H4

H1

NAMCO BANDAI Holdings Inc.

Annual Report 2008www.bandainamco.co.jp

Annual Report 2008
Printed in Japan

Our Vision

To Become theWorld’s Most Inspiring
Entertainment Group
The BANDAI NAMCO Group will constantly strive to be a pioneer, aiming to deepen and widen
the appeal of entertainment and winning the hearts of people worldwide who enjoy having fun.
Our ultimate goal is to become the World’s Most Inspiring Entertainment Group.

01

Hig
hlig
hts

Contents
Consolidated Financial Highlights

4

In the fiscal year ended March 31, 2008, the Company recorded growth in net sales but adecline in operating income.
To Our Shareholders and Investors

Drawing Up New Value
The BANDAI NAMCO Group will continue to draw up new value in the years ahead.

6

Interview with the President“We will build a business model utilizing
the BANDAI NAMCO Group‘s expertise,
and will endeavor to create new value
through entertainment.”

8

Takeo Takasu, President and Representative Director of NAMCO BANDAI Holdings Inc., discusses
the Group’s next Medium-term Management Plan, results in the fiscal year ended March 31,
2008, and the policy for returns to shareholders.

Special Feature:

Strategic Business Units—Results & Growth Strategies

14

Toys and Hobby

16

Amusement Facility

18Game Contents

20

Network

22

Visual and Music Content

24

The presidents of the Strategic Business Units’ core companies discuss
results in the year under review and growth strategies for the future.

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

26
28
30
32
33
69

Forward-Looking Statements

The forward-looking statements in this annual report are based on the information available to management as of August 6, 2008, 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. Fiscal 2008, FY2008.3, and the year under review represent the one-year period ended March 31, 2008.
3. Figures in this annual report are as of May 2008.

00
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“DreamThe Business Portfolio of the BANDAI NAMCO Group

Toys and Hobby

Toys and Hobby

VisualNetworks

Amusement
Facility

CHARACTER
Game Contents

Amusement
Life-Style

Integration ofComplementaryStrengths

Video Game
Software

CHARACTERTECHNOLOGYLOCATION

Network

Visual andMusic Content

Amusement Facility
Operations

Video Game
SoftwareArcadeMachines

TECHNOLOGYLOCATION

03
01

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

2006

2007

2008

2007 vs 2008

2008

Net sales¥450,829¥459,133¥460,474

0.3%$4,596,008

Gross profit

156,565

168,080

164,073-2.4

1,637,619

Operating income

35,66942,22433,411-20.9

333,476

Recurring income*2

37,12245,61636,198-20.6

361,294

Net income

14,15024,252

32,67934.7

326,170

Capital expenditures

24,02027,925

34,11522.2

340,504

Depreciation

19,144

21,201

24,75916.8

247,120

Total assets¥386,651¥408,490¥413,023

1.1%$4,122,397

Total net assets

252,244284,254289,9442.0

2,893,941

Net income (Basic)¥54.39¥95.73¥128.65

34.4%

$1.28

Cash dividends

12.00

28.00

24.00

-14.3

0.24

For the years ended March 31

For the YearAt Year-End

Per Share Data (yen and U.S. dollars*1)

Main Financial Indicators (%)
Return on equity (ROE)*3

5.8%

9.4%

11.7%

Return on assets (ROA)*3

9.6

11.5

8.8

Overseas sales proportion

18.8

22.4

24.7

Operating income margin

7.9

9.2

7.3

Shareholders’ equity ratio

63.0

67.1

69.4

* 1 U.S. dollar amounts have been translated, for convenience only, at the rate of ¥100.19=U.S.$1, the approximate exchange rate on March 31, 2008.
* 2 Recurring income is a Japanese accounting term denoting income before extraordinary items.
* 3 Figures for total shareholders’ equity and total assets as of March 31, 2006, are used in calculating ROE and ROA for the fiscal year ended March 31, 2006.

04

Net Sales /Overseas Sales Proportion(Billions of yen)
500

460.5

Gross Profit /Gross Profit Ratio(%)
40

Operating Income /Operating Income Margin(Billions of yen)
200

(%)
100

(Billions of yen)
50

80

40

(%)
15

Net Income(Billions of yen)
40

32.7

164.1
400
30

150

33.4
60

300

24.7%

20

30
10

30
20

100
40

200

7.3%

20

5
10

35.6%

50

10

100

0

0
2006.32007.302008.32006.3

Overseas sales proportion(right scale)2007.3

20

10

0

0

2008.3Gross profit ratio(right scale)

Total Assets / ROA(Billions of yen)

(%)
20

413.0

(Billions of yen)

289.9

300

2007.302008.32006.32007.32008.3Operating income margin(right scale)

Total Net Assets / ROE

500

02006.3

Interest-Bearing Debt /Debt / Equity Ratio(%)
15(Billions of yen)Free Cash Flows

40

(%)
15

30

12

(Billions of yen)
30

250

400

11.7%

200

10

20.0

20

300

8.8%

10

20

150

9

16.6

200
5

100

10

5.8%

10
100

6

50

0

0
2006.32007.3002008.32006.3

ROA (right scale)2007.32008.3

ROE (right scale)Contribution to Net Sales by Business Segment: Amusement Facility: Game Contents

3
2006.32007.302008.32006.3

Debt / equity ratio (right scale)2007.32008.3*Free cash flows = Net cash provided
by operating activities + Net cashused in investing activities

Contribution to Net Sales by Geographic Segment

7.6% 4.1%: Toys and Hobby

0

2.5%

: Japan: Americas

10.1%

3.2%

: Europe: Network: Asia, excluding Japan: Visual and Music Content: Affiliated Business Companies

30.1%

37.2%
18.5%

11.4%
75.3%
Note: Percentage figures arecalculated based on
external sales.

05

To Our Shareholders and Investors

Drawing up
New Value!!
It has been three years since the management integration of Bandai and NAMCO.
Over that period, the Group has implemented a variety of operational andorganizational initiatives to generate synergies and bolster foundations. Moving
forward, we will build a business model utilizing our expertise, and will create newvalue through entertainment.
For the BANDAI NAMCO Group, the fiscal year ended March 31, 2008, wasmarked by extremely difficult conditions that affected our financial results.
Accordingly, we have positioned the fiscal year ending March 31, 2009, as a period forstrengthening our profit, business, and organizational foundations. We are building
a flexible, strong management constitution that can respond to changes in theoperating environment and a business foundation for the creation of newentertainment, and will use them to foster growth and expansion under our
next Medium-term Management Plan, which is now being formulated.
I want to make the BANDAI NAMCO Group into an entertainment company thatcan compete on a par with industry leaders not only in Japan but around the world.
Under the next Medium-term Management Plan, we will clarify our strategy forachieving this objective and build a business model utilizing our expertise, and withthat model we will create new value through entertainment. We will strive toformulate a Medium-term Management Plan that transcends the stagnant economic
conditions that are currently spreading around the world, and the entire Group will
work together as we endeavor to record further growth.
The BANDAI NAMCO Group will continue to draw up new value and record new
growth in the years ahead, and I would like to ask our shareholders and investors fortheir continued support and understanding.

06

August 2008

Takeo Takasu
President and Representative Director
NAMCO BANDAI Holdings Inc.

07

Interview with the President

QA

It has been three years since the management integration ofBandai and NAMCO. How do you evaluate the Group up to
this point?

From the first phase, in which we implemented the
management integration of Bandai and NAMCO andreinforced our foundation by generating synergies,
we have moved to the second phase, in which we will create
a new business model for the BANDAI NAMCO Group.
Today, the Group has reached the position that it targeted three years ago when it
implemented the management integration. In fact, in reorganizing and bolstering theGroup’s organization, we moved quickly in response to dramatically fluctuating market
conditions. In the fiscal year ended March 31, 2008, with the objectives of further
leveraging synergies and maximizing Group value, we made Bandai Networks andBandai Visual wholly owned subsidiaries. We also reorganized the Game Contents SBU,
and began to consolidate Group administrative functions. In addition, in April 2009, weplan to merge NAMCO BANDAI Games and Bandai Networks in order to integrate
mobile content and network operations.
Following the management integration, our major priority in operations was thegeneration of Group synergies through the integration of Bandai and NAMCO. At this point,
sharing content, infrastructure, and know-how between Bandai and NAMCO is very natural.
They have been completely integrated. That is, the BANDAI NAMCO Group is a single
company that has moved from the first phase, in which it strengthened its foundation
through the integration and generation of synergies, to the second phase, in which it iscreating a new business model that leverages BANDAI NAMCO’s distinctive strengths.
”A business model that leverages our distinctive strengths in the creation of newvalue and new entertainment.” I want to turn this into reality via the next Medium-termManagement Plan, which will commence in April 2009.

Reorganization of the BANDAI NAMCO Group Targeting
Higher Enterprise ValueFor the BANDAI NAMCO Group to survive in global competition in the entertainment
industry, which is undergoing substantial change, it is flexibly implementing
reorganization initiatives targeting the establishment of the optimal Group
organization. In the future, we will continue to pursue the optimal Group organizational
structure in line with environmental changes and strategies.

Reorganization Progress in 2008
•Bandai Networks and Bandai Visual made wholly owned subsidiaries
In February 2008, Bandai Networks and Bandai Visual became wholly owned
subsidiaries of NAMCO BANDAI Holdings.
In the future, based on the Groupwide medium-to-long-term management
strategies, these two companies will work to maximze Group enterprise value,
thereby fostering growth.
•Reorganization of Game Contents SBU
In April 2008, the game operations of consolidated subsidiary Banpresto weretransferred from Banpresto to NAMCO BANDAI Games. Banpresto will focus on prize
operations, such as prizes for arcade game machines.
•Consolidation of Group Administrative Departments
In April 2008, the functions of the administrative departments of four companies in
the BANDAI NAMCO Group were consolidated and the Group Administrative
Headquarters was established in NAMCO BANDAI Holdings.
As a result, we will foster enhanced efficiency and standardization in theGroup’s indirect operations and build a system that is linked to the Group’s
management strategy functions.

08

Q
A

What direction will the Group take under the next
Medium-term Management Plan?
We will compete on a par with the leading companies in theentertainment industry around the world. This is the directionthat the Group will take under the next Medium-termManagement Plan.
Since the management integration, the BANDAI NAMCO Group’s vision has been to
become “the World’s Most Inspiring Entertainment Group,” and its long-term objectives
have been sales of ¥1 trillion, operating income of ¥100 billion, and an overseas sales
percentage of 50%. However, this vision and these long-term numerical objectives havebeen general, symbolic targets without a timetable. In the future, we will clearly set the
timetable for the achievement of these significant objectives. We will determine thepositioning of the next Medium-term Management Plan, as well as its strategies.
Currently, based on our vision and numerical objectives, we are carefully
considering Groupwide management challenges, such as the clarification of regions andbusinesses that will receive priority allocation of management resources and our content
and global strategies. In this way, under the next Medium-term Management Plan, we
will strive to create a business model that leverages the strengths of the BANDAI NAMCO
Group based on the positioning of the plan with respect to long-term objectives and theclarification of specific strategies to achieve our goals.
We will compete on a par with the leading companies in the entertainment
industry around the world. This is the direction that the BANDAI NAMCO Group will takeas we strive to be the “World’s Most Inspiring Entertainment Group.” Under the next
Medium-term Management Plan, our fundamental approach to bolstering the Strategic
Business Units (SBUs) and leveraging synergies among the SBUs will remain the same.
The key to competing with leading companies around the world will be enhancing ouroverseas strategy, and implementing the Entertainment Hub concept together withpartners in Japan and overseas. Furthermore, in striving to achieve our long-term
objectives, we need to create new approaches and business models. Building thefoundation for competition in global markets will be a central part of the next Mediumterm Management Plan. Specifically, we are targeting sales of ¥1 trillion, operating
income of ¥100 billion, and an overseas sales percentage of 50%. Our schedule forthe plan is to settle the details within 2008 and to make an announcement aroundFebruary 2009.
In any event, we want to formulate a dynamic Medium-term Management Plan
that will guide us as we strive to overcome the pessimism that is spreading around theworld as a result of the rising prices of crude oil and raw materials and of the U.S.
subprime loan problem.

Contribution to Net Sales byGeographic Segment
Asia 2.4%
Europe
6.9%
Americas9.5%

Overseas

18.8%

Japan
81.2%

FY2006.3
Asia 3.2%
Europe10.1%
Americas11.4%

Overseas

24.7%

Japan
75.3%

FY2008.3
Note: Percentage figures are calculated
based on external sales.

09Interview with the President

The Entertainment Hub Concept
The Entertainment Hub Concept entails a total system, ranging from content creation
to product development and sales, that is similar to the hub airport of an airline route
network. By advancing a Content Strategy, Domain Strategy, and Channel Strategy,
and not only strengthening tie-ups within the Group but also pursuing alliances andcollaboration with other partners in Japan and overseas, we will build open
relationships that are flexible and mutually beneficial. In this way, we will bolster hub
functionality, and we will strive to create entirely new businesses, products, andservices.

Progress in 2007 and 2008
•Strengthened capital and business relationships with the Toei Group and Kadokawa
Holdings in March 2007
Strengthening relationships with the Toei Group, as a strategic partner in thecharacter business, such as in the POWER RANGERS series, and with the Kadokawa
Group, as a media mix partner.
•Acquisition of a portion of Fujiya stock in May 2007
Aiming to further expand candy toy operations and to promote collaboration withamusement facility operations.
•Capital and business tie-up with the Ishimori Group in May 2007
Aiming to strengthen content development and to establish and activate markets inJapan and overseas for Ishinomori Shotaro productions.
•Capital and business tie-ups with TYO and Tsuburaya Productions Co., Ltd., in January 2008
Aiming to further expand and invigorate the Ultraman Series content business.

Q
A

Would you give us an overview of the Group’s consolidated
results in the fiscal year ended March 31, 2008?
We achieved a small increase in net sales, but due to a lack ofmajor hit products, our gross profit margin declined, and theAmusement Facility SBU faced difficult conditions. As a result,operating income declined.
In the entertainment industry, we are in the “between seasons” transition period
accompanying the shift to next-generation hardware, and the market environment
for amusement facilities has worsened. As a result, the outlook for the operating
environment remains unclear.
In this setting, in the fiscal year ended March 31, 2008, net sales increased slightly,
rising 0.3%, to ¥460.5 billion, while operating income was down, declining 20.9%, to¥33.4 billion. The principal reasons for the decline in operating income included lower
gross profit margins due to a shortage of major industry-leading, hit products. In
addition, due to difficult operating conditions, the Amusement Facility business faceddifficult conditions, and the Visual and Music Content business decided, as a matter ofpolicy, to accept returns of unsold products from retail outlets. Also, costs increased dueto the consolidation of bases in the Game Contents business, and a change in themethod of accounting for depreciation and amortization. As a result, we did not reachthe levels of performance forecast at the beginning of the fiscal year, net sales of ¥480
billion and operating income of ¥45 billion.
On the other hand, we did achieve a substantial increase in net income, which
was up 34.7%, to ¥32.7 billion. Although we recorded an impairment loss due to theclosure of domestic amusement facilities and an impairment loss on poorly performing
amusement facilities overseas, which were recorded as other losses, a huge contributionof ¥16.8 billion was made by gain on the sale of land in Minato-ku, Tokyo, undertaken
for asset securitization, which was recorded as other income.

10

Q
A

What is the outlook for the fiscal year ending March 31, 2009?
We have positioned the fiscal year ending March 31, 2009, asa period for strengthening our foundation for growth anddevelopment under the next Medium-term Management Plan.
With each SBU working to respond rapidly to the challenges it
faces, and with the Group taking steps to determine the optimalorganizational system, we will lay a solid foundation in both
performance and organizational areas.
In consideration of our results in the fiscal year ended March 31, 2008, we havepositioned the fiscal year ending March 31, 2009, as a period of reinforcing thefoundation for growth and expansion under the next Medium-term Management Plan.
Accordingly, each SBU will strive to overcome the challenges it faces with the lessons
learned from the previous year’s performances. In the Amusement Facility SBU, forexample, we will close facilities and improve profitability through restructuring measures,
while in the Visual and Music Content SBU we will bolster our business in Blu-ray Discs. In
these ways, we will reinforce our revenue/profit foundation. We will also consider the
optimal organizational system for implementing our content strategy. In this way, we will
prepare for expansion and growth under the next Medium-term Management Plan.
For the fiscal year ending March 31, 2009, we are forecasting net sales of ¥470
billion, an increase of 2.1%; operating income of ¥38 billion, up 13.7%; and net incomeof ¥22.5 billion, down 31.1%. Following the fiscal year ended March 31, 2008, when we
did not achieve our initial plan, we are forecasting sales and profits that do not meet thetargets announced at the time the current Medium-term Management Plan was formulated.

Q
A

Net Sales(Billions of yen)500

450.8 459.1 460.5

470

400

300

200

100

0

2006.3 2007.3 2008.3 2009.3(forecast)

Operating Income(Billions of yen)
50

42.2
38

40

35.7

33.4

30

20

10

In the final year of the plan, the Group is forecasting resultsthat fall short of the plan’s targets. Would you explain thecircumstances behind these forecasts?
The penetration of next-generation home-use game consoles has
been slower than expected, which has had an influence on the video
game industry. Other factors were the influence on the Visual andMusic Content SBU of the “between seasons” transition period
accompanying the shift to next-generation video standards, aswell as the poor performance in Amusement Facility SBU.
Under these circumstances, we will strive to meet our revised
objectives for the fiscal year ending March 31, 2009.

0

2006.3 2007.3 2008.3 2009.3(forecast)

Net Income(Billions of yen)
50

40

32.7
30

24.3

22.5

20

14.2
10

The reasons are clear. First, the Game Contents SBU was not able to record growth asplanned. An assumption of the current Medium-term Management Plan was that theGame Contents SBU would record major growth. However, the penetration of nextgeneration home-use game consoles has been slower than expected, which has had amajor influence. Another reason is that the Amusement Facility SBU did not record
positive results. We were unable to rapidly adapt to changes in the market environment,
and faced difficult conditions especially in existing facilities. Also, the ”between seasons”
period accompanying the transition from DVD to Blu-ray Disc had an effect on the Visualand Music Content SBU. These are the major reasons why we are forecasting results thatfall short of the targets in the Medium-term Management Plan.
In consideration of these factors, the entire Group will work together to do its
utmost to achieve the forecasted results for the fiscal year ending March 31, 2009, whichhave been revised to reflect the current market environment.

0

2006.3 2007.3 2008.3 2009.3(forecast)11

Interview with the President

Q
A

Q
A

What initiatives is the Group implementing to create new value?
To create new entertainment, which is the source of competitive
strength over the medium to long term, we have established aframework that we call the “Dream Fund.”
The BANDAI NAMCO Group strives to create entertaining products in accordance withits mission of providing “Dreams, Fun and Inspiration” to people around the world, andaccordingly, we create value through entirely new products and services. To that end,
we have worked to establish an open corporate culture that supports the developmentof fresh ideas from the employees and to build various frameworks, such as a proposal
system. In addition, we have established the new Dream Fund framework.
For example, we target technology development from a medium-to-long-term
perspective that transcends the SBU framework or the creation of new operations andbusiness models that extend across SBUs. NAMCO BANDAI Holdings will use the newframework in the determination of budgets and in resource allocation and investment
decisions. Utilizing this new framework, we will reinforce our organizational and operationalfoundations as well as develop ideas for the new entertainment and new businesses that willbe the source of our competitive strength over the medium-to-long-term perspective.

