NAMCO BANDAI Holdings Inc.
Annual Report 2009

Globally RecognizedEntertainmentGroup

NAMCO BANDAI
Holdings Inc.
www.bandainamco.co.jp

Printed in Japan

Annual Report 2009

Aiming to be a
“Globally
RecognizedEntertainment
Group”The BANDAI NAMCO Group develops entertainment-related products and services
in a wide range of fields, including toys, video game software, arcade gamemachines, visual and music products, and amusement facilities. We aim to be a
“Globally Recognized Entertainment Group” by establishing a strong operationalfoundation in the domestic market, while aggressively developing operations inoverseas markets to secure future growth. Moving forward, the BANDAI NAMCO
Group will continue to provide “Dreams, Fun and Inspiration” to people around theworld through entertainment based on creativity and boundless enthusiasm.

NAMCO BANDAI Holdings Inc.
Annual Report 2009

Globally RecognizedEntertainmentGroup

NAMCO BANDAI
Holdings Inc.
www.bandainamco.co.jp

Printed in Japan

Annual Report 2009

Aiming to be a
“Globally
RecognizedEntertainment
Group”The BANDAI NAMCO Group develops entertainment-related products and services
in a wide range of fields, including toys, video game software, arcade gamemachines, visual and music products, and amusement facilities. We aim to be a
“Globally Recognized Entertainment Group” by establishing a strong operationalfoundation in the domestic market, while aggressively developing operations inoverseas markets to secure future growth. Moving forward, the BANDAI NAMCO
Group will continue to provide “Dreams, Fun and Inspiration” to people around theworld through entertainment based on creativity and boundless enthusiasm.

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

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

Corporate Data
As of March 31,2009•Corporate Name: NAMCO BANDAI Holdings Inc.
•Head Office: NAMCO BANDAI Mirai Kenkyusho
4-5-15, Higashi-Shinagawa, Shinagawa-ku, Tokyo 140-8590, Japan (from June 23, 2009)
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:
250,000,000 shares
Number of Shareholders:
36,909Number of Shares per Trading Unit:
100 shares•Ownership Breakdown:•Major Shareholders:
Name% of Total

Individuals, etc.

16.80%

Northern Trust Company (AVFC) Sub-account American Clients

6.52

Japan Trustee Services Bank, Ltd. (Trust Account)

5.02

Japan Trustee Services Bank, Ltd. (Trust Account 4G)

5.01

Masaya Nakamura

4.94

MAL Ltd.

4.80

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

4.50

Foreign corporate
entities and others

Northern Trust Company (AVFC) Re U.S. Tax Exempted Pension Funds

3.75

39.66%The Silchester International Investors International Value Equity Trust

3.28

Sanka Ltd.

2.68

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

1.83

Financial institutions

24.79%

Brokerages

0.39%
Other corporate entities

14.92%
Treasury stock

3.44%•Group Organization:
Strategic Business Units

Toys and Hobby
Core Company: Bandai

Game Contents
NAMCO BANDAI HoldingsCore Company: NAMCO BANDAI Games• Group Strategy Meeting• Contents Business Strategy Meeting• Group CSR Committee
Group Social Contribution Committee
Group Environment Committee

Visual and Music Content

Group Compliance CommitteeCore Company: BANDAI VISUAL• Group Crisis Management Committee

Amusement Facility• Group Information Security CommitteeCore Company: NAMCO• Internal Control Committee

Affiliated Business Companies
Support for Group Businesses©SOTSU • SUNRISE ©2004-2009 Bandai, WiZ ©SUNRISE, NAGOYA BROADCASTING NETWORK ©Cartoon Network ©2008 Ishimori Production, Inc., Toei Company, Ltd., Adness Entertainment Co. Ltd.
©BVS Entertainment, Inc. and BVS International N. V. ©1994-2009NBGI ©SOTSU • SUNRISE ©2008 NBGI ©2009 NAMCO BANDAI Games Inc. ©TRYWORKS ©MEGAHOUSE 2006 ©NBGI/D3
PUBLISHER Othello is a trademark of megahouse ©SOTSU • SUNRISE ©2009 “Dear Doctor”Production Committee Original works ©1976 Osamu Akimoto Animation series and products derived there of©1996-2006 ADK ©Tsuburaya Production ©SOTSU • SUNRISE ©T. YANASE/FROEBELKAN • TMS • NTV

71 NAMCO BANDAI Holdings Inc. Annual Report 2009

Dreams,Fun and
Inspiration

Our Vision70

Our Mission Statement

New Management
We have changed to a system of two representative directors.
From April 2009, Shukuo Ishikawa has become President and CEO and Representative Directorof NAMCO BANDAI Holdings, while Takeo Takasu has become Chairman and Representative
Director. In this way, we have changed from the previous system of
one representative director to a system of two representative
directors. Moving forward, we will work to expand
our operations under this new system.

New Mid-term Business Plan
The BANDAI NAMCO Group has commenced a new
Mid-term Business Plan.
During the new Mid-term Business plan period, which began in April
2009, we will bolster the global growth foundation, targeting theachievement of the medium-to-long-term Group vision of being a“Globally Recognized Entertainment Group,” and accordingly wewill implement upfront investment and take steps to bolster our
profitability.

New Organization
We are aiming for global growth utilizing our four Strategic Business Units (SBUs).
From April 2009, the Game Contents SBU and the Network SBU were merged, creatinga system of four SBUs. In the future, in these four operational areas—Toys and Hobby,
Game Contents, Visual and Music Content, and Amusement Facilities—we will provide
a variety of entertainment to people around the world.
Toys and Hobby
Game Contents
NAMCO BANDAI Holdings
Visual and Music Content
Amusement Facility
Affiliated Business Companies

01 NAMCO BANDAI Holdings Inc. Annual Report 2009

It has been four years since the management integration of Bandai and NAMCO,
and in this Annual Report 2009, we introduce the new BANDAI NAMCO Group,
which has entered the next phase of growth.

00

BANDAI NAMCO Group Annual Report 2009 Topics

Contents

03 Starting Point
Results of the Mid-term Business Plan ended March 2009 and future challenges

06 Consolidated Financial Highlights
07 Destination
New system and Mid-term Business Plan that started April 200908 To Our Shareholders and Investors
10 President’s Message
14 The BANDAI NAMCO Group’s Mid-term Business Plan
18 Strategic Business Units — Mid-term Business Strategies
20 Toys and Hobby
22 Game Contents
24 Visual and Music Content
25 Amusement Facility

26

Corporate Governance28

The BANDAI NAMCO Group’s CSR Initiatives

30

Overview of Main Group Companies

32

Directors and Corporate Auditors

33

Financial Section

71

Corporate Data

Forward-Looking Statements
The forward-looking statements in this annual report are based on the information available to management as of August 6, 2009, and include various risks anduncertainties. 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 2009, FY2009.3, and the year under review represent the one-year period ended March 31, 2009.
3. Figures in this annual report are as of August 2009.

02
03 NAMCO BANDAI Holdings Inc. Annual Report 2009

Globally RecognizedEntertainment
Group

Starting
Point

2006.4 —2009.3

Results of the Mid-term Business Plan ended March 2009 and future challenges

BANDAI NAMCO has completed the three-year Mid-term Business Plan thatcommenced in April 2006, which was the newly formed Group's first business plan.
In this section, we look back over the past three years and outline the results of the planand identify future challenges.

Results and Challenges under thePrevious Mid-term Business Plan

(April 2006 to March 2009)

The theme of the previous Mid-term Business Plan was “maximizing Group synergies” to leveragesynergistic effects as rapidly as possible. Comparing the numerical objectives of the plan to our results,
in the fiscal year ended March 2007, the initial year of the plan, we achieved the plan’s targets, except
for net sales. In the fiscal year ended March 2008, we failed to meet the plan’s targets, with the
exception of net income and ROE, which resulted from a gain on the sale of land. In the fiscal year
ended March 2009, the final year of the plan, the global economic recession had an adverse influence,
and we failed to meet the plan’s targets by a substantial margin.
Looking at the challenges that we faced in operations, we aimed to maximize Group synergies
among all SBUs but we did not select and focus the allocation of management resources or respondrapidly enough to the changes in the market environment and customer needs.
On the other hand, in management, our results included rapid progress with measures to enhance
the Group’s management base, such as the restructuring of the Group’s organization, the integrationof the human resources and corporate cultures of Bandai and NAMCO, and the reinforcement of our
financial condition. Specifically, Bandai Networks, the core company in the Network SBU, and Bandai
Visual, the core company in the Visual and Music Content SBU, were made wholly owned subsidiaries.
In addition, we implemented restructuring measures among consolidated subsidiaries in the Game
Contents SBU and took steps to consolidate Group management functions. In April 2009, we
combined the Game Contents SBU and the Network SBU. In this way, the Group bolstered its
management base for the next phase of growth and created a system that has enhanced the Group’s
focus on operations.
Fiscal year ended MarchFiscal year ended MarchFiscal year ended March

2007

2008

2009

Difference
Results from plan

Plan

Difference
Results from plan

Plan

Results

Difference
from plan

Net sales (¥ billion) 470.0

459.1

97.7%

500.0

460.5

92.1%

550.0

426.4

77.5%

Operating income(¥ billion)

40.0

42.2 105.6%

50.0

33.4

66.8%

58.0

22.3

38.4%

ROA (%)

10.0

11.5

+1.5P

12.0

8.8

- 3.2P

13.5

6.3- 7.2P

ROE (%)

8.0

9.4

+1.4P

9.5

11.7

+2.2P

10.0

4.3

- 5.7P

Plan

Note: The “Plan” figures included here are the figures from the time when the Mid-term Business Plan was formulated in February 2006.

•Net Sales (¥ billion)•ROA (%)

FY2007.3

470.0
459.1

FY2007.3

10.0%

11.5%

FY2008.3

500.0
460.5

FY2008.3

8.8%

12.0%

550.0

FY2009.3

426.4
Plan

50.0

9.5%

FY2008.3

58.0

Results

8.0% 9.4%

FY2007.3

33.4

22.3

Results•ROE (%)
40.0
42.2

FY2008.3

13.5%

Plan

FY2007.3

Plan

6.3%

Results•Operating Income (¥ billion)

FY2009.3

FY2009.3

FY2009.3

11.7%

10.0%

4.3%
Plan

Results

04

FY2006.3

18.8%•Gross Profit (¥ billion) / Gross Profit Margin (%)
450.8

FY2006.3

459.1

FY2007.3

460.5

FY2008.3

22.4%

FY2007.3
FY2008.3

24.7%

FY2009.3

25.1%

426.4

FY2009.3

FY2006.3

9.2%

FY2008.3
FY2009.3

42.2•Total Assets (¥ billion) / ROA (%)
FY2006.3

32.7
11.8

•Total Net Assets (¥ billion) / ROE (%)
386.7

9.6%

FY2007.3

11.5%

FY2008.3

24.3

FY2007.3

FY2009.3

22.3

5.2 %

14.2

FY2008.3

33.4

7.3%

146.0

34.2%

FY2006.3
FY2007.3

164.1

35.6%

•Net Income (¥ billion)

35.7

168.1

36.6%

•Operating Income (¥ billion) / Operating Income Margin (%)
7.9%

156.6

34.7%

408.5
413.0

8.8%

FY2006.3

252.2

5.8%

FY2007.3

9.4%

FY2008.3

11.7%

284.3
289.9

4.3%
FY2009.3

FY2009.3

363.4

6.3%

•Interest-Bearing Debt (¥ billion) / Debt-Equity Ratio (%)
FY2006.3
FY2007.3
FY2008.3

13.5%
5.1%
5.8%

FY2009.3•Free Cash Flows (¥ billion)
33.0

FY2006.3

7.4
27.2

FY2007.3

13.9

FY2008.3

16.6
8.1%

20.0

FY2009.3

20.8

Previous Mid-term Business Plan (April 2006 to March 2009)•Contribution to Net Sales by Business Segment (FY2009.3)
Visual and Music Content
7.8%
Network
2.4%

260.6

*Free cash flows = Net cash provided by operating activities + Net cash used ininvesting activities•Contribution to Net Sales by Geographic Segment (FY2009.3)

Affiliated Business Companies
4.2%

Toys and Hobby
37.1%

9.0

Asia, excluding Japan
Europe10.6%

Americas
11.3%

3.2%

Japan

74.9%

Game Contents
31.2%

Amusement Facility

17.3%
Note: Percentage figures are calculated based on sales before eliminationof internal transactions

Note: Percentage figures are calculated based on external sales

05 NAMCO BANDAI Holdings Inc. Annual Report 2009•Net Sales (¥ billion) / Overseas Sales Proportion (%)

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

2007.32008.32009.32008.3 vs. 2009.3

2009.3

Net sales¥ 459,133¥ 460,474¥426,400-7.4%$4,340,833

Gross profit

168,080

164,073

146,023-11.0

1,486,542

Operating income

42,22433,411

22,348-33.1

227,507

Recurring income*2

45,61636,19824,513-32.3

249,547

Net income

24,252

32,67911,830-63.8

120,432

Capital expenditures

27,925

34,115

17,481-48.8

177,960

Depreciation

21,201

24,75922,546-8.9

229,523

Cash flows from operating activities

42,49335,00019,301-44.9

196,488

Cash and cash equivalents at end of year

124,156

129,290

110,037-14.9

1,120,197¥ 408,490¥ 413,023¥363,445-12.0%$3,699,939

284,254289,944

260,579-10.1

2,652,744-62.7%$0.49

For the years ended March 31

For the YearAt Year-End
Total assets
Total net assets

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

¥

95.73

¥ 128.65¥

47.95

Total net assets

1,063.29

1,127.72

1,067.71

-5.3

10.87

Cash dividends

28.00

24.00

24.00

0.0

0.24

Main Financial Indicators (%)

9.4%

11.7%

4.3%

Return on assets (ROA)

11.5

8.8

6.3

Overseas sales proportion

22.4

24.7

25.1

Operating income margin

9.2

7.3

5.2

Shareholders’ equity ratio

67.1

69.4

70.9

Return on equity (ROE)*1 U.S. dollar amounts have been translated, for convenience only, at the rate of ¥98.23=U.S.$1, the approximate exchange rate on March 31, 2009.
*2 Recurring income is a Japanese accounting term denoting income before extraordinary items.

06
07 NAMCO BANDAI Holdings Inc. Annual Report 2009

Globally RecognizedEntertainmentGroup

Destination
2009.4 —2012.3 New Mid-term Business Plan
New system and Mid-term Business Plan that started April 2009This section provides a message from the Chairman and Representative Director and thePresident and Representative Director. In addition, this section includes an overview of our
new Mid-term Business Plan, under which we are aiming to be a “Globally RecognizedEntertainment Group” over the medium to long term.

To Our Shareholders and Investors

Takeo Takasu

Shukuo Ishikawa

08

In April 2009, NAMCO BANDAI Holdings changed from its
previous system of one representative director to a systemof two representative directors. As a result, Shukuo
Ishikawa, who had served as President and Representative
Director of NAMCO BANDAI Games, the core company
in the Game Contents SBU, became President and CEO and
Representative Director of NAMCO BANDAI Holdings.
Meanwhile, Takeo Takasu, who had served as the president
since the merger of Bandai and NAMCO in September 2005,
became chairman and representative director.
Since the management integration in 2005, Groupmanagement has been handled with a system of one
representative director. This system was intended to rapidly
realize harmonious operations and synergies stemmingfrom the management integration, to harness the Group’s
energies in the same direction, and to establish a strong
management foundation as rapidly as possible. Over thethree-year period (fiscal 2007.3 to fiscal 2009.3) coveredby the previous Mid-term Business Plan, we implemented
initiatives to reinforce our management foundations, suchas restructuring the Group organization, integrating humanresources and corporate cultures, and bolstering ourfinancial foundation. Next, under the new Mid-term
Business Plan that started in April 2009, we will shift to aphase of proactive business development and aim for
growth over the medium to long term. Accordingly,
targeting the further enhancement of management andexpansion of operations, we decided that it was time tochange to a system of two representative directors.
Moving forward, the two representative directors
will work closely, continually sharing information about
important issues and managing the Group. Chairman Takeo
Takasu will provide general guidance for the attainment of
the Group’s long-term vision and will be responsible for the

execution of Groupwide strategies and actions related tooverseas expansion. President Shukuo Ishikawa will serveas the Group’s Chief Executive Officer for management andoperations and will be responsible for the execution of arange of initiatives in accordance with the Mid-term
Business Plan.
Under this new system, the BANDAI NAMCO Groupwill continue working to provide “Dreams, Fun andInspiration” to people around the world throughentertainment as well as to realize its vision of being “TheLeading Innovator in Global Entertainment.” Even as we
implement the new Mid-term Business Plan, we will strive
to record growth by continuing to follow this approach,which expresses our unchanging corporate philosophy. The
current economic slump is said to be the type of event that
occurs only once a century. In this setting, the role of the
BANDAI NAMCO Group is to assist society as a whole inbreaking through the mood of economic stagnancy. We
are confident that we have the potential to fulfill that role.
The BANDAI NAMCO Group looks forward with great
anticipation as we shift to a phase of proactive businessexpansion under the new system. We would like to ask foryour continued support in the years ahead.
August 2009
Chairman and Representative Director, Takeo Takasu

President and CEO, and Representative Director, Shukuo Ishikawa

09 NAMCO BANDAI Holdings Inc. Annual Report 2009

To enhance management andexpand operations, we havechanged to a system of two
representative directors andfocus on growth over the
medium to long term.

President’s Message

ShukuoIshikawa
President and CEO, and Representative Director
Brief History
April 15, 1955: Born in Iwakuni, Yamaguchi Prefecture
April 1978: Joined NAMCO LIMITED
June 1995: Director in charge of Development Division II of NAMCO LIMITED
June 1999: Managing Director in charge of Research, Development and Production at NAMCO LIMITED
April 2005: Executive Vice President and Representative Director in charge of contents business of NAMCO LIMITED
April 2006: President and Representative Director of NAMCO BANDAI Games Inc.
June 2006: Part-time Director of NAMCO BANDAI Holdings Inc. and President and Representative Director of NAMCO
BANDAI Games Inc.
April 2009: President and CEO and Representative Director of NAMCO BANDAI Holdings Inc.

10

I have recently been appointed as the President and CEO
and Representative Director of NAMCO BANDAI Holdings.
About 30 years have passed since I joined NAMCO, andI have spent most of that time in planning and development
departments, working to create products that entertain
customers. Following the management integration ofBandai and NAMCO, I served as President of NAMCO
BANDAI Games, which has overall responsibility for gamecontent. In this role, I endeavored to integrate eachcompany’s know-how and human resources, and I believethat we were able to put operations on the right track.
Moving forward, as President and CEO overseeing the
BANDAI NAMCO Group’s management and operations,
I will strive to implement a range of initiatives based on the
new Mid-term Business Plan and to make BANDAI
NAMCO a “Globally Recognized Entertainment Group.”
The origin of entertainment is the provision of
appealing products and services that delight customers.
The starting point for everything that we do is ourcommitment to providing the best possible entertainment
to customers. By putting that commitment into practice,
we will strive to enhance the Group’s presence in global
markets. It is important that every employee think “I reallywant our customers to enjoy our products and services,”because that is the key to getting customers to actuallypurchase and enjoy our products and services. And withevery employee in the Group strongly committed to that
idea, it is my responsibility to lead the Group in a directionthat will enable us to leverage our full potential.
I actively visit worksites related to the Group’sbusinesses and communicate with employees. The Group
has a large number of uniquely talented individuals with akeen “entertainment” sensibility. I will commit myself tobuilding an environment in which these talented employees
can display their full potential. I will strive to raise thepresence of the Group as a whole by placing importance on
the same point of view as customers and employees, byadvancing management with a focus on people, and byraising the value of each employee’s contribution. My
fundamental management policy is to create “a group
centered on human resource management with uniquestrengths in entertainment and imagination.”
We currently face a difficult business environment due
to the sluggish economic conditions around the world.
Nonetheless, I look at the business environment in apositive way and believe that now is the time for innovation.
The BANDAI NAMCO Group has a business portfolio withan unrivaled scope. This means that we have many avenues
for the use of our entertainment products and services, inother words, business opportunities, and the scope of ouroperations is a strength that is unique to BANDAI NAMCO.
To make the most of that strength, we will strive to drawout the full potential of our employees, who are the greatest
asset of an entertainment company, and to create “a group
centered on human resource management with uniquestrengths in entertainment and imagination.” In this way,
we will create products and services that provide dreams
and inspiration to our customers.
August 200911 NAMCO BANDAI Holdings Inc. Annual Report 2009

To be a “Globally RecognizedEntertainment Group,” we will
manage our operations with anemphasis on people and will
endeavor to raise the value of each
employee’s contribution. In this way,
we will strive to create “a group
centered on human resource
management with unique strengths
in entertainment and imagination.”

