NAMCO BANDAI Holdings Inc.

Annual Report 2007

NAMCO BANDAI Holdings Inc.
Annual Report 2007www.bandainamco.co.jp

Printed in Japan

The BANDAI NAMCO Group creates exciting
and attractive entertainment around the world.
The BANDAI NAMCO Group was established in September 2005 through the
management integration of Bandai and NAMCO. The Group is developing
entertainment-related products and services in a wide range of fields,
including toys, amusement facilities, arcade game machines, video gamesoftware, network services, and visual products, in Japan and overseas.
Since our establishment, we have worked to open up new possibilities
and made steady progress. As we move forward, we will strive to accurately
track changes in our markets around the world and to create movementswith exciting entertainment that showcases our distinctive strengths.
The BANDAI NAMCO Group will endeavor to achieve further growth inaccordance with its mission of providing “Dreams, Fun and Inspiration”
to people around the world.

Our Vision

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

Toys and Hobby

Visual andMusic Content

VisualToys and Hobby

CHARACTER
Life-Style

Life-Style

Networks

Video Game
SoftwareAmusement

Network
Integration ofComplementaryStrengths

CHARACTERTECHNOLOGYLOCATION

Video Game
SoftwareAmusement
Facility
Operations

TECHNOLOGYLOCATION
ArcadeMachines

Game Contents

Amusement
Facility

Contents
Consolidated Financial Highlights ......................... 02
SYNERGY EFFECT: Pursuing Group Synergies ........ 03
To Our Shareholders ............................................. 06
An Interview with the President ........................... 08
Special Feature: Medium-Term Strategies
in the Game Contents SBU................................ 12
Medium-Term Management Plan ......................... 16
Business Strategies by Strategic Business Unit (SBU) ......... 18

Directors and Corporate Auditors ......................... 25
Corporate Governance .......................................... 26
The BANDAI NAMCO Group’s CSR Initiatives ........ 28
Overview of Main Group Companies .................... 30
Business Risks ........................................................ 32
Financial Section .................................................... 33
Corporate Data ...................................................... 69

Forward-Looking Statements

The forward-looking statements in this annual report are based on the information currently available to management and include various risks anduncertainties. Accordingly, actual results may differ materially from these projections for a variety of reasons. Major factors that could influence actual results
include changes in business environments, market trends, and exchange rate fluctuations relevant to the businesses of the BANDAI NAMCO Group.
Notes:
1. All figures in this report are rounded to the nearest unit.
2. Fiscal 2007 or FY2007.3, the year under review, represents the one-year period ended March 31, 2007.
3. Projections and other figures in this annual report are as of May 2007.

01

Consolidated Financial Highlights
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries

Millions of yen except per share data and main financial indicators

For the years ended March 31

2006

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

2007

2007

For the Year￥450,829￥459,133$3,889,310

Gross profit

156,565

168,080

1,423,804

Operating income

35,66942,224

357,679

Recurring income*2

37,12245,616

386,413

Net income

14,15024,252

205,438

Capital expenditures

24,02027,925236,554

Depreciation

19,144

21,201

179,593￥386,651￥408,490$3,460,313

252,244284,254

2,407,911￥54.39￥95.73

$0.81

12.00

28.00

0.24

Net sales

At Year-End
Total assets
Total Net assets
Per Share Data (yen and U.S. dollars*1)
Net income
Cash dividends
Main Financial Indicators (%)
Return on equity*3
Return on assets*

3

Overseas sales proportion

5.8%

9.4%

9.6

11.5

18.8

22.4

Operating income margin

7.9

9.2

Shareholders’ equity ratio

63.0

67.1

*1 U.S. dollar amounts have been translated, for convenience only, at the rate of ¥118.05=U.S.$1, the approximate exchange rate on March 31, 2007.
*2 Recurring income is a Japanese accounting term denoting income before extraordinary items.
*3 Figures for total shareholders’ equity and total assets as of March 31, 2006, are used in calculating ROE and ROA for the fiscal year ended March 2006.

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

（%）

40.0

500

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

Net Income / ROE (%)

Total Net Assets /Shareholders’ Equity Ratio (%)（% ）(Billions of yen)

15.0

25

（%）
24.3 25.0

20

20.0

50

(Billions of yen)
300

459.1
42.2
400

40

（%）

284.3

250

100.0

80.0

30.0
9.2
22.4

300

10.0

200

30

15

20

10

60.0

15.0

20.0
200

67.1

150
9.4

40.0

10.0

5.0

100

10.0
10

100

0

2003.3 2004.3 2005.3
BANDAI02

2006.3 2007.3

0.0

NAMCO

0

5

2003.3 2004.3

2005.3

NAMCO BANDAI Holdings

2006.3 2007.3

0.0

0

5.0

2003.3 2004.3 2005.3 2006.3 2007.3

0.0

20.0

50

0

2003.3 2004.3 2005.3 2006.3 2007.3

0.0

SYNERGY EFFECT
Pursuing Group Synergies

As it targets the creation of exciting entertainment that will lead its markets, the BANDAI NAMCO
Group pursues Group synergies that integrate character merchandising with technical development
capabilities and a location network. In this section, we introduce two of the BANDAI NAMCO Group’s
new entertainment products that resulted from these Group synergies.

03

Feel the BEAT,
Mobile Suit Gundam:
Senjo-no-Kizuna
Arcade game machine—
Mobile Suit Gundam: Senjo-no-Kizuna
Mobile Suit Gundam: Senjo-no-Kizuna was created throughsynergies between Banpresto and NAMCO BANDAI Games.
This cockpit-style amusement machine uses a hemisphericaldome screen called the P.O.D., or panoramic optical display.
The players can hear each other’s voices, and up to 16
people can play at one time. This is an example of anentertainment product that combines Bandai’s charactersand NAMCO’s technologies. Moreover, in addition tocontributing to the customer-drawing power of theGroup’s amusement facilities, it is making a substantial
contribution to sales of character goods and mobile phonegame services, showcasing Group synergies.

Through the use of newly developed dome screen technology on the
P.O.D., players can experience being in the picture, which was notpossible with previous flat-screen displays.

04

Hit the NOTENAMCO WONDER PARKHERO’S BASE
Large-scale hybrid facility—
Namco Wonder Park Hero’s Base
Leveraging abundant Group synergies, this amusement
facility exemplifies the benefits of the management
integration. Based on the theme of meeting andexperiencing the heroes of your dreams, the park includes
five zones that integrate amusement and characters. The
park provides an excellent demonstration of the synergies
between NAMCO’s location management know-how and
Bandai’s character merchandising. The favorable performanceof the park has exceeded initial expectations, withattendance reaching more than a million people in the first
three and a half months after it opened in September 2006.

05

To O u r S h a r e h o l d e r s

Challenge
In September 2005, we formed the BANDAI NAMCO Group through a management
integration, and we are now approaching the second anniversary of the Group’s
establishment. In the fiscal year ended March 2007, the first full fiscal year for
the Group, we recorded increases in sales and profits year on year. This
performance would not have been possible without the support of ourshareholders and investors, which enabled us to leverage the comprehensive
strengths of the Group, centered on the holding company and the five
Strategic Business Units (SBUs). We are grateful for your support.

06

& Speed
Guided by the slogan “challenge and speed,” the BANDAI NAMCO Group willcontinue working to accurately track market trends and to provide innovative,
appealing entertainment that makes full use of the Group’s distinctive strengths.
We will create movements that continually lead the markets and provide “Dreams,
Fun and Inspiration” to people around the world through entertainment. We arecommitted to becoming the World’s Most Inspiring Entertainment Group, and weare confident that our shareholders and investors can expect further growth anddevelopment from the BANDAI NAMCO Group in the years ahead.

July 2007

Takeo Takasu
President and Representative Director
NAMCO BANDAI Holdings Inc.

07

An Interview with
the President
Always taking on new challenges witha sense of speed

Takeo Takasu
President and Representative Director

Q

It has been nearly two years since the management integration.
How would you evaluate the Group’s progress over that period?

Over the past two years, we implemented reorganization measures targeting theestablishment of a foundation for future growth. In addition, we are starting to see
benefits in operations from the synergies among the two companies’ strengths in products,
services, and facilities. In each of these areas, our progress has been faster than we originallyplanned at the time of the management integration.
We have taken steps to reorganize and enhance the Group structure, including theestablishment of a holding company system, with NAMCO BANDAI Holdings overseeing the
major operating companies. In the Americas and Europe, aiming to establish an organizational
system that can implement optimal execution in the same manner as the system in Japan,
we set up regional holding companies and moved to a system under which each SBU canefficiently conduct its activities. Furthermore, in game contents, the one area in which theoperations of Bandai and NAMCO overlapped prior to the management integration, we haveintegrated the business in Japan and overseas, such as the establishment of NAMCO
BANDAI Games Inc. We are currently implementing measures to foster exchanges of
personnel and the sharing of know-how.
On this foundation, we will utilize enhanced synergies in the Group and tie-ups withbusiness partners to further bolster existing SBUs as well as to create new SBUs.

A

Net Sales /Operating Income Margin (%)
BANDAI
NAMCO
NAMCO BANDAI Holdings(Billions of yen)

（%）

10

500
9.0

450.8

459.1

● September 2005

9.2
400

8.4

Major elements of the BANDAI NAMCO Group’s
reorganization initiatives

8
7.9

NAMCO BANDAI Holdings Inc. established.
NAMCO BANDAI Holdings Inc. listed on theFirst Section of the Tokyo Stock Exchange.

● December 2005
300

200

6
269.9

4

178.6

2

100

0

08

2005.32006.32007.30Transfer of a portion of Bandai and NAMCO’s
management of subsidiary and affiliatedcompanies and management of all listed
investment securities by a corporate separation.

● January 2006
NAMCO BANDAI Holdings (USA) Inc., a U.S.
regional holding company, established. Affiliatedoperating companies restructured, including the
integration of home-use game console operations.

● January 2006
BANDAI LOGIPAL INC. made a wholly owned
subsidiary through a share-for-share exchange.

● March 2006
NAMCO’s amusement facility management
operations transferred to the newly established
NAMCO LIMITED.
Domestic game operations integrated under the
newly established NAMCO BANDAI Games Inc.

