inc. was responsible for
producing the TV animation, and since TV broadcasts started in 2013, visual andmusic CDs, and live events
have also been popular.
From April 2014, the TV
animation entered its
second season, and theentire Group is enthusiastic
about this new IP for older
customers.

expand awareness of this IP. Moving forward,
the Company will conduct lateral development for Mobile Suit Gundam, approaching
Japan and Asia as a single market.

Worldwide Development of PAC-MAN
PAC-MAN marked its 30th anniversary in 2010.
From 2013, TV animation broadcasts were started
and development worldwide was linked to thebroadcasts, including sales of game software,
arcade game machines, network content, toys,and licensed merchandise. Overseas, we are
implementing initiatives on a Groupwide bases tofurther nurture PAC-MAN as a long-established IP.

Framework for Creating Powerful IP
Original Star-IP Office, a new initiative for the creation of original IP
Original Star-IP Office is a new initiative
targeting the creation of original new IP on
a Groupwide basis. This project is intended
to discover “diamond-in-the-rough” original
IP and then to nurture that IP to create “stars”
that will represent the BANDAI NAMCO
Group. In the first round of recruitment, morethan 150 plans were submitted from Japanand overseas. In the future, we intend to
recruit further plans on a regular basis.

22

Yasuo Miyakawa
Original Star-IP Office Manager
President and Representative Director, Sunrise Inc.

Rather than creating original IP on a company-by-company basis, we wanted
to create an environment for IP creation in which the entire Group could
provide backup. That was the reason for the launch of Original Star-IP Office.
We recruited new plans within the Group, and for those with businessdevelopment potential we made pilot visual products and conducted IP
discovery and nurturing. IP is not something that can be created in aday. Rather, it is created through a process of trial and error. I would
like this office to support that role by discovering diamond-in-therough stars, developing them, and arranging their debut.

VOICE

Review of Strategic Business Unit (SBU) Operations
and Focus Strategies

Toys and Hobby
Sales Ratioin the Fiscal Year Ended
March 31, 2014

Business Performance

Millions of yen

2012

2013

2014

% change

Forecasts for2015¥177,994¥172,977¥186,391+7.8%¥200,000

16,113

11,255

10,510–6.6%

13,000

9.1%

6.5%

5.6%

—

6.5%

For the fiscal years ended March 31

Net sales
Segment income
Segment income margin

Note: The percentage figure is calculated based on sales
before elimination of internal transactions.

MARKET DATA

Sales of Major Characters (Toys and Hobby Business Overseas)

Billions of yen

For the fiscal years ended March 31

2012

2013

2014

Mobile Suit Gundam series

¥ 4.8

¥ 4.8

¥ 6.9

6.5

10.4

10.2

For the fiscal years ended March 31

2012

2013

2014

KAMEN RIDER series

¥28.3

¥27.1

¥22.3

Mobile Suit Gundam series

15.6

16.5

18.4

Power Rangers series

13.0

9.6

14.4

Power Rangers series

33.9%

Sales of Major Characters (Toys and Hobby Business in Japan)

Size of Japan’s Toy
Market¥ billion ���.�

���.�

���.�

����

����

Billions of yen����Source: Survey by the Japan Toy Association

Strategic Points in FY2015.3
Japan

Overseas

We will implement aggressive initiatives to capture
a dominant No. 1 position in the domestic market.

A recovery in the U.S. and Europe is our highest priority.

	We will further strengthen established IP for preschoolers, such as
Power Rangers, KAMEN RIDER, and PRETTY CURE!, through media
tie-ups and business models that extend across organizationalboundaries.
	‌For elementary school students, in addition to Aikatsu! we will
launch new IP products, such as Yokai Watch, which originated in
the field of game software, and work to increase our market share.
	In addition to products for infants and adult male consumers, wewill utilize such IP as PRETTY GUARDIAN SAILOR MOON to develop
products for a new customer target group, adult women customers.

	The mainstay Power Rangers series is enjoying increased viewershipdue to an improved viewing environment, as well as strong merchandise sales. Through promotions using the Internet and otherinitiatives, we will continue to draw attention to this IP.
	In the U.S. and Europe, we will strengthen our IP lineup through theintroduction of multiple new IP.
	In Asia, where results are favorable, we will accelerate merchandiseand marketing initiatives that are carefully matched to local market
characteristics, such as the free distribution of animations and theuse of locally originated IP. We have started to implement Aikatsu!
development initiatives.

23

Review of Strategic Business Unit (SBU) Operations and Focus Strategies

Content
Sales Ratioin the Fiscal Year Ended
March 31, 2014

Business Performance

Millions of yen

2012

2013

2014

% change

Forecasts for
2015¥225,504¥263,596¥278,408

5.6%¥260,000

17,00336,43837,2492.2%

32,000

7.5%

13.8%

13.4%

—

12.3%

For the fiscal years ended March 31

Net sales
Segment income
Segment income margin

50.6%
Note: The percentage figure is calculated based on sales
before elimination of internal transactions.

MARKET DATANet Sales Breakdown

Billions of yen

Share of HOME VIDEO GAME SOFTWARE Unit Sales
by Domestic Production Group (2013)

For the fiscal years ended March 31

2012

2013

2014

Arcade game machines
and prizes

¥73.4

¥71.8

¥77.0

SCEJ 2.4%

Home video game software

86.0

84.4

84.9

GungHo 2.5%

Network content

33.6

59.2

68.4

Visual and music content

29.6

38.5

37.1

Others 15.0%

LEVEL-5 3.1%
SEGA SAMMY 3.9%

Nintendo
29.0%

BANDAI NAMCO

16.4%

KOEI TECMO 3.9%
BANDAI NAMCO: BANDAI NAMCO Holdings
SQUARE ENIX: SQUARE ENIX HOLDINGSKOEI TECMO: KOEI TECMO HOLDINGSSEGA SAMMY: SEGA SAMMY HOLDINGS
GungHo: GungHo Online Entertainment
SCEJ: Sony Computer Entertainment Japan Asia

KONAMI 4.6%
SQUARE ENIX 8.5%

Capcom 10.7%

Source: Famitsu Game White Paper 2014,
Published by KADOKAWA CORPORATION ENTERBRAIN Brand Company(Period: December 31, 2012, to December 29, 2013)

Strategic points in FY2015.3

We will bolster the IP axis strategy and respond rapidly to changes in the operating environment.

24

Arcade game machines and prizes

Network content

	We will introduce arcade game machines and prizes that leverage
our development capabilities. Moving forward, we will take steps
to expand sales not only in Japan but also in emerging countries,
where the number of multipurpose facilities is increasing. In thesemarkets, we will aggressively exhibit at trade fairs.

	We will focus on responding rapidly to changes in outlets andstrive to achieve stable operation of popular titles. In online games,
we will begin to develop new titles. In apps, we will launch strategic
titles and implement selection and concentration for our resources.

Home video game software

Visual and music content

	We will implement balanced development in line with thedistinctive characteristics of specific IP, such as popular IP titles
for the domestic market, franchise titles being marketed worldwide,
free-to-play titles and other network-linked titles, and titles
intended to expand target customer groups or open up new genres.

	We will maintain a focus on Mobile Suit Gundam and other popularlong-established IP while also taking on the challenge of new IP.
We will also aggressively implement initiatives in the live event
business, working to link visual and music products.

Amusement Facility
Sales Ratioin the Fiscal Year Ended
March 31, 2014

Business Performance
2012

2013

2014

% change

Forecasts for
2015¥61,033¥60,186¥58,200–3.3%¥60,000

Segment income (loss)

2,381

1,684

(898)

—

1,000

Segment income margin

3.9%

2.8%

—

—

1.7%

For the fiscal years ended March 31

Net sales

10.6%

Millions of yen

MARKET DATA

Total Number of Amusement Facilities (March 31, 2014)

Facilities

Number of which that are
RegionRegional total

Directly managed
facilities

Revenue-sharing
facilities*

Others

Japan

225

211

10

4

1,024

19

1,005

0

Europe

21

9

12

0

Asia

25

8

17

0

Total

1,295

247

1,044

4

North America

Note: The percentage figure is calculated based on sales
before elimination of internal transactions.

Size of Japan’s
Amusement Facility
Market¥ billion

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* Revenue-sharing facilities: Revenues from the operation of arcade game machines are shared with operators.

Source: Leisure White Paper 2013, Japan Productivity Center

Strategic Points in FY2015.3

This business has an indispensable presence in the Group’s value chain, and achievinga recovery will be our highest priority.
	‌Under the new system, we will strengthen collaboration within
the Group and rapidly implement a range of initiatives targetinga recovery.

	We will move ahead with the creation of amusement facilities thatencourage customers to visit repeatedly, such as annual campaigns
using prizes.

	To bolster our marketing capabilities, we will take steps to reinforce
and improve efficiency in our front-line operations, such as dispatching personnel from headquarters to the front lines.

	We will leverage the Group’s distinctive strengths to develop new
operational pillars by nurturing theme parks and new business formats that integrate IP and merchandise sales or IP and food service.

25

The bandai namco group’s CSR INITIATIVES

To realize the provision of “Dreams, Fun and Inspiration,” the BANDAI NAMCO Group conducts CSR activities inaccordance with the concept of “Fun for the future!” Themes that require special initiatives have been identified as“BANDAI NAMCO Group’s Important CSR Themes.” In addition, each strategic business unit (SBU) formulates its own“CSR Major Initiative Themes” and leverages the special characteristics of its operations to implement activities inaccordance with those themes.

BANDAI NAMCO Group’s CSR Policy
Mission“Dreams, Fun and Inspiration”
CSR Action Concept

Fun for the future!
The Group’s CSR Initiatives

Compliance Charter

1 Environmental and Social Responsibilities

Rules related to appropriate products and services / fairdealings, respect for all employees, information disclosure,respect for and usage of intellectual property, protection of
information and resources, rejection of anti-society groups,
harmony with the environment, and harmony with society.

2 Economic Responsibilities
3 Legal and Ethical Responsibilities

BANDAI NAMCO Group’s Important CSR Themes
Safety and Cleanliness of Products and Services
Environmental Consideration

Policies Regarding Influence on Society of the Group’s Content and Products
Supply Chain Management

Each SBU and affiliated business company sets up priority initiatives and works to
identify specific activities related to its business operations.

CSR Action Concept
At BANDAI NAMCO, CSR activities are “Fun for
the future!” Our work is to provide inspiration
to customers by realizing individual ideas of“Dreams, Fun and Inspiration.” In turn, those“Dreams, Fun and Inspiration” provide healing andencouragement as they spread around the world.
We believe that “Dreams, Fun and Inspiration”
can change the world, and even change the future.
As a company that provides “Dreams, Fun andInspiration,” our relationship with the natural

26

environment and society will be guided by the
key words “Fun for the future!” We will implement
CSR activities that lead to happiness for stakeholders by featuring fun today while also contributing to the creation of fun tomorrow. We believethat entertainment can contribute to society
by fostering inspiration and creating a futureof “Dreams, Fun and Inspiration.”

Topics
Supporting reconstruction activities following
the Great East Japan Earthquake
In partnership with Save theChildren Japan, we are offering a
range of activities, such as eventsfor children. In addition, we haveintroduced a system offering
choices of complimentary gifts
for shareholders. One of the
choices is to make a donation to
support activities for children.

Manufacture of safe, reliable products
In all of our business fields,
we follow all legal and industry
quality and safety standards. We
have also established our own
more rigorous in-house standards, and pay careful attention
to safety.

Dropping products to test for quality
Workshops in disaster-stricken areas

Product raw materials and packaging andwrapping initiatives
We are implementing measures
to reduce packaging, such as
decreasing packaging spaceratios, developing packaging-free
products, using packaging thatutilizes low-environmentalimpact materials, reducing plastic
model runners, and reducing
packaging materials foramusement machines.
Moving toward low-environmental-impact
packaging (using pulp molds)

Social contribution activities
We are conducting a variety ofactivities to promote a deeper
understanding of culture, science, and entertainment. These
include the Omocha-no-Machi
Bandai Museum, in Tochigi
Prefecture, which has a collectionthat includes toys from Japan andoverseas as well as many items
created by the famous inventor
Thomas Edison.

Wide-ranging environmental impact reduction activities
At the Bandai Hobby Center,in the city of Shizuoka, we are
implementing a range of environmental conservation initiatives,
such as solar power generation
and resource recycling. Moreover,
BANDAI LOGIPAL INC. has
acquired Green Management
Certification, which is given totransportation companies that
implement low-environmentalimpact operations.

Bandai Hobby Center (plastic model plant)

Universal design initiatives
From the viewpoint of universal
design, which focuses on making
things easy to use for as many
people as possible, we are taking
steps to increase usability, suchas improving packaging to makeit easier to open.

Omocha-no-Machi Bandai Museum

Initiatives to motivate and support human resources
The BANDAI NAMCO Groupis implementing initiatives toenhance the utilization of humanresources. These include measures
to advance dynamic corporate
activities. For example, the Grouphas established an award system
to recognize products and services BANDAI NAMCO Awards
that excel in such areas as market
success, creativity, and uniqueness. Other programs include aggressive
personnel exchange initiatives and development training for future
management candidates.

Example of a package designed
so that it is easy to open

“BANDAI NAMCO Forest” at Shiga Kogen
The BANDAI NAMCO Groupparticipates in forest support
activities in Nagano Prefecture.
The Group provides support forforest management activities atthe 47-hectare “BANDAI NAMCO
Forest” at Shiga Kogen andworks to help foster a deeper
understanding of forest
conservation issues.

“BANDAI NAMCO Forest” at Shiga Kogen

27

Corporate Governance

BANDAI NAMCO Holdings’ highest management priority is the provision of benefits to all of its stakeholders,
who support its business activities. We believe that to achieve ongoing growth in enterprise value over the long term,
the continuous enhancement of corporate governance is an important management issue. The Group aims to bea corporate group that is trusted by society and that makes an ongoing contribution to society. While striving
to raise management soundness, transparency, and efficiency, we will build a corporate governance system thatfacilitates rapid information disclosure.
Corporate Governance System

The Internal Auditing Division reports the results of those audits to

BANDAI NAMCO Holdings is working to enhance management over-the president. In addition, the Internal Auditing Division formulates

sight. As of June 23, 2014, the Company had nine directors, including

basic guidelines for internal audits within the Group and monitors thethree outside directors. Moreover, to respond rapidly to changes in

implementation of internal audits at each Group company in accor-

the management environment and to further clarify the responsibili-

dance with the Group’s internal auditing rules. In regard to audits byties of directors, the term of directors has been set at one year or less.

the Audit & Supervisory Board, the four Audit & Supervisory Board

The Company uses the audit & supervisory board system and has

members (of whom two are full-time Audit & Supervisory Board

established the Audit & Supervisory Board. The Company believes thatmembers and three are outside Audit & Supervisory Board members),

the auditing system based on the Audit & Supervisory Board, including

attend important meetings, such as meetings of the Board ofoutside Audit & Supervisory Board members, is an effective means of

Directors. In addition, in accordance with the Audit & Supervisory

implementing the management oversight function. Our outside direc-

Board regulations, the audit standards for the Audit & Supervisory

tors and outside Audit & Supervisory Board members have the impor-

Board, and implementation standards and auditing plans related totant duty of monitoring management through the implementation ofinternal control systems, the Audit & Supervisory Board members

objective, neutral auditing and supervision based on their high levels

conduct audits regarding the status of business execution by theof independence and specialized knowledge. We believe that they are

directors. The Internal Auditing Division, the Audit & Supervisory

contributing to the bolstering of our internal control systems.

Board members, and the independent auditors continually exchange

In regard to internal audits, the Internal Auditing Division audits

opinions and maintain close ties. The status of the Group’s businessbusiness execution by conducting on-site audits or document audits

operations is monitored, issues are identified and understood, andof each Company division in accordance with internal auditing rules.

recommendations for resolving those issues are provided.

General Meeting of Shareholders
Appointment /Dismissal

Appointment /Dismissal

Audit & Supervisory Board

Board of Directors
9 directors(of whom 3 are outside directors)

4 Audit & Supervisory Board members(of whom 3 are outside Audit &Supervisory Board members)

Auditing

Appointment /Dismissal

Account
Auditing /Reports on
Results

Independent Auditors
Dismissal

Appointment /Dismissal /Supervision
Auditing

President and CEO,
Representative Director

Personnel Committee
Reports
Cooperation

Directions
Directions

Reports

Reports

Internal Auditing Division

Committees

SBU Quarterly Report MeetingGroup CSR Committee

Group Management MeetingGroup Risk Compliance Committee

Content Business Strategy MeetingGroup Information Security Committee
SupportAsia Strategy Meeting
Policy Directions

Auditing

Internal Control Committee
Policy Directions

Reports

BANDAI NAMCO Group Companies

28

As of June 23, 2014

Message from Outside Director

I was appointed as an outside director of BANDAI NAMCO Holdings in June 2014 after many years ofexperience in the pharmaceutical industry. Although the entertainment industry and the pharmaceuticalindustry are different in many ways, they also have certain key points in common, such as a commitment
to enhancing people’s lives. Moreover, corporate management involves standard rules and principles andits fundamental nature does not change. As a corporate executive, I was involved in a wide range ofbusiness activities, such as management integration and restructuring initiatives, and I would like toleverage that experience and make a contribution to the management of the BANDAI NAMCO Group
from an outside perspective.
I have high regard for the Group’s corporate governance. In particular, the Group’s governance ishighly effective and places considerable importance on the outside officers. For example, the outside

Yuzuru Matsuda

officers participate in a variety of committees. I look forward to participating in management from

Director (Outside)

this viewpoint.
As a manager, my motto is “transparency, fairness, and speed,” and I believe that these words areapplicable in any industry. Based on this motto, I will work together with other directors to consider thebest style of management for the Group’s growth and will strive to fulfill my duties as an outside director.
More than anything else, I believe that the most important objective of a company is to increase its
corporate value. Even though the Group’s many people have different viewpoints, we all share the same
key objective. Accordingly, I will do my utmost to draw on my experience and contribute to growth in
the corporate value of the BANDAI NAMCO Group. This is my hope and my mission. I would like to
ask the shareholders and investors for their continued support of the BANDAI NAMCO Group.

