NAMCO BANDAI
Holdings Inc.
Consolidated Results for the Interim period of
the Fiscal Year ending March 2006
(April 1, 2005 to September 30, 2005)

Financial Summary

November 22, 2005

- This document has been prepared as a guide to non-Japanese investors and contains forward-looking statementsthat are based on management’s estimates, assumptions and projections at the time of publication. A number offactors could cause actual results to differ materially from expectations. This document is a translation of theJapanese language original.
- This English translation does not include the non-consolidated financial statements of NAMCO BANDAI Holdings
Inc., and consolidated financial statements of Bandai Co., Ltd. and NAMCO LIMITED.

1

NAMCO BANDAI Holdings Inc.
Stock Listing: Tokyo Stock Exchange
Code Number: 7832
Registered Business Location: Tokyo(URL: http://www.bandainamco.co.jp)
November 22, 2005

Consolidated Earnings Report for the Interim Period of Fiscal Year2006 Ended September 30, 2005
Representative: Takeo Takasu, President and Representative Director
Contact:
Keiji Tanaka, Director
Telephone: +81 (03) 5783-5500
Date of the Meeting of the Board of Directors: November 22, 2005
U.S. GAAP Applied: No

1. Consolidated Business Results for the Interim Period of Fiscal Year 2006 Ended
September 30, 2005 (April 1, 2005 ~ September 30, 2005)(1)Consolidated Business Results
Net salesInterim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Operating income

Recurring income¥ million%¥ million%¥ million%

218,873－

17,546－

18,244

－

－

－

－

－

－

－

－

－

－

Net income

Net income per share

Net income per share(diluted)¥ million

%

¥

¥

7,834

－

30.98

30.97

－

－

－

－

－

－

－

Notes:

1.

Equity in earnings (losses) of affiliates:
Interim period ended September 30, 2005(¥25 million)
Interim period ended September 30, 2004—
Fiscal year ended March 31, 2005—
2. Average number of shares outstanding during period (consolidated):
Interim period ended September 30, 2005
252,916,758
Interim period ended September 30, 2004—
Fiscal year ended March 31, 2005—
3. Changes in accounting treatment: None
4. Percentage figures accompanying net sales, operating income, recurring income and net income
represent year-on-year changes.

1(2) Consolidated Financial Position
Total assets

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Stockholders’equity ratio%

Stockholders’equity per share¥ million

Stockholders’equity¥ million

376,280

230,53561.3

918.42

－

－

－

－

－

－

－

－

¥

Note:
Number of shares outstanding at period-end (consolidated):
Interim period ended September 30, 2005 251,014,315
Interim period ended September 30, 2004 —Fiscal year ended March 31, 2005—

(3) Consolidated Statement of Cash Flows
Operatingactivities

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Investingactivities

Financing
activities¥ million¥ million¥ million

Cash and cash
equivalents atperiod-end¥ million

16,338(3,551)(16,327)

120,933

－

－

－

－

－

－

－

－

(4) Scope of Consolidation and Application of Equity Method
Consolidated subsidiaries: 51
Non-consolidated subsidiaries accounted for by the equity method:
Affiliates accounted for by the equity method: 5

1(5) Changes in Scope of Consolidation and Application of Equity Method
Consolidated:
New 2; Excluded 4
Equity method: New 2; Excluded —2. Consolidated Projections for Fiscal Year 2006 (April 1, 2005 ~ March 31, 2006)
Net sales

Recurring income¥ million

Fiscal Year Ending
March 31, 2006
470,000(Reference)
Projected net income per share (full year): ¥94.98

Net income¥ million¥ million

44,10024,400*Figures less than ¥1 million have been omitted

Note:
The above projections are based on information available to the Company at the time of release,and assumptions involving uncertain factors thought likely to have an effect on future results.
Actual results may differ significantly from projections due to a variety of factors. Please referto page 18 of the supplementary materials for more details.
21. The BANDAI NAMCO GroupOn September 29, 2005, Bandai Co., Ltd. and NAMCO LIMITED established a joint holding company,
NAMCO BANDAI Holdings Inc., through a transfer of shares, heralding the start of the new BANDAI
NAMCO Group (the Group).
The Group comprises NAMCO BANDAI Holdings, 73 subsidiaries and 10 affiliates. Operations primarily
encompass the manufacture and sale of toys and plastic models, the core activity of the character
merchandising business; amusement facility operations; coin-operated game machines and other related
products; the production and sale of home videogame software; mobile content; and the production and saleof video-related products. The Group is also engaged in distribution, planning, development and the provisionof other services related to the above areas of business.
The Group’s businesses and the relationships among NAMCO BANDAI Holdings and its subsidiaries andaffiliates with business segments are outlined below. Business classifications correspond directly to theclassifications for business segment information.
Business Segment

Business Outline

RegionMajor Companies

Bandai Co., Ltd., Megahouse Corp., Popy Co., Ltd.,
Seika Co., Ltd., Seeds Co., Ltd., Plex Co., Ltd.,
Sunlink Co., Ltd., Tohato Inc., People Co., Ltd.
Domestic
and 3 other companies
Toys & Hobby
Business

Toys, candy toys, products for vending
machines, cards, plastic models, apparel,sundries, stationery and other products

BANDAI AMERICA INC., BANDAI S.A.,BANDAI U.K.LTD., BANDAI ESPANA S.A.,BANDAI (H.K.) CO.LTD.,
Overseas BANDAI INDUSTRIAL CO.,LTD.,BANDAI KOREA CO.,LTD.,and 6 other companies (includes 1 company*1)

Domestic

Amusement Facility Amusement facility operations, andBusinessother operations

NAMCO CYBERTAINMENT INC.,XS ENTERTAINMENT INC.*1,
NAMCO OPERATIONS EUROPE LTD.,
NAMCO OPERATIONS SPAIN S.L.,
Overseas
NAMCO ENTERPRAISES ASIA LTD.,
SHANGHAI NAMCO LTD.

Domestic

Game Contents
Business

NAMCO LIMITED, Pleasure Cast Co., Ltd.,
Hanayashiki Co., Ltd., St. Tropez Ltd.

Software for home videogames, coinoperated game machines, prizes foramusement machines, and otherproducts
Overseas3

Bandai Co., Ltd., NAMCO LIMTED,
Banpresto Co., Ltd., Banpresto Sales Co., Ltd.,Bec Co., Ltd., Banpresoft Co., Ltd.,
Monolith Software Inc.,
NAMCO TALES STUDIO LTD.
and 1 other company

BANDAI GAMES INC.,
BANPRESTO (H.K.) LTD.,
NAMCO AMERICA INC.,
NAMCO HOMETEK INC.,
NAMCO EUROPE LTD.,and 2 other companies.*1

Business Segment

Network BusinessBusiness Outline

Mobile content and other products

RegionDomestic

Major Companies
Bandai Networks Co., Ltd., VIBE Inc.
and 2 other companies

Bandai Visual Co., Ltd., Sunrise Inc.,
Bandai Channel Co., Ltd.
Domestic and 4 other companies
Visual & Music
Content Business

Animation works, visual software, ondemand video distribution and otherproducts and services
Overseas

Affiliated BusinessTransportation and warehousing ofproducts, leasing, real estate
management, printing, licensing,restaurant management, welfare andnursing care facilities, development andsale of environmental equipment andother activities

BANDAI ENTERTAINMENT INC.,
and 3 other companies

Bandai Logipal Inc., Banalex Corp., Artpresto Co., Ltd.,Happinet Corp., Sotsu Agency Co., Ltd.,NAMCO ECOLOTECH LTD.,
NAMCO SUPPORTERS LTD.,
NAMCO TRADING LTD.,
Domestic
Yunokawa Kanko Hotel Co., Ltd.,
Italian Tomato Ltd.
and 4 other companies

3 companies (includes 1 company*1)
Overseas*1 Not operational as of September 30, 2005

4

Chart of business system is as follows:

END USERJAPANOVERSEAS

Plan
and
Work

Megahouse
Corporation
Popy Co.,Ltd.

Sseds Co.,Ltd.

Seika Co.,Ltd.
Tohato Inc.*
People Co.,Ltd.*

Production

BANDAI AMERICA INC.
BANDAI S.A.
BANDAI U.K. LTD.
BANDAI ESPANA S.A.
BANDAI KOREA CO.,LTD.

Bandai Co.,Ltd.

Plex
Co.,Ltd.

Sunlink Co.,Ltd.

Toys & Hobby Business

Product sale

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

Product sale

SHANGHAI NAMCO LTD.*

NAMCO LIMITED

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

St.Tropez Ltd.

Amusement Facility BusinessPart Sale

Product sale

NAMCO ENTERPRISESASIA LTD.

Product sale

BANDAI GAMES INC.

Plan and Work
Product sale
NAMCO TALES STUDIO LTD.
Monolith Software Inc.
Product development

NAMCO LIMITED

Bandai Co.,Ltd.

Bec Co.,Ltd.

Plan
and
Work

Product sale

NAMCO CYBERTAINMENT INC.
XS ENTERTAINMENT INC.**

Product sale

Banpresoft
Co.,Ltd.

Banpresto Co.,Ltd.

Banpresto Sales
Co.,Ltd.

Game Contents Business

Product
sale

NAMCO OPERATIONSEUROPE LTD.
NAMCO OPERATIONSSPAIN S.L.

Production、Selling license
Distribution license 、Product sale

NAMCO EUROPE LTD.
NAMCO AMERICA INC.

Selling license
NAMCO HOMETEK INC.
BANPRESTO(H.K.) LTD.

Production
NetworkBusiness

Bandai Networks Co.,Ltd.

Production,Sale andCommercialization
license,
Production and Sale
Distribution license license,
Distribution license

ＶＩＢＥ Inc.

Plan and Work

Sunrise Inc.

Visual & Music
Content Business

Bandai Visual Co.,Ltd.
Bandai Channel Co.,Ltd.

Production andSale license
BANDAI ENTERTAINMENT INC.
Plan and Work

NAMCO LIMITED

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

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

Yunokawa Kanko
Hotel Co.,Ltd.

Affilated BusinessOpening a shop toamusement facilities,
Product sale

Production andSale license、Distribution license

NAMCO TRADING LTD.
NAMCO HOLDING CORP.

NAMCO BANDAI Holdings Inc.
*Equity method application company**Not operational as of September 30,2005

5

2. Management Policies
1. Fundamental Management Policy
On September 29, 2005, Bandai Co., Ltd. (Bandai) and NAMCO LIMITED (NAMCO) established ajoint holding company, NAMCO BANDAI Holdings Inc.(the Company), through a transfer of shares,
heralding the start of the new BANDAI NAMCO Group (the Group). With this move, Bandai and
NAMCO are aiming to boost their corporate value in a fast-changing, increasingly competitiveentertainment industry by building even greater strength and depth into their operations.
Guided by its vision of becoming the world’s most inspiring entertainment group, the BANDAI
NAMCO Group’s mission is to offer Dreams, Fun and Inspiration through entertainment to people
around the world.
The BANDAI NAMCO Group can use content born from a variety of products and services, orprovided by partner companies, in a wide range of business fields. Acting as an “entertainment hub,”the BANDAI NAMCO Group is aiming to deliver further growth by effectively utilizing internal
resources and enhancing cooperation with external partners.

2. Fundamental Policy on Profit Sharing
The Company positions the return of profits to stockholders as one of its highest management
priorities. The fundamental policy is to maintain a stable dividend and increase corporate value while
becoming an even more competitive Group, and preserving a sound financial position. In concreteterms, the Company plans to maintain the consolidated dividend payout ratio at a level of 30%, basedon stable annual dividend payments of ¥24 per share.
The Company plans to use retained earnings to actively invest in areas that will boost corporate value
going forward, including the development of new business fields, M&As and joint business ventures.