● June 2006
Banpresto Co., Ltd., made a wholly owned
subsidiary through a share exchange.

● January 2007
NAMCO Holdings UK LTD., a European regional
holding company established with the restructuringof certain affiliated operating companies.

Q

Would you provide an overview of the fiscal year ended March
2007, the first full fiscal year for the BANDAI NAMCO Group?

Net Sales(Billions of yen)
600

The year under review was the first year of our medium-term management plan,
which has the theme of “strengthening, enriching, and expanding portfolio
management.” On a consolidated basis, we recorded higher sales and profits. Net sales
were up 1.8%, to ¥459.1 billion; operating income was up 18.4%, to ¥42.2 billion; andnet income was up 71.4%, to ¥24.3 billion.
In operations, the Toys and Hobby SBU benefited from the worldwide success of
Tamagotchi and the domestic popularity of DATA CARDDASS, and the Visual and Music
Content SBU enjoyed favorable results due to the popularity of Mobile Suit Gundam series
products, such as DVD-BOX. By geographical region, sales and profits were down year on
year in domestic operations but higher in the Americas, Europe, and Asia. In this way,overseas operations supported domestic operations, demonstrating the effectiveness of
our Group portfolio management.
Meanwhile, in the first year of the medium-term management plan, we recorded
net sales of ¥459.1 billion, versus the planned level of ¥470.0 billion. However, we cleared
our targets for operating income and net income. Operating income was ¥42.2 billion,
compared with the planned level of ¥40.0 billion, and net income was ¥24.3 billion,
compared with the planned level of ¥22.0 billion.
The performance of the Game Contents SBU was the reason why we did not reachour target for net sales. The “between seasons” period following the launch of the new,next-generation game consoles lasted longer than we had forecasted when the mediumterm plan was formulated. On the other hand, the Toys and Hobby SBU and the Visual andMusic Content SBU, which exceeded the plan’s targets, complemented our other SBUs. In
operations, we were able to leverage the Group’s strengths in portfolio management.

A

550.0
500

480.0

450.8

459.1

2006.32007.3

400

300

200

100

0

2008.3(Projection)2009.3(Target)Operating Income / Net Income(Billions of yen)

Operating Income
Net Income

60

58.0

50
45.0
42.2
40
35.7
32.5
30
24.3

26.5

20

Q

Overseas operations made a major contribution to the Company’sfavorable performance in the year under review. What were thereasons for this strong performance?

14.2
10

0

One of the Group’s key business strategies in the medium-term management plan
A is strengthening overseas businesses. We decided that, with domestic market
growth expected to be sluggish due to the trends of a lower birthrate and an aging
population, we need to expand our operations overseas in order to further increase thescale of the Group. Accordingly, we implemented Group reorganization measures toachieve optimal business execution in each region.
In the year under review, the Toys and Hobby SBU had favorable results with theoverseas development of products from Japan, such as Tamagotchi and POWER RANGERS.
In addition, BEN10, which originated overseas, enjoyed growing popularity and made acontribution to our results. In the Amusement Facility SBU, our hybrid bowling facilities
in Europe performed well. As a result, we recorded strong growth in overseas operations.
Overseas sales were up approximately 20% year on year, and the overseas sales ratio
increased from 19% in the previous year to 22% in the year under review.
In the future, in addition to the overseas development of content originating inJapan, we will develop content originating overseas and enhance our operations in linewith the tastes and characteristics of each region in order to steadily bolster our overseas
operations. Our targets for the overseas sales percentage are 23% in the fiscal year ending
March 2008, 25% in the following year, and then 50% in the long term.

2006.32007.32008.3(Projection)2009.3(Target)Net Sales by Geographic Segment
Asia 2.4%
Europe
6.9%
Americas9.5%

Overseas

Japan
81.2%

18.8%
FY2006.3

Asia 2.8%
Europe8.2%
Americas11.4%

Overseas

Japan
77.6%

22.4%
FY2007.3

Note: Percentage figures are calculated
based on external sales.

09Top Interview
Q

The BANDAI NAMCO Group has adopted the slogan “challenge andspeed.” What does this slogan mean to you?

For the Group to achieve continued strong growth in the rapidly changing
entertainment industry, we must move quickly to take on new challenges. We needto create movements at the forefront of the industry, carefully track emerging trends, andalways stay one step ahead. We must be aggressive in our thinking and our actions.
Clearly, if we are not eager to take on the challenge of providing new entertainment, thenwe will not be able to provide “Dreams, Fun and Inspiration” to our customers. Accordingly,“challenge and speed” is not just a temporary slogan; it is a never-ending theme for
the BANDAI NAMCO Group.
Sometimes, however, taking on challenges involves risk. We need to continually ask
ourselves if we can leverage our own know-how and strengths in a particular field. We
also need an environment and systems that encourage employees to continually take onchallenges with sustained commitment. And, of course, if we fail in taking on a challenge,
we should assess why we failed. But to record continued growth as a company we need
to be able to develop employees without inhibiting the spirit of taking on challenges thatdrives future success. Even if we fail once, there will be another chance. While controllingrisk, we will strive to provide an environment in which employees are eager to take onchallenges. I believe that spirit is the source of new growth.

AQ

The biggest objective of the medium-term management plan is “strengthening,enriching, and expanding portfolio management.” Our basic strategies are toleverage the substantial growth potential of each of our five SBUs and to create anddevelop new SBUs. In business strategies, in addition to strengthening overseas businesses,
we are promoting the Group’s Entertainment Hub Concept, which integrates a variety offunctions, from content creation to product development and sales. We will aggressively
expand this concept in conjunction with external partners. We have already entered capitaltie-ups with content holders, such as the Toei Group, Kadokawa Group Holdings, and the
Ishimori Group, and we have invested in Fujiya Co., Ltd., a confectionery company. These
measures have strengthened the hub concept, and in the future we will also bolster
initiatives with our partners, including those in overseas markets.
In the fiscal year ending March 2008, the second year of the medium-term
management plan, we are forecasting net sales of ¥480 billion, operating income of ¥45
billion, and net income of ¥26.5 billion, an increase of 9.3%. However, the forecast for
operating income is ¥5 billion less than the initial target of ¥50 billion that is set out in themedium-term management plan. This shortfall is primarily attributable to a reduction of ¥5billion in the forecast for the Game Contents SBU. This revision stemmed from uncertainty
about the future direction of game markets in Japan and overseas, including the pace ofmarket penetration of next-generation home-use game consoles. As an internal target,
we will continue striving toward the target set out in the medium-term management plan.
We will do our utmost to come as close as possible to the initial numerical objectives ofnet sales of ¥500 billion and operating income of ¥50 billion.

A

FY2006.3

Net Sales: ¥450.8 billion
Operating Income: ¥35.7 billion
Overseas Sales: 18.8%
Implementationof Three-Year Plan

FY2007.3

Net Sales: ¥459.1 billion
Operating Income: ¥42.2 billion
Overseas Sales: 22.4%

FY2009.3 (Target)

Net Sales: ¥550 billion
Operating Income: ¥58 billion
Overseas Sales: 25%
Targets for the final
year of the medium-term
management plan

10

In preparation for achieving the goals of the final year of themedium-term management plan, which ends in March 2009, what
type of strategies will the Company implement in the fiscal year
ending March 2008?

Q

M&A activities are increasingly common, and the importanceof providing a return to shareholders is drawing considerable
attention. Would you discuss the policy of the BANDAI NAMCO
Group for shareholder returns, especially dividends?

The Company gives high priority to the distribution of profits to shareholders.
We strive to continue to pay dividends and raise enterprise value while further
strengthening the Group’s competitiveness and maintaining a sound financial position.
Our fundamental policy for providing a return to shareholders is to aim for a payout ratioof 30% in accordance with consolidated operational results, based on a stable annual
dividend payment of ¥24 per share.
In accordance with this fundamental policy, for the year under review we paid
dividends of ¥28 per share, which comprised the base portion of ¥24 per share—¥12 pershare for both interim and year-end dividends—and a performance-linked portion of ¥4
per share. This represents an increase of ¥4 per share from the previous year and aconsolidated payout ratio of 29.2%.
In addition, we have completed the initial round of Group reorganization, and, atthe end of the first full fiscal year since the management integration, we clarified theGroup’s basic policy for the application of cash. Specifically, with regard to reserve funds
after the deduction of working capital and outlays for forward capital investments related
to operations, the Company considers the acquisition of treasury stock for the provision ofa return to shareholders and other purposes, after taking into account an overall
assessment of expected earnings for the current and next terms as well as capital
expenditure projects. We have moved quickly to implement this policy. After deducting
essential funds defined in the policy from reserve funds of about ¥120 billion at the endof the fiscal year ended March 2007, we implemented repurchases of our own stock fromMay 10 to June 12, 2007, and acquired 4.98 million shares. And in June 2007, we cancelled
4.50 million shares of treasury stock, or 1.73% of the total number of shares issued
prior to the cancellation.

A

Cash Dividends /Consolidated Dividend Payout Ratio
(Yen)

Q

In recent years, in addition to profit contributions, the social
expectations for listed companies have included growing concern
with CSR in a wide range of fields, including compliance, productand service safety, and environmental considerations. Please tell us
about the Group’s CSR initiatives.

30

Cash Dividends
Consolidated Dividend
Payout Ratio (Right Scale)

44.1
25

（%）

50
28

24

20

40

29.2
30

The Group’s corporate philosophy is to provide “Dreams, Fun and Inspiration” topeople around the world through entertainment based on creativity and boundlessenthusiasm. Accordingly, we have formulated Groupwide CSR initiatives that include three
types of responsibilities—legal and ethical, environmental and social, and economic.
Centered on the CSR Committee, which I lead, we are implementing a range of CSR
activities that are characteristic of the BANDAI NAMCO Group. (Please see page 28 formore information.)On the other hand, in regard to legal and ethical responsibilities, we have taken steps
to ensure that Group companies in Japan and overseas and all directors and employees
understand the fundamental elements of compliance. At the same time, we are continuallymonitoring legal and ethical compliance under an original corporate governance system.
Without the support of society, a company will not be able to grow. We are undertaking
both business activities and CSR activities in accordance with our strong commitment toproviding “Dreams, Fun and Inspiration” and existing as a group together with society.

