NAMCO BANDAI Holdings Inc.
Annual Report 2010www.bandainamco.co.jp/

Annual Report 2010

NAMCO BANDAI

Holdings Inc.

Printed in Japan

Profile
The BANDAI NAMCO Group develops entertainment-related products and services in a wide range offields, including toys, game software, arcade game machines, visual content, music content, and amusement facilities. We aim to become a “Globally Recognized Entertainment Group” by establishing a strong
operational foundation in Japan while aggressively developing operations in overseas markets to secure
future growth.

Our Mission Statement

Dreams, Funand Inspiration“Dreams, Fun and Inspiration” are the Engine of Happiness.
Through our entertainment products and services, BANDAI NAMCO will continue toprovide “Dreams, Fun and Inspiration” to people around the world,based on our boundless creativity and enthusiasm.

Our Vision

The Leading
Innovator in Global
Entertainment
As an entertainment leader across the ages,
BANDAI NAMCO is constantly 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.”

RESTARTIn April 2010, the BANDAI NAMCO Group launched
the Restart Plan to counter the lengthening economic
slump and the Group’s declining performance. Under
the Restart Plan, the Group will work to bolster its
operational foundation to support the implementationof the current Mid-term Business Plan.
Goals of the Restart Plan

• Transforming into a speedy group• Improving profitability andstrengthening financial standing
By implementing initiatives targeting theachievement of these two goals, the Group will do its
utmost to achieve its medium-to-long-term vision of
being a “Globally Recognized Entertainment Group.”01

Contents

03

RESTART : Improving Profitability and Strengthening Financial Standing

04

Improving Profitability and Strengthening Financial Standing

05

Consolidated Financial Highlights

07

RESTART : Transforming into a Speedy Group08

Message from the President

13

NEW START : Creation of the Content SBU

14

Feature : Maximizing Content Value through the Content SBU

21

Review of SBU Operations

22

Toys and Hobby

24

Content

25

Amusement Facility

26
28
30
32
33
69

Corporate Governance
The BANDAI NAMCO Group’s CSR Initiatives
Overview of Main Group Companies
Directors and Corporate Auditors
Financial Section
Corporate Data

Forward-Looking Statements
The forward-looking statements in this annual report are based on the information available to management as of August 2010, 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 report are rounded to the nearest unit.
2. FY2010.3 and the year under review represent the one-year period ended March 31, 2010.
3. Figures in this annual report are as of August 2010.

02

RESTART
Improving Profitability andStrengthening Financial Standing
Ahead of the launch of the Restart Plan, the Group
implemented a number of measures to strengthen
its financial standing. Having established a solid
foundation, we will now take steps to ensure thesmooth progress of the Restart Plan.

03

Improving Profitability and Strengthening
Financial Standing
Implementing measures ahead of the Restart Plan
In the fiscal year under review, we implemented measures to improvenext and subsequent fiscal years and others, and impairment loss on

our profitability and strengthen our financial standing. These

goodwill of approximately ¥12.7 billion following a review of the future

measures principally involved valuation accounting procedures.

business plans of three subsidiaries, including Bandai Visual Co., Ltd.

We recorded an allowance for distribution inventories and an
estimated valuation loss resulting from inventory reviews for gamesoftware and packaged visual products in Japan and overseas,

In addition, we implemented a reversal of deferred tax assets ofapproximately ¥4.0 billion.
We are also taking steps to reduce our workforce. Throughtotaling approximately ¥5.0 billion. In addition, the Company recorded

solicitations for voluntary retirement at NAMCO BANDAI Games Inc.

the following special losses: special additional retirement benefits ofand the existing voluntary early retirement programs at otherapproximately ¥1.9 billion associated with workforce reductions

companies, by the end of FY2011.3 we expect to reduce theaimed at achieving greater organizational efficiency, a loss of about

Groupwide workforce by 600 employees, or about 8% of the current¥5.5 billion on the closure of amusement facilities scheduled for thelevel of approximately 7,500.

Consolidated Statements of Operations

Net sales

Unit: ¥ billion

FY2010.3¥ 378.5

Cost of sales

249.8

Selling, general and administrative
expenses

126.9

Major Components of Loss

1.9

Special additional retirement benefits due torevision of personnel structure

about ¥

Other loss

(21.2)

Loss on the closure of amusement facilities
and others

about ¥

Loss before income taxes andminority interests(19.3)

Impairment loss on goodwill of
certain subsidiaries

Income taxes

10.5

Operating income

Minority interests

0.1

Net income (loss)(29.9)

Reversal of a certain amount ofdeferred tax assets

1.9 billion
5.5 billion

12.7 billion

about ¥

4.0 billion

about ¥

Cost Reductions in FY2011.3
We expect to save approximately ¥3.0 billion through theimplementation of personnel system reforms and about ¥2.5 billion
in reduced amortization through the goodwill. We will also pursue
efficiency at Group companies and reevaluate indirect expenses. As
a result of these measures, we are forecasting cost reductions ofabout ¥6.5 billion for the Group overall.

04

3.0
2.5
1.0
6.5

Savings from personnel system reevaluation about ¥billionReduced amortization of goodwill

about ¥

billion(reevaluation of indirect expenses, increased efficiency, etc. )about ¥

billionTotal

about ¥

OthersbillionConsolidated Financial Highlights
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries

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

Thousands of U.S. dollars*1
except per share data

2009 vs 2010

2010

2008

2009

2010

Net sales¥ 460,474¥ 426,400¥ 378,547– 11.2 %$ 4,068,648

Gross profit

164,073

146,023

128,753– 11.81,383,846

Operating income

33,411

22,3481,884– 91.6

20,250Recurring income*2

36,19824,513

1,908– 92.2

20,507

Net income (loss)

32,67911,830(29,929)—(321,679)

Capital expenditures

34,115

17,481

14,418– 17.5

154,966

Depreciation

24,75922,54618,989– 15.8204,095

Cash flows from operating activities

35,00019,301

10,582– 45.2

113,736

Cash and cash equivalents at end of year

129,290

110,037

97,777– 11.1

1,050,914¥ 413,023¥ 363,445¥ 325,936– 10.3 %$ 3,503,181

289,944

260,579

229,012– 12.1

2,461,436

For the years ended March 31

For the YearAt Year-End
Total assets
Total net assets

Per Share Data (yen and U.S. dollars*1)
Net income (loss) (Basic)¥ 128.65¥

47.95¥ (123.98)

Total net assets

1,127.72

1,067.71

938.74– 12.1

10.09

Cash dividends

24.00

24.00

24.00

—

0.26

—%

$

(1.33)

Main Financial Indicators (%)
Return on equity (ROE)

11.7 %

4.3 %– 12.4%Return on assets (ROA)

8.8

6.3

0.6

Overseas sales proportion

24.7

25.1

24.4

Operating income margin

7.3

5.2

0.5

Shareholders’ equity ratio

69.4

70.9

69.5

*1 U.S. dollar amounts have been translated, for convenience only, at the rate of ¥93.04=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market on March 31, 2010.
*2 Recurring income is a Japanese accounting term denoting income before extraordinary items.

05

Financial Highlight

Net Sales (¥ billion) / Overseas Sales Proportion (%)
FY2006.3

Gross Profit (¥ billion) / Gross Profit Margin (%)

18.8%

FY2007.3

450.8

FY2006.3

459.1

FY2007.3

460.5

FY2008.3

22.4%

FY2008.3

24.7%

FY2009.3
FY2010.3

Operating Income (¥ billion) / Operating Income Margin (%)
FY2006.3
FY2008.3
FY2009.3
FY2010.3

11.5%
8.8%

FY2009.3

6.3%
0.6%

FY2006.3

386.7

9.6%

FY2008.3

FY2007.3

9.4%

284.3

413.0

FY2008.3

11.7%

289.9

FY2009.3

363.4

33.0

FY2009.3

FY2006.3

7.4

0.08 times

27.2

FY2008.3

16.6

0.05 times

260.6
229.0

FY2007.3

13.9

0.06 times–12.4%

Free Cash Flows (¥ billion)

0.14 times

0.05 times

4.3%

FY2010.3

325.9

FY2006.3

252.2

5.8%

408.5

Interest-Bearing Debt (¥ billion) / Debt-Equity Ratio (times)

FY2010.3

11.8
–29.9

Total Net Assets (¥ billion) / ROE (%)

FY2006.3

FY2008.3

32.7

FY2010.3

FY2007.3

FY2007.3

24.3

FY2009.3

19
0.5%

Total Assets (¥ billion) / ROA (%)

FY2010.3

14.2

FY2008.3

22.3

5.2 %

128.8

34.0%

FY2006.3

33.4

7.3%

146.0

FY2007.3

42.2

9.2%

164.1

35.6%

Net Income (Loss) (¥ billion)

35.7

7.9%

FY2007.3

168.1

34.2%

FY2010.3

378.5

24.4%

156.6
36.6%

FY2009.3

426.4

25.1%

34.7%

20.0

FY2009.3

20.8

9.0

FY2010.3

12.2

0.7

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

Contribution to Net Sales by Business Segment (FY2010.3)

Contribution to Net Sales by Geographic Segment (FY2010.3)

AffiliatedAffiliatedBusinessBusinessCompanies
Companies

4.4%

Asia, excluding
Asia, excluding
Japan Japan

4.4%

4.5%

Europe Europe

Amusement
Amusement
Facility Facility

16.4% 16.4%

Visual andVisualMusic
andContent
Music Content

7.3%

12.2% 12.2%

Toys andToys
Hobby
and Hobby

37.4% 37.4%

4.5%

Americas
Americas

7.7%

7.7%

Japan Japan

75.6% 75.6%

7.3%

Game Contents
Game Contents

34.5% 34.5%
Note: Percentage figures are calculated based on sales before elimination ofinternal transactions

06

Note: Percentage figures are calculated based on external sales

RESTART
Transforming into a Speedy GroupEntertainment markets are undergoing dramatic change
due to diversification of consumer preferences, andcompetition is intensifying on a global basis. To succeedin these markets, we will transform into speedy group.
To that end, we will implement the following measuresand move steadily forward with the establishment of asystem that can generate hit products.

• Establishing the Content SBU
through the integration of the Game
Contents SBU and the Visual andMusic Content SBU• Directly linking management andoperations with presidents of the
SBU core companies concurrently
serving as directors of NAMCO
BANDAI Holdings

07Message from the President

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

08

Weak Performance in the Fiscal Year
Ended March 2010

anticipated when I became president, and I feel a strong sense of
personal responsibility for this performance. While it is true that thesluggish economic conditions had an adverse influence on ourIn the fiscal year under review, the entertainment industry wasbusiness, those conditions were not the key reason for the decline inadversely affected by sluggish consumer spending around the world

our earnings capacity. The fact is that we were unable to fully deliver

as a result of the continued slump in business conditions. In thisproducts and services that responded flexibly to changes in thesetting, the Toys and Hobby business recorded strong results inmarket environment and in customer preferences, and as a result ourJapan, but operating losses were recorded in the Game Contents andprofitability declined.

Visual and Music Content businesses, and overall the BANDAI

Since the management integration in 2005, the BANDAI NAMCO

NAMCO Group’s performance was not satisfactory. Net sales wereGroup has worked to maximize synergies from the integration. The

down 11.2%, to ¥378,547 million, operating income decreased

Group has taken steps to reinforce its management foundation,

91.6%, to ¥1,884 million, and we recorded a net loss of ¥29,929

including reorganization initiatives. We have achieved a certain degree

million. The net loss was the result of measures that we implementedof results from the consolidation of administrative tasks and otherto improve the Company’s profitability and strengthen its financial

streamlining and cost-cutting efforts at key companies. However, instanding. These measures, which included reviewing the personnel

such areas as home game software, we ended up losing sight of thesystem and booking an impairment loss on goodwill, wereindividuality and strengths that Bandai and NAMCO each brought toimplemented prior to the start of the BANDAI NAMCO Group Restart

the management integration. Consequently, the Group lost speed on

Plan. (For more information about the measures implemented tothe operational side.

improve the Company’s profitability and strengthen its financial
standing, please see page 4.)
Our results in the fiscal year under review are worse than I had

To break out of this situation, we determined that we had to movequickly and decisively, and in April 2010 we introduced the BANDAI
NAMCO Group Restart Plan.

My mission is to ensure that the
Restart Plan is on track and to reinforce theCompany’s foundation for global growth overthe medium to long term.
Building a Faster, Stronger Organization
by Advancing the Restart Plan

concurrently as president and representative director of NAMCO BANDAI
Games Inc. from April 2010, and it was decided that the presidents of thecore companies in each SBU (Strategic Business Unit) would become

Under the Mid-term Business Plan that was commenced in April 2009,

directors of the holding company as of the general shareholders’ meeting

we are working to prepare a foundation for global growth, targetingin June 2010. Through this change in directors, we are working toour medium-to long-term vision of being a “Globally Recognizedstrengthen ties among businesses while directly linking management

Entertainment Group.” The Restart Plan, which will be implemented

and operations and increasing the speed at which we can move fromin tandem with the Mid-term Business Plan, will also play the role ofmanagement decision-making to execution. Moving forward, we willreinforcing the foundation for progress with the business plan.

maintain a sense of urgency, make decisions in a speedy manner, andThe objectives of the Restart Plan are “improving profitability andimplement initiatives with bold resolve in all operating areas.

strengthening financial standing” and “transforming into a speedy

Second, we have reorganized the SBUs. We established the Content

group.” To “improve profitability and strengthen financial standing,”

SBU by integrating the SBUs that handle content—the Game Contents

as described above we have already implemented certain measures,

SBU and the Visual and Music Content SBU. As a result, we will movecentered on the accounting treatment of valuation as a non-cash

forward with a system of three SBUs—the Toys and Hobby SBU,

charge. These measures will help to ensure the smooth execution

which will manufacture products; the Content SBU, which will handleof the Restart Plan.

content from creation to delivery; and the Amusement Facility SBU,

To “transform into a speedy group,” we will implement two principal

which will be in charge of key customer contact points.

measures. First, we have revised the management systems. I have served09Mid- to Long-term Group Vision (FY2016.3—FY2018.3)

Globally Recognized Entertainment GroupOperating Income: ¥100 billion Overseas Sales Ratio: 50% ROE: More than 10%

Substantial growth in global market (April 2012—)•G enerating returns from our investments• Making further investments for growth

Mid-term Business Plan (FY2010.3—2012.3)
Developing a global base for growth• Investments in growing
business areas• Improving profitability

Aiming to be a “Globally Recognized Entertainment Group” and to develop the base for global growthin the Mid-term Business Plan, the BANDAI NAMCO Group is pursuing two strategies: “Focus” as
our business strategy and “Enhance the Entertainment-Hub” as our function strategy.

Strategy A “Focus” = Business Strategy
We have clarified our missions based on the market attractiveness andour competitive advantage in each area.
Toys and Hobby SBU• Advance strategy of establishing dominant No.1 positions in Japan• Global expansion of character merchandising model, with the greatestemphasis on markets in the Americas and Europe

Content SBU• Strengthen operations, centered on game software for home video
game consoles in the Americas and Europe• Strengthen earnings capacity in the domestic market

Amusement Facility SBU• Strengthen earnings capacity through selection and concentration• Develop amusement facilities that distinguish the Group from its
competitors

Strategy B “Enhance the EntertainmentHub” = Function Strategy

The Entertainment-Hub function, which adds a series of functions(from content creation and acquisition through development to use)
inside the Group and aims to further strengthen the functions throughsynergies with external partners, is the greatest strength of the
BANDAI NAMCO Group. In the Mid-term Business Plan,
we will enhance this model, which used to be applied mainly inthe domestic market, by evolving into a global model throughcoordination with the strategy for each business.

Evolve from domestic model to global model
Strengthen IP
creation /acquisition
capability

Enhance IP
marketing capability

Maximizemerchandisingdevelopment
capability

New Organization Chart
As of February 1, 2010

From April 1, 2010

NAMCO BANDAI Holdings

NAMCO BANDAI Holdings

Chairman and Representative Director, Takeo Takasu
President and CEO, and Representative Director, Shukuo Ishikawa

President and CEO, and Representative Director, Shukuo Ishikawa

Affiliated Business Companies

Affiliated Business Companies

Toys and Hobby

Toys and Hobby

Core company: Bandai
President and Representative Director: Kazunori Ueno

Core company: Bandai
President and Representative Director: Kazunori Ueno

Game Contents
Core company: NAMCO BANDAI Games
President and Representative Director: Shin Unozawa

Visual and Music Content

Content
Core company: NAMCO BANDAI Games
President and Representative Director: Shukuo Ishikawa
Vice President and Representative Director: Shin Unozawa

Core company: BANDAI VISUAL
President and Representative Director: Kazumi Kawashiro

Amusement Facility
Core company: NAMCO
President and Representative Director: Masahiro Tachibana

10

Amusement Facility
Core company: NAMCO
President and Representative Director: Masahiro Tachibana

The Content SBU Holds the Key to Growth

guidance for overall management. Shin Unozawa, who had been
serving as president, will be vice president. He will focus on rebuilding

The establishment of the Content SBU is the most important part ofcontent operations and providing supervision on the front lines of

the Restart Plan. In recent years, customers have enjoyed a variety ofcontent creation, aiming to integrate game content and visual andcontent, including visual content, games, and music, without limiting

music content.

themselves to specific content outlets. In addition, platforms that

Another step that we have taken to maximize content value isprovide content are increasingly seamless. A good example is thethe conclusion of an advisory contract with Mr. Avi Arad. Mr. Arad hashugely successful mobile device from Apple Inc., of the United States.

produced numerous film series that became global hits, including

To respond to this rapidly changing market environment and to

Spiderman. Mr. Arad will provide advice from a fresh perspective onchanges in consumer preferences, flexibility and speed areworldwide content creation and development for all Content SBU

indispensable. We established the Content SBU in order to moveactivities, as well as on strengthening our overseas Toys and Hobby

away from the previous organization, which was vertically organizedbusiness. Mr. Arad is participating in the PAC-MAN 30th Anniversary

by content outlet, such as home video game software, arcade game

Project, and he has provided a range of advice and opinions aboutmachines, packaged visual content, packaged music content, and

the Group’s abundant content.

on-demand distribution. The new Content SBU has an organizational

In these ways, the BANDAI NAMCO Group will work to increase

structure that functions along a horizontal axis, with its focus shifted

the speed of its business development activities through the reforms

toward content. This structure will enable us to move flexibly andimplemented as part of the Restart Plan. The biggest reason for the

rapidly. With the Content SBU, we will follow a strategy of selecting

recent decline in our profitability is that we lost operational speed andthe optimal content outlet from the customer’s point of view, andended up with a system that made it difficult to create hit products.

we will take steps to maximize content value and achieve growth,

From now on, we will give the highest priority to building a system that

centered on content creation. (For further information about the

can generate hit products. Getting the Restart Plan off to a smoothContent SBU, please see page 13.)start will facilitate wide-ranging business development that leverages

NAMCO BANDAI Games is the core company in the Content SBU.

our abundant content, which is the traditional strength of the BANDAI

As explained above, I will serve concurrently as the president and

NAMCO Group. It is my mission to advance the Restart Plan, and I

representative director of NAMCO BANDAI Games, providing

am determined to do my utmost to achieve that goal.

TOPIC: Avi Arad, Executive Advisor of BANDAI NAMCO GroupOn February 1, 2010, the BANDAI NAMCO Group concluded an advisory agreementwith Mr. Avi Arad. Under this agreement, Mr. Arad will provide advice regarding thebusiness operations of the BANDAI NAMCO Group. As the Chief Creative Officer
of Marvel Entertainment and the Chairman and Chief Executive Officer of Marvel
Studios in the United States, Mr. Arad has produced numerous film series that
became global hits, including Spiderman, X-Men, Iron Man, and The Incredible
Hulk. He contributed greatly to the growth of the Marvel Entertainment group aroundthe world. Mr. Arad also served as a Consultant and Director of Toy Biz, of the UnitedStates, and was engaged in toy design and development for more than 30 years. He
has abundant experience in the toy business.
We plan to ask Mr. Arad, as an Executive Advisor to the Group’s businesses, foradvice on content creation and worldwide development of games, visual and music
content, and other content business, as well as for advice on how to strengthen
our overseas Toys and Hobby business. Mr. Arad will also help us strengthen ouroverseas operations, and commemorating 30 years of PAC-MAN, he will serve as a
producer of a new 3D PAC-MAN animation.

Mr. Avi Arad
11

Stable Dividends of ¥24 per Share
Maintained in FY2010.3

among SBUs and companies, and encourage employees to develop
a wide range of experience and know-how. In this way, we will create
an environment that brings out new capabilities from each employee.

The Company positions the return of profits to stockholders as one of

In these endeavors, we will be guided by the key phrase Fun for theits highest management priorities. The fundamental policy is to maintain

Future. To make a contribution to stakeholders and to create a groupa stable dividend and increase corporate value while becoming an evencentered on human resource management, with unique strengths in

more competitive Group, and preserving a sound financial position. In

entertainment and imagination the Group will advance people-

concrete terms, the Company plans to maintain the consolidated

centered management. We will strive to create an environment individend payout ratio at a level of 30%, based on stable annual dividend

which growth in the abilities of employees supports growth in thepayments of ¥24 per share. In the fiscal year under review, we have

corporate value of the Group.

decided to maintain dividend payments at ¥24 per share.
Furthermore, in addition to the payment of dividends we will also
consider using retaind earnings for the acquisition of our own shares,

Aiming for Global Growth over the Medium
to Long Termwith comprehensive consideration of aspects such as the level ofcash on hand, operating performance, recent share price movement,
and plans for large-scale investments. To efficiently advance thereinforcement of our global management foundation during the period
covered by the Mid-term Business Plan, I would like to give priority to
M&A transactions and to up-front investment, such as R&D investment.
We will consider actively implementing M&A transactions in theentertainment field when we believe that mutual synergies can be
expected, following careful evaluation of investment conditions.

As mentioned above, in the fiscal year ending March 2011, I will domy utmost to steadily advance the Restart Plan, restore speed to ouroperations, and build an environment that can generate hit products
and services that make full use of the strengths of the BANDAI
NAMCO Group. We will strive to recover the trust of our shareholders
and investors through the achievement of our targets—net sales of¥400 billion, operating income of ¥11 billion, and net income of ¥4.5
billion. To that end, in addition to the Content SBU strategy describedabove, the Toys and Hobby SBU will endeavor to achievea dominant No. 1 position in Japan, where it has recorded strong

Cash Dividends per Share (Yen)
FY2006.3

results. Overseas, by expanding into new business categories and24

FY2007.3

28

new geographical regions, the SBU will work to strengthen its existing
operations, which have struggled, and reinforce its growth foundation.

FY2008.3

24

In the Amusement Facility SBU, we have improved profitability by

FY2009.3

24

increasing efficiency. Centered on the domestic market, we will take

FY2010.3

24

steps to provide facilities operations and services that are

Note: Dividends for the fiscal year ended March 2006, include share transfer
payments made in lieu of interim dividends.