3. Policy on Reducing the Investment Unit
The Company recognizes that widening the stockholder base and promoting share liquidity areimportant aspects of its capital policy. The Company will therefore examine the possibility of
reducing its investment unit while taking into account future market trends and operating results.

4. Targets and Management Performance Indicators
The Group has adopted return on assets (ROA) and return on equity (ROE) as medium-term
management performance indicators. The Group’s aim is to create a robust and stable managementbase over the medium term by ensuring all assets are always utilized to maximum efficiency and byaiming to effectively use stockholders’ equity.
Aiming to enhance management efficiency in parallel with business expansion, the Group is aiming toachieve ROA of 11.0% and ROE of 10.0% on a consolidated basis for the year ending March 31,
2006.

5. Medium- to Long-term Management Strategy
The BANDAI NAMCO Group has divided its operations into the five strategic business units listed
below and an Affiliated Business Group that perform cross functional duties, to maximize the benefitsof management integration between Bandai and NAMCO.
•
•
•
•
•

Toys & Hobby Strategic Business Unit
Amusement Facility Strategic Business Unit
Game Contents Strategic Business Unit
Network Strategic Business Unit
Visual and Music Content Strategic Business Unit
6

Each strategic business unit will work to deliver growth as the autonomous and principal actor informulating and implementing business strategy. Based on this approach, they will develop andstrengthen their existing business portfolios and aim to create new businesses. The Group plans toestablish and develop new strategic business units as new businesses are created.
Also, by fusing and complementing the respective strengths of its founding partners—thecharacter-based products and merchandising expertise of Bandai, and the game content development
capabilities and extensive amusement facility network of NAMCO— the BANDAI NAMCO Groupwill pursue synergy effects while boosting profitability by enhancing efficiency in operating andback-office divisions..
The Group is currently formulating a three-year medium-term management plan to commence inApril 2006. Details will be announced when they become available.

6. Issues to be Addressed
The Group and its industry are currently faced with a range of important long-term issues, including
diversifying consumer needs and changes in the market and economic landscapes. The Group plans to
respond to these issues through actions centered on its strategic business units.
(1) Common issues faced by all strategic business units
Overseas business expansion
The Group’s strategic business units are driving efforts to create an optimal business model geared
to overseas expansion, as well as reinforcing cooperation between operating regions. The BANDAI
NAMCO Group is also realigning internal organizations related to the U.S., a strategic market for
the Group, culminating in the planned establishment of a holding company in January 2006 to run
operations in the country. As a result, the creation of a number of strategic business units, as inJapan, will reinforce the management of the Group’s business portfolio in the U.S. and strengthen
results. The Group will also strive to expand its operations in Europe, Asia and other areas basedon careful examination of respective market environments and regional characteristics.
Responding to environmental issues
As a member of society, the BANDAI NAMCO Group is actively working to respond toenvironmental issues. Centered on the Groupwide Environment Project, headed by one of thedirectors of NAMCO BANDAI Holdings Inc., the BANDAI NAMCO Group is striving to ensurehigh levels of quality control and tackle environmental issues such as excessive product packaging
and environmental hormones.
(2) Issues specific to each business unit
Toys & Hobby Strategic Business Unit
This business unit is faced with an array of issues, including the falling birthrate in Japan,
diversifying consumer needs and changes in the retailing environment. In response to Japan’s
falling birthrate, the business unit will actively take a range of steps such as diversifying its
operations, expanding the target age group for its products, and pursuing overseas businessexpansion. And responding to diversifying consumer needs and changes in the retailingenvironment, the business unit will develop products and reform its retailing approach by adopting
marketing methods and business practices that differ from those used in the past.
Amusement Facility Strategic Business Unit
The two main issues for this business unit are slowing market growth, and as a result of this,intensifying competition in the industry. In response, the BANDAI NAMCO Group will work toraise profitability by achieving low-cost operations. In parallel, this business unit will use closer
cooperation with other business units to develop unique, high value-added facilities and services
that appeal to a wide range of customer segments. Additionally, active steps will be taken todevelop new earnings streams, boost profitability in overseas markets and develop new businessformats.
7

Game Contents Strategic Business Unit
Issues for this business unit include an anticipated jump in content development costs related to the
expected launch of new game consoles, falling repeat sales of titles due to the rise of the used gamesoftware market, and responding to the spread of online gaming. Against this backdrop, thisbusiness unit will forge stronger links between its coin-operated game machine, home videogame
software and mobile content businesses to share know-how and technical expertise and create amore flexible product development framework. Based on this approach, this business unit will
boost efficiency and develop high value-added content to create a unique position in themarketplace for the BANDAI NAMCO Group. Aggressive steps to expand operations in overseas
markets will also be taken.
Network Strategic Business Unit
One of the main issues for this business unit is how to respond to the rapid generational transitionin mobile phone handsets. The BANDAI NAMCO Group plans to enhance its content download
services—a key source of earnings—to maintain and boost registered subscribers of these services.
This business unit will also strengthen its ability to plan and develop highly competitive content byenhancing its product development and technical capabilities and effectively using content derived
from products and services across the Group.
Visual and Music Content Strategic Business Unit
The key issue in this business unit is how to respond to changes in markets and business models
brought about by the emergence of next-generation media and other factors. Responding to rapid
shifts in the marketplace, the BANDAI NAMCO Group is carrying out research intonext-generation media formats to allow it to respond flexibly to any developments in the future. In
response to new customer needs, this business unit will acquire expertise in visual content
distribution to supplement its existing packaged content business, as well as secure and reinforce
the management of rights to highly competitive content compatible with a range of media.
The Game Contents, Network and Visual and Music Content strategic business units plan to work
more closely to respond to changing customer needs arising from innovative new technologies

7. Fundamental Policy and Measures Regarding Corporate Governance(1) Fundamental Policy
The BANDAI NAMCO Group is aiming to become the world’s most inspiring entertainment
group by consistently providing Dreams, Fun and Inspiration to people around the world throughentertainment based on creativity and boundless enthusiasm. Consequently, the Group believes thatstrengthening its corporate governance system is an important management issue from thestandpoint of providing benefits for all stakeholders who support its corporate activities, and forcontinuously maximizing stockholder value over the long term.

8(2) Measures
1. Management framework and other systems related to decision-making, executive actions
and oversight(i) NAMCO BANDAI Holdings Inc.
The Board of Directors of NAMCO BANDAI Holdings Inc. comprises ten members, including
two outside directors, who work to strengthen management oversight functions. In order to
respond rapidly to changes in the operating environment, the term of office for directors has
been set at one year to clarify responsibilities and raise awareness of their respective roles. The
BANDAI NAMCO Group has also established a Personnel & Remuneration Committee toprovide objective and neutral advice on matters of particular interest such as personnel andremuneration issues related to directors. Outside directors comprise half of the members of thiscommittee.
NAMCO BANDAI Holdings Inc. has adopted the corporate auditor system. The Board of
Corporate Auditors has four members (including two full-time auditors), two of whom fulfill theconditions of outside corporate auditors. Based on the allocation of duties determined by the
Board of Corporate Auditors, the corporate auditors monitor the operations of the Company
while working with the independent auditors as needed.
In addition to the corporate auditors and the Internal Audit Office, which are respectively
responsible for strictly monitoring the management of the Company and performing operational
audits, the Company also employs an independent auditing firm to carry out audits. The
corporate auditors work closely with the independent auditing firm and other personnel tomonitor internal control systems on a daily basis and then identify, point out and suggest
improvements to any issues that arise.
NAMCO BANDAI Holdings Inc.’s corporate governance framework is shown in the schematic
below:(As of September 30, 2005)

General Meeting of Shareholders
Appointment/Dismissal

Appointment/Dismissal

Appointment/Dismissal

Board of Directors

Audit

10 members(Including 2 outside directors)

Appointment/
Dismissal
Oversight

Board of Corporate Auditors
4 members(Including 2 outside corporate
auditors)

Reporting ofaudit results

Independent Auditor

Personnel &Remuneration
Committee

Audit

Representative
Directors

代表取締役
Direction

Reporting
Reporting

Coordination

Committees

Internal Audit Office
CSR Committee
Management Strategy
Committee
経営戦略 委員会

Projects
Audit

Audit

Group Business Report
Meeting指示

Policy direction

BANDAI NAMCO Group companies

9

ReportingDirectors and corporate auditors attend the following key meetings:(As of September 30, 2005)

Name

Schedule

Purpose/Description

Board of Directors

Monthly

Management Strategy
Committee

Monthly

Group Business Report
MeetingMonthly

Waigaya Meeting

WeeklyResolution and reporting on
matters stipulated by theCommercial Code, as well as
resolution, discussion andreporting on matters related tothe management of the BANDAI
NAMCO Group.
Discussion of the BANDAI
NAMCO Group management
strategies as well as measures forbusiness creation and expansion.
Reports on the state of the
BANDAI NAMCO Group’s
operations and discussion ofissues and problems related to
the Group’s business activities.
Weekly reports by each directorof NAMCO BANDAI Holdingson their respective businessdivisions and other matters.

Participants
Directors: 10
Corporate auditors: 4

Directors, excluding outside
directors: 8
Other attendees depending on theagenda under discussion
Directors, excluding outside
directors: 8
Corporate auditors, excluding
outside corporate auditors: 2
Directors of Group companies
Full-time directors: 6
General managers: 4

In terms of compliance, the Bandai Group and NAMCO Group have integrated their respective
compliance committees in order to create a framework capable of centrally managing important
issues related to compliance. Based on the Bandai Compliance Program and the NAMCO Codeof Corporate Behavior, Bandai and NAMCO have established Compliance Committees tomonitor and supervise importance compliance issues.
The Bandai Group and NAMCO Group have taken separate approaches to crisis management
until now. Going forward, as the combined BANDAI NAMCO Group, both companies willfurther reinforce their crisis management systems to forestall or respond rapidly to crises.
KPMG AZSA & Co. has been selected to carry out audits as the Company’s independent
auditor.
The following CPAs are responsible for performing independent audits:
Designated partner/engagement partner: Seiichi Sasa
Designated partner/engagement partner: Shuji Otsu
Designated partner/engagement partner: Toshihiro Otsuka
The above individuals are supported by a team mainly comprising other CPAs and assistant
CPAs, including systems specialists and other experts.
(ii) Bandai Co., Ltd.
Bandai has adopted the corporate auditor system. The Board of Corporate Auditors has threemembers, including two full-time auditors, all of whom are outside auditors. The auditors work
to improve transparency and ensure objectivity.
Bandai’s Board of Directors comprises eight members, including one outside director. All
directors work to reinforce management oversight functions. In order to respond rapidly tochanges in the operating environment, the term of office for directors has been set at one year toclarify responsibilities and raise awareness of their respective roles. Bandai has also adopted an
executive officer system to further clarify roles and responsibilities, thereby speeding up thedecision-making process.
Bandai’s Internal Audit Office, which reports directly to the president, is an independent internal
body responsible for performing operational audits of each business division.
10

In addition to the corporate auditors and the Internal Audit Office, which are respectively
responsible for strictly monitoring the management of the company and performing operational
audits, Bandai also employs an independent auditing firm to carry out audits. The corporate
auditors work closely with the independent auditing firm and other personnel to monitor internal
control systems on a daily basis and then identify, point out and suggest improvements to any
issues arising.
Bandai’s corporate governance framework is shown in the schematic below:(As of September 30, 2005)

General Meeting of Shareholders

Appointment/Dismissal

Appointment/Dismissal

Appointment/Dismissal

Board of Directors

Board of Corporate Auditors

Audit

3 members(Including 3 outside corporate
auditors)

8 members(Including 1 outside directors)

Reporting ofaudit results

Independent Auditor

Audit

Representative
Directors

代表取締役
Direction

ReportingCommittees

Reporting
Coordination

Compliance Committee

Internal Audit Office
Audit

Strategy 21 Committee

Crisis Management
Committees
Other

経営戦略
委員会
Business
ReportMeeting

Audit
Policy direction

Waiwai 指示
Meeting

ReportingGroup companies

Directors and corporate auditors attend the following key meetings:(As of September 30, 2005)

Name

Schedule

Board of Directors

Monthly

Strategy 21 Committee

Monthly

Waiwai Meeting

WeeklyBusiness Report Meeting

Monthly

Purpose/Description
Resolution and reporting on
matters stipulated by theCommercial Code, as well as
resolution, discussion andreporting on matters related tothe management of Bandai.
Discussion of Bandai
management strategies as well as
measures for business creationand expansion.
Weekly reports by Bandai’s
directors on their respective
business divisions and othermatters.
Reports on the state of Bandai’s
operations and discussion ofissues and problems related tothe company’s businessactivities.