A

15
20
10
10

5

0

2006.32007.30Note: Dividends for the fiscal year ended March
2006 include share transfer payments madein lieu of interim dividends.

11

W
E
I
V
TER

IN

Shukuo Ishikawa,CEO and Representative Director
NAMCO BANDAI Games Inc.

&

Shin Unozawa,
COO and Representative Director
NAMCO BANDAI Games Inc.

Game Contents
Special Feature:
Medium-Term Strategies
in the Game Contents SBU
12

NAMCO BANDAI Games aims to become the world’s premier quality
game maker.
The BANDAI NAMCO Group is implementing a three-year medium-term management plan with the key
theme of “strengthening, enriching, and expanding portfolio management,” centered on its five SBUs. The
year under review was the first year of the management plan, and it got off to a smooth start. However,many analysts and investors believe that the success of the Game Contents SBU will substantially affect
the Group’s ability to achieve the goals set out for the final year of the plan—net sales of ¥550 billion andoperating income of ¥58 billion in the fiscal year ending March 2009.
In this section, Shukuo Ishikawa, CEO and Representative Director, and Shin Unozawa, COO and
Representative Director, of NAMCO BANDAI Games, the core company in the Game Contents SBU, discuss
the medium-term strategies that NAMCO BANDAI Games is implementing.

Q

NAMCO BANDAI Games was established in March 2006. Whatdegree of progress has the company made over the past year?

Our greatest success over the past year was the integration of NAMCO and Bandai,
which had strengths in different fields. In particular, employees came together
quickly on their own initiative. Employees from Bandai showed interest in NAMCO’s strong
technical development capabilities, while employees from NAMCO showed interest in
Bandai’s marketing capabilities, such as media tie-ups. We think that the smooth andnatural process of integration among employees has had tremendous value. Actually, we
started to see concrete results from the second half of FY2007.3. In October 2006, forexample, we launched Mobile Suit Gundam: Senjo-no-Kizuna, an arcade game machine thatshowcases the synergies from the management integration.
And we expect the integration of bases, which has brought together our people,
facilities, and know-how, to serve as a trigger for even greater benefits from the
management integration. In April 2007, NAMCO BANDAI Games consolidated its offices
from five separate locations in Tokyo and Yokohama into a new head office building inTokyo’s Shinagawa Ward. The key phrase for this move was “face to face,” and theobjective was to further increase operational efficiency and productivity, thereby enhancing
our performance. In particular, we expect the improved communication to generate avariety of ripple effects. Since moving to the new building, there is a sense that employees
are smiling more. Employees are closer, both physically and psychologically, and thatcloseness will be the driving force behind the realization of synergies at an accelerated pace.

A

Q

Mobile Suit Gundam: Senjo-no-Kizuna, an arcade game machinethat showcases synergies, has become a major hit.

Mobile Suit Gundam: Senjo-no-Kizuna resulted from synergies between Banprestoand NAMCO BANDAI Games. It concentrates the technical capabilities and character
merchandising know-how of the Group. In fact, it is an arcade game machine that could
only be created by the BANDAI NAMCO Group. Since its launch in October 2006, it hassustained high popularity, and even though more than six months have passed since it was
released we continue to receive additional orders from amusement facilities around thecountry. Also, its utilization rate at amusement facilities remains at a high level. The
overwhelming majority of arcade game machines peak shortly after their introduction, so
the success of our new machine is very unusual. The ability of Mobile Suit Gundam: Senjono-Kizuna to sustain its popularity is a result of the way we leverage network gamecharacteristics and implement finely detailed upgrades that incorporate feedback from
customers. As a result, we are seeing increases in repeat customers. In the future, we will
launch major upgrades at a pace of about once a year, thereby building Mobile Suit
Gundam: Senjo-no-Kizuna into a long-term success. At the same time, we will consider
developing it in overseas markets.
In addition, we are developing other machines that leverage integration synergies,
such as character photo seal printing machines and medal game machines. We will bolster
these activities in the future, including enhancing links with other SBUs.

A

Net Sales by Category
Home-Use Game Software(Billions of yen)
80

78.5

76.0
72.2

60

40

20

0

2006.32007.32008.3(Projection)

Net Sales by Category
Arcade Game Machines(Billions of yen)
80

60.0

60

55.9
46.9

40

20

0

2006.32007.32008.3(Projection)

13

INTER Game Contents
VIEW
Q

The success of the Game Contents SBU will have a major influenceon the ability of the BANDAI NAMCO Group to meet the goals of its
medium-term management plan. Targeting the final year of the plan,
ending March 2009, what areas will the SBU strive to strengthen?

The biggest challenges will be to increase the precision of our strategy of efficiently
extending a single piece of content to all fields, including arcade game machines andhome-use game software, and to strengthen our earnings foundation. Accordingly, we willfurther enhance the quality and competitiveness of each game content title. And due tomore-advanced game machines and higher-speed, higher-capacity networks, business
opportunities in online operations are expanding on a global scale, and in response we willbolster our capabilities in network compatible products.
Moreover, to meet the goals of the medium-term management plan, we believe that
we must expand overseas operations. In particular, the rebuilding of home-use gamesoftware operations in the Americas, where locally developed game titles faced toughconditions in the year under review, will be a major challenge. In response, we are taking
steps to reduce locally developed titles and focus on the development of franchise titles
from Japan. In addition, we are reevaluating our system for local development of home-use
game software for overseas markets and establishing a system that will consolidate controlof overseas bases in Japan, including management. At the same time, instead ofdevelopment that is based on the framework of “products for Japan” and “products
for overseas,” we will emphasize cooperation between Japan and overseas bases andimplement worldwide development from the planning stage. By conducting developmentin this manner, we will strive to raise profitability.

A

A
W
A
SHIK

I

Q
メーカー別ソフト販売本数シェア（2006 年度）
Share of Domestic Software

Unit Sales by Manufacturer(FY2007.3)
Name

1 Nintendo Co., Ltd.

% of Total

33.6

2 NAMCO BANDAI Games Inc. 10.7
3 The Pokemon Company

8.1

4 SQUARE ENIX CO., LTD.

6.9

5 SEGA CORPORATION

6.8

6 KONAMI CORPORATION

6.5

7 CAPCOM CO., LTD.

5.1

8 Sony Computer Entertainment Inc. 3.3
9 KOEI Co., Ltd.

1.6

10 Banpresto Co., Ltd.

1.4

Data from March 27, 2006, to March 25, 2007
Source: Famitsu Game White Paper 2007,
issued by ENTERBRAIN, INC.

Would you explain the SBU’s specific strategies for arcade gamemachines?

In Japan, our basic strategy is to bolster video games for frequent game players aswell as strengthen casual products for families. Recently, we have seen an increasein large-scale amusement facilities in shopping centers, which have significant customerdrawing abilities. These amusement facilities are attracting many families who have notfrequently visited game centers in the past, and we will enhance our casual products forfamilies by aggressively adding features that can be enjoyed by anyone. We will also work tofollow up Mobile Suit Gundam: Senjo-no-Kizuna with the development of other innovative
products that draw on the strengths of the BANDAI NAMCO Group.
Also, our video game machines and prize machines have been well received, but weare not satisfied with our medal game machines. In the fiscal year ending March 2008, we
will launch a large-scale medal game machine and work to expand our share of the market
for these products.

A

Q

What is the SBU’s strategy for home-use game software?

In the year under review, the pace of the adoption of next-generation home-use
game consoles was slower than anticipated. However, from the second half of the
fiscal year ending March 2008, we expect the penetration of next-generation game consoles
to improve and market conditions to turn upward. In line with these market trends, we willbuild a lineup of titles, including the synergy titles that we have been developing since themanagement integration. Moreover, we are conducting a full-scale reevaluation of ourstrategy for overseas operations, where home-use game software operations faced difficult
conditions in the year under review. In the final year of the plan, ending March 2009, we
think we can record substantial growth.

A

14

As a strategy, we will bolster multiplatform development of major titles and work toleverage the distinctive characteristics of each platform. Our specific strategy for handheld
devices is to offer simple software for casual users on the Nintendo DS and software forteenagers on the PSP. For previous-generation home-use game consoles, we will develop
software centered on characters for the PS2. And for next-generation home-use game
consoles, we will take on the challenge of providing new types of entertainment thatleverage the characteristics of the Wii while launching high-end titles and cultivating
advanced development technologies for the PS3 and Xbox360. We are developing abundantvariations of software for a wide range of targets, and we will work to build a lineup of titles
that meet those diverse needs.
Moreover, based on that strategy, we will allocate our development resources equally
among handheld devices, previous-generation home-use game consoles, and nextgeneration home-use game consoles. Furthermore, to implement this platform-oriented
strategy, in April 2007 we reorganized our home-use game software development system,
dividing it into developer and publisher divisions and clarifying roles and responsibilities. As aresult, developers can focus on the development of high-quality software within budget anddelivery constraints and publishers can focus on expanding sales of superior products. Thissystem was made possible by the integration of Bandai and NAMCO, each with its own
strengths.

U

Unit Sales of Home-Use Game Software
Unit Sales by Game Machine

Q

A
W
A
NOZ

Thousands of Units

FY2006.3

FY2007.3

FY2008.3 (Projection)

PlayStation 2 (PS2)

16,08010,6705,991

Nintendo DS

2,418

4,731

8,101

PlayStation Portable (PSP)

2,896

4,641

2,338

PLAYSTATION 3 (PS3)

―

972

2,859

Nintendo Wii―

492

Xbox360

260

Others
Total

Unit Sales by Region

Thousands of Units
FY2006.3

FY2007.3

FY2008.3 (Projection)Japan

13,106

12,215

15,2004,143Americas

6,402

5,930

4,950

237

1,213

Europe

6,726

4,715

4,650

5,218

1,609

555

Asia

638

492

400

26,872

23,352

25,200Total

26,872

23,352

25,200

Finally, what are your aspirations for NAMCO BANDAI Games?

At NAMCO BANDAI Games, we look forward with anticipation, and we are eager
to take on the challenge of future growth. The consolidation of our offices from five
separate locations in Tokyo and Yokohama into the new head office building will enable
us to maximize the benefits of the management integration. And enhanced communication
is driving further integration. For NAMCO BANDAI Games, the greatest benefits from the
management integration are yet to come. We are confident that our shareholders andinvestors can expect great things from NAMCO BANDAI Games, which aims to become
the world’s premier quality game maker.