Would you discuss the policy for returns to shareholders,
especially dividends?
For the fiscal year ended March 31, 2008, we decided to pay dividendsof ¥24 per share, a level that corresponds to the stable portion of
our dividend policy. In addition, we decided to use a portion of
the remaining balance of net income, which in previous years
had been allocated to internal reserves, for the purchase of ourown shares.
Our fundamental policy for providing a return to shareholders is to aim for a payout ratioof 30% in accordance with consolidated operational results, based on a stable annual

12dividend payment of ¥24 per share. For the fiscal year ended March 31, 2008, in
consideration of our under-performance, we decided to pay dividends of ¥24 per share(interim dividend of ¥12 per share and year-end dividend of ¥12 per share), a level that
corresponds to the stable portion of our dividend policy.
In addition, we clarified our approach to the allocation of profits. In the past,
after appropriation of an amount equivalent to a 30% dividend payout ratio from theconsolidated periodical net income, we, in principle, allocated the remaining balance of
net income to retained earnings as a reserve for future investments and for strengthening
our financial position. We have resolved to attribute a portion of this remaining balance tothe acquisition of our own shares, with comprehensive consideration of aspects such as thelevel of cash held, operating performance, share price trend, and plan for large-scale
investments.
In accordance with this approach, between April 1 and July 30, 2008, we acquired
8 million of our own shares, and on August 18, 2008, we retired 6,080,191 shares oftreasury stock.

Q
A

Please tell us about the Group’s CSR initiatives.
Without the support of society, the Company will not be able
to grow. We are working at both business activities and CSR
activities in accordance with our strong commitment to providing“Dreams, Fun and Inspiration” and existing as a Group together
with society.

Cash Dividends /Total Payout Ratio
(%)

(Yen)
30

80

28
70.1

24

24

60
20

55.1
40

44.1
10

20

0

0

2006.32007.32008.3

Total payout ratio (right scale)Note 1:Dividends for the fiscal year
ended March 31, 2006, include
share transfer payments madein lieu of interim dividends.
Note 2:
Total payout is calculated on
the basis of total dividends plus
total aquisitions of treasury
stock.

The Group’s corporate philosophy is to provide “Dreams, Fun and Inspiration” to people
around the world through entertainment based on creativity and boundless enthusiasm.
Accordingly, we have formulated Groupwide CSR initiatives that include three types of
responsibilities—environmental and social, economic, and legal and ethical. Centeredon the CSR Committee, which I lead, we are working to implement a range of CSR
activities unique to the BANDAI NAMCO Group.
In regard to legal and ethical responsibilities, we have taken steps to ensure thatGroup companies in Japan and overseas and all directors and employees understand thefundamental elements of compliance. At the same time, we are thoroughly
implementing legal and ethical compliance under our own corporate governance system.
However, it is more important to increase the awareness of each employee about CSR
in a wide range of fields, including compliance, product and service safety, environmental
considerations, and other CSR activities. I am working to foster that awareness throughmy own actions.
Without the support of society, the Company will not be able to grow. We areworking at both business activities and CSR activities in accordance with our strong
commitment to providing “Dreams, Fun and Inspiration” and existing as a Group
together with society.
August 200813

Special Feature

Strategic Business Units—R
The BANDAI NAMCO Group comprises five SBUs and the Affiliated Business Companies, which
support the SBUs. NAMCO BANDAI Holdings manages and oversees the Group as a whole,and the SBUs, which are composed of the operating companies, formulate and implementbusiness strategies in Japan and overseas. In this section, each SBU‘s results and growthstrategies are presented.

BANDAI NAMCO Group At a Glance

Toys and Hobby
Amusement Facility
Game Contents
Network
Visual and Music Content
Affiliated Business Companies
14esults & Growth Strategies
Contribution to Sales (FY2008.3)

Net Sales

Operating Income(Billions of yen)(Billions of yen)

200

180.2

Business Activities

(%)
15

20

14.3

37.2%

100

10

10

Planning, manufacturing, andmarketing of toys, candy toys, vending
machine capsule products, cards, plastic
models, apparel, sundries, stationery,and other products

7.9
0

0

2006.3 2007.3 2008.3(Billions of yen)
100

5

(%)

(Billions of yen)

89.8

4

10

3

2

50

1.6

0

(Billions of yen)
150

145.7

100

5

0

0

2006.3 2007.3 2008.3(Billions of yen)
15

14.8

10.2

30.1%

(%)
15

10

0

2006.3 2007.3 2008.3

5(%)(Billions of yen)
2

2.5%

20

12.0
10

0.9

1
5

Providing content for mobile phones
and PCs; planning and development of
e-commerce businesses

10

7.5

0

0

2006.3 2007.3 2008.3

0(Billions of yen)(%)(Billions of yen)

50

10

25

36.9

20

15

5

3.8

20

10.4

10
0

Planning and creating visual content;
development and sales of visualpackage software; distribution of video
on-demand services

10

5

0

2006.3 2007.3 2008.3

Operating income margin (right scale)2006.3 2007.3 2008.3

30

4.1%

Operating income margin (right scale)2006.3 2007.3 2008.3(Billions of yen)
15

40

Manufacturing and marketing of gamesoftware for home video game consoles
and handheld devices and of arcade
game machines and prizes

5

0

7.6%

Operating income margin (right scale)2006.3 2007.3 2008.3

10

50

Planning and managing of a full rangeof amusement facilities

1.8

1

18.5%

Operating income margin (right scale)2006.3 2007.3 2008.3

Operating income margin (right scale)2006.3 2007.3 2008.3

Providing support for SBUs in such areas
as distribution, logistics, leasing, andprinting

15

Strategic Business Units—Results & Growth Strategies

Toys and Hobby
Results in Fiscal Year Ended March 31, 2008

Net Sales(Billions of yen)

: Japan

200

181.0

: Overseas

185.6

180.2

150

134.6

132.1

125.6

126

54.6

54

100

50

46.3

53.5

0
2006.3 2007.3 2008.3 2009.3(forecast)

Operating Income(Billions of yen)20

: Japan: Overseas

19.1
17.4
16
14.3
13.5

8.6
6.0

10

8.8

8.3

¥180.2 billion (down 2.9%)
Operating Income¥14.3 billion (down 17.8%)
Net Sales

180

8.8

7.2

5.5
0

In the toy market, consumer needs are diversifying, and there is a risk thatthe market will be affected over the medium-to-long-term by the fallingbirthrate. In this setting, long-established character toys performed well, but
the SBU’s results were down from the previous year, when the DATACARDDASS and Tamagotchi Plus series recorded favorable results. Overseas,
POWER RANGERS and Tamagotchi recorded strong performances, and BEN10
character toys were popular not only in the Americas but also in Europe.
Growth Strategy

We are working to strengthen
long-established character toys,
expand our target customer range,and strengthen overseas operations.
In the year under review, our results were sluggish, and in the fiscal year ending
March 31, 2009, principal strategies will include strengthening development oflong-established characters to achieve stable profit, expanding our customer target
range, and strengthening overseas development. We are targeting net sales of ¥180
billion and operating income of ¥16 billion, an increase of ¥1.7 billion.
To strengthen long-established characters, the latest entries in the POWER
RANGERS series and Pretty Cure series have gotten off to strong starts, and we will
strengthen product development from summer 2008 through the end of the year.
Moreover, in regard to DATA CARDDASS, which has become a new operational pillar
in the card business, we will introduce a range of new content in stages, such as One

2006.3 2007.3 2008.3 2009.3(forecast)

The Super Sentai (POWER RANGERS)
products have remained highly popular among children for more than 30
years in Japan and more than 15
years overseas.

00
16

Our wide range of character apparelfor children, which extends frominnerwear to outerwear, incorporates
a playful spirit.

Combining digital data with a card
game, the DATA CARDDASS
machine has been highly popularwith elementary school children.

Originating in the United States,
BEN10 is being developed globally
as a character for boys.

Piece, and work for stable business development.
Next, to broaden our target customer range, with the objectiveof strengthening products for adults, we established a new Bandai
division handling collectible toys for adult consumers and Real B Voice Surf
Brand operations in April 2008. In Japan, in addition to strengthening ourcore toy operations, we will move ahead with multifaceted development
initiatives in consideration of the problem of the falling birthrate.
As a means of strengthening overseas development, we will focus on
expanding overseas development regions and strengthening content. Specifically,in addition to long-established characters such as POWER RANGERS and Tamagotchi,
BEN10 was launched two years ago. BEN10 has been popular in Europe and theAmericas, and we have begun to market it in Asia. In addition, we are implementing
development in line with specific regional characteristics. Examples include new
Dragon Ball toys in Europe and the Americas and original Mobile Suit Gundam
products matched to regional tastes in Asia. Moreover, we have acquireda master license in the United States and Europe for KAMEN RIDER DRAGON KNIGHT,
which will be broadcast in the United States from 2009, and in the future we willdevelop it as a new core character overseas.
Furthermore, in the year under review we took aggressive steps to bolster
tie-ups with external partners under the Entertainment Hub concept that is being
advanced by the BANDAI NAMCO Group. We have strengthened the characterbusiness by investing in Tsuburaya Productions Co., Ltd., establishing a strategic
partner relationship with the Toei Group, and forming a capital and businesstie-up with the Ishimori Group. Moreover, through a tie-up with Fujiya, we arestrengthening our candy toy operations. By strengthening tie-ups with these external
partners, we will leverage our distinctive strengths in character merchandising andsynergies within the Group.

Bandai Co., Ltd.
President and Representative
Director

Kazunori Ueno

Market Data

Sales of Major Characters (Bandai Co., Ltd.)

Size of Japan’s Toy Market (FY2008.3)
Other
1.0%

(Billions of yen)2007.32008.3

Mobile Suit Gundam series

17.8

18.8

Masked (Kamen) Rider series

7.1

11.5

Pretty Cure series

6.0

10.5

Anpanman

8.8

9.3

POWER RANGERS series

10.1

7.7

Ultraman series

3.6

5.7

Dragon Ball

7.9

5.5

Pokémon

3.4

4.5

Cinnamoroll

3.7

2.7

Tamagotchi

12.4

1.8

Card games,
trading cards
8.1%

Hobby
18.7%

Sundries
14.5%

Toy market
in FY2008. 3¥670.9 billion

Games
2.1%
Jigsaw puzzles
2.0%
High-tech trend toys
1.3%
Boys’ character toys
5.9%Boys’ toys
7.5%
Girls’ toys
6.6%

Seasonal goods
7.7%
Educational toys
21.9%

Stuffed toys
2.7%

Source: Survey by the Japan Toy Association

1701Strategic Business Units—Results & Growth Strategies

Amusement Facility
Results in Fiscal Year Ended March 31, 2008

Net Sales(Billions of yen)

: Japan: Overseas

Net Sales

100

88.2

89.8

86

81.3
75

50

68.2

72.3

72.8

71

15.9

17.0

15

25

13.1

Operating Income(up 1.9%)¥89.8 billion¥1.6 billion (down 59.3%)

The domestic amusement facility market remains sluggish, and customer
needs are diversifying, leading to changes in the revenue/profit structure. In
light of this situation, the Amusement Facility SBU recorded sluggish sales atexisting domestic facilities, down 5.9%, but this decline was basically offset
by new facilities, which recorded generally favorable performances. Looking
at profits, however, the gross margin declined accompanying difficult
conditions at existing facilities and changes in the composition of sales. As aresult, operating profit declined substantially, and we recorded a provision
for impairment losses accompanying the closure of domestic facilities.

0
2006.3 2007.3 2008.3 2009.3(forecast)

Operating Income (Loss)(Billions of yen)

: JapanWith improving profitability as a key
issue, we will pursue Group synergies
and implement overseas development
in line with regional characteristics.

: Overseas

50

4.0
40

30

3.4
20

1.9
1.8

1.6

2

1.9

2

10

0.1
0

0.6

0
-0.3

-5
2006.3 2007.3 2008.3 2009.3(forecast)

NAMCO Wonder Park Hero’s Base isa large-scale entertainment facility
that integrates amusement andcharacters.

18

Growth Strategy

In the year under review, due to a worsening of the market environment and our slow
response to these conditions, our results were not satisfactory. Accordingly, forthe fiscal year ending March 31, 2009, we have positioned the improvement of
profitability as a priority issue. Therefore, we will take such steps as closing somestruggling domestic facilities and revising our standards for the opening of
amusement facilities. On the other hand, we are also working to pursue Groupsynergies, develop facilities with added value that leverage distinctive Group
strengths, and conduct overseas development in line with regional characteristics.
For the fiscal year ending March 31, 2009, we are targeting sales of ¥86 billion

Leveraging Group synergies, we
opened Wonder Park Plus, a largescale amusement facility, in a major
district in Hong Kong.

Wonder Bowl incorporates entertainment elements based on NAMCO’s
original strengths.

The popular Crayon Shinchan movie
is the theme of this character amusement facility.

and operating income of ¥2 billion.
NAMCO, the SBU’s core company, implemented an organizational
reform with the objective of responding quickly to environment changes.
By flattening the organization, we have increased the speed of management
decision making and execution through the elimination of organizational layers.
Strategically, we will close or sell about 20% of domestic facilities inorder to improve domestic profitability. In the fiscal year ending March 31, 2009,
we plan to open 12 domestic facilities and close 69, for a net reduction of 57
facilities. For the majority of the facilities that will be closed or sold, the transactions
NAMCO LIMITED
will be completed in the first half of the fiscal year. We will make facility opening
President and Representative
Directorstandards more rigorous, continue to implement the scrap-and-build policy inMasahiro Tachibana
accordance with the new standards, and work to bolster our revenue/profit foundation.
Also, in the pursuit of Group synergies, we will move forward in Japan and overseas
with the development of facilities that integrate characters and locations and leverage
distinctive Group strengths. In particular, the know-how acquired through the success of
NAMCO Wonder Park Hero’s Base, a large-scale amusement facility that has attracted morethan 3.7 million visitors since it opened, will be applied to other facilities. In this way, we
will differentiate our facilities from those operated by competitors.
We continue to implement overseas development in line with regional
characteristics. In April 2008, we opened Wonder Park Plus, a large-scale amusement
facility, in a major district in Hong Kong. This is the first overseas facility thatshowcases the synergies of the BANDAI NAMCO Group. In addition to the firstoverseas installation of Mobile Suit GUNDAM Senjo no Kizuna, the park includes
about 200 amusement machines as well as character goods shops. It is also playing
a role as a source of character information in the Asia region.
On the other hand, in the Americas, conditions were difficult in the year underreview. The subprime loan problem and rising oil prices resulted in a decline in market
conditions that was worse than the decline in Japan. At this point, we are examining
the situation considering operational restructuring measures to enhance profitability.
In Europe, continued favorable results are being recorded by multipurpose facilities, such as
our hybrid bowling alleys in the United Kingdom. In the future, we will continue to takeMarket Data
steps to develop facilities in line with regional characteristics, including the acquisition of
new facilities.
Market Trends in Japan’s Amusement Industry(Billions of yen)

Number of Facilities at the End of 2008.3(Total for Amusement Facility SBU)
RegionJapan(Facility)

3,000

293

80

5

88

1,222

0

0

Europe

14

13

1

0

0

Asia

31

14

17

0

0

Total

1,736

408

1,320

5

3

2,752.6
223.4

2,246.4

3

Americas 1,310* Revenue-sharing facilities: Revenues from the operation of arcade gamemachines are shared with operations.

: Amusement facility operations sales: Sales of home video game consoles
and softwareof which
Regional Directly managed Revenue-sharing Theme parks Spa facilities
total
facilities
facilities*

381: Sales of products for arcade machines

2,000

2,026.7
154.5

199.2

702.9

1,885.1
177.9

1,749.8
180.6

605.5

682.5

637.7
649.2

1,000
1,826.4
1,364.7

1,266.6
1,069.5

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

920.0

0
2003.3

2004.32005.32006.32007.319

Strategic Business Units—Results & Growth Strategies

Game Contents
Results in Fiscal Year Ended March 31, 2008

Net Sales(Billions of yen)

: Japan

200

160
130.8

139.2

145.7

100

116
106.2

24.6

107.3

31.9

105.3

40.4

44

0
2006.3 2007.3 2008.3 2009.3(forecast)

Operating Income (Loss)(Billions of yen)

: Japan: Overseas

20

18
14.8

9.7
10

11.5
12.5

10.6
10.7
9.7

4.1

5.5

1.8
0

¥145.7 billion (up 4.7%)
Operating Income¥14.8 billion (up 28.5%)
Net Sales: Overseas

–0.9

-2.5

In the markets for software for home video game consoles and arcade gamemachines, content development expenses continue to increase due to thediversifying customer needs and the advanced platform capabilities.
Home game software performed well overseas and the domestic performanceof arcade game machines was favorable. The game contents SBU recorded
higher sales and profits.

Growth Strategy

In home game software, we are
implementing our global multiplatform
strategy, and in arcade game machines,
we are striving to develop category
number one products.
In home game software, we are working to improve profitability by implementing a
multiplatform strategy and reducing titles in line with user preferences around theworld. In arcade game machines, meanwhile, we are working to develop category
number one products. In April 2008, Banpresto’s game division was added to
NAMCO BANDAI Games, and in the future, we will further pursue synergies in theareas of operations and costs. In this way, in the fiscal year ending March 31, 2009,
we are forecasting net sales of ¥160 billion and operating income of ¥18 billion, an
increase of ¥3.3 billion.

2006.3 2007.3 2008.3 2009.3(forecast)

The Sea Story Lucky Marine Theater,which is highly popular in thepachinko market, was launched in a
medal game machine.

20

Soul Caliber IV, which was developedin cooperation with Lucas Arts, ofthe United States, is a strategic software title that was launched worldwide for the PS3 and Xbox 360.

Active Life Outdoor Challenge(Family Trainer), a worldwide title,
leverages the special characteristics
of Wii hardware.

Mobile Suit GUNDAM Senjo no Kizuna, ateam-based arcade battle game witha panoramic optical display, is highly
popular and continues to generate
stable revenues.

Home Game Software
In home game software, our specific operational strategies include
improving profitability by implementing a multiplatform strategy andreducing titles in line with user preferences around the world.
Using our abundant content, we will develop a well-balanced lineupthat leverages the distinctive characteristics of platforms, targeting handheld
devices and console game machines. In the fiscal year ending March 31, 2009,
Soul Caliber IV will be a key strategic title. Developed with Lucas Arts, Soul Caliber IV
was launched worldwide in summer 2008 for the PS3 and Xbox 360 under our
multiplatform strategy, and we are planning sales of two million units. In addition,
we will launch a range of strategic titles from Japan in markets around the world. For
example, Active Life Outdoor Challenge (Family Trainer) which leverages thedistinctive characteristics of the Wii, will be marketed worldwide.
In addition to developing these types of powerful titles, we will also work to reduce
the total number of titles. Specifically, in comparison with the fiscal year ended March 31,
2007, when we offered 109 titles, in the fiscal year ended March 31, 2008, we offered 87
titles, a reduction of about 20%. Moreover, in the fiscal year ending March 31, 2009, ourinitial plan is to offer 84 titles, and we plan to reduce that figure even further during the year.
In this way, we will work to expand sales of each title and raise the overall profit margin.

NAMCO BANDAI Games Inc.
President and Representative
Director

Shukuo Ishikawa

Arcade Game Machines
In arcade game machines, we are working to develop category number one products.
Medal game machines, a field which we had not previously offered any large-scalemachines, are a key focus of these initiatives. From the summer 2008, we will work to
expand our share with the launch of the Sea Story Lucky Marine Theater, a large-scale
medal game machine. Moreover, we will take steps to maintain stable revenue/profits
from the highly popular Mobile Suit GUNDAM Senjo no Kizuna through periodic
domestic content updates and through special events. In overseas operations, we arestrengthening Asia-related development activities. For the first time, Mobile Suit
GUNDAM Senjo no Kizuna is available overseas, at Wonder Park Plus in Hong Kong.
In addition, we are taking steps to expand our development regions, such as
developing a Taiko no Tatsujin Asia Version. In the future, we will continue working
to invigorate arcade game machines and amusement facilities through theMarket Datadevelopment and launch of high-value-added machines.
Share of Unit Sales by Group,
Domestic Manufacturers (FY2008.3)
Unit Sales of Home Game Software by Platform(Thousands of units)2007.3
Number Units soldof titles*

2008.3
Number Units soldof titles*

PlayStation 2

34

10,67021

9,356

PLAYSTATION 3

3

972

1

1,280

Xbox 360

6

237

5

1,509

Wii

5

492

13

1,568

PlayStation Portable

27

4,641

8

3,829

Nintendo DS

30

4,731

39

6,467

Others

4

1,609

0

205

Total

109

23,352

87

24,214* Number of titles does not include localized versions.