11

Participants
Directors: 8
Corporate auditors: 3

Full-time directors: 7

Full-time directors: 7

Full-time directors: 7
Full-time corporate auditors: 2
Executive officers and generalmanagers

(iii) NAMCO LIMITEDThe NAMCO Board of Directors comprises six members and meets monthly. In addition to
making decisions on management issues, the Board of Directors also works to ensure thatbusiness operations are carried out in an appropriate manner based on timely reports from
representative directors and executive officers under them responsible for executive actions.
Meetings of the Executive Committee are also held on a regular basis with the aim of realizing
close communication between directors and executive officers to ensure business operations are
effectively implemented. These meetings are used to communicate decisions made by the Boardof Directors, raise a range of issues such as the respective operating results of each in-housecompany.
NAMCO has adopted the corporate auditor system. The Board of Corporate Auditors has threemembers (including one full-time auditor), all of whom fulfill the conditions of outside
corporate auditors. Based on the allocation of duties determined by the Board of Corporate
Auditors, the corporate auditors monitor the operations of the Company while working with theindependent auditors as needed.
In addition to the corporate auditors and the Internal Audit Office, which are respectively
responsible for strictly monitoring the management of the company and performing operational
audits, NAMCO also employs an independent auditing firm to carry out audits. The corporate
auditors work closely with the independent auditing firm and other personnel to monitor internal
control systems on a daily basis and then identify, point out and suggest improvements to any
issues arising.
NAMCO’s corporate governance framework is shown in the schematic below:(As of September 30, 2005)

General Meeting of Shareholders

Appointment/Dismissal

Board of Directors
6 members

Appointment/Dismissal

Appointment/Dismissal

Board of Corporate Auditors

Audit

Appointment/
Dismissal
Oversight

3 members(All outside auditors)

Reporting ofaudit results

Independent Auditor

Audit

Representative
Directors

代表取締役
Direction

ReportingCommittees

Reporting
Coordination

Direction

Compliance Committee

Internal Audit Office
Audit

Executive Committee
Executive
Officers
経営戦略委員会

PL Committee
Health & Safety
Committee

Audit

Other

指示

Policy Direction

Business Departments (Group Companies)

12

ReportingDirectors and corporate auditors attend the following key meetings:(As of September 30, 2005)

Name

Schedule

Board of Directors

Monthly

Executive Committee

Monthly

Purpose/Description
Resolution and reporting on
matters stipulated by theCommercial Code, as well as
resolution, discussion andreporting on matters related tothe management of NAMCO.
Discussion of NAMCO
management strategies as well as
measures for business creationand expansion.

Participants
Directors: 6
Corporate auditors: 3

Directors: 6
Full-time corporate auditors: 1
Executive Officers

2. Overview of personal, capital, business and other conflicts of interest between the
Company and its outside directors and auditors(i) NAMCO BANDAI Holdings Inc.
NAMCO BANDAI Holdings Inc. has two outside directors: Masatake Yone, a lawyer, andKazuo Ichijo, a graduate school professor at Hitotsubashi University. Neither have any particularconflicts of interest with the Company. Kazuo Ichijo has a contract with Bandai as an advisor inmanagement training services. There are also no particular conflicts of interest between the
Company and its outside auditors, allowing them to monitor the executive actions of the Boardof Directors from an objective standpoint. Osamu Sudo is concurrently an outside auditor forboth NAMCO BANDAI Holdings Inc. and NAMCO.
(ii) Bandai Co., Ltd.
Bandai has one outside director and three outside auditors. None of these individuals have any
particular conflicts of interest with the company.
(iii) NAMCO LIMITEDNAMCO has not appointed any outside directors. None of NAMCO’s three outside auditors
have any particular conflicts of interest with the company.
3. Actions taken to enhance corporate governance in the most recent fiscal period (Apr. ~Sep. 2005) and current status
NAMCO BANDAI Holdings Inc.
Number of meetings held
Board of Directors: 3
Bandai Co., Ltd.
Number of meetings held
Board of Directors: 16 (including 9 extraordinary meetings)
Strategy 21 Committee: 6
Waiwai Meeting: 24
Group Business Report Meeting*: 5Business Report Meeting: 6* Group Business Report Meetings have been held under the auspices of Bandai’s parent
company, NAMCO BANDAI Holdings Inc., since October 2005.
NAMCO LIMITED
Number of meetings held
Board of Directors: 14 (including 8 extraordinary meetings)
Executive Committee: 613

3. Results of Operations and Financial Position
I. Results of Operations
1. Summary of the First Half of Fiscal Year 2006 (April 1, 2005 to September 30,
2005)
Overview of Operating Results
In the first half of fiscal 2006, Japan’s economy saw strong corporate earnings, a slight
improvement in business sentiment, and a sustained increase in capital investment. Despite theimpact of rising crude oil prices and other factors, steady growth in personal income supported
robust consumer spending on the whole.
In the entertainment industry, global competition has come to the fore, driven by the uptake andgrowth of networking infrastructure in step with technological innovation. In Japan, amid a fallingbirthrate and diversifying forms of hobbies and entertainment, entertainment companies must
attract new customers by creating and providing appealing products and services, as well as
conducting active R&D programs. These efforts are becoming increasingly crucial to delivering
steady and sustained earnings.
In this environment, Bandai Co., Ltd. and NAMCO LIMITED determined that management
integration would be the best way for the two companies to concentrate their resources in strategic
domains under a common philosophy and strategy. This integration would also boost theircorporate value by building even greater strength and depth into their operations, while ensuring
success in the fast-changing, increasingly competitive entertainment industry. Guided by thisthinking, on September 29, 2005, Bandai and NAMCO established NAMCO BANDAI Holdings
Inc. as a joint holding company.
In terms of business performance, products that contributed to results during the first half of fiscal
2006 included the Tamagotchi Plus series, which is proving popular worldwide; the Mobile Suit
Gundam series, which is generating groupwide synergies; and coin-operated game machines suchas The Idol Master and Medal No Tatsujin Doki!
Due to the above items, consolidated net sales were ¥218,873 million, recurring income was¥18,244 million and first-half net income was ¥7,834 million.
An overview of each business is presented as follows.
Results by Business Segment(¥ million)
First Half of Fiscal 2006 (April 1, 2005 to September 30, 2005)
Net Sales

Operating Income (Loss)

Toys & Hobby

82,539

8,397

Amusement Facility

41,0522,300

Game Contents

63,733

7,448

Network

5,950

857

Visual & Music

23,053

3,095

Affiliated

11,220(59)

Toys & Hobby BusinessIn the Toys & Hobby Business, in Japan, girls’ toys and children’s apparel based on the animation
series Pretty Cure Max Heart, and the Tamagotchi Plus series continued to achieve strong sales,
following on from the previous year. In addition, DATA CARDDASS, a new game category thatfuses digital data with card games, made a strong start. Meanwhile, popular items for boys included
toys based on Maji Ranger (Power Rangers), and children’s apparel and sundries based on
14

MUSHIKING (The King of Beetles).
Overseas, in the U.S., measures to concentrate the launch of mainstay products in the second half ofthe fiscal year, which includes the Christmas shopping season, has underpinned a robust
performance. These measures come as part of efforts to concentrate resources on carefully selectedcharacters and businesses in the U.S. Meanwhile, in Europe and Asia, sales centered on POWER
RANGERS and the Tamagotchi series went well.
Due to the above items, the Toys & Hobby Business posted net sales of ¥82,539 million andoperating income of ¥8,397 million.
Amusement Facility Business
In Japan, this business focused on capturing new customers mainly through the launch of The Idol
Master, a proprietary coin-operated game machine. Two new large-scale amusement facilities thatwere opened in the previous fiscal year and Asakusa Hanayashiki, an amusement park transferredto the Group on August 30, 2004, also contributed to results. However, deteriorating market
conditions, including the waning popularity of prize machines, reduced first-half sales at existing
directly managed locations by 4.5% year on year.
In the U.S., the Amusement Facility Business continued to take steps to expand its network offacilities operated under revenue-sharing arrangements, close unprofitable sites, and reduce costs.
As a result, sales at existing directly managed locations in the interim period bottomed out, falling
only 2.3% year on year. However, overall performance was lackluster, due to the impact ofdeteriorating market conditions, impacted by the landfall of successive hurricanes and high gasoline
prices. In Europe, operations were generally favorable, centered on business in the U.K., despitesome impact from terrorist incidents. In Asia, the operating environment remained difficult due tothe lack of progress on deregulation in China, but prize games performed well. As of September 30,
2005, the total number of amusement facilities was 1,688 locations, including 479 directly managedsites, 1,205 sites operated under revenue-sharing arrangements, and 4 theme parks.
Due to the above items, the Amusement Facility Business posted net sales of ¥41,052 million andoperating income of ¥2,300 million
Game Contents BusinessIn the Game Contents Business, home videogame software sales in Japan were supported by thelaunch of Tales of Legendia for the PlayStation2 (PS2), in addition to strong sales of Super Robot
Warsα and Dragon Ball Z Sparking!!. In the U.S., Ridge Racer for the PlayStation Portable (PSP)performed well. In Europe, strong performers included Tekken 5 for the PS2 and the Dragon Ball Z
series. In Asia, the Group launched Tekken 5 for the PS2 and other titles.
The Bandai Group will apply accounting standards for content to videogame software production
undertaken since the first fiscal half. Previously, accounting standards for software were applied. As
a result of this change, R&D expenses decreased during the first fiscal half.
In sales of coin-operated game machines in Japan, strong sales were recorded by titles such as The
Idol Master, a game that has attracted significant attention because its content promises diverse
applications. Overseas, strong performers included Wangan Midnight MAXIMUM TUNE 2 in the
U.S. and The Fast and The Furious (RAW THRILLS INC.) in Europe. However, first-half sales
were not sufficient to offset the impact of the postponed launch of certain products.
In the pachinko and pachislot LCD business, LCD display units for the Matsuri No Tatsujin
pachislot machine were sold to YAMASA CO., LTD., but overall sales declined compared to thesame period a year earlier.
NAMCO runs a content distribution business for users of mobile phones and other portable devices.
In Japan, this business saw Taiko No Tatsujin and other mobile phone sites perform well. As of
September 30, 2005, the number of subscribers had reached 1,025,300, topping the one million
mark for the first time. Overseas, there was an increase in the number of carriers offering NAMCO
15