A

15

Medium-Term Management Plan
Strengthening, Enriching,and Expanding Portfolio Management
In April 2006, we commenced a three-year medium-term management plan with the key theme of “strengthening,enriching, and expanding portfolio management.”
We combine a business portfolio, where businesses are developed in a wide range of fields; a content
portfolio, with extensive lineups; and an area (regional) portfolio, where operations are developed in regions
around the world. Under this original portfolio management strategy, we use three-dimensional, multifaceted
combinations of these portfolios and strive to achieve stable, ongoing growth and a strong operationalfoundation.
Under the medium-term management plan, the key business strategies are promoting the Entertainment
Hub Concept and strengthening overseas businesses. In accordance with these strategies, we are working tostrengthen, enrich, and expand portfolio management while, at the same time, creating a spiral effect byleveraging synergies among the portfolios, thereby maximizing the Group’s growth potential.

Key Focus of Medium-Term Management Plan:
Strengthening, Enriching, and Expanding
the BANDAI NAMCO Group’s Portfolio Management

Area (Regional) Portfolio

C

Portfolio SpiralContent

Portfolio

Business

Portfolio

B

Management Strategies

Business Strategies

Pure Holding Company (NAMCO BANDAI Holdings)

Strategic Business Units (SBUs)(1) Strengthening corporate governance(2) Effectively utilizing human resources(3) Building optimal management system

16A(1) Entertainment Hub Concept
1. Content strategy
2. Domain strategy
3. Channel strategy(2) Strengthening overseas businesses

Management Strategies
1. Strengthening corporate governanceThrough the implementation of a range of initiatives, such as bolstering internal control systems, strengthening performancemonitoring, and enhancing the corporate brand, we will work to raise management soundness, transparency, and efficiency
while building a corporate governance system that will enable rapid information disclosure.
2. Effectively utilizing human resources
Employees are the Company’s most important resource and the driver of growth. To provide the workplace environment andthe opportunities needed for employees to utilize their abilities, we are taking such steps as promoting the sharing of knowhow through personnel exchanges within the Group, bolstering Groupwide employee education programs, and introducing
new employment rules.
3. Building optimal management system
Our basic policy for restructuring is to target the most efficient, effective Group management. In accordance with that policy,
we have three principal themes.
The first is “cooperation.” In fields with mature markets, we will combine overlapping divisions in SBUs, while in markets
in which we can expand our share through the use of the Group’s combined strength, we will pursue greater efficiency andeconomies of scale.
The second is “competition.” In growth markets, we will compete aggressively, including within the Group, and work toraise the overall value of the Group as a whole while maintaining the current organization.
The third is “collaboration.” We will integrate the operations of indirect departments, such as accounting, generalaffairs, human resources, and IT, thereby reducing indirect costs and bolstering our profit structure.

Business Strategies
1. Entertainment Hub Concept
The Entertainment Hub Concept entails a system for developing a comprehensive range of activities, from the creation
and acquisition of content to product development and sales. This system is similar to a hub airport. As we implement
the content, domain, and channel strategies, we will strengthen links within the Group and develop open relationships
for flexible cooperation with outside partners and content creators, thereby enhancing the hub functionality. Under thisapproach, we will strive to create entirely new businesses, products, and services and to fully utilize the Group’s strengths.
The Entertainment Hub Concept
Character MerchandisingTechnology

Broad Domain

Locations

Develop VerticallyDevelop Horizontally

Expand Territory

Content Strategy

Domain Strategy

Channel Strategy

Create, Obtain, and Cultivate
High-Quality Content

Expand Growth through Developmentof New Categories within Existing Domains
Venture into New Domains

Bolster Space Creation Capabilities
Expand Client Contacts

Strengthen Efforts with Partner Companies

2. Strengthening overseas businesses
In overseas markets, each SBU will develop its core operations on a regional basis. On the other hand, we will establish close
links with regional oversight, making full use of regional characteristics, and bolster portfolio management by region.

17


c
i
g
e
t
a
r
t
S iness ) y
s
s
b
u
U
b
B ts (SB Ho ility
c
d
i
a
n
F
a
Un
t
s
n
e
y
o
em
T mus
A
ts
n
e
t
n
18.0

o
37.9
Game C
Network
28.4 Visu
al a
nd
Mus
4.3
ic C
8.8 2.6
ont
Amusement Facility

Toys and Hobby

FY2007.3
Net Sales¥459.1billionGame Contents

OthersVisual andMusic Content

NetworktentAffiliated Business Companies
18Toys and Hobby SBU

Core Company
Bandai Co., Ltd.
President andRepresentative Director

Kazunori Ueno

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

Amusement Facility SBU

Core Company
NAMCO LIMITED
President andRepresentative Director

Jun Higashi

Planning and managing
of a full range ofamusement facilities

Game Contents SBUCore Company
NAMCO BANDAI Games Inc.
President andRepresentative Director

Shukuo Ishikawa

Manufacturing andmarketing of gamesoftware for home-use
game consoles andhandheld devices and ofarcade game machines
and prizes

Network SBUCore Company
Bandai Networks Co., Ltd.
President andRepresentative Director

Satoshi Oshita

Provision of content formobile phones and PCs;
planning and developmentof e-commerce businesses

Visual and Music Content SBU

Core Company
Bandai Visual Co., Ltd.
President andRepresentative Director

Kazumi Kawashiro

Affiliated Business Companies

Planning and creation ofvisual content; development and sales of visualpackage software;
distribution of video on
demand services

Support for Strategic
Business Units in such areas
as distribution, logistics,
leasing, and printing

19

Business Strategies by SBU

Toys and Hobby
In the domestic market, we are broadening
our target customer groups and advancing
into new fields. In overseas markets, weare aggressively expanding our operations.

Net Sales(Billions of yen)
250

Japan

Overseas

210.0
200

181.0

190.0

185.6

150

146.0
134.0
134.6

132.1

46.3

53.5

100

50
64.0

56.0

0
2006.32007.32008.32009.3(Projection) (Target)

Operating Income /Operating Income Margin
Operating Income Margin (Right Scale)
Overseas

Japan(Billions of yen)
20
19.1

17.8

17.4
15

（%）

19.0

15

10.5
9.4
13.5

9.4

9.0

11.2 10

8.6
9.6

10

5
5

8.8
8.2

5.5

7.8

0

0
2006.32007.32008.32009.3(Projection) (Target)

The DATA CARDDASS machine,which combines digital data anda card game, is especially popularamong elementary school children.

20

In the toys and hobby business, our challenges include the shrinking of the domestic
market due to the falling birthrate and the diversification of consumer needs. In
response to these challenges, the Toys and Hobby SBU is broadening its target
customer groups and advancing into new fields. At the same time, in overseas markets
we are aggressively expanding our operations. Moreover, to implement strategies more
rapidly, we are actively building strategic relationships with external partners.
In Japan, we are working to strengthen established character toys, expand
our target customer range, increase the market share of DATA CARDDASS, expand
operations in new fields of business, and raise efficiency by reevaluating development
processes.
In strengthening established character toys, in addition to the popular Masked
Rider Den-o and Yes! Precure 5, we will launch products tied in with the start ofbroadcasting of the new Gundam animation in October 2007. DATA CARDDASS faces
intensifying competition among card game machines, and in response we are using
our wealth of content as a competitive edge to expand our market share. We areworking to expand the range of target customers. Specifically, for young boys, inaddition to established content for elementary school boys, such as Dragonball, we
began promoting Daikaijyu Battle–Ultra Monsters for preschool boys from May 2007.
For girls, we launched Yes! Pretty Cure 5 in the second half of the fiscal year.
Furthermore, we are taking on the challenge of new businesses, such as hair salonsand photo studios that we are developing through the extension of the characterbusiness.
We will also work to improve our results overseas. To that end, we will strive toincrease sales of established characters, centered on POWER RANGERS. In addition, we
will expand the regions in which popular products are available, such as BEN10, which
has done well in the United States.

With cumulative sales totaling morethan 380 million units, the Mobile Suit
Gundam plastic model series is afavorite of customers in a wide rangeof age groups.

The POWER RANGERS series products have been highly popular for
more than 30 years in Japan andmore than 15 years overseas.

We are developing candy toys basedon the Tamagotchi characters, which
are popular among children.

Amusement Facility
We are providing innovative, highvalue-added facilities and services thattarget a wide range of customer groups.

Net Sales(Billions of yen)
120

Japan

Overseas

114.0
95.0
88.2

90

81.3

In the amusement facility business, key challenges include changes in the industry’s
profit structure, the diversification of customer preferences, and the revision of theconsumption tax rate. The Amusement Facility SBU is responding to these challenges
by increasing profitability through improvements to the cost structure. In addition,
through links with other SBUs, we are bolstering our provision of innovative, highvalue-added facilities and services that target a wide range of customer groups.
Overseas, we are working aggressively to increase profitability by developing ouroperations in line with regional characteristics.
In the domestic market, we plan to open 10 amusement facilities per year,
principally in shopping centers, which have significant customer-drawing power.
Meanwhile, improving the profit margin in amusement facility operations, which havehigh fixed costs, has become an important issue. One step we are taking to improve
profitability is further acceleration of the scrap and build policy. In the fiscal year
ending March 2008, we plan to close 22 directly managed facilities. And we expect
sales at existing facilities to increase 1% from the previous year. We will aggressively
introduce popular, large-scale machines and work to differentiate our operations fromthose of competitors by leveraging character synergies. Based on the know-how
cultivated through Namco Wonder Park Hero’s Base and Tamagotchi Park, we will
aggressively develop facilities linked with characters.
In overseas markets, we will aim to increase profits through continued
development in line with regional characteristics. In the Americas, we will work to
improve profitability by increasing the number of facilities operated on a revenuesharing basis and implementing cost-cutting measures. In Europe, we will bolster thedevelopment of hybrid facilities, such as bowling facilities.

Namco Wonder Park Hero’s Base isan amusement facility that integrates
amusement and characters andshowcases the benefits of the management integration.

Tamagotchi Park is an amusement
facility based on the popular
Tamagotchi characters.