LEVEL-5
1.7%
Index
Holdings
1.8%

Other
15.2%

KOEI
2.3%
SEGA SAMMYHOLDINGS
3.1%

Nintendo35.0%
Capcom7.3%

Sony ComputerEntertainment Japan
3.1%

NAMCO
BANDAI
KONAMIGames
8.0%
Square Enix
9.9%

12.6%

Source: Famitsu Game White Paper 2008
Published by: ENTERBRAIN INC. (Period: March 26, 2007 to March 30, 2008)21

Strategic Business Units—Results & Growth Strategies

Network
Results in Fiscal Year Ended March 31, 2008

Net Sales(Billions of yen)

: Japan

Net Sales

15

12.5

12.5

Operating Income

12.0
11

10

5

2006.3 2007.3 2008.3 2009.3(forecast)

Operating Income: Japan2

1.8

1

In the mobile content market, key challenges include responding to the rapid
advancement of technologies and functions in mobile phones and to a moresophisticated network environment. In this setting, the Network SBU’s gamecontent continued to earn high regard. This content, which is developed inline with user needs, ranges from Dragon Ball Mobile and other high-valueadded offerings to the SIMPLE100 series and other casual content. As a result,the number of fee-paying subscribers started to increase, and the SBU’s
results were maintained at about the same level as in the previous year.
Growth Strategy

0(Billions of yen)

0.9

0.9
0.8

0
2006.3 2007.3 2008.3 2009.3(forecast)

We will implement wide-ranging
content development, with a focus
on profitability, and will bolster
solutions operations for corporate
customers.
In the network business, we will undertake profit-focused content development
and will take steps to bolster our corporate solutions operations. The operating
environment in the network business is making remarkable progress. In the fiscal year
ended March 31, 2008, NAMCO BANDAI Holdings made Bandai Networks a wholly
owned subsidiary with the objective of creating a platform for rapid management
decision making and implementation. Currently, we are moving ahead with theconsideration of the optimal organizational system as a group, including a merger
with the NAMCO BANDAI Games Mobile Content Division. In the future, we will
pursue Group synergies in the areas of operations and costs and will endeavor to bolster

With popular mobile character game content, the number of fee-paying
subscribers is beginning to increase.

22¥12.0 billion (down 3.6%)¥0.9 billion (up 2.7%)

This popular service enables customers to use their favorite characterson their mobile phone standby andmenu screens.

Bandai Networks is using advanced
technologies to develop services formobile phones.

our revenue/profit foundation. As a result, in the fiscal year ending March
31, 2009, we are forecasting net sales of ¥11 billion and operating incomeof ¥0.8 billion, about the same as in the year under review.
In content development, the number of fee-paying subscribers,
which trended downward for several years, has begun to increase. In gamecontent, which has been recording favorable results, we will strive to develop
high-value-added content as well as simple, casual content. At the same time,
we will develop a varied content lineup, including such customized content as
popular character standby screens. In these ways, we will work to meet diverse userneeds. In our solutions business, we are leveraging our accumulated systemdevelopment and operations know-how and providing support, such as for the official
sites of various companies. These operations are making favorable progress. Recently,
we began to provide Camera de Kensaku, a pattern recognition and searching service
that utilizes the cameras on mobile phones. With this service, product information canbe accessed simply by taking a picture, such as a picture of media, products, oradvertisements. We will bolster our B-to-B operations through content businessdevelopment using our original technical skills and by proposing services that makemobile phones fun and convenient.
Furthermore, we will move ahead with preparations for a merger* with
NAMCO BANDAI Games. NAMCO BANDAI Games has strengths in leveraging its inhouse technical development capabilities and effectively utilizing content. On theother hand, Bandai Networks has strengths in the comprehensive development ofoperations, such as e-commerce, centered on the distribution of mobile phone
content and the provision of technical solutions. After the merger, as a new division in
NAMCO BANDAI Games, we will strive to strengthen our comprehensive capabilities
as a content provider and will work to create new content and operations throughthe combination of the different strengths.

Bandai Networks Co., Ltd.
President and Representative
Director

Satoshi Oshita* A merger of NAMCO BANDAI Games and Bandai Networks is planned for April 1, 2009, with the objective of combining eachcompany’s mobile content distribution and network operations. NAMCO BANDAI Games will be the surviving company, andBandai Networks will be the disappearing company.

Market Data

Network SBU’s Fee-Paying Subscribers
to Mobile Phone Services

Domestic Mobile Content-Related Market(Billions of yen)

1,000

: Mobile commerce market: Mobile content market

928.5

Others
4.4%
800

Sound
12.6%

Characters
26.2%

722.4

No. ofSubscribers
3.66 million

562.4

600

519.6
407.4

Games
56.8%

400

384.2

259.3

170.9
200

213.3

(As of March 31, 2008)

260.3

315.0

2005.32006.3366.1

02004.32007.3

Source: Mobile Content Forum

23

Strategic Business Units—Results & Growth Strategies

Visual and Music Conte
Results in Fiscal Year Ended March 31, 2008

Net Sales(Billions of yen)

: Japan: Overseas

Net Sales

50

43.3

Operating Income

43.0

40

36.9

38

30

20

42.2

41.1

34.9

35.5

2.0

2.5

10

0

1.1

1.9

2006.3 2007.3 2008.3 2009.3(forecast)¥36.9 billion (down 14.1%)¥3.8 billion (down 59.7%)

In visual and music content markets, progress in the network environment isdriving changes in the content business, and there is a need to respond to
next-generation standards for visual products. In this setting, the market is in
the “between seasons” period in the shift to Blu-ray Discs, so the DVD market
overall is sluggish. The competitive environment is challenging, and our visualand music operations faced difficult conditions. Also, in visual and music operations,with the objective of accelerating the shift to Blu-ray Discs, we decided to accept
returns of market inventories of DVDs at the end of the fiscal year. Accordingly,
we made a provision of ¥2.4 billion, and recorded lower sales and profits.

Growth Strategy

Operating Income (Loss)(Billions of yen)

: Japan8

We will work to strengthen Blu-ray
Disc products and bolster our content
media and distribution strategy.

: Overseas

9.5

10

6.2
7.6

6

9.4

3.8

4

3
3.9

2

3

0.1

0

–1.4

-0.1

-2
2006.3 2007.3 2008.3 2009.3(forecast)

The Mobile Suit Gundam series continues
to attract new fans, more than 30 years
after its launch.

24

In the fiscal year ended March 31, 2008, we were in the “between seasons” period
accompanying the shift to next-generation hardware, and market conditions werechallenging. In the fiscal year ending March 31, 2009, we will work to strengthen
Blu-ray Disc products and bolster our content media and distribution strategy. We areplanning sales of ¥38 billion and operating income of ¥3 billion in a market
environment that is expected to remain difficult.
In the visual products market, user needs are diversifying. In consideration of
investment recovery, we need to move away from our previous business model, which
was centered on DVD packages, and to build a new business model. Given these

CODE GEASS Lelouch of the Rebellion
R2, a popular animation, is being
simultaneously developedfor DVD and Blu-ray Disc.

SERGEANT KERORO is a popular animation series with a wide base of support,
ranging from children to adults.

Lantis is offering music content, suchas theme songs, through tie-ups withanimated TV programs.

nt
market needs, we will aggressively move ahead with a full-fledged shift
to Blu-ray Disc products. In addition to conventional DVDs, we will alsooffer Blu-ray Disc versions and take a comprehensive approach tobolstering sales of new TV series, such as CODE GEASS Lelouch of theRebellion R2. Moreover, in July 2008 we started to launch rental Blu-ray
Disc products, centered on theatrical releases, offering users increased
opportunities to experience high-definition quality.
As a means of enhancing our content media and distribution strategy, we willapproach the entire world as a single market and build a business model based on an
overall strategy that integrates operations, including packaging, distribution, andlicensing. For example, by combining package sales and network distribution, we will
increase investment recovery opportunities on a product-by-product basis and strive
to cultivate new users. Furthermore, through simultaneous worldwide release of acommon format with subtitles, we will focus on both expanding sales and decreasing
costs.
In these ways, in the fiscal year ending March 31, 2009, we will strive tostrengthen Blu-ray Disc products and to enhance our content media and distribution
strategy. However, there will be no change in our basic strategy of creating andnurturing high-quality content that is used around the world.
Moreover, having made Bandai Visual a wholly owned subsidiary of NAMCO
BANDAI Holdings, we will consider the optimal system for utilizing the Group’s
management resources more efficiently and implementing strategies more effectively.
We will approach the current challenging market environment as an opportunity,and on that basis we will build a new business model for growth over the
medium-to-long-term.

Bandai Visual Co., Ltd.
President and Representative
Director

Kazumi Kawashiro

Market Data

Net Sales by Category (FY2008.3)

Sales of Video Content(Billions of yen)

: DVD

400

350.6

: VC

375.3

: LD

370.8

1.3

Production licenses¥8.4 billion
22.8%

Total
¥36.9 billion

Visual package software¥28.5 billion
77.2%: Others

330.8

318.0

300

257.7

319.7

200

100

347.7

325.2

317.2

1.6
89.8
55.6

0
2003

2004

23.1

5.5

0.7

2005

2006

2007

Source: JVA Report 2007.4
Published by: JAPAN VIDEOSOFTWARE ASSOCIATION

25

Corporate GovernanceFundamental Approach to Corporate GovernanceAs the “World’s Most Inspiring Entertainment Group,” BANDAI NAMCO will continue to provide “Dreams,
Fun and Inspiration” to people around the world through entertainment based on creativity and boundlessenthusiasm. Our highest priority is the provision of benefits to all stakeholders who support our business activities.
We believe that in striving to maximize enterprise value over the long-term, bolstering corporate governance isan important management issue.

Corporate Governance System
The Company is working to enhance the supervision of management. The Board of Directors includes 11 members, ofwhom two are outside directors. Moreover, in order to ensure that the Company responds to changes in the management
environment as promptly as possible and to further clarify the responsibilities and awareness of directors, the term of directors
has been set at one year or less.
The Company uses the statutory auditor system. The Board of Statutory Auditors comprises four auditors, of whom
two are outside auditors. Two of the statutory auditors are full-time. In accordance with the allocation of responsibilities as
determined by the Board of Auditors, each statutory auditor conducts audits, working with the independent auditors as needed.
The Internal Auditing Division rigorously audits business execution, and the independent auditors provide accountauditing. With close interaction centered on the statutory auditors, the Company’s internal control systems are continuallymonitored, and all issues are identified and understood and recommendations for resolving those issues are provided.
General Meeting of Shareholders
Appointment / Dismissal

Auditing

Board of Directors

Account Auditing
Reports on Results

Statutory Auditors
Board of Statutory Auditors

11 directors(of whom 2 are outside directors)

Appointment / Dismissal
Supervision

Appointment /Dismissal

Appointment / Dismissal

Independent Auditors

4 statutory auditors(of whom 2 are outside statutory auditors)

Dismissal

Auditing

Representative Director

Personnel Committee
Reports
Reports

Directions

Committees
Internal Auditing Division
Cooperation
CSR Committee

Directions

Social Contribution
Committee,
Environmental Project
Committee

Group Crisis
Management Committee

Support

Auditing

Group Compliance Committee

Group Strategy Committee

Internal Control Committee

Policy Directions

BANDAI NAMCO Group Companies

26

Reports

E-1 Project

Top management meetings attended by directors and statutory auditors are shown below.
Meeting Name

Schedule

Agenda / Purpose

Participants

Board of Directors

Monthly

Resolutions and reports on matters prescribed by the Company Law. Resolutions,

Directors, statutory auditors

deliberations, and reports on matters related to the BANDAI NAMCO Group.
Group Strategy Committee

Waigaya Meeting

Monthly

WeeklyReports on BANDAI NAMCO Group business affairs and deliberations on

Directors, statutory auditors,

business issues and problems.

SBU representatives, others

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

Full-time directors, general managers

As shown in the table above, the Company holds a variety of top management meetings and has established a systemthat facilitates rapidly tracking and responding to Group management information. We hold timely meetings of the Group
Compliance Committee, which is led by the president. This committee is in charge of monitoring and supervising important
issues related to compliance and has established a system to prevent violations of laws and regulations and to ensure prompt
action in the event of any incidents that could be a legal or regulatory violation.
In crisis management, the Group Crisis Management Committee, which is led by the president, meets as needed andworks on behalf of the BANDAI NAMCO Group to prevent crisis situations and to ensure a prompt response if such situations
do occur.
The Group comprises five Strategic Business Units (SBUs), and the affiliated business companies which principally
provide support service within the Group. In each SBU, operating strategies in Japan and overseas are formulated andimplemented, centered on the SBU’s core company.
Under the Medium-term Management Plan that began in April 2006, management strategies are mainly implemented by
the holding company and business strategies are mainly implemented by the SBUs. The main theme of the plan is “strengthening,enriching, and expanding the BANDAI NAMCO Group’s portfolio management.”
The Company, which is a holding company, monitors each SBU; holds meetings of Groupwide committees, such as theGroup Strategy Committee and the CSR Committee; and formulates strategies for the Group as a whole.

Internal Control Systems
From the fiscal year ended March 31, 2007, to further enhance its internal control systems and to provide a sound foundation
for internal control on a Groupwide basis, the Group has established basic policies in each of the following areas and is working
to bolster its internal control systems.
1. A system for ensuring that directors conform to laws, regulations, and the Articles of Incorporation in the executionof their duties.
2. A system for storing and controlling information concerning the execution of the duties of directors.
3. Regulations concerning the management of the risk of losses and other systems.
4. A system to ensure that directors execute their duties efficiently.
5. A system for ensuring that employees’ duties conform to laws, regulations, and the Articles of Incorporation.
6. A system for ensuring that work is carried out appropriately by the Group, consisting of the company, its parent company,
and its subsidiaries.
7. Items concerning employees requested by auditors to assist the auditors in the performance of their duties.
8. Items concerning the independence of the employees described in the previous point from the directors.
9. A system for reports by directors and employees to the statutory auditors and a system for other reports to thestatutory auditors.
10. Other systems to ensure that the audits performed by the statutory auditors are effective.

27

The BANDAI NAMCO Group’s
CSR Initiatives
The BANDAI NAMCO Group’s corporate philosophy is to provide “Dreams, Fun and Inspiration”
to people around the world through entertainment based on creativity and boundlessenthusiasm. To ensure that we can continue to provide “Dreams, Fun and Inspiration,” we haveformulated Groupwide CSR initiatives that include three types of responsibilities.
In accordance with these fundamental principles, a range of measures are implemented by
the Groupwide CSR Committee and its sub-committees—the Social Contribution Committee andthe Environmental Project Committee—as well as by the Group Crisis Management Committee
and the Group Compliance Committee.

1

Environmental and Social
Responsibilities

2

EconomicResponsibilities

3

Legal and EthicalResponsibilities(safety / quality, environmental conservation,
cultural / social support activities)

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

Safety / quality initiatives
We follow industry standards and inhouse standards, and we have built
a system that facilitates the achievement of higher levels of safety
and quality, so that customers canuse our products with confidence.
Environmental conservation
initiatives
We are aggressively implementing
forward-looking environmental
conservation measures to ensure that
we can continue to provide “Dreams,
Fun and Inspiration” to people aroundthe world.
Cultural / social support activities
We are also active in areas outside theprovision of products and services,such as museum operations andvolunteer activities.

28(compliance)

Economic Responsibilities
We are continually working toenhance management transparency
and monitoring the management
plans and conditions of Group
companies. Moreover, we are working
to provide maximum returns to society
and stakeholders by selecting the
optimal operational fields for Groupdevelopment and focusing ourmanagement resources on those fields.

Legal and EthicalResponsibilities(compliance)

We have formulated basic compliancestandards for Group companies,
officers, and employees in Japan andoverseas, and we conduct continual
monitoring to ensure appropriate
observance of legal and ethicalstandards.

Topics“BANDAI NAMCO Forest” at Shiga Kogen

Manufacture of Safe, Reliable Products

The BANDAI NAMCO Groupsigned a “forest adoption
agreement” with a forest support
foundation in Nagano Prefecture.
Under the terms of the agreement,
the BANDAI NAMCO Group will
provide support for forest
management activities at the
47-hectare “BANDAI NAMCO
Forest” at Shiga Kogen andwork to help foster a deeper
understanding of forest
conservation issues.

In a range of business fields, wefollow all legal and industry quality
and safety standards. We havealso established our own morerigorous in-house standards,
and we pay careful attention tosafety. In implementing quality
inspections for toys, for example,
we have established more than
300 inspection items and conduct
rigorous tests in accordance with
the individual characteristics ofthe products.

“BANDAI NAMCO Forest”
at Shiga Kogen

Materials for Products, Containers,
and Packaging

A vending machine capsule made withbiomass chips and a capsule productWe are implementing measures
to reduce packaging, such as
decreasing packaging spaceratios; developing packaging-free
products; developing lowenvironmental-impact productpackaging; reducing plastic
model runners; and reducing
packaging materials foramusement 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. Such activities
include the Omocha-no-Machi
Bandai Museum in Tochigi
Prefecture, which has a collectionthat includes toys from Japan andoverseas as well as many items
created by the famous inventor
Thomas Edison. Also, we provide
support for the New Technology
Foundation and toy libraries.

Barrier-Free Entertainment Operations

NAMCO’s TalkingAid Light

We are conducting activities
targeting the integration ofentertainment and well-being. For
example, we developed TalkingAid
Light, which is a mobile device forpeople who have difficulty withconversations, reading, or writing,and machines that combine
entertainment with rehabilitation.
We also operate day service centersto help senior citizens be active inmind and body.

Dropping products to test
for quality

Entertainment Support Activities
Through sponsorship of the
Yosakoi Soran Festival, which isheld in Hokkaido and otherlocations around Japan, we aresupporting people who are
striving to create entertainment.
We are also participating in theplanning of the Yosakoi Chappy
image character.
Yosakoi Soran Festival

Wide-Ranging Environmental Impact
Reduction Activities

One of the low-emission trucks used by
LOGIPAL EXPRESS

In addition to acquiring GreenManagement Certification, which
is given to transportationcompanies that implement lowenvironmental-impact operations,
we are developing environmentally friendly products,
including recycled resins andantibacterial hand towels.
Moreover, we are taking steps—
such as the use of solar
power generation and raw
material recycling—to make ourplastic model plant in Shizuoka
City the first plant in the toy
industry to receive green
certification.

29

Overview of Main Group Companies(As of July 31, 2008)

NAMCO BANDAI Holdings Inc.

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

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 operatingcompanies• 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.

Seika Co., Ltd.

Planning, development, and sales of stationery and sundries, etc.

CCP Co., Ltd.

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

Seeds Co., Ltd.

Manufacturing of toys, etc.

Plex Co., Ltd.

Planning and designing of character-based products

People Co., Ltd.*

Planning, manufacturing, and sales of toys for infants (JASDAQ)

Bandai America Incorporated

Sales of toy-related products

BANDAI S.A.

Regional management functions; sales of toy-related products

BANDAI UK LTD.

Sales of toy-related products

BANDAI ESPAÑA S.A.

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 (SHENZHEN) CO., LTD.

Quality assurance and control for toys and other products

BANDAI INDUSTRIAL CO., LTD.

Manufacturing 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• Amusement Facility Strategic Business Unit
NAMCO LIMITEDManagement of amusement facilities

Pleasure Cast Co., Ltd.

Operation of amusement facilities

Hanayashiki Co., Ltd.

Operation of Asakusa Hanayashiki amusement park

NAMCO SPA RESORT LTD.

Operation of spa facilities

NAMCO CYBERTAINMENT INC.

Management of amusement facilities

NAMCO OPERATIONS EUROPE LTD.

Management of amusement facilities

NAMCO OPERATIONS SPAIN S.L.

Management of amusement facilities

NAMCO ENTERPRISES ASIA LTD.

Management of amusement facilities

SHANGHAI NAMCO LTD.*Management of amusement facilities; production and sales of amusement machines, etc.