Topic
BANDAI NAMCO Holdings Receives Excellence Award at the Tokyo Stock Exchange’s Corporate Value Improvement Awards
BANDAI NAMCO Holdings was selected as a recipient of the ExcellenceAward at the Fiscal 2013 Corporate Value Improvement Awards sponsored by
the Tokyo Stock Exchange (TSE).
The Corporate Value Improvement Awards recognize listed companies
that have high corporate value and implement management initiatives
intended to increase corporate value while reflecting investor concerns, suchas the cost of capital. BANDAI NAMCO Holdings was one of only four companies selected to receive the Excellence Award from among more than 3,000
companies listed on the TSE.
Moving forward, BANDAI NAMCO Holdings will continue to implement
management initiatives targeting gains in corporate value and activities tosupport communication with stakeholders.

Yuji Asako, Member of the Board of Directors of BANDAI NAMCO Holdings(left) and Akira Kiyota, President and CEO of Tokyo Stock Exchange, Inc. (right)

29

Corporate Governance

Main Top Management Meetings

Business Strategy Meeting, the Asia Strategy Meeting, the Group CSR

As shown in the table below, the Company holds a variety of top

Committee, and the Waigaya Meeting; and, for the Group as a whole,management meetings and has established a system that facilitates

shares the status of operations and considers and formulates strategies.

rapidly tracking and responding to Group management information.
Moreover, the Company has established the Personnel Committee,

The Board of Directors has decided fundamental policies
regarding internal control systems as stipulated by the Companies

which objectively and neutrally considers personnel and compensation

Act. In regard to the internal control reporting system under theissues regarding directors, as well as other matters about which it has

Financial Instruments and Exchange Act, the Company’s Internal

received inquiries, in particular from the president and representative

Control Committee formulates policies regarding the establishment

director. (The majority of the committee members are outside directors.)

and evaluation of internal control systems in the Group, shares infor-

Furthermore, the Group comprises three SBUs and the affiliatedmation, and conducts internal Group monitoring. The committee also

business companies, which principally provide support services to thepresents internal control system reports, and the Board of Directors

SBUs. In each SBU, operating strategies for Japan and overseas are

makes decisions on fundamental issues.

formulated and implemented, with the lead role taken by the SBU’s

In addition, the Group Information Security Committee has been
established with the objective of decision making, implementationcore company.
The Company, which is a holding company, monitors each SBU;
holds meetings of Groupwide committees, such as the SBU Quarterly

reporting, and information sharing in regard to the Group’s information security activities overall.

Report Meeting, the Group Management Meeting, the Content
Meeting Name

Schedule

Agenda / Purpose

Participants

Board of Directors

Monthly andotherwise asneededDecisions / reports on matters stipulated by law, items to be resolved inaccordance with authority standards, reports on the status of operational
execution, reports regarding CSR, crisis management, and complianceDirectors, Audit & Supervisory Board
members, other designated employees

SBU Quarterly
Report Meeting

Quarterly

Consolidated numerical reports, SBU reports, other items to be reported

Directors, Audit & Supervisory Board
members, other designated employees

Group Management
Meeting

6 times a year

Deliberations regarding issues extending across SBUs, other Groupmanagement issues, strategic deliberations

Directors (excluding outside directors),
other designated employees

Content Business
Strategy Meeting

Quarterly

Sharing of information about SBU initiatives related to the Group’s
important IP

Directors with related responsibilities,
directors from major subsidiaries
with related responsibilities, otherdesignated employees

Asia Strategy
Meeting

Quarterly

Deliberations regarding issues in executing business strategies, risk
management and medium- to long-term Group regional strategies in Asia

Directors with related responsibilities,
directors from major subsidiaries
with related responsibilities, otherdesignated employees

Group CSR
Committee

Semiannually

Deliberations and information sharing regarding the Group’s important CSR strategies,
consideration of resolutions, items to be reported, and deliberations at meetings of theBoard of Directors, overall supervision of Group CSR subcommittees, overall supervision ofprogress of important items for each SBU and affiliated business company

Directors (excluding outside directors),
other designated employees

Waigaya Meeting

WeeklyWeekly reports regarding the departments for which directors are responsible

Directors (excluding outside directors),
other designated employees

Outside Directors and Outside Audit & Supervisory
Board Members

standards, there is no concern that they will have a conflict of interest

Of the Company’s nine directors, three meet the conditions fordence. Accordingly, the Company has notified the TSE that they areoutside directors. The Company is working to strengthen the manage-

all independent directors or independent Audit & Supervisory Board

ment oversight function. In addition, of the four Audit & Supervisory

members in accordance with TSE regulations.

Board members (including two full-time Audit & Supervisory Board

The status of audits by internal auditors, audits by the Audit &members), three meet the conditions for outside Audit & Supervisory

Supervisory Board members, and audits by the independent auditors

Board members. They work together and monitor the Company’s

are reported to the Board of Directors. By attending meetings of theinternal control situation on a daily basis.

Board of Directors, the outside directors track the status of these

As described on page 32, the Company has established standards
for the independence of outside directors and outside Audit &30

with general shareholders, and they possess high levels of indepen-

audits and work to maintain close ties.
In addition to tracking the status of internal audits reported

Supervisory Board members, and outside directors and outside Auditat meetings of the Board of Directors, outside Audit & Supervisory& Supervisory Board members are appointed in accordance with

Board members track the status of audits by the Audit & Supervisory

those standards. In the Company’s judgment, the outside directors

Board members at meetings of the Audit & Supervisory Board andand outside Audit & Supervisory Board members meet thosemaintain cooperative relationships with the internal auditors and theother Audit & Supervisory Board members. In addition, all members ofCompliance and Risk Management

the Audit & Supervisory Board, including outside Audit & Supervisory

The BANDAI NAMCO Group has formulated standards for compliance

Board members, receive explanations from the independent auditors

and instituted a system that appropriately ensures the strict observanceof the status of account audits on a quarterly basis. In this way, theyof laws and regulations, ethical standards, and internal regulations on

track the status of these audits and maintain cooperative relationships

a Groupwide basis. Under the Group’s compliance system, the director

with the independent auditors.

in charge of compliance has overall responsibility for complianceFurthermore, through matters brought to the Board of Directors,

throughout the Group and leads the Group Risk Complianceoutside directors and outside Audit & Supervisory Board members track

Committee. This committee, which is the top compliance entity,

the status of internal control departments (all of the Company’s depart-promptly considers and determines what action to take when there isments). In addition, they attend the SBU Quarterly Report Meeting, wherea compliance violation or the possibility of a compliance violation inreports on the status of the Group’s operations are made; strengthen

the Group. The Group Risk Compliance Committee works to prevent

supervisory and other functions; and provide advice as needed.

the occurrence of a wide range of risk events, strives to ensure prompt
responses if a risk event does occur, and audits and supervises impor-

Policy Regarding Compensation of Directors andAudit & Supervisory Board Members

tant matters regarding compliance for the entire Group.

In regard to the amounts and methods of calculation of the compen-of risk events and to rapidly identify the causes of risk events. In thesation of directors and Audit & Supervisory Board members, theevent of the occurrence of a risk event, the Group establishes an

Company’s basic policy is to implement a compensation structure

emergency contact network, and in the event of the emergence ofwith the objective of increasing motivation to improve the Group’s

risk event information, including information about violations of laws

performance and corporate value, with consideration for the levels

or regulations, such information is immediately reported to the presi-of compensation that will enable the Company to secure and retain

dent. The Group is working to minimize any influence on operations

highly talented people. In addition, the core companies of the Group’s

through the implementation of rapid and accurate responses.

In risk management, the Group works to prevent the occurrence

SBUs—BANDAI, NAMCO, and BANDAI NAMCO Games—use theIn particular, positing the occurrence of a situation that could
cause drastic damage to the management of the Group through asame basic policy as the Company.
Specifically, the compensation of directors (excluding outsidemajor disaster or the like, the Group has defined the basic policy fordirectors) comprises basic compensation, performance-linked bonuses,

a Business Continuity Plan (BCP) for the Group, and is drawing up aand stock options as stock-linked compensation, with consideration

BCP for the Group and organizing a Business Continuity Management

given to responsibility for increasing results in each fiscal year and(BCM) system to achieve rapid recovery and restart of operations.

expanding corporate value over the medium to long term, to further
clarification of the relationship between results and compensation, andTakeover Defenses

to advancing shared values with shareholders. Decisions regarding

At present, the Company has taken no specific measures as takeoverthe compensation structure for directors are made after a process ofdefenses. The Group regards implementing its management anddeliberations. The Personnel Committee, of which a majority of mem-business strategies in accordance with the measures to increase thebers are outside directors, participates in this process.

corporate value of the Group and aiming to increase the corporate

To secure the independence of outside directors, the compensationof outside directors is composed solely of basic compensation. Audit &Supervisory Board members have the responsibility for auditing busi-

value of the Group as a whole as a substantial defense against
inappropriate takeovers.
That said, since the Group is entrusted by shareholders as theness execution for the entire Group, and accordingly the compensation

management of the Group, we will study and develop a system ofof Audit & Supervisory Board members is composed solely of basic

takeover defenses in anticipation of situations in which an inappropri-

compensation, with amounts determined in accordance with rank. The

ate entity or person might emerge to have decision-making power

amount of compensation received by each Audit & Supervisory Board

over the Company’s financial and business policies.

member is determined by the Audit & Supervisory Board.

In concrete terms, in the event an inappropriate bidder emerges,
the management team will not take steps to guard its own interests

Officer category

Total amount of compensation,
Total amount of
etc., by type (Millions of yen)compensation,
etc.
Basic
(Millions of yen) compensation
Bonus

Number of
eligible officers(People)Directors(excluding outside
directors)

290

172

118

4

(excluding outside Audit& Supervisory Board
members)

24

24

—

1

Outside officers

88

88

—

6

Audit & Supervisory
Board members

against the takeover offer by the bidder, but will construct a systemthat enables the Company to judge from the perspective of improving
corporate value first. The Company will continue to study takeover
defenses by utilizing stock subscription rights, etc., with a close eyeon legal and social trends.

31

Corporate GovernanceStandards for the Independenceof Outside Directors and Outside Audit & Supervisory Board Members

In order for the Outside Directors and Outside Audit & Supervisory Board Members of the Company to be judged
as being independent, such Outside Directors and Outside Audit & Supervisory Board Members must not fallunder any of the following items.
1.	Any person who purports to be a major business partner of the Company (including Group companies of
the Company; the same applies hereafter)
2.	Any Executive Director, Executive Officer, Manager, or other employee of a company that purports to bea major business partner of the Company
3.	Any person who is a major business partner of the Company
4.	Any Executive Director, Executive Officer, Manager, or other employee of a company that is a major business
partner of the Company
5.	Any attorney-at-law, certified public accountant, certified public tax accountant, consultant, or other expert
who receives monies or other economic benefits above a certain amount from the Company, in addition tohis or her remuneration as a Director or Audit & Supervisory Board Member
6.	Any person belonging to a company, association, or other organization such as a law firm, auditing firm, tax
accountant corporation, and consultancy which receives monies or other economic benefits above a certain
amount from the Company
7.	Any person receiving donations or subsidies from the Company above a certain amount
8.	Any person who is a Board member or other Executive Officer in a company, association, or other organization which receives donations or subsidies from the Company above a certain amount9.	If an Executive Director or full-time Audit & Supervisory Board Member for the Company concurrently holds
a position as an Outside Director or Outside Audit & Supervisory Board Member at another company, any
person who is an Executive Director, Executive Officer, Manager, or other employee of that company
10. Any person who has come under one of the categories listed in items 1 through 9 above in the past 5 years
11.	If a person coming under one of the categories listed in items 1 through 9 above is an important person, that
person’s spouse or relative within the second degree of kinship12.	The spouse or relative within the second degree of kinship of any person who is a Director, Executive Officer,
Manager, or other important employee of the Company or its subsidiaries(Notes)1.	In items 1 and 2, where it reads “any person who purports to be a major business partner of the Company,” this means “any person (or company) who hasreceived a payment from the Company 2% or more of its annual consolidated net sales for the most recent business year.”
2.	In items 3 and 4, where it reads “any person who is a major business partner of the Company,” this means “any person (or company) who has paid to the Company
an amount 2% or more of the Company’s annual consolidated net sales for the most recent business year, or any person (or company) who has provided theCompany with a loan of an amount 2% or greater of the value of the Company’s consolidated total assets as of the end of the most recent business year.”
3.	In items 5, 7, and 8, where it reads “a certain amount,” this means “¥10 million a year.”
4.	In item 6, where it reads “a certain amount,” this means “2% or more of the total net sales for that company, association, or organization for the most recent
business year, or ¥100 million; whichever is greater.”32

Financial
Section
Co

n
te

nt

s

34 Consolidated Six-Year Financial Summary
35 Financial Review
38 Consolidated Balance Sheets
40 Consolidated Statements of Income and		 Consolidated Statements of Comprehensive Income

41 Consolidated Statements of Changes in Net Assets
42 Consolidated Statements of Cash Flows
43 Notes to Consolidated Financial Statements
68 Independent Auditors’ Report33Consolidated Six-Year Financial Summary
BANDAI NAMCO Holdings Inc. and Consolidated Subsidiaries
For the Fiscal Years Ended March 31

Millions of yen, except per share data and main financial indicators

2009

2010

2011

2012

2013

2014

Net sales¥426,400¥378,547¥394,179¥454,211¥487,241¥507,679

Gross profit

146,023

128,753

139,415

167,503

183,079

190,829

Selling, general and administrative expenses

123,675

126,869

123,077

132,896

134,436

146,156

Operating income

22,3481,884

16,33834,607

48,64344,673

Recurring income*1

24,513

1,908

16,39934,96049,97347,457

Net income (loss)

11,830(29,929)

1,848

19,30432,38325,055——(4,600)21,551

41,50532,633

Capital expenditures

17,481

14,41813,43923,75823,83628,979Depreciation and amortization

22,54618,98918,001

18,142

20,416

21,726

Cash flows from operating activities

19,301

10,582

22,562

39,112

36,411

41,291

Total assets¥363,445¥325,936¥308,269¥342,172¥374,203¥405,093

Total current assets

230,086

217,763

210,934

240,920

264,804

284,398

Total current liabilities

84,30486,605

86,105

107,946

108,391

120,135

Total net assets

260,579

229,012

213,693

213,126

248,770

267,951

Net income (loss) per share (basic)¥47.95¥(123.98)¥ 7.71¥85.62¥147.40¥114.05

Cash dividends

24.00

24.00

24.00

26.00

45.00

35.00

Return on equity (ROE)*2 (%)

4.3

–12.4

0.8

9.1

14.1

9.7

Return on assets (ROA)*3 (%)

6.3

0.6

5.2

10.7

14.0

12.2

Selling, general and admini­strative expenses to
net sales (%)

29.0

33.5

31.2

29.3

27.6

28.8

Operating income margin (%)

5.2

0.5

4.1

7.6

10.0

8.8

Net income margin (%)

2.8

–7.9

0.5

4.3

6.6

4.9

Shareholders’ equity ratio (%)

70.9

69.5

68.8

61.8

66.0

66.0

Debt/equity ratio (times)

0.08

0.06

0.02

0.09

0.05

0.03

For the Year:

Comprehensive income (loss)

At Year-End:Per Share Data (Yen):

Main Financial Indicators:

Notes:*1 Recurring income is a Japanese accounting term denoting income before extraordinary items.
*2 ROE = Net income (loss) / Average total shareholders’ equity (= Total net assets – Stock acquisition rights – Minority interests)*3 ROA = Recurring income / Average total assets

34

Financial Review

Overview of Performance in the
Fiscal Year Ended March 31, 2014

SG&A Expenses
Selling, general and administrative (SG&A) expenses were ¥146,156
million (year-on-year increase of 8.7%), and the ratio of SG&A expenses to
net sales rose to 28.8%, compared with 27.6% in the previous fiscal year.
Principal items included advertising expenses of ¥38,083 million, directors’ remuneration and employees’ wages of ¥38,005 million, employees’
retirement and severance benefits of ¥2,291 million, and research anddevelopment expenses of ¥16,437 million.

During this fiscal year, although there were some bright signs in theeconomic environment in Japan against a backdrop of economic policies
and fiscal easing, such as improved corporate profitability and individual
consumption, the economic outlook remained uncertain due to concerns
about impacts of the consumption tax increase in April 2014 and otherfactors. In North America and Europe also, individual consumption remained
weak and the economic environment continued to be uncertain due to
confusion over fiscal policy and severe problems with unemployment.
In this environment, the BANDAI NAMCO Group (“the Group”)
implemented various measures aimed at medium- to long-term growth,
focusing on its IP (intellectual property; including intellectual propertyof characters) axis strategy, under the concept of “Empower, Gain
Momentum, Accelerate Evolution,” which is the vision of the Group’s
Mid-term Plan, started in April 2012. On the business front, sales werefavorable in the Content Business in areas including home video gamesoftware, visual and music content, and network content. In addition,
the Toys and Hobby Business performed favorably, particularly its
long-established IP products in Japan.

Operating Income
Operating income was ¥44,673 million (year-on-year decrease of 8.2%),
and the operating income margin declined to 8.8%, compared with 10.0%
in the previous fiscal year.
Other Income (Loss)
In other income (loss), interest and dividend income increased to ¥715
million, compared with ¥457 million in the previous fiscal year. However,loss on valuation of investment securities increased to ¥262 million,
compared with ¥21 million in the previous fiscal year, and loss on
impairment of fixed assets increased substantially to ¥2,003 million,
compared with ¥506 million in the previous fiscal year. As a result, there
was a net other loss of ¥1,914 million.