0

5

10

15

20

differentiated through the use of the Group’s distinctive know-how.
In addition, the Group will continue working to improve earnings
capacity by applying the principles of selection and concentration.

Aiming to Enhance the Group’s Presence
through Bolstered Human Resources Training

We can make the most important contribution through the ongoingprovision of “Dreams, Fun and Inspiration” to people around theworld, and in this way we can realize our vision of being a “Globally
Recognized Entertainment Group.” To further enhance our presence

The Group’s new concept for CSR activities is expressed in the key

in the years ahead, we must bolster our development in global

phrase Fun for the Future. In accordance with this key phrase, we will

markets, pursue innovation in our content strategy, and expand our

implement CSR activities that leverage the Group’s strengths andoperational scale to the level needed for global competition. To

contribute to the creation of a future that is more fun. To further

overcome these challenges, the Group will advance the Restart Plan,

strengthen environmental management, as outlined in the Mid-term

thereby reinforcing its global growth foundation, as outlined in theBusiness Plan, we will establish environmentally friendly measures for

Mid-term Business Plan, and make full use of its traditional strengths.

products and services in our Group companies. We will also work to

On this foundation, the entire Group will work together to achieve

reduce CO2 emissions from Group worksites.

further progress by creating and developing new entertainment

In addition to these action policies, since I became president I havestressed my fundamental management policy of creating “a group
centered on human resource management with unique strengths

products and services, and thereby record global growth over the
medium to long term.
I would like to ask our shareholders, investors, and otherin entertainment and imagination.” To make full use of the Group’s

stakeholders for their continued support and guidance of the BANDAI

extraordinary human resources, we will continue striving to create

NAMCO Group in the years ahead.

workplace environments that enable everyone to achieve their fullpotential. Accordingly, we are implementing personnel policies thatenable all employees to experience a range of work duties. In the
future, we will step up the strategic transfer of human resources

12

August 201025

30

NEW START
Creation of the Content SBU
As one part of the Restart Plan, the Content SBU was
created through the integration of the Game Contents
SBU and the Visual and Music Content SBU. In thissection, the SBU’s future strategy is discussed by
Shin Unozawa, who is NAMCO BANDAI Games’ Vice
President and Representative Director and provides
leadership on the front lines, and by Hajime Nakatani,
who is a Director of NAMCO BANDAI Games andleads the Development Studio.

13

Feature: NEW START

Maximizing Content Value
through the Content SBU
A New Organization to Provide Speedy, Flexible Responses
The Content SBU was established to facilitate speedy, flexible

leverage synergy effects in content creation and to increase value.

responses to the diversification of customer preferences and technology

The Production Group, which brings together a number of small andplatforms. In establishing the new SBU, we moved beyond the previous

medium-sized production units, will take the lead in formulating content

organization, which was vertically organized by content outlet, suchcreation and outlet strategies. The Publisher Function, meanwhile, will

as home vedio game software, arcade game machines, packaged

provide the content that has been created through a variety of outlets.

visual content, packaged music content, and on-demand distribution.

With these two virtual organizations working together in a flexible andIn comparison, the new structure functions along a horizontal axis, withspeedy manner, the Content SBU will work to achieve its No. 1

its focus shifted toward content. Under this new system, we will work to

mission—maximizing content value.

Previously

On-demand distribution

Music content

Visual and Music
Content

Visual content

Prizes foramusement machines

Network content

Arcade game machines

Game software forhome video game consoles

Game Contents

From April 1, 2010

Content SBU
PRODUCTION GROUP…etc

Content Conference
PUBLISHER FUNCTION
NAMCO BANDAI Games BANDAI VISUAL Banpresto Bandai Channel
NAMCO BANDAI Online D3 Group Lantis NAMCO BANDAI Live Creative
NAMCO BANDAI Games America NAMCO BANDAI Games Europe NAMCO AMERICA
NAMCO EUROPE NAMCO BANDAI Partners Group etc.

Customers Around the World

14

Key Executive: Content SBU

I will do my utmost to integrate game content withvisual and music content, and to rebuild home
video game software operations. In a flexible
and speedy manner, we will strive to continuallyprovide content that people enjoy.
Shin Unozawa
Vice President and Representative Director,
NAMCO BANDAI Games15

FY2010.3 Results of Game Contents andVisual and Music Content Businesses

Goals of the Content SBU
The Content SBU, which was created through the integration of the

In FY2010.3, the Game Contents SBU and the Visual and Music

Game Contents SBU and the Visual and Music Content SBU,

Content SBU both recorded losses. In home vedio game software, outtranscends the borders of its predecessor SBUs and handles theof 86 titles (excluding localized products) that we published, half werecomplete range of content-related functions—from creation to

unprofitable, principally small and medium-sized titles. In Visual anddistribution. The previous system was vertically organized by content

Music Content, meanwhile, certain packaged software products

outlet, such as home video game software, arcade game machines,

recorded favorable results, but the overall performance was weak.

packaged visual content, and packaged music content. The new

The sluggish market environment and the influence of environmental
changes did have an adverse influence on our results. However, thestructure, however, functions along a horizontal axis, with a focus
on content creation.

most important factor was internal: we were unable to respond to the

For customers, visual products, music, and games are each amarket environment and we could not provide products that met

different type of content, and increasingly customers enjoy thesecustomer preferences. The fact that our two content-handling SBUs

products in ways that transcend traditional categories. In thisrecorded losses was an indication that we had lost operational speed,environment, it is not possible to implement speedy responses withand a prompt response was required. In this setting, we decided tothe previous approach, which was based on content outlets. Moving

establish the Content SBU as one facet of the Restart Plan. Through theforward, we will create interesting content by drawing on a wide-range

new SBU, we will strive to restore speed to our operations and respondof new ideas that are not limited by the traditional outlet boundaries,

rapidly to future changes in the market environment.

and we will focus on the best outlet for that content. Through this new
approach, the Content SBU is aiming to respond in a speedy mannerto the needs of markets and to create new markets.

Responding tobusiness models that
acommodate diverse
platforms

Sales by Category in the Content SBU (FY2010.3)
Others, elimination¥16.5 billion

Total¥137.5 billion¥77.0 billion

56%

Note: Does not include sales of the Visual and Music Content SBU

16

FY2009.3

FY2010.3

Numberof titles

Unit sales(Thousands)

Numberof titles

Unit sales(Thousands)

Japan

74

10,443

93

8,878

U.S.

19

6,115

39

5,829

Europe

20

6,195

52

7,326

Asia

13

632

41

704

Group total

126

23,385225

22,737

Localized versions

57

Group total after eliminationof localized versions

69¥44.0 billion

12%

32%

Home video
game software

Unit Sales of Home Game Video Software by Region

Arcade gamemachine139
23,38586

22,737

Production Group and Publisher Function

decisions regarding overall strategy. The conference will not be a simple
briefing meeting. Rather, it will be a forum for detailed discussions and

The reorganization was not intended simply to increase efficiency

decision-making regarding the utilization of the content.

by creating a single organizational unit and standardizing work

A New Approach to Content Creation

approaches. It was also intended to unify the approaches anddirections of the SBUs. The Content SBU has the mission of focusing
on content first and foremost and maximizing content value.

The reorganization was implemented in order to facilitate these types

Within the Content SBU, two virtual organizations will implementof speedy responses in the rapidly changing market. What is most

speedy operational management. The first is the Production Group,

important of all, however, is not the change in the structure itself, butwhich will focus on creating content and maximizing its value. The

rather the change in thinking that was brought about by the new

second is the Publisher Function, which will provide a wide range ofstructure. The members of the Production Group will have rights andoutlets for products and services.

responsibilities, and I want them to leverage their originality, to approach

The Production Group encompasses multiple organizations thatthe new system as an opportunity to take on the challenges of a wide

conduct content development. Through a shift in organizational

range of content outlets, and to work with high levels of motivation. It isorientation, from vertical (by content outlet) to horizontal (focus on

important that producers and creators, who until now have developed

content), the creation of the new SBU will facilitate the free creation ofcontent for a specific outlet, change their approach so that they arecontent without any restrictions to a specific outlet. Moreover, byalways considering the possibilities of multiple content outlets.

eliminating the boundaries between outlets, we will create an

This change in thinking is the biggest goal of the reorganization. For

environment that encourages the flexible exchange of opinions among

example, in the past, people working in home video game softwaredevelopers. The Production Group is made up of a number of small

were focused on only one content outlet, and everything fromand medium-sized companies and labels, each with about 20 to 30

development to marketing, sales, and customer service was aligned

employees. Under the new system, it will be easier for these employeeswith that focus. Under the new system, however, from the very firstto leverage their individual personalities and strengths. Moreover, understages of development, everyone will be thinking about thethe Production Group, individual companies and labels will have both

possibilities of multiple outlets. And with profit-and-loss responsibility,

decision-making authority and profit-and-loss responsibility. This

they will consider how to leverage the content that they have createdapproach will utilize the principle of competition in a positive manner

for multiple outlets and how to maximize its value.

and promote the flexible and speedy creation of content.

On the other hand, the Publisher Function also has profit targets

The Group has a large number of highly talented and originalfor multiple outlets, and it conducts discussions with the Production

producers. Our belief is that the new organization will be able toGroup, with consideration for such factors as the status of competitors

make full use of their originality and strengths, thereby leading to theand market trends. Under the new structure, discussions will

creation of hit content. In addition, the Production Group will also playincorporate a variety of perspectives with clear lines of responsibility

a role in overall content-related strategies, such as content outlet

and a focus on securing profits. In this way, the organizational reforms

strategies, collaboration with other Group companies, and links withwill result in a high level of awareness of responsibility for profits andthe media and external production organizations.

will foster even greater speed in business development activities.

The Publisher Function, meanwhile, will serve as infrastructure forthe delivery of content to customers. In a speedy and flexible manner,
the Publisher Function will ensure that content is provided as theMoving Ahead in a Dramatically Changing
Market Environment

optimal products and services.
Moving forward, the Content SBU’s market environment is expected

In addition, the Content Conference will provide a horizontal
connection between the Production Group and the Publisher Function.

to change at an accelerating pace. Due to the diversification of

Key members will participate in the Content Conference, where

content outlets, including smart phones and other mobile phones,

participants will engage in free and open discussions and makeonline PC games, and social networking services (SNS), the breadthof entertainment opportunities will increase, and the range ofcustomers will expand. In addition to traditional core customers, an

FY2010.3: Top 10 Game Titles

increase in customers who enjoy games and visual products more

Title namePlatform

Unit sales
Region (Thousands)

TEKKEN 6

PS3・Xbox360

E, J, A184

Ben 10 : Alien Force

Multi

US, E

108

with diversification in outlets and preferences, entertainment

Ben 10 : Alien Force 2

Multi

US, E

81

companies such as the BANDAI NAMCO Group will need to respond

DRAGON BALL RAGING BLAST

PS3・Xbox360

WW70

in a more wide-ranging, speedy manner.

GOD EATER

PSP

J

61

Ben 10 Protector of The Earth

Multi

US, E

61

Active Life: Extreme Challenge

Wii

WW

60

Tales of Vesperia

PS3・Xbox360

WW50

TEKKEN 6

PSP

WW

47

GUNDAM VS. GUNDAM NEXT PLUS

PSP

J, A

43

WW: Worldwide, J: Japan, US: United States, E: Europe, A: Asia

casually is expected to propel market expansion. On the other hand,

New content outlets, such as SNS and smart phones, are recording
rapid growth, and the business model for these outlets is completely
different from the model used in the existing packaged productbusiness. Accordingly, fresh approaches are needed to respond to
the new market realities. A key issue for the Company will be how
rapidly we can respond to changes in the environment. Under the17new Content SBU system, by focusing on content itself we will be

global, simultaneous development initiatives. In the future, we willable to flexibly and speedily provide content for diversifying outlets.

continue to generate this kind of powerful synergy, and at the same

With a high level of awareness of development for multiple outlets, wetime we will create products, services, and business models that draw

can effectively work to maximize content value.

on the distinctive strengths of the BANDAI NAMCO Group.

We are already seeing new approaches. For example, game

We don’t expect these reforms to generate dramatic results rightsoftware or tickets for downloading game software items are being

away. We think of the recent reorganization as a response to changes

included in the package with visual software products. Moreover, within the market environment from a medium-to long-term viewpoint. For

Mobile Suit Gundam UC (Unicorn), we are taking on the challenge ofthe time being, development will be centered on the packaged

a new business model that includes, at more or less the same time,

software business, but to reduce unprofitable software titles, we will

screenings in movie theaters, sales of packaged visual products, andstrictly examine the profitability of individual titles and conduct speedy

on-demand distribution. We have been highly successful with thesedevelopment on that basis. In addition, we will work to raise thequality of worldwide development titles through the implementation of
integrated quality control that will be based in Japan while covering

Mobile Suit Gundam UC (Unicorn):
Taking on the Challenge of Simultaneous Global
Development with a New Business Modeldomestic and overseas studios. I will take the lead in these endeavors.
We will steadily implement these short-term initiatives and take steps
to foster a new approach through reforms, thereby once again
regaining operational speed.
I want the Content SBU to be an organization that can respond in atimely manner, even in the midst of wide-ranging changes in theoperating environment. No matter what the changes, however, theBANDAI NAMCO Group will always strive to provide content that istruly enjoyed by customers in a flexible and speedy way. My mission

Worldwide simultaneous
sales of software immediately
after movie release.
Total sales of about
200 thousand units in
Blu-ray & DVD(As of June 30, 2010)

On-line distribution
Ranked top in all-time
online distribution at the
PlayStation Store online

Movie event
8 theatres,
37 thousand visitors

is to integrate game content operations and visual and music content
operations, and to rebuild our home video game software business.
Moving forward, the Content SBU will strive to fully leverage thepotential of the BANDAI NAMCO Group and to make a contribution to
the success of the Group as a growing enterprise.

PAC-MAN 30th Anniversary Project©NBGI

PAC-MAN will mark its 30th anniversary in 2010, and accordingly the Group has
positioned 2010 as the year of the PAC-MAN revival. We will implement a range of events,
under the slogan “PAC IS BACK!”Specifically, we plan to launch a wide span of PAC-MAN products around the world,
including new titles for home video game consoles, PCs, smart phones, and other mobile
phones, as well as arcade game machines, and character goods. In addition, Mr. Avi Arad,advisor to the BANDAI NAMCO Group (see page 11), will serve as executive producer fora new 3D PAC-MAN animation. This animation will be released from 2012, and we areconsidering a worldwide roll out.
The Group will start to introduce these products and services in 2010, using its
comprehensive strengths to leverage possibilities in a variety of operational fields. Over the
medium to long term, we plan to establish a new PAC-MAN world.

What is PAC-MAN?
An arcade video game that was launched in Japan in July 1980 and introduced in the United States in October 2010, PAC-MAN became hugely
popular far beyond the borders of Japan. More than 400 types of PAC-MAN related character goods were sold, and a popular animated TV
animation was created, with a viewer rating that reached as high as 56%. PAC-MAN became an unprecedented boom and gave rise to the phrase“PAC-MAN fever.” In June 2005, PAC-MAN received the Guinness World Records award for being the “Most Successful Coin-Operated Game.”
Numerous new titles and series sequels have been released in a range of formats, and PAC-MAN has been ported to various video game platforms,
including home gaming consoles and handheld systems. Thirty years after its launch, it continues to be loved around the world.

18

Key Executive: Content SBU

My role is to think about the use of multiple
outlets for our content, and about moving
forward at full speed with the creation ofcompetitive titles that offer something new.
Hajime Nakatani
Director, NAMCO BANDAI Games,
Group Executive, Development Studio

Brief History
April 1982: Joined NAMCO (current NAMCO BANDAI Games)
April 2000: Became General Manager of Development Division 2
April 2007: Became executive officer, Contents Development Division
and Development Division 1, and General Manager,
Development Unit 1
April 2009: Senior executive officer, Head of Contents Development
Division, Director, NAMCO BANDAI Games America Inc.
April 2010: Director, Group Executive, Development Studio

19

Building Links among the Production Groups

sales. Three months prior to launch, we distributed a free demo versionof this game, and we incorporated the opinions and requests of players

After I joined the company, I was responsible for the development ofin the final version. In this way, we were able to identify customer needs

a variety of games, including home video game software, and large-

and to create and provide timely content.

scale attractions. In April 2010, I became a director of NAMCO

This success will be a model for future initiatives. We will combine a

BANDAI Games, with responsibility for the Development Studio,

steady focus on needs with consistent attention to the outlet strategy.

where my role is to advance content creation.

In this way, we can generate steady profits from titles that are in

We believe the loss that was recorded in Game Content operations

development. In addition, as a new challenge in Europe and thewas a result of our failure to develop products that meet user needs.

Americas, we need to consider new initiatives, such as moving ahead

Looking back on the management integration of Bandai and NAMCO,

first with the development of animations and then subsequently

from the viewpoint of development, the companies had different

launching products and services. Of course, we need to take steps

styles. Bandai, which did not have internal development capabilities

to aggressively build new franchises by creating fresh, new products,

and acted as a producer while rapidly launching products throughincluding 3D animations.

partnerships with outside development companies. NAMCO, on theother hand, had in-house development staff who would work on asingle title over a lengthy period of time. We attempted to achieve

Change that Fosters Active Discussion andFlexible Thinking

efficiency and synergies by integrating these two companies andcreating a single organization, system, and process, but unexpectedly

Under the recent reorganization, the boundaries around each content

we ended up with the respective strengths offsetting each other, andoutlet were eliminated, and we believe that this new structure will result

we lost our sense of urgency.

in significant progress in the Production Group. Previously, theWe thought deeply about what went wrong, and then weorganization was based on content outlets, and we were slow to

implemented the recent reorganization. Through the establishment ofrespond to the emergence of new outlets. However, by sweeping away

the Content SBU, responsibility and authority have been assigned tothose boundaries and creating a single organization, we have madeeach company and each level in the Production Group. In this way,a transition to an environment that encourages mutual discussions.

we have established an environment that facilitates the free and open

Moving forward, in response to changes in user preferences, we needcreation of content. With this system, we can leverage the traditional

to implement development in a way that transcends such genres as

strengths and distinctive capabilities of Bandai, with its strong

games, video, and music. With the boundaries of the outlet-centeredmarketing and rapid business development capabilities, and NAMCO,

organization having been eliminated, producers will now be morewith its advanced technological and development capabilities.

aware of the possibilities of other outlets, and mutual exchanges will be

My role is to think about the use of multiple outlets for our content,

stepped up. As a result, employees working in production will have asuch as games for home video game software, arcade game machines,

greater understanding of each other’s activities and capabilities, know-

mobile phones, and smart phones, and to move forward at full speed

how will be exchanged, and, more than anything else, the increasinglywith the creation of competitive titles that offer something new. I alsovaluable experience of production staff will facilitate flexible thinking.

would like to focus on this type of development on a worldwide basis.

Moving forward, we will create highly appealing content thatleverages the individuality and strength of each production and conduct

Example of Success: GOD EATER

speedy development for outlets that meet user needs. In addition, we
will also focus on human resource development in each outlet. In

We are working to build a foundation for overseas growth in homeparticular, a key goal will be hiring and developing human resources

video game software. To that end, we are not only focusing on existingwith abundant experience in the European and U.S. markets.

titles but also working to create new titles. Those efforts have already20

We also need to focus on initiatives that accelerate new online

begun to pay off. In February 2010, we launched GOD EATER, a gamebusinesses. This is an age in which children acquire productfor the PlayStation Portable. Despite the challenging market conditions,information over the Internet. I want to build new online services,

GOD EATER sold 600,000 units in the first 50 days after its launch.

working to integrate the packaged software business and online

GOD EATER is an example of the success that we can achieve with

operations, and developing innovative ways to make the most of

integrated activities that extend from development to promotion and

BANDAI NAMCO’s abundant content.

Review of SBU Operations

As one facet of the Restart Plan, the Content SBU was established through the integration of theGame Contents SBU and the Visual and Music Content SBU. Consequently, the BANDAI NAMCO
Group now has three SBUs and the affiliated business companies, which principally provide support
to the SBUs. The SBUs (Strategic Business Units) coordinate the operating companies, while NAMCO
BANDAI Holdings manages and oversees the Group as a whole. Operating strategies for Japan andoverseas are formulated and implemented by the SBUs, centered on the core companies.

Toys and Hobby

Sales ratio in thefiscal year ended
March 2010

37.4%

Core Company: Bandai
President and Representative Director
Director, NAMCO BANDAI Holdings

Business activities

Kazunori Ueno

Manufacturing and marketing of toys, cards, plastic models, candy toys,
vending machine capsule products, apparel, sundries, and other productsContent

Sales ratio in thefiscal year ended
March 2010

41.8%

Core Company: NAMCO BANDAI Games
President and Representative Director
President and CEO, and Representative Director,
NAMCO BANDAI Holdings

Shukuo Ishikawa
Core Company: NAMCO BANDAI Games

Business activities
Creation of content and utilization of content in optimal outlet(home video game software, arcade game machines, network
content, visual and music products, etc.)

Vice President and Representative Director
Executive Corporate Officer,
NAMCO BANDAI Holdings

Shin Unozawa

Note: Because the Game Contents SBU and the Visual and Music Content SBU
were integrated from the fiscal year ending March 2011, results in the fiscal
year ended March 2010 are presented as the simple sum of the results ofthe two SBUs.

Amusement
Facility

Sales ratio in thefiscal year ended
March 2010

16.4%

Core Company: NAMCO
President and Representative Director
Director, NAMCO BANDAI Holdings

Business activities

Masahiro Tachibana

Planning and operation of amusement facilities, etc.

21

Toys and Hobby
We will expand the Character Merchandisingbusiness model on a global scale.
In the Toys and Hobby SBU, we will take steps targeting the global expansion of the Character Merchandising business model,
in which the Group excels in Japan. In the Japanese market, we will aim to establish dominant No. 1 positions in all productcategories. In overseas markets, we will strive to strengthen characters and products originating overseas, in addition to thoseoriginating from Japan, and to aggressively develop our operations in new categories. We will also endeavor to improvecooperation among operations in different regions.

Net sales
Operating income

Results in FY2009.3

Results in FY2010.3% change

Forecasts for FY2011.3¥ 165.7 billion¥ 148.8 billion¥ 155.0 billion¥ 11.5 billion¥ 10.8 billion

7.0 %

7.2 %

– 10.2 %– 6.5 %—

Operating income margin¥ 9.5 billion

6.1 %Results in FY2010.3: Key Points
Steady progress with strategy outlined in the Mid-term Business Plan
Japan:

Favorable results with established character toys, centered on year-end sales period.
Good starts were recorded by products launched to expand the customer target range: Hyper Yo-Yo for elementary schoolboys and VooV for preschool boys.

Overseas: BEN10 character toys recorded a solid performance, but overall results were sluggish, especially in the Americas.