mobile phone sites in the U.S. However, in Europe, this business struggled due to delays inlaunching new services and other factors.
Due to the above items, the Game Contents Business recorded net sales of ¥63,773 million andoperating income of ¥7,448 million.
Network BusinessIn the Network Business, which is conducted by Bandai Networks Co., Ltd., good results weredelivered with the launch of a variety of game content tailored to content distribution services
targeting mobile phone users. This included GNO Mobile, a service linked to Gundam Network
Operation 2, an online game for PC users. Furthermore, the provision of new technologies formobile phones, such as 3D Engine, which generates 3D character images, solutions for companies,
and web content contributed to results.
As a result of the foregoing, the Network Business reported net sales of ¥5,950 million andoperating income of ¥857 million.
Visual and Music Content BusinessIn the Visual and Music Content Business, the Group benefited from strong groupwide synergies
generated through initiatives such as the airing of Mobile Suit Gundam SEED DESTINY, ananimated TV series, since the previous fiscal year. Meanwhile, strong sales of DVD releases oforiginal animated programs, such as Super Robot Wars ORIGINAL GENERATION THE
ANIMATION and Steamboy, an animated film, contributed to results. The active launch of rental
DVDs and videos also helped to boost results.
Nikkatsu Corporation is no longer a subsidiary following the transfer of part of the Group’s
shareholding in Nikkatsu to Index Corporation on September 28, 2005, in accordance with a sharetransfer agreement with Index.
Due to the above items, the Visual and Music Content Business recorded net sales of ¥23,053
million and operating income of ¥3,095 million.
Affiliated BusinessIn this business, the logistics business performed well by boosting further efficiency. The
Incubation Center expanded its human services business with the opening of its second Kaikaya
day-care center in April 2005. The center is located in the Kaikaya Ayase Town Hills Shopping
Center, Ayase City, Kanagawa Prefecture. The business also expanded its lineup of human service
equipment with the launch of Talkingaid Light, a lightweight and compact version of the Talkingaid
portable communication support device for the disabled and elderly.
As a result of the foregoing, the Affiliated Business posted net sales of ¥11,220 million, and an
operating loss of ¥59 million.

Geographic Segment Information(¥ million)
First Half of Fiscal Year 2006 (April 1, 2005 to September 30, 2005)
Net Sales

Operating Income (Loss)Japan

184,728

22,377

Americas20,629(3,226)

Europe12,659

1,791

Asia

13,8291,202

16

JapanIn Japan, strong-selling products included girls’ toys and children’s apparel based on the animation
series Pretty Cure Max Heart; the Tamagotchi Plus series; Super Robot Warsα and Dragon Ball Z
Sparking! for the PS2; and coin-operated game machine The Idol Master. As for the Amusement
Facility Business, due to lackluster market conditions, such as the waning popularity of prize
machines, sales at existing directly managed stores fell 4.5% year on year.
In content distribution services for users of mobile phones and other portable devices, Taiko No
Tatsujin and other mobile phone sites performed well. The provision of new technologies formobile phones, such as 3D Engine, which generates 3D character images, and other actions also
contributed to results. Meanwhile, the Group benefited from strong groupwide synergies generated
through initiatives such as the airing of Mobile Suit Gundam SEED DESTINY, an animated TV
series, since the previous fiscal year. In addition, strong sales of video releases of original animatedprograms, such as Super Robot Wars ORIGINAL GENERATION THE ANIMATION also
contributed to results.
Due to the above items, net sales in Japan were ¥184,728 million and operating income was¥22,377 million.

Americas
In the Americas (U.S. and Canada), strong-selling products included the Tamagotchi series, Ridge
Racer for the PSP, and coin-operated game machine Wangan Midnight MAXIMUM TUNE 2.
However, measures to concentrate the launch of mainstay products in the second half of the fiscal
year, which includes the Christmas shopping season, has underpinned a sluggish performance.
These measures come as part of efforts to concentrate resources on carefully selected characters andbusinesses in this region. In the Amusement Facility Business, sales at existing directly managedlocations bottomed out, decreasing only 2.3% year on year. However, overall performance waslackluster, due to the impact of deteriorating market conditions, including the landfall of successive
hurricanes and high gasoline prices.
Consequently, in this region, the BANDAI NAMCO Group posted net sales of ¥20,629 million andan operating loss of ¥3,226 million.
EuropeIn Europe, strong-selling products included toys centered on the POWER RANGERS andTamagotchi series; Tekken 5 for the PS2; the Dragon Ball Z series for the PS2; and coin-operated
game machine The Fast and The Furious (RAW THRILLS INC.). Meanwhile, amusement facility
operations were generally favorable, centered on business in the U.K., despite some impact fromterrorist incidents.
As a result of the foregoing, net sales in Europe were ¥12,659 million and operating income was¥1,791 million.
Asia
In Asia, strong-selling products included toys centered on the POWER RANGERS and Tamagotchi
series as well as Tekken 5 for the PS2. Meanwhile, the operating environment for amusement
facility operations remained difficult due to the lack of progress on deregulation in China, but prize
games performed well.
Consequently, net sales in Asia were ¥13,829 million and operating income was ¥1,202 million.

17

2. Full-Year Outlook
Japan’s economic outlook calls for a gradual, sustained recovery supported mainly by improving
corporate earnings and higher capital expenditures, although the revaluation of China’s currency
will have some impact on the economy.
Furthermore, the operating environment surrounding the BANDAI NAMCO Group will be shapedby diversifying customer preferences in the toy market, and dramatic shifts in the game industry inanticipation of the emergence of next-generation game consoles. The outlook for the Group’s
operating environment thus remains shrouded in uncertainty.
In this context, the Group intends to bring an extensive range of products to the domestic market. In
addition to products based on well-established popular characters such as Maji Ranger (POWER
RANGERS; the Tamagotchi Plus series, products for girls based on Pretty Cure Max Heart andCinnamoroll, were developed. The Group also plans to launch the following game titles: Tales of
the Abyss for the PS2; franchise titles such as Soul Calibur III; titles for next-generation game
consoles, including Ridge Racer 6 for Xbox 360; coin-operated game machines such as Mario Kart
Arcade Grand Prix and Tekken 5 DARK RESURRECTION. There are also plans to continue thefirst-half packaged media sales of the Mobile Suit Gundam series.
Overseas, in addition to launching products based on the popular POWER RANGERS andTamagotchi series, the Group intends to take steps to cultivate new characters. The Group will also
release game titles including Soul Calibur III for the PS2 and other franchise titles, as well as
coin-operated game machines such as Mario Kart Arcade Grand Prix.
In light of the foregoing, the BANDAI NAMCO Group has not revised its consolidated andnon-consolidated forecasts for the fiscal year ending March 31, 2006 announced on November 7,2005 and September 29, 2005, respectively.

Forward-looking statements
This document contains forward-looking statements based on information currently available to theCompany and Group, and as such, include inherent risks and uncertainties. Actual results may differ
materially from forecasts for a variety of reasons, including changes in the Company and Group’s
operating environment, market trends and exchange rate fluctuations.

II. Financial Position
1. Cash Flows
Cash and cash equivalents at September 30, 2005 totaled ¥120,933 million, a decrease of ¥3,990
million compared to the beginning of the current fiscal year. Cash flows in the interim period wereas follows:
Cash flows from operating activities
Operating activities provided net cash of ¥16,338 million. This mainly reflected income before
income taxes of ¥19,079 million and decrease in trade receivables of ¥11,546 million, against
acquisition of amusement machines and facilities of ¥5,149 million, and income taxes paid of¥7,704 million.
Cash flows from investing activities
Investing activities used net cash of ¥3,551 million. This was chiefly attributable to cash outflowsof ¥5,628 million for the acquisition of property, plant and equipment and ¥1,807 million for theacquisition of shares in VIBE Inc. and other subsidiaries, despite cash of ¥5,185 million from thesale of shares in Italian Tomato Ltd. and Nikkatsu Corporation.
Cash flows from financing activities
Financing activities used net cash of ¥16,327 million. This primarily reflected ¥10,539 million
from the purchase of treasury stock and dividends paid of ¥4,415 million, as well as therepayment of long-term debt of ¥1,118 million.
18

2. Full-year Cash flow Forecasts
On September 29, 2005, Bandai Co., Ltd. and NAMCO LIMITED established a joint holding
company, NAMCO BANDAI Holdings Inc., through a transfer of shares. At the start of the fiscal
year, Bandai and NAMCO held a combined total of ¥124,923 million in cash and cash equivalents.
Although the Company expects operating cash flow to increase in line with earnings, cash used ininvesting and financing activities is forecast to exceed cash provided by operating activities as aresult of cash used for the acquisition of shares related to management integration and theredemption of corporate bonds.
As a result, total cash and cash equivalents at March 31, 2006 are expected to be less than at thestart of the fiscal year.
3. Cash Flow IndicesFiscal Year 2006
Interim
Stockholders’ equity ratio

61.3%

Stockholders’ equity ratio (market capitalization basis)126.1%

Debt retirement period (years)

1.0Interest coverage ratio

110.8

Notes:(1) Stockholders’ equity ratio = Total stockholders’ equity/Total assets(2) Stockholders’ equity ratio (market capitalization basis) = Market capitalization/Total assets(3) Debt retirement period = Interest-bearing debt/Operating cash flow(4) Interest coverage ratio = Operating cash flow/Interest expenses(Reference)
1. All figures are calculated using data from the consolidated financial statements.
2. Market capitalization is calculated by multiplying the share price at the end of the interim periodby the number of shares outstanding (net of treasury stock) at the end of the interim period.
3. Operating cash flow is the figure shown in the consolidated statements of cash flows.
Interest-bearing debt is the sum of all debt upon which interest must be paid as shown in the
consolidated balance sheets. Interest expenses are interest payments as shown in the
consolidated statements of cash flows.
4. For calculating the debt retirement period for the interim period, operating cash flow is doubled
to create a full-year figure.

19III. Business Risks
Risk factors related to the Group’s businesses that may significantly affect decisions made by theinvestment community, include, but are not limited to, those listed below. These statements on risk arebased on information available to the Group as of November 22, 2005, the filing date for the NAMCO
BANDAI Holdings Inc.’s earnings report (Kessan Tanshin) for the first half of fiscal year 2006.
Risks associated with the core business model
The BANDAI NAMCO Group’s businesses are centered on products and services based on content,
including various characters. The Group’s operating results may be affected by shifts in the
popularity of specific content or related developments. Therefore, the Group manages a diverse andmultifaceted content portfolio to ensure that it delivers steady earnings. This portfolio comprises abusiness portfolio, in which the Group conducts operations in a diverse array of business domains;a character portfolio, where many different content lines are developed; and a regional portfolio,
where businesses are conducted in various regions worldwide. In each business, the Groupdevelops new content, and conducts marketing activities geared to cultivate and develop thiscontent over the long term.
Risks associated with overseas business expansion
The Group is actively seeking to drive overseas business expansion. However, these efforts expose
the Group to a diverse array of risks, including business risks associated with regional
characteristics, such as local media and distribution systems; risks associated with intellectual
property rights, such as those related to counterfeit products; and risks associated with fluctuations
in exchange rates. From a business standpoint, the Group conducts ample research to minimize
these risks and formulates countermeasures before proceeding with overseas business expansion.
With respect to intellectual property rights, the Group cooperates with local government agencies
and other authorities to identify counterfeit products, promote greater recognition of authentic
products, and achieve other ends. With respect to foreign exchange risk, the Group enters into
foreign exchange forward contracts to mitigate the impact of short-term fluctuations in principal
exchange rates on operating results.
Difficulties in retaining and fostering key personnel
In the fast-changing entertainment industry, it is essential for the Group to retain and foster
personnel who can respond effectively to rapid changes. In addition to developing a remuneration
structure capable of retaining these individuals, the Group has incorporated systems that transfer
authority to them so that they can fully maximize their abilities. Efforts are also being focused on
personnel development in order to foster the next-generation of successful personnel throughtraining seminars and other programs.
Risks associated with the Game Contents BusinessIn the Game Contents Business, changes in the timing of product launches may affect earnings in agiven period because game titles usually generate a substantial proportion of revenues. The Grouptightly controls software development schedules for videogames, while seeking to diversify risks byflexibly developing multiple products with different software characteristics and development
periods.
Risks associated with advances in and new generations of platforms
The Group is exposed to the risk of delays in responding to advances in and new generations ofcontent-provision platforms with respect to its game-, visual-, and network-related content, anddelays in changing its business models in response to these developments. The Group pursues
research into new technologies to develop competitive content in step with the latest advances,while actively working to acquire expertise on new business models. Meanwhile, the Group strives
to create and incubate new content, the source of its competitiveness, and protect intellectual
property rights.