President’s Message

Results in the fiscal year ended March2009“We offered appealing products andservices, but the sluggish businessconditions had an adverse influence,
and we were consequently notsatisfied with our results.”
In the fiscal year under review, the disruption of thefinancial markets, which began with the subprime loan
problem in the United States, developed into a global
financial crisis that had a significant influence on consumer
spending in Japan and overseas. Consequently, market
conditions remained severe throughout the year.
In this setting, the Group’s net sales were down
7.4%, to ¥426.4 billion, and operating income declined
33.1%, to ¥22.3 billion. In the Toys and Hobby SBU, boys
toys based on popular characters performed well in Japanand overseas. In the Game Contents SBU, results were
supported by popular titles of video game software inoverseas markets. However, from fall 2008, the global
economic slowdown had a major adverse influence, andconditions were more sluggish than anticipated in mostbusiness areas. By segment, the economic slowdown
especially affected the Amusement Facility SBU, which
faced difficult operating conditions for its existing facilities
in the domestic market, and the Visual and Music Content
SBU, which recorded sluggish sales of packaged products.
In expenses, we recorded amortization of goodwill for
Bandai Visual and Bandai Networks, which were madewholly owned subsidiaries in the previous fiscal year. We
also recorded a valuation loss on investment in securities
and an impairment loss on amusement facilities.
As a result, net income declined substantially, falling
63.8%, to ¥11.8 billion. However, this decline was due
primarily to a rebound from the previous year, when again was recorded on the sale of land in Tokyo.

Achievements under the previous
Mid-term Business Plan and targets under
the new Mid-term Business Plan
“We will strive to be a ‘Globally
Recognized Entertainment Group’and to build a managementfoundation for global growth.”
Under the previous Mid-term Business Plan, which
commenced in April 2006, we regrettably failed to reachour targets by a substantial margin. The reasons for thisperformance included a decline in economic conditions
that exceeded our expectations, such as the prevailingglobal business slump, as well as the fact that we could not
respond rapidly to changes in the market environment andcustomer needs. On the other hand, our achievements
included rapid progress with measures to enhance theGroup’s management foundation, such as the restructuringof the Group’s organization, the integration of the humanresources and corporate cultures of Bandai and NAMCO,
and the reinforcement of our financial foundation. As aresult, we built a system that enables us to focus on
operational growth, and under the Mid-term Business Plan
that commenced in April 2009, we will allocate ourmanagement resources to focused business opportunities
and aim for growth over the medium to long term.
In formulating the new Mid-term Business Plan, we
determined three directions that are necessary to achieve
growth in the rapidly changing global entertainment market.
First, the BANDAI NAMCO Group must strengthen
its overseas business. Currently, the domestic market isaffected by the trend toward fewer children and is expected
to show sluggish growth or possibly even contract. However,looking at the global market, the toys and hobby market, forexample, has a scale of more than ¥5 trillion, of which
Europe and the Americas account for about 70%. Moreover,in video game software, the global market has a scale ofmore than ¥2 trillion, and the scale of the markets in theAmericas and Europe is 1.7 times the level of four years
ago. In comparison to our operations in the domestic
market, the Group’s presence in these global markets is too
small. For example, in the toys and hobby market, we havea market share of about 1% in Europe and the Americas,
and there are many categories in which we have only alimited presence. Consequently, we must reinforce andexpand our overseas operations.
Second, we need to execute innovative content
strategies. Recently, we have seen a growing trend toward
the emergence of hit content in short periods of time. This

12

Capital policy and return toshareholders“Our fundamental policy is to aim for apayout ratio of 30%, based on a stableannual dividend payment of ¥24 pershare.”The Company considers the return of profits to shareholders
to be one of its most important management issues. Ourbasic policy for the payment of dividends is to continue
to pay dividends and raise enterprise value while further
strengthening the Group’s competitiveness and maintaining
a sound financial position. Specifically, our policy is toappropriate an amount equivalent to a 30% dividend payout
ratio from consolidated periodical net income, based ona stable annual dividend payments of ¥24 per share.
Furthermore, we will consider using a portion of the balanceremaining after the appropriation of dividends for theacquisition of our own shares, with comprehensive
consideration of aspects such as the level of cash on hand,operating performance, recent share price movement, andplans for large-scale investments.
Over the three years of the previous Mid-term
Business Plan, our total payout ratio, including dividends
and the acquisition of our own shares, was actually about
80%. Moving forward, income after the appropriation ofdividends will be applied on a priority basis to M&Atransactions and to up-front investment, such as
development investment, with the objective of expanding
operations overseas. We will consider actively
implementing M&A transactions in the entertainment field
when we believe that mutual synergies can be expected.
Group companies D3 INC. and NAMCO BANDAI Partners
S.A.S. have recently been made wholly owned subsidiaries.
Based on our previous favorable relationship with thesetwo companies, we believe that this initiative will contributeto the strengthening of our overseas business.

•Cash Dividends (yen)
FY2006.3

24
28

FY2007.3
FY2008.3

24

FY2009.3

24

Note: Dividends for the fiscal year ended March 31, 2006, include share transfer
payments made in lieu of interim dividends.

CSR activities“We will continue to implement
creative, highly topical CSR activities
that exemplify BANDAI NAMCO’s
strengths.”
In CSR activities, the new Mid-term Business Plan calls forstrengthening environmental management. Specifically, we
will promote environmentally friendly policies in products
and services for all Group companies. Our objective is to
reduce CO2 emissions from our worksites by 5.4%* overthree years. Also, as one facet of the Mobile Suit Gundam
30th Anniversary Project, we created a real-size (18 metertall) Gundam statue. This statue, which was created as apart of the Green Tokyo Gundam Project, was set up in apark in Tokyo. Donations to the Green Tokyo Fund will bemade from the event receipts. Moving forward, we willcontinue to implement creative, highly topical CSR activities
that exemplify BANDAI NAMCO’s strengths.

13 NAMCO BANDAI Holdings Inc. Annual Report 2009

trend is a result of the global oligopoly in distribution andmedia and of the simultaneous worldwide distribution ofcontent, which is due in part to the spread of the Internet.
Accordingly, we must implement bold reforms, suchas implementing content development based on theassumption of global distribution and responding to media
diversification.
Third, we must expand our scale to compete in the
global market. Mergers and acquisitions (M&As) among
companies in the entertainment industry are taking place at
an increasingly rapid pace, and competition is intensifying ona global scale. Consequently, we will need to expand ourscale to compete with top companies around the world.
While maintaining a focus on these three challenges,
BANDAI NAMCO’s medium-to-long-term Group vision is tobe a “Globally Recognized Entertainment Group,” and theGroup is aiming to achieve operating income of ¥100 billion,
an overseas sales ratio of 50%, and ROE of 10% or more
over the course of the Mid-term Business Plan that starts
in April 2015. We have positioned the term covered by the
new Mid-term Business Plan as a period for advancing
strategies and policies targeting these objectives. The
BANDAI NAMCO Group will strengthen its business
operations on a global scale by making up-front investments
in growth businesses and bolstering its operational
profitability. Based on this foundation, the Group will strive
to achieve full-scale growth in the global market and aim to
be a “Globally Recognized Entertainment Group” throughthe implementation of long-term Group strategies.
(For further information about the Mid-term Business Plan,please refer to pages 14 to 17.)

The BANDAI NAMCO Group’s

Mid-term Business Plan
The BANDAI NAMCO Group commenced a new three-year Mid-term Business Plan in April 2009. Under theprevious Mid-term Business Plan, which covered the period from April 2006 to March 2009, the BANDAI
NAMCO Group reinforced its management foundations by restructuring its organization, integrating its
human resources, and strengthening its financial position. The system established through these measures
has enabled the Group to focus more on its business operations. Now, we have entered a phase of proactive
business development, and we are aiming to achieve accelerated growth over the medium to long term.

Background to the Development of the Mid-term Business Plan
1. Strengthening overseas business
The BANDAI NAMCO Group is currently conducting
entertainment operations in domestic and overseas
markets. In the domestic market, we have strengths ineach business category. On the other hand, in the larger
overseas market, our business scope and content
portfolio are very limited, and thus our market share andsales ratio are small. Therefore, we believe that we muststrengthen our operations in overseas markets in order toachieve future growth.

2. Pursuing innovation in our content strategy
Currently, the entertainment industry is characterized byan oligopoly in distribution and media and the spread of the
network environment. As a result, there is a growing trend
toward the development of powerful content into global hit
products in a short period of time. We will continue to pursue
innovation in our content strategy and will not limit ourselvesto previous methods of developing content.
3. Expanding our scale to compete in the global market
In the entertainment industry, M&As are taking place at anincreasingly rapid pace, and competition is intensifying on a
global scale. Moving forward, we will need to expand ourscale to compete with leading companies around the world.

•Contribution to Net Sales by Geographic Segment
Asia 2.4%

Asia 3.2%

Europe 6.9%

Europe 10.6%

Americas 9.5%
Americas 11.3%

FY2006.3

FY2009.3

Overseas

Overseas18.8 %

25.1 %

Japan

Japan
81.2%

74.9%

Note: Percentage figures are calculated based on external sales.

•Shrinking Japanese market and growing overseas market — Changes in shares by region in the global market

Toys and Hobby

Game Software
Asia

Japan

U.S.

Europe

Japan

Asia
¥

4.9 trillion

2007

¥

5.2 trillion

EuropeMarket Size

Market Size
2003

U.S.

2003

¥

1.3 trillion

2007

¥

2.1trillion

74% in U.S. & Europe (¥3.8 trillion)

Our direction: Focus on growth in the global market from a long-term perspective

14

BANDAI NAMCO’s medium-to-long-term Group vision is tobe a “Globally Recognized Entertainment Group,” and theGroup is aiming to achieve operating income of ¥100 billion,
an overseas sales ratio of 50%, and ROE of 10% or more
under the Mid-term Business Plan that will start from April
2015. The three years covered by the recently launched

Mid-term Business Plan have been positioned as a period
for advancing strategies and measures targeting theachievement of our medium-to-long-term Group vision. We
will reinforce our global growth foundation by implementing
two strategies: “Focus” as our business strategy and“Enhance the Entertainment-Hub” as our function strategy.

Medium to Long-term Group Vision (Apr. 2015–Mar. 2018)

Globally RecognizedEntertainment Group
Previous Mid-term Business Plan
(Apr. 2006–Mar. 2009)

100 billion Overseas Sales Ratio: 50 % ROE: more than10 %Operating Income: ¥Completing development of ourmanagement base
• Restructured organization• Aligned corporate culture and humanresources• Strengthened financial base, etc.

Medium to Long-term (Apr. 2012–)
Substantial growth inglobal market

Mid-term Business Plan
(Apr. 2009–Mar. 2012)
Developing a global base for growth• Investments in growing business areas• Improving profitability• Generating returns from our investments• Making further investments for growth

Aiming to be a “Globally Recognized Entertainment Group” and todevelop the basis for global growth in the Mid-term Business Plan, theBANDAI NAMCO Group will pursue two strategies: “Focus” as ourbusiness strategy and “Enhance the Entertainment-Hub” as our function
strategy.

Strategy A “Focus”= Business Strategy

Please refer to page 16.

We classify the four business segments* of the Group into Dynamic Growth Businesses, for which we will makeproactive investment, and Profit Improvement Businesses, for which we aim at increasing profitability, by clarifying
our missions based on the market attractiveness and our competitive advantage in each area.

*: In April 2009, the Game Contents SBU and the Network SBU were convined, resulting in a system of four SBUs.
Dynamic Growth Businesses
Toys and Hobby

Profit Improvement Businesses
Game Contents

Visual and Music
Content

Amusement Facility

Strategy B “Enhance the Entertainment-Hub”= Function Strategy
Evolve from best domestic model to best global model

Please refer topage 17.

Evolution A
Evolution B
Evolution C
We will enhance the Entertainment-Hub model, which
Strengthen IP creation /Enhance IP
Maximize merchandisingused to be applied mainly in the domestic market, by
acquisition capability
marketing capability development capability
evolving into a global model through coordination withstrategy for each business.
Intellectual property (IP) refers to sources of content, such as characters, values, and ideas.

15 NAMCO BANDAI Holdings Inc. Annual Report 2009

Medium to long-term Group Vision

The BANDAI NAMCO Group’s

Mid-term Business Plan
Business Strategy: “Focus”
on the domestic market.
Moreover, targeting global growth, from the profits tobe generated by the BANDAI NAMCO Group over the next
three years, after subtracting dividends to shareholders, weplan to allocate up to ¥50 billion for medium to long-term upfront investment in dynamic growth businesses. This upfront investment will include about ¥20 billion for bolstering
worldwide development and sales systems in the Game
Contents SBU, and about ¥30 billion for M&A activities, andfor creating, acquiring, and bolstering IP (intellectual
property) with the objective of supporting the global
development of the Entertainment Hub model, centered on
the Toys and Hobby SBU.

Under the “focus” business strategy, we clarify the missionsof our four business segments based on the market
environment and our competitive advantages in each field,
and we will concentrate our investment in growth areas. For
the Toys and Hobby SBU and the Game Contents SBU, we
anticipate large global markets with future growth potential.
Thus, we have positioned these two segments as dynamic
growth businesses and will invest in them proactively withthe objective of generating dynamic growth by taking on new
challenges. On the other hand, we have positioned the Visualand Music Content SBU and the Amusement Facility SBU as
businesses slated for profit improvement. We will take steps
to strengthen the profitability of these segments, centered

Dynamic GrowthBusinesses

Strategic Business Units

Strategy

Toys and Hobby

To expand our operations, we will
implement proactive up-front investment,
centered on the Americas and Europe.

Game Contents

Strategic Business Units
Profit Improvement
Businesses

Strategy

Visual and Music Content
Amusement Facility

Through a change in our mission andthe implementation of selection andconcentration initiatives, we will focus
on the domestic market and take steps
to improve profitability.

Operating Income
Margin (%)
20

Visual and Music Content
Focus on Japan
Game Contents
Focus on software in U.S. / Europe

15

Profit Improvement

Amusement Facility
Focus on Japan

10

5

Toys and Hobby
Focus on U.S. / Europeth

ic Grow

Dynam

0

100

200

300

400

Net Sales

500 (¥ billion)

Clarify the missions of our businesses
and invest in growing areas
2008

2011

2015〜

16

The Entertainment-Hub business model, which entails aseries of functions—from content creation and acquisition
through development to use of the content—both inside theGroup and through synergies with external partners, is thegreatest strength of the BANDAI NAMCO Group. In thepast, we have principally applied this model in the domestic
market. Moving forward, however, we will enhance theEntertainment Hub into a global model through coordinationof segment strategies.

•Business Model Unique to BANDAI NAMCO
IP creation and acquisition

IP marketing (media use)

Merchandising development

Increase value through use of media

Launch diverse products on IP

Group

IP
IP

IP

Toys and Hobby

IP

Creation

Outside

IP

IP

IP

IP

IP

IP

IP

IP

Game Contents

IP

IP

IP

Visual and Music Content

IP

Amusement Facility

IP

Acquisition IP

Synergy by linkage

Enhance the model to best global model
IP Creation andAcquisition• Bolster worldwide studio system for Game Contents business• Reinforce the foundation for the creation of characters by enhancing cooperation with partners, including media companies• Invest in and acquire large-scale content that can be marketed globally

IP Marketing• Implement simultaneous global content launches through strengthened coordination with TV, movies, and websites in theAmericas and Europe in addition to domestic TV and movies

Merchandising
Development• Increase profitability through the lateral expansion of content in terms of regions and business categories

Measures for• In the implementation of IP creation and acquisition, IP marketing, and merchandising development across the Group, theaccelerating theleading role will be played by the “Content Business Strategy Meetings,” which consist of members from each business
implementation of unit, and strategies will be implemented as Group initiatives
our strategies
Intellectual property (IP) refers to sources of content, such as characters, values, and ideas.

Topic
Gundam 30th Anniversary Project
Mobile Suit Gundam has maintained a broad range of support in the 30 years
since its first TV broadcast in 1979. In the fiscal year ended March 2009, Mobile
Suit Gundam was the leading character in terms of net sales, at ¥42.8 billion.
Mobile Suit Gundam exemplifies the success of the Group’s character
merchandising.
For the 30th anniversary, we will implement merchandising activities on aGroupwide basis for the Mobile Suit Gundam 30th Anniversary Project. As thefirst step, we built a real-size (18 meter tall) Gundam statue. The Group alsoplans to implement a range of activities, such as sponsorship of commemorative
events, music collaboration, and sales of commemorative goods.

17 NAMCO BANDAI Holdings Inc. Annual Report 2009

Function Strategy: “Enhance the Entertainment-Hub”

Strategic Business Units

Mid-term Business
Strategies
The BANDAI NAMCO Group comprises four SBUs (Strategic Business Units), each of which operates in its
own business domain, and the affiliated business companies, which principally provide support to the SBUs.
The SBUs coordinate the operating companies, while NAMCO BANDAI Holdings manages and oversees theGroup as a whole. Business strategies for Japan and overseas are formulated and implemented by the
SBUs, centered on the core companies. Moving forward, under the Mid-term Business Plan’s “focus”
business strategy, we will clarify the mission of each SBU based on the market environment and ourcompetitive advantages, and we will adjust our investment accordingly.

18

Toys and Hobby

Sales ratio in fiscal
year ended March
2009

37.1%

Core company: BandaiBusiness activities

President and Representative
Director:

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

Kazunori Ueno

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

Shin Unozawa

Sales ratio in fiscal
year ended March
2009

33.6%

Business activities

Planning, manufacturing, and marketing of game software for home video
game consoles and handheld devices; arcade game machines; network
content; prizes for amusement machines; and other products(Note: Because the Game Contents SBU and Network SBU were combined from the fiscal year ending March 2010, results in the fiscal year ended March 2009 are presented as the simple sum of the results of the two businesses.)

Visual andMusic Content

Sales ratio in fiscal
year ended March
2009

7.8%

Core company: BANDAI VISUAL

Business activities

President and Representative
Director:

Production of visual content; production and sales of packaged visual
products, music, and other products; and on-demand video distribution

Kazumi Kawashiro

Amusement
Facility

Sales ratio in fiscal
year ended March
2009

Core company: NAMCO

Business activities

President and Representative
Director:

Planning and managing amusement facilities, etc.

Masahiro Tachibana

17.3%

19 NAMCO BANDAI Holdings Inc. Annual Report 2009

BANDAI NAMCO Group At a GlanceStrategic Business Units— Mid-term Business Strategies

Toys and Hobby
We will expand the Character Merchandisingmodel on a global scale, with priority on
strengthening operations in the Americas andEurope.
Results in fiscal year ended March 2009

Forecasts for the fiscal year ending March 2010

¥165.7 billion¥158.0 billion¥11.5 billion¥9.0 billion

7.0 %

5.7 %

Net sales
Operating income
Operating income margin

In the Toys and Hobby SBU, which is positioned as a dynamic growth business, we will
work to expand the character merchandising model, which originated in Japan, tomarkets around the world, and to strengthen its operations in the Americas and Europe.
Accordingly, we will bolster cooperation among regions and expand characters,
categories, and distribution networks.

Toys and Hobby Global Strategy

The established charactersin the Super Sentai series
are also popular in overseas markets as thePower Rangers series.

BEN10 has been extended
to 37 countries around theworld as a character originating from the Americas.
In the fiscal year ended
March 2009, global sales
were ¥13 billion.