Key Strategies• Establish dominant No. 1 positions in Japan• Establish growth foundations overseas
In Japan, our challenges include the contraction of the toy market

30th anniversary in 2010,

due to a decline in the number of children and the diversification ofis another example of these initiatives. Targeting a wide range ofconsumer needs. In response to these challenges, our key strategy iscustomers, from elementary school boys to adults in their thirties,

to establish dominant No. 1 positions in Japan, and to that end we

we introduced a new brand of plastic models for Gundam. We also

are taking steps to expand the range of our target customers and to

implemented a range of related activities, such as sponsoring various

create new businesses. Specifically, to further strengthen our

events and installing a full-size Gundam in front of Higashi-Shizuoka

established character goods, which are a stable source of profits,station. We are also developing entirely new customer groups. For

we are working to leverage tie-ups among categories in ways that

adults, principally customers in their 40s and 50s, we introduced suchcompetitors cannot duplicate. Tensou Sentai Goseiger, the new

products as Otona No Chogokin: Apollo 11 & Saturn V Launch

POWER RANGERS series, is a good example. Centered on cards

Vehicle, which was popular despite its relatively high price.

that can be enjoyed with the Dice-O card machine, we are working

22

Overseas, meanwhile, we will implement aggressive investment

to expand Tensou Sentai Goseiger sales through related

in accordance with the Mid-term Business Plan, targeting dynamic

development initiatives in the fields of toys, cards, capsule toys,

growth in Europe and the United States. Specifically, we will work to

candy toys, and others.

expand overseas operations. As we strengthen existing operations,

Furthermore, initiatives targeting an expanded range of customers

centered on those in Europe and the United States, we will take steps

include the launch of BabyLabo, a new brand for babies, and VooV,to enter new business categories and new geographical regions. To

a line of toy vehicles for preschool boys. For elementary school boys,

conduct this development more efficiently and effectively, we will

meanwhile, we have brought back Hyper Yo-Yo. Each of theseaggressively invest our management resources, particularly in Europe

brands has gotten off to a solid start that has exceeded ourand the Americas, and we will consider establishing cooperative

expectations. Gunpla (Gundam plastic model), which marked its

relationships with external partners.

Gundam plastic models havesold more than 400 million
units over the 30 years since
the series was launched.

In the fiscal year ended March 2010, results in overseas operations
were sluggish, especially in North America. However, aiming to quickly
rebuild and position our operations for future growth, we are working
to expand the range of our target customers through the developmentof new IP and new products Previously, our development efforts werefocused on character toys for boys, but now we are also working tobolster our lineup of products for girls, including cooking toys andhobby-related products for girls.
The POWER RANGERS series had a relatively weak performancein 2009. However, the Saban Capital Group (SCG) decided to

BEN10 is a character fromthe U.S. that is being
developed around the world.
It recorded sales of morethan ¥17.0 billion on aGroupwide basis in the fiscal
year ended March 2010.

This established charactertoy for boys has maintained
popularity with children formany years.

produce and broadcast a new series, and we concluded a masterlicense with SCG. From 2011, we will start product development, andmoving forward, we will strive to rebuild this brand.
BEN10 has become an established character, and we haveintroduced new products in conjunction with the start of a newprogram in the United States and Europe. The Toys and Hobby SBU
also plans to launch new products in Europe. In the U.K., where TV
broadcasts of Tinga Tinga Tales have been started, we will launchpreschool Tinga Tinga Tales toys, and in France and Spain, where
Pop Pixie TV broadcasts are planned, we will introduce Pop Pixies

The Tamagotchi series
remains consistently
popular as an establishedproduct for girls.

girls toys. In these ways, we will continue working aggressively to
DATA CARDDASS
combines digital cards anda card game. With repeatedintroductions of many
powerful characters, it ispopular with a wide rangeof customers.

discover and secure IP.
To expand to new geographical regions, meanwhile, we haveestablished sales companies in Poland and Mexico in the year underreview. Through these companies, we will expand our sales
channels in Eastern Europe and Central and South America. Moving
forward, we will continue striving to meet demand for our products
in new regions.
2006
2007
2008

23,61322,723
21,688

Sales of Major Characters (Group total)
FY2008.3

FY2009.3

FY2010.3

Mobile Suit Gundam series

50.9

42.8

34.6

Masked2007 (Kamen) Rider series
2008
BEN10
2009
POWER RANGERS series

13.1

318.010.4

20.0

Dragon Ball(¥ billion)

Market Data

286.1

7.0

13.0

17.9

25.4

25.6

17.5

17.8

15.8

12.5

273.9

The Hyper Yo-Yo series is
0
5000
marketed to elementary
school boys as one partof initiatives to expand therange of target customers
in Japan.

0

500

10000

15000

20000

25000

30000

1000

1500

2000

2500

3000

3500

4000

The Pop Pixie series isscheduled for a0 fall 1000
launch2000
inEurope, centered on France.

3000

4000

5000

6000

7000

8000

Size of Japan’s Toy Market (¥ billion)

FY2008.3
FY2009.3
FY2010.3
Source: Survey by the Japan Toy Association

672.0
655.3
649.4

23

Content©NBGI

In 2010, PAC-MAN celebrates
its 30th anniversary, and weare planning a range of new
initiatives for the worldwide
market under the key concept
PAC IS BACK!

We are aiming to maximize content value.
The Content SBU draws on the capabilities of the Group to create superior content, and it provides that
content through the optimal outlet, such as home video game software, arcade game machines, network
products, and visual and music products. The SBU is striving to respond in a speedy manner to thediversification of content outlets and to maximize content value.

Net sales
Operating income
Operating income margin

Results in FY2009.3

Results in FY2010.3% change

Forecasts for FY2011.3¥ 184.5 billion¥ 166.8 billion¥ 186.5 billion¥ 11.6 billion(7.7)billion– 4.6 %

– 9.6 %——

6.3 %¥ 3.5 billion

With Mobile Suit Gundam UC(Unicorn), we are leveraging
synergies through near
simultaneous implementationof event screenings, visual
product sales, and online
distribution.

1.9 %Note: Because the Game Contents SBU and the Visual and Music Content SBU were integrated from the fiscal year ending March 2011, results in thefiscal years ended March 2009 and March 2010 are presented as the simple sum of the results of the two SBUs.

Results in FY2010.3: Key Points
Sales of home video game software, principally small and medium-sized titles, were slack, and sales of packaged
visual products were weak as a result of sluggish conditions in the DVD market. Consequently, a loss was recorded.
Japan:

In home video game software, strong popularity was earned by GOD EATER, a game for the PSP, but
overall results were weak, centered on small and medium-sized titles.
Development is centered onlarge-scale game machinesthat take full advantage ofthe amusement facility
environment.

In arcade game machines, we introduced TANK! TANK! TANK!, a multiplayer tank game, and took steps
to record repeat sales of products introduced in the previous fiscal year, but nonetheless sales declined
year on year.
In packaged visual software, certain titles were popular, and strong popularity was also recorded by
Mobile Suit Gundam UC (Unicorn) Vol. I, which was introduced under a new business model
incorporating simultaneous global development with event screenings, packaged product sales, andonline distribution. Overall, however, the market for packaged products was sluggish, and our sales of
packaged visual products were weak.
Favorable results in packaged music products, centered on animation-related music.
Overseas: In home video game software, Tekken 6 for the PS3 and Xbox 360 recorded strong results, but our
results were sluggish overall due to a lack of other hit titles.
Improved profitability was recorded in packaged visual products due to increased efficiency in the Americas.

Key Strategies• Maximize content value• Establish growth foundations overseas
The challenges faced by the Content SBU include the diversification ofMarket Data

Share of Unit Sales by Group, Domestic Manufacturer

Index Holdings

1.6%Sony ComputerEntertainment Japan

2.8%

TECMO KOEI HOLDINGS 3.0%

a new strategy focused on content. On that basis, we will work to
respond in a speedy manner to changes in the needs of customers
around the world and strive to maximize content value. Furthermore, overthe medium term we will endeavor to expand operations in Europe andthe Americas, centered on home video game software. To create andstrengthen franchise titles that can be developed worldwide, we willbolster the development and sales system. (For further information about
the strategies of the Content SBU, please see page 13.)

24

Nintendo
31.2%

3.6%

LEVEL-5

2009

SEGA SAMMY
4.7%
HOLDINGS

platforms and customer needs. To respond to these challenges, wereevaluated the strategy centered on business categories and formulated

Others 15.6%

2006
2007
2008

Capcom7.0%

KONAMI

Square Enix
23,613

8.9%

13.6%

22,723BANDAI NAMCO
21,688 Group

12.5%

Source: Famitsu Game White Paper 2010
Published by: ENTERBRAIN INC. (Period: December 29, 2008 to December 27, 2009)Market Data

Sales of Video Content in Japan(¥ billion)

2007
2008
2009

318.0
286.1
273.9

Source: JVA Report 2009
Published by: JAPAN VIDEOSOFTWARE ASSOCIATION

Amusement
Facility

Japan’s first Thomas &Friends indoor amusement
facility.

We are leveraging our distinctive know-how
in developing amusement facilities that
distinguish the Group from its competitors.

Character packageentertainment areas drawing
on the Group’s distinctive
strengths.

As a key point of customer contact, the Amusement Facility SBU is focusing on leveraging the distinctive
entertainment know-how of the BANDAI NAMCO Group in developing amusement facilities that distinguish theGroup from its competitors. Our campaigns and other development initiatives are coordinated with customer
group characteristics.

Net sales
Operating income
Operating income margin

Results in FY2009.3

Results in FY2010.3% change

Forecasts for FY2011.3¥ 77.3 billion¥ 65.4 billion¥ 63.0 billion¥ 0.4 billion¥ 0.3 billion

0.5 %

0.4 %

– 15.4 %– 27.5 %—Indoor theme park with arange of experiences,including attractions and afood theme park.

¥ 1.0 billion

1.6 %Results in FY2010.3: Key Points
We worked to increase efficiency, and to improve our corporate constitution.
Japan:

There were signs of emerging improvement in sales, but for the full fiscal year sales at existing amusement
facilities were sluggish, declining 8.8%.
In the fiscal year ended March 2009, we closed or sold 63 facilities, principally unprofitable facilities.
In addition, we have continued working to increase operational efficiency. As a result, we have madeprogress in cost reductions.

Overseas: In the Americas, we made further progress in increasing efficiency, while in Europe, development wascentered on multi-purpose facilities. However, results were weak overall.

Key Strategies

Market Data

Amusement Facilities in Japan(Facilities)• Strengthen facilities through differentiation• Increase profitability through efficient operations

2006
2007
2008

In the Amusement Facility SBU, key challenges include the diversification of customer preferences,

Source: Fact-Finding Survey of the Amusement Machinery
Industry 2008, Published by JAIA

23,61322,723
21,688sluggish consumer spending, and the expected revision of the consumption tax rate. To respond tothese challenges, we will operate facilities and provide services, principally in Japan, that leverage
our character merchandising know-how and foster differentiation by drawing on the Group’s

Number of Facilities at the End of FY2010.3(Total for Amusement Facility SBU)

of which

operations and closing unprofitable facilities. In addition, we will continue to increase management

2007
2008
Region
2009
Japan

248

223

20

5

efficiency by thoroughly analyzing customer information and managing facility revenues and profits.

Americas

897

41

856

0

In the year under review, sales were sluggish at existing facilities in Japan, but the number ofEurope

16

14

2

0

Asia

29

11

18

0

Total

1,190

289

896

5

distinctive ability to add value. In Japan and overseas, we will work to improve our earnings
capacity by implementing the principles of selection and concentration, such as specializing in core

existing facilities that recorded year-on-year gains increased, and results are on recovery trend. In
the fiscal year ending March 2011, we will continue to implement activities aligned with the needsof specific customer groups. We will provide limited-time installation of character-based
entertainment areas at 27 facilities, principally large-scale facilities. We will also foster differentiation
through enhanced combinations of facilities and characters that make full use of the Group’s

318.0

Regional Directly managed Revenue-sharing
Theme parks
286.1
total
facilities
facilities*273.9

672.0
FY2008.3* Revenue-sharing facilities: Revenues from the operation of arcade
655.3
FY2009.3
game machines are shared with operators.

FY2010.3

649.4

distinctive strengths. In these ways, we will continue to enhance our presence in the industry.

25

Corporate GovernanceOur highest management priority is the provision of benefits to all of our stakeholders, who support our businessactivities. 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 be a corporate group thatis 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 that facilitates rapid information disclosure.

Corporate Governance System

attorney and has extensive knowledge in areas related to corporate
legal affairs, finance, and accounting. Kouji Yanase, an outside

NAMCO BANDAI Holdings is working to enhance management

corporate auditor, is an attorney and has extensive knowledge in areas

oversight. As of June 21, 2010, the Company had nine directors,

related to corporate legal affairs.

including three outside directors. Moreover, to respond rapidly to changes

The Company’s Internal Auditing Division audits businessin the management environment and to further clarify the responsibilities

execution by conducting on-site audits or document audits of eachof directors, the term of directors has been set at one year or less.

Company division in accordance with internal auditing rules. The

The Company uses the statutory auditor system and has establishedInternal Auditing Division reports the results of those audits to thethe Board of Statutory Auditors. The Company believes that thepresident. In addition, the Internal Auditing Division formulates basic

auditing system based on the statutory auditors, including outside

guidelines for internal audits within the Group and monitors thestatutory auditors, is an effective means of implementing theimplementation of internal audits at each Group company in accordance

management oversight function. There are four statutory auditors, ofwith the Group’s internal auditing rules. The Internal Auditing Division

whom three are outside statutory auditors. Two of the statutory auditors

continually exchanges opinions and maintains close ties with theare full-time. In accordance with the allocation of responsibilities as

independent auditors and the statutory auditors. The status of the Group’s

determined by the Board of Statutory Auditors, each statutory auditor

business operations is monitored, issues are identified and understood,

conducts audits, working with the independent auditors as needed.

and recommendations for resolving those issues are provided.

Katsuhiko Kohtari, an outside statutory auditor, is a certified public
accountant and has extensive knowledge in areas related to financeAs shown in the table on page 27, the Company holds a variety ofand accounting. Osamu Sudoh, an outside statutory auditor, is an

top management meetings and has established a system that facilitates

General Meeting of Shareholders
Appointment /Dismissal

Appointment /Dismissal
Auditing

Board of Directors

9 directors(of whom 3 are outside directors)

Appointment /Dismissal
Account Auditing /Reports on Results

Board of Statutory Auditors

Independent Auditors

4 statutory auditors(of whom 3 are outside statutory auditors)

Dismissal

Appointment / Dismissal /Supervision
Auditing

Representative Director

Personnel Committee
Reports

Directions

Cooperation

Reports

Internal Auditing Division
Directions

Committees

Group CSR Committee

Reports

Group Risk Compliance Committee

SBU Monthly Report MeetingGroup Management Meeting

Content Business Strategy MeetingGroup Social Contribution
Subcommittee
Group Environment
Subcommittee

Support

Auditing

Group Information Security Committee

Internal Control Committee
Policy Directions

Reports

BANDAI NAMCO Group Companies
As of June 21, 201026

Meeting Name

Schedule

Agenda / Purpose

Participants

Board of Directors

Monthly andotherwise asneededResolutions and reports on matters prescribed by the Companies Act.
Resolutions, deliberations, and reports on matters related to the
BANDAI NAMCO Group.

Directors, statutory auditors

SBU Monthly Report Monthly
Meeting

Report on BANDAI NAMCO Group business affairs.

Directors, statutory auditors,
corporate offcers, others

Group Management Monthly
Meeting

Deliberations on BANDAI NAMCO Group business issues and problems. Full-time directors, representative directorsof core company in each SBU, others

Waigaya Meeting

Weekly reports on divisions supervised by NAMCO BANDAI Holdings’
directors.

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

Full-time directors, representative directorsof core company in each SBU, others

In addition to tracking the status of internal audits reported atmeetings of the Board of Directors, outside statutory auditors also

which objectively and neutrally considers personnel andtrack the status of audits by the statutory auditors at meetings of thecompensation issues regarding directors, as well as other matters

Board of Statutory Auditors and maintain cooperative relationships

about which it has received inquiries (The majority of the committeewith the internal auditors and the other statutory auditors. In addition,members are from outside the Company).

all members of the Board of Statutory Auditors, including outside

The Group comprises three SBUs and the affiliated businessstatutory auditors, receive explanations from the independent auditors

companies, which principally provide support services to the SBUs. Inof the status of account audits on a quarterly basis. In this way, theyeach SBU, operating strategies for Japan and overseas are formulated

track the status of these audits, and maintain cooperative relationships

and implemented, with the lead role taken by the SBU’s core company.

with the independent auditors.

The Company, which is a holding company, monitors each SBU; holds

The Company’s outside directors—Masatake Yone, Kazuo Ichijo, andmeetings of Groupwide committees, such as the SBU Monthly Report

Manabu Tazaki—and the Company’s outside statutory auditors—

Meeting, the Group Management Meeting, the Group CSR Committee,

Katsuhiko Kohtari, Osamu Sudoh, and Kouji Yanase—all have a highand the Content Business Strategy Meeting; and formulates strategies

degree of independence and there is no cause for concern about thefor the Group as a whole.

development of any conflict of interest with ordinary shareholders.

In accordance with the Companies Act, the Board of Directors has
decided fundamental policies regarding internal control systems. In

Furthermore, notification has been filed with the Tokyo Stock Exchange(TSE) that Kazuo Ichijo is an independent director.

regard to the internal control reporting system under the Financial
Instruments and Exchange Act, the Company’s Internal Control

Compliance and Risk Management

Committee formulates policies regarding the establishment andevaluation of internal control systems in the Group, shares information,

The BANDAI NAMCO Group has formulated standards for complianceand conducts internal Group monitoring. The committee also presents

and instituted a system that appropriately ensures the strict observanceinternal control system reports. The Board of Directors makesof laws and regulations, ethical standards, and internal regulations on adecisions on fundamental issues.

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

In addition, the Group Information Security Committee has beenin charge of compliance has overall responsibility for complianceestablished with the objective of decision-making, implementation

throughout the Group and leads the Group Risk Compliancereporting, and information sharing in regard to the Group’s information

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

security activities overall.

promptly considers and determines what action to take when there is
a compliance violation or the possibility of a compliance violation in theOutside Directors and Outside Statutory
Auditors

Group. The Group Risk Compliance Committee works to prevent the

In corporate governance, the Company believes that the provision of

responses if a risk event does occur, and audits and supervises

objective, neutral auditing and oversight from an outside viewpoint

important matters regarding compliance for the entire Group.

occurrence of a wide range of risk events, strives to ensure prompt

is an important part of the management supervision function. To

In risk management, the Group works to prevent the occurrence ofstrengthen appropriate decision-making and the management

risk events and to rapidly identify the causes of risk events. In the event

supervision/monitoring function, three outside directors have beenof the occurrence of a risk event, the Group establishes an emergency

appointed, and to strengthen the neutrality and independence of thecontact network, and in the event of the emergence of risk event

auditing system, three outside statutory auditors have been appointed.

information, including information about violations of laws orBased on their high levels of independence and specialized knowledge,

regulations, such information is immediately reported to the president.

the outside directors and outside statutory auditors conduct objective,

The Group is working to minimize any influence on operations throughneutral auditing and oversight. In this way, they carry our the importantthe implementation of rapid and accurate responses.

functions and responsibilities of management supervision and contribute

In addition, the Company has formulated the Group Complianceto the strengthening of the Company’s corporate governance system.

Charter, and has published the BANDAI NAMCO Group Compliance

The status of audits by internal auditors, audits by the statutory

Handbook to ensure thorough knowledge of compliance throughout

auditors, and audits by the independent auditors are reported to thethe Group. In addition, the Group implements training activities,

Board of Directors. By attending meetings of the Board of Directors,

such as through an education system utilizing the Group’s intranet.

the outside directors track the status of these audits.

Furthermore, the presidents of Group operating companies submit
written oaths pledging strict compliance with the charter.

27

The BANDAI NAMCO Group’s
CSR Initiatives
The mission of the BANDAI NAMCO Group is to provide “Dreams, Fun and Inspiration” to people around theworld through entertainment, drawing on our boundless creativity and enthusiasm. To ensure that we continue toprovide “Dreams, Fun and Inspiration,” we have formulated Groupwide CSR initiatives that are based on thethree types of responsibilities outlined below.
In accordance with these fundamental principles, a range of measures are implemented by the Groupwide
Group CSR Committee and its subcommittees—the Group Social Contribution Subcommittee and the Group
Environment Subcommittee—as well as by the Group Risk Compliance Committee, the Group Information
Security Committee, and the Internal Control Committee.

Environmental and Social Responsibilities

1(safety / quality, environmental conservation, cultural / social support activities)

• Safety / quality initiatives
We follow industry standards and in-house standards, and we have built a system that facilitates
the achievement of higher levels of safety and quality so that customers can use our products

Environmental and Social
Responsibilities(safety / quality, environmental conservation,
cultural / social support activities)

with confidence.

• Environmental conservation initiatives
We are aggressively implementing forward-looking environmental conservation measures toensure that we can continue to provide “Dreams, Fun and Inspiration” to people around the world.

• Cultural / social support activities
We are also active in areas outside the provision of products and services, such as museum
operations and volunteer activities.

Economic Responsibilities

2

We are continually working to enhance management transparency and monitoring thebusiness plans and conditions of Group companies. Moreover, we are working to provide
maximum returns to society and stakeholders by selecting the optimal operational fields forGroup development and focusing our management resources on those fields.

Economic Responsibilities

3

Legal and Ethical Responsibilities (compliance)

Legal and Ethical Responsibilities(compliance)

CSR
Action Concept
CSR Key Phrase

We have formulated basic compliance standards for Group companies, officers, andemployees in Japan and overseas, and we conduct continual monitoring to ensure appropriate
observance of legal and ethical standards.

As a provider of “Dreams, Fun and Inspiration,” BANDAI NAMCO is committed to CSR activities that
contribute to the creation of a fun tomorrow and foster continuous happiness for society and stakeholders.

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 andInspiration.”funfor thefutureIn turn, those “Dreams, Fun and Inspiration” provide healing and encouragement as they spread aroundthe world. We believe that “Dreams, Fun and Inspiration” can change the world, and even change the future.
As a company that provides “Dreams, Fun and Inspiration,” our relationship with the natural environmentand society will be guided by the key phrase “Fun for the Future.” We will implement CSR activities that leadto happiness for stakeholders by featuring fun today while also contributing to the creation of fun tomorrow.
We believe that entertainment can contribute to society by fostering inspiration and creating a future of

楽しみながら、楽しい未来へ。

28“Dreams, Fun and Inspiration.”

Topics“BANDAI NAMCO Forest” at Shiga Kogen

Conservation activities at “BANDAI
NAMCO Forest”

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

Product raw materials and packaging andwrapping initiatives
We are implementing measures
to reduce packaging, such as
decreasing packaging space ratios,developing packaging-free
products, using packaging thatutilizes low-environmental-impact
materials, reducing plastic model
runners, and reducing packaging
materials for amusement machines.