20

Japan’s falling birthrate
Looking ahead, the Group’s operating results may be affected by Japan’s falling birthrate. In
response, the Group is actively taking a range of steps such as expanding the target age group for its
products, diversifying its operations, and pursuing overseas business expansion.
Concentration of production in China
The Group’s Toys & Hobby Business manufactures approximately 90% of its toys in China. In
future, the revaluation of China’s currency may drive up production costs or the Group may beaffected by country risks such as unforeseeable disasters. In response, the Group is working to
reduce production costs and diversify production bases into Southeast Asia and other regions.
Risks associated with rising crude oil prices
With rising crude oil prices, the Group faces the risk of higher production costs due to a surge inraw material prices and higher freight costs. In response, the Group is pursuing cost reductions
mainly by using standardized dyes for character toys sold worldwide and raising the efficiency of
production processes ranging from manufacturing to distribution.
In addition, the Group also faces risks associated with natural disasters and accidents, changes inlaws and regulations, defects in products and services, leakages of customer information, lawsuits
accompanying business activities and other issues. Efforts will be made to reinforce the Group’s
operating base to minimize the impact of these risks on operating results in the event that they are
realized.

21

4. Interim Consolidated Financial Statements(1) Consolidated Balance Sheet
As of September 30, 2005

Note

( (

(Assets)

Share
(%)

Millions of yen)

ⅠCurrent assets:
1. Cash and time deposits※2112,526

2. Trade receivables

61,609

3. Short-term investments

9,893

4. Inventories

32,472

5. Deferred tax assets

4,257

6. Other current assets

18,837

7. Allowance for doubtful receivables(1,346)

Total current assets

238,249

63.3

II Fixed assets
1. Property, plant and equipment※1(1) Buildings and structures

16,169(2) Amusement facilities and machines

22,038(3) Land

23,342(4) Other property, plant and equipment

14,04675,596

2. Intangible assets(1) Consolidation adjustment accounts(2) Other intangible assets

67
8,457

8,525

3. Investments and other assets(1) Investment securities

20,707(2) Guarantee money deposited

25,602(3) Deferred tax assets

3,680(4) Other investments and assets

5,423(5) Allowance for doubtful receivables(1,505)

Total fixed assets

Total assets

53,908138,03036.7

376,280 100.022

As of September 30, 2005

Note

Share
(%)

Millions of yen(Liabilities)
I Current Liabilities
1. Trade payables

40,347

2. Short-term borrowings

3,521

3. Bonds—current portion

11,0004. Accounts payable—other

20,565

5. Accrued income taxes

8,457

6. Other current liabilities

11,810Total current liabilities

95,701 25.4

II Long-term Liabilities
1. Bonds

15,0002. Long-term debt

3,277

3. Deferred tax liabilities, land
revaluation difference849

4. Accrued retirement and severance
benefits

2,015

5. Directors’ and auditors’
retirement and severance benefits867

6. Other long-term liabilities
Total long-term liabilities
Total liabilities

7,765
29,7757.9

125,477 33.3

(Minority Interests)
Minority Interests

20,267

5.4

I Common stock

10,0002.7

II Additional paid-in capital

92,430 24.6

III Retained earnings

157,885 42.0

IV Land revaluation difference(21,246) (5.7)(Stockholders’ Equity)

V Other securities valuationdifference

3,381

VI Translation adjustment(778) (0.2)

0.9

VII Treasury stock(11,136) (3.0)

Total stockholder’s equity

230,535 61.3

Total liabilities, minority interestsand stockholders’ equity

376,280 100.023

(2) Consolidated Statements of Income
Six months ended
September 30, 2005

Note

Share
(%)

Millions of yen

I Net sales

218,873 100.0

II Cost of sales

141,346

64.6

77,52635.4

59,97927.4

17,546

8.0

1,282

0.6

585

0.3

18,244

8.3

3,271

1.5

Gross profit
III Selling, general and administrative
expenses*1

Operating income
IV Non-operating income
1. Interest income

396

2. Dividend income

101

3. Rental income

131

4. Foreign exchange gain

186

5. Operation consignment income

138

6. Other non-operating income

327

V Non-operating expenses
1. Interest expense

147

2. Equity in loss of affiliated companies

25

3. Amortization of goodwill242

4. Other non-operating expenses

170

Recurring income
VI Extraordinary income
1. Gain on sale of property, plant andequipment
2. Gain on sale of investment securities
3. Gain on sale of investments inaffiliated companies
4. Reversal of allowance for doubtfulreceivables
5. Other extraordinary income

*2

182
282
2,602
195
7

24

Six months ended
September 30, 2005

Note

Millions of yen

*3

19

*4

174

*5

1,636

Share
(%)

VII Extraordinary loss
1. Loss on sale of property, plant andequipment
2. Loss on disposal of property, plantand equipment
3. Loss on impairment of property,
plant and equipment
4. Loss on business restructuring
5. Loss on valuation of investment
securities
6. Loss on valuation of investments inaffiliated companies
7. Loss on valuation of guaranteemoney deposited

50
201
17
2

8. Loss on changes in equity interests

15

9. Provision for allowance for doubtfulreceivables

317

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

7,633

Tax adjustments

2,735

Minority interests
Net income

2,436

1.1

19,0798.7

10,369

4.7

875

0.4

7,834

3.6

25

(3) Consolidated Statements of Retained Earnings
Six months ended
September 30, 2005
Note

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

92,033

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

396

III Consolidated additional paid-in
capital at the end of the period

92,430(Retained Earnings)
I Consolidated retained earnings at the
beginning of the period

158,181

II Increase in retained earnings
1. Net income

7,834

2. Increase in retained earnings
resulting from exclusion from thescope of consolidation29

3. Increase in retained earnings
resulting from the new applicationof the equity method

15

4. Reversal of land revaluationdifference

83

7,962

III Decrease in retained earnings
1. Cash dividends

4,415

2. Share transfer payments

3,097

3. Bonuses to directors and corporate
auditors

559

4. Decrease in retained earnings
resulting from exclusion ofsubsidiaries from the scope of
consolidation

186

V Consolidated retained earnings at
the end of the period

8,258

157,88526

(4) Consolidated Statements of Cash FlowsSix months ended
September 30, 2005
Note

Millions of yen

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

19,079Depreciation and amortization

8,743

Loss on impairment of property, plant and1,636

equipment
Amortization of goodwill

83

Increase in allowance for doubtful receivables

679

Increase in accrued retirement and severance

126

benefits
Decrease in directors’ and auditors’ retirement and(129)

severance benefits
Interest and dividend income(498)Interest expense

147

Foreign exchange loss

(31)

Equity in loss of affiliated companies

25

Loss on disposal of property, plant and equipment

174

Loss on sale of property, plant and equipment(162)

Loss on disposal of amusement facilities and575

machines
Gain on sale of investment securities(2,885)

Loss on valuation of investment securities

219

Decrease in trade receivables

11,546

Increase in inventories(1,151)

Investment for amusement facilities and machines(5,149)Decrease in trade payables(1,930)Decrease in accounts payable—other(4,328)Bonuses to directors and corporate auditors

(627)

Other

(2,526)

Subtotal

23,616

Interest and dividends received

574

Interest paid

(147)

Income taxes paid

(7,704)

Net cash provided by operating activities

16,33827

Six months ended
September 30, 2005
Note

Millions of yen

II Cash Flows from Investing Activities
Payments for deposit in time deposits(143)

Proceeds from withdrawal from time deposits

170

Proceeds from sales of short-term investments

499

Purchases of property, plant and equipment(5,628)Proceeds from sales of property, plant and588

equipment
Purchases of intangible assets(1,656)

Purchases of investment securities(1,194)

Sales of investment securities

341

Acquisition of shares in consolidated(26)

subsidiaries, net of cash acquired
Proceeds from sales of shares in consolidated

220

subsidiaries
Purchase of subsidiary shares related to(1,780)changes in scope of consolidation
Proceeds from sale of subsidiary shares related

5,185

to changes in scope of consolidation
Proceeds from decrease in capital at100

non-consolidated subsidiaries
Advances of loans receivable(308)

Collection of loans receivable

293

Guarantee money deposited(463)

Proceeds from collection of guarantee money

627

deposited
Other

(376)

Net cash used in investing activities(3,551)

III Cash Flows from Financing Activities
Net decrease in short-term borrowings(444)

Repayment of long-term debt

(1,118)Proceeds from issuance of shares

396

Proceeds from capital paid by minority

20

interests
Purchases of treasury stock(10,539)

Dividends paid

(4,415)

Dividends paid to minority interests(226)

Net cash used in financing activities(16,327)

IV Effect of exchange rate changes on cash and410

cash equivalents(3,129)V Net decrease in cash and cash equivalents
VI Cash and cash equivalents at beginning of

124,923

periodVII Net decrease in cash and cash equivalents due(860)

to elimination from consolidation
VIII Cash and cash equivalents at end of period※

120,933

28

Important Information Constituting the Basis for Preparation of Interim Consolidated Financial
Statements (April 1, 2005 ~ September 30, 2005)
Six months ended September 30, 2005
1. Information Concerning the Scope (1) Consolidated subsidiaries:
There are 51 consolidated subsidiaries.
of Consolidation
The major consolidated subsidiaries are listed
here:Bandai Co., Ltd.,NAMCO LIMITED,
Banpresto Co., Ltd.,
Bandai Visual Co., Ltd.,
Bandai Networks Co., Ltd.,
Bandai Logipal Inc.,
Sunrise Inc.,
NAMCO HOLDING CORP.,
NAMCO AMERICA INC.,
NAMCO HOMETEK INC.,
NAMCO CYBERTAINMENT INC.,
NAMCO EUROPE LTD.,
NAMCO OPERATIONS EUROPE LTD.,
NAMCO ENTERPRISES ASIA LTD.,BANDAI AMERICA INC.,
BANDAI S.A.,

Two companies were included in the scopeof consolidation from the interim period:
BANDAI GAMES INC, a newly establishedcompany, and VIBE Inc., which became asubsidiary following the purchase of stock.
Three companies were excluded from thescope of consolidation from the interim
period: PalBox Co., Ltd., due to liquidation,and Italian Tomato Ltd. and Nikkatsu
Corporation, which are no longer treated as
consolidated subsidiaries following sales ofstock in these companies
Effective April 1, 2005, Banwave Co., Ltd.
and BanPocket Co., Ltd. merged, with
Banwave, the surviving company. The
company has been renamed Banpresto Sales
Co., Ltd.

(2) Non-consolidated subsidiaries:
Including Sunrise Interactive Co., Ltd., 22 of
the Company’s subsidiaries are excluded fromthe scope of consolidation, because total
assets, net sales, interim net income(corresponding to equity therein) and retained
earnings (corresponding to equity therein) for
each company would not have a material
impact on the interim consolidated financial
statements of the Company.