By region, in the Americas we will work to strengthen our operations in existing categories in which
we are competitive as well as expand our business scope. In addition to making full use of characters
originating in Japan, such as Power Rangers, we will work cooperatively with local media companies andstrengthen development of characters originating in the Americas, such as BEN10. From the fiscal year
ending March 2010, Masked Rider was launched as a new character from Japan. We will startdevelopment of Kamen Rider Dragon Knight related products, and develop it into an establishedcharacter like Power Rangers. At present, the development of BEN10 has been extended to more than
37 countries, and we are forecasting BEN10 sales, including game content, of more than ¥16 billion
in the fiscal year ending March 2010. We will also conduct lateral development into new categories, suchas toys for pre-school children, dolls, and other products. At the same time, we will strengthen
development of products originating in Japan, such as the major hit Tamagotchi, and will aggressively
introduce unique new products into categories that will match customer needs in the Americas, such as
vehicle-related products and other hobby products as well as girls activity products. Furthermore, there•Dramatically Expand the Character Merchandising Model to the Global Market
Character (IP)U.S.

EuropeKamen Rider Dragon
Knight is currently a popular show in the UnitedStates, and the Company
will commence full-scale
product sales.

Products (Merchandising)

Strengthening
characters originating fromJapan and the U.S.

Sales & Marketing

Strengthening products originating from Japan and the U.S.
Expanding our categories

Strengthening collaboration with the U.S.

Japan

Building a dominant No.1 position in the market

Asia

Strengthening collaboration with Japan

Expanding sales areas

20
21 NAMCO BANDAI Holdings Inc. Annual Report 2009are some fields in which we could potentially leverage synergies but in which we have not yet establishedan operational presence. We will actively consider entering these fields, including through the use of M&As.
In Europe, we will strengthen connections with operations in the Americas and accelerate the local
development of content originating in the Americas, such as BEN10. Moreover, new products for girls thatwere developed in Europe will be introduced throughout the European market. In this way, we will expand
the category of products for girls. Moreover, as an initiative for expanding sales areas in Europe, we will
establish a base in Poland for sales in Eastern Europe. Until now, our sales in Europe have been centeredon Western Europe, such as France and the United Kingdom, but in the future we will utilize sales
companies to expand our sales area to Central Europe and Eastern Europe. Currently, there are 10
countries in the direct sales system, and we plan to nearly double that number in the future.
The Toys and Hobby SBU has a solid presence in the Japanese market, and we will strive to establish
dominant No.1 positions in all categories in which we are active. To that end, we will maintain our No.1
position in categories such as toys for boys, while bolstering our positions in such categories as tradingcards, aiming to secure a No.1 ranking. Also, by strengthening cooperation between Japanese operations
and other Asian areas, we will accelerate the development of characters originating in Japan.

•Strategy for the United States
Utilizing characters
Making the most ofJapanese characters

Strengthening creationof U.S. characters

Stepping up development of
products originating from Japan
Developing unique products of
categories popular in the U.S.

Utilizing charactersto develop new categories
Existing

Action Figure Toys
Trading Cards

New

Girls (Dolls)
Pre-school Toys, etc.

Existing

Hit products in Japan(Tamagotchi, Mugen Pop Pop)

New

Hobby (Vehicle),
Girls (Activity toys), etc.

Since it first went on sale in1980, the Mobile Suit Gundam plastic model series
has sold a total of 400 million units.

Entering new businesses
Considering growth initiatives, including M&As

Strengthening our existing competitive advantages and expanding our product categories•Sales of Major Characters (Group Total)(¥ Billion)

Market Data

FY2007.3 FY2008.3 FY2009.3

Mobile Suit Gundam series

54.5

50.9

42.8

POWER RANGERS series

32.0

25.4

23.0

Dragon Ball

20.5

17.8

15.8

Masked (Kamen) Rider series

8.7

13.1

10.4

BEN10

2.4

7.0

13.0

Size of Japan’s Toy Market (FY2009.3)

Other 1.4%

Games 1.9%
Card games,trading cards

11.5%

Hobby 18.9%

Toy market in
Sundries

12.6%

FY2009.3¥663.6 billion

Jigsaw puzzles 1.9%
High-tech trend toys 1.3%
Boys’ character toys

The Tamagotchi series has
become an established product for girls in Japan andoverseas. The Company
plans to start a TV animationin the fiscal year ending
March 2010.

6.3%
Boys’ toys 6.8%
Girls’ toys 6.1%

Seasonal goods

7.9%

Stuffed toys 2.4%
Educational toys 20.9%

Source: Survey by the Japan Toy Association

The Battle Spirits tradingcard game sold a total of 200
million cards in about sevenmonths after it was launched,
and the Company has juststarted sales in the UnitedStates in summer 2009.

Strategic Business Units— Mid-term Business Strategies

Game Contents
The Game Contents SBU will place a special
emphasis on game software for home video game
consoles in the Americas and Europe, while making
full use of our strengths in arcade game machines
snd network content.
Net sales

Results in fiscal year ended March 2009

Forecasts for the fiscal year ending March 2010

¥150.3 billion¥140.0 billion¥11.6 billion¥5.5 billion

7.7 %

3.9 %

Operating income
Operating income margin

Note: Because Game Contents SBU and Network SBU were combined from the fiscal year ending March 2010, results in the fiscal year ended
March 2009 are presented as the simple sum of the results of the two businesses.

In the Game Contents SBU, which is a dynamic growth business, we will advance ourbusiness strategies with consideration for our competitive advantages in each field andfor market characteristics. In particular, in game software for home video game consoles,
the scale of overseas markets is large in comparison with the domestic market, andstrong growth can be expected. Accordingly, we will bolster the development and sales
system on a worldwide basis.

Home Game Software

In fall 2009, the Group plans tostart worldwide sales of the
Tekken 6 home video gamesoftware, for three platforms.

In game software for home video game consoles, we will strengthen development and sales
systems, especially in the Americas and Europe. In the past, we have undertaken the global
development of products originating in Japan. Moving forward, we will also bolster the global
development of products originating in the Americas, boost cooperative initiatives between theAmericas and Europe with Japan providing overall coordination, and bolster the product lineup overthe medium to long term. Through this new worldwide development system, we will establish a•Worldwide Development System
Developed in Japan
Core target
Developed in the U.S.
Core target

Developed in Japan
Casual target
Developed in the U.S.
Casual target
Worldwide studio

Worldwide extension of Japanese andU.S. development capabilities
The Family Series for the Wii
has sold more than one million
units in Japan and overseas
and is on the way to becoming
an established series for casual
users.

Current BANDAI NAMCO
SystemSales in Europe
Mobile Suit Gundam: Senjo no
Kizuna, a cockpit style arcade
game, is a popular product thathas been available since 2006.

Sales in Japan

New BANDAI NAMCO System

Development
in Japan
Developmentin the U.S.

Sales inthe U.S.

22
TANK! TANK! TANK! is aforce-feedback battle gamescheduled for introduction in
fall 2009.

In content for mobile
phones, the Game Contents
SBU aims to leverage further synergies stemmingfrom the integration with the
Network SBU.

23 NAMCO BANDAI Holdings Inc. Annual Report 2009

framework for investment recovery worldwide while maintaining a balance between software forcore users and software for casual users.
In development, with comprehensive consideration for market characteristics and our own
competitive advantages, we will aggressively develop products in eight genres—fight, flight, andanimation/action, which are in the general progress category; music and action (including gamecharacters), which are in the revitalization category; and racing, core action, and shooting, which
are in the new development category. In the general progress category, we will focus on further
advances, centered on strong franchise titles—such as Soul Caliber in the fight genre, Ace Combat
in flight; and Dragonball in animation/action. In the revitalization category, by strengthening
development in accordance with preferences in the Americas and Europe, such as Family Series
for the Wii, we will leverage our presence in rapidly growing markets. In the new development
category, we will apply existing technical and planning capabilities to the development of new
franchises, such as Afro Samurai, a core action game. At the same time, we will collaborate withother companies and develop new game engines. In addition, we will strategically allocate
management resources on a five-year timeframe and introduce a portfolio map for the purpose ofthoroughly bolstering scheduling capabilities in global markets. Based on the portfolio map, we willtake steps to reinforce competitive advantages and efficiently recover investment by standardizing
development and screening processes and aligning sales and development strategies.
Also, as one facet of M&A strategies targeting stronger operations in the Americas and Europe,
we have made D3 INC. a wholly owned subsidiary. D3 has special strengths in game software forhome video game consoles and casual games for mobile devices. Through the combination of D3’sknow-how in casual games and the BANDAI NAMCO Group’s content, we will display synergistic
effects, such as strengthening our operations in the general progress and revitalization categories.
Furthermore, with the objective of expanding our sales area, we have made NAMCO BANDAI
Partners S.A.S., a game software sales company in Europe, a wholly owned subsidiary. As a result,
we have greater independence in the implementation of marketing and sales strategies in Europe,and we have expanded our sales area to 10 bases covering 20 countries. In this way, we have built asystem that covers more than half of the major countries.
On the other hand, in Japan, we will maintain our third-party No.1 market share, while aiming to
improve profitability by focusing on strategic titles.

Leveraging Group knowhow, we provide character
prizes for arcade machines.

Market Data

•Unit Sales of Home Game Software by Region

Share of Unit Sales by Group, Domestic Manufactures

FY2008.3

FY2009.3

Number Unit salesof titles (Thousand)Number Unit salesof titles (Thousand)

Japan

89

11,75274

10,443

U.S.

26

5,019

19

6,115

Europe

20

6,908

20

6,195

Asia

11

535

13

632

Overseas Total

57

12,462

52

12,942

Group Total

146

24,214

126

23,385

Localized versions

59

Group total after eliminationof localized versions

87

69

Others 15.6%

KOEI 2.3%
Sony ComputerEntertainment Japan 3.0%

Nintendo

34.2%

SEGA SAMMYHOLDINGS 4.7%

2008

Square Enix 6.4%
Capcom 8.1%

57
24,214LEVEL-5 1.9%
Index Holdings 2.0%

KONAMI

23,385

8.8%

NAMCO BANDAI
Games

13.0%

Source: Famitsu Game White Paper 2009
Published by: ENTERBRAIN INC. (Period: December 31, 2007 to December 28, 2008)

Arcade Game Machines / Network Content
The sluggish business conditions faced by the amusement facility industry influenced our arcade
game machine operations, and moving forward, we will focus resources on the development ofhigh-value-added machines that can be enjoyed only in amusement facilities. Also, in addition tobolstering our development capabilities in line with next-generation needs, such as online
functionality, we will also contribute to the activation of amusement facilities by implementing lateraldevelopment into Asia. In network content, we will work to leverage synergies resulting from theintegration with the Network SBU.

Strategic Business Units— Mid-term Business Strategies

Visual and Music Content
We will improve profitability through theestablishment of an optimal IP portfolio andinvestment recovery from a global perspective.
Results in fiscal year ended March 2009

Net sales

Forecasts for the fiscal year ending March 2010¥34.6 billion¥34.0 billion¥0 billion¥1.5 billion

Operating income

0.1 %Operating income margin

4.4 %In the Visual and Music Content SBU, which is slated for profit improvement, the domestic
packaged animation market is medium sized, but the “between seasons” transition period
accompanying the shift to next-generation hardware is ongoing, and accompanying the trend
toward increasingly advanced hardware, profitability in the software business is declining. In
this environment, we will focus on improving profitability and on creating appealing content,
which is the foundation of the Group’s business in this field. We will also build a nextgeneration business model that is aligned with changes in the environment.
In the domestic market, packaged animation products are recording steady results, but total sales of video
game software have declined to about three-quarters of the level reached in 2004, when sales peaked.
This is an indication that Blu-ray Disc hardware, which was launched as next-generation hardware, has not
yet widely penetrated the market, while sales of DVD products have declined. Accompanying the shift toterrestrial digital broadcasting in 2011, the transition to Blu-ray Discs is expected to make gradual progress,
but for the time being, the future course of the market environment is unclear.
Moving forward, we will take a thorough approach to portfolio management, under which we will
In regard to Mobile Suit Gundam Unicorn, scheduled for aspring 2010 introduction, we
will take on the challenge of
new initiatives, such as theater
screenings and simultaneous
worldwide distribution.

manage content for core users, who place a high priority on image quality, and wide-ranging content forfamilies, as well as in-house content and content from other companies. We will strive to allocate
resources strategically and efficiently in the creation and acquisition of content. We will streamline titles tomeet needs in a timely manner, and will take steps to improve profitability. At the same time, we will strive
to enhance investment recovery through a global viewpoint that leverages the distinctive characteristic of
Blu-ray Discs, which can be released in a region-free format. In these ways, we will endeavor to enhance
profitability.
Moreover, targeting the enhancement of the Entertainment-Hub model, we will bolster the content
creation function, which is the source of the Group’s business. We have decided to create a new

In addition to animation products, we have also participatedin the production of multiple
live-action films that have beenhighly regarded.

animation, Mobile Suit Gundam UC (Unicorn). We plan to conduct such activities as theater screenings,
packaged product sales, and on-demand distribution, and to implement simultaneous worldwide
development in multiple languages. In the future, we will move forward with the establishment of a new
business model through this type of global development.

•Net Sales by Category (FY2009.3)
Production licenses¥10.8 billion
31.2%

Total
¥34.6 billion
We provide music content
related to animations andgame software.

Market Data

Sales of Video Content (¥ billion)

Visual package
software2004¥23.8 billion
68.8%

2005

23.1

2006

5.5

325.2

2007

0.7

317.2

55.6

319.7

375.3

347.7

370.8
330.8
318.0
9.9

2008

0.3

VC

286.1

275.7

DVD

Source: JVA Report 2008.4

Blu-ray

UMD

0.3

Published by: JAPAN VIDEO SOFTWARE ASSOCIATION24

We will improve profitability through selection
and concentration and develop differentiatedamusement facilities.
Results in fiscal year ended March 2009

Forecasts for the fiscal year ending March 2010

¥77.3 billion¥70.0 billion

Operating income¥0.4 billion¥1.5 billion

Operating income margin

0.5 %

2.1 %

Net sales

The Amusement Facility SBU is slated for profit improvement. In an operating
environment that has been affected by the difficult economic conditions, we will work to
improve profits by advancing selection and concentration initiatives in operations and byincreasing efficiency. We will also leverage our distinctive know-how, such as character
merchandising, in developing differentiated amusement facilities.
In the fiscal year ended March 2009, sales at existing facilities in the domestic market were down 13.3%

NAMCO Wonder Park
Hero’s Base is an amusement facility that leverages
the distinctive know-how of
the BANDAI NAMCO Group.

due to sluggish consumer spending, and operating conditions were extremely challenging. In
this environment, we took steps to reduce costs. We closed 63 facilities, about 20% of our domestic
facilities, and at the same time we implemented selection and concentration initiatives in capital investment
and introduced an early retirement program for employees.
Moving forward, we will endeavor to bolster profitability through selection and concentration initiatives,
continue to step up the pace of scrap-and-build initiatives through rigorous store profit management, andimplement efficient management. At the same time, we will bolster marketing in line with the needs of

We opened Wonder Park
Plus in Hong Kong in 2008.

each customer segment. At amusement facilities in shopping centers, where many customers are in familygroups, we will implement campaigns linked to characters and will draw on the distinctive strengths of the
BANDAI NAMCO Group to leverage facilities integrated with characters. In these ways, we will differentiate
our operations. On the other hand, at facilities that are on shopping streets or roadsides, we will implement
store development centered on product lineups targeting core fans, implement game tournaments, andwork to promote repeat visits by issuing point cards. To advance these strategies, NAMCO’s organization
has been changed from a regional store management system to a system based on store format. In

At Kochikame Game Park,
visitors can experience theworlds of popular characters.

addition, by bolstering the planning department, we will focus our resources on the opening of differentiatedfacilities that leverage the know-how of the Group and offer distinctive competitive advantages.
Overseas, meanwhile, we will advance efficiency in the Americas by closing directly operated facilities
and consolidating revenue-sharing facilities on a regional basis. We will also withdraw from Spain. In theseways, we will rebuild our business model.

•Number of Facilities at the End of 2009.3(Total for Amusement Facility SBU)

RegionRegional Directly managed
total
facilities

Market Dataof which
Revenue-sharing
Theme parks
facilities*(Facilities)
Spa facilities

2003

Amusement Facilities in Japan (Facilities)
26,359

270

240

23

4

3

2004

Americas 1,146

58

1,088

0

0

2005

23,901

Europe

14

12

2

0

0

2006

23,613

Asia

28

12

16

0

0

2007

Total

1,458

322

1,129

4

3

Source: Fact-Finding Survey of the Amusement Machinery Industry 2007, Published by JAIA

Japan

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

25,04422,72325 NAMCO BANDAI Holdings Inc. Annual Report 2009

Amusement Facility

Corporate GovernanceOur highest management priority is the provision of benefits to all of our stakeholders, who support ourbusiness activities. We believe that to achieve ongoing growth in enterprise value over the long term, thecontinuous enhancement of corporate governance is an important management issue. The Group aims to
be a corporate group that is trusted by society and that makes an ongoing contribution to society. While
striving to raise management soundness, transparency, and efficiency, we will build a corporate governancesystem that facilitates rapid information disclosure.

Corporate Governance System
From April 2009, the Group has moved to a system of
two representative directors. As a result, the Group has
further strengthened its corporate governance system.
To further clarify the separation of the management
function and the execution function, we will strengthen
the executive officer system. Basically the presidents ofthe core company in each SBU, who previously weredirectors of the Company, will now focus on operational
advancement as senior executive officers. Also, with theobjective of bolstering overseas operations, the regional
heads in the Americas, Europe, and Asia will become
executive officers.
The number of directors has been reduced from 11

to 9, and the number of outside directors has been
increased from 2 to 3. In this way, one-third of all
directors are outside directors, and the management
oversight function has been enhanced. Also, to respondrapidly to changes in the management environment andto clarify further the responsibilities of directors, the termof office of directors has been set at one year.
The Company uses the statutory auditor system.
There are four auditors—two outside statutory auditors
and two full-time statutory auditors. In accordance withthe allocation of responsibilities as determined by the
Board of Auditors, each statutory auditor conducts audits,working with the independent auditors as needed.

General Meeting of Shareholders
Appointment /Dismissal

Appointment /Dismissal

Appointment /Dismissal
Account Auditing
Reports on Results

Auditing

Board of Directors

Board of Statutory Auditors

9 directors(of whom 3 are outside directors)

Independent Auditors

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

Dismissal
Appointment / Dismissal /Supervision
Auditing
Personnel Committee

Representative Directors
Cooperation

Directions

Reports

Reports
Committees
Group CSR Committee

Internal Auditing Division
Directions

Group Crisis Management Committee

Group Strategy Meeting

Contents Business Strategy Meeting

SupportGroup Social Contribution
Committee
Group Environment
Committee
Group Compliance
Committee

Auditing
Group Information Security Committee

Internal Control Committee
Policy Directions

Reports

BANDAI NAMCO Group Company
As of June 22,2009

26

Schedule

Agenda / Purpose

Board of Directors

Monthly and
Resolutions and reports on matters prescribed by the Company Law. Resolutions,otherwise as needed deliberations, and reports on matters related to the BANDAI NAMCO Group.

Directors, statutory auditors

Group Strategy Committee

Monthly

Reports on BANDAI NAMCO Group business affairs and deliberations on
business issues and problems.

Directors, statutory auditors,
SBU representatives, others

Waigaya Meeting

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

Full-time directors, others

The Internal Auditing Division rigorously audits businessexecution, while the independent auditors provide
account auditing. With close interaction centered on
the statutory auditors, the Company’s internal control
systems are continually monitored, and all issues are
identified and understood and recommendations forresolving those issues are provided.
As shown in the table above, the Company holds avariety of top management meetings and has establisheda system that facilitates rapidly tracking and responding toGroup management information.

Participants

The Group comprises four strategic business units(SBUs) as well as affiliated business companies, whichprincipally provide support services within the Group. In
each SBU, operating strategies for Japan and overseas
are formulated and implemented, with the lead role takenby the SBU’s core company. The Company, which is aholding company, monitors each SBU; holds meetings ofGroupwide committees, such as the Group Strategy
Meeting and the Group CSR Committee; and formulates
strategies for the Group as a whole.