Net sales
On a consolidated basis, the Group’s net sales were ¥507,679 million(year-on-year increase of 4.2%).

Net Income
The Amusement Facility Business recorded extraordinary losses, due
primarily to the closure of unprofitable facilities and the disposalof machines that were expected to be used infrequently. As a result, theGroup recorded net income of ¥25,055 million (year-on-year decreaseof 22.6%). The net income margin in this fiscal year was 4.9%, and net
income per share declined to ¥114.05, compared with ¥147.40 in theprevious fiscal year.

Cost of Sales
Cost of sales was ¥316,850 million, and the ratio of cost of sales to net
sales was 62.4%, the same as in the previous fiscal year. As a result, grossprofit was ¥190,829 million, and the gross profit margin was 37.6%, thesame as in the previous fiscal year.

Results by Segment

Millions of yen

Millions of yen

Net sales

Segment income (loss)

2014

2013

Year on year

2014

2013

Year on year

Toys and Hobby¥186,391¥172,977¥13,414¥10,510¥11,255¥ (745)

Content

278,408

263,596

14,812

37,24936,438811

Amusement Facility

58,20060,186(1,986)

(898)

1,684

(2,582)

Other

27,35125,788

1,563

1,646

1,693

(47)

Toys and Hobby BusinessIn the Toys and Hobby Business, in Japan, sales performed favorably
thanks to cross-functional efforts undertaken across all businesses forlong-established IP such as Kyouryuger (the Power Rangers series), KAMENRIDER GAIM and DOKIDOKI! PRETTY CURE in addition to products of new
IP Aikatsu! for girls. In addition, new IP aimed at boys Yokai Watch launched
in January 2014, has proved to be a very popular product. In addition,
the Group strived to broaden the variety of its target customers by suchmeans as stepping up development of products for babies and pre-school
children, and also for adults, thereby steadily moving toward achieving our
objective of becoming No. 1 for each target customer and market in Japanby an overwhelming margin.
Overseas, in North America and Europe, products of the Power Rangers
series sold steadily but overall sales of North America and Europe were
weak. In the Asian region, toys, plastic models, collectable toys for adults
and card products became popular thanks to developments in conjunction
with Japan.

As a result, net sales in the Toys and Hobby Business were¥186,391 million (year-on-year increase of 7.8%), and segment income
was ¥10,510 million (year-on-year decrease of 6.6%).
Content BusinessLooking at the Content Business, in the area of home video gamesoftware, in addition to the hits of DARK SOULS II for overseas and GOD
EATER 2 for Japan, there were favorable repeat sales of several products
including Disney MAGIC CASTLE MY HAPPY LIFE and the TAIKO: DRUM
MASTER series, which was launched in the previous fiscal year. In the areaof network content, the key titles of social games such as ONE PIECE
Grand Collection, the Mobile Suit Gundam series, and THE IDOLM@STER
series sold stably, and applications for smartphones such as the Mobile
Suit Gundam series and online games contributed to improved
performance as well.

35

Financial Review

In the area of visual and music content, strong sales were realized frommultiple new titles such as SPACE BATTLESHIP YAMATO 2199, Love Live!
School idol project and GIRLS und PANZER, as well as music titles related toanimation. The Group strived to maximize IP value through cross-functional
efforts in the Content Business by linking products and services with
network functions and events.
As a result, net sales in the Content Business were ¥278,408 million(year-on-year increase of 5.6%), and segment income was ¥37,249 million(year-on-year increase of 2.2%).
Amusement Facility BusinessIn the Amusement Facility Business, in Japan the Group newly opened
three indoor theme parks as a measure to build a new business pillar
following the existing amusement facility businesses, while also
promoting the development of differentiated facilities that offer theexperience of the Group’s distinctive worldview of specific IPs. Sales ofexisting facilities declined to 93.8% of the previous fiscal year.
As a result, net sales in the Amusement Facility Business were¥58,200 million (year-on-year decrease of 3.3%), and segment loss was¥898 million (compared with segment income of ¥1,684 million for theprevious fiscal year).
Other Businesses
Other Businesses consist of companies that conduct businesses such as
logistics support, printing, and other kinds of administration and operational
support for each of the Group’s strategic business units: Toys and Hobby
SBU, Content SBU, and Amusement Facility SBU. We are making efforts tomanage such operations related to group support in an efficient manner.
As a result, net sales in Other Businesses were ¥27,351 million(year-on-year increase of 6.1%), and segment income was ¥1,646 million(year-on-year decrease of 2.8%).

Financial Position
As of March 31, 2014, total assets stood at ¥405,093 million, an increaseof ¥30,890 million from the end of the previous fiscal year. The main
factors were increases of ¥12,271 million in cash and time deposits,¥8,370 million in inventories, ¥4,717 million in property, plant andequipment, ¥3,163 million in investment securities due to market valuation,and ¥2,286 million in deferred tax assets.
Total liabilities amounted to ¥137,142 million, an increase of¥11,709 million from the end of the previous fiscal year. The main factors
were increases of ¥5,153 million in trade payables and ¥6,499 million in
accrued expenses, despite a decrease of ¥3,911 million in long-termborrowings due to repayment. In line with a revision to the AccountingStandard for Retirement Benefits, net defined benefit liability increased by¥8,062 million while accrued retirement and severance benefits decreasedby ¥3,724 million.
Total net assets stood at ¥267,951 million, an increase of ¥19,181
million from the end of the previous fiscal year. The main factors wereincreases of ¥15,297 million in retained earnings thanks to the recordingof net income through favorable consolidated results, and ¥7,048 million
in foreign currency translation adjustments due to foreign exchange
fluctuations, despite cash dividends paid of ¥9,892 million.
As a result, the shareholders’ equity ratio of 66.0% is unchanged
compared to the end of the previous fiscal year. The current ratio*1 was
236.7%, compared with 244.3% at the end of the previous fiscal year,
the quick ratio*2 was 176.8%, compared with 185.1%; and the interest
coverage ratio*3 was 308.1 times, compared with 244.4 times.

36

Notes:*1 Current ratio: Total current assets / Total current liabilities*2	Quick ratio: (Cash and time deposits + Short-term investments +Trade receivables) / Total current liabilities*3 Interest coverage ratio: Cash flows from operating activities / Interest paid

Cash Flows
As of the end of the fiscal year, cash and cash equivalents (“net cash”) had
increased by ¥15,625 million from the end of the previous fiscal year to¥134,667 million. Below is the breakdown of cash flows by activities.
Cash Flows from Operating Activities
The amount of net cash provided by operating activities totaled ¥41,291
million (year-on-year increase of 13.4%). Net cash used mainly included
income taxes paid of ¥18,220 million (compared with ¥20,378 million in
the previous fiscal year) and an increase in inventories of ¥7,167 million(compared with ¥1,558 million in the previous fiscal year). However,overall, there was a net increase in net cash due to income before income
taxes and minority interests of ¥42,759 million (compared with ¥48,490
million in the previous fiscal year), depreciation and amortization of¥21,726 million (compared with ¥20,416 million in the previous fiscal
year), and a decrease in trade receivables of ¥5,105 million (comparedwith an increase of ¥5,522 million in the previous fiscal year).
Cash Flows from Investing Activities
The amount of net cash used in investing activities totaled ¥14,421
million (year-on-year decrease of 3.0%). The main item of net cash used
was purchases of property, plant and equipment and intangible assets
totaling ¥15,603 million (compared with ¥13,531 million in the previous
fiscal year).
Cash Flows from Financing Activities
The amount of net cash used in financing activities amounted to ¥15,070
million (year-on-year increase of 20.6%). The main factors for net cashused were cash dividends paid of ¥9,892 million (compared with ¥5,715
million in the previous fiscal year) and repayment of long-term borrowingsof ¥6,052 million (compared with ¥5,333 million in the previous fiscal
year).

Basic Policy on the Distribution of Profits andthe Payment of Dividends
The Company positions the return of profits to stockholders as one of its
highest management priorities. The fundamental policy is to maintain astable dividend and increase corporate value while becoming an evenmore competitive Group, and preserving a sound financial position. The
Company is maintaining the consolidated dividend payout ratio at a levelof 30%, based on stable annual dividend payments of ¥24 per share. The
Company has paid dividends of ¥35 per share for the fiscal year ended
March 31, 2014, including the stable dividend portion of ¥24 and a
results-linked dividend of ¥11. For the fiscal year ending March 31, 2015,
the Company plans to pay the stable dividend portion of ¥24 per share,
and this will be considered by the Company in light of the consolidated
operating results and other factors.
In addition, after appropriation of dividends from the consolidated net
income for the period, the Company has resolved to attribute a portion of
the remaining balance to the acquisition of its own shares, with comprehensive consideration of aspects such as the level of cash held, operating
performance, share price trend, and plan for large-scale investments.

Targets and Management Performance Indicators
The Group has adopted ROE (return on equity) as its key management
performance indicator. Looking ahead, the Group will strive to continue tosecure ROE of 10% or more by aiming to further expand profits throughexecution of strategies under the Mid-term Plan, as well as by effectively
utilizing stockholders’ equity.

Outlook for the Fiscal Year Ending March 31, 2015
Looking ahead, although there are some bright signs in Japanese
economic trends, the business environment is expected to remain beset
by uncertainties, including the impact on consumption from theconsumption tax increase and economic trends in North America andEurope. Such factors are also expected to have an impact on theentertainment industry, in which the Group is extensively involved,
resulting in ongoing uncertainty in this business environment.
Facing these circumstances, the Group will develop and strengthen thefoundations for medium- and long-term growth for the Group in lightof achievements and issues yet to be solved under the current Mid-term
Plan, looking ahead to its next Mid-term Plan starting in April 2015.
On the business front, in the strongly performing Toys and Hobby
Business in Japan and the Content Business, the Group will vigorously
push forward with its IP strategy with the aim of further growing its
market share. Meanwhile, in the Toys and Hobby Business in North
America and Europe and the Amusement Facility Business, which areoperating under difficult conditions, the Group will press ahead withmeasures to construct a stable business foundation. In addition, a projectwill be started for the 35th anniversary of the Group’s mainstay IP, theMobile Suit Gundam series. The Group will work to maximize the IP value
in the medium- and long-term by offering products and services andholding events across the Group with a focus on new animated productions.
In the Toys and Hobby Business, the Group’s plan for the Japanesemarket is to further strengthen the business foundation through thestable deployment of popular IP series such as Mobile Suit Gundam,
Super Sentai (Power Rangers), KAMEN RIDER, PRETTY CURE!, and Aikatsu!.
The Group will also expand its IP lineup by such means as introducing IP
for elementary-school-age boys and for adults, and launch products andservices targeting a variety of customers, and will aim to be No. 1 in Japanby an overwhelming margin. Overseas, in North America and Europe theGroup aims to develop a stable portfolio with multiple IP by launching
new IP products in addition to the Power Rangers series, the mainstay IP.
The Group will also strive to construct a business foundation in theregions of North America and Europe by pressing forward with fundamental reform of the organizational framework and revenue structure.
In Asian areas, the Group aims to expand its IP lineup and areas of operation
and achieve growth through developments in conjunction with Japan,
focusing on plastic models, collectable toys for adults, and card productsthat are popular in Japan.
In the Content Business, to further enhance its IP strategy for offering
products and services in a wide variety of categories with a focus on IP,
the Group will not only respond swiftly to changes in the businessenvironment and new outlets but also strengthen its creation anddevelopment of new IP. In addition, by fusion of the virtual and the realsuch as through the synergistic linking of products and services withconcerts and live events, the Group will strive to create new added value
and maximize IP value.
In the network content area, the Group will work to achieve stabledevelopment of content by launching new titles that appeal to changing
user tastes and releasing timely upgrades of existing titles. In home video

game software, the Group will respond to new platforms by approachingthem as new outlets in its IP axis strategy, while deploying a well-balanced
software lineup consisting of titles for Japan utilizing IP that is in currently
popular titles released worldwide, and titles utilizing network functions.
In arcade game machines, the Group will work on the development andsale of popular game machines and their prizes. In the area of visual andmusic content, the Group will work to create new IP with animatedproductions, in addition to the sales of various new packages of software.
In the Amusement Facility Business, in Japan the Group will strive torealize its unique capability by such means as developing facilities thatcan offer the experience of IP worldviews and closely coordinated efforts
with other Group businesses including the arcade game machine business.
In addition, the Group aims to build new business pillars by directing
efforts toward the theme park business and new business formats.
In North America and Europe, the Group will strive to secure stableprofitability by continuing to implement various efficiency measures.
In light of the above considerations, the consolidated projectionsof the fiscal year ending March 31, 2015 are as follows: net salesof ¥500,000 million (year-on-year decrease of 1.5%), operating incomeof ¥45,000 million (year-on-year increase of 0.7%), and net incomeof ¥28,000 million (year-on-year increase of 11.8%).
Consolidated Plan for the Fiscal Year Ending March 31, 2015
Segments

Millions of yen
Net sales

Segment income

Toys and Hobby¥200,000¥13,000

Content

260,000

32,000

Amusement Facility

60,000

1,000

Other

25,0001,000

Adjustments(45,000)(2,000)Consolidated¥500,000¥45,000

Forward-Looking Statements
Forecasts for the next fiscal year and other future projections in thisannual report are based on information available to the Group at the timethey were made and are therefore subject to various risks and uncertainties.
Actual results therefore may differ materially from projections for a variety
of factors. Major factors that could influence results include changes in
the Company and the Group’s operating environment, market trends,
and exchange rate fluctuations.

37

Consolidated Balance Sheets
BANDAI NAMCO Holdings Inc. and Consolidated Subsidiaries
As of March 31, 2013 and 2014

Millions of yen

Thousands of
U.S. dollars (note 3)

2013

2014

2014

AssetsCurrent assets:
Cash and time deposits (notes 4 and 12)¥ 119,133¥ 131,404$ 1,276,759

Short-term investments (notes 4, 5 and 12)

4,380

4,423

42,975Trade receivables (notes 6 and 12)

77,06976,588744,151

Allowance for doubtful receivables

(485)

(595)

(5,781)Inventories (note 7)

36,64445,014437,369

Deferred tax assets (note 13)

10,5809,914

96,327

Other current assets

17,483

17,650171,492

		 Total current assets

264,804

284,398

2,763,292

25,40528,568277,575

—

47

457

Deferred tax assets (note 13)

8,399

11,351

110,290

Other investments and assets

21,18019,626

190,691

Investments and other assets:
Investment securities (notes 5 and 12)
Net defined benefit asset (note 11)

Allowance for doubtful receivables(1,338)(1,015)(9,862)

		 Total investments and other assets

53,64658,577569,151

Buildings and structures

25,31926,764260,047

Amusement facilities and machines

60,99959,886

581,869

Land

11,538

11,630113,000

Property, plant and equipment:

Other property, plant and equipment
		TotalLess accumulated depreciation
		 Net property, plant and equipment

86,537

99,419965,983

184,393

197,699

1,920,899(137,137)(145,726)(1,415,915)

47,256

51,973504,984

8,497

10,14598,572¥ 374,203¥ 405,093$ 3,935,999

Intangible assets:
Total intangible assets
Total assets
See accompanying Notes to Consolidated Financial Statements.

38

Millions of yen

Thousands of
U.S. dollars (note 3)

2013

2014

2014

Liabilities and net assets
Current liabilities:
Short-term borrowings (notes 9 and 12)¥  5,596¥  5,502$   53,459

Trade payables (notes 10 and 12)

46,472

51,625

501,603

Accrued expenses

38,07044,569433,045

Accrued income taxes (notes 12 and 13)

7,853

8,828

85,775

Other current liabilities (notes 9 and 13)
		 Total current liabilities

10,4009,611

93,384

108,391

120,135

1,167,266

3,724

—

—

Long-term liabilities:
Accrued retirement and severance benefits (note 11)
Net defined benefit liability (note 11)
Deferred tax liabilities (note 13)
Other long-term liabilities (note 9)

—

8,062

78,333

1,589

1,044

10,144

11,7297,901

76,768

		 Total long-term liabilities

17,042

17,007

165,245

		Total liabilities

125,433

137,142

1,332,511

10,00010,00097,163

Net assets:
Shareholders’ equity
Common stock (note 19)
		 Authorized: 1,000,000,000 shares
		 Issued: 222,000,000 shares
Additional paid-in capital

52,24652,246507,637

Retained earnings (note 17)

199,118

214,415

2,083,317

Treasury stock, at cost; 2,309,342 shares in 2013 and 2,312,098 shares in 2014 (note 19)
		Subtotal(2,385)(2,391)(23,232)

258,979

274,2702,664,885

5,212

6,226

60,494

Accumulated other comprehensive income
Unrealized gains or losses on other securities, net of tax (note 5)
Deferred gains or losses on hedges, net of tax

642

195

1,895

Revaluation reserve for land, net of tax (note 18)(5,609)(5,743)(55,801)

Foreign currency translation adjustments(12,193)(5,145)(49,990)—(2,282)(22,173)(11,948)(6,749)(65,575)

Remeasurements of defined benefit plans, net of tax (note 11)
		Subtotal
Subscription rights to shares

—

44

428

Minority interests

1,739

386

3,750

		 Total net assets

248,770

267,951

2,603,488

		 Total liabilities and net assets¥374,203¥405,093$3,935,999

39

Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
BANDAI NAMCO Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2013 and 2014

Consolidated Statements of Income
Millions of yen

Thousands of
U.S. dollars (note 3)

2013

2014

2014

Net sales¥487,241¥507,679$4,932,754

Cost of sales

304,162

316,850

3,078,605

		Gross profit

183,079

190,829

1,854,149

Selling, general and administrative expenses (note 14)

134,436

146,156

1,420,093

		Operating income

48,64344,673434,056

Other income (loss):
Interest and dividend income

457

715

6,947

Interest expense

(142)

(125)

(1,215)Gain (loss) on sales of investment securities, net

15

11

107

Loss on valuation of investment securities

(21)

(262)

(2,546)

Gain (loss) on sales and disposal of fixed assets, net

(234)

(131)

(1,273)

Loss on impairment of fixed assets (note 8)(506)(2,003)(19,462)

Other

278

(119)

(1,155)(153)(1,914)(18,597)

Income before income taxes and minority interests

48,49042,759415,459

Income taxes (note 13)

16,03817,872

173,650

Income before minority interests

32,452

24,887

241,809

Minority interests in income (loss)

69

(168)

(1,633)¥ 32,383¥ 25,055$   243,442

Yen

U.S. dollars (note 3)

2013

2014

2014

¥1,124.45¥1,217.74$11.83

		Net income

Data per common share (note 16):
Net assets at March 31
Net income:
Basic
DilutedCash dividends applicable to period (note 17)147.40114.051.11—

114.03

1.11

45.00

35.00

0.34

Millions of yen

Thousands of
U.S. dollars (note 3)

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income

Income before minority interests

2013

2014

2014

¥32,452¥24,887$241,809

Other comprehensive income
Unrealized gains or losses on other securities, net of tax (note 5)
Deferred gains or losses on hedges, net of tax
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted forusing equity method
Total other comprehensive income
Comprehensive income

2,325

987

9,590

412

(450)

(4,372)

6,283

7,159

69,559

33
9,053

50
7,746

486
75,263¥41,505¥32,633$317,072¥41,304¥32,670$317,431

201

(37)

(359)

Comprehensive income attributable to:
Owners of the parent
Minority interests
See accompanying Notes to Consolidated Financial Statements.