Social contribution activities

Omocha-no-Machi Bandai Museum

We are conducting a variety ofactivities to promote a deeper
understanding of culture, science,and entertainment. These include the
Omocha-no-Machi Bandai Museumin Tochigi Prefecture, which has acollection that includes toys fromJapan and overseas as well as many
items created by the famous inventor
Thomas Edison. We also provide
support for the New Technology
Foundation and toy libraries.

Expanding employment opportunities forpeople with disabilities
At the BANDAI NAMCO Group, we are working to expand employment ofpeople with disabilities. In March 2006, we established NAMCO BANDAI
Will Co., Ltd., with the objective of employing people with disabilities. In
May, NAMCO BANDAI Will was certified as a special subsidiary as
stipulated by Japan’s Law for Employment, Promotion, etc., of the
Disabled, and employees of NAMCO BANDAI Will are regarded as being
employed by the Group as a whole. With consideration for thecharacteristics of the Group’s operations and the skills of people withdisabilities, we are working to expand the range of work for people
employed by NAMCO BANDAI Will.

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

Dropping products to test for quality

Wide-ranging environmental impact reduction activities
We are taking steps–such as the useof solar power generation and raw
material recycling–to make our plastic
model plant in Shizuoka City the firstplant in the domestic toy industry toreceive green certification. Moreover,
BANDAI LOGIPAL has acquired
Green Management Certification,
which is given to transportationcompanies that implement lowBandai Hobby Center (plastic model plant) environmental-impact operations.

Barrier-free entertainment

NAMCO’s TalkingAid Light

We are conducting activities targeting
the integration of entertainment andwell-being. For example, wedeveloped TalkingAid Light, which isa mobile device for people who havedifficulty with conversations, reading,or writing, and machines thatcombine entertainment withrehabilitation. We also operate day
service centers to help senior citizens
be active in mind and body.

Initiatives to motivate and support human resources

BANDAI NAMCO Group Creative Award
2009

The BANDAI NAMCO Group is
implementing a range of initiatives
regarding the motivation and supportof human resources. We have a systemof awards to recognize products andbusiness models that contribute toincreasing Group value from a varietyof viewpoints, such as sales, profit,
topicality, and newness. Other initiatives
include active exchanges of humanresources among Group companies andentertainment training. In these ways,
we will continue working to promote
dynamic corporate activities.

29

Overview of Main Group Companies
As of August 1, 2010

NAMCO BANDAI Holdings Inc.

 lanning and execution of medium- and long-term management strategies; provision of support forPbusiness strategy implementation by Group companies (Tokyo Stock Exchange, First Section)

NAMCO BANDAI Holdings (USA) Inc.

Execution of North American regional strategy; management support for North American
operating companies

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, apparel, and vending machine products, etc.

Megahouse Corporation

Planning, manufacturing, and sales of toys, etc.

CCP Co., Ltd.

Planning, development, manufacturing, and sales of toys, hobby commodities,
and home electric appliances

Plex Co., Ltd.

Planning and designing of character-based products

Seeds Co., Ltd.

Manufacturing of toys, etc.

People Co., Ltd.*

Planning, manufacturing, and sales of toys for infants (JASDAQ)TSUBURAYA PRODUCTION CO., LTD.*

Development of visual products and management of copyrights

Sun-Star Stationery Co., Ltd.*

Planning, production, and sales of stationery, sundries, and other products

BANDAI AMERICA INCORPORATEDSales of toy-related products

BANDAI S.A.

Regional management functions; 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 ASIA CO., LTD.

Sales of toy-related products

BANDAI KOREA CO., LTD.

Manufacturing, import, and sales of toys, etc., and licensing operations

CREATIVE B WORKS CO., LTD.

Sales of toy-related products

BANDAI (GUANGZHOU) CO., LTD.

Planning and sales of toy-related products

BANDAI INDUSTRIAL CO., LTD.

Manufacturing of toy-related products

BANDAI (SHENZHEN) CO., LTD.

Quality assurance and quality control operations, and factory inspections of trading partners

Content Strategic Business Unit
NAMCO BANDAI Games Inc.

Planning, development, and sales of game software and arcade machines, etc.

Banpresto Co., Ltd.

Planning, development, and sales of prizes for arcade machines

D3 PUBLISHER INC.

Planning, development, and sales of game software

Banpresoft Co., Ltd.

Planning, development, and sales of game software

VIBE Inc.

Development and provision of network content

Bec Co., Ltd.

Planning and development of game software

NAMCO TALES STUDIO LTD.

Planning, development, and sales of game software

Banpresto Sales Co., Ltd.

Sales of arcade machines and prizes, etc.

NAMCO BANDAI Online Inc.

Online games and other software; planning, development, and administration of services* Companies accounted for by the equity method30

BANDAI VISUAL CO., LTD.

Planning, production, and sales of visual software, etc.

Sunrise Inc.

Planning and production of animation for TV and theatrical release, management andadministration of copyrights

Bandai Channel Co., Ltd.

On-demand delivery of content, such as animations

EMOTION CO., LTD.

Planning development, and production of comics and visual products

SUNRISE MUSIC Publishing Co., Ltd.

Production of music for animations produced by Sunrise; overall management of music
publishing and master recording rights

Lantis Co., Ltd.

Planning, manufacturing, sales, and management of musical content

NAMCO BANDAI Live Creative Inc.

Planning and production of events and live concerts, etc.

NAMCO BANDAI Games America Inc.

Planning, development, and sales of game software

NAMCO AMERICA INC.

Sales of arcade machines

NAMCO NETWORKS AMERICA INC.

Development and distribution of content for mobile platforms

NAMCO BANDAI Games Europe S.A.S.

Sales and marketing of game software

NAMCO EUROPE LTD.

Sales of arcade machines

NAMCO BANDAI Networks Europe LTD. Development and distribution of content for mobile platforms
NAMCO BANDAI Partners S.A.S.

Holding company of the NAMCO BANDAI Partners Group, which conducts sales of gamesoftware. Shared services company.

BANPRESTO (H.K.) LTD.

Manufacturing and production management of arcade machines and prizes

BANDAI ENTERTAINMENT INC.

Planning, manufacturing, sales, and copyright management of visual content

BEEZ ENTERTAINMENT S.A.S.

Production and sales of visual programming and movies; video and DVD sales;
copyright management

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 CYBERTAINMENT INC.

Planning and operation of amusement facilities in the United States

NAMCO OPERATIONS EUROPE LTD.

Overall responsibility for amusement facility operations in Europe and planning andoperation of amusement facilities in the U.K.

NAMCO ENTERPRISES ASIA LTD.

Planning and operation of amusement facilities in Hong Kong

SHANGHAI NAMCO LTD.*

Planning and operation of amusement facilities in China

Affiliated Business Companies
BANDAI LOGIPAL INC.

Cargo trucking operations, logistics management, etc.

LOGIPAL EXPRESS INC.

Transportation, distribution, warehousing, etc.

NAMCO BANDAI Business Services Inc.

Support of Group operations and administration, etc.

Artpresto Co., Ltd.

Planning and designing of various printed materials

Happinet Corporation*

Wholesale of toys and video game consoles (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

31

Directors and Corporate Auditors
As of June 21, 201032

Chairman and Director

President and CEO, Representative Director

Takeo Takasu

Shukuo Ishikawa

Director

Director

Director (Part-time)

Director (Part-time)

Shuji Ohtsu

Yuji Asako

Kazunori Ueno

Masahiro Tachibana

Director (Outside)

Director (Outside)

Director (Outside)

Masatake Yone

Kazuo Ichijo

Manabu Tazaki

Statutory Auditor

Koichiro Honma

Statutory Auditor (Outside)

Katsuhiko Kohtari

Statutory Auditor (Outside)

Osamu Sudoh

Statutory Auditor (Outside)

Kouji Yanase

FINANCIAL SECTION

Contents
34 Consolidated Six-Year
Financial Summary
35 Financial Review
40 Consolidated Balance Sheets
42 Consolidated Statementsof Operations
43 Consolidated Statements of
Changes in Net Assets
44 Consolidated Statements ofCash Flows
45	Notes to Consolidated
Financial Statements
68 Independent Auditors’ Report33Consolidated Six-Year Financial Summary
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries

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

2005*1For the years ended March 31

For the Year:Net sales
Gross profit
Selling, general andadministrative expenses
Operating income
Recurring income*

2006

2007

2008

2009

2

Net income (loss)
Capital expenditures
Depreciation
Cash flows from operating
activities
At Year-End:Total assets
Total current assets
Total current liabilities
Total net assets
Per Share Data (yen):
Net income (loss) per share(basic)Cash dividends
Main Financial Indicators:
Return on equity (ROE)*3, 5 (%)
Return on assets (ROA)*

4, 5

(%)

Selling, general and admini­strative
expenses to net sales (%)
Operating income to net sales(%)
Net income to net sales (%)
Shareholders’ equity ratio (%)
Debt/equity ratio (times)

BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO¥269,946¥178,552
116,801
47,55592,40332,46924,39815,08625,724
14,58911,225
9,465
11,53913,155
7,947
11,173
14,8393,172

BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO¥240,290¥154,474
173,40282,666
68,862
33,219150,410
110,935

BANDAI
NAMCO
BANDAI
NAMCO¥111.13¥ 83.63
30.00
40.00

BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO

8.9
9.0
11.0
9.6
34.2
18.2
9.0
8.4
4.2
5.3
54.8
69.8
0.21
0.07

¥450,829¥459,133¥460,474¥426,400¥378,547

156,565

168,080

164,073

146,023

128,753

120,896

125,856

130,662

123,675

126,869

35,66942,22433,411

22,3481,884

37,12245,61636,19824,513

1,908

14,15024,252

32,67911,830(29,929)

24,02027,925

34,115

17,481

14,41819,144

21,201

24,75922,54618,98931,80942,49335,00019,301

10,582¥386,651¥408,490¥413,023¥363,445¥325,936

240,635

257,209267,713230,086

217,763

107,528

110,829

101,649

84,30486,605

252,244284,254289,944

260,579

229,012¥54.39¥95.73¥128.65¥47.95¥(123.98)

12.00*6

28.00

24.00

24.00

24.00

5.8

9.4

11.7

4.3

–12.4

9.6

11.5

8.8

6.3

0.6

26.8

27.4

28.4

29.0

33.5

7.9

9.2

7.3

5.2

0.5

3.1

5.3

7.1

2.8

–7.9

63.0

67.1

69.4

70.9

69.5

0.14

0.05

0.06

0.08

0.05

*1 Figures for FY2005.3 is the consolidated figures for Bandai and NAMCO prior to the management integration.
*2 Recurring income is a Japanese accounting term denoting income before extraordinary items.
*3 ROE = Net income (loss) / Average total shareholders’ equity (= Net assets – Stock subscription rights – Minority interests)*4 ROA = Recurring income / Average total assets*5 Figures for shareholders’ equity and total assets as of March 31, 2006, are used in calculating ROE and ROA for the year ended March 31, 2006.
*6 In lieu of interim dividends, share transfer payments of ¥18 per share were paid to shareholders of Bandai and ¥12 were paid to shareholders of NAMCO.

34

2010

NAMCO BANDAI NAMCO BANDAI NAMCO BANDAI NAMCO BANDAI NAMCO BANDAI
Holdings Inc.
Holdings Inc.
Holdings Inc.
Holdings Inc.
Holdings Inc.
(Consolidated)(Consolidated)(Consolidated)(Consolidated)(Consolidated)Financial Review

Overview of Performance in the Year Ended
March 31, 2010

Net Sales

In this year, during the global economic recession, there werea year-on-year decrease of 11.2%. By region, sales in thevisible signs of a partial recovery in the economy in the context

domestic market were ¥297,978 million, down 10.7%. Overseas,of government deployment of emergency economic stimulus

sales were ¥32,852 million in the Americas, down 35.5%;

measures and other factors. However, economic conditions¥46,917 million in Europe, up 4.2%; and ¥38,691 million in Asia,

remained harsh due to, among other things, weakness in theup 3.5%.

The Group’s consolidated net sales were ¥378,547 million,

self-sustainability of the recovery and high unemployment rates.
Reduced consumption had a substantial impact on the enter-

Cost of Sales

tainment industry, causing continued uncertainty in the industry

Cost of sales was ¥249,794 million, down 10.9%, and the ratio

as a whole.

of cost of sales to net sales increased to 66.0% from 65.8% in

In this environment, the Group has worked to put in place thethe previous year. As a result, gross profit was ¥128,753 million,

global management foundation adopted in the three-year

and the gross margin declined to 34.0% from 34.2% in the

Mid-term Business Plan that has been implemented since April

previous year.

2009. Moreover, prior to launching the “BANDAI NAMCO Group
Restart Plan” in April 2010, for the purpose of a more assured

SG&A Expenses

implementation of the global management foundation, theSelling, general and administrative (SG&A) expenses wereGroup carried out steps, including a review of its personnel¥126,869 million, up 2.6%, and the ratio of SG&A expenses tostructure, to improve profitability. On the business front,

net sales increased to 33.5% from 29.0% in the previous year.

although long-established character toys in the Toys and Hobby

Principal items included advertising expenses of ¥29,515 million,

SBU posted strong performance figures in Japan, amidst weak

directors’ remuneration and employees’ wages of ¥31,645

individual consumption world-wide, overall results for the Groupmillion, employees’ retirement and severance benefits ofwere harsh, especially in the Game Contents SBU.

¥1,517 million, and research and development expenses of¥16,144 million.
Operating Income
Operating income was ¥1,884 million, a decrease of 91.6%, andthe operating margin fell from 5.2% in the previous year to 0.5%.
By region, operating income declined 65.1% in Japan, to ¥5,537
million, and operating loss was ¥3,325 million in the Americas,
compared with operating income of ¥874 million in the previous
year. Operating loss was ¥388 million in Europe, compared with
operating income of ¥6,248 million in the previous year, andoperating income rose 20.9% in Asia, to ¥2,768 million.
Eliminations totaled ¥2,708 million.
Other Income (Loss)
Other losses included a loss of ¥304 million on sales anddisposal of fixed assets, a loss on impairment of fixed assets of¥15,903 million, and other of ¥5,187 million, including expenses
related to the restructuring of the personnel structure. As aresult, other losses totaled ¥21,178 million.
Net Income (Loss)
The Group recorded net loss of ¥29,929 million, compared with
net income of ¥11,830 million in the previous year. The net margin
in this year was –7.9% compared to 2.8% in the previous year.
This was attributable in part to the reversal of a certain amountof deferred tax assets. Net loss per share was ¥123.98, comparedwith net income per share of ¥47.95 in the previous year.

35Results by Business Segment
Net sales (Millions of yen)

Operating income (loss) (Millions of yen)

FY2010.3

FY2009.3

Year on year

FY2010.3

FY2009.3

Toys and Hobby¥148,844¥165,725¥(16,881)¥10,787¥11,533

Year on year¥(746)

Game Contents

137,529

149,891(12,362)(6,845)

11,610(18,455)

Visual and Music Content

29,236

34,639(5,403)

(872)

39

(911)

Amusement Facility

65,36377,270(11,907)

285

393

(108)

Other Businesses

17,451

19,009(1,558)

357

565

(208)

Note: Due to changes in the business segments in this year, in order to make year-on-year comparisons, the results of the previous year were reconfigured to reflect the postchange segments.

Toys and Hobby SBU

income of ¥11,610 million in the previous fiscal year. Due toIn the Toys and Hobby Business, long-established characterchanges in the business segments in this year, in order to maketoys, such as the MASKED RIDER series and FRESH PRETTY

year-on-year comparisons, the results of the previous year were

CURE !, posted strong performance figures in Japan, mainly

reconfigured to reflect the post-change segments.

during the Christmas shopping season. Popularity was also
enjoyed by Tamagotchi, for which there were tie-ups to a made-Visual and Music Content SBU

for-television animation, and DATA CARDDASS MASKED RIDER

In the Visual and Music Content Business, GUNDAM 30th

BATTLE: GANBARIDE. In addition, HYPER YO-YO and VooV,

ANNIVERSARY COLLECTION, Psalms of Planets Eureka Seven,both of which were launched to expand the target population forand other visual package software were popular in Japan.

the purpose of achieving the dominant No. 1 position in Japan,

In addition, application of the new business model, which called

made favorable starts. Overseas, despite the strong sales offor simultaneous worldwide development through special

BEN10 character toys, overall performance was weak, especiallytheater screenings, packaged product sales, and on-demandin the Americas, where the competitive environment was

distribution, helped to make the first episode of Mobile Suit

particularly fierce.

Gundam UC (Unicorn) Vol. I a huge hit in the fourth quarter.

As a result, net sales in the Toys and Hobby Business were

However, amidst a stagnant package software market, the visual¥148,844 million, a year-on-year decrease of 10.2%, and operating

package software business as a whole faced steep challenges.

income was ¥10,787 million, a year-on-year decrease of 6.5%.

On the other hand, sales of packaged music products were
solid, particularly for animation-related music. Overseas, theGame Contents SBU

profitability of business in the Americas improved throughIn the Game Contents Business, although some signs ofgreater efficiency of the business.

recovery were discernible for home video game software, such

As a result, net sales in the Visual and Music Content

as the fact that GOD EATER for PlayStation Portable wasBusiness were ¥29,236 million, a year-on-year decrease oflaunched in Japan in the fourth quarter and proved popular, this

15.6%, and operating loss was ¥872 million, compared withbusiness faced difficulties throughout the year, mainly with small

operating income of ¥39 million in the previous year.

to medium-size game titles. Overseas, Tekken 6, released for the
PlayStation 3 and Xbox 360, was a hit. However, a lack of otherAmusement Facility SBU

hit titles in a depressed market kept performance sluggish.

In the Amusement Facility Business, implementation of different

As for arcade game machines, despite the launch of themarketing strategies for each customer segment in Japan led toforce-feedback battle game TANK! TANK! TANK! in this year andglimmers of a gradual recovery in sales at existing facilities, but

repeat sales of machines launched in the previous year, perfor-

their sales remained sluggish throughout the year, at 91.2% ofmance did not reach the level of the previous year, when large

the figure for the previous year. Costs, on the other hand, weremedal machines and other machines were popular.

reduced as a result of the strategic closure or sale of 63 facili-

In addition, amortization of goodwill (¥1,263 million from July

the ongoing efforts to improve business efficiency. Overseas,

NAMCO BANDAI Partners S.A.S., a home game software sales

despite efforts to improve operational efficiency in the Americas

company, which became a wholly owned subsidiary of theand business development in Europe centered on multipurpose

Company this year.

facilities, overall performance was sluggish.

As a result, net sales in the Game Contents Business were36

ties, most of which were unprofitable, in the previous year, and2009 through March 2010) was recorded with respect to

As a result, net sales in the Amusement Facility Business were¥137,529 million, a year-on-year decrease of 8.2%, and¥65,363 million yen, a year-on-year decrease of 15.4%, and operat­ing

operating loss was ¥6,845 million yen, compared with operating

income was ¥285 million, a year-on-year decrease of 27.5%.

Other Businesses

As a result, net sales in the Other Businesses were ¥17,451

Other Businesses consist of companies that conduct opera-

million, a year-on-year decrease of 8.2%, and operating income

tions, such as logistics support and building management forwas ¥357 million yen, a year-on-year decrease of 36.8%.

each of the Group’s strategic business units. During this year,
efforts were made to improve the efficiency of these operations
related to group support. However, due to a decline in theamount of work handled, performance did not reach the levelof the previous year.

Results by Geographic Segment
Net sales (Millions of yen)

Operating income (loss) (Millions of yen)

FY2010.3

FY2009.3

Year on year

FY2010.3

FY2009.3

Year on yearJapan

¥297,978¥333,534¥(35,556)¥ 5,537¥15,863¥(10,326)

Americas32,85250,934(18,082)(3,325)874(4,199)Europe46,91745,021

1,896

(388)

6,248

(6,636)

Asia

38,69137,377

1,314

2,768

2,289

479

Japan

EuropeIn the Toys and Hobby Business, mainly during the Christmas

In the Toys and Hobby Business, although the BEN10 character

shopping season, long-established character toys such as thetoys became popular, overall business was sluggish in the midst

MASKED RIDER series and FRESH PRETTY CURE!, as well asof a difficult market environment.

Tamagotchi and the DATA CARDDASS among others became
popular.

In the Game Contents Business, although Tekken 6, released
for the PlayStation 3 and Xbox 360, was a hit, the segment

In the Game Contents Business, although some signs of

struggled due to a lack of other hit titles amongst home video

recovery were discernible for home video game software, suchgame software in a depressed market, and the Amusement

as by the fact that GOD EATER for PlayStation Portable proved

Facility Business performed weakly under the impact of the

popular, the SBU faced difficulties throughout the year, mainly

economic downturn.

with small to medium-size game titles.

In addition, NAMCO BANDAI Partners S.A.S., a home gameIn the Visual and Music Content Business, amidst a stagnant

software sales company, became a wholly owned subsidiary of

package software market, the visual package software business

the Company this year, and while sales increased, amortization

faced steep challenges.

of goodwill (¥1,263 million from July 2009 through March 2010)

In the Amusement Facility Business, although sales at existing
facilities were weak, costs were reduced as a result of the efforts
to improve business efficiency.
As a result, net sales in Japan were ¥297,978 million, a yearon-year decrease of 10.7%, and operating income was ¥5,537

was recorded.
As a result, net sales in Europe were ¥46,917 million, a yearon-year increase of 4.2%, and operating loss was ¥388 million,
compared with operating income of ¥6,248 million in theprevious year.

million, a year-on-year decrease of 65.1%.
Asia
Americas

In the Toys and Hobby Business, in addition to long-establishedIn the Toys and Hobby Business, the BEN10 character toys

character products such as Mobile Suit Gundam, the BEN10

performed solidly, but overall the SBU struggled due to intensi-

character toys became popular. Also, in the Amusement Facility

fied market competition.

Business, performance was solid, particularly with respect to

The Game Contents Business struggled due to a lack of hit

Wonder Park Plus, a large-scale amusement facility in Hongtitles amongst home video game software in a stagnant market.

Kong. In addition, NAMCO BANDAI Partners S.A.S., a home

On the other hand, efforts on cutting costs by improving

game software sales company, became a wholly owned

operational efficiency continued in the Visual and Music Content

subsidiary of the Company this year, and its AsianBusiness and the Amusement Facility Business.

subsidiaries contributed to the sales and profit of the GameAs a result, net sales in the Americas were ¥32,852 million, aContents Business.

year-on-year decrease of 35.5%, and operating loss was ¥3,325

As a result, net sales in Asia were ¥38,691 million, a year-on-

million, compared with an operating income of ¥874 million in theyear increase of 3.5%, and operating income was ¥2,768 million

previous year.

yen, a year-on-year increase of 20.9%.