KOCHIKAME Game Park is acharacter amusement facility thatenables customers to experience
the world view of KOCHIKAME.

98.8
60

78.0
72.3
68.2

30

15.2

17.0

15.9

13.1
0
2006.32007.32008.3(Projection)2009.3(Target)Operating Income /Operating Income Margin
Operating Income Margin (Right Scale)Japan
Overseas(Billions of yen)
8

（%）

8.0

15

6.0

6

10

4.0

4

7.0

7.5

6.3
5.5

4.5
2

1.9

5

3.4

2.3
1.8
0

0.6
0.1
2006.32007.30.5

0.5

2008.3(Projection)2009.3(Target)0Hybrid bowling facilities are being
developed in Europe.

21

Business Strategies by SBU

Game Contents
We are working to increase development
efficiency and create a title lineup that isbalanced among platforms.

Net Sales(Billions of yen)
200

Japan

Overseas

170.0
150

130.8

150.0

139.2

115.0
100

115.0
107.3

106.2
50

55.0

35.0

31.9

24.6
0
2006.32007.32008.3(Projection)2009.3(Target)Operating Income (Loss) /Operating Income Margin
Operating Income Margin (Right Scale)Japan
Overseas(Billions of yen)
25

（%）

24.0

20

14.1

15

20

15.0

15

19.6

10.0

10

11.5

9.7
10

8.3

12.5

7.4
9.7
5

0

5

10.6

1.8

4.4

2.5

0

–0.9

–2.5

2006.32007.32008.3(Projection)2009.3(Target)The game industry is in the “between seasons” period following the launch of nextgeneration game consoles. The industry’s key challenges include changes in customer
needs and rising content development costs. In the Game Contents SBU, in responseto these challenges, we will share know-how and technologies among such fields as
arcade game machines, software for home-use game consoles, and game content formobile phones. In this way, we will reevaluate development processes and build aflexible development system. Through these types of initiatives, we are working to
respond rapidly to customer needs by increasing development efficiency and creating
a title lineup that is balanced among platforms.
In the domestic market for arcade game machines, we will aggressively introduce
new large-scale medal game machines to expand our market share. Also, we will work
to follow up the highly popular Mobile Suit Gundam: Senjo-no-Kizuna with thedevelopment of other innovative products. Meanwhile, in overseas markets, in addition
to Europe and the Americas, we will implement dynamic development of content on aworldwide basis, including Asia.
In the domestic market for software for home-use game consoles, we will bolster
multiplatform development of major titles and work to leverage the distinctive
characteristics of each platform. Overseas, in the Americas, we will consolidate our
locally developed titles and move forward in developing a stable profit base and abalanced lineup of titles. In addition, we will work to improve profitability in the global
market by conducting worldwide development of franchise titles from Japan. In gamecontent for mobile phones, we will work to further increase the number of domestic
subscribers by enhancing content. At the same time, through tie-ups with overseas
partners, such as telecommunications carriers, we will bolster our operations abroad.
Note: For more information about the Game Contents SBU, please see page 12.

The Wangan Midnight series of arcade
game machines, which enables players
to experience the world of comics, isan established favorite.

22

Mobile Suit Gundam: Senjo-noKizuna was made possible bysynergies between Banprestoand NAMCO BANDAI Games.

This software, developed throughcollaboration with another company,
leverages character merchandisingknow-how.

For handheld devices, we provide
a variety of game software that iseasy to enjoy.

Network
We are moving forward aggressively
in planning and developing attractive
mobile content while bolstering our
B-to-B business through the use of ourcapabilities in the development andproposal of new, industry-leading
technologies.

Net Sales(Billions of yen)
20

Japan

16.0
15

12.5

12.5

11.5

10

5

In the network business, key challenges include responding to new technologies
and functions in mobile phones, which are advancing rapidly, and to a larger, more
02006.32007.32008.32009.3sophisticated network environment. In the Network SBU, we are taking various steps(Projection) (Target)
to respond to these challenges. In mobile content operations, the SBU’s earnings base,
Operating Income /we are moving forward aggressively in planning and developing attractive mobile
Operating Income Margincontent while bolstering our B-to-B business through the use of our capabilities in(Billions of yen)
Operating Income Margin (Right Scale)
（%）
2.5
25
Japan
the development and proposal of new, industry-leading technologies. To respond to
2.3
intensifying competition in the industry, we will bolster our earnings base throughselection and concentration by reevaluating unprofitable content and improving our
2.0
20
1.8
business model and open up new fields of business.
We will expand our lineup of popular game content, from high-value-added
14.7
14.4
1.5
15
content based on popular characters to simple content, and implement development
targeting a wider range of customers. In standby screen images and ring tones, we
1.0
1.0
10
0.9
will consolidate unprofitable contents. At the same time, we will reevaluate our
8.7
business model, including our solutions business for corporate customers, such as
7.0
0.5
5
systems development for mobile sites. Moreover, we will take steps to pursue Groupsynergies, including the distribution of content through Group companies in Europe00
and further strengthening of tie-ups, such as the provision of a service linked with the2006.32007.32008.32009.3
Mobile Suit Gundam: Senjo-no-Kizuna arcade game machine.
(Projection) (Target)

With progress on both graphics and entertainment
value, our mobile game content has generated a steadyincrease in the number of fee-paying subscribers.

Through Internet sales, we areoffering unique products for awide range of customers.

We operate information exchangesites for selected target groups.

23

Business Strategies by SBU

Visual and Music Content
We are increasing business opportunities
by striving to create superior content andexpanding the scope of our operations toinclude content development in music andpublishing.

Net Sales(Billions of yen)
50

Japan

43.3

Overseas

44.0

43.0

42.0

40

30
42.2

41.1

39.2

42.0

20

10

0

1.9
1.1
2006.32007.32.8

2.0

2008.32009.3(Projection) (Target)

Operating Income (Loss) /Operating Income Margin
Operating Income Margin (Right Scale)Japan
Overseas(Billions of yen)
10

（%）

25

9.5
8

7.6

22.1

6

16.7

6.2
14.3

20

7.0

6.8
9.4

4

15

15.5

6.7

6.9

2

5

0.1

0

0.1

0.1

–1.4
–2
2006.32007.32008.32009.3(Projection) (Target)

This is the latest product in the Mobile
Suit Gundam series, which has been
consistently popular since its first broadcast more than 25 years ago.

24

10

0

In the visual and music content business, key challenges include developing content
businesses targeting new media and responding to new, advanced hardware. In the
Visual and Music Content SBU, to respond to these challenges, we are striving tocreate superior content and expanding the scope of our operations to include content
development in music and publishing. We are moving rapidly to make full use of
our own content on new hardware. At the same time, we are taking steps to build
a business model for new media, such as on-demand distribution of content.
Future development efforts will include the development of next-generation
media and initiatives to enhance on-demand distribution. We have begun full-fledged
development on a global scale of next-generation media. We plan about 30 titles for
HD-DVD and Blu-ray. In June 2007, we kicked off those activities when we launched
FREEDOM simultaneously in Japan and the United States. In on-demand distribution,
the number of downloads on the Bandai Channel is increasing steadily, and in the fiscal
year ended March 2007 we surpassed 16 million, for an overwhelming number one
share of the domestic market for fee-based animation distribution.
Our content strategy calls for the cross development of visual and music content
with publishing operations, including cooperation with Group companies Sunrise Inc.,
Lantis Co., Ltd., and EMOTION CO., LTD. Moreover, we are also focusing on thecreation of new content. In the fiscal year ending March 2008, we are introducing
products in a range of genres. These products include IDOLM@STER XENOGLOSSIA, asynergy title that animates popular content from arcade game machines; CODE GEASS:
Lelouch of the Rebellion, introduced through a tie-up with the Kadokawa Group; andMobile Suit Gundam 00, a new animation from Sunrise, a Group company.

An arcade game from NAMCO
BANDAI Games was developed
into this TV animation.

This original video animation is linked
with TV CF. It was launched simultaneously in Japan and the Americas as
the Group’s first HD-DVD product.

The ALI PROJECT best hits album
was released by Lantis.

Directors and Corporate Auditors(As of June 25, 2007)

President and Representative Director
Takeo Takasu

Director
Masahiro Tachibana

Director
Masaatsu Hayakawa

Director (Part-time)
Kazunori Ueno

Director (Part-time)Jun Higashi

Director (Part-time)
Shukuo Ishikawa

Director (Part-time)
Satoshi Oshita

Director (Part-time)
Kazumi Kawashiro

Director (Outside)
Masatake Yone

Director (Outside)
Kazuo Ichijo

Statutory Auditor (Full-time)
Koichiro Honma

Statutory Auditor (Full-time)
Katsutoshi Hirasawa

Statutory Auditor (Outside)
Osamu Sudo

Statutory Auditor (Outside)
Kouji Yanase• Management Strategy Committee• CSR Committee• Social Contribution Committee• Environmental Project Committee

Group Organization

Strategic Business Units• Crisis Management Committee

Toys and Hobby
Core Company Bandai

Amusement Facility
Core Company NAMCO• Compliance Committee• Internal Control Committee• E-1 Project• Waigaya (weekly meetings)

Game Contents

NAMCO BANDAI Holdings Inc.