Compliance
As “The Leading Innovator in Global Entertainment,”
the BANDAI NAMCO Group has clarified its thinking on
compliance and takes steps to make its Group companies
fully aware of these thoughts. To audit and supervise
important matters related to the entire Group’s
compliance, the Group Compliance Committee, whichis led by the President and CEO of NAMCO BANDAI
Holdings, meets on a regular basis. We have establisheda 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.
Based on the recognition that important components
of a company’s mission include strict compliance with thelaws in every country and region where it does businessand the pursuit of profit through fair competition, in April
2007, we formulated the BANDAI NAMCO Group
Compliance Charter, and we announced the BANDAI
NAMCO Group Declaration of Compliance in line with thatcharter.
In the fiscal year ended March 2009, e-learning
training based on the BANDAI NAMCO Group Compliance
Charter was implemented twice for all Group employees.
In addition, Group companies also conducted their own
compliance training. We will continue to conduct training
on a regular basis in order to foster an awareness ofcompliance and further enhance legal knowledge.

Risk Management
Recognizing the importance of risk management for thecontinuity of sound business operations, the BANDAI
NAMCO Group has formulated the Group Crisis
Management Regulations as guidelines for the actions
to be taken by each officer or employee when a crisis
occurs. Moreover, we have established the Group Crisis
Management Committee, which is chaired by the
President and CEO of NAMCO BANDAI Holdings. This

committee works to identify risks, to prevent the risks
from materializing, and to respond promptly in the eventof a crisis. Moving forward, we will strengthen our risk
management system to ensure that we can correctly
identify the social trends of the times and implement
prompt and appropriate responses to a range ofmanagement risks.

27 NAMCO BANDAI Holdings Inc. Annual Report 2009

Meeting Name

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 boundless enthusiasm. To ensure that we
can continue to provide “Dreams, Fun and Inspiration,” we have formulated Groupwide CSR initiatives that
include three types of responsibilities.
In accordance with these fundamental principles, a range of measures are implemented by theGroupwide Group CSR Committee and its sub-committees—the Group Social Contribution Committee, theGroup Environment Committee and the Group Compliance Committee—as well as by the Group Crisis
Management Committee, Group Information Security Committee and Internal Control Committee.

1
Environmental and Social
Responsibilities(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 in-house 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 around the world.

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

Economic Responsibilities

2
EconomicResponsibilities

3
Legal and EthicalResponsibilities(compliance)

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

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

28“BANDAI NAMCO Forest”at Shiga Kogen“BANDAI NAMCO Forest” at Shiga Kogen

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

Product raw materials and packaging andwrapping initiatives

Example of packaging-free products

We are implementing
measures to reduce packaging,such as decreasing packaging
space ratios, developing
packaging-free products, using
packaging that utilizes lowenvironmental-impact
materials, 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. These include
the Omocha-no-Machi Bandai
Museum in Tochigi Prefecture,
which has a collection that
includes toys from Japan andoverseas as well as many items
created by the famous inventor
Thomas Edison. We also provide
support for the New Technology
Foundation and Toy Library
Foundation.

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

Manufacture of safe, reliable products

Dropping products to test for quality

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

Wide-ranging environmental impact
reduction activities

Bandai Hobby Center (plastic model plant)

We are taking steps–such as theuse of solar power generation
and raw material recycling–to
make our plastic model plant in
Shizuoka City the first plant in thedomestic toy industry to receive
green certification. Moreover,
BANDAI LOGIPAL has acquired
Green Management Certification,
which is given to transportationcompanies that implement lowenvironmental-impact operations.

Barrier-free entertainment

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
centers to help senior citizens be
active in mind and body.

Initiatives to motivate and support humanresources
The BANDAI NAMCO Group is
implementing a range ofinitiatives regarding the
motivation and support ofhuman resources. We have asystem of awards to recognize
products and business models
that contribute to increasing
Group value from a variety ofviewpoints, such as sales, profit,
BANDAI NAMCO Group Creative Awards
topicality, and newness. Other
initiatives include active exchanges of human resources among Group
companies and entertainment training. In these ways, we will continue
working to promote dynamic corporate activities.

29 NAMCO BANDAI Holdings Inc. Annual Report 2009

TopicsOverview of Main Group Companies
As of August 1, 2009

NAMCO BANDAI Holdings Inc.

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

NAMCO BANDAI Holdings (USA) Inc.

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

NAMCO Holdings UK LTD.

Execution of European regional strategy; management support for European operating companies

Toys and Hobby Strategic Business Unit
Bandai Co., Ltd.

Planning, production, and sales of toys, apparel, and vending machine products, etc.

Megahouse Corporation

Planning, manufacturing, and sales of toys, etc.

CCP Co., Ltd.

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

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)

Sun-Star Stationery Co., Ltd.*

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

BANDAI AMERICA INCORPORATEDSales of toy-related products

BANDAI S.A.

Regional management functions; sales of toy-related products

BANDAI U.K. LTD.

Sales of toy-related products

BANDAI ESPAÑA S.A.

Sales of toy-related products

BANDAI (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 INDUSTRIAL CO., LTD.

Manufacturing of toy-related products

BANDAI (SHENZHEN) CO., LTD.

Quality assurance and quality control operations, and factory inspections for trading partners

BANDAI (GUANGZHOU) CO., LTD.

Planning and sales of toy-related products

BANDAI KOREA CO., LTD.

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

CREATIVE B WORKS CO., LTD.

Sales of toy-related products

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

D3 INC.

Planning, development, and sales of game software (Management of its subsidiaries)

VIBE Inc.

Development and provision of network content

Bec Co., Ltd.

Planning and development of game software

Banpresoft Co., Ltd.

Planning, development, and sales of game software

NAMCO TALES STUDIO LTD.

Planning, development, and sales of game software

Banpresto Sales Co., Ltd.

Sales of arcade machines and prizes, etc.

NAMCO TRADING LTD.

Purchase and sales of used arcade game machines; installation and management of vending machines; distribution of mobile content

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 network contents*Companies accounted for by the equity method

30

Sales and marketing of game software

NAMCO EUROPE LTD.

Sales of arcade machines

NAMCO BANDAI Networks Europe LTD.

Development and distribution of network contents

NAMCO BANDAI Partners S.A.S.

Management of its sales subsidiaries

BANPRESTO (H.K.) LTD.

Manufacturing and production management of arcade machines and prizes

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 for TV and theatrical release, management and administration of copyrights

Bandai Channel Co., Ltd.

On-demand delivery of content, such as animation

EMOTION CO., LTD.

Planning and development of visual products

SUNRISE MUSIC Publishing Co., Ltd.

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

Lantis Co., Ltd.

Planning, manufacturing, sales, and management of musical content

BANDAI ENTERTAINMENT INC.

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

BEEZ ENTERTAINMENT S.A.S.

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

Amusement Facility Strategic Business Unit
NAMCO LIMITED

Planning and operation of amusement facilities

Pleasure Cast Co., Ltd.

Planning and operation of amusement facilities

Hanayashiki Co., Ltd.

Planning and operation of Asakusa Hanayashiki amusement park

NAMCO SPA RESORT LTD.

Planning and operation of spa facilities

NAMCO CYBERTAINMENT INC.

Planning and operation of amusement facilities in America

NAMCO OPERATIONS EUROPE LTD.

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

BOWLING STATION S.L.

Planning and managing of amusement facilities in Spain

NAMCO ENTERPRISES ASIA LTD.

Planning and operation of amusement facilities in Hong Kong

SHANGHAI NAMCO LTD.*

Planning and operation of amusement facilities in China

Affiliated Business Companies
BANDAI LOGIPAL INC.

Cargo trucking operations, logistics management, etc.

LOGIPAL EXPRESS INC.

Transportation, distribution, warehousing, etc.

NAMCO BANDAI Business Services Inc.

Support of Group operations and administration, etc.

Artpresto Co., Ltd.

Planning and designing of various printed materials

Happinet Corporation*

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

Sotsu Co., Ltd.*

Planning and development of advertising and copyright business (JASDAQ)

Italian Tomato Ltd.*Management of directly operated restaurants; franchise operations

31 NAMCO BANDAI Holdings Inc. Annual Report 2009

NAMCO BANDAI Games Europe S.A.S.

Directors and Corporate Auditors
As of June 22, 2009

Chairman, Representative Director

President and CEO, Representative Director

Takeo Takasu

Shukuo Ishikawa

Director

Director

Director

Director (Part-time)Jun Higashi

Shuji Ohtsu

Yusuke Fukuda

Kazunori Ueno

Director (Outside)

Director (Outside)

Director (Outside)

Masatake Yone

Kazuo Ichijo

Manabu Tazaki

Statutory Auditor (Full-time) Koichiro Honma
Statutory Auditor (Full-time) Katsutoshi Hirasawa
Statutory Auditor (Outside)

Osamu Sudo

Statutory Auditor (Outside)

Kouji Yanase34
32
HoldingsInc.
Inc. Annual
AnnualReport
Report20092009
35 NAMCO BANDAI Holdings
33

Financial
SectionContents
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’ Report70Consolidated Six-Year Financial Summary
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries

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

2004*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

2005*1

2006

2007

2008

2009

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

BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO¥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¥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¥142.28¥133.00
22.50
40.00

¥111.13¥ 83.63
30.00
40.00

¥450,829¥459,133¥460,474¥426,400

156,565

168,080

164,073

146,023

120,896

125,856

130,662

123,675

35,66942,22433,411

22,34837,12245,61636,19824,513

14,15024,252

32,67911,83024,02027,925

34,115

17,481

19,144

21,201

24,75922,54631,80942,49335,00019,301¥386,651¥408,490¥413,023¥363,445

240,635

257,209267,713230,086

107,528

110,829

101,649

84,304

252,244284,254289,944

260,579¥54.39¥95.73¥128.65¥47.9512.00*6

28.00

24.00

24.00

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

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

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

5.8%

9.4%

11.7%

4.3%

9.6

11.5

8.8

6.3

26.8

27.4

28.4

29.0

7.9

9.2

7.3

5.2

3.1

5.3

7.1

2.8

63.0

67.1

69.4

70.9

13.5

5.1

5.8

8.3

*1 Figures for FY2004.3 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

Financial Review
Net Sales
The Company reported consolidated net sales of ¥426,400 million,a year-on-year decrease of 7.4%. By region, sales in the domestic
The economic environment in this fiscal year saw the disarray inmarket were ¥333,534 million, down 7.5%. Overseas, sales were

the U.S. financial markets arising from the subprime loan issues¥50,934 million in the Americas, down 6.7%; ¥45,021 million inwhich evolved into a global financial crisis, with reduced individual

Europe, a decline of 3.0%; and ¥37,377 million in Asia, a decrease

consumption worldwide and employment instability due to theof 1.5%.

social problem. In addition, reduced consumption had substantial

Cost of Sales

impact on the entertainment industry, causing continued

Cost of sales was ¥280,377 million, and the ratio of cost of sales

uncertainty in the industry as a whole.

to net sales increased to 65.8%, from 64.4% a year earlier. As a

In such environment, the BANDAI NAMCO Group (“the Group”)
continued to push ahead with strengthening, enriching, andresult, gross profit was ¥146,023 million, and the gross margin
declined to 34.2%, from 35.6% in the previous year.

expanding its portfolio management in the third and final year of
the three-year Mid-term Business Plan implemented in April 2006.

SG&A Expenses

On the business front, in this difficult market environment,

Selling, general and administrative (SG&A) expenses wereboys’ toys based on popular characters in both Japan and abroad¥123,675 million, down 5.3%, and the ratio of SG&A expenses toperformed well in the Toys and Hobby Business. In the Gamenet sales increased to 29.0%, from 28.4% in the previous year.

Contents Business, popular home video game software titles

Principal items included marketing of ¥28,410 million, directors’

made a positive contribution to performance overseas. The

remuneration and employees’ wages of ¥27,992 million,

decline in individual consumption, however, kept performance

retirement and severance benefits of ¥1,247 million, and researchsluggish as a whole and below the levels of the previous fiscal

and development of ¥17,512 million.

year. On the expenses front, the Group recorded, among otherthings, amortization of goodwill resulting from Bandai Visual Co.,

Operating Income

Ltd. and Bandai Networks Co., Ltd. having been made wholly

Operating income was ¥22,348 million, a decrease of 33.1%, andowned subsidiaries during the previous fiscal year, loss on

the operating margin fell from 7.3% in the previous year to 5.2%.

valuation of investment securities, and impairment loss on

By region, operating income declined 35.2% in Japan, to ¥15,863

amusement facilities.

million; fell 62.3% in the Americas, to ¥874 million; decreased
8.5% in Europe, to ¥6,248 million; and declined 19.8% in Asia, to¥2,289 million. Eliminations totaled ¥2,926 million.
Other Income (Loss)
In other income, loss on impairment of fixed assets declined, but
gain (loss) on sales and disposal of fixed assets, net, which was¥16,105 million in the previous fiscal year, was not recorded in theyear under review. In addition, loss on valuation of investment
securities increased. As a result, other loss was ¥1,223 million.
Net Income
Net income was down 63.8%, to ¥11,830 million, and the net
margin decreased to 2.8% from 7.1% a year earlier. This waslargely attributable to the gain on sales of property, plant andequipment that was recorded in other income in the previous
fiscal year, but not in the year under review. Net income per share(basic) decreased to ¥47.95, from ¥128.65 in the previous year.

Annual Report 2009

rapid declining of the business performance developing into a35 NAMCO BANDAI Holdings Inc.

■ Overview of Performance in the Fiscal Year
Ended March 31, 2009

■ 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)

FY2009.3

FY2008.3

Year on year

FY2009.3

FY2008.3

Year on year

¥165,725
77,270139,405
10,89034,63919,010¥180,165
89,829145,673
12,04436,95019,811¥(14,440)(12,559)(6,268)(1,154)(2,311)(801)¥11,533
393
10,940669
39
566¥14,310
1,631
14,794
904
3,832
754

¥(2,777)(1,238)(3,854)(235)(3,793)(188)

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, 2009, have increased in comparison with the previous year.

Toys and Hobby SBU

PlayStation 2 and Taiko Drum Master series for the Wii and theIn the Toys and Hobby Business, boys’ toys based on the

DS became popular. Minor titles, however, faced difficulties as acharacter, Engine Sentai Go-onger, posted strong performances inwhole. Moreover, in preparation for the implementation of theJapan. In addition, the card game Battle Spirits, newly launched in

Mid-term Business Plan from April 2009, the valuation of work-in-

this fiscal year with tie-ups to a made-for-television animation, also

process related to games under development was revisited andbecame popular. Amidst the stagnation of individual consumption,

treated part of the costs as an expense.

however, candy toys, children’s clothing and other peripheral toy
categories were struggling.

With respect to arcade game machines, the large medal
machine Sea Story Lucky Marine Theater gained popularity, but

Overseas, the BEN10 character boys’ toys made a positive

sales did not reach the performance levels of the previous fiscal

contribution to performance in Europe and North America. Given

year, which were strong particularly in repeat sales. Gamethe economic downturn, however, the results did not equal thecontents for mobile phones and other mobile devices, however,strong performance of the previous fiscal year, when theperformed robustly, thanks to the development of a wide variety

Tamagotchi sold well.

of content to suit increasingly diverse user preferences.

As a result, the Toys and Hobby SBU recorded net sales of

As a result, the Game Contents SBU recorded net sales of¥165,725 million, a decrease of 8.0%, and operating income of¥139,405 million, a decrease of 4.3%, and operating income of¥11,533 million, down 19.4%.

¥10,940 million, down 26.1%.

Amusement Facility SBU

Network SBU

In the difficult market environment, the Amusement Facility

In the Network Business, game contents tailored to suit a variety

Business was sluggish, with domestic existing-facility sales atof user preferences in the mobile content sector, from high value-

86.7% of the figure for the previous fiscal year. In view of such

added content, such as Dragon Ball Mobile and ONE PIECE

environment, continued efforts were made to cut costs in order toMobile Jack, to casual games, such as the Simple 100 series andimprove profitability and about 20% of existing amusement

Zoo Keeper, performed well. Further, customizable contents forfacilities in Japan, a total of 63, were closed to increase efficiency.

mobile phones, particularly customizable Mobile Suit Gundam andOverseas, efforts in the United States were continuously focused

Hello Kitty for standby displays, were popular, but the number ofon improving operational efficiency. In Europe, this businessringtone service subscribers continued to decline.

performed well, particularly in complex facilities in Great Britain. In

As a result, the Network SBU recorded net sales of ¥10,890

Asia, Wonder Park Plus, a large-scale amusement facility in Hongmillion, a decrease of 9.6%. Operating income was ¥669 million,

Kong making use of Group synergies, became popular.

down 26.0%, due in part to amortization of goodwill.

Consequently, the Amusement Facility SBU recorded net salesof ¥77,270 million, down 14.0%, and operating income of ¥393

Visual and Music Content SBU

million, a decline of 75.9%.

In the Visual and Music Content Business, the animated televisionseries Mobile Suit Gundam 00 (Double O), Macross F (Frontier),

Game Contents SBU

and CODE GEASS: Lelouch of the Rebellion R2, released on Blu-In the Game Contents Business, the worldwide launch of Soul

ray Disc and DVD in Japan, were popular visual software

Caliber IV, home video game software, for the PLAYSTATION 3

packages. In this transition period for hardware, where there is aand the Xbox360, contributed strongly to business results. In

shift from DVD to Blu-ray Disc; however, overall performance wasEurope and North America, Active Life Outdoor Challenge (Family

sluggish. Sales of music software packages, particularly thoseTrainer Athletic World, in Japan) and WE SKI (Family Ski, in Japan)

related to animation, performed strongly. Overseas, we accepted

for the Wii performed well. In Japan, the multi-platform developed

returning of merchandise in conjunction with a review of the

Gundam Musou 2 for the PLAYSTATION 3, the Xbox360 and thebusiness model for package sales in the United States.

36
such as logistics support and building management to the Group’s
each strategic business unit. During this fiscal year, efforts werewas ¥39 million, down 99.0%, due in part to amortization ofmade to improve the efficiency of these operations related togoodwill.

group support.

Other Businesses

million, down 4.0%, and operating income of ¥566 million, aOther Businesses consist of companies that conduct operations

decline of 24.9%.

Consequently, Other Businesses recorded net sales of ¥19,010

Net sales (Millions of yen)Japan
Americas
EuropeAsia

Operating income (Millions of yen)

FY2009.3

FY2008.3

Year on year

FY2009.3

FY2008.3

Year on year

¥333,534
50,93445,02137,377¥360,697
54,566
46,39837,933¥(27,163)(3,632)(1,377)(556)¥15,863
874
6,248
2,289

¥24,480
2,318
6,831
2,855

¥(8,617)(1,444)
(583)
(566)

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, 2009,
has increased in comparison with the previous year.

Japan

Visual and Music Content Business, we accepted returning ofIn the Toys and Hobby Business, although the Engine Sentai

merchandise in conjunction with a review of the business model

Go-onger character boys’ toys and the card game Battle Spirits,

for package sales, while in the Amusement Facility Business, efforts

newly launched in this fiscal year, posted strong performance, thecontinued to be focused on improving operational efficiency.

peripheral toy categories struggled due to weak individual

As a result of these factors, the Americas recorded net sales ofconsumption. In the Game Contents Business, the home video¥50,934 million, a 6.7% decrease, and operating income of ¥874

game software titles Gundam Musou 2, developed for the

million, a decline of 62.3%.

multiple platforms of PLAYSTATION 3, Xbox360 and PlayStation
2, and Taiko Drum Master series for the Wii and the DS became

Europepopular. Minor titles, however, faced difficulties as a whole. WithIn the Toys and Hobby Business, although the BEN10 character

respect to arcade game machines, sales did not reach theboys’ toys performed strongly, performance did not reach theperformance levels of the previous fiscal year, which were stronglevels of the previous fiscal year which enjoyed strong

particularly in repeat sales. In the Visual and Music Content

performance from POWER RANGERS and Tamagotchi. In theBusiness, sales remained sluggish amid a transition period forGame Contents Business, Soul Calibur IV, developed for the

hardware. The Amusement Facility Business also struggled under

PLAYSTATION 3 and the Xbox360, and Dragon Ball Z: Burst Limit,

difficult market environment, particularly existing facilities.

also for the PLAYSTATION 3 and the Xbox360, and others

As a result, net sales in Japan totaled ¥333,534 million, a 7.5%

delivered strong performance. The Amusement Facility Businessdecrease. Operating income was ¥15,863 million, down 35.2%,

showed steady performance, particularly in complex facilities indue in part to amortization of goodwill accompanying theGreat Britain.

transition of Bandai Visual and Bandai Networks to wholly owned
subsidiaries.