37

Financial Position¥954 million in the previous year; and a decrease in trade receiv-

At the end of the year ended March 31, 2010, total assets stoodables of ¥13,478 million, compared with ¥3,827 million in theat ¥325,936 million, a decrease of ¥37,509 million yen from theprevious year.

end of the previous year. The main factors of this decline weredecreases of ¥10,099 million in cash and time deposits, ¥9,793

Cash Flows from Investing Activities

million in trade receivables, and ¥9,104 million in goodwill from

Net cash used in investing activities totaled ¥9,863 million, down

recognition of impairment losses. Concerning goodwill, the

4.5% compared with the previous year. As a breakdown of funds

Company recognized impairment losses, including one related

used, there were purchases of property, plant and equipment

to the goodwill that was generated in this year as a result ofand intangible assets of ¥10,008 million, compared with ¥10,811

NAMCO BANDAI Partners S.A.S. becoming a wholly owned

million yen in the previous year.

subsidiary.
Total liabilities amounted to ¥96,924 million, a decrease of

Cash Flows from Financing Activities¥5,942 million from the end of the previous year. The main

The amount of funds used in financing activities amounted tofactors were as follows. While there were increases of ¥4,325¥15,277 million yen, down 7.6% compared with the previous

million in advances received included in other current liabilities

year. The main factors for funds used were repayment of long-

due to the deferral of game software revenue at a U.S.

term debt of ¥8,762 million, compared with ¥5,338 million in thesubsidiary and ¥8,658 million in long-term debt due toprevious year, and cash dividends paid of ¥5,796 million,

repayment.

compared with ¥6,009 million in the previous year.

Total net assets stood at ¥229,012 million, a decrease of¥31,567 million from the end of the previous year. This decline
was mainly due to the net loss of ¥29,929 million.
As a result, the equity ratio became 69.5%, compared with

Basic Policy on the Distribution of Profits
and the Payment of Dividends
The Company positions the return of profits to stockholders as

70.9% at the end of the previous year. The current ratio* wasone of its highest management priorities. The fundamental

251.4%, compared with 280.0% a year earlier; the quick ratio*

policy is to maintain a stable dividend and increase corporate

was 174.8%, compared with 206.0%; and the interest coveragevalue while becoming an even more competitive Group, andratio* was 33.0 times, compared to 112.9 times.

preserving a sound financial position. In concrete terms, the*Current ratio: Current assets / Total current liabilities

Company plans to maintain the consolidated dividend payout

Quick ratio: (Cash and time deposits + Short-term investments

ratio at a level of 30%, based on stable annual dividend+ Trade receivables ) / Total current liabilities
Interest coverage ratio: Cash flows from operating activities /Interest paid

payments of ¥24 per share. In addition, after appropriation ofdividend from the consolidated periodical net income, theCompany has resolved to attribute a portion of the remainingbalance to the acquisition of its own shares, with comprehensive

Cash Flows

consideration of aspects such as the level of cash held, its

As of the end of the year, cash and cash equivalents (hereafter

operating performance, its share price trend, and its plan for“funds”) remaining on hand had decreased by ¥12,260 million

large-scale investments.

from the end of the previous year to ¥97,777 million.

As part of our three-year Mid-term Business Plan that started
in April 2009, we shall place priority on allocating the remaining

Cash Flows from Operating Activities

portion of net income after appropriation of dividend to up-front

Net cash provided by operating activities totaled ¥10,582 million,

investment aimed at business expansion overseas.

down 45.2% compared with the previous year. As a main break-Dividends for the year were ¥24 per share, comprised of thedown of funds used, loss before income taxes and minority

base component of ¥12 per share for both interim and year-end

interests was ¥19,294 million, compared with income before

dividends.

income taxes and minority interests of ¥21,125 million in thewith ¥12,727 million in the previous year; and decrease in trade

Targets and Management Performance
Indicators

payables was ¥6,701 million, compared with ¥59 million in the

The Group has adopted ROE (Return on Equity) as management

previous year. However, overall, there was a net increase inperformance indicators. Looking ahead, we aim to further

funds due to depreciation and amortization of ¥18,989 million,

expand profits by strengthening investments, particularly incompared with ¥22,546 million in the previous year; loss onoverseas business, as well as effectively utilize stockholders’impairment of fixed assets of ¥15,903 million, compared withequity to build a strong and stable management base over theprevious year; income taxes paid was ¥8,762 million, compared38

medium- to long-term. Specifically, the Group aims to achieve

For the Amusement Facility business, the Group will improveconsolidated ROE of 10% or higher in the Mid-term Businessprofitability by continuing to implement various efficiency

Plan starting from 2015, and tackles to achieve this target on

measures, mainly overseas. In Japan, the Group will pursue a

two fronts: business expansion and efficient management. In

strategy of differentiation through the promotion of amusement

addition, the Group has introduced the use of return on invested

facilities as places where users can experience the world-views

capital (ROIC) as an indicator in making rapid decisions aboutof the Group’s unique characters.

restructuring businesses or withdrawing from them in the rapidlychanging entertainment industry.

In light of the above considerations, the consolidated projections for the year ending March 31, 2011 are as follows: net salesof ¥400,000 million, a year-on-year increase of 5.7%; operating

Outlook for the Year Ended March 31, 2011

income of ¥11,000 million, a year-on-year increase of 483.9%;

As for the future of the economy, the uncertain environment ofand net income of ¥4,500 million, compared with net loss of

weak individual consumption and employment instability on a¥29,929 million in this year.

global environment is expected to continue. This, moreover, isthe Group is extensively involved, and the Group expects the

The Year Ended March 31, 2011
(Consolidated Plan)

harsh business environment will continue. Facing these circum-

Business Segments

having a global impact on the entertainment industry, in which

stances, the Group has commenced the “BANDAI NAMCO
Group Restart Plan” for the purpose of a more assured implementation of the global management foundation adopted in thethree-year Mid-term Business Plan that has been in operation
since April 2009. Through these measures, the Group intends totransform itself into a speedy Group, improve its profitability andToys and Hobby
Contents
Amusement Facility
Other Businesses
Eliminations and corporate
Total(Millions of yen)

Net sales¥155,000
186,500
63,00018,000(22,500)¥400,000

Operating income¥ 9,500
3,500
1,000
500
(3,500)¥11,000

strengthen its financial standing.
Specifically, in the Toys and Hobby business, our plan for

Forward-Looking Statements

Japan is to further develop the long-established character series

Forecasts for the next year and other future projections in thisaimed at existing users, such as TENSO SENTAI GOSEIGER

annual report are based on information available to the Group at(Power Rangers series) and MASKED RIDER W, aimed at boys,

the time they were made and are therefore subject to variousand HEART CATCH PRETTY CURE !, aimed at girls, whilerisks and uncertainties. Actual results therefore may differ

strengthening others, including Mobile Suit Gundam plastic

materially from projections for a variety of factors. Major factors

models, which are celebrating their 30th anniversary, and thethat could influence results include changes in the Company andpopular DATA CARDDASS. In addition, to expand the target

the Group's operating environment, market trends, andpopulation for the purpose of aiming for the dominant No. 1

exchange rate fluctuations.

position in Japan, we shall focus on further strengthening new
products, such as HYPER YO-YO and VooV. Overseas, inaddition to the BEN10 character toys, which have become along-established character series, we shall place our attention
on expanding new categories such as toys for girls and preschool toys for infants.
In the Content business, the Group will place a particularfocus on the home game software business in Europe and theAmericas as it continues its worldwide deployment of multiple
major software titles that are potential candidates for new
franchise titles. Considering that this segment faced difficulties
in Japan for the year ended March 31, 2010, mainly with small to
medium-size game titles, our plan for Japan is to more strictly
scrutinize each title during the development process in order toimprove our profitability. Also, effective April 2010, the Group
integrated the existing Game Contents SBU and Visual andMusic Content SBU, which will allow the Group to respondswiftly to the increasing diversification of customer needs and to
maximize the value of the Group’s content.

39Consolidated Balance Sheets
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
As of March 31, 2009 and 2010
Thousands of
U.S. dollars(note 3)

Millions of yen

2009

2010

2010

$ 1,038,779

AssetsCurrent assets:
Cash and time deposits (notes 4 and 12)¥106,747¥ 96,648

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

4,426

2,038

21,905Trade receivables (notes 6 and 12)

62,51952,726566,702

Allowance for doubtful receivables
Inventories (note 7)(447)(1,139)(12,242)

37,651

40,957440,209

Deferred tax assets (note 13)

6,146

5,763

61,941Other current assets

19,044

20,770223,237

		 Total current assets

236,086

217,763

2,340,531

Investment securities (notes 5 and 12)

24,95023,275

250,161

Deferred tax assets (note 13)

7,125

5,886

63,263

Other investments and assets

22,261

22,303

239,715

Allowance for doubtful receivables(1,254)(1,807)(19,422)

		 Total investments and other assets

53,08249,657533,717

Buildings and structures

24,066

24,671

265,166

Amusement facilities and machines

70,82360,827653,773Land

11,783

11,592

124,592

Other property, plant and equipment

67,284

71,180765,046

173,956

168,270

1,808,577(121,964)(122,256)(1,314,016)

51,99246,014

494,561

Goodwill

12,055

2,951

31,718Other intangible assets

10,2309,551

102,654

		 Total intangible assets

22,285

12,502

134,372¥363,445¥ 325,936$ 3,503,181

Investments and other assets:

Property, plant and equipment:

		 TotalLess accumulated depreciation
		 Net property, plant and equipment

Intangible assets:

		 Total assets
See accompanying Notes to Consolidated Financial Statements.

40

Thousands of
U.S. dollars(note 3)

Millions of yen

2009

2010

2010

Liabilities and net assets
Current liabilities:
Short-term borrowings (notes 9 and 12)

8,857¥   8,877$   95,411

Trade payables (notes 10 and 12)

36,76135,956

386,457

Accrued expenses

25,03020,147

216,541

Accrued income taxes (notes 12 and 13)

6,375

8,240

88,564

Other current liabilities (notes 9 and 13)

7,281

13,385

143,863

84,30486,605930,836

Long-term debt (notes 9 and 12)

11,991

3,333

35,823

Accrued retirement and severance benefits (note 11)

1,953

2,436

26,182

Deferred tax liabilities (note 13)

1,098

1,289

13,854

		 Total current liabilities¥

Long-term liabilities:

Other long-term liabilities (note 9)

3,520

3,261

35,050		 Total long-term liabilities

18,562

10,319110,909

		 Total liabilities

102,866

96,924

1,041,745

10,00010,000107,481

Net assets:
Common stock (notes 18 and 19)
		 Authorized 1,000,000,000 shares;		 issued 250,000,000 shares
Additional paid-in capital (note 19)

79,88879,960859,415

Retained earnings (note 16)	Treasury stock, at cost; 8,694,796 shares in 2009 and
8,540,776 shares in 2010 (note 18)

199,453

163,454

1,756,814(9,624)(9,455)(101,623)

		 Subtotal

279,717

243,959

2,622,087(1,911)

19

204

Unrealized gains or losses on other securities, net of tax (notes 5 and 13)
Deferred gains or losses on hedges, net of tax

(105)

80

860

Land revaluation, net of tax (notes 13 and 17)(6,300)(6,492)(69,776)

Foreign currency translation adjustments(13,756)(10,900)(117,154)(22,072)(17,293)(185,866)

		 Subtotal
Stock subscription rights (note 19)

1,468

810

8,706

Minority interests

1,466

1,536

16,509

		 Total net assets

260,579

229,0122,461,436

		 Total liabilities and net assets¥363,445¥325,936$3,503,181

41

Consolidated Statements of Operations
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2009 and 2010
Thousands of
U.S. dollars(note 3)

Millions of yen

2009

2010

2010

Net sales¥426,400¥378,547$4,068,648

Cost of sales

280,377

249,7942,684,802

		 Gross profit

146,023

128,753

1,383,846

Selling, general and administrative expenses (note 14)

123,675

126,869

1,363,596

		 Operating income

22,3481,884

20,250

Other income (loss):
Interest and dividend income

2,039

584

6,277

Interest expense

(247)

(378)

(4,063)Gain (loss) on sales of investment securities, net

57

151

1,623

Loss on valuation of investment securities(1,327)(141)(1,515)Gain (loss) on sales and disposal of fixed assets, net

1,333

(304)

(3,267)

Loss on impairment of fixed assets (note 8)(954)(15,903)(170,926)(2,124)(5,187)(55,752)(1,223)(21,178)(227,623)

Income (loss) before income taxes and minority interests

21,125(19,294)(207,373)

Income taxes (note 13)

9,060

10,499112,844

235

136

1,462

¥ 11,830¥ (29,929)$ (321,679)

Other

Minority interests
		 Net income (loss)

U.S. dollars(note 3)

Yen

2009

2010

2010

¥1,067.71¥ 938.74$10.09

Basic

47.95

(123.98)(1.33)

Diluted

47.88

—

—

24.00

24.00

0.26

Data per common share (note 15):
Net assets at March 31
Net income (loss):

Cash dividends applicable to period (note 15)
See accompanying Notes to Consolidated Financial Statements.

42

Consolidated Statements of Changes in Net Assets
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2009 and 2010
Thousands of
U.S. dollars(note 3)

Millions of yen

2009

2010

2010

Balance at beginning of year

¥10,000¥ 10,000$ 107,481

Balance at end of year

10,00010,000107,481

87,94679,888858,641

Common stock (notes 18 and 19):

Additional paid-in capital (note 19):
Balance at beginning of year
Disposal of treasury stock

—

72

774

(8,336)

—

—

278

—

—

79,88879,960859,415

192,865

199,453

2,143,734

(66)

—

—

11,830(29,929)(321,679)

818

116

1,247

Changes in the scope of application of the equity method

—

(416)

(4,471)

Reversal of land revaluation

15

—

—

(6,009)(5,796)(62,296)

—

26

279

199,453

163,454

1,756,814

Balance at beginning of year

(2,840)(9,624)(103,439)

Net change during year

(6,784)

169

1,816

Balance at end of year

(9,624)(9,455)(101,623)

Retirement of treasury stock
Purchase of treasury stock from consolidated subsidiaries
Balance at end of year
Retained earnings (note 16):
Balance at beginning of year
Effect of changes in accounting policies applied to foreign subsidiaries
Net income (loss)
Changes in the scope of consolidation

Cash dividends
Increase due to company split
Balance at end of year
Treasury stock (note 18):

Unrealized gains or losses on other securities, net of tax (notes 5 and 13):
Balance at beginning of year

193

(1,911)(20,540)

Net change during year

(2,104)

1,930

20,744

Balance at end of year

(1,911)

19

204

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

(113)

(105)

(1,129)Net change during year

8

185

1,989

Balance at end of year

(105)

80

860
(67,712)Land revaluation, net of tax (notes 13 and 17):
Balance at beginning of year

(6,284)(6,300)Net change during year

(16)

(192)

(2,064)

Balance at end of year

(6,300)(6,492)(69,776)(147,850)

Foreign currency translation adjustments:
Balance at beginning of year

5,029

(13,756)

Net change during year

(18,785)2,856

30,696

Balance at end of year

(13,756)(10,900)(117,154)

Stock subscription rights (note 19):
Balance at beginning of year

1,531

1,468

15,778Net change during year

(63)

(658)

(7,072)

Balance at end of year

1,468

810

8,706

1,617

1,466

15,757

Minority interests:
Balance at beginning of year
Net change during year

(151)

70

752

Balance at end of year

1,466

1,536

16,509¥260,579¥229,012$2,461,436

		 Total net assets at end of year
See accompanying Notes to Consolidated Financial Statements.

43

Consolidated Statements of Cash Flows
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2009 and 2010
Thousands of
U.S. dollars(note 3)

Millions of yen

2009

2010

2010

Income (loss) before income taxes and minority interests¥21,125¥ (19,294)$ (207,373)

Depreciation

22,54618,989204,095

954

15,903

170,926

Loss (gain) on sales and disposal of fixed assets, net(1,333)

304

3,267

Loss on disposal of amusement facilities and machines

796

570

6,126

Loss (gain) on sales of investment securities, net

(57)

(151)

(1,623)

Cash flows from operating activities:

Loss on impairment of fixed assets

Loss on valuation of investment securities

1,327

141

1,515

Decrease (increase) in trade receivables

3,827

13,478144,862

Decrease (increase) in inventories(2,128)(1,726)(18,551)

Acquisition of amusement facilities and machines(6,646)(4,410)(47,399)(59)(6,701)(72,023)

Other(10,227)

1,980

21,283

		 Subtotal

30,12519,083205,105

Increase (decrease) in trade payables

Interest and dividends received

2,074

582

6,255

Interest paid

(171)

(321)

(3,450)

Income taxes paid
		 Net cash provided by operating activities(12,727)(8,762)(94,174)

19,301

10,582

113,736

Cash flows from investing activities:

Decrease (increase) in time deposits, net

2,874

327

3,515

Purchases of property, plant and equipment(8,012)(7,177)(77,139)

Sales of property, plant and equipment

4,053

124

1,333

Purchases of intangible assets(2,799)(2,831)(30,428)

Purchases of investment securities(3,344)(422)(4,536)

Sales of investment securities

354

472

5,073

Acquisition of shares in consolidated subsidiaries, net of cash acquired

(49)

(81)

(871)

Acquisition of subsidiary shares affecting the scope of consolidation

277(1,760)(18,917)

Payments of loans receivable(5,646)(1,070)(11,500)

Collection of loans receivable

297

171

1,838

Payment of guarantee money deposited(1,198)(398)(4,278)

Collection of guarantee money deposited

2,865

2,739

29,4391

43463(10,327)(9,863)(106,008)

Other
		 Net cash used in investing activities
Cash flows from financing activities:

Increase (decrease) in short-term borrowings, net

128

(577)

(6,202)

Proceeds from long-term debt

10,000——

Repayment of long-term debt

(5,338)(8,762)(94,174)

Payments of lease obligations

(104)

(83)

(892)

Decrease (increase) in treasury stock, net(15,131)

(8)

(86)

Cash dividends paid

(6,009)(5,796)(62,296)

Cash dividends paid to minority interests

(76)

(51)

(548)

		 Net cash used in financing activities(16,530)(15,277)(164,198)

Effect of exchange rate changes on cash and cash equivalents(12,620)

2,010

21,604

Net increase (decrease) in cash and cash equivalents(20,176)(12,548)(134,866)

Cash and cash equivalents at beginning of year

129,290

110,037

1,182,685

Increase in cash and cash equivalents due to consolidation of additional subsidiaries

1,143

271

2,913

Increase in cash and cash equivalents due to merger of non-consolidated subsidiaries

85

62

666

(305)

(45)

(484)

¥110,037¥ 97,777$1,050,914

Decrease in cash and cash equivalents due to company split
Cash and cash equivalents at end of year (note 4)
See accompanying Notes to Consolidated Financial Statements.

44

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

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

Ministry of Finance as required by the Financial Instruments andits consolidated subsidiaries have prepared their financial

Exchange Act.

statements in accordance with the provisions set forth in theSome supplementary information included in the statutory

Japanese Financial Instruments and Exchange Act and its

Japanese language consolidated financial statements that is not

related accounting regulations, and in conformity withrequired for fair presentation is not presented in the accompa-

accounting principles generally accepted in Japan, which arenying consolidated financial statements.

different in certain respects as to application and disclo­sure
requirements of International Financial Reporting Standards.

In preparing the accompanying consolidated financial state­ments, certain reclassifications have been made to the

The accounts of overseas subsidiaries are based on theircon­solidated financial statements issued in Japan in order toaccounting records maintained in conformity with Internationalpresent them in a form that is more useful to readers outside

Financial Reporting Standards or U.S. GAAP. The accompa-

Japan.

nying consolidated financial statements have been prepared andCertain reclassifications have been made to the prior year

translated into English from the consolidated financial state-con­solidated financial statements to conform to the presen­tation

ments of the Company prepared in accordance with Japanese

used for the year ended March 31, 2010.

GAAP and filed with the appropriate Local Finance Bureau of the2  Summary of Significant Accounting Policies(a) Principles of Consolidation

Receivables and payables denominated in foreign currencies

The accompanying consolidated financial statements include

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

the accounts of the Company and its significant subsidiaries.

of the balance sheet date and the unrealized gains or losses are

Consolidation of the remaining subsidiaries would have had no

included in “Other income (loss)”.

material effect on the accompanying consolidated financial

The assets and liabilities of foreign consolidated subsidiaries

statements. Investments in significant affiliates are accounted forand affiliates are translated into yen at the rates of exchange inusing the equity method.

effect at the balance sheet date. Revenue and expenses ofInvestments in unconsolidated subsidiaries and certain

foreign consolidated subsidiaries and affiliates are translated into

affiliates other than those accounted for using the equity method

yen at the average rates of exchange during the year. Gains andare stated at cost. If the equity method had been applied to thelosses resulting from foreign currency transactions are included

investments in these companies, there would have been no

in “Other income (loss)”, and those resulting from the translationmaterial effect on the accompanying consolidated financialof foreign currency financial statements are generally excluded

statements.

from the consolidated statements of operations and are included

All significant intercompany accounts and transactions havebeen eliminated in consolidation. The excess of cost over thein “Translation adjustments” and “Minority interests” in “Netassets”.

underlying fair value of the net assets of consolidated sub­sidiaries
acquired is being amortized over a five-year period.

(d) Accounting Standards for Income and Expenses
Video Game Software Revenue Recognition:(b) Cash and Cash Equivalents

Consolidated subsidiaries operating in the United States recog-

In reporting cash flows, the Company considers cash on hand,

nize revenue in accordance with “Software Revenue Recogni-

demand deposits, and all highly liquid investments with originaltion” of FASB Accounting Standards Codification No. 985-605,

maturities of three months or less to be cash and cash equiva-

treating video game software with online functions as softwarelents (note 4).

products with multiple-element arrangements. Unless thevendor can objectively and reasonably identify the fair value of(c) Foreign Currency Translation

undelivered elements specified by the vendor, recording of any

Foreign currency transactions are translated into yen at rates inrevenue attributable to video game software is deferred until all

effect at the dates they are transacted, and the gains or losses

the elements are delivered.

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

45

Accounting for video game software production expenses:

Statement No. 9, issued on July 5, 2006) was applied from the

A distinctive characteristic of video game software is theyear ended March 31, 2009.

process through which the software is highly combined with

The impact of this change on operating income and income

content that cannot be separated into identifiable components.

before income taxes and minority interests is immaterial in the

The content is considered to be an important component ofyear ended March 31, 2009.

each video game title, which includes the game content andvisual/music data. Once management makes a decision to go(h) Income Taxes

forward in distributing a title, the Company records the software

Current income taxes are accounted for based on income.

and content development costs as inventories.

Deferred income taxes are accounted for under the asset and

The capitalized production costs are amortized to cost of
sales based on projected sales volumes.

liability method. Deferred tax assets and liabilities are recog­nized
for future tax consequences attributable to dif­ferences between
the financial statement carrying amounts of existing assets and(e) Short-Term Investments and Investment Securities

liabilities and their respective tax bases and operat­ing loss and

The Company and its consolidated subsidiaries classify its

tax credit carryforwards. Deferred tax assets and liabilities are

securities into one of the following three categories: held-to-measured using enacted tax rates expected to apply to taxable

maturity securities, investments in unconsoli­dated subsidiaries

income in the years in which those temporary differences are

and affiliated companies, or other securities.