* Companies accounted for by the equity method
Notes 1. Liquidation of BANDAI VISUAL USA INC. is scheduled for completion by the end of September 2008.
2. Accompanying the transfer of shares of Sunlink Co., Ltd., Sunlink is no longer a company accounted for by the equity method as of August 6, 2008.
3. A merger of NAMCO BANDAI Games Inc. and Bandai Networks Co., Ltd., is planned for April 1, 2009, with NAMCO BANDAI Games as the surviving company
and Bandai Networks as the disappearing company.

30

• Game Contents 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.

Bec Co., Ltd.

Planning and development of game software

Banpresto Sales Co., Ltd.

Sales of arcade machines and prizes, etc.

Banpresoft Co., Ltd.

Planning, development, and sales of game software

NAMCO TALES STUDIO LTD.

Planning, development, and sales of game software

NAMCO TRADING LTD.

Installation and management of vending machines; purchase and sales of used arcade game machines; distribution of mobile contents

BANPRESTO (H.K.) LTD.

Manufacturing and production management of arcade machines and prizes

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• Network Strategic Business Unit
Bandai Networks Co., Ltd.

Development and provision of network content and network solutions

VIBE Inc.

Development and provision of network content• Visual and Music Content Strategic Business Unit
Bandai Visual Co., Ltd.

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

Sunrise Inc.

Planning and production of animation

Bandai Channel Co., Ltd.

On-demand delivery of content, such as animations

Lantis Co., Ltd.

Planning, manufacturing, sales, and management of musical content

EMOTION CO., LTD.

Planning and development of visual products; control and administration of copyrighted music

ANIME CHANNEL CO., LTD.

Operation of comprehensive animation content sites

SUNRISE Music Publishing Co., Ltd.

Management and licensing of music copyrights, production and publishing of musical content, etc.

BANDAI ENTERTAINMENT INC.

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

BANDAI VISUAL USA INC.

Operation of visual packaged software

BEEZ ENTERTAINMENT S.A.S.

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

NAMCO ECOLOTECH LTD.

Development and sales of environmental equipment

Happinet Corporation*

Wholesale of toys and video game consoles (Tokyo Stock Exchange, First Section)

Sunlink Co., Ltd.*

Operation and sales of vending machine products, etc.

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 23, 2008)

President and Representative Director
Takeo Takasu

Director
Jun Higashi

Director
Shuji Ohtsu

Director
Yusuke Fukuda

Director (Part-time)
Kazunori Ueno

Director (Part-time)Masahiro Tachibana

Director (Part-time)
Shukuo Ishikawa

Director (Part-time)
Satoshi Oshita

Director (Part-time)
Kazumi Kawashiro

Statutory Auditor (Full-time)
Koichiro Honma
Statutory Auditor (Full-time)
Katsutoshi Hirasawa
Statutory Auditor (Outside)
Osamu Sudo
Statutory Auditor (Outside)
Kouji Yanase
Director (Outside)
Masatake Yone

32

Director (Outside)
Kazuo Ichijo

Financial Section

Contents
Consolidated Six-Year Financial Summary

34

Financial Review

35

Consolidated Balance Sheets

40

Consolidated Statements of Income

42

Consolidated Statements of Changes in Net Assets

43

Consolidated Statements of Cash Flows

44

Notes to Consolidated Financial Statements

45

Independent Auditors’ Report

68

33

Consolidated Six-Year Financial Summary
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries

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

2003*1For the years ended March 31

For the Year:Net sales
Gross profit
Selling, general andadministrative expenses
Operating income
Recurring income*2
Net income
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 per share (basic)
Cash dividends
Main Financial Indicators (%):
Return on equity (ROE)*3, 5
Return on assets (ROA)*4, 5Selling, general and administrative expenses to net sales
Operating income
to net sales
Net income to net sales
Shareholders’ equity ratio
Debt/equity ratio

2004*1

2005*1

2006

2007

BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO¥244,950¥154,777
106,801
37,52980,932
28,05925,8699,470
26,435
8,777
12,667
4,116
8,593
10,376
6,885
11,22728,00915,890¥263,175¥172,594
116,258
49,08888,60733,65827,651
15,43027,222
14,428
14,207
7,546
11,576
14,009
7,149
11,104
20,033
12,931¥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¥225,683¥143,214
158,782
68,08967,21535,920130,683
98,400¥228,076¥148,117
163,13173,61461,31933,860137,739
104,619¥240,290¥154,474
173,40282,666
68,862
33,219150,410
110,935

BANDAI
NAMCO
BANDAI
NAMCO¥254.09¥ 72.35
40.00
30.00

¥142.28¥133.00
22.50
40.00

¥111.13¥ 83.63
30.00
40.00

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

11.3%
4.3%
12.5
6.1
33.0
18.1
10.6
6.1
5.2
2.7
51.5
67.5
31.6
16.3

12.0%
7.6%
12.0
9.9
33.7
19.5
10.5
8.9
5.4
4.4
53.1
68.7
21.1
6.7

8.9%
9.0%
11.0
9.6
34.2
18.2
9.0
8.4
4.2
5.3
54.8
69.8
21.4
6.7

¥450,829¥459,133¥460,474

156,565

168,080

164,073

120,896

125,856

130,662

35,66942,22433,411

37,12245,61636,19814,15024,252

32,67924,02027,925

34,115

19,144

21,201

24,75931,80942,49335,000¥386,651¥408,490¥413,023

240,635

257,209267,713

107,528

110,829

101,649

252,244284,254289,944¥54.39¥95.73¥128.65

12.00*6

28.00

24.00

5.8%

9.4%

11.7%

9.6

11.5

8.8

26.8

27.4

28.4

7.9

9.2

7.3

3.1

5.3

7.1

63.0

67.1

69.4

13.5

5.1

5.8

*1 Figures for FY2003.3 to FY2005.3 are 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 / 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 fiscal 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

2008

NAMCO BANDAI NAMCO BANDAI NAMCO BANDAI
Holdings Inc.
Holdings Inc.
Holdings Inc.
(Consolidated)(Consolidated)(Consolidated)Financial Review■ Overview of Performance in the Fiscal Year
Ended March 31, 2008

Net Sales
The Company reported consolidated net sales of ¥460,474 million,a year-on-year increase of 0.3%. Looking at sales by region, sales inIn the year under review, there was an increasing sense of warinessthe domestic market were ¥360,697 million, down 1.8%. Overseas,

about the future course of business conditions due to such factors

sales were ¥54,566 million in the Americas, up 1.1%; ¥46,398

as rising crude oil prices and global financial concern stemming

million in Europe, a gain of 22.9%; and ¥37,933 million in Asia,

from the U.S. subprime loan problem. In the entertainment

excluding Japan, a rise of 2.4%.

industry, overall conditions were also uncertain, as a result of asimilar sense of wariness about the economy and the influence of

Cost of Sales

the “between seasons“ period accompanying the transition to

Cost of sales was ¥296,401 million, and the ratio of cost of sales tonext-generation hardware specifications.

net sales increased to 64.4%, from 63.4% a year earlier. Gross

In this setting, the BANDAI NAMCO Group pushed ahead withstrengthening, enriching, and expanding its portfolio management,

profit was ¥164,073 million, and the gross margin ratio declined to35.6%, from 36.6% in the previous year.

based on the three-year medium-term management plan it began
in April 2006.

SG&A Expenses

In the Game Contents SBU, sales were favorable, particularly

Selling, general and administrative (SG&A) expenses were ¥130,662

domestic sales of arcade game machines and overseas sales of

million, up 3.8%, and the ratio of SG&A expenses to net sales

home video game software. However, the Toys and Hobby SBU andincreased to 28.4%, from 27.4% in the previous year. Principal

Visual and Music Content SBU were unable to repeat the strong

items included marketing of ¥30,550 million, directors’

performances that they recorded in the previous fiscal year, when

remuneration and employees’ wages of ¥30,884 million, retirement

they enjoyed hit products and Group synergies. In a difficultand severance benefits of ¥1,116 million, and research andoperating environment, the Amusement Facility SBU recordeddevelopment of ¥17,583 million.

sluggish sales, particularly at existing facilities. As a result, theAmusement Facility SBU reconsidered its business strategy with an

Operating Income

eye to future market trends, and has decided to close certain facilities

Operating income was ¥33,411 million, a decrease of 20.9%, andwith the objective of increasing profitability. In expenses, factors

the operating income margin fell from 9.2% in the previous year tothat increased expenses included the integration of operational

7.3%. By region, operating income declined 26.1% in Japan, tobases by the Game Contents SBU and a change to the Company’s¥24,480 million; fell 31.4% in the Americas, to ¥2,318 million;

system for accounting for depreciation and amortization.

increased 30.0% in Europe, to ¥6,831 million; and rose 4.6% in Asia,
excluding Japan, to ¥2,855 million. Eliminations totaled ¥3,073
million.
Other Income (Loss)
Other income was ¥12,554 million, principally due to a gain on
sales and disposal of fixed assets, net of ¥16,105 million, which
exceeded a loss on impairment of fixed assets of ¥4,248 million
that accompanied that closure of domestic amusement facilities.
Net Income
Net income was up 34.7%, to ¥32,679 million, and the net marginincreased to 7.1%, from 5.3% a year earlier. This was largely
attributable to a gain on sales of fixed assets recorded in otherincome. Net income per share (basic) increased to ¥128.65, from¥95.73 in the previous year.

35

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

Toys and Hobby
Amusement Facility
Game Contents
Network
Visual and Music Content
Other Businesses

Operating income (Millions of yen)

FY2008.3

FY2007.3

Year on year

FY2008.3

FY2007.3

Year on year

¥180,165
89,829145,673
12,04436,95019,811¥185,586
88,196
139,187
12,49043,007
20,901¥(5,421)
1,633
6,486
(446)
(6,057)(1,090)¥14,310
1,631
14,794
904
3,832
754

¥17,403
4,004
11,510
880
9,497
1,018

¥(3,093)(2,373)3,284
24(5,665)(264)

Note: Due to the reorganization accompanying the management integration, the percentages of corporate expenses allocated to the Toys and Hobby, Amusement Facility, and Game
Contents SBUs in the fiscal year ended March 31, 2008, have increased in comparison with the previous year.

Toys and Hobby SBU

player Dragon Ball Z: Sparking! METEOR for the PlayStation2 andIn Japan, the Masked Rider Den-o series character toys for boys andthe Wii. In addition, domestic sales of PlayStation2 software were

the Yes! Pretty Cure 5 character toys for girls both posted solid

brisk, including SD Gundam Generation Spirits. Overseas sales weresales. However, sales did not reach the levels of the previous fiscal

solid, specifically NARUTO-related titles in the Americas and Dragon

year, which benefited from strong sales of hit products such as

Ball Z-related titles in Europe.

Tamagotchi Plus and DATA CARDASS. Overseas, the Tamagotchi

In coin-operated game machines, Tekken 6 and MIDNIGHT

series and POWER RANGERS series performed well, principally in

MAXIMUM TUNE 3 sold well, while repeat purchases of machines

the Americas and Europe, and the BEN10 character toys for boys

launched in the previous fiscal year contributed to results. Also, inalso proved popular in these regions.

game content for mobile devices, such as mobile phones, a variety

As a result, the Toys and Hobby SBU recorded net sales of¥180,165 million, a decrease of 2.9%, and operating income of¥14,310 million, down 17.8%.

of rich content to meet diversified customer needs was developed,
resulting in steady growth.
As a result, the Game Contents SBU recorded net sales of¥145,673 million, an increase of 4.7%, and operating income ofAmusement Facility SBU¥14,794 million, a rise of 28.5%.

The challenging conditions in the Japanese market meant existing
store sales declined 5.9% year on year. However, this fall was

Network SBU

counteracted by the strong start made by the new large-scale stores

In the mobile content business, games tailored to match user

opened in both the previous fiscal year and the fiscal year under

preferences performed well, including high-value-added content

review. However, in addition to the challenging environment faced

such as Dragon Ball Mobile, and content for casual gamers,by existing stores, the decline in the gross margin ratio that

including the comprehensive mini game site, Simple 100 series.

accompanied changes to the composition of sales adversely

Ring tones registered a sluggish performance, but customized

affected profits. Overseas, hybrid facilities performed well,

wallpaper content for mobile phones proved popular, and we wereparticularly in Europe. In the Americas, however, although we worked

able to halt the downward trend in the number of fee-paying

to increase efficiency from directly managed stores and to expand

subscribers, which began to increase. In solutions services forrevenue-sharing locations, the impact of slack market conditions

corporations, outsourcing operations for developing and managing

and an increase in costs that accompanied measures to strengthen

mobile content sites performed well.

sales of prizes meant that performance was sluggish.
As a result, the Amusement Facility SBU recorded net sales of¥89,829 million, an increase of 1.9%, and operating income of

As a result, the Network SBU recorded net sales of ¥12,044
million, a decrease of 3.6%, and operating income of ¥904 million,
an increase of 2.7%.

¥1,631 million, a decrease of 59.3%. At the end of the fiscal year,
we had a total of 1,736 facilities. By type, we had 408 directly

Visual and Music Content SBU

managed facilities, 1,320 revenue-sharing facilities, 5 theme parks,

Visual software packages, such as TV animation CODE GEASS:

and 3 spa facilities.

Lelouch of the Revolution, and music software packages related to
the TV animation Raki-Suta were popular. In addition, the Mobile

36

Game Contents SBU

Suit Gundam theatrical version commemorative boxed set and the

In home video game software, we took steps to strengthen

DVD software package Mobile Suit Gundam OO (Double O) werebusiness development around the world, centered on sales of ACE

launched. However, the industry as a whole has been undergoing a

COMBAT 6: Fires of Liberation for the Xbox 360 and the multi-

downturn, reflected in sluggish sales of the Group’s DVD software.

In addition, to prepare for the fully fledged shift to the Blu-ray Disc

Other businesses comprises companies that provide services to theformat, at the end of the fiscal year we accepted the return ofGroup’s SBUs, such as logistics, leasing, and building management.

certain products from retail outlets, further exacerbating conditions

In the year under review, we focused on efficiently operating thesein an already difficult operating environment.

Group support activities.

Consequently, the Visual and Music Content SBU recorded net

As a result, Other Businesses recorded net sales of ¥19,811 million,

sales of ¥36,950 million, a decrease of 14.1%, and operating

down 5.2%, and operating income of ¥754 million, a decrease ofincome of ¥3,832 million, a decline of 59.7%.

25.9%.

Other Businesses■ Results by Geographic Segment
Net sales (Millions of yen)Japan
Americas
EuropeAsia

Operating income (Millions of yen)

FY2008.3

FY2007.3

Year on year

FY2008.3

FY2007.3

Year on year

¥360,697
54,566
46,39837,933¥367,448
53,99037,76337,061¥(6,751)
576
8,635
872

¥24,480
2,318
6,831
2,855

¥33,128
3,377
5,253
2,730

¥(8,648)(1,059)1,578
125

Note: Due to the reorganization accompanying the management integration, the percentage of corporate overhead expenses allocated to Japan in the fiscal year ended March 31, 2008,
has increased in comparison with the previous year.

Japan

The Americas

In the Toys and Hobby SBU, the Masked Rider series character toys

In the Toys and Hobby SBU, the Tamagotchi series performed wellfor boys and the Yes! Pretty Cure 5 character toys for girls posted

and the BEN10 character toys for boys also contributed to results.

solid results. However, the SBU’s sales did not reach the levels of

However, the POWER RANGERS series sales did not match the highthe previous fiscal year, which benefited from the strong sales of hit

levels reached in the previous fiscal year.

products such as Tamagotchi Plus and DATA CARDASS.

In the Amusement Facility SBU, despite increased efficiency

Amusement Facility SBU sales were sluggish, as it continued tothrough directly managed stores and expanded revenue-sharing

face a challenging marketing environment, particularly at its

locations, the impact of slack market conditions and higher costs

existing stores. In addition, the decline in the gross margin ratio

accompanying strengthened prize campaigns meant a downturn inthat accompanied changes to the composition of sales adversely

performance.

affected profits.

The Game Contents SBU posted solid sales, particularly ACE

In the Game Contents SBU, solid sales were recorded by home

COMBAT 6: Fires of Liberation for the Xbox 360 and NARUTO-

video game software for the PlayStation2, such as SD Gundam

related titles and repeat purchases for home video game software.

Generation Spirits. In coin-operated game machines, Tekken 6 andAs a result of these factors, the Americas recorded net sales of

MIDNIGHT MAXIMUM TUNE 3 sold well, while repeat purchases of¥54,566 million, a 1.1% increase, and operating income of ¥2,318

machines sold in the previous fiscal year contributed to performance.

million, a decline of 31.4%.

In the Network SBU, the mobile content business released games
tailored to match user preferences that performed well, including

Europehigh-value-added content. Content for casual gamers performed

In the Toys and Hobby SBU, the POWER RANGERS and Tamagotchi

strongly, and customized wallpaper content for mobile phones

series continued to perform well and the BEN10 character toys forbecame popular. As a result, we were able to halt the downward

boys, launched in Europe in the fiscal year under review, also

trend in the number of fee-paying subscribers, which began toproved popular. In the Amusement Facility SBU, the hybrid facilities

increase.

purchased in the previous fiscal year contributed to sales, while inIn the Visual and Music Content SBU, some package software
titles performed strongly. However, the industry as a whole has

the Game Contents SBU, home video game software sales werefavorable, particularly for Dragon Ball Z-related titles.

been undergoing a downturn, reflected in sluggish sales of the

As a result, net sales in Europe amounted to ¥46,398 million, anGroup’s DVD software. In addition, to prepare for the fully fledged

increase of 22.9%, and operating income totaled ¥6,831 million,

shift to the Blu-ray Disc format, at the end of the fiscal year underup 30.0%.

review we accepted the return of certain unsold products fromretail outlets, further exacerbating conditions in an already difficult
operating environment.
As a result, net sales in Japan totaled ¥360,697 million, a 1.8%
decrease, and operating income was ¥24,480 million, a 26.1% decline.

37

Asia

Cash flows from Investing Activities

In the Toys and Hobby SBU, results were solid, centered on strong

Net cash used in investing activities was ¥14,981 million, down

sales of POWER RANGERS and Masked Rider character toys for boys

1.8%. Sales of property, plant and equipment totaled ¥22,425

and models in the Mobile Suit Gundam series. In the Amusement

million, up from ¥568 million, but acquisition of shares in

Facility SBU, initiatives surrounding prize games and Group

consolidated subsidiaries, net of cash acquired was ¥15,983 million,

products continued to do well.

compared to ¥1,103 million in the previous year, primarily due toAs a result, net sales in Asia were ¥37,933 million, up 2.4%, andoperating income was ¥2,855 million, up 4.6%.

acquisition of shares in consolidated subsidiaries through tender
offers for Bandai Visual Co., Ltd., and Bandai Network Co., Ltd.
Purchases of property, plant and equipment and of intangible■ Financial Position

assets were ¥14,670 million, up from ¥14,521 million, andpurchases of investment securities, in Toei Co., Ltd., and others

At the fiscal year-end, total assets were up ¥4,533 million year on

were ¥4,994 million, down from ¥7,595 million.

year, to ¥413,023 million. This gain was primarily due to a ¥12,392
million increase in cash and time deposits, which exceeded a

Cash Flows from Financing Activities¥11,510 million decrease in net property, plant and equipment,

Net cash used in financing activities was ¥15,067 million, down

including land and amusement facilities and machines.

20.1% year on year. Proceeds from long-term debt were ¥16,000

Total liabilities were down ¥1,157 million, to ¥123,079 million,

million, while in the previous year no proceeds were recorded. A

mainly because an increase of ¥9,529 million in long-term debt was

decrease in treasury stock—total purchases of treasury stock lesscounteracted by decreases of ¥6,832 million in short-term

proceeds from disposal of treasury stock—of ¥10,236 million wasborrowings and ¥4,494 in trade payables.

recorded, compared to ¥8,084 million in the previous fiscal year.