As a result, net sales in Europe were ¥45,021 million, adecrease of 3.0%, and operating income totaled ¥6,248 million,
down 8.5%.

The Americas
In the Toys and Hobby Business, the BEN10 character boys’ toysAsia

performed strongly. Given the economic downturn, however,

Although the Toys and Hobby Business delivered a steady perfor-

performance did not reach the levels of the previous fiscal year

mance centering on the Mobile Suit Gundam plastic models andwhich enjoyed strong performance from POWER RANGERS and

the POWER RANGERS character boys’ toys, performance did not

Tamagotchi. In the Game Contents Business, Soul Calibur IV forreach the levels of the previous fiscal year due to a decline in

the PLAYSTATION 3 and the Xbox360 contributed strongly to

production transactions for Europe and North America. In thebusiness results, while Active Life Outdoor Challenge (Family

Amusement Facility Business, Wonder Park Plus, a large-scale

Trainer Athletic World, in Japan) and WE SKI (Family Ski, in Japan)

amusement facility in Hong Kong also serving as the base for thefor the Wii performed well. Moreover, in preparation for the imple-

Group’s information dissemination in the Asia region, became

mentation of the Mid-term Business Plan from April 2009, thepopular.

valuation of work-in-process related to games under development
was revisited and treated part of the costs as an expense. In the

As a result, net sales in Asia were ¥37,377 million, down 1.5%,
and operating income was ¥2,289 million, a decline of 19.8%.

Annual Report 2009

■ Results by Geographic Segment

37 NAMCO BANDAI Holdings Inc.

As a result, the Visual and Music Content SBU recorded net
sales of ¥34,639 million, a decrease of 6.3%. Operating income

■ Financial Position

receivable was ¥5,646 million, compared with ¥1,617 million.
Purchases of investment securities in Distribution Partners S.A.S.

At the fiscal year-end, total assets were down ¥49,578 million

and others were ¥3,344 million, compared with ¥4,994 million.

year on year, to ¥363,445 million. Cash and time deposits were
down ¥19,356 million, property, plant and equipment, such as

Cash Flows from Financing Activities

amusement facilities and machines and land, was down ¥11,454

Net cash used in investing activities was ¥16,530 million, up

million, and trade receivables declined ¥10,622 million.

9.7%. Proceeds from long-term debt were ¥10,000 million,

Total liabilities were down ¥20,213 million, to ¥102,866 million.

compared with ¥16,000 million in the previous year. On the other

Short-term borrowings increased ¥3,519 million, and long-term

hand, decrease (increase) in treasury stock was ¥15,131 million,

debt rose ¥1,329 million, but trade payables declined ¥5,842

compared with ¥10,236 million in the previous year. Dividends

million, accrued expenses were down ¥8,735 million, andpaid totaled ¥6,009 million, compared to ¥7,163 million in thedeferred tax liabilities declined ¥3,634 million.

previous fiscal year.

Total net assets were down ¥29,365 million year on year, to¥260,579 million. Net income was ¥11,830 million, but as a resultof the acquisition and retirement of treasury stock, treasury stock■ Basic Policy on the Distribution of Profits andthe Payment of Dividends

increased ¥6,784 million while additional paid-in capital declined¥8,058 million. Also, due to exchange rate fluctuations, translation

The Company positions the return of profits to stockholders as

adjustments were down ¥18,785 million. As a result, the share-

one of its highest management priorities. The fundamental policy

holders’ equity ratio increased to 70.9%, from 69.4% a year earlier.

is to maintain a stable dividend and increase corporate value while

The current ratio* was 272.9%, compared with 263.4% a year

becoming an even more competitive Group, and preserving aearlier; the quick ratio* was 206.0%, compared with 203.0%; and thesound financial position. In concrete terms, the Company plans tointerest coverage ratio* was 112.9 times, compared to 200.0 times.

maintain the consolidated dividend payout ratio at a level of 30%,

*Current ratio: Current assets / Total current liabilities

based on stable annual dividend payments of ¥24 per share. In

Quick ratio: (Cash and time deposits + Short-term investments +addition, after appropriation of dividend from the consolidated

Trade receivables ) / Total current liabilities

periodical net income, the Company has resolved to attribute aInterest coverage ratio: Cash flows from operating activities /

portion of the remaining balance to the acquisition of its own

Interest paid

shares, with comprehensive consideration of aspects such as thelevel of cash held, its operating performance, its share price trend,■ Cash Flows
Cash and cash equivalents at the end of the fiscal year totaled¥110,037 million, a year-on-year decrease of ¥19,253 million.

and its plan for large-scale investments.
As part of our three-year Mid-term Business Plan that started in
April 2009, we shall place priority on allocating the remaining
portion of net income after appropriation of dividend to up-front

Cash Flows from Operating Activities

investment aimed at business expansion overseas.

Net cash provided by operating activities was ¥19,301 million,

Dividends for the year were ¥24 per share, comprised of thedown 44.9%. Principal cash outflows were income taxes paid ofbase component of ¥12 per share for both interim and year-end¥12,727 million, compared with ¥16,286 million a year earlier, anddividends. The consolidated payout ratio was 50.1%.

acquisition of amusement facilities and machines of ¥6,646
million, compared to ¥9,286 million in the previous fiscal year.

■ Targets and Management Indicators

However, income before income taxes and minority interests was¥21,125 million, compared to ¥45,965 million in the previous fiscal

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

year, and depreciation was ¥22,546 million, compared withperformance indicators. Looking ahead, we aim to further expand¥24,759 million a year earlier. Overall, net cash provided byprofits by strengthening investments, particularly in overseas

operating activities increased.

business, as well as effectively utilize stockholders’ equity to build
a strong and stable management base over the medium- to long-

Cash Flows from Investing Activities

term. Specifically, the Group aims to achieve consolidated ROE of

Net cash used in investing activities was ¥10,327 million, down

10% or higher in the Mid-term Business Plan starting from 2015,31.1%. Decrease (increase) in time deposits, net was ¥2,874

and are tackling to achieve this target on two fronts: businessmillion, compared with –¥2,218 million a year earlier. Sales of

expansion and efficient management.

property, plant and equipment totaled ¥4,053 million, compared

In addition, we will introduce Return on Invested Capital (ROIC)

with ¥22,425 million in the previous fiscal year, but purchases ofas a new indicator to facilitate swift decision-making with regard

property, plant and equipment and of intangible assets wereto business recovery and closure in the rapidly changing¥10,811 million, compared with ¥14,670 million, and payments of loans

entertainment industry.

38
Fiscal Year Ending March 31, 2010 (Consolidated Plan)
Business Segments
As for the future of the economy, there are fears that the trend of
economic recession that has occurred from the disarray of the
global financial market will become prolonged and serious. Also,
the uncertain environment of weak individual consumption andemployment instability is expected to continue. This, moreover, isGroup is extensively involved. Based on current circumstances,

Operating income¥158,000
140,000
34,00070,00018,000(20,000)¥400,000¥ 9,000
5,500
1,500
1,500
500
(3,000)¥15,000

the Group expects the harsh business environment will continue.
Amidst these conditions, the Group will press ahead with its

Geographic Segmentssights set on the medium- to long-term Group vision of becoming
a “Globally Recognized Entertainment Group.” By promoting upfront investment in growing business areas and improving
profitability of businesses, the Group shall further develop its
global management foundation, based on the three-year Mid-term
Business Plan that started in April 2009.
Specifically, in the Toys and Hobby Business, in Japan, whilestrengthening development of long-established character series(Millions of yen)

Net sales(after eliminations) Operating income

Japan
Americas
EuropeAsia
Eliminations and corporate
Total¥300,000
46,00040,00014,000—¥400,000¥11,800
0
4,200
2,500
(3,500)¥15,000

Note: Figures in these tables are as of August 4, 2009.

aimed at existing users such as Samurai Sentai Shinkenger,
Masked Rider Decade, aimed at boys, and FRESH Pretty Cure,■ Forward-Looking Statements

aimed at girls, and Mobile Suit Gundam, which is celebrating its
30th anniversary, the Group will also focus on new content develop-

Forecasts for the next fiscal year and other future projections in thisment including the card game Battle Spirits. Overseas, the Group will

annual report are based on information available to the Group at thework on strengthening product development centering on not only

time they were made and are therefore subject to various risks and

POWER RANGERS and BEN10 for boys, but also new characters

uncertainties. Actual results therefore may differ materially fromsuch as Kamen Rider Dragon Knight (Kamen Rider Ryuki, in Japan).

projections for a variety of factors. Major factors that could influence

In the Game Contents Business, the Group will place particular

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

focus on the home video game software business in Europe andNorth America. In addition to the popular series titles originated inJapan such as Tekken 6, developed for PLAYSTATION 3 andXbox360, the focus on Europe and North America will also include
casual games such as the “Family” series, for the Wii.
In the Visual and Music Content Business, amidst the transition
period for hardware, where there is a shift from DVD to Blu-ray
Disc, the Group will aim to boost profitability by ensuring abalance of content for all target groups.
For the Amusement Facility Business, the Group will improve
profitability by continuing to implement scrap-and-build measuresand differentiating its stores from competitors’ by utilizing theGroup’s assets.
In consideration of the measures implemented by each SBU
and the continued difficult operating environment, for the fiscal
year ending March 2010, we are forecasting consolidated net
sales of ¥400,000 million, a year-on-year decrease of 6.2%;
operating income of ¥15,000 million, a year-on-year decrease of
32.9%; and net income of ¥8,500 million, a year-on-year decreaseof 28.1%.

environment, market trends, and exchange rate fluctuations.

Annual Report 2009

having a global impact on the entertainment industry, in which theToys and Hobby
Game Contents
Visual and Music Content
Amusement Facility
Other Businesses
Eliminations and corporate
Total(Millions of yen)

Net sales

39 NAMCO BANDAI Holdings Inc.

■ Outlook for the Fiscal Year Ending March 2010

Consolidated Balance Sheets
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
As of March 31, 2008 and 2009

Thousands of
U.S. dollars(note 3)

Millions of yen

2008

2009

2009

AssetsCurrent assets:
Cash and time deposits (note 4)¥ 126,103¥ 106,747$ 1,086,705

Short-term investments (notes 4 and 5)

7,069

4,426

45,058Trade receivables (note 6)

73,141

62,519636,455

(607)

(447)

(4,551)

36,42937,651

383,294

Allowance for doubtful receivables
Inventories (note 7)
Deferred tax assets (note 12)

5,909

6,146

62,567

Other current assets

19,66919,044

193,872

267,713

236,086

2,403,400

Total current assets

Investments and other assets:
Investment securities (note 5)

26,143

24,950253,996

Guarantee money deposited

20,11218,013

183,376

Deferred tax assets (note 12)

6,291

7,125

72,534

Other investments and assets

3,542

4,248

43,245

Allowance for doubtful receivables(1,216)(1,254)(12,766)

54,87253,082

540,385

Total investments and other assets

Property, plant and equipment:
Buildings and structures

26,31624,066244,996

Amusement facilities and machines

81,04270,823

720,992Land

14,347

11,783

119,953

Other property, plant and equipment

66,57567,284

684,964

188,280

173,956

1,770,905(124,834)(121,964)(1,241,617)

63,44651,992529,288

Goodwill

15,80012,055

122,722

Other intangible assets

11,192

10,230104,144

26,992

22,285

226,866¥ 413,023¥ 363,445$ 3,699,939

Total
Less accumulated depreciation
Net property, plant and equipment

Intangible assets:

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

40

Millions of yen

2008

2009

2009

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

¥

5,338

¥

8,857

$

90,16642,60336,761

374,234

Accrued expenses

33,76525,030254,810

Accrued income taxes (note 12)

9,263

6,375

64,899Other current liabilities (notes 9 and 12)

10,6807,281

74,122

101,649

84,304858,231

Long-term debt (note 9)

10,662

11,991122,071

Accrued retirement and severance benefits (note 11)

1,598

1,953

19,882

Deferred tax liabilities (note 12)

4,732

1,098

11,178

Total current liabilities
Long-term liabilities:

Other long-term liabilities (note 9)

4,438

3,520

35,833

Total long-term liabilities

21,43018,562

188,964

Total liabilities

123,079

102,866

1,047,195

Net assets:
Common stock (notes 17 and 18)
Authorized 1,000,000,000 shares;
10,00010,000101,802

Additional paid-in capital (note 18)

issued 250,000,000 shares

87,94679,888813,275

Retained earnings (note 15)

192,865

199,453

2,030,469(2,840)(9,624)(97,974)

287,971279,717

2,847,572

193(1,911)(19,454)

Treasury stock, at cost; 1,766,271 shares in 2008 and 8,694,796 shares in 2009 (note 17)
Subtotal
Other securities valuation difference (notes 5 and 12)
Deferred gains or losses on hedges, net of tax

(113)

(105)

(1,069)Land revaluation (notes 12 and 16)(6,284)(6,300)(64,135)

Translation adjustments

5,029(13,756)(140,039)(1,175)(22,072)(224,697)

1,531

1,468

14,945

Subtotal
Stock subscription rights (note 18)
Minority interests

1,617

1,466

14,924

Total net assets

289,944

260,579

2,652,744¥413,023¥363,445$3,699,939

Contingencies (note 21)
Total liabilities and net assets

Annual Report 2009

Trade payables (note 10)41 NAMCO BANDAI Holdings Inc.

Thousands of
U.S. dollars(note 3)

Consolidated Statements of Income
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2008 and 2009

Thousands of
U.S. dollars(note 3)

Millions of yen

2008

2009

2009

Net sales¥460,474¥426,400$4,340,833

Cost of sales

296,401

280,377

2,854,291

Gross profit

164,073

146,023

1,486,542

130,662

123,675

1,259,035

33,411

22,348

227,507

Interest and dividend income

2,553

2,039

20,757

Interest expense

(202)

(247)

(2,515)

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

Gain (loss) on sales of investment securities, net

288

57

580

Loss on valuation of investment securities(225)(1,327)(13,509)

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

16,105

1,333

13,570Loss on impairment of fixed assets (note 8)(4,248)(954)(9,713)

Other(1,717)(2,124)(21,620)

12,554(1,223)(12,450)

Income before income taxes and minority interests

45,965

21,125215,057

Income taxes (note 12)12,635

9,060

92,233

651

235

2,392

¥ 32,679¥ 11,830$ 120,432

Minority interests
Net income

U.S. dollars(note 3)

Yen

Data per common share (note 14):
Net assets at March 31¥1,127.72¥1,067.71$10.87

Basic

128.65

47.95

0.49

Diluted128.47

47.88

0.49

24.00

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
Thousands of
U.S. dollars(note 3)

Millions of yen

See accompanying Notes to Consolidated Financial Statements.

2009

2009

¥ 10,000
10,000¥ 10,000
10,000$ 101,802
101,802

97,142(8,184)—(1,012)
87,946

87,946(8,336)278—
79,888895,307(84,862)
2,830—
813,275

182,389—
32,679(104)(27)

192,865(66)
11,830818—

1,963,402(672)
120,4328,327—

93(15,002)(7,163)
192,865—15(6,009)199,453—
153(61,173)
2,030,469(3,952)
1,112(2,840)(2,840)(6,784)(9,624)(28,912)(69,062)(97,974)

4,101(3,908)193

193(2,104)(1,911)

1,965(21,419)( 19,454)

92
(205)
(113)

(113)
8
(105)

(1,150)81(1,069)(21,286)
15,002(6,284)(6,284)(16)(6,300)(63,972)(163)(64,135)

5,684
(655)
5,029

5,029
(18,785)(13,756)

51,196(191,235)(140,039)

577
954
1,531

1,531
(63)
1,468

15,586(641)
14,945

9,507(7,890)1,617¥289,944

1,617
(151)
1,466
¥260,579

16,461(1,537)
14,924$2,652,744

Annual Report 2009

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
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
Effect of changes in accounting policies applied to foreign subsidiaries
Net income
Effect from newly consolidated subsidiaries
Decrease due to the deconsolidation of subsidiaries
Increase due to change of consolidated subsidiaries into investments reported
under the equity method
Reversal of land revaluation
Cash dividends
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 year2008

43 NAMCO BANDAI Holdings Inc.

NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2008 and 2009

Consolidated Statements of Cash Flows
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2008 and 2009

Millions of yen

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation
Loss on impairment of fixed assets
Loss (gain) on sales and disposal of fixed assets, net
Loss on disposal of amusement facilities and machines
Gain (loss) on sales of investment securities, net
Loss on valuation of investment securities
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Acquisition of amusement facilities and machines
Increase (decrease) in trade payables
Other
SubtotalInterest and dividends received
Interest paid
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
Purchases of intangible assets
Purchases of investment securities
Sales of investment securities
Acquisition of shares in consolidated subsidiaries, net of cash acquired
Sales of subsidiary shares affecting the scope of consolidation
Payments of loans receivableCollection of loans receivable
Payment of guarantee money deposited
Collection of guarantee money depositedOther
Net cash used in investing activities
Cash flows from financing activities:
Increase (decrease) in short-term borrowings, net
Proceeds from long-term debt
Repayment of long-term debt
Repayments of lease obligations
Decrease (increase) in treasury stock
Dividends paid
Dividends paid to minority interests
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents due to consolidation of additional subsidiaries
Increase in cash and cash equivalents due to merger of nonconsolidated subsidiaries
Decrease in cash and cash equivalents due to the company split
Cash and cash equivalents at end of year (note 4)
See accompanying Notes to Consolidated Financial Statements.

Thousands of
U.S. dollars(note 3)

2008

2009

2009

¥ 45,965
24,7594,248(16,105)
1,215
(288)
225
6,129
(3,936)(9,286)(4,203)217
48,9402,521(175)(16,286)
35,000¥ 21,125
22,546954(1,333)
796
(57)
1,327
3,827
(2,128)(6,646)(59)(10,227)
30,125
2,074(171)(12,727)
19,301$ 215,057
229,523
9,713(13,570)
8,103
(580)
13,50938,960(21,663)(67,658)(601)(104,115)
306,678
21,114(1,741)(129,563)
196,488(2,218)(10,471)
22,425(4,199)(4,994)26(15,983)(63)(1,617)
1,452(1,588)2,260(11)(14,981)2,874(8,012)
4,053(2,799)(3,344)
354
(49)
277
(5,646)297(1,198)2,865
1(10,327)

29,258(81,564)
41,260(28,494)(34,043)
3,604
(499)
2,820
(57,477)
3,024(12,196)
29,166
10(105,131)(739)
16,000(12,542)—(10,236)(7,163)(387)(15,067)
(304)
4,648
124,156486——¥129,290128
10,000(5,338)(104)(15,131)(6,009)(76)(16,530)(12,620)(20,176)
129,290
1,143
85
(305)
¥110,037

1,303
101,802(54,342)(1,059)(154,036)(61,173)(774)(168,279)(128,474)(205,396)
1,316,197
11,636865(3,105)$1,120,197

Notes to Consolidated Financial Statements

44

NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries

45 NAMCO BANDAI Holdings Inc.

2 Summary of Significant Accounting Policies

NAMCO BANDAI Holdings Inc. (“the Company”) and its(a) Principles of Consolidation

consolidated subsidiaries (collectively, “the Company”) have

The accompanying consolidated financial statements include

prepared their financial statements in accordance with thethe accounts of the Company and its significant subsidiaries.

provisions set forth in the Japanese Financial Instruments

Consolidation of the remaining subsidiaries would haveand Exchange Act and its related accounting regulations, andhad no material effect on the accompanying consolidated

in conformity with accounting principles generally acceptedfinancial statements. Investments in significant affiliates are

in Japan, which are different in certain respects as toaccounted for using the equity method.

application and disclosure requirements of International
Financial Reporting Standards.

Investments in unconsolidated subsidiaries and certain
affiliates other than those discussed in the previous paragraph

The accounts of overseas subsidiaries are based on theirare stated at cost. If the equity method had been applied toaccounting records maintained in conformity with

the investments in these companies, there would have been

International Financial Reporting Standards or U.S. GAAP.

no material effect on the accompanying consolidated financial

The accompanying consolidated financial statements havestatements.

been prepared and translated into English from the

All significant intercompany accounts and transactions

consolidated financial statements of the Company preparedhave been eliminated in consolidation. The excess of costin accordance with Japanese GAAP and filed with theover the underlying fair value of the net assets of consolidated

appropriate Local Finance Bureau of the Ministry of Financesubsidiaries from acquisition is being amortized over a five-as required by the Financial Instruments and Exchange Act.

year period.