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

Held-to-maturity securities are amortized to face value overthe period remaining to the maturity date. Investments in uncon-

assets and liabilities of a change in the tax rate is recog­nized inincome in the period that includes the enactment date.

solidated subsidiaries and affiliated companies are carried atcost. Other securities with a market value are principally carried(i) Property, Plant and Equipment

at market value. The difference, net of tax, between the acquisi-

The Company and its domestic consolidated subsidiaries:

tion cost and the carrying amount of other securities with a

Depreciation of property, plant and equipment is principallymarket value, is recognized in “Unrealized gains or losses on

computed by the declining-balance method based on estimatedother securities, net of tax” in “Net assets” until realized. Other

useful lives. The straight-line method is used for buildings (except

securities without a market value are principally carried at cost.

for building fixtures) acquired since April 1, 1998. The estimated

The cost of other securities sold is principally computed based

useful lives for Buildings and structures and Amusement facili-on the moving average method.

ties and machines are 2–50 years and 3–15 years, respectively.

(f) Allowance for Doubtful Receivables

domestic consolidated subsidiaries was changed from the year

The allowance for doubtful receivables is provided for possible

ended March 31, 2009, pursuant to the change in statutory

losses on unrecoverable receivables. For ordinary receivables,

useful life in the 2008 revision of the Corporation Tax Law.

The useful life of the property, plant and equipment of somethe amount of the allowance is based on the historical rate of

The impact of this change on operating income and income

loss. For receivables from debtors at risk of bankruptcy andbefore income taxes and minority interests in the year ended

receivables from debtors in bankruptcy or under reorganiza­tion,

March 31, 2009 is immaterial.

the amount of the allowance is based on individually estimatedForeign consolidated subsidiaries:

unrecoverable amounts.

Depreciation of property, plant and equipment is principally
computed by the straight-line method based on estimated useful(g) Inventories

lives. The estimated useful lives for Buildings and structures andDomestic consolidated subsidiaries:

Amusement facilities and machines are 5–50 years and 2–7

Inventories are stated at cost determined by the average costyears, respectively.

method (The value stated on the balance sheet is calculated bywriting down the carrying amount based on declining profitability).

(j) Intangible Assets

Foreign consolidated subsidiaries:

Amortization of intangible assets is computed by the straight-line

Inventories are stated at the lower of cost, determined prin­cipally

method based on estimated useful lives. Software for internalby the average cost method, or market.

use is depreciated over 1–5 years.

Both domestic and foreign consolidated subsidiaries state

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

game software work-in-process by the specific-cost method

46(The value stated on the balance sheet is calculated by writing(k) Leases

down the carrying amount based on declining profitability).

Depreciation of lease assets is computed by the straight-line“Accounting Standard for Measurement of Inventories” (ASBJ

method, over the period of the lease, with a residual value ofzero. Before the change the accounting treatment for finance

As a general rule, derivative instruments are stated at fairlease except for those where the legal title to the underlying

value. For derivative instruments that meet the criteria for hedge

property is transferred from the lessor to lessee at the end of theaccounting, recognition of unrealized gains or losses is deferred.

lease term followed the method for operating lease trans­actions.

In cases where forward foreign exchange contracts meet certain

However, the “Accounting Standard for Lease Transactions”

hedging criteria, the hedged receivables and payables are(ASBJ Statement No. 13 [Business Accounting Council Committee

translated at the corresponding foreign exchange contract rate,

No. 1, June 17, 1993; revised March 30, 2007]) and the “Guidance“Allocation Method.” Interest rate swaps that meet specificon Accounting Standard for Lease Transactions” (ASBJ Guidance

matching criteria are accounted for using specific allowed

No. 16 [The Japanese Institute of Certified Public Accountants

methods under relevant accounting standards.

(JICPA) Accounting Standard Committee, January 18, 1994;

The Company assesses the effectiveness of hedging transac-

revised March 30, 2007]) are applied and the accounting treat-tions from the start of the transaction to the point at which effec-

ment for such transactions follows the method for ordinary pur­chasetiveness is assessed by comparing the cumulative changes inor sales trans­actions from the year ended March 31, 2009.

the fair value or the cumulative changes in the cash flows of the

However, finance lease transactions other than those in which

hedged item with the cumulative changes in the fair value or thetitles to leased property are determined to be transferred tocumulative changes in the cash flows of the hedging instrument.

lessees, which transactions started on or before March 31,

In the event that critical terms are the same for the hedging

2008, are stated by applying the accounting treatment

instrument and the hedged assets, liabilities, or scheduled

applicable to ordinary operating lease transactions.

transaction, it is assumed that the hedge is 100% effective, soThis change has no impact on operating income and net

the assessment of effectiveness is not performed. Also, forincome before income taxes and minority interests in the year

interest rate swaps for which the specific allowed methods areended March 31, 2009.

applied, the assessment of effectiveness is not performed.

(l) Impairment of Fixed Assets

accounting is no longer applied and the recognition of the gains

The Company has applied the “Accounting Standard for Impair-or losses on the hedge transaction is no longer deferred.

In the event that a hedge becomes ineffective, hedge

ment of Fixed Assets” (the “Opinion Concerning Establishmentof Accounting Standard for Impairment of Fixed Assets”(n) Provision for Directors’ Bonuses(Business Accounting Deliberation Council, August 9, 2002)) andDomestic consolidated subsidiaries provide accrued bonuses

the “Implementation Guidance for the Accounting Standard forfor directors based on the estimated amounts to be paid in

Impairment of Fixed Assets” (Guidance on Corporate

respect of the fiscal year.

Accounting Standard No. 6, October 31, 2003). The amount ofaccumulated losses on impairment of fixed assets is deducted(o) Retirement and Severance Benefits

directly from the carrying amount of each asset pursuant to the

The Company has established a retirement lump-sum benefits

Regulations Concerning Financial Statements.

system and a defined contribution pension plan. With the excep­
tion of certain companies, domestic consolidated sub­sidiaries(m) Derivatives and Hedging Activities

have established qualified retirement benefit plans, retirement

The Company and its consolidated subsidiaries use derivative

lump-sum benefits, or comprehensive employee pension funds.

instruments, such as forward exchange contracts and interest

At the Company’s discretion, additional benefits may be paid at

rate swap contracts, to reduce market risks stemming fromretirement. Certain foreign consoli­dated subsidiaries have estab-fluctua­tions in foreign exchange rates and interest rates. The

lished defined con­tribution pension plans or retirement lump-Company and its consolidated subsidiaries use these deriva­tive

sum benefits system.

instru­ments solely for the purpose of reducing the risks resulting

Accrued retirement and severance benefits for employees infrom such fluctua­tions to which they are exposed in the course

respect of defined benefit plans is provided for based on theof their ordinary business activi­ties. Accordingly, the Company

estimated values of projected benefit obligations and pension

does not use derivative instru­ments or other financial instru-

plan assets at the end of the fiscal year. Unrecognized actuarial

ments for speculative purposes.

gain or loss is amortized, beginning from the fiscal year following

The Company’s counterparties for derivative instruments are

the year in which it is incurred, using the straight-line method

all highly creditworthy financial institutions and, therefore, theover a period that does not exceed the average remaining years

Company believes that it is exposed to almost no counterpartyof service of employees as of the end of the fiscal year in whichrisk. Derivative transactions are conducted in accordance with

it is incurred (9 to 19 years). Certain domestic consolidated

internal rules that specify transaction authority and transaction

subsidiaries amortize prior service costs over a fixed periodamount limits.

(10 to 11 years) that does not exceed the aver­age remaining

47

years of service of employees at the point when the costs are
incurred. Provision for retirement benefits to directors andcorporate auditors of certain domestic consolidated sub­sidiaries(t) Practical Solution on Unification of Accounting
Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements

is provided based on the amount payable at the end of the fiscal

With the adoption of the “Practical Solution on Unification ofyear in accordance with internal regulations.

Accounting Policies Applied to Foreign Subsidiaries for Consoli-“Partial Amendments to Accounting Standard for Retirement

dated Financial Statements” (PITF Practical Solution No. 18, issued

Benefits (Part3)” (ASBJ Statement No.19, issued on July 31,

on May 17, 2006), necessary adjustments to the consolidated2008) were applied from the year ended March 31, 2010.

returns were carried out from the year ended March 31, 2009.

This change has no impact on operating income and net loss

The impact of this change on operating income and net

before income taxes and minority interests in the year ended

income before income taxes and minority interests is immaterial

March 31, 2010.

in the year ended March 31, 2009.

(p) Provision for Losses from Business Restructuring(u) Change in Classification of Costs for the Amusement

Certain consolidated subsidiaries make provision for estimatedlosses on restructuring of operations.

Facilities BusinessPrior to the year ended March 31, 2010, the costs of backroom
support operations at amusement facilities was treated as cost(q) Provision for Sales Returnsof sales for the amusement facilities business. However, from

Certain consolidated subsidiaries provide for losses on returned

the year ended March 31, 2010, such costs are stated as selling,

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

general and administrative expenses. This change is made toprovide a more appropriate presentation of costs of facilities(r) Appropriation of Retained Earnings

management operations from the point of view of the relation-

In Japan, retained earnings with respect to a given financial

ship between sales and cost of sales, in conjunction withperiod are appropriated by resolution of the shareholders at areviewing how facilities are operated and the roles of operating

general meeting to be held subsequent to the close of such

staff, and clarifying the scope of facilities management opera-

financial period. The accounts for that period do not, therefore,

tions, given that competition has grown more intense in thereflect such appropriations.

amusement facilities business.

(s) Data per Common Sharetion used until the previous fiscal year, is a ¥2,011 million

In computing basic net income (loss) per common share, the($21,614 thousand) reduction in the cost of sales for this fiscal

average number of shares outstanding during each year has

year with an equivalent increase in gross profit, as well as an

been used.

increase in selling, general and administrative expenses by the

The impact of this change, in comparison with the classifica-

Diluted net income per share assumes the dilution that could
occur if securities or other contracts to issue common stock

same amount.
This change has no impact upon operating income and net

were exercised or converted into common stock, or resulted inloss before income taxes and minority interests for the year

issuance of common stock.

ended March 31, 2010.

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

3  Financial Statement Translation
The consolidated financial statements are expressed in yen. However, solely for the convenience of the reader, the consolidated
financial statements as of and for the year ended March 31, 2010, have been translated into U.S. dollars at the rate of ¥93.04=U.S.$1,
the approximate exchange rate on the Tokyo Foreign Exchange Market on March 31, 2010.
This translation should not be construed as an indication that the amounts shown could be converted into U.S. dollars at such rate.

48

4  Cash and Cash Equivalents
Reconciliations of cash and cash equivalents as of March 31, 2009 and 2010 between the amounts shown in the consolidatedbalance sheets and the consolidated statements of cash flows are as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and time deposits
Short-term investments
Time deposits with maturities in excess of three months
Cash and cash equivalents per consolidated statements of cash flows

2009

2010

2010

¥106,747¥96,648$1,038,779
21,905

4,426

2,038

(1,136)(909)(9,770)¥110,037¥97,777$1,050,914

Cash and time deposits of ¥131 million and ¥4 million ($43 thousand) are pledged as collateral for bank transaction guarantees
as of March 31, 2009 and 2010, respectively.

5  Short-Term Investments and Investment Securities
Short-term investments and investment securities as of March 31, 2009 and 2010 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Held-to-maturity securities
Other securities with fair value
Other securities wihtout fair value
Investments in unconsolidated subsidiaries and affiliated companies
Total of short-term investments and investment securities

2009

2010

2010

¥
31
15,505
1,690
12,150¥29,376¥    28
14,286
1,578
9,421¥25,313$    301
153,547
16,960101,258$272,066

Note: The fair values of held-to-maturity securities are the same as amounts of the consolidated balance sheets.

The original cost, carrying amount (fair value), and gross unrealized holding gain (loss) for other securities with fair value as ofMarch 31, 2009 and 2010, are summarized as follows:
Millions of yen

2009
Original cost

Other securities with fair value:
Equity securities
Debt securities
Other
		 Total¥11,446300
4,849¥16,595

Gross unrealized
holding gain

Gross unrealized
holding loss

¥2,165
3—¥2,168¥(3,111)(2)(145)¥(3,258)

Carrying amount(fair value)¥10,500
301
4,704¥15,505

Millions of yen

2010
Original cost

Other securities with fair value:
Equity securities
Debt securities
Other
		 Total¥11,317100
2,461¥13,878

Gross unrealized
holding gain

Gross unrealized
holding loss

¥3,242——¥3,242¥(2,704)—(130)¥(2,834)

Carrying amount(fair value)¥11,855100
2,331¥14,286

Thousands of U.S. dollars

2010

Other securities with fair value:
Equity securities
Debt securities
Other
		 Total

Original cost

Gross unrealized
holding gain

Gross unrealized
holding loss

Carrying amount(fair value)$121,636
1,075
26,451$149,162$34,845——$34,845$(29,063)—(1,397)$(30,460)$127,418
1,075
25,054$153,547

49

The following is a summary of the carrying amount of other securities without fair value as of March 31, 2009 and 2010:
Thousands of
U.S. dollars

Millions of yen

2009

2010

2010

Carrying
amountCarrying
amountCarrying
amount¥1,690¥1,578$16,960¥1,690¥1,578$16,960

Other securities without fair value:
Unlisted securities
		 Total

Proceeds and gross realized gains and losses from the sale of other securities in the years ended March 31, 2009 and 2010 are as
follows:
Thousands of
U.S. dollars

Millions of yen

2010

2009
Equity securities

2010

¥ 45

¥269

$2,891

Corporate bond securities

—

200

2,150

Other

12

41

441

57

510

5,482

Gross realized gains from the sales of other securities

1

176

1,892

Gross realized losses from the sales of other securities

(16)

(25)

(269)

Debt securities

Proceeds from the sales of other securities

6  Trade Receivables
Trade receivables as of March 31, 2009 and 2010 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2009

2010

2010

Notes receivable¥ 6,248¥ﾔ 4,372$ 46,991

Accounts receivable-trade56,12048,239518,475

151

115

1,236

¥62,519¥52,726$566,702

Lease receivables and investment assets
		 Total

7  Inventories
Inventories at March 31, 2009 and 2010 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2009

2010

2010

Finished goods and merchandise¥11,643¥12,817$137,758

Work in process

21,65423,805

255,858

Raw materials and supplies

4,354

4,335

46,593¥37,651¥40,957$440,209

		 Total

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 the smallest unit used in management accounting and is the basic unit for evaluating impairment.

50

The carrying amounts of the following assets, which exclude reusable assets, were reduced to the recoverable amount. The amountsof reduction recorded as an impairment loss in “Other income (loss)” for the years ended March 31, 2009 and 2010 were as follows:
Thousands of
U.S. dollars

Millions of yen

Location

Items

Kanazawa City, Ishikawa (Note 1)

Amusement facility

Sendai City, Miyagi (Note 2)

Amusement facility

Osaka City Osaka (Note 3)

Amusement facility

Sapporo City, Hokkaido (Note 1)

Assets for business use

Shibuya-ku, Tokyo (Note 4)

Assets for business use

Seoul, KOREA (Note 1)

Software for Internet
content business
Assets scheduled for
disposalMinato-ku, Tokyo (Note 5)
Minato-ku, Tokyo (Note 5)
Ibaraki City, Osaka (Note 6)
Muko City, Kyoto, etc. (Note 1)

Assets scheduled for
disposal
Idle assets
Amusement facility

Toshima-ku, Tokyo(Note 2)

Amusement facility

Kishiwada City, Osaka (Note 7 )Amusement facility

Illinois, U.S.A. etc. (Note 8)

Amusement facility

Braintree, U.K. etc. (Note 1)

Amusement facility

New territories, H.K. etc. (Note 1)

Amusement facility

Cambridge, U.K. (Note 1)

Assets for business use

Shinagawa-ku, Tokyo (Note 8)

Assets for business use

Kasuya-gun, Fukuoka (Note 1)

Warehouse— (Note 9)
		 Total—Classification
Amusement facilities andmachines, and other assets
Amusement facilities andmachines, and other assets
Amusement facilities andmachines, and other assets
Buildings and structures, andOther property, plant andequipment
Buildings and structures, andOther property, plant andequipment
Other intangible fixed assets
Buildings and structures, andOther property, plant andequipment
Buildings and structures
Land
Amusement facilities andmachines, and other assets
Amusement facilities andmachines, and other assets
Amusement facilities andmachines, Land, and otherassetsAmusement facilities andmachines
Amusement facilities andmachines, and other assets
Amusement facilities andmachines, and other assets
Buildings and structures, andOther property, plant andequipment
Other property, plant andequipment, Other intangible
fixed assets, and other assets
Buildings and structures, andOther property, plant andequipment
Goodwill

2010

2009
¥208

¥

—

2010
$

—

94

—

—

475

—

—

48

—

—

38

—

—

25

—

—

23

—

—

14

—

—

29

—

—

—

285

3,063

—

90

967

—

1,153

12,393

—

481

5,170

—

342

3,676

—

1

11

—

3

32

—

747

8,029

—

50

537

—
¥954

12,751¥15,903

137,048$170,926

Notes:
1.	An impairment loss was recorded because it was forecasted 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 fair value.
2.	An impairment loss was recorded because it was judged that the carrying amount that could be recovered for these fixed assets had fallen substantially due to the decision toclose the facility. In addition, these assets were determined to have no fair value.
3.	An impairment loss was recorded for these fixed assets because, while it had previously been operated to generate income, an assessment of the main objective of theoperation led to a decision to operate these assets as a research facility for new product development and development of new types of facilities. Based on that decision, it was
judged that the value that could be recovered for these fixed assets had fallen substantially. In addition, these assets were determined to have no fair value.
4.	An impairment loss was recorded because the collectible amount of these fixed assets substantially decreased due to the decision to close the facility. These assets were
determined to have no fair value.
5.	An impairment loss was recorded for these assets for which no future use is anticipated, accompanying the relocation of the Company and its subsidiaries’ head office
functions. In addition, these assets were determined to have no fair value.
6.	These assets that had no foreseeable use in the future were written down, and an impairment loss was recorded. The recoverable amount of real estate assets was measured
based on the estimated net selling price, which was assessed based on real estate appraisals.
7.	An impairment loss was recorded because it was forecasted that the carrying amount of these fixed assets could not be recovered due to the decline in business profitability.
The recoverable amount was measured based on the estimated net selling price, which was assessed based on a reasonable estimated.
8.	An impairment loss was recorded because it was forecasted that the carrying amount of these fixed assets could not be recovered due to the decline in business profitability.

51

The recoverable amount was measured as the estimated value in use based on future cash flows.
9.	It was determined that the future super-profit assumed in the business plan considered at the time of acquisition of the shares was unlikely to be realized. Therefore, the total
unamortized balance was recorded as an impairment loss. It includes an impairment loss of ¥7,043 million ($75,699 thousand) of goodwill which was generated as a result of
NAMCO BANDAI Partners S.A.S. becoming a wholly owned subsidiary.

9  Borrowings and Lease Obligations
Short-term borrowings and lease obligations as of March 31, 2009 and 2010 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2009

2010

2010

Short-term borrowings

¥

96

¥ 219

$ 2,354

Long-term debt due within one year

8,761

8,658

93,057

		 Subtotal

8,857

8,877

95,411

Lease obligations due within one year
		 Total

85

71

763

¥8,942¥8,948$96,174

The weighted average interest rates on short-term borrowings outstanding as of March 31, 2009 and 2010 were 4.77% and 4.31%
respectively.
Long-term debt and lease obligations as of March 31, 2009 and 2010 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2009

2010

2010

¥20,752¥11,991$128,880

396

295

3,171

		 Subtotal

21,14812,286132,051

Less long-term debt due within one year

(8,761)(8,658)(93,057)

Less lease obligations due within one year

(85)

(71)

(763)

¥12,302¥ﾔ3,557$ﾔ38,231

Loans, principally from banks, maturing in installments through March 31, 2012;
the weighted average interest rates of current installments at March 31, 2010 was
0.51% and non-current installments at March 31, 2010 was 0.86%
Lease obligations maturing in installments through March 31, 2015;
the weighted average interest rates of current installments at March 31, 2010 was
3.79% and non-current installments at March 31, 2010 was 2.50%

		 Total

The aggregate annual maturities of long-term debt and lease obligations outstanding as of March 31, 2009 and 2010 are as follows:
Years ending March 31

2011
2012
2013
2014
2015
2016
		 Total

Millions of yen

Thousands of
U.S. dollars¥ 8,729$ 93,820

3,406

36,608

60

645

41

441

34

365

16

172

¥12,286$132,051

10  Trade Payables
Trade payables as of March 31, 2009 and 2010 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

52

2009

2010

2010

Notes payable¥7,130¥ﾔ5,349$ﾔ57,491

Accounts payable-trade29,63130,607

328,966

		 Total¥36,761¥35,956$386,457

11  Retirement and Severance Benefits
The plans’ funded status and amounts recognized in the accompanying consolidated balance sheets as of March 31, 2009 and 2010
are as follows:
Thousands of
U.S. dollars

Millions of yen

Employee retirement and severance benefits:
Projected benefit obligations
Plan assets at fair value
Projected benefit obligation in excess of plan assets
Unrecognized loss
Unrecognized prior service cost
Net retirement and severance benefits recognized on the balance sheet
Prepaid pension costAccrued retirement and severance benefits
Directors’ and corporate auditors’ retirement and severance benefits:
Accrued retirement and severance benefits		 Total accrued retirement and severance benefits

2009

2010

2010

¥14,254¥ 14,474$ 155,567(9,326)(10,402)(111,801)

4,928

4,072

43,766(3,532)(2,114)(22,721)

373

393

4,224

1,769

2,351

25,269

137

52

559

1,906

2,403

25,828

47

33

354

¥ 1,953¥ 2,436$ 26,182

Notes:
1. In addition to the above plan assets, plan assets of ¥438 million and ¥566 million ($6,083 thousand) as of March 31, 2009 and 2010, respectively, are 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 years ended March 31, 2009 and 2010 consists of thefollowing:Thousands of
U.S. dollars

Millions of yen

Service cost for benefits earned, net of employee contributions
Interest cost on projected benefit obligations
Expected return on plan assets
Amortization of unrecognized actuarial gain or loss
Amortization of prior service cost		 Net periodic cost

2009

2010

2010

¥1,628¥1,662$17,863

245

253

2,719

(275)

(213)

(2,289)

286

429

4,611

(40)

(47)

(505)

¥1,844¥2,084$22,399

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 and administrative expenses”. Contributions to the governmental welfare pension benefit plan of ¥31 million and ¥30 million ($322 thousand) were charged
to “Cost of sales” and “Selling, general and administrative expenses” in the years ended March 31, 2009 and 2010, respectively. Also, additional discretionary retirement
allowances of ¥98 million and ¥93 million ($1,000 thousand) were charged to “Selling, general and administrative expenses” in the years ended March 31, 2009 and 2010,
respectively. In addition, for certain domestic consolidated subsidiaries, due to the second career support system / early retirement system, additional retirement allowances of¥533 million were recorded for the year ended March 31, 2009, and due to the retirement of employees for voluntary early retirement, additional retirement allowances of ¥1,694
million ($18,207 thousand) were recorded for the year ended March 31, 2010.
2. The retirement benefit expense of consolidated subsidiaries that use a simplified calculation method is recorded as service cost.
3. The defined contribution expenses for the Company and certain consolidated subsidiaries that have established defined contribution retirement pension systems is recorded asa service cost.
4. The contributions of certain consolidated subsidiaries that simultaneously participate in the Smaller Enterprise Retirement Allowance Mutual Aid Scheme are recorded as service cost.