29

Six months ended September 30, 2005
2. Information Concerning
Application of the Equity
Method(1) Application of equity method:
One non-consolidated subsidiary, SHANGHAINAMCO LTD., is accounted for by the equity
method. Five affiliates are accounted for by theequity method: Happinet Corp., Sotsu Agency
Co., Ltd., Tohato Inc., People Co., Ltd. andItalian Tomato Ltd. People and Italian Tomato
became equity-method affiliates from theinterim period under review.

(2) Non-consolidated subsidiaries and affiliates towhich the equity method is not applied
The equity method was not applied to 21 nonconsolidated subsidiaries and five affiliates,
because these companies would have only aminimal impact on the Company’s interim
consolidated net income and retained earnings,
as their significance is minimal as a whole.

30

Six months ended September 30, 2005
3. Information Concerning theInterim Settlement Date forConsolidated Subsidiaries

Consolidated subsidiaries with an interim
settlement date of September 30:
Bandai Co., Ltd.,NAMCO LIMITED,
Banpresto Co., Ltd.,
Bandai Networks Co., Ltd.,
Banpresoft Co., Ltd.,NAMCO Tales Studio Ltd.,VIBE Inc.
Consolidated subsidiaries with an interim
settlement date of July 31:
Artpresto Co., Ltd.
St. Tropez Ltd.
Consolidated subsidiaries with an interim
settlement date of June 30:
BANDAI AMERICA INC.
BANDAI ENTERTAINMENT INC.
BANDAI GAMES INC.
BANDAI S.A.
BANDAI U.K.LTD.
BANDAI ESPANA S.A.
BANDAI (H.K.) CO., LTD.,BANPRESTO（H.K.）LTD.
BHK TRADING LTD.
BANDAI INDUSTRIAL CO., LTD.
BANDAI KOREA CO., LTD.
Consolidated subsidiaries not listed above have theinterim settlement date of August 31.
All of the above settlement dates fall within threemonths of the consolidated interim settlement date.
Consequently, the interim results of the above
consolidated subsidiaries are reflected in the
consolidated interim financial statements.
However, necessary adjustments are made to theconsolidated financial statements for materialtransactions occurring between the subsidiaryinterim settlement dates and the consolidated
interim settlement date.

31

Six months ended September 30, 2005
4. Information Concerning
Capital Consolidation Related
to the Stock Transfer(1) NAMCO BANDAI Holdings Inc., the parent
company of Bandai Co., Ltd. and NAMCO
LIMITED, was established through a transferof stock.
Management integration through capitalconsolidation is being carried out based on thepooling-of-interests method in accordance with
“Accounting for the Consolidation of a Holding
Company Established by Stock Exchange orStock Transfers” (JICPA Accounting Committee
Research Report No. 6).

(2) Based on comprehensive analysis of theoperations and financial position of each wholly
owned subsidiary, the pooling of interests was
judged to be the appropriate method forcarrying out management integration to allow
each wholly owned subsidiary to continuously
share the risks and benefits of the NAMCO
BANDAI Group

5. Information Concerning
Accounting Policies(1) Valuation basis and methods for significant
assets:(i)Short-term investments:
Bonds to be held to maturity
Stated at amortized cost (straight-line method)
Other securities
Securities with market values:
Stated at market value using, among others,market prices at interim period settlement
dates. (Valuation differences are reflected
directly in stockholders’ equity and the costof securities sold is calculated by themoving-average method).
Securities without market values:
Stated at cost based on the moving-averagemethod. However, with respect toinvestments in limited liability partnerships
for investment businesses and similar
partnerships, the amount corresponding to
the equity holding of the partnership’s assets
is stated as investment in securities, and theamount corresponding to the profit or loss
derived from the operations of thepartnership is stated as profit or loss for the
fiscal year.

32Six months ended September 30, 2005(ii) Derivative trading:Stated using the market price method(iii) Inventories:
Domestic consolidated subsidiaries
Game software and other work in progressStated at cost using the specific cost
methodOther inventories
Generally stated at cost using the movingaverage method
Overseas consolidated subsidiaries
Game software and other work in progressStated at cost using the specific cost
methodOther inventories:
Generally stated at the lower of cost or
market using the first-in, first-out method(2) Depreciation methods for significant
depreciable assets:(i) Property, plant and equipment:
The Company and its domestic consolidated
subsidiaries
Generally the declining-balance method isused.
However, for buildings (excluding equipment
attached thereto) acquired on or after April 1,
1998, and certain amusement facilities andequipment, the straight-line method is used.
The useful life of buildings and structures is
2 to 50 years.
The useful life of amusement facilities andequipment is 3 to 15 years.
Overseas consolidated subsidiaries
The straight-line method is used.
The useful life of buildings and structures is
5 to 50 years.
The useful life of amusement facilities andequipment is 2 to 7 years(ii) Intangible assets:
The straight-line method is used.
The useful life of software used internally is
2 to 5 years.

33

Six months ended September 30, 2005
Goodwill at domestic consolidated
subsidiaries is amortized equally over a
period of five years in accordance with
enforcement regulations of the JapaneseCommercial Code. Goodwill at overseas
consolidated subsidiaries is treated inaccordance with the accounting regulations of
the country of domicile.
(3) Basis of recognition for significant provisions:(i) Allowance for doubtful receivables:
The Company provides for potential losses
due to bad debts using historical credit loss
ratios for ordinary receivables. Projecteduncollectible amounts are also recorded forreceivables clearly at risk and receivablesfrom companies under bankruptcy orreorganization processes, based on individual
consideration of the account's potential forcollection.

(ii) Allowance for retirement and severance
benefits:
The Company provides for retirement andseverance benefits for employees based on
estimated retirement benefit obligations andpension assets as of the consolidated fiscal
year-end. The amount recognized to as having
been accrued at the end of the interim periodend has been recorded.
Actuarial gain/loss is amortized in equalamounts in each fiscal year over a fixed
period (10 to 17 years) from the following
consolidated fiscal year within the averageremaining period of service for affected
employees.
At certain domestic consolidated subsidiaries,
past service obligations are amortized over a
fixed period (10 years) within the averageremaining period of service for affected
employees when incurred.
(iii) Officers’ retirement and severance benefits:
Certain domestic consolidated subsidiaries
record provisions for retirement andseverance benefits payable at the end of theinterim period in accordance with internal
rules.

34

Six months ended September 30, 2005
(4) Accounting policies for translation ofsignificant assets and liabilities into Japanesecurrency
Receivables and payables denominatedin foreign currencies are translated at spot
exchange rates prevailing at the end of eachinterim period, and resulting gains or losses areincluded in income.
Assets and liabilities of overseas subsidiaries
are translated at spot exchange rates prevailingat the end of each interim period, while
revenues and expenses of the same aretranslated at the average rates for the period.
The differences resulting from such translations
are recorded in minority interests and instockholders’ equity under foreign currencytranslation adjustment.
(5) Accounting standards for recording income andexpenses
Videogame software production costs:
The production of videogame software involves
the complex combination of both software andcontent. Consequently, it is difficult to treat
these constituent items as separate components
for accounting purposes.
The Company judges the main component ofvideogame software to be content, which
includes visual image and music data, including
the game itself.
Based on the above, videogame software
production costs are recorded as either
inventories or advance payments effective fromthe point an internal decision is made tocommercialize a product. For software
production costs recorded under assets, cost of
sales is recorded based on estimated sales
volume.

35

Six months ended September 30, 2005
(6) Accounting policies for significant leasetransactions
The Company and its consolidated subsidiaries
account for financing lease transactions, otherthan those in which titles to leased property aretransferred to lessees, by applying accounting
treatment applicable to ordinary leasetransactions.
However, overseas consolidated subsidiaries
follow the accounting standards in the countryof domicile and therefore treat financing leasetransactions in accordance with accounting
treatment applicable to ordinary sale andpurchase transactions.
(7) Significant accounting policies for hedging(i) Accounting for hedging:
The Company uses deferred hedge accounting.
The allocation method is used for forward
exchange contracts when appropriate. The
special method is used for interest rate swaps
when appropriate.
(ii) Hedging instruments and hedged items:
Hedging instruments:
Forward exchange contracts, interest rate
swaps, etc.
Hedged items:
Foreign currency-denominated liabilities
and scheduled transactions, and interest on
debt.
(iii) Hedging policies:
Hedging is implemented for the purpose of
reducing risks arising from fluctuations in
exchange rates and interest rates involved inoperational and financing activities.

36

Six months ended September 30, 2005(iv) Method of assessing the effectiveness ofhedging:
The effectiveness of a hedging transaction is inprinciple determined by comparing the
cumulative change in the cash flows or market
movement of the hedged item and that of thehedging instrument from the start of hedging to
the time of assessing the effectiveness thereof.
However, if important conditions are common
for the hedging instrument and the hedged asset,
liability, or scheduled transaction, no suchdetermination is made because it is apparent that
100% effectiveness in hedging was achieved.
(8) Other important information constituting thebasis of preparation of interim financial
statements(i) Accounting treatment of consumption tax:
Consumption tax is accounted for separately
and is not included in each account.
(ii) Appropriation of earnings for reversal ofreserve for deferred gains on sales of fixed
assets:
The amounts of current and deferred income
taxes for the interim period under review arecalculated assuming the reversal of the reservefor deferred gains on sale of fixed assets set
forth in the proposal for appropriation ofretained earnings for the current fiscal year.
6. Scope of Cash and Cash
Equivalents in Interim
Consolidated Statements ofCash Flows

Cash and cash equivalents include cash on hand,deposits on demand, and short-term, highly
liquid investments with maturities of threemonths or less from the date of acquisition thatare readily convertible to cash and are subject toonly insignificant risk of changes in value.

37

Notes
Notes to Consolidated Balance Sheet
As of September 30, 2005
*1. Accumulated depreciation of tangible assets:¥123,336 million*2. Secured assets and secured loans
The following assets are accompanied bycollateral (security). .
Cash and time deposits: ¥54 million
The above collateral is applicable to overdraft
contracts by subsidiaries. However, at the end of
the interim period, there was no applicable loanbalance.
3. Guarantees for loans
The Company provides guarantees for loans
extended by financial institutions and otherfinancial obligations to companies that are notconsolidated subsidiaries.
Guarantees for lease agreements concluded withtrading partners of overseas subsidiaries: ¥80
million
4. Other occurring loans
Additionally, in the stock purchase and saleagreement concluded with Index Corporation
related to Nikkatsu Corporation stock, NAMCO
LIMTED is obligated to pay Index compensationof up to ¥354 million for damages in the event ofviolations by NAMCO to clauses that it has
declared or guaranteed. (Effective until April 30,
2006)

38

Notes to Consolidated Statements of Income
Six months ended September 30, 2005
(April 1, 2005 ~ September 30, 2005)*1. Major components of selling, general and administrative expenses
Advertising expenses: ¥15,359 million
Officers’ remuneration and employee salaries and benefits: ¥14,051 million
Research and development expenses: ¥9,835 million
Allowance for doubtful receivables: ¥689 million
Provision for employee retirement and severance benefits: ¥571 million
Provision for officers’ retirement and severance benefits: ¥111 million*2. Breakdown of gains on sales of property, plant and equipment
Buildings and structures: ¥99 million
Machinery, equipment and vehicles: ¥2 million
Tools, furniture and fixtures: ¥6 million
Land: ¥74 million*3. Breakdown of losses on sales of property, plant and equipment
Tools, furniture and fixtures: ¥4 million
Land: ¥14 million*4. Breakdown of losses on disposal of property, plant and equipment
Buildings and structures: ¥72 million
Machinery, equipment and vehicles: ¥5 million
Tools, furniture and fixtures: ¥83 million
Construction in progress: ¥5 million
Software: ¥7 million*5. Loss on impairment of property, plant and equipment
In order to identify assets for impairment, the Company and its consolidated
subsidiaries group their fixed assets according to management accountingclassifications based on each business unit, except for important idle assets,
assets to be disposed of and lease assets.
To establish a more sound financial base, the Company has reduced the bookvalue of the following intangible assets in the period under review to a level
deemed recoverable, and recorded the reduction under extraordinary loss asloss on impairment of property, plant and equipment.