Total net assets grew ¥5,690 million year on year, to ¥289,944

Repayment of long-term debt was ¥12,542 million, up from ¥7,434

million, principally because a ¥32,679 million rise in retained

million, while dividends paid totaled ¥7,163 million, compared toearnings due to an increase in net income counteracted a ¥9,196¥6,073 million in the previous fiscal year.

million fall in additional paid-in capital due to retirement of treasury
stock, etc., and a ¥1,502 million decrease in retained earnings due
to a reversal of land revaluation. As a result, the shareholders’■ Basic Policy on the Distribution of Profits
and the Payment of Dividends

equity ratio increased to 69.4%, from 67.1% a year earlier.
The current ratio* was 263.4%, compared with 232.1% a year

The Company gives high priority to the distribution of profits toearlier; the quick ratio* was 203.0%, compared with 184.4%; andshareholders, and its basic policy for the payment of dividends is tothe interest coverage ratio* was 200.0 times, compared to 180.1 times.

continue to pay dividends and raise enterprise value while further* Current ratio: Total current assets / Total current liabilities

strengthening the Group’s competitiveness and maintaining a

Quick ratio: (Cash and time deposits + Short-term investments +sound financial position. Specifically, our objectives are to maintain

Trade receivables ) / Total current liabilities
Interest coverage ratio: Cash flows from operating activities /Interest paida base level of annual per share dividend payments of ¥24 and aconsolidated dividend payout ratio of 30%.
Furthermore, as a basic principle the Company plans to use
profits remaining after dividends have been paid to supplement■ Cash Flows

retained earnings, which in turn are used for continued investment
and strengthening of the financial structure. After taking into

Cash and cash equivalents at the end of the fiscal year totaled

account current levels of shareholders’ equity, going forward we¥129,290 million, a year-on-year increase of ¥5,134 million.

will use some retained earnings to purchase treasury stock. Any
decision will be based on a comprehensive consideration of such

Cash Flows from Operating Activities

factors as the Company’s level of capital, performance and share

Net cash provided by operating activities was ¥35,000 million,

price trends, and whether any major investment projects are being

down 17.6%. Principal cash outflows were an increase in income

undertaken.

taxes paid from ¥13,671 million a year earlier to ¥16,286 million

In accordance with the Company’s basic policy, dividends for theand acquisition of amusement facilities and machines of ¥9,286

year was ¥24 per share, comprised of the base component of ¥12

million, compared to ¥10,601 million in the previous fiscal year.

per share for both interim and year-end dividends. The consolidated

However, income before income taxes and minority interests was

payout ratio was 18.7%.

¥45,965 million, compared to ¥43,714 million in the previous fiscal
year, and overall net cash provided by operating activities increased.

38

■ Targets and Management Indicators

facilities and will target increased share by concentrating resources
into the development of large-scale machines, including the large-

The Group has adopted return on assets (ROA) and return on equity

scale medal machines Sea Story Lucky Marine Theater.

(ROE) as medium-term management performance indicators. The

In the Network SBU, focusing on profitability, we will enhanceGroup believes that it can reinforce and stabilize its management

diverse content and reinforce our revenue/profit foundation by

foundation over the medium-to-long term by striving to consistently

bolstering synergies between Group companies. We will alsoutilize all of its assets and shareholders’ equity effectively.

devote our energies into the continued provision of newSpecifically, the Group aims to attain consolidated ROA of 10%
and consolidated ROE of 8.0% in the fiscal year ending March
2009, and will work to enhance management efficiency in parallelwith business expansion.

technologies for mobile phone handsets and for corporate
solutions, such as the development of systems for mobile sites.
In the Visual and Music Content SBU, we will conduct platformbusiness development in line with the distinctive characteristics ofproducts, including for the Blu-ray Disc format, such as CODE

■ Outlook for the Fiscal Year Ending March 31, 2009

GEASS: Lelouch of the Rebellion R2, Mobile Suit Gundam 00(Double O), and Macross F (Frontier) TV animations. Also, from theWe expect business conditions to remain unstable, due to the effectsummer we will begin fully fledged Blu-ray Disc rental operations.

on exports of the U.S. economic slowdown, the high price of crude

As a result of these factors, for the fiscal year ending March 31,

oil, the strong yen, and sluggish consumer spending due to the2009, we are forecasting net sales of ¥470,000 million, a year-on-

rising prices of daily necessities. For the Group, the operating

year increase of 2.1%; operating income of ¥38,000 million, a gain

environment in the entertainment industry is expected to undergo

of 13.7%; recurring income of ¥39,500 million, up 9.1%; and net

further change as consumer trends continue to diversify and moreincome of ¥22,500 million, a decrease of 31.1%.

new technologies and services are introduced. Consequently, theoutlook for the industry remains unclear.
In this setting, the Group will push ahead with strengthening,

Fiscal Year Ending March 31, 2009 (Consolidated Plan)
Business Segments

enriching, and expanding its portfolio management, based on thethree-year medium-term management plan launched in April 2006,
which has now entered its final year.
In the Toys and Hobby SBU, in Japan we will utilize longestablished, popular character series to further cultivate existingcustomers, such as Engine Sentai Go-onger and Masked Rider for
young boys and Yes! Pretty Cure 5 for young girls. We will also
expand our target customer groups by strengthening productToys and Hobby
Amusement Facility
Game Contents
Network
Visual and Music Content
Other Businesses
Eliminations and corporate
Total(Millions of yen)

Net sales

Operating income¥180,000
86,000160,000
11,00038,00018,000(23,000)¥470,000¥16,000
2,000
18,000
800
3,000
700
(2,500)¥38,000

development for adult consumers. Overseas, as well as continuing
to focus on POWER RANGER and BEN10 character toys for boys,

Geographic Segments

we will also develop new character products, such as for the
Dragon Ball series.

(Millions of yen)

Net sales(after eliminations) Operating income

foundation by sharing management know-how of low-cost operations.

Japan
Americas
EuropeAsia
Eliminations and corporate
Total

Overseas, we intend to maintain a balance between efficiency andNote: Figures in these tables are as of August 6, 2008.

In the Amusement Facility SBU, in Japan we will close approximately
20% of existing facilities, focusing on closures of non-profitablefacilities. We are revising our standards for the opening and closingof amusement facilities, aiming to strengthen our revenue/profit¥354,500
55,00047,00013,500—¥470,000¥27,800
3,800
6,400
2,500
(2,500)¥38,000

expansion tailored to the characteristics of each region. Also,
domestically the Group will develop new facilities and continue to■ Forward-Looking Statements

provide its customers with the Group’s unique added value.
In the Game Contents SBU, we will strengthen our multiplatform

Forecasts for the next fiscal year and other future projections in thisstrategy on a global level and in a balanced manner while targeting

annual report are based on information available to the Group atuser preferences, such as through sales of Soul Caliber IV for thethe time they were made and are therefore subject to various risks

PLAYSTATION 3 and Xbox 360 and Active Life Outdoor Challenge

and uncertainties. Actual results therefore may differ materially from

(Family Trainer) for the Wii. In addition, we will develop operations

projections for a variety of factors. Major factors that could influencewith a focus on profitability, concentrating efforts into increasing

results include changes in the Company and the Group’s operating

sales of selected titles from within our lineup. In coin-operated

environment, market trends, and exchange rate fluctuations.

game machines, we will bolster linkages between amusement39Consolidated Balance Sheets
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
As of March 31, 2007 and 2008

Thousands of
U.S. dollars(note 3)

Millions of yen

2007

2008

2008

AssetsCurrent assets:
Cash and time deposits (note 4)¥113,711¥ 126,103$ 1,258,639

Short-term investments (notes 4 and 5)

12,191

7,069

70,556

Trade receivables (note 6)

78,43073,141730,023

Allowance for doubtful receivables(1,948)(607)(6,058)Inventories (note 7)

34,31836,429363,599

Deferred tax assets (note 12)

5,718

5,909

58,978Other current assets

14,78919,669196,316

Total current assets

257,209267,713

2,672,053

Investments and other assets:
Investment securities (note 5)

28,817

26,143260,934

Guarantee money deposited

21,023

20,112200,739

Deferred tax assets (note 12)

4,142

6,291

62,791Other investments and assets

4,171

3,542

35,352

Allowance for doubtful receivables(1,296)(1,216)(12,137)

56,85754,872547,679

Total investments and other assets

Property, plant and equipment:
Buildings and structures

30,28626,316262,661

Amusement facilities and machines

85,262

81,042808,883

Land

20,59814,347

143,198

Other property, plant and equipment

65,094

66,575

664,488

201,240

188,280

1,879,230(126,284)(124,834)(1,245,973)

74,95663,446633,257

9,739

15,800157,700

Other intangible assets

9,729

11,192

111,708

Total intangible assets

19,46826,992

269,408¥ 408,490¥ 413,023$ 4,122,397

Total
Less accumulated depreciation
Net property, plant and equipment

Intangible assets:
Goodwill

Total assets
See accompanying Notes to Consolidated Financial Statements.

40

Thousands of
U.S. dollars(note 3)

Millions of yen

2007

2008

2008

Liabilities and net assets
Current liabilities:
Short-term borrowings (note 9)¥ 12,170

¥

5,338

$

53,279Trade payables (note 10)

47,09742,603425,222

Accrued expenses

31,86933,765

337,010

Accrued income taxes (note 12)10,875

9,263

92,454

Other current liabilities (note 12)

8,818

10,680106,597

110,829

101,649

1,014,562

Long-term debt (note 9)

1,133

10,662

106,418

Accrued retirement and severance benefits (note 11)

2,749

1,598

15,950

Deferred tax liabilities (note 12)

5,786

4,732

47,230Total current liabilities
Long-term liabilities:

Other long-term liabilities

3,739

4,438

44,296

Total long-term liabilities

13,407

21,430213,894

Total liabilities

124,236

123,079

1,228,456

Net assets:
Common stock (notes 17 and 18)
Authorized 1,000,000,000 shares;
10,00010,00099,810Additional paid-in capital (note 18)

issued 256,080,191 shares

97,142

87,946

877,792

Retained earnings (note 15)

182,389

192,865

1,924,993(3,952)(2,840)(28,346)

285,579

287,9712,874,249

4,101

193

1,926

Treasury stock, at cost; 2,731,047 shares in 2007 and 1,766,271 shares in 2008 (note 17)
Subtotal
Other securities valuation difference (notes 5 and 12)
Deferred gains or losses on hedges, net of tax
Land revaluation (notes 12 and 16)
Translation adjustments
Subtotal
Stock subscription rights (note 18)

92

(113)

(1,128)(21,286)(6,284)(62,721)

5,684

5,029

50,195(11,409)(1,175)(11,728)

577

1,531

15,281

Minority interests

9,507

1,617

16,139Total net assets

284,254289,9442,893,941¥408,490¥413,023$4,122,397

Contingencies (note 21)
Total liabilities and net assets

41

Consolidated Statements of Income
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2007 and 2008

Thousands of
U.S. dollars(note 3)

Millions of yen

2007

2008

2008

Net sales¥459,133¥460,474$4,596,008

Cost of sales

291,053

296,401

2,958,389

Gross profit

168,080

164,073

1,637,619

125,856

130,6621,304,143

42,22433,411

333,476

Interest and dividend income

2,088

2,553

25,482

Interest expense

(237)

(202)

(2,016)

Gain (loss) on sales of investment securities, net

4,827

288

2,875

Loss on valuation of investment securities

(701)

(225)

(2,246)(267)

16,105

160,745(5,070)(4,248)(42,399)

Selling, general and administrative expenses (note 13)
Operating income
Other income (loss):

Gain (loss) on sales and disposal of fixed assets, net
Loss on impairment of fixed assets (note 8)
Other

850

(1,717)(17,139)

1,490

12,554125,302

Income before income taxes and minority interests

43,71445,965

458,778

Income taxes (note 12)

17,57012,635

126,110

Minority interests

1,892

651

6,498

¥ 24,252¥ 32,679$ 326,170

Net income

U.S. dollars(note 3)

Yen

Data per common share (note 14):
Net assets at March 31¥1,063.29¥1,127.72$11.26

Basic

95.73

128.65

1.28

Diluted95.67

128.47

1.28

28.00

24.00

0.24

Net income:

Dividend 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, 2007 and 2008

Thousands of
U.S. dollars(note 3)

Millions of yen

Common stock (notes 17 and 18):
Balance at beginning of year
Balance at end of year
Additional paid-in capital (note 18):
Balance at beginning of year
Disposal of treasury stock
Retirement of treasury stock
Purchase of treasury stock from consolidated subsidiaries
Decrease in treasury stock due to a share exchange
Balance at end of year
Retained earnings (note 15):
Balance at beginning of year
Net income
Effect from newly consolidated subsidiaries
Decrease due to the deconsolidation of subsidiaries
Decrease from merger of consolidated subsidiaries
Effect from the reduction of investments reported under the equity method
Increase due to change of consolidated subsidiaries into investments reported
under the equity method
Reversal of land revaluation
Cash dividends
Bonuses to directors and corporate auditors
Balance at end of year
Treasury stock (note 17):
Balance at beginning of year
Net change during year
Balance at end of year
Other securities valuation difference (notes 5 and 12):
Balance at beginning of year
Net change during year, net of tax
Balance at end of year
Deferred gains or losses on hedges, net of tax:
Balance at beginning of year
Net change during year
Balance at end of year
Land revaluation (notes 12 and 16):
Balance at beginning of year
Net change during year, net of tax
Balance at end of year
Translation adjustments:
Balance at beginning of year
Net change during year
Balance at end of year
Stock subscription rights (note 18):
Balance at beginning of year
Net change during year
Balance at end of year
Minority interests:
Balance at beginning of year
Net change during year
Balance at end of year
Total net assets at end of year

2007

2008

2008

¥ 10,000
10,000¥ 10,000
10,00095,772868—
502—
97,142

97,142—(8,184)—(1,012)
87,946

969,578—(81,685)—(10,101)
877,792

164,504
24,252
31
—
(29)
295

182,389
32,679
(104)
(27)
—
—

1,820,432
326,170(1,038)
(269)
—
—

—
(173)
(6,073)(418)
182,389

93(15,002)(7,163)—
192,865928(149,736)(71,494)—
1,924,993(11,156)
7,204(3,952)(3,952)
1,112(2,840)(39,445)
11,099(28,346)

4,145
(44)
4,101

4,101
(3,908)193

40,932(39,006)
1,926

—
92
92

92
(205)
(113)

918
(2,046)(1,128)(21,460)
174(21,286)(21,286)
15,002(6,284)(212,457)
149,736(62,721)

1,802
3,882
5,684

5,684
(655)
5,029

56,733(6,538)50,195

—
577
577

577
954
1,531

5,759
9,522
15,281

8,637
870
9,507
¥284,254

9,507(7,890)1,617¥289,944

94,889(78,750)
16,139$2,893,941$

99,81099,810See accompanying Notes to Consolidated Financial Statements.

43

Consolidated Statements of Cash Flows
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2007 and 2008

Thousands of
U.S. dollars(note 3)

Millions of yen

2007

2008

2008

Cash flows from operating activities:
Income before income taxes and minority interests¥ 43,714¥ 45,965$ 458,778

Depreciation

21,201

24,759247,120

Loss on impairment of fixed assets

5,070

4,248

42,399Loss (gain) on sales and disposal of fixed assets, net

267(16,105)(160,745)

Loss on disposal of amusement facilities and machines

1,129

1,215

12,127

Gain (loss) on sales of investment securities, net(2,875)(4,827)(288)

Loss on valuation of investment securities

701

225

2,246

Decrease (increase) in trade receivables(3,111)6,129

61,174

Decrease (increase) in inventories(3,588)(3,936)(39,285)

Acquisition of amusement facilities and machines(10,601)(9,286)(92,684)

3,465(4,203)(41,950)

902

217

2,166

54,322

48,940488,471

Interest and dividends received

2,078

2,521

25,162

Interest paid

(236)

(175)

(1,747)(13,671)(16,286)(162,550)

42,49335,000349,336

Increase (decrease) in trade payables
Other
Subtotal

Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Decrease (increase) in time deposits, net
Purchases of property, plant and equipment
Sales of property, plant and equipment

133(2,218)(22,138)(9,731)(10,471)(104,511)

568

22,425

223,825

Purchases of intangible assets(4,790)(4,199)(41,910)Purchases of investment securities(7,595)(4,994)(49,845)

Sales of investment securities

6,165

26

260

Acquisition of shares in consolidated subsidiaries, net of cash acquired(1,103)(15,983)(159,527)

1——

Sales of shares in consolidated subsidiaries
Purchase of subsidiary shares affecting the scope of consolidation

(417)

—

—

Sales of subsidiary shares affecting the scope of consolidation

445

(63)

(629)

Payment of guarantee money deposited(2,578)(1,588)(15,850)

Collection of guarantee money deposited

1,556

2,260

22,557

Other

2,093

(176)

(1,758)(15,253)(14,981)(149,526)

Net cash used in investing activities
Cash flows from financing activities:
Increase (decrease) in short-term borrowings, net(13,113)(739)(7,376)

Proceeds from long-term debt—

16,000159,697

Repayment of long-term debt

(7,434)(12,542)(125,182)

Decrease (increase) in treasury stock

8,084(10,236)(102,166)

Dividends paid

(6,073)(7,163)(71,494)

(320)

(387)

(3,863)(18,856)(15,067)(150,384)

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

2,550

(304)

(3,034)

Net increase in cash and cash equivalents

10,934

4,648

46,392

Cash and cash equivalents at beginning of year

113,186

124,156

1,239,205

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

15

486

4,851

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

21

—

—

¥124,156¥129,290$1,290,448

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

Investments in unconsolidated subsidiaries and certain

NAMCO BANDAI Holdings Inc. (“the Company”) and its

affiliates other than those discussed in the previous paragraphconsolidated subsidiaries (collectively, “the Company”) haveare stated at cost. If the equity method had been applied toprepared their financial statements in accordance with thethe investments in these companies, there would have been

provisions set forth in the Japanese Financial Instruments andno material effect on the accompanying consolidated financial

Exchange Act and its related accounting regulations, and instatements.

conformity with accounting principles generally accepted in

All significant intercompany accounts and transactions haveJapan, which are different in certain respects as to application

been eliminated in consolidation. The excess of cost over theand disclosure requirements of International Financial Reporting

underlying fair value of the net assets of consolidated sub-Standards.

sidiaries from acquisition is being amortized over a five-year

The accounts of overseas subsidiaries are based on theirperiod.

accounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective(b) Cash and Cash Equivalentscountries of domicile. The accompanying consolidated

In reporting cash flows, the Company considers cash on hand,financial statements have been prepared and translated into

demand deposits, and all highly liquid investments withEnglish from the consolidated financial statements of theoriginal maturities of three months or less to be cash and cash

Company prepared in accordance with Japanese GAAP and

equivalents (note 4).

filed with the appropriate Local Finance Bureau of the Ministryof Finance as required by the Financial Instruments and(c) Foreign Currency Translation

Exchange Act.

Foreign currency transactions are translated into yen at rates

Some supplementary information included in the statutoryin effect at the dates they are transacted, and the gains orJapanese language consolidated financial statements that islosses arising from the settlement of the related receivables or

not required for fair presentation is not presented in thepayables are included in “Other income (loss)”.

accompanying consolidated financial statements.

Receivables and payables denominated in foreign currencies

In preparing the accompanying consolidated financial state-at the balance sheet date are translated at the rates in effectments, certain reclassifications have been made to the con-as of the balance sheet date and the unrealized gains or losses

solidated financial statements issued in Japan in order to present

are included in “Other income (loss)”.

them in a form that is more useful to readers outside Japan.

The assets and liabilities of foreign consolidated subsidiaries

Certain reclassifications have been made to the prior year

and affiliates are translated into yen at the rates of exchange

consolidated financial statements to conform to the presen-in effect at the balance sheet date. Revenue and expenses oftation used for the year ended March 31, 2008.

foreign consolidated subsidiaries and affiliates are translated
into yen at the average rates of exchange during the year. Gains

2 Summary of Significant Accounting Policies

and losses resulting from foreign currency transactions are(a) Principles of Consolidation

included in “Other income (loss)”, and those resulting from

The accompanying consolidated financial statements include

the translation of foreign currency financial statements are

the accounts of the Company and its significant subsidiaries.

generally excluded from the consolidated statements of income

Consolidation of the remaining subsidiaries would have had
no material effect on the accompanying consolidated financial

and are included in “Translation adjustments” and “Minority
interests” in “Net assets”.

statements. Investments in significant affiliates are accounted
for using the equity method.