Some supplementary information included in the statutory
Japanese language consolidated financial statements that is(b) Cash and Cash Equivalents

not required for fair presentation is not presented in the

In reporting cash flows, the Company considers cash on

accompanying consolidated financial statements.

hand, demand deposits, and all highly liquid investments

In preparing the accompanying consolidated financial statements, certain reclassifications have been made to the con-with original maturities of three months or less to be cash
and cash equivalents (note 4).

solidated financial statements issued in Japan in order to present
them in a form that is more useful to readers outside Japan.

(c) Foreign Currency Translation

Certain reclassifications have been made to the prior year

Foreign currency transactions are translated into yen at rates

consolidated financial statements to conform to the presen-in effect at the dates they are transacted, and the gains or

tation used for the year ended March 31, 2009.

losses arising from the settlement of the related receivables
or payables are included in “Other income (loss)”.
Receivables and payables denominated in foreign
currencies at the balance sheet date are translated at therates in effect as of the balance sheet date and the unrealized
gains or losses are included in “Other income (loss)”.

Annual Report 2009

1 Basis of Presentation

The assets and liabilities of foreign consolidated
subsidiaries and affiliates are translated into yen at the rates

at cost. The cost of other securities sold is principally
computed based on the moving average method.

of exchange in effect at the balance sheet date. Revenue
and expenses of foreign consolidated subsidiaries and affiliates(f) Allowance for Doubtful Receivables

are translated into yen at the average rates of exchange during

The allowance for doubtful receivables is provided forthe year. Gains and losses resulting from foreign currency

possible losses on unrecoverable receivables. For ordinarytransactions are included in “Other income (loss)”, and thosereceivables, the amount of the allowance is based on the

resulting from the translation of foreign currency financial

historical rate of loss. For receivables from debtors at risk ofstatements are generally excluded from the consolidated

bankruptcy and receivables from debtors in bankruptcy orstatements of income and are included in “Translation

under reorganization, the amount of the allowance is based

adjustments” and “Minority interests” in “Net assets”.

on individually estimated unrecoverable amounts.

(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

process through which the software is combined with thebasis (The value stated on the balance sheet was calculated

content that cannot be separated into identifiable

by writing down the book value based on declining

components.

profitability).

The content is considered to be an important component

Foreign consolidated subsidiaries:of each video game title, which includes the game content

Inventories are stated at the lower of cost, determined prin-and visual / music data. Once management makes a decision

cipally by an average method, or market.

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

Both domestic and foreign consolidated subsidiaries state
game software work-in-process by the specific-cost method

The capitalized production costs (which include(The value stated on the balance sheet was calculated byinventories) are amortized to cost of sales based on projected

writing down the book value based on declining profitability).

sales volumes.

(Change in accounting policies)“Accounting Standard for Measurement of Inventories”(e) Short-Term Investments and Investment Securities(ASBJ Statement No. 9, issued on July 5, 2006) was applied

The Company classifies its securities into one of thefrom fiscal 2009. The impact of this change on operating

following three categories: held-to-maturity securities,

income and income before income taxes and minority

investments in unconsolidated subsidiaries and affiliatedinterests is immaterial.

companies, or other securities.
Held-to-maturity securities are amortized to face value over(h) Income Taxes

the period remaining to the maturity date. Investments in

Current income taxes are accounted for based on income

unconsolidated subsidiaries and affiliated companies are

and deferred income taxes are accounted for under the asset

carried at cost. Other securities with a market value are

and liability method. Deferred tax assets and liabilities are

principally carried at market value. The difference, net of tax,

recognized for future tax consequences attributable to dif-

between the acquisition cost and the carrying amount offerences between the financial statement carrying amounts

other securities with a market value, is recognized in “Otherof existing assets and liabilities and their respective tax

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

bases and operating loss and tax credit carryforwards.

Other securities without a market value are principally carriedDeferred tax assets and liabilities are measured using

46
As a result of this change, operating income and income

years in which those temporary differences are expected to be

before income taxes and minority interests in fiscal 2008

recovered or settled. The effect on deferred tax assets andeach decreased by ¥187 million.

liabilities of a change in the tax rate is recognized in income in theForeign consolidated subsidiaries:

period that includes the enactment date.

Depreciation of property, plant and equipment is principally
computed by the straight-line method based on estimateduseful lives. The estimated useful lives for Buildings and

The Company and its domestic consolidated subsidiaries:

structures and Amusement facilities and machines are 5–50

Depreciation of property, plant and equipment is principally

years and 2–7 years, respectively.

computed by the declining-balance method based on
estimated useful lives. The straight-line method is used for(j) Intangible Assets

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

Depreciation of intangible assets is computed by the straight-

1998. The estimated useful lives for Buildings and structuresline method based on estimated useful lives. Software for

and Amusement facilities and machines are 2–50 years andinternal use is depreciated over 1–5 years.

3–15 years, respectively.
As for the property, plant and equipment of some

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

domestic consolidated subsidiaries, the useful life waschanged from fiscal 2009, pursuant to the change in(k) Leases

statutory useful life in the 2008 revision of the Corporation

Depreciation of lease assets is computed by the straight-line

Tax Law. The impact of this change on operating income andmethod, over the period of the lease, for a residual value of zero.

income before income taxes and minority interests in fiscal

Before the change the accounting treatment for finance lease2009 is immaterial.

except for those where the legal title to the underlying property

From fiscal 2008, due to the revision of the Japaneseis transferred from the lessor to lessee at the end of the lease

Corporation Tax Law, the Company and some of its domestic

term followed the method for operating lease transactions.

consolidated subsidiaries changed the method of calculating

However, the “Accounting Standard for Lease Transactions”

the depreciation of property, plant and equipment acquired(ASBJ Statement No. 13 [Business Accounting Council

on or after April 1, 2007, based on the revised JapaneseCommittee No. 1, June 17, 1993; revised March 30, 2007]) andCorporation Tax Law.

the “Guidance on Accounting Standard for Lease Transactions”

As a result of this change, operating income and income(ASBJ Guidance No. 16 [The Japanese Institute of Certified

before income taxes and minority interests in fiscal 2008 each

Public Accountants (JICPA) Accounting Standard Committee,

decreased by ¥989 million.

January 18, 1994; revised March 30, 2007]) are applied and theFrom fiscal 2008, due to the revision of the JapaneseCorporation Tax Law, the Company and some of its domestic

accounting treatment for such transactions follows the method
for ordinary purchase or sales transactions from fiscal 2009.

consolidated subsidiaries, depreciate the difference between

However, finance lease transactions other than those in

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

which titles to leased property are determined to beacquired on or before March 31, 2007, and the new residualtransferred to lessees, which transactions started on orvalue of ¥1 (memorandum value) by the straight line method

before March 31, 2008, are stated by applying theover 5 years commencing from the fiscal year following theaccounting treatment applicable to ordinary operating leaseyear in which the asset becomes fully depreciated to thetransactions. This change has no impact on operating income

original residual value.

and net income before income taxes and minority interests
in fiscal 2009.

Annual Report 2009(i) Property, Plant and Equipment

47 NAMCO BANDAI Holdings Inc.

enacted tax rates expected to apply to taxable income in the(l) Impairment of Fixed Assets

cumulative changes in the fair value or the cumulative

The Company has applied the “Accounting Standard forchanges in the cash flows of the hedged item with the

Impairment of Fixed Assets” (the “Opinion Concerning

cumulative changes in the fair value or the cumulative

Establishment of Accounting Standard for Impairment ofchanges in the cash flows of the hedging instrument. In the

Fixed Assets” (Business Accounting Deliberation Council,

event that critical terms are the same for the hedging

August 9, 2002)) and the “Implementation Guidance for the

instrument and the hedged assets, liabilities, or forecast

Accounting Standard for Impairment of Fixed Assets”

transaction, it is assumed that the hedge is 100% effective,(Guidance on Corporate Accounting Standard No. 6, Octoberso the assessment of effectiveness is not performed. Also,31, 2003). The amount of accumulated losses on impairment

for interest rate swaps for which the specific allowedof fixed assets is deducted directly from the carrying amountmethods are applied, the assessment of effectiveness is notof each asset pursuant to the Regulations Concerning

performed.

Financial Statements.

In the event that a hedge becomes ineffective, hedge
accounting is no longer applied and the recognition of the(m) Derivatives and Hedging Activities

gains or losses on the hedge transaction is no longer

The Company and its consolidated subsidiaries use derivative

deferred.

instruments, such as forward exchange contracts and interest
rate swap contracts, to reduce market risks stemming from(n) Provision for Directors’ Bonuses

fluctuations in foreign exchange rates and interest rates. The

The Company and its domestic consolidated subsidiaries

Company and its consolidated subsidiaries use these deriva-

provide accrued bonuses for directors based on thetive instruments solely for the purpose of reducing the risks

estimated amounts to be paid in respect of the fiscal year.

resulting from such fluctuations to which they are exposed in
the course of their ordinary business activities. Accordingly,(o) Retirement and Severance Benefits

the Company does not use derivative instruments or other

The Company has established a retirement lump-sum benefits

financial instruments for speculative purposes.

system and a defined contribution pension plan. With the

The Company’s counterparties for derivative instruments

exception of certain companies, domestic consolidated sub-are all highly creditworthy financial institutions and,sidiaries have established qualified retirement benefit plans,

therefore, the Company believes that it is exposed to almost

retirement lump-sum benefits, or comprehensive employee

no counterparty risk. Derivative transactions are conducted inpension funds. At the Company’s discretion, additional

accordance with internal rules that specify transaction

benefits may be paid at retirement. Certain foreign consoli-

authority and transaction amount limits.

dated subsidiaries have established defined contribution

As a general rule, derivative instruments are stated at fairpension plans or retirement lump-sum benefits system.

value. For derivative instruments that meet the standards for

Accrued retirement and severance benefits for employees

hedge accounting, recognition of gains or losses is deferred.

in respect of defined benefit plans is provided for based on

In cases where forward foreign exchange contracts meetthe estimated values of projected benefit obligations andcertain hedging criteria, they are accounted for under thepension plan assets at the end of the fiscal year.

allocation method. Interest rate swaps that meet specificUnrecognized actuarial gain or loss is amortized, beginning

matching criteria are accounted for using specific allowedfrom the fiscal year following the year in which it is incurred,

methods under relevant accounting standards.

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

The Company assesses the effectiveness of hedging

exceed the average remaining years of service of employeestransactions from the start of the transaction to the point at

as of the end of the fiscal year in which it is incurred (9 to 19

which effectiveness is assessed by comparing theyears). Certain domestic consolidated subsidiaries amortize48(s) Data per Common Sharedoes not exceed the average remaining years of service of

In computing basic net income per common share, theemployees at the point when the costs are incurred.

average number of shares outstanding during each year has

To provide for payment of retirement benefits to directors

been used.
Diluted net income per share assumes the dilution thatsidiaries record the amount payable at the end of the fiscal

could occur if securities or other contracts to issue common

year in accordance with internal regulations.

stock were exercised or converted into common stock, or
resulted in issuance of common stock.
Cash dividends per common share are computed based on(p) Provision for Losses from Business Restructuring
Certain consolidated subsidiaries make provision for

dividends declared with respect to the income for the year.

estimated losses on restructuring of operations.
(t) Practical Solution on Unification of Accounting(q) Provision for Sales Returns

Policies Applied to Foreign Subsidiaries for

Certain consolidated subsidiaries provide for losses on

Consolidated Financial Statements

returned goods after the end of the fiscal year based on

With the adoption of the “Practical Solution on Unification ofhistoric experience.

Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements” (PITF Practical Solution(r) Appropriation of Retained Earnings

No. 18, issued on May 17, 2006), necessary adjustments to

In Japan, retained earnings with respect to a given financial

the consolidated returns were carried out from fiscal 2009.

period are appropriated by resolution of the shareholders at a

The impact of this change on operating income and net

general meeting to be held subsequent to the close of suchincome before income taxes and minority interests isfinancial period. The accounts for that period do not,immaterial.

therefore, reflect such appropriations.

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, 2009, have been translated into U.S. dollars at the rate of ¥98.23=U.S.$1, the approximate exchange rate on the Tokyo
Foreign Exchange Market on March 31, 2009.
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, 2008 and 2009 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

2008

2009

2009

Cash and time deposits¥126,103¥106,747$1,086,705

Short-term investments

7,069

4,426

45,058Time deposits with maturities in excess of three months(3,882)(1,136)(11,566)¥129,290¥110,037$1,120,197

Cash and cash equivalents per consolidated statement of cash flows

Cash and time deposits of ¥131 million ($1,334 thousand) is pledged as collateral for bank transaction guarantees
at March 31, 2009.

Annual Report 2009

and corporate auditors, certain domestic consolidated sub-49 NAMCO BANDAI Holdings Inc.

prior service costs over a fixed period (10 to 11 years) that

5 Short-Term Investments and Investment Securities
Short-term investments and investment securities at March 31, 2008 and 2009 are summarized as follows:
Held-to-maturity securities at March 31, 2008 include marketable governmental bond securities with a carrying amount of¥30 million, which approximates market value.
Thousands of
U.S. dollars

Millions of yen

2008

Held-to-maturity securities

¥

2009

64

¥

2009

31

$

316

Other securities–marketable

15,102

10,956

111,534

Other securities–non-marketable

8,924

6,239

63,514

Investments in unconsolidated subsidiaries and affiliated companies

9,122

12,150123,690

Total of short-term investments and investment securities¥33,212¥29,376$ 299,054

The original cost, carrying amount (market value), and gross unrealized holding gain (loss) for marketable other securities at
March 31, 2008 and 2009, are summarized as follows:
Millions of yen

2008
Original cost

Gross unrealized
holding gain

¥12,410¥4,932

Debt securities

301

Other

223

Total

¥12,934

Gross unrealized
holding loss

Carrying amount(Market value)

Other securities–marketable:
Equity securities¥(2,746)¥14,596

—

(2)

299

—

(16)

207

¥4,932¥(2,764)¥15,102

Millions of yen

2009
Original cost

Gross unrealized
holding gain

¥11,445¥2,165Gross unrealized
holding loss

Carrying amount(Market value)

Other securities–marketable:
Equity securities¥(3,111)¥10,499

Debt securities

300

4

(3)

301

Other

223

—

(67)

156

Total

¥11,968¥2,169¥(3,181)¥10,956

Thousands of U.S. dollars

2009
Original cost

Gross unrealized
holding gain

Gross unrealized
holding loss

Carrying amount(Market value)$116,512$22,040$(31,670)$106,882

3,054

41

(31)

3,064

Other securities–marketable:
Equity securities
Debt securities
Other

2,270

—

(682)

1,588

Total

$121,836$22,081$(32,383)$111,534

50

are as follows:
Thousands of
U.S. dollars

Millions of yen

2008

Proceeds from the sales of other securities

2009

2009

¥ 57

$ 580

2

1

10

Gross realized losses from the sales of other securities

(12)

(16)

(163)

The following is a summary of non-marketable other securities at March 31, 2008 and 2009:
Thousands of
U.S. dollars

Millions of yen

2008

2009

2009

Carrying
amountCarrying
amountCarrying
amountOther securities–non-marketable:
Unlisted securities¥1,721¥1,691$17,214

Money market fund and others

5,863

3,695

37,616

Other

1,340

853

8,684

¥8,924¥6,239$63,514

Total

Other securities with specified maturity dates and held-to-maturity securities at March 31, 2008 and 2009 mature as follows:
Millions of yen

2008
Due:

Withinone year

After 1through 5 years

After 5through 10 years

Debt securities:
Governmental bond securities

¥10

¥20

¥—

Corporate bond securities

—

34

—

¥10

¥54

¥—

Total

Millions of yen

2009
Due:

Withinone year

After 1through 5 years

After 5through 10 years

Debt securities:
Governmental bond securities

¥—

¥—

¥—

Corporate bond securities

—

31

—

¥—

¥31

¥—

Total

Thousands of U.S. dollars

2009
Due:

Withinone year

After 1through 5 years

After 5through 10 years

$ —

$—

Debt securities:
Governmental bond securities
Corporate bond securities
Total

$—
—

316

—

$—

$316

$—

Annual Report 2009

¥ 26

Gross realized gains from the sales of other securities

51 NAMCO BANDAI Holdings Inc.

Proceeds and gross realized gains and losses from the sale of other securities in the years ended March 31, 2008 and 2009

6 Trade Receivables
Trade receivables at March 31, 2008 and 2009 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2008

2009

2009

Notes receivable¥ 6,874¥ 6,248$ 63,606

Accounts receivable–trade66,26756,120571,312

—

151

1,537

¥73,141¥62,519$636,455

Lease receivables and investment assets
Total

7 Inventories
Inventories at March 31, 2008 and 2009 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2008

2009

2009

Finished goods and merchandise¥11,463¥11,643$118,528

Work in process

21,481

21,654

220,441

Raw materials and supplies

3,485

4,354

44,325¥36,429¥37,651$383,294

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. Of these, in theamusement facility business, the individual facility, the smallest unit used in management accounting, is mainly the basic unit
for grouping assets.

(Changes in grouping of assets)
In the past, in the amusement facility business, asset groupings were mainly organized by a certain region; in some domestic
consolidated subsidiaries, however, due to changes in their organization, the units used in the management accounting andthe units in those groupings have diverged; thus, from fiscal 2009, the individual facility, the smallest unit used in management
accounting, is the basic unit for grouping assets.
Accompanying these changes, the Company stated loss on impairment of fixed assets of ¥160 million ($1,629 thousand) in
fiscal 2009 as other income (loss) and reduced income before income taxes and minority interests in the same amount of theimpairment loss.

52
The amount of reduction recorded as an impairment loss in, Other income (loss), for the years ended March 31, 2008 and 2009were as follows:
Thousands of
U.S. dollars

Millions of yen

Location

Classification

2008

2009

2009

Amusement facility

Amusement facilities andmachines and other assets

¥938

¥ —

$

Kanazawa City, Ishikawa (Note 2)

Amusement facility

Amusement facilities andmachines and other assets

173

—

—

Ayase City, Kanagawa, etc.
(Note 3)

Amusement facility

Amusement facilities andmachines and other assets

Hakodate City, Hokkaido (Note 2)

Amusement facility(Tourist hotel)

Buildings & structuresand other assets

—

85

—

—

483

—

—

948

—

—

BEDFORDSHIRE, U.K. etc. (Note 2) Amusement facility

Amusement facilities andmachines and other assets

CAUSEWAY BAY, HONG KONG
(Note 4)

Assets scheduled
for disposal, etc.

Amusement facilities andmachines and other assets

2

—

—

ILLINOIS, U.S.A. (Note 5)

Amusement facility

Goodwill

662

—

—

Shimotsuga-gun, Tochigi, etc.
(Note 6)

Idle assets

Buildings & structures, land,and other assets

789

—

—

Bunkyo-ku, Tokyo, etc. (Note 4)

Assets scheduled
for disposal andother assets

Buildings & structures, otherproperty, plant and equipment
116

—

—

Inashiki-gun, Ibaraki (Note 7)

Warehouse

Buildings & structures, land

35

—

—

Koutou-ku, Tokyo (Note 2)

Software for Internet
content business

Other property, plant andequipment, other intangible
fixed assets

17

—

—

Kanazawa City, Ishikawa (Note 8)

Amusement facility

Amusement facilities
and machines and other assets

—

208

2,117

Sendai City, Miyagi (Note 9)

Amusement facility

Amusement facilities
and machines and other assets

—

94

957

Osaka City Osaka (Note 10)

Amusement facility

Amusement facilities
and machines and other assets

—

475

4,836

SAPPORO City, Hokkaido (Note 8)

Assets for business use

Buildings & structures, otherproperty, plant and equipment

—

48

489

Shibuya-ku, Tokyo (Note 11)

Assets for business use

Buildings & structures, otherproperty, plant and equipment

—

38

387

SEOUL, KOREA (Note 8)

Software for Internet
content business

Other intangible fixed assets

—

25

255

Minato-ku, Tokyo (Note 12)

Assets scheduled
for disposal,etc.