Actuarial assumptions and the basis for the calculation of retirement and severance benefits in 2009 and 2010 are as follows:
2009

2010

“Benefits/years-of-service” approach“Benefits/years-of-service” approach

Discount rate

1.7%~2.0%

1.25%~2.0%

Expected rate of return on plan assets
Period of amortizationof unrecognized prior service cost
Period of amortizationof unrecognized actuarial gain or loss

2.5%~3.0%

2.5%~3.0%

10~11 years

10~11 years

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

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

Method of benefit attribution

53

12  Financial Instruments
1. Financial Instruments(1) Policy for financial instruments
The Company and its consolidated subsidiaries manage funds by means of highly secure financial instruments only and procures
funds through borrowing from banks and other way, such as issuing corporate bonds.
The Company and its consolidated subsidiaries utilize derivatives to hedge the risks noted below and do not engage in speculativetransactions.
(2) Contents and risks of financial instruments
With regard to credit risk posed by customers with respect to trade receivables, the Company and its consolidated subsidiaries
manage balances by counterparty and due date, and credit information on major customers is updated at least once a year, tominimize such credit risk. The Company and its consolidated subsidiaries have a system for immediately sharing within the Company
and its consolidated subsidiaries adverse credit and other information, regarding transaction counterparties in the event that suchinformation is received. As of March 31, 2010, designated large customers were counterparties for 14.2% of trade receivables.
Receivables denominated in foreign currencies arising as a result of the fact that the Company and its consolidated subsidiaries
conduct business on a global basis are subject to foreign exchange rate fluctuation risk. The Company and its consolidated subsidiaries manage balances by counterparty and currency, and in addition the Company and its consolidated subsidiaries track market
trends and, as necessary, utilize forward exchange contracts for hedging.
Short-term investments and investment securities are principally money market funds, held-to-maturity securities, and the sharesof companies with which the Company has a business relationship. These investments are exposed to the risk of fluctuations inmarket prices. The market price is confirmed at least once per quarter, and for investments other than held-to-maturity securities,
the holdings are reevaluated once per year with consideration of market conditions and relationships with counterparty companies.
Trade payables, substantially all have due dates within one year. Certain trade payables are denominated in foreign currencies andare exposed to the risk of fluctuations in foreign exchange rates. In the same manner as receivables, the Company and its consolidated subsidiaries manage balances by counterparty and currency, and in addition the Company and its consolidated subsidiaries
track market trends and, as necessary, utilize forward exchange contracts for hedging.
Borrowings are used mainly to procure funds needed for capital expenditures and for investment financing. Variable rate borrowings are exposed to the risk of fluctuations in interest rates. With consideration of market trends, the Company and its consolidated
subsidiaries implement hedging as necessary through the use of interest rate swaps.
Notes payable, borrowings, accrued income taxes, and other liabilities are exposed to liquidity risk. The Company and its
consolidated subsidiaries manages this risk through the formulation and revision of monthly funding plans for the Company and its
consolidated subsidiaries.
Derivative transactions are used for hedging purposes. With regards to hedging methods and hedged items, hedging policies, andmethods of assessing the effectiveness of hedging transactions, for which hedge accounting is applied, please refer to “2 Summaryof Significant Accounting Policies—(m) Derivatives and Hedging Activities” in the above Notes to Consolidated Financial Statements.
Derivative transactions are executed and managed according to internal rules that determine trading authority and limits on amounts
traded. Derivatives are used in ways that minimize credit risk, and thus transactions are carried out only with highly creditworthy
financial institutions.
(3) Supplementary explanation on the fair value of financial instruments
The fair value of financial instruments includes, in addition to the value determined based on market prices, valuations calculated on areasonable basis if no market price is available. However, as certain variables are used for these calculations, the result of suchcalculations may vary if different assumptions are used.
The contract amounts of derivative transactions in note 21 should not be considered indicative of the market risk associated withthe derivative financial instruments.
2. Fair Value of Financial Instruments
The carrying amounts of financial instruments as stated in the consolidated balance sheets, their fair value as of March 31, 2010, andthe difference between carrying amounts and fair value are as stated below. This table does not include assets for which it was
judged extremely difficult to assess the fair value. Please refer to Note 2.

54

Millions of yen

Thousands of U.S. dollars

2010

2010

Carrying amount

Fair value

Difference

Carrying amount

Fair value

Difference¥ 96,648¥ 96,648¥—$1,038,779$1,038,779$     —

(2) Trade receivables

52,72652,726—566,702566,702—(3) Short-term investments and investment
securities

21,40019,696(1,704)230,009

211,694(18,315)

		 Total assets¥170,774¥169,070¥(1,704)$1,835,490$1,817,175$(18,315)(1) Trade payables

35,95635,956—

386,457

386,457—(2) Short-term borrowings

8,877

8,877

—

95,411

95,411—(3) Accrued income taxes

8,240

8,240

—

88,56488,564—(4) Long-term debt

3,333

3,333

—

35,82335,823—

		 Total liabilities¥ 56,406¥ 56,406¥—$ 606,255$ 606,255$     —

Derivative financial instruments*

¥

¥

¥

—

$

$

$     —

(1) Cash and time deposits

92

92

989

989

* Assets and Liabilities derived from derivative transactions are stated on a net basis.
Note 1. Method for calculating the fair value of financial instruments securities and derivative transactions
Assets(1) Cash and time deposits and (2) Trade receivables
		 Since these are readily convertible into cash, their fair value is almost identical with the carrying amount; and these are stated at the carrying amount.
(3) Short-term investments and investment securities		The fair value of these investments is stated at the quoted price on the stock exchange or the price as provided by counterparty financial institutions. In addition,with regard to short-term investments and investment securities by each holding purpose, please refer to “5 Short-Term Investments and Investment Securities” in theNotes to Consolidated Financial Statements.
Liabilities(1) Trade payables, (2) Short-term borrowings and (3) Accrued income taxes
		 Since these are readily convertible into cash, their fair value is almost identical with the carrying amount; and these are stated at the carrying amount.
(4) Long-term debt
		The fair value of long-term debt is calculated by discounting the total principle and interest by the current market interest rate for comparable debt.
Derivative financial instruments
Please refer to “21 Foreign Exchange Risk Management and Rate Interest Risk Management” in the Notes to Consolidated Financial Statements.
Note 2. Financial instruments for which fair value is extremely difficult to determine
Carrying amount（Millions of yen）

Carrying amount（Thousands of
U.S. dollars）

Unlisted securities¥1,578$16,960

Investments in non-consolidated subsidiaries andinvestments in affiliated companies (unlisted securities）

2,335

25,097As these instruments do not have readily available market values, and their fair values are extremely difficult to determine, they are not included in “(3) Short-term investments andinvestment securities” in the table above.
Note 3. Maturity analysis of financial assets and securities with contractual maturities
Millions of yen

Thousands of U.S. dollars

2010
Withinone year
Cash and time deposits
Trade receivables
Short-term investments andinvestment securities
Held-to-maturity securities   Corporate bonds securities   TotalMore thanMore than
one year, within five years, within
five years
ten years

2010
More thanten years

Withinone yearMore thanMore than
one year, within five years, within
five years
ten years

More thanten years¥ 96,648

¥ —

¥—

¥—

$1,038,779$    —$ —$—52,488224

14—564,144

2,408

150

—

—
¥149,136

27
¥251

—
¥14

—
¥—

—
$1,602,923

290$2,698

—
$150

—
$—

“Accounting Standard for Financial Instruments” and the related “Implementation Guidance” (ASBJ Statement No. 10, issued March 10 2008) and“Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19, issued March 10, 2008) were applied from the year ended March 31, 2010.

55

13  Income Taxes
The Company and its domestic consolidated subsidiaries are subject to Japanese corporate, inhabitant, and enterprise taxes basedon income which, in the aggregate, resulted in a normal tax rate of approximately 40.6% in 2009 and 2010.
Income tax expenses reflected in the accompanying consolidated statements of operations for the years ended March 31, 2009
and 2010 consist of the following:Thousands of
U.S. dollars

Millions of yen

Current
Previous
Deferred		 Total

2009

2010

2010

¥ 9,843
1,173(1,956)¥ 9,060¥ 7,064964
2,471¥10,499$ 75,925
10,361
26,558$112,844

Reconciliation of the normal tax rate and the effective tax rate as a percentage of income before income taxes and minority interests for the year ended March 31, 2009 is as follows:2009
Normal tax rate
Amortization of goodwill
Increase (decrease) in valuation allowance for deferred tax assets
Income tax for previous periods
Entertainment expenses not deductible for tax purposes
Corporate inhabitant tax on per capita basis
Reversal of deferred tax liabilities for retained earnings of foreign consolidated subsidiaries
Differences of tax rates of foreign consolidated subsidiaries
Other		 Effective tax rate

40.6%
7.6
6.6
5.5
1.6
1.2
(17.2)
(3.4)
0.4
42.9%

The note has been omitted for the year ended March 31, 2010 because the Company recorded a loss before income taxes andminority interests.
Significant components of deferred tax assets and liabilities as of March 31, 2009 and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen

Deferred tax assets:
Land revaluation
Excess depreciation of fixed assets
Losses carried forward
Loss on valuation of advance payments
Inventory valuation losses
Accrued employee bonuses
Allowance for doubtful receivables
Loss on impairment of fixed assets
Accrued enterprise taxes and others
Accrued retirement and severance benefits
Research and development costs
Unrealized gains or losses on other securities, net of tax
Other		 Total gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Retained earnings of foreign consolidated subsidiaries
Unrealized gains or losses on other securities, net of tax
Land revaluation, net of tax
Reserve for deferred income tax
Other		 Total gross deferred tax liabilities
Net deferred tax assets

56

2009

2010

2010

¥3,036
4,472
8,411
941
3,085
1,208
800
802
733
738
507
927
3,467
29,127(15,879)
13,248¥ 3,036
4,434
14,185
1,068
3,570
1,273
669
1,686
428
923
576
209
3,736
35,793(25,117)
10,676$ 32,631
47,657
152,461
11,47938,371
13,682
7,190
18,121
4,600
9,920
6,191
2,246
40,154
384,703(269,959)
114,744

(592)
(490)
(674)
(128)
(161)
(2,045)¥11,203

(508)
(392)
(674)
(122)
(59)
(1,755)¥ 8,921(5,460)(4,213)(7,244)(1,311)(633)(18,861)$ 95,883

Net deferred tax assets are included in the following line items in the consolidated balance sheets:
Thousands of
U.S. dollars

Millions of yen

Current assets–Deferred tax assets
Investments and other assets–Deferred tax assets
Current liabilities–Other (deferred tax liabilities)
Long-term liabilities–Deferred tax liabilities
		 Total

2009

2010

2010

¥ 6,146¥ 5,763$ 61,941

7,125

5,886

63,263(15,467)(970)(1,439)(1,098)(1,289)(13,854)¥11,203¥ 8,921$ 95,883

14  Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2009 and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen

2009

2010

2010

¥ 28,410¥ 29,515$ 317,229

Directors’ remuneration and employees’ wages

27,992

31,645340,123

Employees’ retirement and severance benefits

1,247

1,517

16,305

Provision for directors’ bonuses

626

422

4,536

Provision for directors’ and corporate auditors’ retirement and severance benefits

13

33

355

17,512

16,144

173,517

135

276

2,966

47,74047,317

508,565¥123,675¥126,869$1,363,596

Advertising expenses

Research and development expenses
Allowance for doubtful receivables, investments, and other assets
Other
		 Total selling, general and administrative expenses

15  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 years ended March 31, 2009
and 2010 is as follows:
Thousands of
U.S. dollars

Millions of yen

2009

2010

2010

Net income (loss)¥11,830¥(29,929)$(321,679)

Net income (loss) available to common stockholders
Effect of dilutive securities:
Stock options in a consolidated subsidiary

11,830(29,929)(321,679)———

Net income for diluted EPS calculation¥11,830¥     —

$      —

Average number of common shares outstanding
Effect of dilutive securities:
Stock options

246,743

241,402

313—

Average number of common shares for diluted EPS calculation

247,056—

Thousands of shares

Yen

U. S. dollars

Net income (loss) per common share:Basic¥47.95¥(123.98)$(1.33)

Diluted

47.88

—

—

Note: For the year ended March 31, 2010, dilutive shares exist, but diluted net income per common share is not reported because the Company recorded a net loss.

57

16  Retained Earnings and Dividends

17  Land Revaluation

In Japan, in the event a dividend distribution of surplus is made,In accordance with the “Law Concerning Land Revaluation (Lawthe lesser of an amount equal to 10% of the dividend or the

No. 34, promulgated on March 31, 1998)”, the land used forexcess, if any, of 25% of common stock over the total of

business purposes was revalued and “Land revaluation, net of

additional paid-in capital and legal earnings reserve must be settax” was reported in “Net assets”.

aside as a legal reserve until the aggregate amount of capitalsurplus and the legal reserve equals 25% of stated capital.
Certain foreign consolidated subsidiaries are also required to

Revaluation method:
The fair value of land is determined based on official notice

appropriate their earnings to legal reserves under the laws of theprices that are calculated by the method assessed andrespective countries.

published by the Commissioner of the National Tax Agency. The

The Company’s retained earnings includes legal reserves ofCom­missioner assesses and publishes the method to calculate¥1,645 million and ¥1,645 million ($17,681 thousand) at Marchland value that forms the foundation for calculating taxable value

31, 2009 and 2010, respectively. Proposed appro­priations offor land value tax prescribed in “Article 16 of Land Value Tax Law

retained earnings have not been reflected in the consolidated(Law No. 69, promulgated on May 2, 1991)”, as stipulated infinancial statements at the end of the fiscal year. The Company’s“Article 2-4 of the Ordinance Implementing the Law Con­cerning

approved appropriations of retained earnings at March 31, 2010,Land Revaluation (Cabinet Order No. 119, promulgated onwere cash dividends of ¥2,899 million ($31,159 thousand). In

March 31, 1998)”. Reasonable adjustments are made to theaddition, a mid-year dividend may be paid based on approval by

official notice prices.

the Board of Directors, which is subject to limitations. The

Unrealized losses for land of ¥513 million ($5,514 thousand)mid-year dividend for the year ended March 31, 2010 was

were recognized based on the difference between the land

¥2,899 million ($31,159 thousand).

carrying amount, which was revalued as of March 31, 2002, andthe fair value of the land as of March 31, 2010.

18  Common Stock and Treasury Stock
The changes in the number of common stock and treasury stock for the year ended March 31, 2010 were as follows:
Common stock (number of shares)
March 31, 2009
Increase or decrease in the number of shares during the period
March 31, 2010

250,000,000—
250,000,000

Treasury stock (number of shares)
March 31, 2009
Repurchase of fractional shares
Increase in the shareholder ratio for affiliates to which the equity method applies	Decrease due to the exercise of stock subscription rights
Sale of fractional shares
March 31, 2010

58

8,694,796
10,204
1,358(164,800)(782)
8,540,776

19  Stock Option Plan
The following are details of the stock option plan at March 31, 2010.
Resolution date of generalshareholders’ meeting

June 26, 2006

June 26, 2006

June 25, 2007

Position (number of beneficiaries)

Employees of the Company (19)and subsidiaries (555)

Employees of subsidiaries (222)

Directors of the Company (6)Type (number of shares) (Note 1)

Common stock (1,753,000)

Common stock (562,000)

Common stock (92,600)

Amount to be paid upon exercise ofstock subscription rights (yen)Grant dateConditions for exercising rights

1,754

1,895

1

July 18, 2006

April 18, 2007

July 19, 2007

(Note 4)(Note 4)(Note 2)

From July 18, 2006 to July 9,
2008

From April 18, 2007
to March 31, 2009

Not specified

Applicable period for exercising rights

From July 10, 2008
to June 30, 2010

From April 1, 2009
to June 30, 2010

From July 10, 2010
to June 30, 2015

Matters relating to the transfer of stock
subscription rights

Approval of the directors of
NAMCO BANDAI Holdings Inc.
required for the transfer ofstock subscription rights

Approval of the directors of
NAMCO BANDAI Holdings Inc.
required for the transfer ofstock subscription rights

Approval of the directors of
NAMCO BANDAI Holdings Inc.
required for the transfer ofstock subscription rights

219.07279.13

1,893.38

Required service

Fair market price of each stock option(yen) (Note 5)
Resolution date of generalshareholders’ meeting

June 25, 2007

Position (number of beneficiaries)

Directors of subsidiaries (26)Type (number of shares) (Note 1)

Common stock (49,700)

Amount to be paid upon exercise ofstock subscription rights (yen)1Grant dateJuly 19, 2007

Conditions for exercising rights(Note 3)Required service

Not specified

Applicable period for exercising rights

From July 10, 2010
to June 30, 2015

Matters relating to the transfer of stock
subscription rights

Approval of the directors of
NAMCO BANDAI Holdings Inc.
required for the transfer ofstock subscription rights

Fair market price of each stock option(yen) (Note 5)

1,893.38

Notes:
1.	Regarding the method for estimating the number of effective rights of stock options, since it is difficult to rationally estimate the number of expired options at a future date, thenumber of previously expired options is therefore used. With respect to business performance conditions, at the end of the evaluation period, the rate of achievement of results
targets is rationally estimated and the number of expired options is estimated.
2.	If, after subscription rights are allocated, the Company’s stock price growth rate up to the start of the period for exercising those rights does not exceed the TOPIX (Tokyo Stock
Price Index) growth rate, those subscription rights cannot be exercised. The Company’s stock price growth rate shall be calculated as the average closing price for commonshares of the Company on the Tokyo Stock Exchange on each of the days within the previous three months prior to the month in which the starting date for the period forexercising the subscription rights falls (except if there is no trading) divided by the average closing price for common shares of the Company on the Tokyo Stock Exchange oneach of the days within three months prior to the month in which the allotment date falls (except if there is no trading). The TOPIX growth rate is calculated in the same way as theCompany’s stock price growth rate.
3.	The annual target for business performance and evaluation period (3 years from the time of the issuance of rights to the time it is possible to exercise those rights) shall be
determined, based on sales, operating income and other measures of the strategic business unit to which the subsidiary officer who is the target of the allotment belongs at thetime of issuance of the subscription rights. The annual target should be used as the evaluation index, and the ratio of achievement of that target shall be measured for each fiscal
year during that evaluation period. If the ratio of achievement at the end of the evaluation period is above 50% on average during the evaluation period, those rights may be exercised.
However, the number of shares that can be acquired by exercising those rights shall be based on a ratio equivalent to the average ratio of achievement (maximum of 100%).
4. (i)	Any person receiving an allotment of subscription rights (hereinafter referred to as “Holder(s) of Subscription Rights”) must be an employee of the Company or of its Group
Companies at the time those rights are issued.
(ii)	Regardless of the regulation in (i), if the Holder of Subscription Rights leaves the Company due to his or her own personal reasons, that person may only possess andexercise the corresponding rights up to 6 months from the time of leaving. However, he or she may not possess and exercise the corresponding rights beyond the period forexercising those rights. In addition, if that person leaves upon the Company’s request or for any other reason that the Company accepts, those rights and the period forexercising those rights shall remain unchanged.
5.	The Black-Scholes Model is used for estimating the fair value of stock options.

5920  Leases
1. Lessee
The Company and its subsidiaries occupy offices and other facilities and use various assets under finance and operating leasearrangements.
(1) Finance leases
Finance lease transactions other than those in which title to leased property are determined to be transferred to lessees, which transactions started on or before March 31, 2008, are stated by applying the accounting treatment applicable to ordinary operating lease transactions.
The pro-forma original cost and accumulated depreciation of assets under such finance leases as if they had been accounted for
as finance leases as of March 31, 2009 and 2010 are as follows:

Thousands of
U.S. dollars

Millions of yen

2010

2009
Original cost at inception of leases
Less accumulated depreciation
Assets under finance leases, net

¥ 779
(502)
¥ 277

Future minimum payments due under finance leases as of March 31, 2009 and 2010 are as follows:$ 5,450(4,149)$ 1,301
Thousands of
U.S. dollars

Millions of yen

2010

2009
Due within one year
Due after one year
		 Total

2010

¥ 507
(386)
¥ 121

¥156
121
¥277

2010

¥ 75
46
¥121

$  807494$1,301The pro-forma lease expense and depreciation expense for such finance leases as if they had been accounted for as financeleases for the years ended March 31, 2009 and 2010 are as follows:

Thousands of
U.S. dollars

Millions of yen

2010

2009
Lease expense
Depreciation expense

¥209
209

2010

¥152
152

$1,634
1,634(2) Operating leases			
Future minimum payments required under operating leases at March 31, 2009 and 2010 are as follows:

Thousands of
U.S. dollars

Millions of yen

Due within one year
Due after one year
		 Total

2009

2010

2010

¥ 3,219
9,769¥12,988¥ 3,410
8,174¥11,584$ 36,651
87,855$124,506

2. Lessor
Finance leases
Finance lease transactions other than those in which title to leased property are determined to be transferred to lessees, which transactions started on or before March 31, 2008, are stated by applying the accounting treatment applicable to ordinary operating lease transactions.
The acquisition cost, accumulated depreciation, and net value of assets under such finance leases included in fixed assets
as of March 31, 2009 and 2010 are as follows:

Thousands of
U.S. dollars

Millions of yen

2010

2009
Acquisition costLess accumulated depreciation
Assets under finance leases, net

¥ 648
(452)
¥ 196

Future minimum payments due under finance leases at March 31, 2009 and 2010 are as follows:$ 3,547(2,365)$ 1,182
Thousands of
U.S. dollars

Millions of yen

2010

2009
Due within one year
Due after one year
		 Total

2010

¥ 330
(220)
¥ 110

¥ 97
124
¥221

2010

¥ 58
66
¥124

$ 623
710
$1,333

Lease income and depreciation expense for finance leases for the years ended March 31, 2009 and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen

2009
Lease income
Depreciation expense

60

¥170
150

2010
¥100
89

2010
$1,075957

21  Foreign Exchange Risk Management and Interest Rate Risk Management
Derivative financial instruments are comprised principally of foreign exchange contracts and interest rate swaps. These instruments
are used to reduce 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 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, fair values, and gains or losses from valuation of foreign exchange contracts outstanding as of March 31, 2009
and 2010 are as follows. The contract amounts in themselves should not be considered indicative of the market risk associated withthe derivative financial instruments.
(1) Derivative transactions not qualifying for hedge accounting
Millions of yen

Thousands of U.S. dollars

2010

2009

2010

Contract
amountEstimated
fair value

Unrealized
gain (loss)

Contract
amountEstimated
fair value

Unrealized
gain (loss)

Contract
amountEstimated
fair value

Unrealized
gain (loss)

Yen

¥728

¥(95)

¥(95)

¥  875

¥(25)

¥(25)

$ 9,405$(269)$(269)

Won

161

(5)

(5)

—

—

—

—

—

—

U.S. dollars

—

—

—

771

(18)

(18)

8,287

(193)

(193)

952

24

24

2,354

56

56

25,301602

602

Foreign exchange contracts
Sold:

Purchased:
U.S. dollars
Yen

12

—

—

		 Total

¥ —

¥(76)

¥(76)

¥

10

—

—

107

—

—

—

¥ 13

¥ 13

$    —

$ 140

$ 140

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

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

Hedge accounting
methodHedging method

Hedge targets

Thousands of U.S. dollars

2010
Contract
amount2010

Estimated fairvalue

Contract
amountEstimated fairvalue

Foreign exchange
contracts
Sold:
Yen

Accounts
receivable-trade¥3,684¥121$39,596$1,300

4,622

(47)

49,677(505)

60¥8,3664¥ 78

645$89,91843$  83843¥   431¥  1462$   46211$   11

Deferred
Purchased:
U.S. dollars
HK dollars

Accounts
payable-trade
Accounts
payable-trade

		 Total
Foreign exchange
allocation method

Foreign exchange
contracts
Purchased:
U.S. dollars

Accounts
payable-trade

		 Total
Notes:
1. Method of calculating fair value
Calculated based on prices, provided by counterparty financial institutions.
2. The contract balance and fair value as of March 31, 2009 are not disclosed.