40

Consolidated Statements of Changes in Net Assets
BANDAI NAMCO Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2013 and 2014

Millions of yen

Thousands of
U.S. dollars (note 3)

2013

2014

2014

¥ 10,000¥ 10,000$   97,163

10,00010,00097,16352,24652,246507,637

Shareholders’ equity
Common stock (note 19):
		 Balance at beginning of year
		 Balance at end of year
Additional paid-in capital:
		 Balance at beginning of year
		 Disposal of treasury stock

(0)

0

0

52,24652,246507,637

		 Balance at beginning of year

173,250

199,118

1,934,687

		Net income

32,38325,055

243,442		 Balance at end of year
Retained earnings (note 17):

		 Reversal of revaluation reserve for land		Cash dividends
		 Balance at end of year

(800)

134

1,302

(5,715)(9,892)

199,118

214,415(96,114)2,083,317(23,173)

Treasury stock (note 19):
		 Balance at beginning of year

(2,383)(2,385)

		 Net change during year

(2)

(6)

(59)

		 Balance at end of year

(2,385)(2,391)(23,232)¥258,979¥274,270$2,664,885

		 Balance at beginning of year

2,868

5,212

50,641		 Net change during year

2,344

1,014

9,853

		 Balance at end of year

5,212

6,226

60,494

			Total shareholders’ equity
Accumulated other comprehensive income
Unrealized gains or losses on other securities, net of tax (note 5):

Deferred gains or losses on hedges, net of tax:
		 Balance at beginning of year

230

642

6,238

		 Net change during year

412

(447)

(4,343)

		 Balance at end of year

642

195

1,895
(54,499)

Revaluation reserve for land, net of tax (note 18):
		 Balance at beginning of year

(6,409)(5,609)

		 Net change during year

800

(134)

(1,302)

		 Balance at end of year

(5,609)(5,743)(55,801)(118,471)

Foreign currency translation adjustments:
		 Balance at beginning of year

(18,358)(12,193)		 Net change during year

6,165

7,048

68,481

		 Balance at end of year

(12,193)(5,145)(49,990)

Remeasurements of defined benefit plans, net of tax (note 11):
		 Balance at beginning of year

—

—

—

		 Net change during year—

(2,282)(22,173)

		 Balance at end of year
			 Total accumulated other comprehensive income—(2,282)(22,173)¥ (11,948)¥   (6,749)$  (65,575)

Subscription rights to shares:
Balance at beginning of year

—

—

—

Net change during year

—

44

428

Balance at end of year

—

44

428

Minority interests:
Balance at beginning of year
Net change during year
Balance at end of year
			 Total net assets at end of year

1,682

1,739

16,89757(1,353)(13,147)

1,739

386

3,750

¥248,770¥ 267,951$2,603,488

See accompanying Notes to Consolidated Financial Statements.

41

Consolidated Statements of Cash Flows
BANDAI NAMCO Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2013 and 2014

Millions of yen

Thousands of
U.S. dollars (note 3)

2013

2014

2014

¥ 48,490¥   42,759$   415,459

20,416

21,726211,096

Loss on impairment of fixed assets

506

2,003

19,462

Loss (gain) on sales and disposal of fixed assets, net

234

131

1,273

Loss on disposal of amusement facilities and machines

407

579

5,626

Loss (gain) on sales of investment securities, net

(49)

(11)

(107)

Loss on valuation of investment securities

21

262

2,546

Decrease (increase) in trade receivables(5,522)

5,105

49,602

Decrease (increase) in inventories(1,558)(7,167)(69,637)

Acquisition of amusement facilities and machines(3,516)(5,132)(49,864)

Increase (decrease) in trade payables(4,264)

812

7,890

Other

1,312

(2,157)(20,959)

		Subtotal

572,387

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization

56,477

58,910Interest and dividends received

461

735

7,141

Interest paid

(149)

(134)

(1,302)(20,378)(18,220)(177,031)

36,411

41,291

401,195

Income taxes paid
		 Net cash provided by operating activities
Cash flows from investing activities:
Decrease (increase) in time deposits, net(2,352)

3,519

34,192

Purchases of property, plant and equipment(8,842)(10,415)(101,195)

Sales of property, plant and equipment

272

99

962

(4,689)(5,188)(50,408)

Purchases of investment securities

(102)

(504)

(4,897)

Sales of investment securities

101

144

1,399

Proceeds from redemption of investment securities

74

—

—

Purchases of intangible assets

Proceeds from liquidation of subsidiaries

—

576

5,597

Purchases of investments in subsidiaries(250)(2,743)(26,652)

Proceeds from sales of shares of subsidiaries

—

9

87

Payments for investments in capital of subsidiaries and affiliates

—

(300)

(2,915)

Proceeds from purchase of shares of subsidiaries resulting in change in scope of consolidation
Payments of loans receivable

—

328

3,187

(229)

(328)

(3,187)

Collection of loans receivable

676

834

8,103

Payments of guarantee money deposited

(610)

(919)

(8,929)Collection of guarantee money deposited

1,175

689

6,695

(85)

(222)

(2,158)(14,861)(14,421)(140,119)
3,060

Other
		 Net cash used in investing activities
Cash flows from financing activities:
Increase (decrease) in short-term borrowings, net(1,317)315

Proceeds from long-term borrowings

—

710

6,899

Repayment of long-term borrowings(5,333)(6,052)(58,803)

Payment of lease obligations

(83)

(129)

(1,253)

Decrease (increase) in treasury stock, net

(2)

(6)

(58)

(5,715)(9,892)(96,114)

(50)

(16)

(155)

(12,500)(15,070)(146,424)

Cash dividends paid
Cash dividends paid to minority interests
		 Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents

2,665

3,825

37,165

Net increase (decrease) in cash and cash equivalents

11,715

15,625

151,817

Cash and cash equivalents at beginning of year

107,327

119,042

1,156,646

Cash and cash equivalents at end of year (note 4)¥119,042¥ 134,667$1,308,463

See accompanying Notes to Consolidated Financial Statements.

42

Notes to Consolidated Financial Statements
BANDAI NAMCO Holdings Inc. and Consolidated Subsidiaries

1 Basis of Presentation
BANDAI NAMCO Holdings Inc. (“the Company”) and its consolidated

and filed with the appropriate Local Finance Bureau of the Ministry ofsubsidiaries have prepared their financial statements in accordance withFinance as required by the Financial Instruments and Exchange Act.

the provisions set forth in the Japanese Financial Instruments andSome supplementary information included in the statutory Japanese-

Exchange Act and its related accounting regulations, and in conformity

language consolidated financial statements that is not required for fairwith accounting principles generally accepted in Japan (Japanese GAAP),

presentation is not presented in the accompanying consolidated financial

which are different in certain respects as to application and disclo­surestatements.

requirements of International Financial Reporting Standards (IFRSs).

In preparing the accompanying consolidated financial state­ments,

The accounts of foreign subsidiaries are based on their accounting

certain reclassifications have been made to the con­solidated financial

records maintained in conformity with IFRSs or account­ing principles

statements issued in Japan in order to present them in a form that is

generally accepted in the United States (U.S. GAAP).

more useful to readers outside Japan.

The accompanying consolidated financial statements have been

Certain reclassifications have been made to the prior year con­solidated

prepared and translated into English from the consolidated financial

financial statements to conform to the presen­tation used for the fiscal

statements of the Company prepared in accordance with Japanese GAAP

year ended March 31, 2014.

2 Summary of Significant Accounting Policies(a) Principles of Consolidation(d) Accounting Standards for Income and Expenses

The accompanying consolidated financial statements include the accounts

Video Game Software Revenue Recognition:of the Company and its significant subsidiaries. Consolidation of theConsolidated subsidiaries operating in the United States recognize

remaining subsidiaries would have had no material effect on the accom-

revenue in accordance with “Software Revenue Recognition” of Financial

panying consolidated financial statements. Investments in significant

Accounting Standards Board (FASB) Accounting Standards Codification

affiliates are accounted for using the equity method.

No. 985-605, treating video game software with online functions as

Investments in unconsolidated subsidiaries and certain affiliates othersoftware products with multiple-element arrangements. Unless the vendor

than those accounted for using the equity method are stated at cost. If the

can objectively and reasonably identify the market value of undelivered

equity method had been applied to the investments in these companies,

elements specified by the vendor, recording of any revenue attributable

there would have been no material effect on the accompanying consolidated

to video game software is deferred until all the elements are delivered.

financial statements.
All significant intercompany accounts and transactions have been
eliminated in consolidation.

Accounting for Video Game Software Production Expenses:
A distinctive characteristic of video game software is the process throughwhich the software is highly integrated with content that cannot be(b) Cash and Cash Equivalents
In reporting cash flows, the Company considers cash on hand, demand

separated into identifiable components.
The content is considered to be an important component of eachdeposits, and all highly liquid investments with original maturities

video game title, which includes the game content and visual/music data.

of three months or less to be cash and cash equivalents.

Once management makes a decision to go forward in distributing a title,
the Company records the software and content development costs as(c) Foreign Currency Translation
Foreign currency transactions are translated into yen at rates in effectat the dates they are transacted, and the gains or losses arising from theinventories.
The capitalized production costs are amortized to cost of sales basedon projected sales volumes.

settlement of the related receivables or payables are included in “Other
income (loss)” in the consolidated statements of income.

(e) Short-Term Investments and Investment Securities

Receivables and payables denominated in foreign currencies at the

Other securities with market value are principally carried at market value.

balance sheet date are translated at the rates in effect as of the balance

The difference, net of tax, between the acquisition cost and the carrying

sheet date and the unrealized gains or losses are included in “Other

amount of other securities with market value is recognized in “Unrealized

income (loss)” in the consolidated statements of income.

gains or losses on other securities, net of tax” in “Net assets” in the

The assets and liabilities of foreign consolidated subsidiaries andconsolidated balance sheets until realized. Other securities without

affiliates are translated into yen at the rates of exchange in effect at

market value are principally carried at cost. The cost of other securities

the balance sheet date. Revenue and expenses of foreign consolidated

sold is principally computed based on the moving-average method.

subsidiaries and affiliates are translated into yen at the average rates

Investments in investment limited partnerships or similar associationsof exchange during the fiscal year. Gains and losses, resulting from(investments that are deemed to be securities under the Financial Instru-

the translation of foreign currency financial statements are generally

ments and Exchange Act, Article 2, Clause 2), are carried at the net

excluded from the consolidated statements of income and are included

amount proportionate to the Company’s ownership interests, based onin “Foreign currency translation adjustments” in “Net assets” in thethe most recent financial statements available in accordance with theconsolidated balance sheets.

financial reporting date specified in the partnership agreement.

43Notes to Consolidated Financial Statements( f ) Allowance for Doubtful Receivables( j ) Intangible Assets

The allowance for doubtful receivables is provided for possible losses on

Amortization of intangible assets is computed by the straight-line method

unrecoverable receivables. For ordinary receivables, the amount of thebased on estimated useful lives. Software for internal use is amortizedallowance is based on the historical rate of loss. For receivables fromover 1–5 years.

debtors at risk of bankruptcy and receivables from debtors in bankruptcy,

Goodwill is amortized over 5 years using the straight-line method.

under reorganiza­tion or other, the amount of the allowance is based on
individually estimated unrecoverable amounts.

(k) Leased Assets
Depreciation of leased assets is computed by the straight-line method(g) Inventories

over the period of the lease with a residual value of zero.

Domestic Consolidated Subsidiaries:
Inventories are stated at cost determined by the average-cost method.

(l ) Derivatives and Hedging Activities

The value stated on the balance sheet is calculated by writing down the

The Company and its consolidated subsidiaries use derivative instruments,

carrying amount based on declining profitability.

such as forward foreign exchange contracts and currency option contracts,
to reduce market risks arising from fluctua­tions in foreign exchange rates

Foreign Consolidated Subsidiaries:

and interest rates. The Company and its consolidated subsidiaries use

Inventories are stated at the lower of cost, determined prin­cipallythese deriva­tive instru­ments solely for the purpose of reducing the risks

by the average cost method, or net realizable value.

resulting from such fluctua­tions to which they are exposed in the courseof their ordinary business activi­ties. Accordingly, the Company and its

Both domestic and foreign consolidated subsidiaries state gamesoftware work in process by the specific-cost method. The value stated on
the consolidated balance sheets is calculated by writing down the carrying
amount based on declining profitability.

consolidated subsidiaries do not use derivative instru­ments or otherfinancial instruments for speculative purposes.
The Company and its consolidated subsidiaries’ counterparties forderivative instruments are all highly creditworthy financial institutions
and, therefore, the Company believes that it is exposed to almost no(h) Income Taxes

counterparty risk. Derivative transactions are conducted in accordance

Current income taxes are accounted for based on income. Deferredwith internal rules that specify transaction authority and transaction

income taxes are accounted for under the asset and liability method.

amount limits.

Deferred tax assets and liabilities are recog­nized for future tax conse-

As a general rule, derivative instruments are stated at market value.

quences attributable to dif­ferences between the financial statement

For derivative instruments that meet the criteria for hedge accounting,carrying amounts of existing assets and liabilities and their respective tax

recognition of unrealized gains or losses is deferred. In cases wherebases and operat­ing loss and tax credit carryforwards. Deferred tax assets

forward foreign exchange contracts meet certain hedging criteria, theand liabilities are measured using enacted tax rates expected to apply tohedged receivables and payables are translated at the corresponding

taxable income in the years in which those temporary differences areforward foreign exchange contract rate (the “Allocation Method”).

expected to be recovered or settled. The effect on deferred tax assets and

The Company and its consolidated subsidiaries assess the effectivenessliabilities of a change in the tax rate is recog­nized in income in the periodof hedging transactions from the start of the transaction to the point atthat includes the enactment date.

which effectiveness is assessed by comparing the cumulative changes in

The Company and some of its domestic consolidated subsidiaries havebeen applying the consolidated taxation system.

the market value or the cumulative changes in the cash flows of the hedged
item with the cumulative changes in the market value or the cumulativechanges in the cash flows of the hedging instrument. In the event that(i) Property, Plant and Equipment

critical terms are the same for the hedging instrument and the hedged

The Company and Its Domestic Consolidated Subsidiaries:

assets, liabilities, or scheduled transaction, it is assumed that the hedge

Depreciation of property, plant and equipment is principally computed by theis 100% effective, so the assessment of effectiveness is not performed.

declining-balance method based on estimated useful lives. The straight-line

In the event that a hedge becomes ineffective, hedge accounting is no

method is used for buildings (except for building fixtures) acquired since April 1,

longer applied and the recognition of the gains or losses on the hedge

1998. The estimated useful lives for Buildings and structures and Amuse-transaction is no longer deferred.

ment facilities and machines are 3–50 years and 3–15 years, respectively.
(m) Provision for Directors’ Bonuses
Foreign Consolidated Subsidiaries:

Accrued bonuses for directors are provided for based on the estimatedDepreciation of property, plant and equipment is principally computed byamounts to be paid in respect of the fiscal year.

the straight-line method based on estimated useful lives. The estimateduseful lives for Buildings and structures and Amusement facilities and(n) Retirement and Severance Benefitsmachines are 5–50 years and 3–7 years, respectively.