Location

Items

Classification

Impairment loss(¥ million)

Shibuya-ku,
Tokyo(VIBE Inc.)－

Consolidation
adjustment
accounts

1,610

Taito-ku,
TokyoInternet content andadministrative software

Other intangible
assets

25

Total

1,636

In determining loss on impairment of property, plant and equipment, theCompany assumes a zero value in use to calculate recoverable asset value.

39

Notes to Consolidated Statements of Cash FlowsSix months ended September 30, 2005
(April 1, 2005 ~ September 30, 2005)* Relationship between cash and cash
equivalents at the end of the period underreview and the amounts accounted for on the
consolidated balance sheets:(As of September 30, 2005)
Cash and time deposits: ¥112,526 million
Short-term investments: ¥9,893 million
Total ¥122,419 million
Time deposits with maturities exceeding threemonths: (¥1,485 million)
Cash and cash equivalents: ¥120,933 million

40Other Notes
I. Segment Information
1. By Business Segment(¥ million)
Interim Period Fiscal Year 2006, Ended September 30, 2005
(April 1, 2005 ~ September 30, 2005)
Toys &
Hobby
Business

Amusement
Facility
Business

1. To external customers
2. Intersegment sales andtransfers

81,10640,90862,151

5,805

22,557

6,342

218,873－

218,873

1,432

143

1,621

144

495

4,878

8,716

(8,716)－

Total

82,53941,052

63,773

5,950

23,053

11,220227,590(8,716)

218,873

Operating expenses

74,14238,751

56,325

5,092

19,958

11,280205,551(4,224)

201,326

Operating income (loss)

8,397

2,300

7,448

857

3,095

(59)

22,039(4,492)

17,546

Game
Contents
Business

NetworkBusiness

Visual andMusic Contents
Business

AffiliatedBusiness

Total

Eliminations
andConsolidated
Corporate

Net sales

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

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

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

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

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

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

Transportation and warehousing of products, leasing, real estate management, printing,licensing, restaurant management, human services and nursing care facilities, development andsale of environmental equipment and other activities

3. Operating expenses include an unallocatable amount of ¥4,762 million under eliminations and corporate. This figure primarily consists ofexpenses related to management divisions at Bandai Co., Ltd. and NAMCO LIMITED.

41

2. By Geographic Segment(¥ million)
Interim Period Fiscal Year 2006, Ended September 30, 2005
(April 1, 2005 ~ September 30, 2005)
Japan

Net sales
1. To external customers
2. Intersegment sales and transfers

Americas180,849

20,048EuropeAsia

12,6595,315

Eliminations andCorporate

Total

218,873－

Consolidated

218,873

3,879

581

－

8,513

12,974(12,974)－

184,728

20,62912,65913,829231,847(12,974)

218,873

Operating expenses

162,350

23,856

10,867

12,626

209,701(8,375)201,326

Operating income (loss)

22,377(3,226)

1,791

1,202

22,145(4,598)17,546

Total

Notes:
1. Methods for classifying geographic segments and principal countries and regions(1) The Company classifies geographic segments by such factors as degree of geographic closeness, similarities in economic activities,
and mutual relationship of business activities.
(2) Principal countries and regions belonging to each geographic segment(i) Americas:(ii) Europe:(iii) Asia:

U.S.A and Canada
France, U.K. and Spain
Hong Kong, Thailand and South Korea

2. Operating expenses include an unallocatable amount of ¥4,762 million under eliminations and corporate. This figure primarily consists ofexpenses related to management divisions at Bandai Co., Ltd. and NAMCO LIMITED.

3. Overseas Sales
Interim Period Fiscal Year 2006, Ended September 30, 2005
(April 1, 2005 ~ September 30, 2005)
Americas
Ⅰ

Overseas sales (¥ million)

Ⅱ
Ⅲ

Europe

Asia

Total

21,20019,3595,928

46,487

Consolidated sales (¥ million)

－

－

－

218,873

Overseas sales as a ratio ofconsolidated sales (%)

9.6

8.8

2.7

21.2

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

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

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

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

42II. Marketable Securities
As of the end of period under review (September 30, 2005)
1. Bonds Held to Maturity With Market Values(¥ million)
Balance Sheet

Market Value

Difference

1. Government and local government bonds

9

9

－

2. Corporate bonds

－

－

－

－

－

－

9

9

－

Balance Sheet

Difference

3. OtherTotal

2. Other Securities With Market Value(¥ million)
Acquisition Cost
1. Equity securities

2,832

9,802

6,970

－

－

－

Government and local government bonds

－

－

－

Corporate bonds

－

－

－

Other

－

－

－

2. Bonds

3. Other
Total

242

274

32

3,074

10,077

7,002

Notes:The Company recorded impairment losses of ¥200 million on equity securities with market value classified as other securities for the period
under review.
Impairment accounting is applied in the following way:
Stocks where the market value has declined 50% or more: all stocks
Stocks where the market value has declined more than 30% but less than 50%: stocks for which no recovery in value is expected

3. Principal Securities Without Market Value
Amount recorded on balance sheet (¥ million)
1. Bonds held to maturity

36

Unlisted bonds

36

2. Other securities

11,266(i) Unlisted stocks

1,310(ii) MMF

6,893(iii) CP

499

(iv) Other

2,562

3. Subsidiary and affiliate stock

2,777

Unlisted stocks

2,777

43

5. Production, Orders Received and Net Sales
1. Production
Production by business segment during the period under review was as follows:Business Segment

Output (¥ million)

YoY Change (%)

Toys & Hobby Business

4,669

－

Game Contents Business

21,455－Visual and Music Content Business

9,536

－

132

－

35,795－Affiliated Business
Total
Notes:
1. The above amounts are stated at manufacturing cost.
2. The above amounts include fees for product commercialization rights.
3. Intersegment transactions have been eliminated from the above amounts.

2. Orders Received
Orders received by business segment during the period under review were as follows:
Order Backlog(¥ million)

Orders Received(¥ million)

YoY Change (%)

Toys & Hobby Business

490

－

65

－

Visual and Music Content Business

43

－

40

－

Total

533

－

105

－

Business Segment

YoY Change (%)

Note: Intersegment transactions have been eliminated from the above amounts.

3. Net Sales
Net sales by business segment during the period under review were as follows:Business Segment

Net Sales (¥ million)

YoY Change (%)

Toys & Hobby Business

82,324－

Amusement Facility Business

49,166－

Game Contents Business

55,172－

Network Business

5,950

－

Visual and Music Contents Business

23,053－Affiliated Business

11,220－Eliminations and Corporate(8,015)－

Total

218,873－

44

NAMCO BANDAI Holdings Inc.
Stock Listing: Tokyo Stock Exchange
Code Number: 7832
Registered Business Location: Tokyo(URL: http://www.bandainamco.co.jp)
November 22, 2005

Non-Consolidated Earnings Report for the Interim Period of Fiscal
Year 2006 Ended September 30, 2005
Representative: Takeo Takasu, President and Representative Director
Contact:
Keiji Tanaka, Director
Telephone: +81 (03) 5783-5500
Date of the Meeting of the Board of Directors: November 22, 2005
Interim period dividend payment: Yes
Interim period dividend payment date starting: Use of unit system of shares: Yes (1 unit: 100 shares)

1. Business Results for the Interim Period of Fiscal Year 2006 Ended September 30,
2005 (September 29, 2005 ~ September 30, 2005)(1)Business Results
Ordinary Revenue

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Operating income

Recurring income¥ million%¥ million%¥ million

%

10

－

(263)

－

(286)

－

－

－

－

－

－

－

－

－

－

Net income¥ million%

Net income per share
¥

(286)

－

(1.11)

－

－

－

－-

－

Notes:

1. Average number of shares outstanding during period (consolidated):
Interim period ended September 30, 2005
258,613,382
Interim period ended September 30, 2004—
Fiscal year ended March 31, 2005—
2. Changes in accounting treatment: None
3. Percentage figures accompanying net sales, operating income, recurring income and net income
represent year-on-year changes.

45

(2) Dividend payment: Current Status
Interim period dividend
payment per share

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

End of fiscal period
dividend payment per
share

¥

¥

－

－

－

－

－

－

Note: Stockholders listed on the final Stockholders’ list of both Bandai and NAMCO respectively, as of September 28,
2005, are to be paid, in substitution of the interim period dividend payment, the following share transfer payments.
1 share of common stock of Bandai Co., Ltd:
18 yen1 share of common stock of NAMCO Ltd.:
12 yen(3) Financial Position
Total assets

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Stockholders’equity ratio%

Stockholders’equity per share¥ million

Stockholders’equity¥ million

200,131

196,54598.2

760.00

－

－

－

－

－

－

－

－

Note:
1. Number of shares outstanding at period-end:
Interim period ended September 30, 2005
Interim period ended September 30, 2004
Fiscal year ended March 31, 2005
2. Number of shares of treasure stock at period-end:
Interim period ended September 30, 2005
Interim period ended September 30, 2004
Fiscal year ended March 31, 2005¥

258,613,382
—
—
—
—
—

2. Projections for Fiscal Year 2006 (September 29, 2005 ~ March 31, 2006)
Ordinary Revenue

Recurring income¥ million¥ million¥ million

27,00027,000Fiscal Year Ending
March 31, 2006
28,000(Reference)
Projected net income per share (full year): ¥104.40

Net income

Dividend payment
per share
End offiscalperiod¥ million ¥ million
12.00

12.00

*Figures less than ¥1 million have been omitted

Note:
The above projections are based on information available to the Company at the time of release,and assumptions involving uncertain factors thought likely to have an effect on future results.
Actual results may differ significantly from projections due to a variety of factors. Please referto page 18 of the supplementary materials for more details.

46

Significant Subsequent Events(Transfer of Operations After Corporate Separation)
As part of Group business restructuring, NAMCO BANDAI Holdings Inc. resolved at a meeting of the Boardof Directors on September 30, 2005 to separate the supervision and management of certain subsidiaries andaffiliates conducted by BANDAI and NAMCO, and activities related to the management of all listed
investment securities owned by BANDAI and NAMCO, and transfer them to NAMCO BANDAI Holdings
Inc. On the same date, NAMCO BANDAI Holdings Inc. concluded a corporate separation agreement withboth BANDAI and NAMCO.
Overview of the Corporate Separation Agreement
A corporate separation in which BANDAI and NAMCO are the separated companies and whereby thesupervision and management of certain BANDAI and NAMCO subsidiaries and affiliates stipulated in theagreement and activities related to the management of all listed investment securities owned by BANDAI and
NAMCO are transferred to the parent company NAMCO BANDAI Holdings Inc. on December 1, 2005, thedate of the separation.
As a result of the corporate separation, NAMCO BANDAI Holdings Inc.’s common stock will increase as
follows. There will be no increase in capital.
Capital reserve:
The amount of the Company’s capital increase in accordancewith Article 374-21 of Japan’s Commercial Code, less retained
earnings appropriated for legal reserves and general reserves to betransferred, both indicated below.
Retained earnings appropriated for legal reserves:
The entire amount of BANDAI’s retained earnings appropriated for legal reserves.
Retained earnings appropriated for general reserves:
The amount remaining after the deduction of ¥17.6 billion and the entire
amount of BANDAI’s retained earnings from the assets separated from BANDAI.
No shares will be allotted and no payments will be made with regard to the corporate separation.
As of September 30, 2005, the book values of shares of subsidiaries and affiliates and listed investment
securities to be transferred from BANDAI and NAMCO to NAMCO BANDAI Holdings Inc. as a result of
the corporate separation are as follows.
BANDAI:

Shares of affiliates:
Investment securities:¥27,785 million¥4,357 million

NAMCO:

Shares of affiliates:
Investment securities:¥12,434 million¥908 million(Share-for-share Exchange Agreement)
A share-for-share exchange agreement was concluded between NAMCO BANDAI Holdings Inc. andBANDAI LOGIPAL INC. on October 14, 2005. This agreement is conditional upon the resolution made at
NAMCO BANDAI Holdings Inc.’s Board of Directors’ meeting held on October 14, 2005 to conduct a
corporate separation in which BANDAI’s operations will be partially split and transferred to NAMCO
BANDAI Holdings Inc., as well as on BANDAI LOGIPAL INC.’s extraordinary meeting of shareholders to
conduct a share-for-share exchange under which NAMCO BANDAI Holdings Inc. will make BANDAI
LOGIPAL INC. a wholly-owned subsidiary on January 31, 2006.