Core Company NAMCO BANDAI Games

Network

Groupwide Meetings

Core Company Bandai Networks

Visual and Music Content
Core Company Bandai VisualGroup Strategy Committee
Content Strategy Meeting

Affiliated Business Companies
Support for Group Businesses

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

Corporate Governance System
The Company is working to enhance the supervision of management. The board of directors includes 10 members, of whom
2 are outside directors. Moreover, in order to ensure that the Company responds to changes in the management environment
as promptly as possible and to further clarify the responsibilities and awareness of directors, the term of directors has been set
at one year or less.
The Company uses the statutory auditor system. The board of statutory auditors comprises four auditors, of whom
two are outside auditors. Two of the statutory auditors are full-time. In accordance with the allocation of responsibilities as
determined by the board of auditors, each statutory auditor conducts audits, working with the independent auditors as needed.
The Internal Auditing Division rigorously audits business execution, and the independent auditors provide accountauditing. With close interaction centered on the statutory auditors, the Company’s internal control systems are continuallymonitored, and all issues are identified and understood and recommendations for resolving those issues are provided.
General Meeting of Shareholders
Appointment / Dismissal

Account Auditing
Reports on Results

Board of Statutory Auditors

Board of Directors
10 directors(of whom 2 are outside directors)

Independent Auditors

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

Auditing

Appointment / Dismissal
Supervision

Appointment /Dismissal

Appointment / Dismissal

Dismissal

Auditing

Representative Director

Personnel Committee
Reports

Directions

Reports
Committees

Directions

Internal Auditing Division
Cooperation
CSR Committee

Social Contribution
Committee,
Environmental Project
Committee

Crisis Management Committee

Management Strategy Committee
Support

Auditing
Compliance Committee

Group Strategy Committee

Internal Control Committee

Policy Directions

BANDAI NAMCO Group Companies

26

Reports

E-1 Project

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

Schedule

Agenda / Purpose

Participants

Board of Directors

Monthly

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

Directors, statutory auditors

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

Monthly

Preliminary investigation in accordance with work authority standards. Discussion

Full-time directors, full-time statutory

and reporting of Group management challenges and overall strategies.

auditors, others in accordance withagenda items

Group Strategy Committee

Waigaya Meeting

Monthly

WeeklyReports on BANDAI NAMCO Group business affairs and deliberations on

Directors, statutory auditors,

business issues and problems.

SBU representatives, others

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

Full-time directors, general managers

As shown in the table above, the Company holds a variety of top management meetings and has established a systemthat facilitates rapidly tracking and responding to Group management information. Moreover, the Company has establishedthe Personnel Committee. Outside directors represent half of the members of this committee, which objectively and neutrally
considers personnel and compensation issues regarding directors of the Company as well as other matters that are referred to it.
In addition, we hold regular meetings of the Compliance Committee, which is led by the president. This committee is incharge of monitoring and supervising important issues related to compliance and has established a system to prevent violationsof laws and regulations and to ensure prompt action in the event of any incidents that could be a legal or regulatory violation.
In crisis management, the Crisis Management Committee, which is led by the president, meets as needed and works onbehalf of the BANDAI NAMCO Group to prevent crisis situations and to ensure a prompt response if such situations do occur.
The Group comprises five Strategic Business Units (SBUs) and the affiliated business companies, which principally
provide support. In each SBU, operating strategies in Japan and overseas are formulated and implemented, centered on the
SBU’s core company.
Under the medium-term management plan that began in April 2006, management strategies are mainly implemented by
the holding company and business strategies are mainly implemented by the SBUs. The main theme of the plan is “strengthening,enriching, and expanding the BANDAI NAMCO Group’s portfolio management.”
The Company, which is a holding company, monitors each SBU; holds meetings of Groupwide committees, such as theManagement Strategy Committee, the Group Strategy Committee, and the CSR Committee; and formulates strategies for theGroup as a whole.

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

27

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

12Legal and ethicalresponsibilities

Environmental and social
responsibilities(compliance)(safety / quality, environmental conservation,
cultural / social support activities)

Legal and ethicalresponsibilities

Environmental and social
responsibilities(compliance)(safety / quality, environmental conservation,
cultural / social support activities)

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

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

28

3

Economic
responsibilities

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

T O P I C S“Bandai Namco Forest” at Shiga Kogen“Bandai Namco Forest”
at Shiga Kogen

The BANDAI NAMCO Group signed a“forest adoption agreement” with aforest support foundation in Nagano
Prefecture. Under the terms of theagreement, the BANDAI NAMCO
Group will provide support for forest
management activities at the 47hectare “Bandai Namco Forest” at
Shiga Kogen and work to help fostera deeper understanding of forest
conservation issues.

Packaging and wrapping initiatives

Manufacture of safe, reliable products

Dropping products to test
for quality

Barrier-free entertainment operations

We are implementing measures toreduce packaging, such as decreasing
packaging space ratios; developing
packaging-free products; developing
low-environmental-impact productpackaging; reducing plastic model
runners; and reducing packaging
materials for amusement machines.
Packaging materials foramusement machines

A vending machine
capsule made withbiomass chips and acapsule productSocial contribution activities

Omocha-no-Machi
Bandai Museum

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

NAMCO’s TalkingAid Light

We are using our unique capabilities inentertainment in a range of ways, suchas the development of TalkingAid, a
portable communications device; thedevelopment of a rehabilitationentertainment machine that isdesigned to provide fun and physicalrehabilitation; and the operation of a
day service center that helps seniorcitizens to remain active in mind andbody.

Wide-ranging environmental impact
reduction activities

Bandai’s Hobby Center(plastic model plant)Entertainment support activities
We have signed a sponsorship contract
with Toyota Team Kraft, which competes
in the Super GT Series, and we haveprovided support for the Yosakoi SoranFestival in Hokkaido. In these ways, we
are working to foster understanding of
the Group and to support people who
strive to create entertainment.

In a range of business fields, we follow
all legal and industry quality and safety
standards. We have also established
our own more-rigorous in-housestandards, and we pay carefulattention to safety. In implementing
quality inspections for toys, forexample, we have established morethan 300 inspection items and conduct
rigorous tests in accordance with theindividual characteristics of the products.

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

One of BANDAI LOGIPAL’s
low-emission trucks

Yosakoi Soran Festival

29

Overview of Main Group Companies(As of the end of June 2007)

NAMCO BANDAI Holdings Inc.

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

NAMCO BANDAI Holdings (USA) Inc.

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

NAMCO Holdings UK LTD.

Execution of European regional strategy; management support for European operatingcompanies

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

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

Megahouse Corporation

Planning, manufacturing, and sales of toys, etc.

Seika Co., Ltd.

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

CCP Co., Ltd.

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

Seeds Co., Ltd.

Manufacturing of toys, etc.

Plex Co., Ltd.

Planning and designing of character-based products

Sunlink Co., Ltd.

Operation and sales of vending machine products, etc.

People Co., Ltd.*

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

Bandai America Incorporated

Sales of toy-related products

BANDAI S.A.

Regional management functions; sales of toy-related products

BANDAI U.K. LTD.

Sales of toy-related products

BANDAI ESPAÑA S.A.

Sales of toy-related products

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

Regional management functions; import, export, manufacturing, and sales of toy-related products

BANDAI ASIA CO., LTD.

Sales of toy-related products

BANDAI INDUSTRIAL CO., LTD.

Manufacturing of toy-related products

BANDAI KOREA CO., LTD.

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

CREATIVE B WORKS CO., LTD.

Sales of toy-related products

Amusement Facility Strategic Business Unit

30

NAMCO LIMITEDManagement of amusement facilities

Pleasure Cast Co., Ltd.

Operation of amusement facilities

Hanayashiki Co., Ltd.

Operation of Asakusa Hanayashiki amusement park

NAMCO SPA RESORT LTD.

Operation of spa facilities

Yunokawa Kanko Hotel Co., Ltd.

Management of tourist hotels

NAMCO CYBERTAINMENT INC.

Management of amusement facilities

NAMCO OPERATIONS EUROPE LTD.

Management of amusement facilities

NAMCO OPERATIONS SPAIN S.L.

Management of amusement facilities

NAMCO ENTERPRISES ASIA LTD.

Management of amusement facilities

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

* Companies accounted for by the equity method

Game Contents Strategic Business Unit
NAMCO BANDAI Games Inc.

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

Banpresto Co., Ltd.

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

Bec Co., Ltd.

Planning and development of game software

Banpresto Sales Co., Ltd.

Sales of arcade machines and prizes, etc.

Banpresoft Co., Ltd.

Planning and development of game software

NAMCO TALES STUDIO LTD.

Planning, development, and sales of game software

NAMCO TRADING LTD.

Vending machine installation and management; distribution of content for mobile platforms

BANPRESTO (H.K.) LTD.

Manufacturing and production management of arcade machines and prizes

NAMCO BANDAI Games America Inc.

Planning, development, and sales of game software

NAMCO AMERICA INC.

Sales of arcade machines

NAMCO NETWORKS AMERICA INC.

Development and distribution of content for mobile platforms

NAMCO BANDAI Games Europe S.A.S.

Sales and marketing of game software

NAMCO EUROPE LTD.

Sales of arcade machines

NAMCO BANDAI Networks Europe LTD.

Development and distribution of content for mobile platforms

Network Strategic Business Unit
Bandai Networks Co., Ltd.

Development and provision of network content and network solutions (JASDAQ)

VIBE Inc.

Development and provision of network content

Visual and Music Content Strategic Business Unit
Bandai Visual Co., Ltd.

Planning, production, and sales of visual software, etc. (Tokyo Stock Exchange, First Section)

Sunrise Inc.

Planning and production of animation

Bandai Channel Co., Ltd.

On-demand delivery of content, such as animations

Lantis Co., Ltd.

Planning, production, sales, and management of musical content

EMOTION CO., LTD.

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

ANIME CHANNEL CO., LTD.

Operation of comprehensive animation content sites

BANDAI ENTERTAINMENT INC.

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

BANDAI VISUAL USA INC.

Operation of visual packaged software

Affiliated Business Companies
BANDAI LOGIPAL INC.

Logistics management, warehousing, and transportation operations

NAMCO BANDAI Business Services Inc.

Leasing, building maintenance operations, insurance agency, real estate management, etc.

Artpresto Co., Ltd.

Planning and designing of various printed materials

NAMCO ECOLOTECH LTD.