45

(d) Accounting Standards for Income and Expenses(g) Inventories

Accounting for video game software production expenses:

Domestic consolidated subsidiaries:

A distinctive characteristic of video game software is theInventories are stated at cost determined on an average cost basis.

process through which the software is combined with theForeign consolidated subsidiaries:

content that cannot be separated into identifiable components.

Inventories are stated at the lower of cost, determined prin-

The content is considered to be an important component ofeach video game title, which includes the game content andvisual / music data. Once management makes a decision to go

cipally by the first-in, first-out method, or market.
Both domestic and foreign consolidated subsidiaries state
game software work-in-process by the specific-cost method.

forward in distributing a title, the Company records thesoftware and content development costs as inventories.

(h) Income Taxes

The capitalized production costs (which include inventories)

Current income taxes are accounted for based on income andare amortized to cost of sales based on projected sales volumes.

deferred income taxes are accounted for under the asset andliability method. Deferred tax assets and liabilities are recog-(e) Short-Term Investments and Investment Securities

nized for future tax consequences attributable to differences

The Company classifies its securities into one of the following

between the financial statement carrying amounts of existing

three categories: held-to-maturity securities, investments inassets and liabilities and their respective tax bases and operat-

unconsolidated subsidiaries and affiliated companies, or othering loss and tax credit carryforwards. Deferred tax assets andsecurities.

liabilities are measured using enacted tax rates expected to

Held-to-maturity securities are amortized to face value over

apply to taxable income in the years in which those temporary

the period remaining to the maturity date. Investments indifferences are expected to be recovered or settled. The effect on

unconsolidated subsidiaries and affiliated companies aredeferred tax assets and liabilities of a change in the tax rate is recog-

carried at cost. Other securities with a market value are

nized in income in the period that includes the enactment date.

principally carried at market value. The difference, net of tax,
between the acquisition cost and the carrying amount of(i) Property, Plant and Equipment

other securities with a market value, is recognized in “Other

The Company and its domestic consolidated subsidiaries:

securities valuation difference” in “Net assets” until realized.

Depreciation of property, plant and equipment is principally

Other securities without a market value are principally carriedcomputed by the declining-balance method based onat cost. The cost of other securities sold is principally

estimated useful lives. The straight-line method is used forcomputed based on the moving average method.

buildings (except for building fixtures) acquired since April 1,
1998. The estimated useful lives for Buildings and structures(f) Allowance for Doubtful Receivables

and Amusement facilities and machines are 2–50 years and

The allowance for doubtful receivables is provided for possible

3–15 years, respectively.

losses on unrecoverable receivables. For ordinary receivables,

From fiscal 2008, due to the revision of the Japanese

the amount of the allowance is based on the historical rate ofCorporation Tax Law, the Company and some of its domestic

loss. For receivables from debtors at risk of bankruptcy andconsolidated subsidiaries changed the method of calculatingreceivables from debtors in bankruptcy or under reorganiza-

the depreciation of property, plant and equipment acquiredtion, the amount of the allowance is based on individuallyon or after April 1, 2007, based on the revised Japaneseestimated unrecoverable amounts.

Corporation Tax Law.
As a result of this change, operating income and income
before income taxes and minority interests each decreased by

46¥989 million ($9,871 thousand).

From fiscal 2008, due to the revision of the Japanese(l) Derivatives and Hedging Activities

Corporation Tax Law, the Company and some of its domestic

The Company and its consolidated subsidiaries use derivative

consolidated subsidiaries, depreciate the difference between

instruments, such as forward exchange contracts and interest rate

the original residual value of 5% of acquisition cost of assets

swap contracts, to reduce market risks stemming from fluctua-acquired on or before March 31, 2007, and the new residual

tions in foreign exchange rates and interest rates. The Company

value of ¥1 (memorandum value) by the straight line method

and its consolidated subsidiaries use these derivative instru-

over 5 years commencing from the fiscal year following thements solely for the purpose of reducing the risks resulting fromyear in which the asset becomes fully depreciated to thesuch fluctuations to which they are exposed in the course oforiginal residual value.

their ordinary business activities. Accordingly, the Company

As a result of this change, operating income and income
before income taxes and minority interests each decreased bydoes not use derivative instruments or other financial
instruments for speculative purposes.

¥187 million ($1,866 thousand).

The Company’s counterparties for derivative instruments are

Foreign consolidated subsidiaries:

all highly creditworthy financial institutions and, therefore, theDepreciation of property, plant and equipment is principally

Company believes that it is exposed to almost no counterparty

computed by the straight-line method based on estimatedrisk. Derivative transactions are conducted in accordance with

useful lives. The estimated useful lives for Buildings andinternal rules that specify transaction authority and transaction

structures and Amusement facilities and machines are 5–50

amount limits.

years and 2–7 years, respectively.

As a general rule, derivative instruments are stated at fairvalue. For derivative instruments that meet the standards for(j) Intangible Assets

hedge accounting, recognition of gains or losses is deferred. In

Depreciation of intangible assets is computed by the straight-

cases where forward foreign exchange contracts meet certain

line method based on estimated useful lives. Software forhedging criteria, they are accounted for under the allocationinternal use is depreciated over 1–5 years.

method. Interest rate swaps that meet specific matching

Goodwill is amortized over 5 years using the straight-line
method, except for goodwill recognized by foreign subsidiaries

criteria are accounted for using specific allowed methods
under relevant accounting standards.

which is accounted for in conformity with accounting principles

The Company assesses the effectiveness of hedging

and practices generally accepted in the respective country oftransactions from the start of the transaction to the point atincorporation.

which effectiveness is assessed by comparing the cumulativechanges in the fair value or the cumulative changes in the(k) Impairment of Fixed Assets

cash flows of the hedged item with the cumulative changes in

The Company has applied the “Accounting Standard forthe fair value or the cumulative changes in the cash flows of

Impairment of Fixed Assets” (the “Opinion Concerning

the hedging instrument. In the event that critical terms are theEstablishment of Accounting Standard for Impairment of Fixedsame for the hedging instrument and the hedged assets,

Assets” (Business Accounting Deliberation Council, August 9,

liabilities, or forecast transaction, it is assumed that the hedge

2002)) and the “Implementation Guidance for the Accounting

is 100% effective, so the assessment of effectiveness is notStandard for Impairment of Fixed Assets” (Guidance on

performed. Also, for interest rate swaps for which the specificCorporate Accounting Standard No. 6, October 31, 2003).

allowed methods are applied, the assessment of effectivenessThe amount of accumulated losses on impairment of fixed

is not performed.

assets is deducted directly from the carrying amount of each
asset pursuant to the Regulations Concerning Financial
Statements.

47

In the event that a hedge becomes ineffective, hedge(o) Provision for Losses from Business Restructuringaccounting is no longer applied and the recognition of the

Certain consolidated subsidiaries make provision for estimatedgains or losses on the hedge transaction is no longer deferred.

losses on restructuring of operations.

(m) Provision for Directors’ Bonuses(p) Provision for Sales Returns

The “Accounting Standard for Directors’ Bonus” (The

Certain consolidated subsidiaries provide for losses on

Accounting Standards Board of Japan (ASBJ) Statement No. 4

returned goods after the end of the fiscal year based on

Accounting Standard, November 29, 2005) became effective

historic experience.

from April 1, 2006.
The Company and its domestic consolidated subsidiaries(q) Leases

provide accrued bonuses for directors based on the estimatedFinance leases, except for those where the legal title to theamounts to be paid in respect of the fiscal year.

underlying property is transferred from the lessor to the lessee
at the end of the lease term, are accounted for similar(n) Retirement and Severance Benefits

to operating leases. The Company and its consolidated

The Company has established a retirement lump-sum benefits

subsidiaries do not have any leases where the title is trans-

system and a defined contribution pension plan. With the excep-

ferred. Foreign consolidated subsidiaries account for financetion of certain companies, domestic consolidated subsidiaries

leases in accordance with local accounting principles.

have established qualified retirement benefit plans, retirement
lump-sum benefits, or comprehensive employee pension(r) Appropriation of Retained Earnings

funds. At the Company’s discretion, additional benefits may be

In Japan, retained earnings with respect to a given financial

paid at retirement. Certain foreign consolidated subsidiaries

period are appropriated by resolution of the shareholders at ahave established defined contribution pension plans.

general meeting to be held subsequent to the close of such

Accrued retirement and severance benefits for employees inrespect of defined benefit plans is provided for based on thefinancial period. The accounts for that period do not,therefore, reflect such appropriations.

estimated values of projected benefit obligations and pension
plan assets at the end of the fiscal year. Unrecognized(s) Data per Common Shareactuarial gain or loss is amortized, beginning from the fiscal

In computing basic net income per common share, the average

year following the year in which it is incurred, using thenumber of shares outstanding during each year has been used.

straight-line method over a period that does not exceed the

Diluted net income per share assumes the dilution that

average remaining years of service of employees as of the end

could occur if securities or other contracts to issue commonof the fiscal year in which it is incurred (9 to 17 years). Certain

stock were exercised or converted into common stock, ordomestic consolidated subsidiaries amortize prior service costs

resulted in issuance of common stock.

over a fixed period (10 years) that does not exceed the average remaining years of service of employees at the point when
the costs are incurred.
To provide for payment of retirement benefits to directors
and corporate auditors, certain domestic consolidated subsidiaries record the amount payable at the end of the fiscal
year in accordance with internal regulations.

48

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

(t) Presentation of Net Assets

rights and minority interests are required to be included in the

The “Accounting Standard for Presentation of Net Assets in

net assets section under the New Accounting Standard. Under

the Balance Sheet” (The Accounting Standards Board of Japanthe previous presentation rules, companies were required to(ASBJ) Statement No. 5 Accounting Standard, December 9,

present stock subscription rights and minority interests in the2005) and “Guidance on the Accounting Standard for Presenta-

current liabilities section and between the non-current

tion of Net Assets in the Balance Sheet” (The Accounting

liabilities and shareholders’ equity sections, respectively.

Standards Board of Japan (ASBJ) Guidance No. 8 Guidance on
Accounting Standard, December 9, 2005) became effective(u) Stock Options

from April 1, 2006.

The “Accounting Standard for Share-based Payment” (The

Under the New Accounting Standard, the following items

Accounting Standards Board of Japan (ASBJ) Statement No. 8

are presented differently compared to the previous pre-Accounting Standard, December 27, 2005) and the “Guidance

sentation. The net assets section includes unrealized gains

on the Accounting Standard for Share-based Payment” (The(losses) on hedges, net of tax. Under the previous presentation

Accounting Standards Board of Japan (ASBJ) Guidance No. 11

rules, companies were required to present unrealized gains

Guidance on Accounting Standard, May 31, 2006) became(losses) on hedges in the assets or liabilities section without

effective from April 1, 2006.

considering the related income tax effects. Stock subscription

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, 2008, have been translated into U.S. dollars at the rate of ¥100.19=U.S.$1, the approximate exchange rate on the Tokyo
Foreign Exchange Market on March 31, 2008.
This translation should not be construed as an indication that the amounts shown could be converted into U.S. dollars at such rate.

4 Cash and Cash Equivalents
Reconciliations of cash and cash equivalents at March 31, 2007 and 2008 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

2007

2008

2008

Cash and time deposits¥113,711¥126,103$1,258,639

Short-term investments

12,191

7,069

70,556Time deposits with maturities in excess of three months
Cash and cash equivalents per consolidated statement of cash flows(1,746)(3,882)(38,747)¥124,156¥129,290$1,290,448

Cash and time deposits of ¥54 million is pledged as collateral for short-term borrowings of ¥23 million at March 31, 2007.

49

5 Short-Term Investments and Investment Securities
Short-term investments and investment securities at March 31, 2007 and 2008 are summarized as follows:
Held-to-maturity securities at March 31, 2007 and 2008 include marketable governmental bond securities with a carrying
amount of ¥6,017 million and ¥30 million ($299 thousand), respectively, which approximates market value.
Thousands of
U.S. dollars

Millions of yen

2007

2008

64

2008

Held-to-maturity securities¥ 6,054¥$

639

Other securities–marketable

17,878

15,102

150,733

Other securities–non-marketable

8,019

8,924

89,071

Investments in unconsolidated subsidiaries and affiliated companies

9,057

9,122

91,047

Total of short-term investments and investment securities¥41,008¥33,212$331,490

The original cost, carrying amount (market value), and gross unrealized holding gain (loss) for marketable other securities at
March 31, 2007 and 2008, are summarized as follows:
Millions of yen

2007
Original cost

Gross unrealized
holding gain

Gross unrealized
holding loss

Carrying amount(Market value)

Equity securities¥9,376¥8,259¥(120)¥17,515

Debt securities

100

—

(2)

98

Other

223

46

(4)

265

Total

¥9,699¥8,305¥(126)¥17,878

Original cost

Gross unrealized
holding gain

Gross unrealized
holding loss

Carrying amount(Market value)

Equity securities¥12,410¥4,932¥(2,746)¥14,596

Debt securities

301

—

(2)

299

Other securities–marketable:

Millions of yen

2008

Other securities–marketable:

Other

223

—

(16)

207

Total

¥12,934¥4,932¥(2,764)¥15,102

Thousands of U.S. dollars

2008
Original cost

Gross unrealized
holding hain

Gross unrealized
holding loss

Carrying amount(Market value)

Equity securities$123,865$49,226$(27,408)$145,683

Debt securities

3,004

—

(20)

2,984

Other securities–marketable:

50

Other

2,226

—

(160)

2,066

Total

$129,095$49,226$(27,588)$150,733

Proceeds and gross realized gains and losses from the sale of other securities in the years ended March 31, 2007 and 2008 are
as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2008

2008

Proceeds from the sales of other securities

¥534

¥ 26

$ 260

Gross realized gains from the sales of other securities

499

2

20

Gross realized losses from the sales of other securities

(1)

(12)

(120)

The following is a summary of non-marketable other securities at March 31, 2007 and 2008:
Thousands of
U.S. dollars

Millions of yen

2007

2008

2008

Carrying
amountCarrying
amountCarrying
amountUnlisted securities¥1,763¥1,721$17,177

Money market fund and others

5,706

5,863

58,519Other securities–non-marketable:

Other

550

1,340

13,375

Total¥8,019¥8,924$89,071

Other securities with specified maturity dates and held-to-maturity securities at March 31, 2007 and 2008 mature as follows:
Millions of yen

2007
Due:

Withinone year

After 1through 5 years

After 5through 10 years¥5,997

¥20

¥—

—

—

37

¥5,997¥20¥37

Debt securities:
Governmental bond securities
Corporate bond securities
Total

Millions of yen

2008
Due:

Withinone year

After 1through 5 years

After 5through 10 years

Governmental bond securities

¥10

¥20

¥—

Corporate bond securities

—

34

—

¥10

¥54

¥—

Debt securities:

Total

Thousands of U.S. dollars

2008
Due:

Withinone year

After 1through 5 years

After 5through 10 years

$100

$200

$ —

Debt securities:
Governmental bond securities
Corporate bond securities
Total

—

339

—

$100

$539

$ —

51

6 Trade Receivables
Trade receivables at March 31, 2007 and 2008 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Notes receivable
Accounts receivable–trade
Total

2007

2008

2008

¥ 8,337¥ 6,874$ 68,610

70,093

66,267

661,413¥78,430¥73,141$730,023

At March 31, 2007, the Company had ¥684 million of notes receivable which had matured but were still in the process ofcollection since March 31, 2007, was a public holiday and, therefore, were included in notes receivable as of March 31, 2007.

7 Inventories
Inventories at March 31, 2007 and 2008 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2008

2008

Finished goods and merchandise¥12,049¥11,463$114,413

Work in process

19,361

21,481

214,402

Raw materials and supplies

2,908

3,485

34,784¥34,318¥36,429$363,599

Total

8 Loss on Impairment of Fixed Assets
Groupings for evaluating fixed asset impairment are made according to management accounting classifications based on strategic
business units, excluding significant idle assets, assets scheduled for disposal, and leased assets. Assets are located in Japan andoverseas and, therefore, assets in the Amusement Facility Business are grouped mainly by geographical region.
The book values of the following assets, which exclude reusable assets, were reduced to the recoverable amount. The amountof reduction recorded as an impairment loss in, Other income (loss), for the years ended March 31, 2007 and 2008 were as follows:52

Thousands of
U.S. dollars

Millions of yen

Location

Toshima-ku, Tokyo (Note 1)
Sapporo City, Hokkaido (Note 2)

Items

Classification

Amusement facility(Theme park)
Amusement facility

Amusement facilities andmachines and other assets
Amusement facilities andmachines and other assets
Buildings & structures, land

Hakodate City, Hokkaido (Note 3)

2007

2008

¥1,544

¥

—

2008

$

—

161

—

—

1,338

—

—

220

—

—

1,160

—

—

486
161

—
—

—
—

Amusement facilities andmachines and other assets

—

938

9,362

173

1,727

Amusement facility(Tourist hotel)
Yokohama City, Kanagawa (Note 4) LAN entertainment
Other intangible assets,businessother investments, and assets
Ota-ku, Tokyo (Note 5)
Management, sales,
Buildings & structures, land
production control, R&D
Shimotsuga-gun, Tochigi (Note 6) Idle assets, assets
Buildings & structures, land,scheduled for disposal
and other assets
Ibaraki City, Osaka (Note 7)
Assets for lease
Buildings & structures, land,and other assets
Yokohama City, Kanagawa, etc.
(Note 8)

Amusement facility

Kanazawa City, Ishikawa (Note 9)

Amusement facility

Amusement facilities andmachines and other assets—

Ayase City, Kanagawa, etc.
(Note 10)

Amusement facility

Amusement facilities andmachines and other assets

—

85

848

Hakodate City, Hokkaido (Note 9)

Amusement facility(Tourist hotel)

Buildings & structuresand other assets

—

483

4,821

BEDFORDSHIRE, U.K. etc. (Note 9)

Amusement facility

Amusement facilities andmachines and other assets—

948

9,462.

CAUSEWAY BAY, HONG KONG
(Note 11)

Assets scheduled
for disposal, etc.

Amusement facilities andmachines and other assets

—

2

20

ILLINOIS, U.S.A. (Note 12)

Amusement facility

Goodwill

—

662

6,607

Shimotsuga-gun, Tochigi, etc.
(Note 13)

Idle assets

Buildings & structures, land,and other assets

—

789

7,875

Bunkyo-ku, Tokyo, etc. (Note 11)

Assets scheduled
for disposal andother assets

Buildings & structures, otherproperty, plant and equipment
—

116

1,158

Inashiki-gun, Ibaraki (Note 14)

Warehouse

Buildings & structures, land

—

35

349

Koutou-ku, Tokyo (Note 9)

Software for Internet
content business

Property, plant and equipment(others), software

Total

—

17

170

¥5,070¥4,248$42,399

Notes:
1. The Company separately classified these assets and recorded an impairment loss since management changed the objective of the asset from income generating to advertising.
Furthermore, the assets were categorized differently in the investment decision process since the group contained facilities that aimed to generate income. The assets were determined
to have no value.
2. The fair value of these assets was determined to be significantly impaired due to the decision to close the facility and, accordingly, the assets were separated from its group and an
impairment loss was recorded. The asset was determined to have no value.
3. A loss was recorded because it was determined that the carrying value of the fixed asset would not be recoverable due to the decline in business profits. Fair value was measured to be
the net selling price, which was assessed based on real estate appraisals.
4. Assets used for unprofitable businesses which are proposed to be disposed have been written down and a loss has been recorded. The assets were determined to have no value.
5. Assets that have no foreseeable use in the future due to the integration of business units or a relocation of a subsidiary were written down and an impairment loss recorded.
The recoverable amount of real estate assets was measured to be the net selling price, which was assessed based on real estate appraisals.
6. Assets that have no foreseeable use in the future due to integration of business units were written down and an impairment loss was recorded. The recoverable amount of real estate assets
was measured to be the net selling price, which was assessed based on real estate appraisals and other market information. The other assets were determined to have no value.
7. Assets planned to be disposed of and leased assets that have no foreseeable use in the future were written down and an impairment loss recorded. The recoverable amount of theassets to be disposed of was assessed based on liquidation value. The fair value of the leased assets was calculated based on market land prices provided by the government(in the Rosenka report) and lease income for the remaining period of the agreement.
8. This asset was separated from its current grouping and an impairment loss was recorded because the recoverable amount of this asset decreased due to the decision to close thefacility. The asset was determined to have no value.
9. An impairment loss was recorded because it was forecast that the book value of this fixed asset could not be recovered due to the decline in business profitability.
The asset was determined to have no value.
10. These assets were separated from their current grouping and an impairment loss was recorded because it was decided to change the use of the assets from income generating touse for social welfare projects which resulted in a reduction in their recoverable amounts, and because these assets were considered to have lost its mutually complementaryfunction in their current grouping. The assets were determined to have no value.