Buildings & structures, otherproperty, plant and equipment

—

23

234

Minato-ku, Tokyo (Note 12)

Assets scheduled
for disposal,etc.

Buildings & structures
—

14

143

Idle assets

Land

Ibaraki City, Osaka (Note 13)
Total

—

29

295

¥4,248¥954$9,713

Notes:
1. 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. In addition, the asset was determined to have no value.
2. An impairment loss was recorded because it was forecasted that the book value of this fixed asset could not be recovered due to the decline in business profitability.
In addition, the asset was determined to have no value.
3. 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. In addition, the assets were determined to have no value.
4. An impairment loss was recorded for this asset which is unlikely to be used because of relocation of facilities. In addition, the asset was determined to have no value.
5. 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.
In addition, the asset was determined to have no value.
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. In addition, the recoverable
amount of real estate assets was measured to be the net selling price which was assessed based on road rating.
7. An impairment loss was recorded because it was forecasted that the book value of this fixed asset could not be recovered due to the decrease in business profitability.
In addition, the recoverable amounts for real estate were measured by the net sales value and assessed based on fixed assets tax rating.

Annual Report 2009

Items

Yokohama City, Kanagawa, etc.
(Note 1)53 NAMCO BANDAI Holdings Inc.

The book values of the following assets, which exclude reusable assets, were reduced to the recoverable amount.

8. An impairment loss was recorded because it was predicted that the book value of this fixed asset could not be collected due to the decrease in business profitability. In addition,
the asset was determined to have no value.
9. An impairment loss was recorded because it was judged that the value that could be collected on this fixed asset had fallen substantially, due to the decision to close the facility.
In addition, the asset was determined to have no value.
10. This asset was separated from its existing grouping and an impairment loss was recorded for the asset because, while it had previously been operated to generate income, arethinking of the main objective of the operation led to a decision to operate the asset as a research facility for new product development and development of new types offacilities; upon that decision, the asset was recognized that the value that could be collected on this fixed asset had fallen substantially. In addition, the asset was determined tohave no value.
11. This asset was separated from its current grouping and recorded as an impairment loss because the collectible amount of this fixed asset largely decreased due to the decision toclose the facility. The asset was determined to have no value.
12. An impairment loss was recorded on this asset, for which no future use is anticipated, accompanying the relocation of the Company and its subsidiaries’ head office functions. In
addition, the asset was determined to have no value.
13. Assets that had no foreseeable use in the future were written down and 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 assets appraisals.

9 Borrowings and Lease Obligations
Short-term borrowings at March 31, 2008 and 2009 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2008

2009

Short-term borrowings¥¥

Long-term borrowings due within one year

5,338

Lease obligations due within one year
Total

—

2009

96
8,761

$

977
89,189—85865¥5,338¥8,942$91,031

The weighted average interest rates on short-term borrowings outstanding at March 31, 2009 was 4.77%.
Millions of yen

Loans, principally from banks, maturing in installments through March 31, 2011;
the weighted average interest rates of current installments at March 31, 2009 was
0.70% and non-current installments at March 31, 2009 was 0.78%
Lease obligations maturing in installments through March 31, 2014;
the weighted average interest rates of current installments at March 31, 2009 was
4.20% and non-current installments at March 31, 2009 was 2.90%
SubtotalLess long-term borrowings due within one year
Less lease obligations due within one year
Total

Thousands of
U.S. dollars

2008

2009

2009

¥16,000¥20,752$211,260—
16,000(5,338)—¥10,662396
21,148(8,761)(85)¥12,302

4,031
215,291(89,189)(865)$125,237

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

Millions of yen

Thousands of
U.S. dollars

2010¥ 8,845$ 90,044

2011

8,743

89,005

2012

3,411

34,725

2013

61

621

2014

39

397

2015–2016

49

499

Total

¥21,148$215,291

54

Trade payables at March 31, 2008 and 2009 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2009

2009

Notes payable¥ 8,188¥ 7,130$ 72,585

Accounts payable–trade34,41529,631

301,649¥42,603¥36,761$374,234

Total

11 Retirement and Severance Benefits
The plan’s funded status and amounts recognized in the accompanying consolidated balance sheets at March 31, 2008 and 2009
are as follows:
Thousands of
U.S. dollars

Millions of yen

2008

2009

2009

Projected benefit obligations¥ 13,544¥14,254$145,108

Plan assets at fair value(94,940)

Employee retirement and severance benefits:(10,531)(9,326)

Projected benefit obligation in excess of plan assets

3,013

4,928

50,168Unrecognized loss

(1,996)(3,532)(35,956)

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

413

373

3,797

1,430

1,769

18,009

141

137

1,395

1,571

1,906

19,404

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

27

47

478

¥ 1,598¥ 1,953$ 19,882

Notes:
1. In addition to the above plan assets, plan assets of ¥539 million and ¥438 million ($4,459 thousand) at March 31, 2008 and 2009, 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
allocation of contributions paid.
2. Certain consolidated subsidiaries use a simplified method for calculating projected benefit obligations.

Net periodic cost of employee retirement and severance benefits for the years ended March 31, 2008 and 2009 consists ofthe following:Thousands of
U.S. dollars

Millions of yen

Service cost for benefits earned–net of employee contributions

2008

2009

2009

¥1,471¥1,628$16,573

Interest cost on projected benefit obligation

237

245

2,494

Expected return on plan assets

(254)

(275)

(2,800)

Amortization of unrecognized actuarial gain or loss

237

286

2,912

Amortization of prior service cost

(40)

(40)

(407)

¥1,651¥1,844$18,772

Net periodic cost

Notes:
1. In addition to the net periodic cost of employee retirement and severance benefits, contributions to the governmental welfare pension benefit plan are charged to “Cost of sales”
and “Selling, general and administrative expenses.” Contributions to the governmental welfare pension benefit plan of ¥38 million and ¥31 million ($316 thousand) were charged to“Cost of sales” and “Selling, general and administrative expenses” in the years ended March 31, 2008 and 2009, respectively. Also, additional retirement allowances of ¥118 millionand ¥98 million ($998 thousand) were charged to “Selling, general and administrative expenses” in the years ended March 31, 2008 and 2009, respectively. In addition, for certain
domestic consolidated subsidiaries, as part of a second career support system / early retirement system, special retirement benefits included ¥553 million ($5,630 thousand) in
additional retirement allowances in the year ended March 31, 2009, which was recorded as “other income (loss).”
2. The retirement benefit expense of consolidated subsidiaries that use a simplified method is recorded as service cost.
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. The contributions of certain consolidated subsidiaries that simultaneously participate in the Smaller Enterprise Retirement Allowance Mutual Aid Scheme are recorded as service cost.

Annual Report 20092008

55 NAMCO BANDAI Holdings Inc.

10 Trade Payables

Actuarial assumptions and the basis for the calculation of retirement and severance benefits in 2008 and 2009 are as follows:
Method of benefit attribution

2008

2009

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

2.0%

1.7%~2.0%

2.0%~3.0%

2.5%~3.0%

10 years

10~11years

Discount rate
Expected rate of return on plan assets
Period of amortizationof unrecognized prior service cost
Period of amortizationof unrecognized actuarial gain or loss

9~17 years

9~19 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
based on income which, in the aggregate, resulted in a normal tax rate of approximately 40.6% in 2008 and 2009.
Income tax expenses reflected in the accompanying consolidated statements of income for the years ended March 31,
2008 and 2009 consist of the following:Thousands of
U.S. dollars

Millions of yen

Current

2008

2009

2009

¥14,845¥ 9,843$100,204

Previous—

1,173

11,941

Deferred(2,210)(1,956)(19,912)

Total¥12,635¥ 9,060$ 92,233

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, 2008 and 2009 is as follows:
2008

2009

Normal tax rate

40.6%

40.6%

Amortization of goodwill

1.9

7.6

Increase (decrease) in valuation allowance for deferred tax assets(14.1)

6.6

Income tax for previous period—

5.5Entertainment expenses not deductible for tax purposes

0.8

1.6

Corporate inhabitant tax on per capita basis

0.6

1.2

—

(17.2)

Lower tax rates of foreign consolidated subsidiaries

(0.9)

(3.4)

Directors’ bonuses

0.5—

Tax credit for R&D expenses

(1.3)

—

Other

(0.6)

0.4

27.5%

42.9%

Reversal of deferred tax liabilities for retained earnings
of foreign consolidated subsidiaries

Effective tax rate

56
Thousands of
U.S. dollars

Millions of yen

2008

2009

2009

¥ 3,036¥ 3,036$ 30,907

Deferred tax assets:
Land revaluation

4,830

4,472

45,526

Losses carried forward

2,983

8,411

85,626

Loss on valuation of advance payments

924

941

9,580

Inventory valuation losses

1,253

3,085

31,406

Accrued employee bonuses

1,743

1,208

12,298

Allowance for doubtful receivables

906

800

8,144

Loss on impairment of fixed assets

1,537

802

8,165

Accrued enterprise taxes and others

801

733

7,462

Accrued retirement and severance benefits

580

738

7,513

Research and development costs

614

507

5,161

Other securities valuation difference

—

927

9,437

Other

5,742

3,467

35,29324,94929,127

296,518

Valuation allowance(11,714)(15,879)(161,651)

Total deferred tax assets

13,235

13,248134,867

Retained earnings of foreign consolidated subsidiaries(4,178)(592)(6,027)

Other securities valuation difference(1,294)(490)(4,988)

Total gross deferred tax assets

Deferred tax liabilities:

Land revaluation

(684)

(674)

(6,861)

Reserve for deferred income tax

(135)

(128)

(1,303)

Other
Total gross deferred tax liabilities
Net deferred tax assets

(76)

(161)

(1,639)(6,367)(2,045)(20,818)¥ 6,868¥ 11,203$ 114,049

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

Millions of yen

Current assets–Deferred tax assets
Investments and other assets–Deferred tax assets
Current liabilities–Other (deferred tax liabilities)
Long-term liabilities–Deferred tax liabilities
Total

2008

2009

2009

¥ 5,909¥ 6,146$ 62,567

6,291

7,125

72,534

(600)

(970)

(9,874)(4,732)(1,098)(11,178)¥ 6,868¥11,203$114,049

Annual Report 2009

Excess depreciation of fixed assets

57 NAMCO BANDAI Holdings Inc.

Significant components of deferred tax assets and liabilities at March 31, 2008 and 2009 are as follows:

13 Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2008 and 2009 are as follows:
Thousands of
U.S. dollars

Millions of yen

Marketing

2008

2009

2009

¥ 30,550¥ 28,410$ 289,219

Directors’ remuneration and employees’ wages

30,88427,992284,964

Employees’ retirement and severance benefits

1,116

1,247

12,695

Provision for directors’ bonuses

498

626

6,373

Directors’ and corporate auditors’ retirement and severance benefits

46

13

132

17,583

17,512

178,275

56

135

1,374

49,92947,740486,003¥130,662¥123,675$1,259,035

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,
2008 and 2009 is as follows:
Thousands of
U.S. dollars

Millions of yen

2008

2009

2009

Net income¥32,679¥11,830$120,432

Net income available to common stockholders

32,67911,830120,432———

Net income for diluted EPS calculation¥32,679¥11,830$120,432

Average number of common shares outstanding

254,025

246,743

341

313

254,366

247,056

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:
Basic¥128.65¥47.95$0.49

Diluted128.47

47.88

0.49

58

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(Law No. 34, promulgated on March 31, 1998)”, thedividend or the excess, if any, of 25% of common stock overCompany revalued its land used for business purposes on

the total of additional paid-in capital and legal earnings

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

reserve must be set aside as a legal reserve until the(¥20,769 million), net of related deferred tax assets andaggregate amount of capital surplus and the legal reserve

liabilities, was reported as “Land revaluation” in “Netequals 25% of stated capital.

assets”.

Certain foreign consolidated subsidiaries are also required
to appropriate their earnings to legal reserves under the laws

Revaluation method:of the respective countries.

The fair value of land is determined based on official notice

The Company’s retained earnings includes legal reserves

prices that are calculated by the method assessed andof ¥1,645 million and ¥1,645 million ($16,746 thousand) at

published by the Commissioner of the National Tax Agency.

March 31, 2008 and 2009, respectively. Proposed appro-

The Commissioner assesses and publishes the method topriations of retained earnings have not been reflected in thecalculate land value that forms the foundation for calculating

consolidated financial statements at the end of the fiscal

taxable value for land value tax prescribed in “Article 16 ofyear. The Company’s approved appropriations of retained

Land Value Tax Law (Law No. 69, promulgated on May 2,

earnings at March 31, 2009, were cash dividends of ¥2,897

1991)”, as stipulated in “Article 2-4 of the Ordinancemillion ($29,492 thousand). In addition, a mid-year dividend

Implementing the Law Concerning Land Revaluation (Cabinet

may be paid based on approval by the Board of Directors,

Order No. 119, promulgated on March 31, 1998)”. Reasonable

which is subject to limitations. The mid-year dividend in 2009

adjustments are made to the official notice prices.

was ¥2,957 million ($30,103 thousand).

In fiscal 2009, unrealized losses for land of ¥158 million($1,608 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, 2009.

17 Common Stock and Treasury Stock
The changes in the number of common stock and treasury stock for the year ended March 31, 2009 were as follows:
Common stock (number of shares)
March 31, 2008
Retirement of treasury stock
March 31, 2009

256,080,191(6,080,191)
250,000,000

Treasury stock (number of shares)
March 31, 2008
Purchase of treasury stock in accordance with a decision made by the Board of Directors
Repurchase of fractional shares
Increase in the shareholder ratio for affiliates to which the equity method applies
Retirement of treasury stock
Sale of fractional shares
March 31, 2009

1,766,271
13,000,000
6,550
3,126
(6,080,191)(960)
8,694,796

Annual Report 200916 Land Revaluation

59 NAMCO BANDAI Holdings Inc.

15 Retained Earnings and Dividends

18 Stock Option Plan
The following are details of the stock option plan at March 31, 2009.
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 (20)Type and number of shares (Note 1)

Common stock 126,300

Common stock 142,100

Common stock 1,776,000

and subsidiaries (561)
Amount to be paid upon exercise of stock
subscription rights (yen)Grant dateConditions for exercising rights
Required service
Applicable period for exercising rights
Matters relating to the transfer of stock
subscription 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

Approval of the directors ofApproval of the directors ofApproval of the directors of

NAMCO BANDAI Holdings Inc. NAMCO BANDAI Holdings Inc. NAMCO BANDAI Holdings Inc.

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

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

Resolution date of general
June 26, 2006

June 25, 2007

June 25, 2007

Position and number of beneficiaries

shareholders’ meeting

Employees of subsidiaries (226)

Directors of the Company (6)Directors of subsidiaries (84)Type and number of shares (Note 1)

Common stock 572,000

Common stock 92,600

Common stock 257,700

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

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

Approval of the directors ofApproval of the directors ofApproval of the directors ofApplicable period for exercising rights
Matters relating to the transfer of stock
subscription rights

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

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

Notes:
1. Regarding the method for estimating the number of effective rights of stock options, since it is difficult to rationally estimate the number of expired options at a future date, thenumber of previously expired options 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 sharesof the Company on the Tokyo Stock Exchange on each of the days within the previous three months prior to the month in which the starting date for the period for exercising thesubscription 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 thetime of issuance of the subscription rights. The annual target should be used as the evaluation index, and the ratio of achievement of that target shall be measured for each fiscal
year during that evaluation period. If the ratio of achievement at the end of the evaluation period is above 50% on average during the evaluation period, those rights may be
exercised. However, even in that case, the number of shares that can be acquired by exercising those rights shall be based on a ratio equivalent to the average ratio of achievement(maximum of 100%).
4. (i) Any person receiving an allotment of subscription rights (hereinafter referred to as “Holder(s) of Subscription Rights”) must be an employee of the Company or of its Group
Companies at 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
the corresponding rights up to 6 months from the time of leaving. However, he or she may not possess and exercise the corresponding rights beyond the period for exercisingthose rights. In addition, if that person leaves upon the Company’s request or for any other reason that the Company accepts, those rights and the period for exercising thoserights shall remain unchanged.
5. The Black-Scholes Model is used for estimating fair market price for stock options.

60

1. Lessee
The Company and its subsidiaries occupy offices and other facilities under various finance and operating lease arrangements.
(1) Finance 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, 2008 and 2009 are as follows:2008

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

2009¥1,107
(559)
¥ 548

¥ 779
(502)
¥ 277

2009

$ 7,930(5,110)$ 2,820

Future minimum payments due under finance leases as of March 31, 2008 and 2009 are as follows:
Thousands of
U.S. dollars

Millions of yen

2008

Due within one year
Due after one year
Total

2009

¥230
318
¥548

¥156
121
¥277

2009

$1,5881,232$2,820The 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, 2008 and 2009 are as follows:
Millions of yen

Lease expense
Depreciation expense

Thousands of
U.S. dollars

2008

2009

2009

¥290
290

¥209
209

$2,1282,128(2) Operating leases
Future minimum payments required under operating leases at March 31, 2008 and 2009 are as follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of
U.S. dollars

2008

2009

2009

¥ 3,487
13,528¥17,015¥ 3,219
9,769¥12,988$ 32,770
99,450$132,220

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,
are accounted 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, 2008 and 2009 are as follows:
Millions of yen

Acquisition costLess accumulated depreciation
Assets under finance leases, net

Thousands of
U.S. dollars

2008

2009

2009

¥1,367
(752)
¥ 615

¥ 648
(452)
¥ 196

$ 6,596(4,601)$ 1,995

Annual Report 2009

Thousands of
U.S. dollars

Millions of yen

61 NAMCO BANDAI Holdings Inc.

19 Leases

Future minimum payments due under finance leases at March 31, 2008 and 2009 are as follows:
Thousands of
U.S. dollars

Millions of yen

2008

Due within one year

2009

¥255

Due after one year
Total

2009

¥ 97

$ 987

454

124

1,263

¥709

¥221

$2,250

Lease income and depreciation expense for finance leases for the years ended March 31, 2008 and 2009 are as follows:
Thousands of
U.S. dollars

Millions of yen

2008

2009

2009

Lease income

¥284

¥170

$1,731

Depreciation expense

250

150

1,527

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,
2008 and 2009 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

2008

2009

2009

Contract
amountEstimated
fair value

Unrealized
gain (loss)

Contract
amountEstimated
fair value

Unrealized
gain (loss)

¥ 561

¥ 549

¥ 12

¥ —

¥ —

¥ —

Contract
amountEstimated
fair value

Unrealized
gain (loss)

Foreign exchange contracts
Sold:
British pounds

$

—

$

—

$

—

Yen

856

882

(26)

728

823

(95)

7,411

8,378

(967)

Won

230

223

7

161

166

(5)

1,639

1,690

(51)

2,613

2,348

(265)

952

976

24

9,692

9,936

244

Purchased:
U.S. dollars
Yen
Total

—
¥

—

¥

—

—

12

12

—

—

¥(272)

¥ —

¥ —

¥(76)

122
$

—

$

122

—

—

$(774)

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, 2008 and 2009 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2008

2009

2009

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

¥83

¥—

$—

62

(1) Business segments
Millions of yen

2008
Amusement
Facility

Game
Contents¥175,992¥89,430¥137,947

Network

Visual andMusic Content

Other

Subtotal¥11,688¥36,020¥ 9,397¥460,474

Eliminations
and corporate

Consolidated¥¥460,474

Net sales and Operating
income:Sales to externalcustomers
Intersegment transactions

—

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

operating 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

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

940

3,291

17

—

—

—

4,248

—

4,248

9,226

9,828

3,439

1,043

10,080485

34,101

14

34,115

Eliminations
and corporate

Consolidated¥¥ 426,400

Millions of yen

2009
Toys and
Hobby

Amusement
Facility

Game
Contents¥163,068¥76,917¥133,722

Network

Visual andMusic Content

Other

Subtotal¥10,499¥33,634¥ 8,560¥426,400

Net sales and Operating
income:Sales to externalcustomers
Intersegment transactions
Subtotal

—

2,657

353

5,683

391

1,005

10,45020,539(20,539)—

165,725

77,270139,405

10,89034,63919,010446,939(20,539)