Development and sales of environmental equipment

Happinet Corporation*

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

Sotsu Co., Ltd.*

Planning and development of advertising and copyright business (JASDAQ)

Italian Tomato Ltd.*Management of directly operated restaurants; franchise operations* Companies accounted for by the equity method

31

Business Risks
Risk factors related to the BANDAI NAMCO Group’s businesses
that may significantly affect decisions made by the investmentcommunity, include, but are not limited to, those listed below.
These statements on risk are based on information available to theGroup as of May 9, 2007.
1. Risks associated with 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 changes in the
popularity of specific content or related trends. Therefore, theGroup is working to achieve stable earnings by strengthening,enriching, and expanding its portfolio management through threedimensional and multilateral business administration. This portfolio
management comprises a business portfolio, in which the Group
conducts operations in a diverse array of business domains; acontent portfolio, consisting of many different characters andcontent; and a regional portfolio, where businesses are conductedin various regions around the world. In each business, the Group
works to develop new content and conducts marketing activities
designed to cultivate and develop that content over the long term.
2. Risks associated with overseas business expansion
The Group is aggressively expanding its business overseas. Thisinitiative exposes the Group to a variety of risks, including businessrisks 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. Operationally, theGroup conducts sufficient research to minimize these risks andformulates countermeasures before proceeding with overseas
business expansion. With respect to intellectual property rights,
the Group cooperates with local government agencies and otherauthorities to identify counterfeit products, promote enhanced
recognition of genuine products, etc. In addition, for foreignexchange risks, the Group uses forward contracts to lower therisks from short-term fluctuations in the exchange rates for major
currencies.
3. Retainment and development of key personnel
In the fast-changing entertainment industry, it is essential for theGroup to retain and develop personnel who can respond effectively
to rapid changes. In addition to developing a compensation systemthat will facilitate the retention of these employees, the Group
actively delegates authority. To develop the next generation of
employees, the Group is devoting resources to training seminars
and other development programs. Furthermore, the Group will
actively adopt personnel exchanges with the aim of reinforcing
cooperation between each Strategic Business Unit.

32

4. Risks associated with game contents businessIn the game contents business, titles are a significant cause offluctuations in profits, and there is a risk that changes in the timingof product launches will affect earnings in a given period. The Grouptightly controls software development schedules for every game while
striving to diversify risks by flexibly developing multiple products withdifferent software characteristics and development periods. Moreover,the launch of next-generation game platforms and the diversificationof customer needs lead to market conditions marked by uncertainty.
The Group tries to respond quickly to customer needs by putting moreemphasis on balanced titles among various platforms.
5. Risks associated with advances in and new generationsof platforms
In developing game content, visual content, and network content, theGroup faces the risk of delays in responding to advances in and newgenerations of content-provision platforms and the risk of delays inchanging its business models in response to these developments. The
Group conducts research into new technologies and works to develop
competitive content that is in step with the latest advances. At thesame time, the Group actively works to accumulate expertise on new
business models. Additionally, the Group takes steps to further
develop the content that it has created and to acquire rights to newcontent.
6. Decline in domestic birthrate
In the future, an ongoing decline in the domestic birthrate might
affect the financial results of the Group. Accordingly, the Group has
been expanding the scope and target of its business activities in Japanand is aggressively taking steps to expand its operations in overseas
markets.
7. Risks associated with concentration of production in China
In the Group’s Toys and Hobby SBU, approximately 90% of the toys
are manufactured in China. The Group faces the risk of higher
production costs from the revaluation of the yuan and country risk
stemming from the regional concentration of production. In response,
the Group is working to reduce production costs and to diversify its
production bases into Southeast Asia and other regions.
8. Risks from higher crude oil prices
The Group faces the risk that higher crude oil prices could lead tohigher production costs from increased product raw material prices
and to higher transportation costs. Accordingly, the Group is working
to standardize the metal casts and molds used for character toys
marketed worldwide and to reduce costs by enhancing the efficiency
of processes, ranging from production to distribution.
Additional risks include disasters, such as natural disasters or
accidents, changes in laws and regulations, defective or deficient
products or services, leaks of customer information, and litigation
associated with business activities. The Group maintains risk
management systems and works to strengthen its managementfoundation in order to minimize the effects on its results in the unlikely
event that any of these risks should materialize.

F i n a n c i a l

S e c t i o nContents
Consolidated Six-Year Financial Summary

34

Financial Review

35

Consolidated Balance Sheets

40

Consolidated Statements of Income

42

Consolidated Statements of Changes in Net Assets

43

Consolidated Statements of Cash Flows

44

Notes to Consolidated Financial Statements

45

Independent Auditors’ Report

68

33

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

Millions of yen except per share data and main financial indicators

2002*1For the years ended March 31

For the Year:Net sales
Gross profit
Selling, general andadministrative expenses
Operating income
Recurring income*2
Net income
Capital expenditures
Depreciation
Cash flows from operating
activities
At Year-End:Total assets
Current assets
Current liabilities
Total net assets
Per Share Data (yen):
Net income per share
Cash dividends
Main Financial Indicators (%):
Return on equity (ROE)*3, 5
Return on assets (ROA)*4, 5Selling, general and administrative expenses to net sales
Operating income
to net sales
Net income to net sales
Shareholders’ equity ratio
Debt/equity ratio

2003*1

2004*1

2005*12006

BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO¥227,930¥152,136
90,86634,85370,102
28,72020,764
6,133
21,993
4,664
10,644
2,035
7,212
11,943
6,505
14,08526,56815,368¥244,950¥154,777
106,801
37,52980,932
28,05925,8699,470
26,435
8,777
12,667
4,116
8,593
10,376
6,885
11,22728,00915,890¥263,175¥172,594
116,258
49,08888,60733,65827,651
15,43027,222
14,428
14,207
7,546
11,576
14,009
7,149
11,104
20,033
12,931¥269,946¥178,552
116,801
47,55592,40332,46924,39815,08625,724
14,58911,225
9,465
11,53913,155
7,947
11,173
14,8393,172

BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO
BANDAI
NAMCO¥197,424¥144,140
126,966
61,346
62,20829,659122,257
97,747¥225,683¥143,214
158,782
68,08967,21535,920130,683
98,400¥228,076¥148,117
163,13173,61461,31933,860137,739
104,619¥240,290¥154,474
173,40282,666
68,862
33,219150,410
110,935

BANDAI
NAMCO
BANDAI
NAMCO¥217.62¥ 36.95
30.00
17.00

¥254.09¥ 72.35
40.00
30.00

¥142.28¥133.00
22.50
40.00

¥111.13¥ 83.63
30.00
40.00

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

9.9%
2.2%
10.9
3.3
30.8
18.9
9.1
4.0
4.7
1.3
54.4
66.7
18.1
18.6

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

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

¥450,829¥459,133

156,565

168,080

120,896

125,856

35,66942,224

37,12245,61614,15024,252

24,02027,925

19,144

21,20131,80942,493¥386,651¥408,490

240,635

257,209107,528

110,829

252,244284,254¥54.39¥95.7312.00*6

28.00

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

*1 Figures for FY2002.3 to FY2005.3 are the consolidated figures for Bandai and NAMCO prior to the management integration.
*2 Recurring income is a Japanese accounting term denoting income before extraordinary items.
*3 ROE = Net income / Average total shareholders’ equity*4 ROA = Recurring income / Average total assets*5 Figures for shareholders’ equity and total assets as of March 31, 2006, are used in calculating ROE and ROA for the fiscal year ended March 2006.
*6 In lieu of interim dividends, share transfer payments of ¥18 per share were paid to shareholders of Bandai and ¥12 were paid to shareholders of NAMCO.

34

2007

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

5.8%

9.4%

9.6

11.5

26.8

27.4

7.9

9.2

3.1

5.3

63.0

67.1

13.5

5.1

Financial Review■ Overview of Performance in the Fiscal Year
Ended March 2007

Cost of Sales
Cost of sales was ¥291,053 million, and the ratio of cost of sales to
net sales declined to 63.4%, from 65.3% a year earlier. Gross profit

In the year under review, despite the fact that global crude oilwas ¥168,080 million, and the gross margin increased to 36.6%,

prices continued to soar, the worldwide economic climate tended

from 34.7% in the previous year.

toward recovery. Gradual growth also continued in Japan, where
corporate earnings continued to improve.

SG&A Expenses

The entertainment industry experienced increasingly intense

Selling, general and administrative (SG&A) expenses were ¥125,856

global competition, due to the diffusion and expansion of networked

million, up 4.1%, and the ratio of SG&A expenses to net sales

environments resulting from technological innovation. Furthermore,increased to 27.4%, from 26.8% in the previous year. Major items

the field of home video games was “between seasons” as, with theincluded marketing of ¥31,031 million, directors’ remuneration andfocus of popularity on portable video game consoles, next-

employees’ wages of ¥29,426 million, retirement and severance

generation video game consoles were released.

benefits of ¥1,163 million, and research and development ofIn this setting, the Group pushed ahead with strengthening,¥18,004 million.

enriching, and expanding its portfolio management, based on thethree-year medium-term management plan launched in the fiscal

Operating Income

year under review.

Operating income was ¥42,224 million, an increase of 18.4%, andIn the Toys and Hobby SBU, DATA CARDDASS performed well inthe operating income margin increased to 9.2%, from 7.9% in theJapan, while overseas POWER RANGERS toys for boys andprevious year. By region, operating income declined 11.9% in

Tamagotchi were popular. In the Amusement Facility SBU in Japan,

Japan, to ¥33,128 million; improved from the previous year’salong with an expansion in sales due to the opening of such new

operating loss to operating income of ¥3,377 million in the Americas;

large-scale stores as NAMCO Wonder Park Hero’s Base (Kawasaki

increased 21.3% in Europe, to ¥5,253 million; and rose 20.2% in

City, Kanagawa Prefecture), which pursued group synergy and got

Asia, to ¥2,730 million. Eliminations totaled ¥2,264 million.

off to a good start, cost reduction was attempted by optimizing theoperation of existing stores. In the home video game software field

Other Income (Loss)of the Game Contents SBU, in addition to strengthening sales ofLoss on impairment of fixed assets was ¥5,070 million, while

software for portable video game consoles, software for next-

interest and dividend income was ¥2,088 million and gain on sales

generation video game consoles was released. And, in coin-of investment securities was ¥4,827 million. As a result, net otheroperated game machines, Mobile Suit Gundam: Senjo no Kizuna

income was ¥1,490 million.

became extremely popular. In the Network SBU, despite the field ofgames in mobile content performing well, a reduction in the

Net Income

number of fee-paying subscribers for wallpaper and ring tones had

Net income was up 71.4%, to ¥24,252 million, and the net margin

a huge impact and the business struggled. In the Visual and Music

increased to 5.3%, from 3.1% a year earlier. This was largely

Content SBU, Group synergy was displayed in the Mobile Suit

attributable to gain on the sale of shares of Tohato Inc. and to

Gundam series, and new products, such as CODE GEASS: Lelouch

impairment loss on fixed assets accompanying the integrationof the Rebellion, became really popular.

of domestic Group company bases, such as Namco Nanjatown.
Net income per share increased to ¥95.73, from ¥54.39 in the

Net Sales

previous year.