The Company and certain domestic consolidated subsidiaries haveestablished a defined benefit corporate pension plan, a defined benefit
retirement lump-sum benefit system plan, and a defined contribution
pension plan. Other domestic consolidated subsidiaries (excluding44

domestic consolidated subsidiaries with no retirement benefit system)(r) Data per Common Sharehave established a defined benefit corporate pension plan, a defined

In computing basic net income per common share, the average number ofbenefit retirement lump-sum benefit system, and defined benefit compre-

shares outstanding during each year has been used. Diluted net income perhensive employee pension funds. Certain consolidated subsidiaries haveshare assumes the dilution that could occur if securities or other contracts

established a defined contribution pension plan and a defined contribution

to issue common stock were exercised or converted into common stock, or

smaller enterprise retirement allowance mutual aid system. Moreover,resulted in issuance of common stock.

additional benefits may be paid at retirement. Certain foreign consolidated
subsidiaries have established defined benefit pension plans, retirement

Cash dividends per common share are computed based on dividends
declared with respect to the income for the year.

lump-sum benefit systems, and defined contribution pension plans.
In calculating the retirement benefit obligations of certain consolidated(s) Accounting Standards Issued But Not Yet Adopted

subsidiaries, the straight-line method is used to attribute expected benefit

Revised Accounting Standard for Retirement Benefits

payments to the period extending up to the end of the current fiscal year.
Prior service costs are amortized from the time they accrue by thestraight-line method for a certain number of years (10 years) within(ASBJ Statement No. 26, May 17, 2012)
Revised Guidance on Accounting Standard for Retirement Benefits(ASBJ Guidance No. 25, May 17, 2012)

employees’ average remaining years of service. Actuarial gains or losses
are amortized from the consolidated fiscal year following the year in

The treatment of unrecognized actuarial gains or losses and unrecognizedwhich the gain or loss is incurred by the straight-line method for a certain

prior service cost and the method of calculating and presenting retirement

number of years (9–19 years) not longer than employees’ average remaining

benefit obligations and prior service cost have been revised. The revised

years of service. The Company and certain consolidated subsidiaries use

methods of calculating retirement benefit obligation and prior service costa simplified method in calculating net defined benefit asset, net defined

will be applied from the beginning of the fiscal year ending March 31,

benefit liability, and periodic pension cost under which retirement benefit

2015. This accounting standard, includes transitional provisions andobligations are principally based on accrued benefits at the end of the year.

accordingly will not be retroactively applied to consolidated financial

As of the end of the fiscal year ended March 31, 2014, the Company

statements from prior periods. The impact of the application of thisand its domestic consolidated subsidiaries have applied the Accounting

accounting standard, on the consolidated financial statements is expectedStandard for Retirement Benefits (ASBJ Statement No. 26, May 17, 2012

to be minimal.

(“Statement No. 26”)) and Guidance on Accounting Standard for Retirement
Benefits (ASBJ Guidance No. 25, May 17, 2012 (“Guidance No. 25”)) except forarticle 35 of Statement No. 26 and article 67 of Guidance No. 25 and actuarial
gains and losses and past service costs that were yet to be recognized have

Revised Accounting Standard for Business Combinations(ASBJ Statement No. 21, September 13, 2013)
Revised Accounting Standard for Consolidated Financial Statements

been recognized and the difference between retirement benefit obligations(ASBJ Statement No. 22, September 13, 2013)and plan assets has been recognized as a net defined benefit liability.

Revised Accounting Standard for Business Divestitures

In accordance with article 37 of Statement No.26, the effect of the(ASBJ Statement No. 7, September 13, 2013)change in accounting policies arising from initial application has been

Revised Accounting Standard for Earnings Per Sharerecognized in remeasurements of defined benefit plans, net of tax inaccumulated other comprehensive income.
As a result of the application, net defined benefit asset of ¥47 million($457 thousand) and net defined benefit liability of ¥8,062 million($78,333 thousand) have been recognized, deferred tax assets increasedby ¥1,184 million ($11,504 thousand), and accumulated other comprehensive(ASBJ Statement No. 2, September 13, 2013)
Revised Guidance on Accounting Standard for Business Combinations andBusiness Divestitures(ASBJ Guidance No. 10, September 13, 2013)
Revised Guidance on Accounting Standard for Earnings Per Share(ASBJ Guidance No. 4, September 13, 2013)

income decreased by ¥2,282 million ($22,173 thousand) at the end of thecurrent fiscal year.

These accounting standards include revisions, principally as follows:
1) Accounting treatment for changes in parent company’s ownership of(o) Provision for Losses from Business Restructuringa subsidiary in cases where the parent company retains control of theProvision for losses from business restructuring is provided based on

subsidiary through an additional purchase of shares of the subsidiary, 2)

the estimated losses to be incurred on restructuring of operations.

Accounting treatment of acquisition-related costs, 3) Change in presentation of net income and change from minority interests to non-controlling(p) Provision for Sales Returns

interests, and 4) Provisional accounting treatment. The Company plans to

The Company and its consolidated subsidiaries provide for losses on

apply these for business combinations occurring at or after the beginning

returned goods after the end of the fiscal year based on historic experience.

of the fiscal year ending March 31, 2016. The impact of the application ofthese accounting standards is being evaluated at the time of preparation(q) Appropriation of Retained Earningsof these consolidated financial statements were being prepared.

In Japan, retained earnings with respect to a given financial period areappropriated by resolution of the shareholders at a general meeting to beheld subsequent to the close of such financial period. The accounts forthat period do not, therefore, reflect such appropriations.

45

Notes to Consolidated Financial Statements

3 Financial Statement Translation
The consolidated financial statements are expressed in yen. However, solely for the convenience of the reader, the consolidated financial statements asof and for the fiscal year ended March 31, 2014 have been translated into U.S. dollars at the rate of ¥102.92=U.S.$1, the approximate exchange rate on
the Tokyo Foreign Exchange Market on March 31, 2014.
This translation should not be construed as an indication that the amounts shown could be converted into U.S. dollars at such rate.

4 Cash and Cash Equivalents
Reconciliations of cash and cash equivalents as of March 31, 2013 and 2014 between the amounts shown in the consolidated balance sheets andthe consolidated statements of cash flows are as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and time deposits

2013

2014

2014

¥119,133¥131,404$1,276,759

Short-term investments

4,380

4,423

42,975Time deposits with maturities in excess of three months(4,471)(1,160)(11,271)¥119,042¥134,667$1,308,463

Millions of yen

Thousands of
U.S. dollars

2013

2014

2014

Other securities with market value¥18,902¥19,983$194,161

Other securities without market value

1,527

2,466

23,960Investments in non-consolidated subsidiaries and affiliated companies

9,273

10,469101,720

83

73

709

¥29,785¥32,991$320,550

Cash and cash equivalents

5 Short-Term Investments and Investment Securities
Short-term investments and investment securities as of March 31, 2013 and 2014 are summarized as follows:

Contributions to investment partnerships
Total of short-term investments and investment securities

The original cost, carrying amount (market value), and gross unrealized holding gain (loss) for other securities with market value as of March 31, 2013
and 2014 are summarized as follows:
Millions of yen

2013
Original cost

Gross unrealized
holding gain

Gross unrealized
holding loss

Carrying amount(market value)¥ 7,721¥6,804¥(3)¥14,522

Other securities with market value:
Equity securities
Other

4,380

—

—

4,380

		Total¥12,101¥6,804¥(3)¥18,902

Millions of yen

2014
Original cost

Gross unrealized
holding gain

Gross unrealized
holding loss

Carrying amount(market value)¥15,560

Other securities with market value:
Equity securities46¥ 7,740¥7,821

¥(1)

Other

4,423

—

—

4,423

		Total¥12,163¥7,821¥(1)¥19,983

Thousands of U.S. dollars

2014
Original cost

Gross unrealized
holding gain

Gross unrealized
holding loss

Carrying amount(market value)$151,186

Other securities with market value:
Equity securities$ 75,205$75,991

$(10)

Other

42,975——42,975

		Total$118,180$75,991$(10)$194,161

The following is a summary of the carrying amount of other securities without market value as of March 31, 2013 and 2014:
Thousands of
U.S. dollars

Millions of yen

2013

2014

2014

Carrying amount

Carrying amount

Carrying amount¥1,527¥2,466$23,960¥1,527¥2,466$23,960

Other securities without market value:
Unlisted securities
		TotalProceeds and gross realized gains and losses from the sales of other securities in the fiscal years ended March 31, 2013 and 2014 are as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2014

2014

Equity securities

¥55

¥121

$1,176

Other

10

23

223

Proceeds from the sales of other securities

¥65

¥144

$1,399Gross realized gains from the sales of other securities

15

11

107

Gross realized losses from the sales of other securities

(0)

—

—

Millions of yen

Thousands of
U.S. dollars

6 Trade Receivables
Trade receivables as of March 31, 2013 and 2014 are summarized as follows:

2013

2014

2014

Notes receivable¥ 2,569¥ 5,641$ 54,810

Accounts receivable–trade74,45770,924689,118

43

23

223

¥77,069¥76,588$744,151

Lease receivables and investment assets
		TotalNotes receivable and accounts receivable–trade of ¥30 million are pledged as collateral for borrowings as of March 31, 2014. No trade receivables were
pledged as of March 31, 2013.

7 Inventories
Inventories as of March 31, 2013 and 2014 are summarized as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2014

2014

Finished goods and merchandise¥10,916¥15,277$148,436

Work in process

19,59823,274226,137

Raw materials and supplies

6,130

6,463

62,796¥36,644¥45,014$437,369

		Total47

Notes to Consolidated Financial Statements

8 Loss on Impairment of Fixed Assets
Evaluation of fixed asset impairment is performed by grouping assets according to management accounting classifications based on strategic business
units, excluding significant idle assets, assets scheduled for disposal, and leased assets. In the Amusement Facility Business, the individual facility is thesmallest unit used in management accounting and is the basic unit for evaluating impairment.
The carrying amounts of the following assets, which exclude reusable assets, were reduced to the recoverable amount. The amounts of reduction
recorded as an impairment loss in “Other income (loss)” for the fiscal years ended March 31, 2013 and 2014 are as follows:

Strategic business unit

Items

Classification

Location

Toys and Hobby

Software for Internet content
business

Intangible assets

Seoul, Korea (note 1)

Assets scheduled for
disposal

Buildings and structures,and other assets

Taito-ku, Tokyo (note 2)

Millions of yen

Thousands of
U.S. dollars

2013

2014

2014

¥ 91

¥     —

$    —

71——

Funabashi City, Chiba, andothers (note 3)

17

—

—

Content

Assets scheduled for
disposal

Other property, plant andequipment

Shinagawa-ku, Tokyo(note 2)

12——

Amusement Facility

Amusement facilities

Amusement facilities andmachines

Nagoya City, Aichi, and others(note 2)

186

—

—

Kobe City, Hyogo (note 3)

44

—

—

Corporate (Common)

Assets scheduled for
disposal

Buildings and structures,and other assets

Shinagawa-ku, Tokyo(note 2)

85——

Toys and Hobby

Business assets

Land and other assets

Fukuoka City, Fukuoka(note 4)

—

222

2,157

Business assets

Buildings and structures,and other assets

Osaka City, Osaka, and others(note 1)

—

58

564

Content

Assets scheduled for
disposal

Buildings and structures,and other assets

Shibuya-ku, Tokyo (note 3)
—

20

194

Amusement Facility

Amusement facilities

Amusement facilities andmachines

Osaka City, Osaka, and others(note 1)

—

619

6,014

Fukuoka City, Fukuoka, andothers (note 3)

—

560

5,441

Kawasaki City, Kanagawa, andothers (note 2)

—

518

5,033

—

1

10

Other

Business assets

Buildings and structures,and other assets

Sendai City, Miyagi (note 1)

Corporate (Common)

Operational facilities

Other property, plant andequipment

Yokohama City, Kanagawa,and others (note 2)

Total

—

5

49

¥506

¥2,003$19,462

Notes: 1. Impairment loss was recorded because it was forecast that the carrying amount of these fixed assets could not be recovered due to the decline in business profitability. In addition, these assets were
determined to have no market value.
2. Impairment loss was recorded on these fixed assets, for which no future use is anticipated. In addition, these assets were determined to have no market value.
3. Impairment loss was recorded because it was judged that the recoverable amount of these fixed assets had decreased substantially due to the decision to close the facility. In addition, these assets
were determined to have no market value.
4. I mpairment loss was recorded due to the continuous decline of land price. The recoverable amount was measured based on the estimated net selling price, which was assessed based on its officially publishedland price.

48

9 Borrowings and Lease Obligations
Borrowings and lease obligations as of March 31, 2013 and 2014 are summarized as follows:
Millions of yen

2013

Short-term borrowings
Long-term borrowings due within one year
Lease obligations due within one year
Long-term borrowings (Less current portion)
Lease obligations (Less current portion)
Total

Thousands of
U.S. dollars

2014

2014

Carrying
amountWeighted averageinterest rate (%)

Carrying
amountWeighted averageinterest rate (%)

Carrying
amount¥  213

2.63¥  7001.18$ 6,801

5,383

0.73

4,802

0.65

46,658

71

4.97

51

8.33

496

7,500

0.76

3,588

0.68

34,861

96

4.42

44

8.39

428

¥13,263—¥9,185—$89,244

Notes: 1. The terms of the Company’s major borrowings include restrictive financial covenants. In regard to the details of these financial covenants, see Note “17 Retained Earnings and Dividends.”
2. As of March 31, 2014, ¥17 million of long-term borrowings due within one year and ¥33 million of long-term borrowings (less current portion) were loans from financial institutions for which¥30 million in notes receivable and accounts receivable–trade have been used for collateral. As of March 31, 2013, there were no obligations with collateral.

The aggregate annual maturities of long-term borrowings and lease obligations outstanding as of March 31, 2014 are as follows:
Millions of yen

Thousands of
U.S. dollars

2015¥4,853$47,154

2016

2,323

22,571

2017

1,266

12,300

2018

22

214

Years ending March 31

2019
Total

20

194

¥8,484$82,433

Millions of yen

Thousands of
U.S. dollars

10 Trade Payables
Trade payables as of March 31, 2013 and 2014 are summarized as follows:

Notes payable
Accounts payable–trade
Total

2013

2014

2014

¥ 4,776¥ 9,160$ 89,001

41,69642,465

412,602¥46,472¥51,625$501,603

49

Notes to Consolidated Financial Statements

11 Retirement and Severance Benefits
1. Accrued retirement and severance benefits, and others
The plans’ funded status and amounts of accrued retirement and severance benefits as of March 31, 2013 was as follows:
Millions of yen

2013

Projected benefit obligations¥(18,798)

Plan assets at market value

11,070

Projected benefit obligation in excess of plan assets(7,728)Unrecognized loss

4,231

Unrecognized prior service cost

(227)

Total accrued retirement and severance benefits¥ (3,724)

Notes: 1.	In addition to the above plan assets, plan assets of ¥148 million as of March 31, 2013 were managed by a governmental welfare pension benefit plan, which was jointly established by the Company
and various third-party companies. The aforementioned plan assets are computed based on a pro-rata allocation of contributions paid.
2.	Certain consolidated subsidiaries use a simplified method for calculating projected benefit obligations.

Net periodic cost of employee retirement and severance benefits for the fiscal year ended March 31, 2013 consisted of the following:
Millions of yen

2013

Service cost for benefits earned, net of employee contributions¥1,691

Interest cost on projected benefit obligations

280

Expected return on plan assets(154)

Amortization of unrecognized actuarial gain or loss

356

Amortization of prior service cost

(28)

Net periodic cost

¥2,145

Notes: 1. In addition to the net periodic cost of employee retirement and severance benefits, contributions to a governmental welfare pension benefit plan are charged to “Cost of sales” and “Selling, general andadministrative expenses.” Contributions to the governmental welfare pension benefit plan of ¥8 million was charged to “Cost of sales” and “Selling, general and administrative expenses” in the fiscal year
ended March 31, 2013. Also, additional discretionary retirement allowances of ¥560 million were charged to “Selling, general and administrative expenses” in the fiscal year ended March 31, 2013.
In addition, for certain consolidated subsidiaries, additional retirement allowances of ¥51 million were recorded for the fiscal year ended March 31, 2013.
2. The retirement benefit expense for the Company and certain consolidated subsidiaries that use a simplified calculation method is recorded as service cost.
3. T he defined contribution expenses for the Company and certain consolidated subsidiaries that have established defined contribution retirement pension systems is recorded as service cost.
4. T he contributions of certain consolidated subsidiaries that simultaneously participate in the Smaller Enterprise Retirement Allowance Mutual Aid System are recorded as service cost.

Actuarial assumptions and the basis for the calculation of retirement and severance benefits in 2013 was as follows:
2013

Method of benefit attribution“Benefits/years-of-service” approach

Discount rate

0.60%~1.40%

Expected rate of return on plan assets

1.62%~2.50%

Period of amortization of unrecognized prior service cost

10~11 years

Period of amortization of unrecognized actuarial gain or loss

9~19 years (from the year following
the year incurred)

2. Net defined benefit liability and net defined benefit asset information for retirement and severance benefits
Defined benefit plans
As of March 31, 2014, the reconciliation of the beginning and ending balances of retirement benefit obligations is as follows (excluding plans for which thesimplified method is applied):

Beginning balance of retirement benefit obligations

Thousands of
U.S. dollars

2014

2014

¥17,041$165,575

Service cost

1,159

11,262

Interest cost

189

1,836

Actuarial gains or losses incurred
Retirement benefits paid
Prior service costs incurredEnding balance of retirement benefit obligations

50

Millions of yen

2

19

(722)

(7,015)

61593¥17,730$172,270As of March 31, 2014, the reconciliation of the beginning and ending balances of plan assets is as follows (excluding plans for which the simplified
method is applied):
Millions of yen

Thousands of
U.S. dollars

2014

2014

Beginning balance of plan assets¥10,031$ 97,464

Expected rate of return on assets

170

1,652

Actuarial gains or losses incurred

96

933

Contributions to plan from employer

970

9,425

Retirement benefits paid

(685)

(6,656)¥10,582$102,818

Ending balance of plan assets

As of March 31, 2014, the reconciliation of the beginning and ending balances of net defined benefit liability and net defined benefit asset for plans using
the simplified method is as follows:
Millions of yen

Thousands of
U.S. dollars

2014

2014

Beginning balance of net defined benefit liability and net defined benefit asset¥718$6,976Retirement benefit expenses

171

1,661

Retirement benefits paid

(70)

(680)

Contributions to plan from employer

(98)

(952)

Other

147

1,429

Ending balance of net defined benefit liability and net defined benefit asset¥868$8,434As of March 31, 2014, the reconciliation of the ending balances of retirement benefit obligations and plan assets with the net defined benefit liability andnet defined benefit asset recorded on the consolidated balance sheet is as follows:
Millions of yen

Thousands of
U.S. dollars

2014

2014

Retirement benefit obligations of funded plans¥18,604$ 180,762

Plan assets(11,702)(113,700)

6,902

67,062Retirement benefit obligations of non-funded plans

1,113

10,814

Net amount of liabilities and assets recorded on consolidated balance sheet

8,015

77,876

Net defined benefit liability

8,062

78,333Net defined benefit asset
Net amount of liabilities and assets recorded on consolidated balance sheet

(47)

(457)

¥ 8,015$  77,876

Millions of yen

Thousands of
U.S. dollars

Note: Including plans using the simplified method.