5311. An impairment loss was recorded for this asset which is unlikely to be used because of relocation of facilities. The asset was determined to have no value.
12. An impairment loss was recorded because the book value of this fixed asset could not be recovered due to the decrease in profitability of the acquired business.
The asset was determined to have no value.
13. Assets that have no foreseeable use in the future due to integration of business units were written down and an impairment loss was recorded. The recoverable amount of real estate
assets was measured to be the net selling price which was assessed based on road rating.
14. An impairment loss was recorded because it was forecast that the book value of this fixed asset could not be recovered due to the decrease in business profitability. The recoverable
amounts for real estate were measured by the net sales value and assessed based on fixed assets tax rating.

9 Short-Term Borrowings and Long-Term Debt
Short-term borrowings at March 31, 2007 and 2008 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2007

Bank borrowings
Long-term debt due within one year
Total

¥

2008

760

¥

—

2008

$

—

11,4105,338

53,279¥12,170¥5,338$53,279

The weighted average interest rates on bank borrowings outstanding at March 31, 2007 and 2008 were 4.13% and 0.76%,
respectively.
Thousands of
U.S. dollars

Millions of yen

Loans, principally from banks, maturing in installments through March 31, 2011;
the weighted average interest rates of current and non-current installments
at March 31, 2008 was 0.76%
0.69% debentures, due March 28, 2008
Total long-term debt
Less current installments
Total

2007

2008

2008

¥ 2,543
10,00012,543(11,410)¥ 1,133¥16,000—
16,000(5,338)¥10,662$159,697—
159,697(53,279)$106,418

The aggregate annual maturities of long-term debt outstanding at March 31, 2008 are as follows:
Millions of yen

Thousands of
U.S. dollars

2009¥5,338$ 53,279

2010

5,338

53,279

2011

5,324

53,139¥16,000$159,697

Years ending March 31

Total

54

10 Trade Payables
Trade payables at March 31, 2007 and 2008 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Notes payable
Accounts payable–trade
Total

2007

2008

2008

¥ 9,079¥ 8,188$ 81,725

38,01834,415

343,497¥47,097¥42,603$425,222

At March 31, 2007, the Company had ¥1,891 million of notes payable that had matured but were still in the process of
payment since March 31, 2007, was a public holiday and, therefore, were included in notes payable as of March 31, 2007.

11 Retirement and Severance Benefits
The plan’s funded status and amounts recognized in the accompanying consolidated balance sheets at March 31, 2007 and 2008
are as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2008

2008

Projected benefit obligations¥ 15,381¥ 13,544$ 135,183

Plan assets at fair value

Employee retirement and severance benefits:(12,811)(10,531)(105,110)

Projected benefit obligation in excess of plan assets

2,570

3,013

30,073

Unrecognized loss

(525)

(1,996)(19,922)

41

413

4,122

2,086

1,430

14,273

Unrecognized prior service cost
Net retirement and severance benefits recognized on the balance sheet
Prepaid pension costAccrued retirement and severance benefits

137

141

1,408

2,223

1,571

15,681

526

27

269

¥ 2,749¥ 1,598$ 15,950

Directors’ and corporate auditors’ retirement and severance benefits:
Accrued retirement and severance benefits
Total accrued retirement and severance benefits

Notes:
1. In addition to the above plan assets, plan assets of ¥1,192 million and ¥539 million ($5,380 thousand) at March 31, 2007 and 2008, 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 on a pro-rata allocationof contributions paid.
2. Certain consolidated subsidiaries use a simplified method for calculating projected benefit obligations.

55

Net periodic cost of employee retirement and severance benefits for the years ended March 31, 2007 and 2008 consists of thefollowing:Thousands of
U.S. dollars

Millions of yen

Service cost for benefits earned–net of employee contributions

2007

2008

2008

¥1,545¥1,471$14,681Interest cost on projected benefit obligation

272

237

2,366

Expected return on plan assets

(245)

(254)

(2,535)

Amortization of unrecognized actuarial gain or loss

197

237

2,366

Amortization of prior service cost

16

(40)

(399)

¥1,785¥1,651$16,479

Net periodic cost

Notes:
1. In addition to the net periodic cost of employee retirement and severance benefits, additional retirement payments of ¥110 million and ¥118 million ($1,178 thousand) are charged to
expense in the years ended March 31, 2007 and 2008, respectively, and are included in “Selling, general and administrative expenses”.
2. In addition to the net periodic cost of employee retirement and severance benefits, contributions to the governmental welfare pension benefit plan of ¥102 million and ¥38 million($379 thousand) are charged to “Cost of sales” and “Selling, general and administrative expenses” in the years ended March 31, 2007 and 2008, respectively.
3. The defined contribution amounts for the Company and certain consolidated subsidiaries that have established defined contribution retirement pension systems is recorded as a service cost.
4. Retirement benefit expenses in the amount of ¥501 million ($5,000 thousand) due to the change in the Company’s retirement benefit scheme were recognized as “Other income (loss).”

Actuarial assumptions and the basis for the calculation of retirement and severance benefits in 2007 and 2008 are as follows:
Method of benefit attribution

2007

2008

“Benefit/year-of-service” approach“Benefit/year-of-service” approach

Discount rate

1.3%~2.0%

2.0%

Expected rate of return on plan assets

1.5%~3.0%

2.0%~3.0%

10~11 years

10 years

Period of amortizationof unrecognized prior service cost
Period of amortizationof unrecognized actuarial gain or loss

9~17 years

9~17 years(from the year following
the year incurred)(from the year following
the year incurred)

12 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 2007 and 2008.
Income tax expenses reflected in the accompanying consolidated statements of income for the years ended March 31, 2007
and 2008 consist of the following:Thousands of
U.S. dollars

Millions of yen

Current

56

2007

2008

2008

¥17,823¥14,845$148,168

Deferred(253)(2,210)(22,058)

Total¥17,570¥12,635$126,110

Reconciliation of the normal tax rate and the effective tax rate as a percentage of income before income taxes and minority
interests for the years ended March 31, 2007 and 2008 is as follows:
2007

2008

Normal tax rate

40.6%

40.6%

Amortization of goodwill

1.7

1.9

Entertainment expenses not deductible for tax purposes

1.0

0.8

Corporate inhabitant tax on per capita basis

0.6

0.6

Directors’ bonuses—

0.5

Increase in valuation allowance for deferred tax assets

1.6(14.1)Tax credit for R&D expenses

—

(1.3)

Lower tax rates of foreign consolidated subsidiaries

—

(0.9)

of foreign consolidated subsidiaries

(5.1)

—

Other

(0.2)

(0.6)

40.2%

27.5%

Reversal of deferred tax liabilities for retained earnings

Effective tax rateSignificant components of deferred tax assets and liabilities at March 31, 2007 and 2008 are as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2008

2008

¥ 9,186¥ 3,036$ 30,302

4,589

4,830

48,208Losses carried forward

3,387

2,983

29,773

Loss on valuation of advance payments

1,270

924

9,222

Deferred tax assets:
Land revaluation
Excess depreciation of fixed assets

Inventory valuation losses

1,626

1,253

12,506

Accrued employee bonuses

1,348

1,743

17,397

Allowance for doubtful receivables

321

906

9,043

Loss on impairment of fixed assets

1,890

1,537

15,341

Accrued enterprise taxes and others

1,066

801

7,995

Accrued retirement and severance benefits

824

580

5,789

Research and development costs

443

614

6,128

Other

5,058

5,742

57,31331,00824,949249,017

Valuation allowance(19,514)(11,714)(116,918)

Total deferred tax assets

11,494

13,235132,099

Retained earnings of foreign consolidated subsidiaries(3,652)(4,178)(41,700)

Other securities valuation difference(3,325)(1,294)(12,915)

(867)

—

—

Total gross deferred tax assets

Deferred tax liabilities:

Inventory revaluation
Land revaluation

(784)

(684)

(6,827)

Reserve for deferred income tax

(147)

(135)

(1,347)

Other

(104)

(76)

(760)

Total gross deferred tax liabilities
Net deferred tax assets(8,879)(6,367)(63,549)¥ 2,615¥ 6,868$ 68,550

57

Net deferred tax assets are included in the following line items in the consolidated balance sheets:
Thousands of
U.S. dollars

Millions of yen

2007

2008

2008

¥ 5,718¥ 5,909$ 58,978

Investments and other assets–Deferred tax assets

4,142

6,291

62,791

Current liabilities–Other (deferred tax liabilities)(1,459)(600)(5,989)Long-term liabilities–Deferred tax liabilities(5,786)(4,732)(47,230)¥ 2,615¥ 6,868$ 68,550

Current assets–Deferred tax assets

Total

13 Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2007 and 2008 are as follows:
Thousands of
U.S. dollars

Millions of yen

Marketing

2007

2008

2008

¥ 31,031¥ 30,550$ 304,921

Directors’ remuneration and employees’ wages

29,42630,884308,254

Employees’ retirement and severance benefits

1,163

1,116

11,139Provision for directors’ bonuses

658

498

4,971

Directors’ and corporate auditors’ retirement and severance benefits

138

46

459

18,004

17,583

175,497

398

56

559

45,03849,929498,343¥125,856¥130,662$1,304,143

Research and development
Allowance for doubtful receivables, investments, and other assets
Other
Total selling, general and administrative expenses

14 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,
2007 and 2008 is as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2008

2008

Net income¥24,252¥32,679$326,170

Net income available to common stockholders

24,252

32,679326,170———

Net income for diluted EPS calculation¥24,252¥32,679$326,170

Average number of common shares outstanding

253,331254,025

254,025

183

341

341

253,514254,366

254,366

Effect of dilutive securities:
Stock options in a consolidated subsidiary

Thousands of shares

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

Yen

U.S. dollars

Net income per common share:

58

Basic

¥95.73¥128.65$1.28

Diluted95.67

128.471.28

15 Retained Earnings and Dividends

16 Land Revaluation

In Japan, in the event a dividend distribution of surplus is

In accordance with the “Law Concerning Land Revaluation

made, the smaller of an amount equal to 10% of the dividend(Law No. 34, promulgated on March 31, 1998)”, theor the excess, if any, of 25% of common stock over the total ofCompany revalued its land used for business purposes on

additional paid-in capital and legal earnings reserve must be

March 31, 2002. The write-down in the value of the land

set aside as a legal reserve until the aggregate amount of capital(¥20,769 million), net of related deferred tax assets andsurplus and the legal reserve equals 25% of stated capital.

liabilities, was reported as “Land revaluation” in “Net assets”.

Certain foreign consolidated subsidiaries are also required toappropriate their earnings to legal reserves under the laws ofRevaluation method:

the respective countries.

The fair value of land is determined based on official notice

The Company’s retained earnings includes legal reserves of

prices that are calculated by the method assessed and published¥1,645 million and ¥1,645 million ($16,419 thousand) atby the Commissioner of the National Tax Agency. The Com-

March 31, 2007 and 2008, respectively. Proposed appro-

missioner assesses and publishes the method to calculate land

priations of retained earnings have not been reflected in thevalue that forms the foundation for calculating taxable value

consolidated financial statements at the end of the fiscal year.

for land value tax prescribed in “Article 16 of Land Value Tax

The Company’s approved appropriations of retained earnings

Law (Law No. 69, promulgated on May 2, 1991)”, as stipulated

at March 31, 2008, were cash dividends of ¥3,057 millionin “Article 2-4 of the Ordinance Implementing the Law Con-($30,512 thousand). In addition, a mid-year dividend may becerning Land Revaluation (Cabinet Order No. 119, promulgatedpaid based on approval by the Board of Directors, which ison March 31, 1998)”. Reasonable adjustments are made to thesubject to limitations. The mid-year dividend in 2008 was

official notice prices.

¥3,036 million ($30,302 thousand).

In fiscal 2008, unrealized losses for land of ¥582 million($5,809 thousand) were recognised based on the difference
between the land carrying amount, which was revalued infiscal 2002, and the fair market value of the land as of March
31, 2008.

17 Common Stock and Treasury Stock
The changes in the number of common stock and treasury stock for the year ended March 31, 2008 were as follows:
Common stock (number of shares)
March 31, 2007
Retirement of treasury stock
March 31, 2008
Treasury stock (number of shares)
March 31, 2007
Purchase of treasury stock in accordance with a decision made by the Board of Directors
Repurchase of fractional shares
Purchase of treasury stock through a put for purchase in connection with the share exchange
between the Company and Bandai Visual Co., Ltd.
Increase in the shareholder ratio for affiliates to which the equity method applies
Retirement of treasury stock
Allotment of treasury stock to shareholders of Bandai Networks Co., Ltd., and Bandai Visual Co., Ltd.,
via the share exchange carried out between those companies and the Company
Sale of fractional shares
March 31, 2008

260,508,191(4,500,000)
256,080,191

2,731,047
4,980,000
5,646
198,600
1,765(4,500,000)(1,650,696)(91)
1,766,271

59

18 Stock Option Plan
The following are details of the stock option plan at March 31, 2008.
Resolution date of general
June 26, 2006

June 26, 2006

June 26, 2006

Position and number of beneficiaries

shareholders’ meeting

Directors of the Company (8)Directors of subsidiaries (14)

Employees of the Company (21)Type and number of shares (Note 1)

Common stock 126,300

Common stock 149,700

Common stock 1,805,000

and subsidiaries (570)
Amount to be paid upon exercise of stock
subscription rights (yen)Grant dateConditions for exercising rights

1

1

1,754

July 18, 2006

July 18, 2006

July 18, 2006

(Note 2)

(Note 3)(Note 4)

Not specified

Not specified

From July 18, 2006 to July 9, 2008

From July 10, 2009

From July 10, 2009

From July 10, 2008

to June 30, 2014

to June 30, 2014

to June 30, 2010

Matters relating to the transfer of stock

Approval of the directors ofApproval of the directors ofApproval of the directors ofsubscription rights

NAMCO BANDAI Holdings Inc.

NAMCO BANDAI Holdings Inc.

NAMCO BANDAI Holdings Inc.

required for the transfer ofrequired for the transfer ofrequired for the transfer ofstock subscription rights

stock subscription rights

stock subscription rights

1,550.90

1,550.90

219.07

Required service
Applicable period for exercising rights

Fair market price of stock options (yen) (Note 5)
Resolution date of general

June 26, 2006

June 25, 2007

June 25, 2007

Position and number of beneficiaries

shareholders’ meeting

Employees of subsidiaries (229)

Directors of the Company (6)Directors of subsidiaries (85)Type and number of shares (Note 1)

Common stock 579,000

Common stock 92,600

Common stock 264,700

Amount to be paid upon exercise of stock
subscription rights (yen)Grant dateConditions for exercising rights

1,895

1

1

April 18, 2007

July 19, 2007

July 19, 2007

(Note 4)(Note 2)

(Note 3)

From April 18, 2007 to March 31, 2009

Not specified

Not specified

From April 1, 2009

From July 10, 2010

From July 10, 2010

to June 30, 2010

to June 30, 2015

to June 30, 2015

Matters relating to the transfer of stock

Approval of the directors ofApproval of the directors ofApproval of the directors ofsubscription rights

NAMCO BANDAI Holdings Inc.

NAMCO BANDAI Holdings Inc.

NAMCO BANDAI Holdings Inc.

required for the transfer ofrequired for the transfer ofrequired for the transfer ofstock subscription rights

stock subscription rights

stock subscription rights

279.13

1,893.38

1,893.38

Required service
Applicable period for exercising rights

Fair market price of stock options (yen) (Note 5)

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, the numberof previously expired options was therefore used.
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 common shares of theCompany 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 for exercising the subscription
rights falls (except if there is no trading) divided by the average closing price for common shares of the Company on the Tokyo Stock Exchange on each of the days within three months
prior to the month in which the allotment date falls (except if there is no trading). The TOPIX growth rate is calculated in the same way as the Company’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 the time of issuance ofthe 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, evenin that case, the number of shares that can be acquired by exercising those rights shall be based on a ratio equivalent to the average ratio of achievement (maximum of 100%).
4. (i) Any person receiving an allotment of subscription rights (hereinafter referred to as “Holder(s) of Subscription Rights”) must be an employee of the Company or of its Group
Companies at 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 and exercise thecorresponding 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 for exercising thoserights. 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 for exercising those rights shallremain unchanged.
5. The Black-Scholes Model is used for estimating fair market price for stock options.

60

19 Leases
1. Lessee
The Company and its subsidiaries occupy offices and other facilities under various finance and operating lease arrangements.
(1) Finance leases
Finance leases, except for those where the legal title to the underlying property is transferred to the lessee, are accounted forsimilar to operating leases. Title does not transfer for any of the Company’s leases.
The pro-forma original cost and accumulated depreciation of assets under such finance leases as if they had been accounted
for as finance leases at March 31, 2007 and 2008 are as follows:
Thousands of
U.S. dollars

Millions of yen

Original cost at inception of leases
Less accumulated depreciation
Assets under finance leases, net

2007

2008

2008

¥1,308(649)¥ 659¥1,107(559)¥ 548$11,049(5,579)$ 5,470

Future minimum payments due under finance leases as of March 31, 2007 and 2008 are as follows:
Thousands of
U.S. dollars

Millions of yen

Due within one year
Due after one year
Total

2007

2008

2008

¥250
409
¥659

¥230
318
¥548

$2,296
3,174$5,470The 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, 2007 and 2008 are as follows:
Thousands of
U.S. dollars

Millions of yen

Lease expense
Depreciation expense

2007

2008

2008

¥259
259

¥290
290

$2,8952,895(2) Operating leases
Future minimum payments required under operating leases at March 31, 2007 and 2008 are as follows:
Thousands of
U.S. dollars

Millions of yen

Due within one year
Due after one year
Total

2007

2008

2008

¥ 3,718
13,948¥17,666¥ 3,487
13,528¥17,015$ 34,804
135,023$169,827

2. Lessor
Finance leases
Finance leases, except for those where the legal title to the underlying property is transferred from the lessor to the lessee, areaccounted for similar to operating leases.
The acquisition cost, accumulated depreciation, and net value of assets under such finance leases included in fixed assets at
March 31, 2007 and 2008 are as follows:
Millions of yen

Acquisition costLess accumulated depreciation
Assets under finance leases, net

Thousands of
U.S. dollars

2007

2008

2008

¥1,426(714)¥ 712¥1,367(752)¥ 615$13,644(7,506)$ 6,13861

Future minimum payments due under finance leases at March 31, 2007 and 2008 are as follows:
Thousands of
U.S. dollars

Millions of yen

Due within one year
Due after one year
Total

2007

2008

2008

¥267

¥255

$2,545

555

454

4,532

¥822

¥709

$7,077

Lease income and depreciation expense for finance leases for the years ended March 31, 2007 and 2008 are as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2008

2008

Lease income

¥283

¥284

$2,835

Depreciation expense

238

250

2,495

20 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; they 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, market values, and gains or losses from valuation of foreign exchange contracts outstanding at March 31,
2007 and 2008 are as follows. The contracted amounts in themselves should not be considered indicative of the market risk
associated with the derivative financial instruments.
Millions of yen

Thousands of U.S. dollars

2007

2008

2008

Contract
amountEstimated
fair value

Unrealized
gain (loss)

Contract
amountEstimated
fair value

Unrealized
gain (loss)

Contract
amountEstimated
fair value

Unrealized
gain (loss)¥1,308¥1,329¥ (21)

¥ 561

¥ 549

¥ 12

$ 5,599$ 5,480$

Foreign exchange contracts
Sold:
British pounds

119

Yen

965

937

28

856

882

(26)

8,544

8,803

(259)

Won

115

118

(3)

230

223

7

2,296

2,226

70

3,288

3,165

(123)

2,613

2,348

(265)

26,08023,435(2,645)——¥(119)——¥(272)——$(2,715)

Purchased:
U.S. dollars
Total

Notes:
1. The above table does not include any derivative financial instruments which are treated as effective hedges of the hedged assets and/or liabilities.
2. The above foreign exchange contracts were originally utilized to manage risks arising from foreign currency receivables and payables between consolidated companies, which were
eliminated in the consolidated financial statements.