47

1. Objective of share-for-share exchange agreement
As competition intensifies in a rapidly changing environment, it can be expected that the logistics industry inJapan will experience even more industry consolidation. Under these conditions, NAMCO BANDAI
Holdings Inc. and BANDAI LOGIPAL INC. have determined it necessary to proceed with the centralized
management of logistics capabilities in the Toys & Hobby business, the Group’s main business, and over the
mid-term, realize synergistic effects in the Group’s logistics capabilities.
By making BANDAI LOGIPAL INC. a wholly-owned subsidiary through a share-for-share exchange,
NAMCO BANDAI Holdings Inc. will aim to realize efficiencies such as cost reduction by achieving effective
cooperation between business line and logistics over multiple business lines over the mid- to long-term in the
BANDAI NAMCO Group.

2. Terms, etc., of the share-for-share exchange agreement(1) Outline of schedule
October 14, 2005:
December 1, 2005 (expected):
December 15, 2005 (expected):
January 25, 2006 (expected):
January 30, 2006 (expected):
January 31, 2006 (expected):
March 20, 2006 (expected):

Board of Director meetings to approve the share-for-shareexchange
Succession of BANDAI LOGIPAL INC. shares by corporate
separation (NAMCO BANDAI Holdings Inc.)
Extraordinary meeting of shareholders (BANDAI LOGIPAL
INC.) to approve the share-for-share exchange agreement
JASDAQ delisting date (BANDAI LOGIPAL INC.)
Due date for submitting share certificates (BANDAI
LOGIPAL INC.)
Share-for-share exchange date
Grant new shares* Based on the separation agreement entered into on September 30, 2005 between BANDAI and
NAMCO BANDAI Holdings Inc., as a part of the management operation of the affiliated companies,
the share-for-share exchange will be conducted on the condition of splitting and succeeding
BANDAI LOGIPAL INC. shares to NAMCO BANDAI Holdings Inc. from BANDAI.
* This share-for-share exchange requires approval by BANDAI LOGIPAL INC.’s extraordinary
meeting of shareholders scheduled for December 15, 2005.
* Pursuant to the provisions of Article 358, Paragraph 1 (Share-for-share exchanges) of theCommercial Code of Japan, at NAMCO BANDAI Holdings Inc., the share-for-share exchange will
be conducted without obtaining approval for the share-for-share agreement at a general meeting ofshareholders.

(2) Share-for-share exchange ratios
0.6 shares of common stock of NAMCO BANDAI Holdings Inc. for 1 share of common stock of
BANDAI LOGIPAL INC. will be allotted.
However, no shares will be allotted with respect to the BANDAI LOGIPAL INC. shares (2,640,000
shares) which NAMCO BANDAI Holdings Inc. will succeed to as a result of the corporate split on
December 1, 2005 (expected).
As a result of the above, the number of NAMCO BANDAI Holdings Inc.’s outstanding shares will total
260,580,191 shares.

(3) Cash payments upon the share-for-share exchange
NAMCO BANDAI Holdings Inc. will not make any cash payments upon the share-for-share exchange.

(Interim Dividends From Wholly-owned Subsidiaries)
On October 3, 2005, NAMCO BANDAI Holdings Inc. received interim dividends of ¥16,822 million and¥9,915 million from wholly-owned subsidiaries BANDAI and NAMCO, respectively.

48

NAMCO BANDAI Holdings Inc.
(Bandai Co., Ltd)
Stock Listing: Tokyo Stock Exchange
Code Number: 7832
Registered Business Location: Tokyo(URL: http://www.bandainamco.co.jp)
November 22, 2005

Consolidated Earnings Report for the Interim Period of Fiscal Year2006 Ended September 30, 2005
(Bandai Co., Ltd.)
Contact:
Keiji Tanaka, Director
Telephone: +81 (03) 5783-5500
Date of the Meeting of the Board of Directors: November 21, 2005
Name of parent company: NAMCO BANDAI Holdings Inc.
% of voting rights held by parent company: 100%
U.S. GAAP Applied: No

1. Consolidated Business Results for the Interim Period of Fiscal Year 2006 Ended
September 30, 2005 (April 1, 2005 ~ September 30, 2005)(1)Consolidated Business Results
Net salesInterim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Operating income¥ million%¥ million%¥ million%

134,645

11.0

15,33256.0

15,94657.4

121,277

1.1

9,829

(29.6)

10,132(25.2)

269,945

24,398Net income

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Recurring income

25,723

Net income per share

Net income per share(diluted)¥ million

%

¥

¥

5,607

44.4

56.76

56.74

3,883

(42.3)

39.42

39.34

111.13110.9911,225

Notes:

1.

Equity in earnings (losses) of affiliates:
Interim period ended September 30, 2005(¥1 million)
Interim period ended September 30, 2004(¥235 million)
Fiscal year ended March 31, 2005(¥24 million)
2. Average number of shares outstanding during period (consolidated):
Interim period ended September 30, 2005
98,789,972
Interim period ended September 30, 2004
98,513,480
Fiscal year ended March 31, 2005
98,552,426
3. Changes in accounting treatment: Yes
4. Percentage figures accompanying net sales, operating income, recurring income and net income
represent year-on-year changes.

49(2) Consolidated Financial Position
Total assets

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Stockholders’equity ratio%

Stockholders’equity per share¥ million

Stockholders’equity¥ million

245,617

137,866

56.1

1,393.17

224,297

125,34855.9

1,271.66

240,290131,75054.8

1,333.06¥

Note:
Number of shares outstanding at period-end (consolidated):
Interim period ended September 30, 2005 98,958,764
Interim period ended September 30, 2004 98,570,825
Fiscal year ended March 31, 2005
98,628,311(3) Consolidated Statement of Cash Flows
Operatingactivities

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Investingactivities

Financing
activities¥ million¥ million¥ million

Cash and cash
equivalents atperiod-end¥ million

15,776(17,760)(2,754)82,938137(8,079)1,699

76,165

14,839(10,153)

1,212

88,517(4) Scope of Consolidation and Application of Equity Method
Consolidated subsidiaries: 31
Non-consolidated subsidiaries accounted for by the equity method:
Affiliated companies accounted for by the equity method: 4―(5) Changes in Scope of Consolidation and Application of Equity Method
Consolidated:
New 2; Excluded 2
Equity method: New 1; Excluded —2. Consolidated Projections for Fiscal Year 2006 (April 1, 2005 ~ March 31, 2006)
For projections, please refer to “Consolidated Earnings Report for the Interim Period of Fiscal
Year 2006 Ended September 30, 2005” of NAMCO BANDAI Holdings Inc.
*Figures less than ¥1 million have been omitted

50

NAMCO BANDAI Holdings Inc.
(NAMCO LIMITED)
Stock Listing: Tokyo Stock Exchange
Code Number: 7832
Registered Business Location: Tokyo(URL: http://www.bandainamco.co.jp)
November 22, 2005

Consolidated Earnings Report for the Interim Period of Fiscal Year2006 Ended September 30, 2005
(NAMCO LIMITED)Contact: Keiji Tanaka, Director
Telephone: +81 (03) 5783-5500
Date of the Meeting of the Board of Directors: November 21, 2005
Name of parent company: NAMCO BANDAI Holdings Inc.
% of voting rights held by parent company: 100%
U.S. GAAP Applied: No

1. Consolidated Business Results for the Interim Period of Fiscal Year 2006 Ended
September 30, 2005 (April 1, 2005 ~ September 30, 2005)(1)Consolidated Business Results
Net salesInterim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Operating income¥ million%¥ million%¥ million%

85,0523.7

2,538(42.6)

2,632(37.3)

81,980

(2.0)

4,422

(49.0)

4,200(43.8)

178,551

15,085

Net income

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Recurring income

14,588Net income per share

Net income per share(diluted)¥ million

%

¥

¥

2,526

(5.7)

23.00

－

2,679

(28.2)

48.83

－

83.63

－

9,464

Notes:

1.

Equity in earnings (losses) of affiliates:
Interim period ended September 30, 2005(¥23 million)
Interim period ended September 30, 2004(¥10 million)
Fiscal year ended March 31, 2005(¥51 million)
2. Average number of shares outstanding during period (consolidated):
Interim period ended September 30, 2005
109,817,381
Interim period ended September 30, 2004
54,879,270
Fiscal year ended March 31, 2005
109,758,418
3. Changes in accounting treatment: Yes
4. Percentage figures accompanying net sales, operating income, recurring income and net income
represent year-on-year changes.
5. The company carried out a 2-for-1 stock split of common shares on November 19, 2004. As such, net income pershare for the interim period is calculated presuming that the stock split was enacted at the beginning of theprevious fiscal year.
6. Presuming that the stock split was enacted at the start of the previous fiscal year, for the period ended September
30, 2004, net income per share for the interim period is ¥24.42.
7. Diluted net income per share for the interim period is not shown because there are no shares with dilutive effect.

51

(2) Consolidated Financial Position
Total assets

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Stockholders’equity ratio%

Stockholders’equity per share¥ million

Stockholders’equity¥ million

145,499

109,10575.0

990.29148,119

105,68369.3

1,871.07

154,474

107,77369.8

979.31¥Note:
1. Number of shares outstanding at period-end (consolidated):
Interim period ended September 30, 2005 110,175,236Interim period ended September 30, 2004 54,879,228
Fiscal year ended March 31, 2005
109,757,781
2. Presuming that the stock split was enacted at the start of the previous fiscal year, for the period ended September
30, 2004, stockholders’ equity per share for the interim period is ¥935.54.

(3) Consolidated Statement of Cash Flows
Operatingactivities

Interim Period Ended
September 30, 2005
Interim Period Ended
September 30, 2004
Fiscal Year Ended
March 31, 2005

Investingactivities

Financing
activities¥ million¥ million¥ million

Cash and cash
equivalents atperiod-end¥ million

513

3,723

(3,037)37,995(6,235)(1,333)364

28,325

3,172

(188)

(1,767)36,406(4) Scope of Consolidation and Application of Equity Method
Consolidated subsidiaries: 18
Non-consolidated subsidiaries accounted for by the equity method:
Affiliates accounted for by the equity method: 1

1(5) Changes in Scope of Consolidation and Application of Equity Method
Consolidated:
New —; Excluded 2
Equity method: New 1; Excluded —2. Consolidated Projections for Fiscal Year 2006 (April 1, 2005 ~ March 31, 2006)
For projections, please refer to “Consolidated Earnings Report for the Interim Period of Fiscal
Year 2006 Ended September 30, 2005” of NAMCO BANDAI Holdings Inc.
*Figures less than ¥1 million have been omitted

52