For the fiscal year ended March 31, 2014, the breakdown of retirement benefit expenses is as follows:

2014

2014

Service cost

¥1,159$11,262Interest cost

189

1,836

Expected rate of return on assets(170)(1,652)

Amortization of actuarial gains/losses

440

4,276

Amortization of prior service cost

(36)

(350)

Retirement benefit expenses calculated using the simplified method

171

1,661

Retirement benefit expenses related to defined benefit plans

1,753

17,033

Other (note)

1,116

10,843

Total retirement benefit expenses

2,869

27,876

Note: In the fiscal year ended March 31, 2014, the following extra retirement payments were recorded: ¥642 million ($6,238 thousand) in “Selling general and administrative expenses” and ¥474 million($4,605 thousand) in “Other income (loss).”51

Notes to Consolidated Financial Statements

As of March 31, 2014, the breakdown of items recorded in remeasurements of defined benefit plans (before tax effect) is as follows:
Millions of yen

Thousands of
U.S. dollars

2014

2014

Unrecognized prior service costs¥   (54)$   (525)

Unrecognized actuarial gains or losses(3,412)(33,152)

Total¥(3,466)$(33,677)

As of March 31, 2014, the major categories of plan assets as a percentage of total plan assets are as follows:
2014

Bonds

30%

Equities

24

Life insurance general account

36

Other

10

Total

100%

For the fiscal year ended March 31, 2014, the actuarial assumptions are as follows:
2014

Discount rate

0.60%~1.40%

Long-term expected rate of return on assets

1.65%~2.50%

Method of determining long-term expected rate of return on assets

To determine the long-term expected returnon plan assets, reference was made to thecurrent and expected future allocationsof plan assets and to the current andexpected future long-term returns on thevarious assets that make up plan assets.

Defined contribution plans
For the fiscal year ended March 31, 2014, the amount of required contribution to defined contributions plans for the Company and consolidated
subsidiaries is as follows:
Millions of yen

Required contributions to defined contribution plans

Thousands of
U.S. dollars

2014

2014

¥469

$4,557

Multi-employer plans
For the fiscal year ended March 31, 2014, the required contributions of certain subsidiaries to multi-employer plans, for which the accounting treatment is
the same as defined contribution plans is as follows:

Required contributions to multi-employer plans

52

Millions of yen

Thousands of
U.S. dollars

2014

2014

¥6

$58

12 Financial Instruments
1. Financial instruments

Borrowings are used mainly to procure funds needed for capital(1) Policy for financial instruments

expenditures and for investment financing. Variable rate borrowings are

The Company and its consolidated subsidiaries manage funds by means

exposed to the risk of fluctuations in interest rates. With consideration ofof highly secure financial instruments only and procures funds throughmarket trends, the Company and its consolidated subsidiaries implement

borrowing from banks and other methods, such as issuing corporate bonds.

hedging as necessary through the use of interest rate swaps or interest

The Company and its consolidated subsidiaries utilize derivatives tohedge the risks noted below and do not engage in speculative transactions.

rate options.
Trade payables, borrowings, and accrued income taxes are exposed toliquidity risk. The Company and its consolidated subsidiaries manage this(2) Contents and risks of financial instruments

risk through the formulation and revision of monthly funding plans forWith regard to credit risk posed by customers with respect to trade

the Company and its consolidated subsidiaries.

receivables, the Company and its consolidated subsidiaries manage

Derivative transactions are used for hedging purposes. With regards tobalances by counterparty and due date, and credit information on major

hedging methods and hedged items, hedging policies, and methods ofcustomers is updated at least once a year to minimize such credit risk. The

assessing the effectiveness of hedging transactions, for which hedge

Company and its consolidated subsidiaries have a system for immediately

accounting is applied, please refer to Note “2 Summary of Significant

sharing within the Company and its consolidated subsidiaries adverse

Accounting Policies—(l) Derivatives and Hedging Activities” in the Notes

credit and other information regarding counterparties in the event thatto Consolidated Financial Statements.

such information is received.
As of March 31, 2013 and 2014, designated large customers were

Derivative transactions are executed and managed according to internal
rules that determine trading authority and limits on amounts traded.

counterparties for 12.0% and 14.7% of trade receivables, respectively.

Derivatives are used in ways that minimize credit risk, and thus transactions

Receivables denominated in foreign currencies arising as a result of theare carried out only with highly creditworthy financial institutions.

fact that the Company and its consolidated subsidiaries conduct businesson a global basis are subject to foreign exchange rate fluctuation risk. The
Company and its consolidated subsidiaries manage balances by counter-(3) S upplementary explanation on the market value offinancial instruments

party and currency, and in addition the Company and its consolidated

The market value of financial instruments includes, in addition to

subsidiaries track market trends and, as necessary, utilize forward foreign

the value determined based on market prices, valuations calculated on

exchange contracts and currency option contracts for hedging.

a reasonable basis if no market price is available. However, as certain

Short-term investments and investment securities are principallymoney market funds and the shares of companies with which theCompany has a business relationship. These investments are exposed tovariables are used for these calculations, the result of such calculations
may vary if different assumptions are used.
The contract amounts of derivative transactions in Note “22 Foreign

the risk of fluctuations in market prices. The market price is confirmed at

Exchange Risk Management and Interest Rate Risk Management”

least once per quarter, and the holdings are reevaluated once per year within the Notes to Consolidated Financial Statements should not be

consideration of market conditions and relationships with counterparties.

considered indicative of the market risk associated with the derivative

Trade payables substantially all have due dates within one year. Certain

financial instruments.

trade payables are denominated in foreign currencies and are exposed to
the risk of fluctuations in foreign exchange rates. In the same manner asreceivables, the Company and its consolidated subsidiaries manage balancesby counterparty and currency, and in addition the Company and its consolidated subsidiaries track market trends and, as necessary, utilize forward
foreign exchange contracts and currency option contracts for hedging.

53

Notes to Consolidated Financial Statements

2. Market value of financial instruments

The carrying amounts of financial instruments as stated in the consolidated balance sheets, their market values as of March 31, 2013 and 2014,
and the differences between carrying amounts and market values are as stated below. This table does not include assets for which it was judged
extremely difficult to assess the market value (Note 2 below).
Millions of yen

2013
Carrying
amountMarket value(1) Cash and time deposits¥119,133(2) Trade receivables(3) Short-term investments
and investment
securities

77,069Thousands of U.S. dollars

2014

Difference

Carrying
amountMarket value¥119,133¥   —¥131,404

77,069—76,5882014

Difference

Carrying
amountMarket value

Difference¥131,404¥   —$1,276,759$1,276,759$    —

76,588—744,151

744,151—

26,292

28,027

1,735

28,38230,363

1,981

275,768

295,016

19,248

		Total assets¥222,494¥224,229¥1,735¥236,374¥238,355¥1,981$2,296,678$2,315,926$19,248(1) Trade payables¥ 46,472¥ 46,472¥   —¥ 51,625¥ 51,625¥   —$  501,603$   501,603$    —(2) Short-term borrowings

5,596

5,596

—

5,502

5,502

—

53,45953,459—(3) Accrued income taxes

7,853

7,853

—

8,828

8,828

—

85,77585,775—¥ 59,921¥ 59,921¥   —¥ 65,955¥ 65,955¥   —$   640,837$   640,837$    —¥    964¥    964¥   —¥    351¥    351¥   —$    3,410$    3,410$    —

		Total liabilities
Derivative financial
instruments** Assets and liabilities derived from derivative transactions are stated on a net basis. Items for which the total is a net liability are shown in parentheses.
Notes: 1. Method for calculating the market value of financial instruments and derivative transactions
		
Assets		 (1) Cash and time deposits, and (2) Trade receivables
			 Their market values are almost identical with the carrying amount, since these assets will be settled within a short period of time.
		 (3) Short-term investments and investment securities
			Money Management Fund are settled on a short-term basis, and accordingly the market value is nearly equivalent to the carrying amount. So the carrying amount is used. With regard to short-term
investments and investment securities by holding purpose, please refer to Note “5 Short-Term Investments and Investment Securities” in the Notes to Consolidated Financial Statements.
		Liabilities
		 (1) Trade payables, (2) Short-term borrowings, and (3) Accrued income taxes
			 Their market values are almost identical with the carrying amount, since these assets are readily convertible into cash.
		
Derivative financial instruments
		 Please refer to Note “22 Foreign Exchange Risk Management and Interest Rate Risk Management” in the Notes to Consolidated Financial Statements.
2. Financial instruments for which market value is extremely difficult to determine
Millions of yen

Thousands of U.S. dollars

2013

2014

2014

Carrying amount

Carrying amount

Carrying amountUnlisted stocks¥1,527¥2,466$23,960

Stocks of affiliated companies (unlisted stocks)

1,883

2,070

20,113

83

73

709

Contributions to investment partnerships

	As these instruments do not have readily available market values, and their market values are extremely difficult to determine, they are not included in “(3) Short-term investments and investment
securities” in the table above.
3. Maturity analysis of financial assets and securities with contractual maturities
Millions of yen

2013

Cash and time deposits
Trade receivables
Total

54

Withinone yearMore than
one year,withinfive years

More than
five years,
withinten years

More thanten years¥119,133

¥   —

¥—

75,772

1,297—¥194,905¥1,297¥—

Thousands of U.S. dollars

2014
Withinone yearMore than
one year,withinfive years

More than
five years,
withinten years

More thanten years¥—¥131,404

¥  —

¥—

—

76,044544—¥—¥207,448

¥544

¥—

2014
Withinone yearMore than
one year,withinfive years

More than
five years,
withinten years

More thanten years¥—$1,276,759$    —$—$——

738,865

5,286

—

—

¥—

$2,015,624$5,286$—$—

13 Income Taxes
The Company and its domestic consolidated subsidiaries are subject to Japanese corporate, inhabitant, and enterprise taxes based on income which,in the aggregate, resulted in a normal tax rate of approximately 38.0% for the fiscal years ended March 31, 2013 and 2014.
Income tax expenses reflected in the accompanying consolidated statements of income for the fiscal years ended March 31, 2013 and 2014 consist of
the following:
Millions of yen

Income taxes–current
Income taxes–deferred		TotalThousands of
U.S. dollars

2013

2014

2014

¥19,649¥19,194$186,495(3,611)(1,322)(12,845)¥16,038¥17,872$173,650

Reconciliation of the normal tax rate and the effective tax rate as a percentage of income before income taxes and minority interests for the fiscal years
ended March 31, 2013 and 2014 is as follows:
2013

2014

Normal tax rate

38.0%

38.0%

Entertainment expenses not deductible for tax purposes

0.7

0.9

Corporate inhabitant tax on per capita basis

0.4

0.4

Directors’ bonuses

1.2

1.1

Change in valuation allowance for deferred tax assets

(2.3)

5.9

Effect of changes in tax rates on net deferred tax assets—

1.9

Amortization of goodwill

0.2

0.2

Reversal of revaluation reserve for land, net of tax

(0.6)

—

Tax credits for salary growth

—

(0.9)

Differences of tax rates of foreign consolidated subsidiaries

(0.3)

(1.0)

Tax credit for research and development expenses

(5.4)

(4.7)

Other

1.2

0.0

Effective tax rate

33.1%

41.8%

55

Notes to Consolidated Financial Statements

Significant components of deferred tax assets and liabilities as of March 31, 2013 and 2014 are as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2014

2014

Deferred tax assets:
Losses carried forward¥ 14,504¥ 17,058$ 165,740

Excess depreciation of fixed assets

6,364

8,688

84,415Inventory valuation losses

7,376

7,357

71,483

Accrued employee bonuses

4,167

4,557

44,277

Loss on valuation of advance payments

1,022

1,630

15,838

Accrued retirement and severance benefits

1,300

—

—

—

2,773

26,943

Accrued enterprise taxes and others

1,256

1,049

10,192

Loss on impairment of fixed assets

838

853

8,288

Research and development expenses

488

414

4,022

Allowance for doubtful receivables

456

318

3,090

Revaluation reserve for land

2,377

2,377

23,096

Other

7,874

7,470

72,581

Net defined benefit liability

		 Total gross deferred tax assets

48,02254,544

529,965

Valuation allowance(27,994)(31,771)(308,696)

Total deferred tax assets

20,02822,773

221,269

Deferred tax liabilities:
Reserve for advanced depreciation of fixed assets

(91)

(88)

(855)

Retained earnings of foreign consolidated subsidiaries

(284)

(372)

(3,614)

Unrealized gains or losses on other securities(1,463)(1,504)(14,613)

Revaluation reserve for land

(591)

(516)

(5,015)

Other

(209)

(77)

(748)

Total deferred tax liabilities
Net deferred tax assets(2,638)(2,557)(24,845)¥ 17,390¥ 20,216$ 196,424

Millions of yen

Thousands of
U.S. dollars

2013

2014

2014

Net deferred tax assets are included in the following line items in the consolidated balance sheets:

Current assets–Deferred tax assets¥10,580¥ 9,914$ 96,327

Investments and other assets–Deferred tax assets

8,399

11,351

110,290

Current liabilities–Other (deferred tax liabilities)

—

(5)

(49)

(1,589)(1,044)(10,144)¥17,390¥20,216$196,424

Long-term liabilities–Deferred tax liabilities
		TotalThe Bill for Partial Amendment of the Income Tax Act (Law No. 10 of 2014), was promulgated on March 31, 2014. This bill stipulated that the special
corporate tax for reconstruction will not be levied for fiscal years starting on or after April 1, 2014. Consequently, the normal effective statutory tax rateused in the calculation of deferred tax assets and deferred tax liabilities was changed from the previous 38.0% to 35.6% for temporary differences that are
expected to be recovered or settled in the fiscal year beginning on April 1, 2014.
As a result of this change in the tax rate, the amount of deferred tax assets (net of deferred tax liabilities) decreased by ¥812 million ($7,890 thousand)and the amount of income taxes–deferred increased by the same amount.

56

14 Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the fiscal years ended March 31, 2013 and 2014 are as follows:

Advertising expenses

Millions of yen

Thousands of
U.S. dollars

2013

2014

2014

¥ 32,600¥ 38,083$  370,025

Directors’ remuneration and employees’ wages

36,16038,005369,267

Employees’ retirement and severance benefits

2,159

2,291

22,260

Provision for directors’ bonuses

1,172

1,084

10,532

Research and development expenses

16,61916,437

159,707

Provision of allowance for doubtful accounts
Other		Total

—

56

544

45,72650,200487,758¥134,436¥146,156$1,420,093

15 Other Comprehensive Income
The components of “Other comprehensive income” for the fiscal years ended March 31, 2013 and 2014 are as follows:
Millions of yen

2013
Amounts Reclassification
arising
adjustments

Beforetax effectTax effect

Net oftax effectUnrealized gains or losses
on other securities¥ 2,865¥   7¥2,872¥(547)¥2,325

Deferred gains or losses onhedges

1,233

(744)

489

(77)

412

Foreign currency translation
adjustments

6,237

46

6,283

—

6,283

Share of other comprehensive
income of associates
accounted for using equity
method		Total

16

17

33

—

33

¥10,351¥(674)¥9,677¥(624)¥9,053

Millions of yen

Thousands of U.S. dollars

2014
Amounts Reclassification
arising
adjustments

Beforetax effectUnrealized gains or losses
on other securities¥ 1,016¥     0

Deferred gains or losses
on hedges

2,171

Foreign currency translation
adjustments

6,876

Share of other comprehensive
income of associates
accounted for using equity
method		Total2014

Tax effect

Net oftax effectAmounts Reclassification
arising
adjustments

Beforetax effectTax effect

Net oftax effect¥1,016¥(29)¥  987$ 9,872$     0

$ 9,872$(282)$ 9,590(2,698)

(527)

77

(450)

21,094(26,215)(5,121)749(4,372)

283

7,159

—

7,159

66,8092,750

69,559—69,559

52

(2)

50

—

50

505

(19)

486

—

486

¥10,115¥(2,417)¥7,698¥ 48¥7,746$98,280$(23,484)$74,796$ 467$75,26357

Notes to Consolidated Financial Statements

16 Reconciliation of Differences between Basic and Diluted Net Income per Common Share
The reconciliation of the differences between basic and diluted net income per common share for the fiscal years ended March 31, 2013 and2014 is as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2014

2014

Net income¥32,383¥25,055$243,442

Net income available to common stockholders

32,38325,055

243,442—

25,055

243,442

Net income for diluted EPS calculation

Thousands of shares

Average number of common shares outstanding

219,691

219,689

Effect of dilutive securities:
Stock options
Average number of common shares for diluted EPS calculation

—

28

—

219,717

Yen

U.S. dollars¥147.40¥114.05$1.11—

114.03

1.11

Net income per common share:
Basic
DilutedNote: Diluted net income per common share is not presented for the fiscal year ended March 31, 2013 because no dilutive securities were outstanding.

17 Retained Earnings and Dividends
In Japan, in the event a dividend distribution of surplus is made, the lesser

Dividend limitation:of an amount equal to 10% of the dividend or the excess, if any, of 25% of

On August 5, 2011, the Company raised funds from financial institutions

common stock over the total of additional paid-in capital and legal earnings

as long-term loans payable. These loans payable have the following

reserve must be set aside as a legal reserve until the aggregate amount of

restrictive financial covenants:

capital surplus and the legal reserve equals 25% of stated capital.