21 Commitments and Contingent Liabilities
Contingent liabilities as of March 31, 2007 and 2008 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2007

2008

2008

¥86

¥83

$828

Guarantee for lease agreement made by a business partner of a foreign
consolidated subsidiary62

22 Segment Information(1) Business segments
Millions of yen

2007
Toys and
Hobby

Amusement
Facility

Game
Contents¥179,474¥87,863¥127,389

Network

Visual andMusic Content

Other

Subtotal¥12,082¥41,955¥10,370¥459,133

Eliminations
and corporate

Consolidated¥¥459,133

Net sales and Operating
income:Sales to externalcustomers
Intersegment transactions

—-

6,112

333

11,798408

1,052

10,531

30,234(30,234)—

185,586

88,196

139,187

12,49043,007

20,901

489,367(30,234)

459,133

operating expenses

168,183

84,192

127,677

11,61033,51019,883445,055(28,146)

416,909

Operating income¥ 17,403¥ 4,004¥ 11,510¥

880¥ 9,497¥ 1,018¥ 44,312¥ (2,088)¥ 42,224¥151,547¥65,144¥119,103¥11,191¥42,268¥23,571¥412,824¥ (4,334)¥408,490

8,054

8,707

4,423

173

664

1,640

23,661(159)

23,502

Subtotal
Cost of sales andAssets, Depreciation,
Impairment losses, andCapital expenditures:
AssetsDepreciation
Loss on impairmentof fixed assets
Capital expenditures

486

3,753

670

—

—

208

5,117

(47)

5,070

9,063

10,679

4,220

157

1,437

2,369

27,925—27,925

Eliminations
and corporate

Consolidated¥—¥460,474

Millions of yen

2008
Toys and
Hobby

Amusement
Facility

Game
Contents

Network

Visual andMusic Content

Other

Subtotal¥175,992¥89,430¥137,947¥11,688¥36,020¥ 9,397¥460,474

4,173

399

7,726

356

930

10,41423,998(23,998)—

180,165

89,829145,673

12,04436,95019,811

484,472(23,998)

460,474

Net sales and Operating
income:Sales to externalcustomers
Intersegment transactions
Subtotal
Cost of sales andoperating expenses

165,855

88,198130,879

11,14033,11819,057448,247(21,184)

427,063

Operating income¥ 14,310¥ 1,631¥ 14,794¥

904¥ 3,832¥754¥ 36,225¥ (2,814)¥ 33,411¥160,335¥62,034¥118,786¥11,753¥52,897¥20,535¥426,340¥(13,317)¥413,023

9,129

11,313

4,643

223

1,352

1,666

28,326(562)

27,764

940

3,291

17

—

—

—

4,248

—

4,248

9,226

9,828

3,439

1,043

10,080485

34,101

14

34,115

Assets, Depreciation,
Impairment losses, andCapital expenditures:
AssetsDepreciation
Loss on impairmentof fixed assets
Capital expenditures63Thousands of U.S. dollars

2008
Toys and
Hobby

Amusement
Facility

Game
Contents

Network

Visual andMusic Content

Other

Subtotal

Eliminations
and corporate

Consolidated

Net sales and Operating
income:Sales to externalcustomers$1,756,583 $892,604 $1,376,854 $116,658

Intersegment transactions$359,517 $ 93,792 $4,596,008 $— $4,596,008

41,651

3,982

77,113

3,553

9,282

103,944

239,525

1,798,234

896,586

1,453,967

120,211368,799

197,736

4,835,533(239,525) 4,596,008

operating expenses

1,655,405

880,307

1,306,308

111,189

330,552

190,2094,473,970(211,438) 4,262,532

Operating income$ 142,829 $ 16,279 $ 147,659 $ 9,022$ 38,247 $$1,600,309 $619,164 $1,185,607 $117,307$527,967 $204,961 $4,255,315 $(132,918) $4,122,397

Subtotal(239,525)—

Cost of sales and7,527 $ 361,563 $ (28,087) $ 333,476

Assets, Depreciation,
Impairment losses, andCapital expenditures:
AssetsDepreciation

91,117112,915

46,342

2,226

13,494

16,628282,722(5,609)277,113of fixed assets

9,382

32,847

170

—

—

—

42,399—42,399

Capital expenditures

92,08598,09434,325

10,410100,609

4,841

340,364140

340,504

Loss on impairment

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, stationery.
(2) Amusement Facility: amusement facilities operation.
(3) Game Contents: home-use video game software, commercial-use video game machines, prizes for amusement arcade machines.
(4) Network: mobile contents.
(5) Visual and Music Content: video products, video software, on-demand video distribution.
(6) Other: transportation and storage of products, leases, real estate management, printing, development and sales of environmental devices.
3. Unallocatable operating expenses included in the “Eliminations and Corporate” column under “Operating expenses” were ¥2,539 million and ¥3,253 million ($32,468 thousand) for
the years ended March 31, 2007 and 2008, respectively. The majority of these costs represent administrative costs incurred by the general administration department of the Company
and NAMCO BANDAI Holdings (USA) Inc.
4. Unallocatable assets included in the “Eliminations and Corporate” column under “Assets” approximated ¥34,674 million and ¥26,151 million ($261,014 thousand) as of March 31,
2007 and 2008, 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, but does not includes extraordinary depreciation of fixed assets.
6. From fiscal 2008, as described in Summary of Significant Accounting Policies (i), the Company and some of its domestic consolidated subsidiaries have, in accordance with the revisionof the Japanese Corporation Tax Law, changed their depreciation method with respect to assets acquired on or after April 1, 2007.
These changes had the following effect on Operating Income for each segment:
Millions of yen

64

Operating income

Toys and
Hobby
(682)

Amusement
Facility(4)

Game
Contents(175)

Operating income

Toys and
Hobby(6,806)

Amusement
Facility(40)

Game
Contents(1,747)Visual andMusic Content
(105)

Other
(9)

Subtotal(989)

Eliminations
and corporate—

Consolidated(989)

Thousands of U.S. dollars
Visual and
NetworkMusic Content(140)(1,048)

Other
(90)

Subtotal(9,871)Eliminations
and corporate—

Consolidated(9,871)

Network(14)

7. As described in the Summary of Significant Accounting Policies (i), due to the revision of the Japanese Corporate Tax Law, the Company and some of its domestic consolidated subsidiaries
depreciate the difference between the original residual value of 5% of acquisition cost of assets acquired on or before March 31, 2007, and the new residual value of ¥1 (memorandum
value) by the straight line method over 5 years commencing from the fiscal year following the year in which the asset becomes fully depreciated to the original residual value.
These changes had the following effect on Operating Income for each segment.
Millions of yen

Operating income

Toys and
Hobby
(161)

Amusement
Facility—

Game
Contents(20)

Operating income

Toys and
Hobby(1,606)

Amusement
Facility—

Game
Contents(200)

Visual andMusic Content
—

Other
(3)

Subtotal(187)

Eliminations
and corporate—

Consolidated(187)

Thousands of U.S. dollars
Visual and
NetworkMusic Content
(30)
—

Other
(30)

Subtotal(1,866)

Eliminations
and corporate—

Consolidated(1,866)

Network(3)(2) Geographic segments
Millions of yen

2007

Japan

Americas

EuropeAsia,
ExcludingJapan¥356,249¥52,316¥37,763¥12,805

Subtotal¥459,133

Eliminations
and corporate

Consolidated

Net sales and Operating income:Sales to external customers¥—-¥459,133

Intersegment transactions

11,1991,674—

24,25637,129(37,129)—

Subtotal

367,448

53,99037,76337,061

496,262(37,129)

459,133

Cost of sales and operating expenses

334,320

50,61332,51034,331

451,774(34,865)

416,909¥ 33,128¥ 3,377¥ 5,253¥ 2,730¥ 44,488¥ (2,264)¥ 42,224¥310,464¥37,370¥45,764¥21,239¥414,837¥ (6,347)¥408,490

Eliminations
and corporate

Consolidated

Operating income
AssetsMillions of yen

2008

Japan

Americas

EuropeAsia,
ExcludingJapan¥346,736¥52,623¥46,388¥14,727

Subtotal¥460,474

Net sales and Operating income:Sales to external customers¥—¥460,474

Intersegment transactions

13,961

1,943

10

23,206

39,120(39,120)—

Subtotal

360,697

54,566

46,39837,933

499,594(39,120)

460,474

Cost of sales and operating expenses

336,217

52,24839,56735,078463,110(36,047)

427,063

Operating income¥ 24,480¥ 2,318¥ 6,831¥ 2,855¥ 36,484¥ (3,073)¥ 33,411¥321,489¥35,620¥48,864¥23,939¥429,912¥(16,889)¥413,023

Eliminations
and corporate

Consolidated

AssetsThousands of U.S. dollars

2008

Japan

Americas

Europe$3,460,785$525,232$463,000

Asia,
ExcludingJapan

Subtotal

Net sales and Operating income:Sales to external customers
Intersegment transactions
Subtotal$146,991 $4,596,008 $— $4,596,008

139,345

19,393100

231,620

390,458

3,600,130544,625

463,100

378,611

4,986,466(390,458)(390,458) 4,596,008—

4,622,318(359,786) 4,262,532

Cost of sales and operating expenses

3,355,794

521,489

394,920

350,115

Operating income$ 244,336$ 23,136$ 68,180$ 28,496 $ 364,148 $ (30,672) $ 333,476$3,208,793$355,525$487,713$238,936 $4,290,967 $(168,570) $4,122,397

Assets65

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, and Spain
3) Asia, Excluding Japan: Hong Kong, Thailand, and Korea
2. Unallocatable operating expenses included in the “Eliminations and Corporate” column under “Operating expenses” were ¥2,539 million and ¥3,253 million ($32,468 thousand) for
the years ended March 31, 2007 and 2008, respectively. The majority of these costs represent administrative costs incurred by the general administration department of the Company
and NAMCO BANDAI Holdings (USA) Inc.
3. Assets included in the “Eliminations and Corporate” column under “Assets” approximated ¥34,674 million and ¥26,151 million ($261,014 thousand) as of March 31, 2007 and 2008,
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.
4. From fiscal 2008, as described in Summary of Significant Accounting Policies (i), the Company and some of its domestic consolidated subsidiaries have, in accordance with the revisionof the Japanese Corporation Tax Law, changed their depreciation method with respect to assets acquired on or after April 1, 2007.
As a result of this change, consolidated operating expenses in Japan in fiscal 2008 increased ¥989 million ($9,871 thousand) and operating income decreased by the same amount.
5. As described in the “Summary of Significant Accounting Policies (i), due to the revision of the Japanese Corporate Tax Law, the Company and some of its domestic consolidated subsidiaries
depreciate the difference between the original residual value of 5% of acquisition cost of assets acquired on or before March 31, 2007 and the new residual value of ¥1 (memorandum
value) by the straight line method over 5 years commencing from the fiscal year following the year in which the asset becomes fully depreciated to the original residual value.
As a result of this change, consolidated operating expenses in Japan in fiscal 2008 increased ¥187 million ($1,866 thousand) and operating income decreased by the same amount.

(3) Foreign sales
Millions of yen

2007

Foreign sales

2008

Americas

Europe

Asia

Total

Americas

Europe

Asia

Total

¥53,719¥41,267¥17,814¥112,800¥54,835¥47,855¥20,233¥122,923

Consolidated sales
Share of sales to customers outside Japan

459,133
11.7%

9.0%

3.9%

24.6%

460,474
11.9%

10.4%

4.4%

26.7%

Thousands of U.S. dollars

2008
Americas

Foreign sales

EuropeAsia$547,311 $477,642 $201,946 $1,226,899

Consolidated sales
Share of sales to customers outside Japan

Total

4,596,008
11.9%

10.4%

4.4%

26.7%

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, Middle East, and Africa
3) Asia, Excluding Japan: Hong Kong, Singapore, Thailand, Korea, Australia, China, and Taiwan

23 Significant Subsequent Events
Transactions conducted by commonly controlled entities
Organizational Restructuring of the Domestic Group66

1. Transfer of Game Operations from Banpresto Co.,
Ltd., and Merger

1. Overview of Transaction Including Transaction

The game operations of Banpresto Co., Ltd., which

Objectives, Names and Business Content ofplanned and developed home video game software

Restructured Companies, and Legal Form of Businessand coin-operated game machines, was transferred

Combination and Split of Operations

and consolidated into NAMCO BANDAI Games, Inc.,(1) Overview of Transaction including Transaction Objectives

which integrates the Group game operations; Pleasure

An organizational restructuring of the Group companies

Cast Co., Ltd., and Hanayashiki Co., Ltd., subsidiaries

in Japan was carried out as of April 1, 2008, to maximizeof Banpresto engaged in operating amusement

the value of the Group companies.

facilities, were made subsidiaries of NAMCO LIMITED,which integrates the amusement facilities operations(3) Legal Form of the Business Combination and Split ofof the Group. Banpresto Co., Ltd., was redefined as

Operations

focusing on the prize business, with an emphasis on

1. An incorporation-type company split of Banpresto

prizes for coin-operated game machines.
2. Consolidation of Subsidiaries with Group Support
FunctionsCo., Ltd., with the establishment of a subsidiary, the
new Banpresto Co., Ltd.
2. A company split in which Banpresto Co., Ltd., is a split

As of April 1, 2008, a Shared Services Division wascompany in an absorption-type company split andestablished within the Company and the shared

NAMCO LIMITED is the successor company in the

management operations for NAMCO BANDAI

absorption-type company split.

Business Services Inc., and Artpresto Co., Ltd., which

3. A company split in which Banpresto Co., Ltd., is a split

had been carried out by Bandai Co, Ltd., andcompany in an absorption-type company split and theBanpresto Co., Ltd., were transferred to the Company.

Company is the successor company in the absorption-(2) Names and Business Content of Restructured Companies
1. NAMCO BANDAI Games Inc.

type company split.
4. A merger in which Banpresto Co., Ltd., is a merged

Planning, development, and sales of home video

company in an absorption-type merger and NAMCO

game software, coin-operated game machines, andBANDAI Games, Inc., is the surviving company in theothersabsorption-type merger.

2. NAMCO LIMITEDManagement of amusement facilities and others
3. Banpresto Co., Ltd. (a newly-incorporated company in
an incorporation-type company split)

5. A company split in which Bandai Co., Ltd., is acompany of an absorption-type company split and theCompany is the successor company in the absorptiontype company split.

Planning, development, and sales of prizes and others
for coin-operated game machines.
4. Bandai Co., Ltd.

2. Overview of Accounting method
The accounting method for the consolidated financial

Manufacturing and sales of toys, apparel, and related

statements was handled in accordance with the provisions of

products.

“Accounting for Transactions Conducted by Commonly

5. NAMCO BANDAI Holdings Inc.
Planning and implementation of management strategy

Controlled Entities, etc.” of Article 3, Paragraph 4 of the“Accounting Standard for Business Combinations.”

and business management and instruction of theGroup companies.

24 Additional Information
Legal action
The Company and its U.S. consolidated subsidiaries had a suit brought against them on October 5, 2006, in the state ofCalifornia by Game Ballers Inc., claiming compensatory damages in relation to certain business transactions. However, asettlement was reached and a settlement agreement was concluded in September 2007.
Litigation settlement of ¥283 million ($2,825 thousand) in respect of this settlement is recorded under “Other income (loss)”for the year ended March 31, 2008.

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 as of March 31, 2008 and 2007, and the related consolidated statements of income, shareholders’ equity andcash flows for the years then ended, expressed in Japanese yen. These consolidated financial statements are the responsibilityof 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 thatwe plan and 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 the overall financial statement presentation. We believe that our audits provide a reasonable basis forour 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, 2008 and 2007, and the consolidated
results of their operations and their 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,
2008 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 10, 200868

Corporate Data
(As of March 31, 2008)

Corporate Name : NAMCO BANDAI Holdings Inc.
Head Office : 9th Floor, Taiyo Seimei Shinagawa Building, 2-16-2, Konan,
Minato-ku, Tokyo 108-0075, Japan
URL: www.bandainamco.co.jp
Capital : ¥10 billion
Stock Exchange Listing : Tokyo Stock Exchange, First Section (Code number: 7832)
Main Business : Planning and execution of medium- and long-term management strategies for the
BANDAI NAMCO Group; provision of support for business strategy implementation
by Group companies and management of business activities.
1,000,000,000 shares
Stock Information : Number of Shares Authorized:
Number of Shares Issued:
256,080,191 shares
Number of Shareholders:
35,821
Number of Shares per Trading Unit:
100 shares
Major Shareholders:Ownership Breakdown:

Name% of Total

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

8.3

Northern Trust Company (AVFC) Sub-account
American Clients

6.7

Masaya Nakamura

5.6

Japan Trustee Services Bank, Ltd. (Trust Account)

4.8

MAL Ltd.

3.9

The Silchester International Investors International
Value Equity Trust

3.2

Sanka Ltd.

2.8

State Street Bank and Trust Company

2.0

The Nomura Trust and Banking Co., Ltd.
(Retirement and severance benefits trust. The Bankof Tokyo-Mitsubishi UFJ account.)

1.8

Morgan Stanley & Co. Incorporated

1.8Group Organization:

Strategic Business Units

Toys and Hobby

Individuals, etc.

18.20%

Financial
institutions

28.06%
Brokerages

Foreign corporate
entities and others

0.69%

39.19%

Other corporate
entities

13.86%• CSR Committee• Social Contribution Committee• Environmental Project CommitteeCore Company Bandai

Amusement Facility
Core Company NAMCO

NAMCO BANDAI
Holdings Inc.

Game Contents
Core Company NAMCO BANDAI Games

Network
Core Company Bandai Networks• Group Crisis Management Committee• Group Compliance Committee• Internal Control Committee• E-1 Project• Waigaya (weekly meetings)

Groupwide Meetings

Visual and Music Content
Core Company Bandai VisualGroup Strategy Committee

Affiliated Business Companies
Support for Group Businesses©2008 TV ASAHI • TOEI AG • TOEI ©ABC • Toei Animation ©Cartoon Network ©Eiichiro Oda/Shueisha, Toei Animation ©BANDAI 2008 ©SOTSU • SUNRISE ©Usui Yoshito/Futabasha • shin-ei • TV Asahi©SOTSU • SUNRISE ©2008NBGI ©1995-2008 NBGI LucasArts, the LucasArts logo, and the STAR WARS characters, names and all related indicia are trademarks of & ©Lucasfilm Ltd. ©2008 Lucasfilm
Entertainment Company Ltd. or Lucasfilm Ltd. & © or TM as indicated. All rights reserved. Used with permission. ©SANYO BUSSAN CO., LTD. ©2007 NAMCO BANDAI Games Inc. ©Eiichiro Oda / SHUEISHA©BANDAI NETWORKS ©SOTSU • SUNRISE ©BANDAI NETWORKS ©1976, 2008 SANRIO CO., LTD. APPROVAL NO.S 9070831 ©BANDAI NETWORKS ©SOTSU • SUNRISE • MBS ©SUNRISE / PROJECT GEASS • MBS
Character Design©2006-2008 CLAMP ©Mine Yoshizaki / Kadokawashoten, SUNRISE, TV TOKYO, NAS, BV

69

H4

H1

NAMCO BANDAI Holdings Inc.

Annual Report 2008www.bandainamco.co.jp

Annual Report 2008
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