6122  Segment Information(1) Business segments
Millions of yen

2009

Net sales and Operating
income (loss):	Sales to externalcustomers
	Intersegment transactions
Subtotal

Toys and
Hobby

Game
Contents

Visual andMusic Content

Amusement
Facility

Other

Subtotal¥163,068¥144,222¥33,634¥76,917¥ 8,559¥426,400

Eliminations
and corporate

Consolidated¥¥426,400

—

2,657

5,669

1,005

353

10,45020,134(20,134)—

165,725

149,891

34,63977,27019,009446,534(20,134)

426,400	Operating expenses

154,192

138,281

34,60076,87718,444422,394(18,342)404,052

Operating income
Assets, Depreciation,
Impairment losses, andCapital expenditures:¥ 11,533¥ 11,610

¥

¥

¥

565

¥ 24,140¥ (1,792)¥ 22,348

Assets39393¥130,405¥119,605¥48,071¥54,400¥19,207¥371,688¥ (8,243)¥363,445

Depreciation	Loss on impairment of
fixed assets

8,973

4,074

3,113

9,571

927

26,65885

26,743

63

—

14

776

78

931

23

954

Capital expenditures

6,724

2,610

885

6,713

385

17,317164

17,481Millions of yen

2010

Net sales and Operating
income (loss):	Sales to externalcustomers
	Intersegment transactions
Subtotal

Game
Contents

Visual andMusic Content

Amusement
Facility

Other

Subtotal¥145,673¥132,178¥27,910¥65,112¥ 7,674¥378,547

3,171

5,351

1,326

251

9,777

19,876(19,876)—

148,844

137,529

29,23665,363

17,451

398,423(19,876)

378,547

	Operating expenses

138,057

144,374

30,10865,07817,094

394,711

Operating income (loss)
Assets, Depreciation,
Impairment losses, andCapital expenditures:¥ 10,787¥ (6,845)

¥

¥

¥

¥

¥111,993¥101,496¥19,240¥38,775

Depreciation	Loss on impairment of
fixed assets

8,195

5,478

2,266

7,320

147

7,042

6,313

Capital expenditures

6,866

1,871

513

Assets62

Toys and
Hobby

(872)

285

357

Eliminations
and corporate

Consolidated¥¥378,547—(18,048)376,663

3,712¥ (1,828)

¥

1,884

¥17,579¥289,083¥36,853¥325,936

482

23,741

216

23,9572,351

50

15,903—

15,903

4,496

423

14,169249

14,418

Thousands of U.S. dollars

2010

Net sales and Operating
income (loss):	Sales to externalcustomers

Toys and
Hobby

Game
Contents

Visual andMusic Content

Amusement
Facility

Other

Subtotal$1,565,703$1,420,658$299,979$699,828$ 82,480$4,068,648

34,08257,513

14,252

2,698

105,084

213,629(213,629)—

1,599,785

1,478,171

314,231702,526

187,564

4,282,277(213,629)

4,068,648
4,048,398

	Intersegment transactions
Subtotal

Eliminations
and corporate

Consolidated$$4,068,648—

	Operating expenses

1,483,846

1,551,741

323,603699,463

183,727

4,242,380(193,982)

Operating income (loss)
Assets, Depreciation,
Impairment losses, andCapital expenditures:$ 115,939$(73,570)$ (9,372)

$

3,063

$ 3,837$$ (19,647) $Assets39,897

20,250$1,203,708$1,090,886$206,793$416,756$188,940$3,107,083$ 396,098$3,503,181

Depreciation	Loss on impairment of
fixed assets

88,08058,87824,35578,676

5,181

255,170

2,321

257,491

1,580

75,68867,85325,269536

170,926—

170,926

Capital expenditures

73,796

20,1105,514

48,323

4,546

152,289

2,677

154,966

Notes:
1.	The industry segments used above are those used for internal management purposes.
2. Main products in each business segment:(1) Toys and Hobby: toys, candy toys, products for vending machines, cards, plastic models, apparel, sundries.
(2) Game Contents: home-use video game software, arcade game machines, mobile contents, prizes for amusement arcade machines.
(3) Visual and Music Content: video contents, video software, on-demand video distribution, music software.
(4) Amusement Facility: amusement facilities operation.
(5) Other: transportation and storage of products, leases, real estate management, printing, sales of environmental devices.
3.	Unallocatable operating expenses included in the “Eliminations and corporate” column under “Operating expenses” were ¥3,087 million and ¥2,685 million ($28,859 thousand)for the years ended March 31, 2009 and 2010, respectively. The majority of these costs represent administrative costs incurred by the general administration department of theCompany and NAMCO BANDAI Holdings (USA) Inc.
4.	Unallocatable assets included in the “Eliminations and corporate” column under “Assets” were ¥36,217 million and ¥44,169 million ($474,731 thousand) as of March 31, 2009
and 2010, respectively. The significant assets included in the amounts were surplus operating funds (cash and time deposits) of the Company, long-term investment funds(investment securities), and assets held by the administrative sections.
5. Depreciation includes amortization of goodwill.

Segment information for the year ended March 2009, prior to the reorganization of the business segments, is as follows.
Millions of yen

2009

Net sales and Operating
income (loss):	Sales to externalcustomers
	Intersegment transactions
Subtotal	Operating expenses
Operating income
Assets, Depreciation,
Impairment losses, andCapital expenditures:
AssetsDepreciation	Loss on impairment of
fixed assets
Capital expenditures

Toys and
Hobby

Amusement
Facility

Game
Contents

Network

Visual andMusic
Content¥163,068
2,657
165,725
154,192¥ 11,533¥76,917353
77,27076,877¥ 393¥133,722
5,683
139,405
128,465¥ 10,940¥10,499
391
10,890
10,221¥ 669¥33,634
1,005
34,63934,600¥39¥ 8,560
10,45019,01018,444¥ 566¥426,400 ¥— ¥426,400
20,539(20,539)—446,939(20,539)
426,400
422,799(18,747)
404,052¥ 24,140 ¥ (1,792) ¥ 22,348¥130,405
8,973¥54,400
9,571¥108,965
3,766¥11,092308¥48,071
3,113¥19,207927¥372,140
26,658

63
6,724

776
6,713

—
2,527

—
83

14
885

78
385

931
17,317

Other

Subtotal

Eliminations
andcorporate

Consolidated¥ (8,695) ¥363,445
85
26,74323
164

954
17,48163

(2) Geographic segments
Millions of yen

2009
Japan

Americas

EuropeAsia, excludingJapan

Subtotal

Eliminations
and corporate

Consolidated¥¥426,400

Net sales and Operating income (loss):
Sales to external customers¥319,535¥48,338¥45,005¥13,522¥426,400

Intersegment transactions

13,9992,596

1623,85540,466(40,466)—

Subtotal

333,534

50,93445,02137,377

466,866(40,466)

426,400—

Operating expenses

317,671

50,06038,77335,088441,592(37,540)

404,052

Operating income (loss)¥ 15,863¥

874¥ 6,248¥ 2,289¥ 25,274¥ (2,926)¥ 22,348¥293,054¥28,703¥37,035¥19,397¥378,189¥(14,744)¥363,445

Subtotal

Eliminations
and corporate

Consolidated¥378,547¥¥378,547

AssetsMillions of yen

2010
Japan

Americas

EuropeAsia, excludingJapan¥286,210¥29,269¥45,956¥17,112Net sales and Operating income (loss):
Sales to external customers—

Intersegment transactions

11,7683,583

961

21,57937,891(37,891)—

Subtotal

297,978

32,852

46,917

38,691

416,438(37,891)

378,547

Operating expenses

292,441

36,17747,30535,923411,846(35,183)

376,663

Operating income (loss)

¥

5,537

¥ (3,325)

¥

(388)

¥ 2,768¥

4,592¥ (2,708)¥¥206,157¥28,465¥40,432¥24,889¥299,943¥ 25,993¥325,936

Eliminations
and corporate

Consolidated

Assets1,884

Thousands of U.S. dollars

2010
Japan

Americas

EuropeAsia, excludingJapan$3,076,204$314,585$493,938$183,921

Subtotal$4,068,648

Net sales and Operating income (loss):
Sales to external customers
Intersegment transactions
Subtotal$—$4,068,648

126,483

38,510

10,329231,933

407,255(407,255)—

3,202,687

353,095

504,267

415,854

4,475,903(407,255)

4,068,648
4,048,398

Operating expenses

3,143,175

388,833

508,437

386,1034,426,548(378,150)

Operating income (loss)$

59,512$ (35,738)$ (4,170)$ 29,751$$ (29,105) $$2,215,788$305,944$434,566$267,509$3,223,807

Assets49,355$ 279,374

20,250$3,503,181

Notes:
1. Definition of geographic segments and main countries and regions in geographic segments:(1) Foreign geographic segments are defined by geographic region, similarity of economic activities, and interrelation of business activities.
(2) The main countries and regions in each geographic segment are as follows:		1) Americas: United States and Canada

		2) Europe: France, United Kingdom, Spain and Germany		3) Asia, excluding Japan: Hong Kong, Thailand, Korea, China and Australia

	In the year ended March 31, 2010, due to the new consolidation of NAMCO BANDAI Partners S.A.S. and its 18 subsidiaries, Germany was added to the Europe geographic
segment and Australia to the Asia geographic segment.
2.	Unallocatable operating expenses included in the “Eliminations and corporate” column under “Operating expenses” were ¥3,087 million and ¥2,685 million ($28,859 thousand)for the years ended March 31, 2009 and 2010, respectively. The majority of these costs represent administrative costs incurred by the general administration department of theCompany and NAMCO BANDAI Holdings (USA) Inc.
3.	Assets included in the “Eliminations and corporate” column under “Assets” approximated ¥36,217 million and ¥44,169 million ($474,731 thousand) as of March 31, 2009 and2010, respectively. The significant assets included in the amounts were surplus operating funds (cash and time deposits) of the Company, long-term investment funds(investment securities) and assets held by the administrative sections.

64

(3) Foreign sales
Millions of yen

2010

2009

Foreign sales

Americas

EuropeAsia,
excludingJapan¥50,618¥46,005¥17,444

Consolidated sales

Total

Americas

EuropeAsia,
excluding
Japan

Total

¥114,067¥31,370¥46,197¥21,720¥ 99,287

8.3%

12.2%

5.7%

426,400

Share of sales to customers outside Japan

11.9%

10.8%

4.1%

378,547

26.8%

26.2%

Thousands of U.S. dollars

2010

Foreign sales

Americas

Europe$337,167$496,528

8.3%

12.2%

Asia,
excluding
Japan

Total

$233,448 $1,067,143

Consolidated sales

4,068,648

Share of sales to customers outside Japan

5.7%

26.2%

Notes:
1. Foreign sales are defined as total sales by the Company and its consolidated subsidiaries in countries and regions other than Japan.
2. Segmentation by country or by region and the main countries and regions in each geographic segment are as follows:(1) Foreign geographic segments are defined by geographic region, similarity of economic activities, and interrelation of business activities.
(2) The main countries and regions in each geographic segment are as follows:		 1) Americas: United States, Canada, and Latin America		 2) Europe: France, United Kingdom, Spain, Germany, Middle East, and Africa		 3) Asia, excluding Japan: Hong Kong, Singapore, Thailand, Korea, Australia, China, and Taiwan
In the fiscal year ended March 2010, due to the new consolidation of NAMCO BANDAI Partners S.A.S. and its 18 subsidiaries, Germany was added to the Europe geographic segment.

23  Related Party Disclosures
From the year ended March 31, 2009, the “Accounting Standard for Related Party Disclosures” (ASBJ Statement No. 11, issued on
October 17, 2006) and “Guidance on Accounting Standard for Related Party Disclosures” (ASBJ Guidance No. 13, issued on October
17, 2006) have been adopted.
Transactions with Related Parties
Year ended March 31, 2009
Transactions by consolidated subsidiaries of the Company with non-consolidated subsidiaries and affiliated companiesof the Company
Type

Affiliatedcompany

Company

Address

Capital orContribution
to Capital

Happinet
Taito-ku Tokyo ¥2,751 Million
Corporation

Content ofbusiness

Ratio ofvoting rights
ownership

Wholesaler ofHoldingToys, Video gamedirectly 26.0%
and Amusement
indirectly 0.3%
products.

Relationshipwith related
party
Sales
agencyContent

AmountSales ofproducts, etc. ¥38,644 Million(Note 2)

Account
items

Balance
as of March 31,
2009

Account
receivabletrade¥7,445 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.

65Year ended March 31, 2010
(1) Transactions of the Company with officers and major individual shareholders of the Company
Type

Name

Position

Ratio of voting rights
ownership

Content

Transaction amount

Officer

Takeo Takasu

Chairman and Director of
the Company

Ownership
directly 0.0%

Disposal of treasury stock
accompanying exercise ofstock options (Note)¥25 million($269 thousand)

Officer

Shukuo Ishikawa

President
and CEO, Representative
Director of the Company

Ownership
directly 0.0%

Disposal of treasury stock
accompanying exercise ofstock options (Note)¥23 million($247 thousand)

OfficerJun Higashi

Director of the Company

Ownership
directly 0.0%

Disposal of treasury stock
accompanying exercise ofstock options (Note)¥22 million($236 thousand)

Officer

Kazunori Ueno

Director of the Company

Ownership
directly 0.0%

Disposal of treasury stock
accompanying exercise ofstock options (Note)¥28 million($301 thousand)

Officer of a subsidiary

Masahiro Tachibana

President
and CEO, representative
director of
NAMCO Limited.

Ownership
directly 0.0%

Disposal of treasury stock
accompanying exercise ofstock options (Note)¥13 million($140 thousand)Note:
The price at which treasury stock is disposed of is determined based on the stock options (stock subscription rights) exercise price set by the resolution at the first Ordinary
General Meeting of Shareholders of the Company. The figure in the “Transaction amount” column is the book value as stated on the Company books at the time of such disposal.

(2) T ransactions by consolidated subsidiaries of the Company with non-consolidated subsidiaries and affiliated companiesof the Company
Type

Affiliatedcompany

Company

Address

Happinet
Taito-ku Tokyo
Corporation

Capital orContribution
to Capital¥2,751 Million($29,568
Thousand)Content ofbusiness

Ratio ofvoting rights
ownership

Wholesaler ofHoldingToys, Video gamedirectly 26.4%
and Amusement
indirectly 0.3%
products.

Relationshipwith related
party
Sales
agencyContent

Transaction
amountSales of¥38,196 Million
products, etc.
($410,533(Note 2)Thousand)Account
items

Balance
as of March 31,
2010

Account
receivabletrade¥7,490 Million($80,503
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.

66

24  Business Combinations
Transactions conducted by commonly controlled entities.

for mobile phones: this is a market for which technological

Merger of subsidiaries and succession to part of the businesses

progress and other factors have produced drastic changesof subsidiaries due to company split in the course of thein the environment and in which competition is becoming

restructuring of the Group’s businesses

increasingly intense on a global scale. Thus far, NAMCO

On April 1, 2009, NAMCO BANDAI Games Inc. merged with and

BANDAI Games Inc. has strengths in leveraging its in-houseabsorbed Bandai Networks Co., Ltd. due to an absorption-type

technical development capabilities and effectively utilizing

merger. Also, the Company succeeded to a part of the sharecontent for each platform, including home-use video gamemanagement business that had been carried out by Bandai

software, arcade game machines, and mobile phones. Also,

Networks Co., Ltd., due to company split (absorption-type

Bandai Networks Co., Ltd. has strengths in the comprehen-company split) on such date.

sive development of operations, such as e-commerce,

1. Names and Business Content of Combined Companies,

centered on the distribution of mobile phone content andLegal Form of Business Combination, and Overview ofthe provision of technical solutions. NAMCO BANDAI

Transaction Including Transaction Objectives

Games Inc., and Bandai Networks Co., Ltd., have each(1) Names and Business Content of Combined Companies

worked to grow their businesses by leveraging their respec-

		(i) NAMCO BANDAI Games Inc.

			Planning, development, and sales of home-use video
game software and arcade game machines, etc.
		(ii) Bandai Networks Co., Ltd.

tive strengths.
			 The merger of these two companies and the establishment of a new business unit within NAMCO BANDAI
Games Inc. are designed to reinforce the total power of the			Distribution of content for mobile phones, con­signment

network business within the Group and to create newof website development, mail order sales, etc.

content and businesses through the synergistic fusion of		(iii)	NAMCO BANDAI Holdings Inc. (the Company)

varied strengths.

			Planning and implementation of management strategy			 In addition, upon this restructuring within the Group, theand business management and instruction of the group

Company has succeeded to part of the share managementcompanies.

business that had been carried out by Bandai Networks
Co., Ltd., due to company split (absorption-type(2) Legal Form of the Business Combinations
		Co., Ltd. was the disappearing company; and NAMCO
		

company split).

(i) An absorption-type merger in which Bandai Networks
2. Overview of Accounting Process

BANDAI Games Inc. was the surviving company.

The accounting process for the consolidated financial state-(ii) An absorption-type company split in which Bandai

ments was conducted as transactions conducted by commonly

Networks Co., Ltd. was the split company; and thecontrolled entities, handled in accordance with the provisions ofCompany was the successor company.

the “Accounting Standard for Business Combinations” (issued by(3) Overview of Transaction Including Transaction Objectives
		The Group has considered what its optimal organizational

the Business Accounting Council on October 31, 2003) and“Guidance on Accounting Standard for Business Combinations

structure would be to work for further growth in theand Accounting Standard for Business Divestitures” (ASBJ

network-related market, which includes distributing content

Guidance No. 10, final revision issued on November 15, 2007).

67

Independent Auditors’ Report

To the Board of Directors of
NAMCO BANDAI Holdings Inc.:

We have audited the accompanying consolidated balance sheets of NAMCO BANDAI Holdings Inc. and consolidated subsidiaries asof March 31, 2010 and 2009, and the related consolidated statements of operations, changes in net assets and cash flows for the years
then ended expressed in Japanese yen. These consolidated financial statements are the responsibility of the Company’s manage­ment.
Our responsibility is to independently express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of NAMCO BANDAI Holdings Inc. and subsidiaries as of March 31, 2010 and 2009, and the results of their operations andtheir cash flows for the years then ended, in conformity with accounting principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2010 are
presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 3 to the consolidated financial statements.

Tokyo, Japan
June 22, 201068

Corporate Data
As of March 31,2010

Corporate Name: NAMCO BANDAI Holdings Inc.
Head Office: NAMCO BANDAI Mirai Kenkyusho

Capital:Stock Exchange Listing:Main Business:

Stock Information:

4-5-15, Higashi-Shinagawa, Shinagawa-ku, Tokyo 140-8590, Japan
URL: www.bandainamco.co.jp/¥10 billion
Tokyo Stock Exchange, First Section (Code number: 7832)
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 and management of business activities.
Number of Shares Authorized: ................ 1,000,000,000 shares
Number of Shares Issued: ......................... 250,000,000 shares
Number of Shareholders: .......................... 39,777
Number of Shares per Trading Unit: ...... 100 shares

Major Shareholders:Ownership Breakdown:

Name% of Total

Northern Trust Company (AVFC) Sub-account American
Clients

9.34%

Masaya Nakamura

4.94%

MAL Ltd.

4.80%

Northern Trust Company (AVFC) Re U.S. Tax Exempted
Pension Funds

4.72%

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

3.51%

Japan Trustee Services Bank, Ltd. (Trust Account)

3.43%

The Silchester International Investors International Value
Equity Trust

3.28%

Bank Julius Bear & Co., Ltd.

2.60%

The Nomura Trust and Banking Co., Ltd.
(Retirement and severance benefits trust. The Bank ofTokyo-Mitsubishi UFJ account.)

1.83%

MELLON BANK, N.A. AS AGENT FOR ITS CLIENTMELLON OMNIBUS US PENSION

1.77%

Group Organization:

Individuals, etc.

20.34%

Brokerages

0.69%
Other corporate
entities

12.12%
Foreign corporate
entities and others

45.09%

Strategic Business Units

Toys and Hobby
Core Company: Bandai

NAMCO BANDAI Holdings

Financial institutions

21.75%

Content
Core Company: NAMCO BANDAI Games

Amusement Facility
Core Company: NAMCO• SBU Monthly Report Meeting• Group Management Meeting• Contents Business Strategy Meeting• Group CSR Committee
Group Social Contribution subcommittee
Group Environment subcommittee• Group Risk Compliance Committee• Group Information Security Committee• Internal Control Committee

Affiliated Business Companies
Support for Group Businesses©SOTSU SUNRISE ©NBGI ©2010NBGI ©SOTSU SUNRISE ©2010 TV ASAHI・TOEI AG・TOEI ©ISHIMORIPRO・TV ASAHI・ADK・TOEI ©BANDAI 2008-2010©Cartoon Network™ ©BANDAI・WiZ 2004 ©BANDAI 2010 Poppixie™ ©2009-2010 Rainbow S.p.A. All rights reserved Series created by Iginio Straffi. ©2010NBGI©SOTSU SUNRISE ©2009 NAMCO BANDAI Games Inc. ©2010 Gullane (Thomas) Limited ©Tsuburaya Production

69

NAMCO BANDAI Holdings Inc.
Annual Report 2010www.bandainamco.co.jp/

Annual Report 2010

NAMCO BANDAI

Holdings Inc.

Printed in Japan