(1)	The Company shall maintain the amount of net assets on the consoli-

Certain foreign consolidated subsidiaries are also required to appro-

dated balance sheet as of the closing dates of the interim and end

priate their earnings to legal reserves under the laws of the respectiveof each fiscal year (the “Interim or End of Fiscal Year”) at 75% or above

countries.

of whichever is greater: (i) the amount of net assets on the consolidated

The Company’s retained earnings includes legal reserves of ¥1,645

balance sheet as of the closing date of the immediately preceding

million and ¥1,645 million ($15,983 thousand) at March 31, 2013 andInterim or End of Fiscal Year, or (ii) the amount of the net assets on

2014, respectively. Proposed appro­priations of retained earnings have notbeen reflected in the consolidated financial statements at the end of thethe consolidated balance sheet as of March 31, 2011.
(2)	With respect to the recurring income and loss* on the consolidated

fiscal year. The Company’s approved appropriations of retained earnings

statement of income for each fiscal year, the Company shall not record

for the fiscal year ended March 31, 2014 were cash dividends of ¥5,055

recurring losses for two consecutive fiscal years.

million ($49,116 thousand). In addition, a mid-year dividend may be paid

* Recurring income and loss is a Japanese accounting term denoting income before
extraordinary items.

based on approval by the Board of Directors, which is subject to limitations. The mid-year dividend for the fiscal year ended March 31, 2014was ¥2,638 million ($25,632 thousand).

(3)	From the date of the loan agreement and until all obligations to thelender and its agents under the terms of the agreement have been
fulfilled, the Company shall maintain the ownership ratio (direct orindirect) at 100% with respect to Bandai Co., Ltd., BANDAI NAMCO
Games Inc., and NAMCO LIMITED.

58

18 Revaluation Reserve for Land
In accordance with the “Law Concerning Land Revaluation” (Law No. 34,

for calculating taxable value for land value tax prescribed in “Article 16

promulgated on March 31, 1998), the land used for business purposes wasof Land Value Tax Law” (Law No. 69, promulgated on May 2, 1991), as

revalued and “Revaluation reserve for land, net of tax” was reported in

stipulated in “Article 2-4 of the Ordinance Implementing the Law Con­cerning“Net assets” in the consolidated balance sheets.

Land Revaluation” (Cabinet Order No. 119, promulgated on March 31,
1998). Reasonable adjustments are made to the official notice prices.

Revaluation method:

Unrealized losses for land of ¥1,001 million ($9,726 thousand) were

The market value of land is determined based on official notice prices

recognized based on the difference between the land carrying amount,that are calculated by the method assessed and published by the Commis-

which was revalued as of March 31, 2002, and the market value of thesioner of the National Tax Agency. The Com­missioner assesses andland as of March 31, 2014.

publishes the method to calculate land value that forms the foundation

19 Common Stock and Treasury Stock
The changes in the number of common stock and treasury stock for the fiscal years ended March 31, 2013 and 2014 are as follows:
Common stock (number of shares)

2013

2014

Number of shares at beginning of year

222,000,000

222,000,000

Number of shares at end of year

222,000,000

222,000,000

Treasury stock (number of shares)

2013

2014

2,308,176

2,309,342

Number of shares at beginning of year
Other
Number of shares at end of year

1,166

2,756

2,309,342

2,312,098

59

Notes to Consolidated Financial Statements

20 Stock Option Plan
Stock option plan as of March 31, 2014 is summarized as follows:
Resolution date of the meeting of the Company’s Board of Directors

May 21, 2013

Position (number of beneficiaries)

Directors of the Company (4)Directors of subsidiaries (7)Class (number of shares) (note 1)

Common stock (36,100)

Amount to be paid upon exercise of stock acquisition rights¥1 per share

Grant dateJune 5, 2013

Vesting conditions for stock acquisition rights

None

Required service

Not specified

Exercise period for the stock acquisition rights

From June 5, 2013 to June 4, 2033

Fair value of each stock option (yen) (note 2)¥1,219.63

Notes: 1.	In regard to the method used to estimate the number of stock options vested, the number of stock options granted is used as the number of stock options vested because there are no vesting conditions.
2. The method used to estimate the fair value per unit for stock options granted in the current fiscal year was as follows:		 (1) Valuation method applied: Black-Scholes method
		 (2) Principal assumptions and method of estimation
Volatility of stock price (note 1)
Estimated remaining outstanding period (note 2)
Estimated dividend (note 3)
Risk-free interest rate (note 4)

26.78%
10 years
2.17%
0.845%

		
Notes: 1. Volatility of stock price is calculated based on the actual stock prices over the period from the establishment of the Company to the grant date (September 29, 2005 to June 5, 2013).
			
2. The available data is not sufficient, and it is difficult to make reasonable estimates. Accordingly, estimates are based on the assumption that exercise takes place at the midpoint of the exercise period.
			
3. Estimated dividend is based on actual dividends over the period from the establishment of the Company to the grant date (September 29, 2005 to June 5, 2013).
			
4. Risk-free interest rate is based on the yield of Japanese government bonds with a period corresponding to the estimated remaining outstanding period.

21 Leases
As lessee
The Company and its consolidated subsidiaries occupy offices and other facilities and use various assets under operating lease arrangements.
Operating leases
Future minimum payments required under operating leases as of March 31, 2013 and 2014 are as follows:
Millions of yen

60

Thousands of
U.S. dollars

2013

2014

2014

Within one year

¥2,478¥2,436$23,669Over one year

6,246

5,088

49,436

		Total¥8,724¥7,524$73,105

22 Foreign Exchange Risk Management and Interest Rate Risk Management
Derivative financial instruments are comprised principally of forward foreign exchange contracts and interest rate swaps. These instruments are used toreduce the risks of changes in foreign exchange rates and interest rates, but are not used for speculation.
The Company is exposed to credit risk related to nonperformance by the counterparties to forward foreign exchange contracts and interest rate swaps,
but the Company does not expect any instances of nonperformance due to the high credit ratings of the counterparties.
Contract amounts, market values, and gains or losses from valuation of forward foreign exchange contracts outstanding as of March 31, 2013 and2014 are as follows. The contract amounts in themselves should not be considered indicative of the market risk associated with the derivative financial
instruments.
(1) Derivative transactions not qualifying for hedge accounting
Millions of yen

2013

Thousands of U.S. dollars

2014

2014

Contract
amountEstimatedmarket value

Unrealized
gain (loss)

Contract
amountEstimatedmarket value

Unrealized
gain (loss)

Contract
amountEstimatedmarket value

Unrealized
gain (loss)¥2,208¥156¥156¥1,955¥75¥75$18,995

$729

$729

U.S. dollars

331

1

1

389

(2)

(2)

3,780

(19)

(19)

Euro

345

8

8

351

(2)

(2)

3,410

(19)

(19)

224

6

6

850

14

14

8,259

135

135

Forward foreign exchange contracts
Sold:
Yen

Purchased:
U.S. dollars
H.K. dollars
		Total

—

—

—

22

(0)

(0)

214

(0)

(0)

¥3,108¥171¥171¥3,567¥85¥85$34,658

$826

$826

Notes: 1.	Method of calculating market value
		 Calculated based on prices provided by counterparty financial institutions.
2.	For the above forward foreign exchange contracts, hedge accounting is applied mainly for the transactions between consolidated subsidiaries in non-consolidated financial statements, but thesetransactions have been eliminated in the consolidated financial statements, and as a result these transactions are not treated as effective hedges of the hedged assets and/or liabilities in the
consolidated financial statements.

(2) Derivative transactions qualifying for hedge accounting
Millions of yen

2013
Hedge accounting
methodHedging method

Hedged items

Thousands of U.S. dollars

2014

2014

Contract
amountEstimatedmarket value

Contract
amountEstimatedmarket value

Contract
amountEstimatedmarket value¥    —¥  —¥ 4,992¥259$ 48,504$2,517

7,835
—

586
—

494
488

4
(2)

4,800
4,741

39
(19)

Forward foreign exchange contracts
Sold:
Yen

Other current assets

Yen

Accounts receivable–trade

U.S. dollars

Accounts receivable–trade

Purchased:

Deferred

U.S. dollars

Accounts payable–trade

6,249

217

9,464

41

91,955398

Chinese yuan

Accrued expenses

2,061

(4)

1,678

(21)

16,304(204)

Accounts payable–trade

61

(9)

48

(5)

466

(49)

H.K. dollars
Currency option
contracts
Sold put option:

Yen

Accounts payable–trade

60

2

—

—

—

—

U.S. dollars
Purchased call
option:U.S. dollars

Accounts payable–trade

—

—

1,943

(16)

18,879(155)

Accounts payable–trade—¥16,266

—
¥792

1,967
¥21,0746¥266

19,112$204,761

58$2,585

199(note 3)333

(note 3)

3,236

(note 3)¥   199¥ —¥   333¥ —$  3,236

		TotalForeign exchange
allocation method
		TotalForward foreign exchange contracts
Purchased:
U.S. dollars

Accounts payable–trade$—

Notes: 1. Method of calculating market value
		 Calculated based on prices provided by counterparty financial institutions.
2. Currency option contracts are zero cost options, and option premiums are not paid or received.
3.	Forward foreign exchange contracts and other contracts for which the designation method is applied are accounted for together with the accounts payable–trade that are the hedged items, and as aresult the market values of those contracts are included in the market values of the accounts payable–trade.

61

Notes to Consolidated Financial Statements

23 Commitments and Contingent Liabilities
1. Pledged assets and secured liabilities
As of March 31, 2013 and 2014, the details of pledged assets and secured liabilities are as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2014

2014

¥—

¥30

$291

Short-term borrowings

¥—

¥17

$165

Long-term borrowings

—

33

321

¥—

¥50

$486

Millions of yen

Thousands of
U.S. dollars

Pledged assets
Trade receivables
Secured liabilities

		Total

2. Commitments
Commitments as of March 31, 2013 and 2014 are summarized as follows:

Guarantees for loans payable from financial institutions to unconsolidated subsidiaries

Guarantee of obligation resulting from rental contracts of unconsolidated subsidiary

2013

2014

2014

¥  —

¥256

$2,487

Millions of yen

Thousands of
U.S. dollars

2013

2014

2014

¥136

¥68

$661

24 Segment Information
The reportable segments of the Company are components of the Group whose separate financial information is available and which are periodicallyevaluated by the Board of Directors in deciding how to allocate management resources and in assessing performance.
The Group is made up of three strategic business units (“SBUs”), one for each business domain, namely the Toys and Hobby SBU, the Content SBU, and
the Amusement Facility SBU, and the affiliated business companies that mainly serve a supporting role for these SBUs.
The major company of each SBU leads the planning and promotion of the business strategies of the SBU for Japan and overseas.
Accordingly, the Group has the following three reportable segments: Toys and Hobby Business, Content Business, and Amusement Facility Business.
The Toys and Hobby Business conducts manufacturing and sales of toys, candy toys, and products for vending machines. The Content Business distributes network content, manufactures and sells arcade game machines, and produces home video game software and video-related products. The Amusement Facility Business conducts the operation of amusement facilities.
The methods for accounting for reportable segments are the same as those described in Note “2 Summary of Significant Accounting Policies” in theNotes to Consolidated Financial Statements. Segment income in the segment information below is based on operating income, and segment assets are
based on total assets. Amounts of inter-segment transactions are based on the prevailing market prices.

62

Millions of yen

2013
Reportable Segment
Toys and
Hobby

Content

Amusement
Facility

Subtotal

Other (note 1)

Total

Adjustments(note 2)

Consolidated
total (note 3)¥165,957¥251,790¥60,113¥477,860¥ 9,381¥487,241¥     —

¥487,241

Net sales
To external customers
Inter-segment sales and transfers
Total

7,020

11,80673

18,89916,40735,306(35,306)—¥172,977¥263,596¥60,186¥496,759¥25,788¥522,547¥(35,306)¥487,241

Segment income

11,25536,4381,684

49,377

1,693

51,070(2,427)

48,643

Segment assets

103,784

152,130

34,745

290,659

21,348312,00762,196374,203¥ 12,289¥  2,539¥ 5,692¥ 20,520¥   482¥ 21,002¥   (586)¥ 20,416

Other items:
Depreciation and amortization

—

151

—

151

—

151

142

293

	Loss on impairment of fixed assets

	Amortization of goodwill

179

12

230

421

—

421

85

506

	Investments in associates accounted
for using equity method

517

—

131

648

7,581

8,229

—

8,229

	Increase in property, plant andequipment and intangible assets

11,561

4,636

5,017

21,214489

21,703

2,133

23,836
Millions of yen

2014
Reportable Segment
Toys and
Hobby

Content

Amusement
Facility

Subtotal

Other (note 1)

Total

Adjustments(note 2)

Consolidated
total (note 3)¥177,826¥261,563¥58,138¥497,527¥10,152¥507,679¥     —

¥507,679

Net sales
To external customers
Inter-segment sales and transfers

8,565

16,84562

25,472

17,19942,671(42,671)—¥186,391¥278,408¥58,200¥522,999¥27,351¥550,350¥(42,671)¥507,679

Segment income (loss)

10,51037,249(898)

46,861

1,646

48,507(3,834)

44,673

Segment assets

117,773

158,925

36,817

313,515

23,958337,473

67,620405,093¥ 11,758¥  4,139¥ 5,664¥ 21,561¥   450¥ 22,011¥   (285)¥ 21,726

—

66

—

66

—

66

57

123

Total

Other items:
Depreciation and amortization
	Amortization of goodwill
	Loss on impairment of fixed assets

280

20

1,697

1,997

1

1,998

5

2,003

	Investments in associates accounted
for using equity method

439

—

28

467

8,579

9,046

—

9,046

	Increase in property, plant andequipment and intangible assets

16,712

3,383

7,367

27,462441

27,903

1,076

28,97963

Notes to Consolidated Financial Statements

Thousands of U.S. dollars

2014
Reportable Segment
Toys and
Hobby

Content

Amusement
Facility

Subtotal

Other (note 1)

Total

Adjustments(note 2)

Consolidated
total (note 3)$1,727,808$2,541,420$564,886$4,834,114$ 98,640$4,932,754$     —

$4,932,754(414,603)—

Net sales
To external customers
Inter-segment sales and transfers
Total
Segment income (loss)
Segment assets

83,220163,671602

247,493

167,110414,603$1,811,028$2,705,091$565,488$5,081,607$265,750$5,347,357$(414,603) $4,932,754

102,118

361,922(8,725)455,315

15,993471,308(37,252)

434,056

1,144,316

1,544,161

357,724

3,046,201

232,783

3,278,984

657,015

3,935,999$   114,244$   40,216$ 55,033$ 209,493$  4,372$ 213,865$  (2,769)$ 211,096

Other items:
Depreciation and amortization

—

641

—

641

—

641

554

1,195

	Loss on impairment of fixed assets

	Amortization of goodwill

2,721

194

16,48819,403

10

19,41349

19,462

	Investments in associates accounted
for using equity method

4,266

—

272

4,538

83,35687,894—87,894	Increase in property, plant andequipment and intangible assets

162,379

32,87071,580266,8294,284

271,113

10,455281,568

Notes: 1. The “Other” business segment is not a reportable segment and includes logistics services and printing services for the Group’s SBUs.
2. Details of “Adjustments” are as follows:		 (1)	The adjustment to segment income of –¥2,427 million for the fiscal year ended March 31, 2013 includes elimination of inter-segment transactions of ¥842 million and corporate expenses notallocated to reportable segments of –¥3,269 million. The adjustment to segment income of –¥3,834 million (–$37,252 thousand) for the fiscal year ended March 31, 2014 includes eliminationof inter-segment transactions of –¥626 million (–$6,082 thousand) and corporate expenses not allocated to reportable segments of –¥3,208 million (–$31,170 thousand). Principal corporate
expenses are expenses related to administrative divisions not belonging to reportable segments.
		 (2)	The adjustment to segment assets of ¥62,196 million as of March 31, 2013 includes elimination of inter-segment transactions of –¥19,159 million and corporate assets not allocated to reportablesegments of ¥81,355 million. The adjustment to segment assets of ¥67,620 million ($657,015 thousand) as of March 31, 2014 includes elimination of inter-segment transactions of –¥25,208
million (–$244,928 thousand) and corporate assets not allocated to reportable segments of ¥92,828 million ($901,943 thousand). Principal corporate assets are cash and deposits, investment
securities, and assets related to administrative divisions not belonging to reportable segments.
		 (3)	The adjustment to depreciation and amortization expense of –¥586 million for the fiscal year ended March 31, 2013 includes elimination of inter-segment transactions of –¥1,644 million anddepreciation and amortization expense not allocated to reportable segments of ¥1,058 million. The adjustment to depreciation and amortization expense of –¥285 million (–$2,769 thousand) for
the fiscal year ended March 31, 2014 includes elimination of inter-segment transactions of –¥1,391 million (–$13,515 thousand) and depreciation and amortization expense not allocated toreportable segments of ¥1,106 million ($10,746 thousand).
		 (4)	The adjustment to amortization of goodwill of ¥142 million and ¥57 million ($554 thousand) for the fiscal years ended March 31, 2013 and 2014, respectively, are related to goodwill not allocatedto reportable segments.
		 (5)	The adjustment to loss on impairment of fixed assets of ¥85 million and ¥5 million ($49 thousand) for the fiscal years ended March 31, 2013 and 2014, respectively, are related to corporate assets
not allocated to reportable segments.
		 (6)	The adjustment to property, plant and equipment and intangible assets of ¥2,133 million and ¥1,076 million ($10,455 thousand) as of March 31, 2013 and 2014, respectively, are related tocorporate assets not allocated to reportable segments.
3. Segment income is reconciled to operating income on the consolidated statements of income.