426,400

Cost of sales andoperating expenses

154,192

Operating income¥ 11,533¥

76,877

128,465393¥ 10,940¥

10,221¥130,405¥54,400¥108,965¥11,092

8,973

9,571

3,766

308

669

34,60018,444

422,799(18,747)

404,052566¥ 24,140¥ (1,792)¥ 22,348¥48,071¥19,207¥372,140¥(8,695)¥363,445

3,113

927

26,65885

26,743¥39¥

Assets, Depreciation,
Impairment losses, andCapital expenditures:
AssetsDepreciation
Loss on impairmentof fixed assets
Capital expenditures

63

776

—

—

14

78

931

23

954

6,724

6,713

2,527

83

885

385

17,317164

17,481

Annual Report 2009

Toys andHobby

63 NAMCO BANDAI Holdings Inc.

22 Segment Information

Thousands of U.S. dollars

2009
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$1,660,064 $783,030 $1,361,315 $106,882 $342,400 $ 87,142 $4,340,833 $Intersegment transactions— $4,340,833

27,0493,594

57,854

3,980

10,231

106,383

209,091(209,091)—

1,687,113

786,624

1,419,169

110,862352,631

193,525

4,549,924(209,091)

4,340,833

operating expenses

1,569,704

782,622

1,307,798

104,052

352,235

187,7634,304,174(190,848)

4,113,326

Operating income$ 117,409 $Subtotal
Cost of sales and4,002 $ 111,371 $

6,810 $

396 $

5,762 $ 245,750 $ (18,243) $ 227,507

Assets, Depreciation,
Impairment losses, andCapital expenditures:
Assets$1,327,548 $553,802 $1,109,284 $112,919 $489,372 $195,532 $3,788,457

Depreciation$(88,518) $3,699,939

91,347

97,43538,3393,135

31,691

9,437

271,384865

272,249

641

7,901

—

—

143

794

9,479

234

9,713

68,452

68,34025,725

845

9,009

3,919

176,290

1,670

177,960

Loss on impairmentof fixed assets
Capital expenditures

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 ¥3,253 million and ¥3,087 million ($31,426 thousand) for
the years ended March 31, 2008 and 2009, respectively. The majority of these costs represent administrative costs incurred by the general administration department of theCompany and NAMCO BANDAI Holdings (USA) Inc.
4. Unallocatable assets included in the “Eliminations and Corporate” column under “Assets” approximated ¥26,151 million and ¥36,217 million ($368,696 thousand) as of March 31,
2008 and 2009, 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 therevision of 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 in fiscal 2008:
Millions of yen

Operating income

Toys and
Hobby
(682)

Amusement
Facility(4)

Game
Contents(175)

Network(14)

Visual andMusic Content
(105)

Other
(9)

Subtotal(989)

Eliminations
and corporate—

Consolidated(989)

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 in fiscal 2008.
Millions of yen

Operating income

Toys and
Hobby
(161)

Amusement
Facility—

Game
Contents(20)

Network(3)

Visual andMusic Content
—

Other
(3)

Subtotal(187)

Eliminations
and corporate—

Consolidated
(187)

64

Millions of yen

2008

Japan

Americas

EuropeAsia,
ExcludingJapan

Subtotal¥346,736¥52,623¥46,388¥14,727¥460,474

Eliminations
and corporate

Consolidated

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

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

AssetsMillions of yen

2009

Japan

Americas

EuropeAsia,
ExcludingJapan

Sales to external customers¥319,535¥48,338¥45,005¥13,522¥426,400

Intersegment transactions

13,9992,596

1623,85540,466

Subtotal

Net sales and Operating income:¥—¥426,400(40,466)—

Subtotal

333,534

50,93445,02137,377

466,866(40,466)

426,400

Cost of sales and operating expenses

317,671

50,06038,77335,088441,592(37,540)

404,052

Operating income¥ 15,863¥

874¥ 6,248¥ 2,289¥ 25,274¥ (2,926)¥ 22,348¥293,054¥28,703¥37,035¥19,397¥378,189¥(14,744)¥363,445

Eliminations
and corporate

Consolidated

AssetsThousands of U.S. dollars

2009

Japan

Americas

EuropeSales to external customers$3,252,927$492,090$458,159

Intersegment transactions

142,51226,428163

Asia,
ExcludingJapan

Subtotal

Net sales and Operating income:$137,657 $4,340,833 $
242,848

411,951— $4,340,833(411,951)—

Subtotal

3,395,439

518,518

458,322

380,505

4,752,784(411,951) 4,340,833

Cost of sales and operating expenses

3,233,952

509,620394,716357,2024,495,490(382,164) 4,113,326

Operating income
Assets$ 161,487

$

8,898

$ 63,606$ 23,303 $ 257,294 $ (29,787) $ 227,507$2,983,346$292,202$377,023$197,465 $3,850,036 $(150,097) $3,699,939

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
In fiscal 2009, accompanying the new establishment of BANDAI (SHENZHEN) CO., LTD., China was added to the Asia segment.
2. Unallocatable operating expenses included in the “Eliminations and Corporate” column under “Operating expenses” were ¥3,253 million and ¥3,087 million ($31,426 thousand) for
the years ended March 31, 2008 and 2009, respectively. The majority of these costs represent administrative costs incurred by the general administration department of theCompany and NAMCO BANDAI Holdings (USA) Inc.
3. Assets included in the “Eliminations and Corporate” column under “Assets” approximated ¥26,151 million and ¥36,217 million ($368,696 thousand) as of March 31, 2008 and2009, 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 therevision of 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 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 and operating income decreased by the same amount.

Annual Report 2009

Intersegment transactions

65 NAMCO BANDAI Holdings Inc.

(2) Geographic segments

(3) Foreign sales
Millions of yen

2008

Foreign sales

2009

Americas

Europe

Asia

Total

Americas

Europe¥54,835¥47,855¥20,233¥122,923¥50,618¥46,005

Consolidated salesAsia¥17,444 ¥114,067

460,474

Share of sales to customers outside Japan

11.9%

10.4%

4.4%

26.7%

Total

426,400
11.9%

10.8%

4.1%

26.8%

Thousands of U.S. dollars

2009
Americas

Foreign sales

Europe

Asia

Total

$515,301 $468,340 $177,583 $1,161,224

Consolidated sales

4,340,833

Share of sales to customers outside Japan

11.9%

10.8%

4.1%

26.8%

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 Related Party Disclosures
From fiscal 2009, the “Accounting Standard for Related Party Disclosures” (ASBJ Statement No. 11, issued on October 17,2006) and “Guidance on Accounting Standard for Related Party Disclosures” (ASBJ Guidance No. 13, issued on October 17,2006) have been adopted.
As a result, transactions with Happinet Corporation have been added to the scope of disclosure of transactions with relatedparties.
Transactions with Related Parties
Transactions with related parties by consolidated subsidiaries of the Company
Non-consolidated subsidiaries and affiliated companies, etc., of the Company
Type

Company

Address

Capital orContribution
to CapitalContent ofbusiness

Ratio ofvoting rights
ownership

AffiliatedHappinet

Taito-ku Tokyo¥2,751 Million

Wholesaler ofHoldingcompanies

Corporation($28,006
Thousand)

Toys, Video game andAmusement products.

driectly 26.0%
indirectly 0.3%

Relationshipwith relatedpartiesContent

Amount

Sales

Sales ofagencyproducts, etc.
(Note 2)

Notes:
1. The above transaction amount does not include consumption tax; the balance at the end of this term includes consumption tax.
2. Transaction terms and policy for determining transaction terms.
For the transaction stated above, the products were sold on the same terms as in general transactions.

Account
items

Balanceat the endof this term

¥38,644 Million

Account¥7,445 Million($393,403
Thousand)receivable-($75,792
Thousand)

trade

66

(Transactions of entities under common control, etc.)(iv) An absorption-type merger in which Banpresto Co.,

Organizational Restructuring of the Domestic Group

Ltd. is the merged company and NAMCO BANDAI

1. Names and Business Content of Restructured

Games Inc. is the surviving company.

Companies, Legal Form of Business Combinations,(v) An absorption-type company split in which Bandai
Co., Ltd. is the split company and the Company is

Objectives

the successor company.

(1) Names and Business Content of Restructured(3) Overview of Transaction Including Transaction

Companies

Objectives(i) NAMCO BANDAI Games Inc.

An organizational restructuring of the group companies

Planning, development and sales of home video

in Japan was carried out as of April 1, 2008, togame software and coin-operated game machines,

maximize the value of the group companies.

etc.

(i) Transfer and Integration of Game Operations of(ii) NAMCO LIMITEDManagement of amusement facilities, etc.
(iii) Banpresto Co., Ltd. (a newly-incorporated company

Banpresto Co., Ltd.
The game operations of Banpresto Co., Ltd., whichplanned and developed home video game softwarein an incorporation-type company split)

and coin-operated game machines, was transferred

Planning, development and sales of prizes, etc., for

to NAMCO BANDAI Games Inc., which integrates

coin-operated game machines.

the Group game operations; Pleasure Cast Co.,(iv) Bandai Co., Ltd.

Ltd., and Hanayashiki Co., Ltd., engaged in

Manufacturing and sales of toys, apparel andoperating amusement facilities, as subsidiaries ofrelated products.

Banpresto, were made subsidiaries of NAMCO(v) NAMCO BANDAI Holdings Inc. (the Company)

LIMITED, which integrates the amusement

Planning and implementation of management

facilities operation business of the Group.

strategy and business management and instruction

Banpresto Co., Ltd. was redefined as focusing onof the group companies.

the prize business, with an emphasis on prizes for(2) Legal Form of Business Combinations(i) An incorporation-type company split of Banprestocoin-operated game machines.
(ii) Consolidation of Subsidiaries with Group Support

Co., Ltd., with the establishment of a subsidiary

Functions(the new Banpresto Co., Ltd).

As of April 1, 2008, a Shared Services Division was(ii) An absorption-type company split in which

established within the Company and the share

Banpresto Co., Ltd. is the split company andmanagement operations for NAMCO BANDAI

NAMCO LIMITED is the successor company.

Business Services Inc., and Artpresto Co., Ltd.,(iii) An absorption-type company split in which

which had been carried out by Bandai Co., Ltd., andBanpresto Co., Ltd. is the split company andBanpresto Co., Ltd., were transferred to thethe Company is the successor company.

Company.

Annual Report 2009

and Overview of the Transaction Including Transaction

67 NAMCO BANDAI Holdings Inc.

24 Business Combinations

2. Overview of Accounting Process(issued by the Business Accounting Council on October 31,

The accounting process for the consolidated financial

2003) and “Guidance on Accounting Standard for Businessstatements was conducted as transactions of entities under

Combinations and Accounting Standard for Business

common control, handled in accordance with the provisions

Divestitures” (ASBJ Guidance No. 10, final revision issued onof the “Accounting Standard for Business Combinations”

November 15, 2007).

25 Significant Subsequent Events(Transactions conducted by commonly controlled entities, etc.)(2) Legal Form of the Business Combinations

The merger of subsidiaries and succession to part of the(i) An absorption-type merger in which Bandai Networks

businesses of subsidiaries due to a company split in the courseCo., Ltd. is the disappearing company; and NAMCOof the restructuring of the Group’s businesses

BANDAI Games Inc. is the surviving company.

On April 1, 2009, NAMCO BANDAI Games Inc. merged with(ii) An absorption-type company split in which Bandai

and absorbed Bandai Networks Co., Ltd. due to an absorption-

Networks Co., Ltd. is the split company; and thetype merger. Also, the Company succeeded to a part of theCompany is the successor company.

share management business that had been carried out by
Bandai Networks Co., Ltd., due to the company split(3) Overview of Transaction Including Transaction Objectives
The Group has considered what its optimal organizational(absorption-type company split) on such date.

structure would be to work for further growth in the

1. Names and Business Content of Combined Companies,

network-related market, which includes distributing content

Legal Form of Business Combination, and Overview offor mobile phones: this is a market for which technologicalTransaction Including Transaction Objectives

progress and other factors have produced drastic changes in(1) Names and Business Content of Combined Companies

the environment and in which competition is becoming(i) NAMCO BANDAI Games Inc.

increasingly intense on a global scale. Thus far, NAMCO

Planning, development, and sales of home video

BANDAI Games Inc. has strengths in leveraging its in-housegame software and coin-operated game machines, etc.

technical development capabilities and effectively utilizing(ii) Bandai Networks Co., Ltd.

content for each platform, including home video gameDistribution of content for mobile phones, con-software, coin-operated game machines, and mobile phones.

signment of website development, mail order sales, etc.

Also, Bandai Networks Co., Ltd. has strengths in the(iii) NAMCO BANDAI Holdings Inc. (the Company)

comprehensive development of operations, such as e-

Planning and implementation of management strategy

commerce, centered on the distribution of mobile phone

and business management and instruction of thecontent and the provision of technical solutions. NAMCO

group companies.

BANDAI Games Inc., and Bandai Networks Co., Ltd., haveeach worked to grow their businesses by leveraging theirrespective strengths.

68
In addition, as of June 16, 2009, Bandai S.A., a subsidiary of

establishment of a new business unit within NAMCO

the Company carried out a paid-in capital increase of 50 million

BANDAI Games Inc. are designed to reinforce the total

euros in NAMCO BANDAI Games Europe S.A.S., a subsidiary

power of the network business within the Group and toof BANDAI S.A.

create new content and businesses through the synergistic

Reason for capital increase and use of the funds

fusion of varied strengths.

The capital increase was carried out to secure the funds for theacquisition of shares in Distribution Partners S.A.S. from Atari

Company has succeeded to part of the share management

Europe S.A.S. by NAMCO BANDAI Games Europe S.A.S., abusiness that had been carried out by Bandai Networks Co., Ltd.,subsidiary of BANDAI S.A. and the funds are used for thedue to the company split (absorption-type company split).

acquisition.

2. Overview of Accounting Process(Change in segment classification by type of operation)

The accounting process for the consolidated financial

On April 1, 2009, with the objective of achieving further growthstatements was conducted as transactions conducted byin network-related markets, two of the Company’scommonly controlled entities, handled in accordance with theconsolidated subsidiaries were combined in an absorption-typeprovisions of the “Accounting Standard for Businessmerger, with Bandai Networks Co., Ltd., as the disappearing

Combinations” (issued by the Business Accounting Council oncompany and NAMCO BANDAI Games Inc. as the surviving

October 31, 2003) and “Guidance on Accounting Standard forcompany. Accompanying this merger, the classification ofBusiness Combinations and Accounting Standard for Business

operations was reviewed, and as a result, because ofDivestitures” (ASBJ Guidance No. 10, final revision issued on

similarities in business characteristics, such as nature ofNovember 15, 2007).

services, content development, and response to media
diversification, it was decided to combine the Network(Capital increase in a subsidiary)

segment and the Game Contents segment from the next

As of April 27, 2009, the Company carried out a paid-in capitalconsolidated fiscal year.

increase of 50 million euros in BANDAI S.A., a subsidiary of theCompany.

Segment information in fiscal 2009, prepared according to
the new segment classification, is presented below.
Millions of yen

2009

Net sales and Operating income:Sales to external customers
Intersegment transactions
Subtotal
Cost of sales and operating expenses
Operating income
Assets, Depreciation, Impairment
losses, and Capital expenditures:
AssetsDepreciation
Loss on impairment of fixed assets
Capital expenditures

Toys and
Hobby

Amusement
Facility

Game
Contents

Visual andMusic Content

Other

Subtotal

Eliminations
and corporate

Consolidated¥163,068
2,657
165,725
154,192¥ 11,533¥76,917353
77,27076,877¥ 393¥144,222
5,669
149,891
138,281¥ 11,610¥33,634
1,005
34,63934,600¥39¥ 8,559
10,45019,00918,444¥ 565¥426,400
20,134
446,534
422,394¥ 24,140¥—(20,134)(20,134)(18,342)¥ (1,792)¥426,400—
426,400
404,052¥ 22,348¥130,405
8,973
63
6,724

¥54,400
9,571
776
6,713

¥119,605
4,074
—
2,610

¥48,071
3,113
14
885

¥19,207927
78
385¥371,688
26,658931
17,317¥ (8,243)
85
23
164

¥363,445
26,743954
17,481

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, mobile contents, prizes for amusement arcade machines.
(4) Visual and Music Content: video products, video software, on-demand video distribution.
(5) Other: transportation and storage of products, leases, real estate management, printing, development and sales of environmental devices.

Annual Report 2009

In addition, upon this restructuring within the Group, the69 NAMCO BANDAI Holdings Inc.

This time, the merger of these two companies and the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, 2009 and 2008, and the related consolidated statements of income, changes in net assets 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 that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of NAMCO BANDAI Holdings Inc.and subsidiaries as of March 31, 2009 and 2008, and the results of theiroperations 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,
2009 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 23, 2009

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

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

Corporate Data
As of March 31,2009•Corporate Name: NAMCO BANDAI Holdings Inc.
•Head Office: NAMCO BANDAI Mirai Kenkyusho
4-5-15, Higashi-Shinagawa, Shinagawa-ku, Tokyo 140-8590, Japan (from June 23, 2009)
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:
250,000,000 shares
Number of Shareholders:
36,909Number of Shares per Trading Unit:
100 shares•Ownership Breakdown:•Major Shareholders:
Name% of Total

Individuals, etc.

16.80%

Northern Trust Company (AVFC) Sub-account American Clients

6.52

Japan Trustee Services Bank, Ltd. (Trust Account)

5.02

Japan Trustee Services Bank, Ltd. (Trust Account 4G)

5.01

Masaya Nakamura

4.94

MAL Ltd.

4.80

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

4.50

Foreign corporate
entities and others

Northern Trust Company (AVFC) Re U.S. Tax Exempted Pension Funds

3.75

39.66%The Silchester International Investors International Value Equity Trust

3.28

Sanka Ltd.

2.68

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

1.83

Financial institutions

24.79%

Brokerages

0.39%
Other corporate entities

14.92%
Treasury stock

3.44%•Group Organization:
Strategic Business Units

Toys and Hobby
Core Company: Bandai

Game Contents
NAMCO BANDAI HoldingsCore Company: NAMCO BANDAI Games• Group Strategy Meeting• Contents Business Strategy Meeting• Group CSR Committee
Group Social Contribution Committee
Group Environment Committee

Visual and Music Content

Group Compliance CommitteeCore Company: BANDAI VISUAL• Group Crisis Management Committee

Amusement Facility• Group Information Security CommitteeCore Company: NAMCO• Internal Control Committee

Affiliated Business Companies
Support for Group Businesses©SOTSU • SUNRISE ©2004-2009 Bandai, WiZ ©SUNRISE, NAGOYA BROADCASTING NETWORK ©Cartoon Network ©2008 Ishimori Production, Inc., Toei Company, Ltd., Adness Entertainment Co. Ltd.
©BVS Entertainment, Inc. and BVS International N. V. ©1994-2009NBGI ©SOTSU • SUNRISE ©2008 NBGI ©2009 NAMCO BANDAI Games Inc. ©TRYWORKS ©MEGAHOUSE 2006 ©NBGI/D3
PUBLISHER Othello is a trademark of megahouse ©SOTSU • SUNRISE ©2009 “Dear Doctor”Production Committee Original works ©1976 Osamu Akimoto Animation series and products derived there of©1996-2006 ADK ©Tsuburaya Production ©SOTSU • SUNRISE ©T. YANASE/FROEBELKAN • TMS • NTV

71 NAMCO BANDAI Holdings Inc. Annual Report 2009

Dreams,Fun and
Inspiration

Our Vision70

Our Mission Statement

NAMCO BANDAI Holdings Inc.
Annual Report 2009

Globally RecognizedEntertainmentGroup

NAMCO BANDAI
Holdings Inc.
www.bandainamco.co.jp

Printed in Japan

Annual Report 2009

Aiming to be a
“Globally
RecognizedEntertainment
Group”The BANDAI NAMCO Group develops entertainment-related products and services
in a wide range of fields, including toys, video game software, arcade gamemachines, visual and music products, and amusement facilities. We aim to be a
“Globally Recognized Entertainment Group” by establishing a strong operationalfoundation in the domestic market, while aggressively developing operations inoverseas markets to secure future growth. Moving forward, the BANDAI NAMCO
Group will continue to provide “Dreams, Fun and Inspiration” to people around theworld through entertainment based on creativity and boundless enthusiasm.