64For the fiscal years ended March 31, 2013 and 2014, additional segment information is as follows:
1. Information by product and service
This information is included in the segment information above.
2. Information by geographic region
Net sales and property, plant and equipment
Millions of yen

2013

Net salesJapan

Americas

EuropeAsia, excluding Japan

Total¥399,261¥35,803¥28,569¥23,608¥487,241

39,157

2,039

1,877

4,183

47,256

Property, plant and equipment

Millions of yen

2014

Net salesJapan

Americas

EuropeAsia, excluding Japan

Total¥419,804¥30,832¥28,226¥28,817¥507,679

41,753

2,229

2,565

5,426

51,973

Property, plant and equipment

Thousands of U.S. dollars

2014

Net sales
Property, plant and equipment

Japan

Americas

EuropeAsia, excluding Japan

Total$4,078,936$299,572$274,252$279,994$4,932,754

405,683

21,65824,922

52,721

504,984

3. Information by major customer
Fiscal year ended March 31, 2013

Name

Net sales

Name of related segment

—

—

—

Note: There is no outside customer representing 10% or more of the net sales in the consolidated statement of income for the fiscal year ended March 31, 2013.

Fiscal year ended March 31, 2014

Name

Net sales(Millions of yen)

Net sales(Thousands of U.S. dollars)Name of related segment

Happinet Corporation¥54,954$533,949

Toys and Hobby, Content

65Notes to Consolidated Financial Statements

4.	By reportable segment, information regarding the amount of amortization of goodwill and negative goodwill for the fiscal years ended March 31,
2013 and 2014, and the unamortized balance of goodwill and negative goodwill as of March 31, 2013 and 2014, is as follows:
Millions of yen

2013

Amortization of goodwill

Toys and Hobby

Content

Amusement
Facility

Other

Corporate andeliminations(note)

¥—

¥151

¥—

¥—

¥142

¥293

Total

Unamortized balance of goodwill

—

4

—

—

57

61

Amortization of negative goodwill

—

3

—

—

—

3

Unamortized balance of negative goodwill

—

3

—

—

—

3
Millions of yen

2014

Toys and Hobby

Content

Amusement
Facility

Other

Corporate andeliminations(note)

Amortization of goodwill

¥ —

¥ 66

¥—

¥—

¥57

¥123
661

Total

Unamortized balance of goodwill

412

249

—

—

—

Amortization of negative goodwill

—

2

—

—

—

2

Unamortized balance of negative goodwill

—

0

—

—

—

0
Thousands of U.S. dollars

2014

Toys and Hobby

Content

Amusement
Facility

Other

Corporate andeliminations(note)

Amortization of goodwill$   —$  641

$—

$—

$554

$1,195

Total

Unamortized balance of goodwill

4,003

2,419

—

—

—

6,422

Amortization of negative goodwill

—

19

—

—

—

19

Unamortized balance of negative goodwill

—

0

—

—

—

0

Note:	The amount of “Corporate and eliminations” is the amount related to investment securities transferred from domestic consolidated subsidiaries to the Company on account of thebusiness combination.

25 Related-Party Disclosures
Transactions with Related Parties
Fiscal year ended March 31, 2013
(1) Transactions by consolidated subsidiaries of the Company with non-consolidated subsidiaries and affiliated companies of the Company

Type

Company

Address

Affiliatedcompany

Happinet
Corporation

Taito-ku,
Tokyo

Capital orcontribution
to capital¥2,751 million

Content of business

Ratio of voting rights
ownership

Wholesaler of toys,
video games, andamusement products

Holding
directly 26.3%
indirectly 0.3%

Relationshipwith related
party
Sales agency

Content

Transaction
amountAccount items

Sales of products,
Accounts
and others¥46,086 million receivable–(note 2)
trade

Balance asof March 31,
2013¥9,241 million

Notes: 1. The above “Transaction amount” does not include consumption tax; the balance includes consumption tax.
2.	Transaction terms and policy for determining transaction terms
		 For the transaction stated above, the products were sold on the same terms as general transactions with third parties in the ordinary course of business.

(2) Transactions by consolidated subsidiaries of the Company with directors, Audit & Supervisory Board members, and principal stockholders (limited toindividual stockholders) of the Company

Type

Name

Audit &
Supervisory Kouji Yanase
Board member

Address—

Capital orcontribution
to capital—Content of business
Audit & Supervisory
Board member
LawyerRatio of voting rights
ownership
Held directly 0.0%

Relationshipwith related
partyContent

Corporate lawyer
Legal feesof the Company

Transaction
amount¥11 million

Account items
Accruedexpenses

Balance asof March 31,
2013¥1 million

Notes: 1. The above “Transaction amount” does not include consumption tax; the balance includes consumption tax.
2.	Transaction terms and policy for determining transaction terms.
		Attorney compensation is based on advisory agreements with the Company’s subsidiaries and is determined after deliberations with reference to the compensation standards of the Japan Federationof Bar Associations.

66

Fiscal year ended March 31, 2014
(1) Transactions by consolidated subsidiaries of the Company with non-consolidated subsidiaries and affiliated companies of the Company

Type

Company

Affiliatedcompany

Happinet
Corporation

Address
Taito-ku,
Tokyo

Capital orcontribution
to capitalContent of business

Ratio of voting rights
ownership¥2,751 million($26,729
thousand)

Wholesaler of toys,
video games, andamusement products

Holding
directly 26.1%
indirectly 0.3%

Relationshipwith related
party
Sales agency

Content

Transaction
amountAccount items

Sales of products, ¥54,954 million Accounts
receivable–($533,949
and others
trade
thousand)(note 2)

Balance asof March 31,
2014¥11,296 million($109,755
thousand)

Notes: 1. The above “Transaction amount” does not include consumption tax; the balance includes consumption tax.
2.	Transaction terms and policy for determining transaction terms
		 For the transaction stated above, the products were sold on the same terms as general transactions with third parties in the ordinary course of business.

(2) Transactions by consolidated subsidiaries of the Company with directors, Audit & Supervisory Board members, and principal stockholders (limited toindividual stockholders) of the Company

Type

Name

Audit &
Supervisory Kouji Yanase
Board member

Address—

Capital orcontribution
to capital—Content of business
Audit & Supervisory
Board member
LawyerRatio of voting rights
ownership

Held directly 0.0%

Relationshipwith relatedparty
Corporate
lawyer of theCompany

Content

Legal fees

Transaction
amount¥11 million($107 thousand)Account items

Balance asof March 31,
2014

Other current
assets¥0 million($0 thousand)Accruedexpenses¥1 million($10 thousand)Notes: 1. The above “Transaction amount” does not include consumption tax; the balance includes consumption tax.
2. Transaction terms and policy for determining transaction terms.
		Attorney compensation is based on advisory agreements with the Company’s subsidiaries and is determined after deliberations with reference to the compensation standards of the Japan Federationof Bar Associations.

26 Business Combinations
Fiscal year ended March 31, 2013
Transactions conducted by commonly controlled entities, and others
1.	Names and business content of the companies involved in the combination, the date of combination, legal form of the combination, nameof the company after the combination, and outline of the transaction,(4) Name of the company after the combination
		NAMCO BANDAI Games Europe S.A.S. (a consolidated subsidiaryof the Company)(5) Outline of the transaction, including its purpose
		Based on the Mid-term Plan that went into effect in April 2012, theincluding its purpose.

marketing operations of NAMCO BANDAI Games Europe S.A.S. and(1)	Names and business content of the companies involved in thethe sales operations of NAMCO BANDAI Partners S.A.S. werecombination		(i)	NAMCO BANDAI Games Europe S.A.S.

integrated for more efficient operations, aimed at recovering profitability in the Content Business in the European region.

			(a consolidated subsidiary of the Company)

2. Overview of accounting			Sales and marketing of home video game software	The accounting in the consolidated financial statements was conducted		(ii)	NAMCO BANDAI Partners S.A.S.

			

as a transaction made by commonly controlled entities, in accordance(a consolidated subsidiary of the Company)

with the provisions of the “Accounting Standard for Business Combina-

			A holding company and a shared-service company of thetions” (ASBJ Statement No. 21, December 26, 2008) and “Guidance on

NAMCO BANDAI Partners group that carries out sales andAccounting Standard for Business Combinations and Accounting

other related services of home video game softwareStandard for Business Divestitures” (ASBJ Guidance No. 10, final(2) Date of combination		revision issued on December 26, 2008).

September 28, 2012

(3) Legal form of the combination
		An absorption-type merger in which NAMCO BANDAI Games

Fiscal year ended March 31, 2014
Omitted because it is insignificant.

Europe S.A.S. is the surviving company and NAMCO BANDAI
Partners S.A.S. was the company absorbed.

67

Independent Auditors’ Report

To the Board of Directors of BANDAI NAMCO Holdings Inc.:
We have audited the accompanying consolidated financial statements of BANDAI NAMCO Holdings Inc. and its consolidated subsidiaries, which comprisethe consolidated balance sheets as at March 31, 2014 and 2013, and the consolidated statements of income, statements of comprehensive income,statements of changes in net assets and statements of cash flows for the years then ended, and a summary of significant accounting policies and otherexplanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles
generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance withauditing standards generally accepted in Japan. Those standards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fairpresentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, while the objectiveof the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of BANDAI NAMCO Holdings Inc. and its
consolidated subsidiaries as at March 31, 2014 and 2013, and their financial performance and cash flows for the years then ended in accordance withaccounting principles generally accepted in Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2014 are presented solely forconvenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on thebasis described in Note 3 to the consolidated financial statements.

August 8, 2014
Tokyo, Japan

68

Corporate Data
As of March 31, 2014

Corporate Name:BANDAI NAMCO Holdings Inc.
(Note)	On June 23, 2014, the English version of the Company’s name was changed from NAMCO BANDAI Holdings, Inc.

Head Office:

BANDAI NAMCO Mirai Kenkyusho
4-5-15, Higashi-Shinagawa, Shinagawa-ku, Tokyo 140-8590, Japan
URL: www.bandainamco.co.jp/

Capital:¥10 billion

Stock Exchange Listing:Tokyo Stock Exchange, First Section (Code number: 7832)

Main Business:

Planning and execution of medium- and long-term management
strategies for the BANDAI NAMCO Group;
provision of support for business strategy implementation by Group companies andmanagement of business activities

Stock Information:

Number of Shares Authorized:
Number of Shares Issued:

1,000,000,000 shares
222,000,000 shares

Number of Shareholders:

35,339Number of Shares per Trading Unit:

Major Shareholders:

100 shares% of total

Name

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

6.36%

Japan Trustee Services Bank, Ltd. (Trust account)

4.61%

XIL, LTD.

2.73%

Masaya Nakamura

2.71%

MAL Ltd.

2.68%

State Street Bank and Trust Company 505225

2.41%

JP MORGAN CHASE BANK 385632

2.12%

The Nomura Trust and Banking Co., Ltd.
(Retirement and severance benefits trust, The Bank of Tokyo-Mitsubishi UFJ account) 2.09%
Nintendo Co., Ltd.

1.75%

Northern Trust Company (AVFC) (Non-treaty account)

1.53%(Note) The shareholding ratio is calculated after subtraction of the number of shares of treasury stock.

Ownership Breakdown:

Number of shares (Thousand)Financial institutions

59,239Brokerage

1,973

Other corporate entities

28,431

Foreign corporate entities and others

100,376

Individuals, etc.

29,780Treasury stocks

2,198© 創通・サンライズ © 創通・サンライズ・MBS ©2013 石森プロ・テレビ朝日・ADK・東映 ©ABC・東映アニメーション ©L5/YWP・TX © 武内直子・PNP・東映アニメーション ©SUNRISE/T&B MOVIE PARTNERS ©SUNRISE/T&B PARTNERS © 尾田栄一郎／集英社・フジテレビ・東映アニメーション ©BANDAI NAMCO Games Inc. © 尾田栄一郎／集英社・フジテレビ・東映アニメーション ©2013プロジェクトラブライブ！
©SUNRISE/BANDAI, DENTSU, TV TOKYO ©SUNRISE/BANDAI, DENTSU, TV TOKYO ©BANDAI ©SUNRISE/BANDAI, DENTSU, TV TOKYO ©BANDAI NAMCO Games Inc. ©BANDAI NAMCO Games Inc. TM&©2014 SCG Power Rangers LLC. ©BANDAI, WiZ ©BANDAI NAMCO Games Inc. © 窪岡俊之 ©BANDAI NAMCO Games Inc. ©BANDAI NAMCO Games Inc. ©NAMCO LIMITED© 石森プロ・テレビ朝日・ADK・東映 AG・東映ビデオ・東映 ©2013 Gullane (Thomas) Limited.

©2014 テレビ朝日・東映 AG・東映 © バードスタジオ／集英社・東映アニメーション © 岸本斉史 スコット／集英社・テレビ東京・ぴえろ © 尾田栄一郎／集英社・フジテレビ・東映アニメーション ©SOTSU·SUNRISE

69

Overview of Main Group Companies
As of April 1, 2014

BANDAI NAMCO Holdings Inc.*

Planning and execution of medium- and long-term management strategies; provision of support forbusiness strategy implementation by Group companies (Tokyo Stock Exchange, First Section)* On June 23, 2014, the English version of the Company’s name was changed from NAMCO BANDAI Holdings, Inc.

BANDAI NAMCO Holdings USA Inc.

Execution of North American regional strategy; management support for North American
operating companies

BANDAI NAMCO Holdings UK Ltd.

Execution of European regional strategy; management support for European operating companies

Toys and Hobby Strategic Business Unit
BANDAI Co., Ltd.

Planning, production, and sales of toys, plastic models, candy toys, vending machine products,
apparel, and sundries, etc.

MegaHouse Corporation

Planning, development, production, and sales of toys, candy toys, figures, general games,
and other products

CCP Co., Ltd.

Planning, development, manufacturing, and sales of toys, hobby commodities,
and home electric appliances

Sun-Star Stationery Co., Ltd.

Planning, production, and sales of stationery, sundries, and other products

Plex Co., Ltd.

Planning, design, development, and sales of character-based products

Seeds Co., Ltd.

Planning, development, and manufacturing of toys; contract operations for various types ofinspecting and testing

People Co., Ltd.*

Planning, development, and sales of toys and bicycles for young children (JASDAQ)TSUBURAYA PRODUCTION CO., LTD.*

Development of visual products and management of copyrights

BANDAI AMERICA INCORPORATEDSales of toy-related products

BANDAI S.A.

Regional management functions in Europe; sales of toy-related products

BANDAI U.K. LTD.

Sales of toy-related products

BANDAI ESPAÑA S.A.

Sales of toy-related products

BANDAI POLSKA sp.zo.o

Sales of toy-related products

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

Regional management functions; import, export, manufacturing, and sales of toy-related products

BANDAI KOREA CO., LTD.

Manufacturing, import, and sales of toys, games, etc.; licensing operations

BANDAI (SHENZHEN) CO., LTD.

Quality assurance and quality control operations; factory inspections of trading partners

BANDAI INDUSTRIAL CO., LTD.

Manufacturing of toy-related products

BANDAI PHILIPPINES INC.

Manufacturing of toy-related productsContent Strategic Business Unit
BANDAI NAMCO Games Inc.

Planning, development, and sales of game software and arcade game machines, etc.

BANDAI NAMCO Studios Inc.

Planning and development of games and other content

D3 PUBLISHER INC.

Planning, development, and sales of game software

B.B.STUDIO Co., Ltd.

Planning, development, and sales of game software, etc.

VIBE Inc.

Development and provision of network content

BANDAI NAMCO Online Inc.

Planning, development, and operation of online games and other software

Banpresto Co., Ltd.

Planning, development, and sales of amusement prizes

Banpresto Sales Co., Ltd.

Sales of arcade game machines and prizes, etc.

* Companies accounted for by the equity method70

BANDAI VISUAL CO., LTD.

Planning, production, and sales of visual software, etc.

Lantis Co., Ltd.

Planning, manufacturing, sales, and management of musical content

Sunrise Inc.

Planning and production of animation for TV and theatrical release; management andadministration of copyrights

SUNRISE MUSIC Publishing Co., Ltd.

Production of music for animations produced by Sunrise; overall management of music publishingand master recording rights

Bandai Channel Co., Ltd.

On-demand delivery of content, such as animations

BANDAI NAMCO Live Creative Inc.

Planning and production of events and live performances, etc.

I WILL Co., Ltd.

Development and training of artist management

BANDAI NAMCO Games America Inc.

Sales and marketing of game software

BANDAI NAMCO Amusement America Inc.

Sales of arcade game machines

BANDAI NAMCO Games Europe S.A.S.

Sales and marketing of game software

BANDAI NAMCO Amusement Europe Ltd.

Sales of arcade game machines

BANPRESTO (H.K.) LTD.

Manufacturing and production management of arcade game machines and prizes

Amusement Facility Strategic Business Unit
NAMCO LIMITED

Planning and operation of amusement facilities

Pleasure Cast Co., Ltd.

Planning and operation of amusement facilities

Hanayashiki Co., Ltd.

Planning and operation of Asakusa Hanayashiki amusement park

NAMCO ENTERTAINMENT INC.

Planning and operation of amusement facilities in the U.S.

NAMCO OPERATIONS EUROPE LTD.

Planning and operation of amusement facilities in the U.K.

NAMCO ENTERPRISES ASIA LTD.

Planning and operation of amusement facilities in Hong Kong

Affiliated Business Companies
BANDAI LOGIPAL INC.

Cargo trucking operations, logistics management, etc.

LOGIPAL EXPRESS INC.

Transportation, distribution, warehousing, etc.

BANDAI NAMCO Business Arc Inc.

Support of Group operations and administration, etc.

Artpresto Co., Ltd.

Planning and designing of various printed materials

Happinet Corporation*

Based on an optimal distribution system, Happinet distributes toys, visual and music software,video games, and amusement products all over Japan (Tokyo Stock Exchange, First Section)

Sotsu Co., Ltd.*

Planning and development of advertising and copyright business (JASDAQ)

Italian Tomato Ltd.*Management of directly operated restaurants; franchise operations* Companies accounted for by the equity method71

www.bandainamco.co.jp

BANDAI NAMCO Group ANNUAL REPORT 2014

Printed in Japan