The Company reported consolidated net sales of ¥459,133 million,
an increase of 1.8%. Looking at sales by region, sales in thedomestic market were ¥367,448 million, down 1.8%. Overseas,
sales were ¥53,990 million in the Americas, up 22.4%, and¥37,763 million in Europe, a gain of 20.9%. Sales in Asia were¥37,061 million, a rise of 15.4%.

35

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

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

Operating income (Millions of yen)

FY2007.3

FY2006.3

Year on year

FY2007.3

FY2006.3

Year on year

¥185,586
88,196
139,187
12,49043,007
20,901¥181,008
81,295
130,774
12,521
43,32820,804¥4,578
6,901
8,413
(31)
(321)
97

¥17,403
4,004
11,510
880
9,497
1,018

¥19,085
1,889
9,706
1,836
6,187
1,188

¥(1,682)
2,115
1,804
(956)
3,310
(170)

Note: Due to reorganization accompanying the management integration, the percentages of corporate expenses allocated to the Toys and Hobby, Amusement Facility,
and Game Contents SBUs in the fiscal year ended March 2007 have increased in comparison with the previous year.

Toys and Hobby SBU

Game Contents SBU

In Japan, DATA CARDDASS, whose development centered on

Among home video game software, attention focused on portablecharacters from Dragon Ball Z and Tamagotchi, became popular withvideo game consoles with the popularity, both domestically andboys and girls in the lower grades of elementary schools, and long-overseas, of the Tekken: Dark Resurrection for the PlayStation

established popular character toys for boys, such as Boukenjar

Portable and the Tamagotchi Connection: Corner Shop for the(POWER RANGERS), showed solid performance. However, girls’ toys

Nintendo DS. Also, Dragon Ball Z: Sparking NEO for the PlayStation

faced a tough battle amid sluggishness in the entire industry caused

2 and Wii performed well both domestically and overseas, whileby the popularity of portable video game consoles. Overseas, theMobile Suit Gundam: SEED Destiny Rengo vs. Z.A.F.T.II Plus andTamagotchi and POWER RANGERS series performed well

Tales of Destiny for the PlayStation 2 performed well in Japan. In

throughout the world and, in the Americas, character toys for boys

addition, a multiplatform strategy was pushed ahead with theof the locally developed character BEN10 became popular.

release of software for next-generation game machines; however,As a result, the Toys and Hobby SBU recorded net sales ofoverall performance was steady due to the scheduled release of¥185.6 billion, an increase of 2.5%, and operating income wassome products being changed from the fiscal year under review to¥17.4 billion, a decline of 8.8%.

the following fiscal year and a slump in local titles in America. In
coin-operated game machines, the cockpit-style game machine

Amusement Facility SBU

Mobile Suit Gundam: Senjo no Kizuna, which brings together the

In Japan, there was an increase in the number of store visits byGroup’s know-how to enable online play throughout Japan,

families due to the popularity of such card games as DATA

became popular domestically and synergy effects were displayed.

CARDDASS and crane game machines. In addition, Mobile Suit

Also, the expansion of new game contents for mobile devices, such

Gundam: Senjo no Kizuna, introduced sequentially from Octoberas mobile phones, resulted in a steady growth in the number of

2006, became extremely popular, mainly among core users. As afee-paying subscribers.

result, sales at existing stores were 101.1% compared with the

As a result, the Game Contents SBU recorded net sales ofprevious fiscal year. New large-scale stores also contributed to sales,¥139,187 million, an increase of 6.4%, and operating income offor example, a good start was made by NAMCO Wonder Park

¥11,510 million, up 18.6%.

Hero’s Base (Kawasaki City, Kanagawa Prefecture), which pursued
Group synergy. In addition, cost reduction was implemented by

Network SBU

optimizing the operation of existing stores.

In the mobile content business, the field of games performed well

Overseas, development was promoted according to regional

due to the popularity of high-value-added content, such as Mobile

characteristics. In Europe, hybrid facilities, such as bowling alleys,

Suit Gundam: Senjo no Kizuna content for mobile phones

were developed, mainly in the U.K., and performance was good. In

originated from the coin-operated game machine, and thethe Americas, various measures were taken in an effort to improve

comprehensive mini game site, Simple 100 Series. However, aprofitability, such as expanding revenue-sharing locations by

reduction in the number of fee-paying subscribers for wallpaper

working with major mass retailers and withdrawing from storesand ring tones had a huge impact and the business struggled.

with low profitability.

the 3D Engine, and solutions services for corporations, including¥88,196 million, an increase of 8.5%, and operating income ofsystem development for mobile sites, showed solid performance.

¥4,004 million, up 112.0%. At the end of the fiscal year, we had a total

As a result, the Network SBU recorded net sales of ¥12,490

of 1,664 facilities, an increase of 19 from a year earlier. By type, wemillion, a decline of 0.2%, and operating income was ¥880 million,

had 453 directly managed facilities, 1,202 revenue-sharing facilities,

down 52.1%.

6 theme parks, and 3 spa facilities.

36

Also, the provision of new technology for mobile phones, such as

As a result, the Amusement Facility SBU recorded net sales ofVisual and Music Content SBU

As a result, the Visual and Music Content SBU recorded net sales

The Mobile Suit Gundam series performed extremely well,of ¥43,007 million, a decrease of 0.7%, and operating income ofparticularly the DVD-BOX of the TV animation and new original¥9,497 million, up 53.5%.

video animations, and Group synergy was displayed. Also, among
visual software packages, in addition to such popular series as

Other Businesses

Ghost in the Shell: STAND ALONE COMPLEX Solid State Society,

Other Businesses consist of companies that provide support to the

new works, such as the TV animation CODE GEASS: Lelouch ofGroup’s SBUs through operations that include logistics, leasing, andthe Rebellion and the original animation FREEDOM, were alsobuilding management. During the fiscal year under review, thepopular. In addition, DVD-video sales to rental outlets contributed

business remained focused in its efforts at efficient operations ofto performance, and the music software package related tothese Group support services.

the TV animation The Melancholy of Haruhi Suzumiya by Lantis

As a result, Other Businesses recorded net sales of ¥20,901

Co., Ltd., who joined the Group during the fiscal year, also

million, up 0.5%, and operating income of ¥1,018 million, down

performed well.

14.3%.

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

Operating income (Millions of yen)

FY2007.3

FY2006.3

Year on year

FY2007.3

FY2006.3

Year on year

¥367,448
53,99037,76337,061¥374,320
44,104
31,244
32,112¥(6,872)
9,886
6,519
4,949

¥33,128
3,377
5,253
2,730

¥37,614(3,284)
4,330
2,271

¥(4,486)
6,661
923
459

Note: Due to reorganization accompanying the management integration, the percentage of corporate overhead expenses allocated to Japan in the fiscal year ended March 2007
has increased in comparison with the previous year.

Japan

In the Visual and Music Content SBU, Group synergy effects were

In the Toys and Hobby SBU, DATA CARDDASS was popular withdisplayed through the Mobile Suit Gundam series, and new works,

boys and girls in the lower grades of elementary schools and long-such as CODE GEASS: Lelouch of the Rebellion, were also popular.

established popular character toys for boys, such as Boukenjar

As a result, net sales in Japan totaled ¥367,448 million, a(POWER RANGERS), performed strongly; however, competition

decrease of 1.8%, and operating income was ¥33,128 million,

proved intense for girls’ toys.

down 11.9%.

In the Amusement Facility SBU, due to the popularity of card
game and crane game machines, as well as Mobile Suit Gundam:

Americas

Senjo no Kizuna, sales at existing stores were 101.1% compared withIn the Toys and Hobby SBU, the POWER RANGERS and BEN10

the previous fiscal year. Also, along with the contribution to sales bycharacter toys for boys and Tamagotchi were popular. In the

new large-scale stores, cost reduction was implemented by optimizing

Amusement Facility SBU, various measures were taken in an effort

the operation of existing stores.

to improve profitability, such as expanding revenue-sharing

In the Game Contents SBU, among home video game software, in

locations by working with major mass retailers and withdrawing

addition to releasing titles for next-generation game consoles, afrom stores with low profitability. In the Visual and Music Content

multiplatform strategy was pushed forward with attention also

SBU, efforts were made to increase profitability by reviewing

given to software for portable game machines and existing gamemarketing. In the Game Contents SBU, despite some home video

machines, and there was a trend toward recovery. However, agame software hits, such as Tekken: Dark Resurrection for thechange in the scheduled release of some products from the fiscal

PlayStation Portable and Naruto: Ultimate Ninja for the PlayStation

year under review to the following fiscal year had an impact, and2, the business struggled due to a slump in local titles. Game

performance did not reach that of the previous fiscal year. The coin-contents for mobile devices, such as mobile phones, performed welloperated game machines, centering on sales of Mobile Suit Gundam:

due to an expansion in new content.

Senjo no Kizuna, performed well.

As a result of these factors, we recorded net sales of ¥53,990

In the Network SBU, despite the field of games in mobile content

million in the Americas, up 22.4%, and operating income of ¥3,377

performing well, a reduction in the number of fee-paying sub-million, a substantial improvement from the previous year’s

scribers for wallpaper and ring tones had a huge impact and theoperating loss of ¥3,284 million.

business struggled.

37

Europe

Cash Flows from Investing Activities

In the Toys and Hobby SBU, Tamagotchi and POWER RANGERS

Net cash used in investing activities was ¥15,253 million, down

boys’ character toys were popular. In the Amusement Facility SBU,

37.5%. We recorded a ¥6,165 million gain on the sale ofstores integrated with such facilities as bowling alleys were

investment securities in Tohato Inc. Nonetheless, purchases ofdeveloped. In the Game Contents SBU, with regard to home video

property, plant and equipment and of intangible assets totaled

game software for the PlayStation 2, such as Dragon Ball Z Budokai¥14,521 million and purchases of investment securities in Kadokawa

Tenkaichi 2 and Tekken 5 Platinum, were popular.

Group Holdings Inc., Toei Co., Ltd., and others were ¥7,595 million.

As a result, net sales in Europe were ¥37,763 million, up 20.9%,
and operating income was ¥5,253 million, a gain of 21.3%.

Cash Flows from Financing Activities
Net cash used in financing activities was ¥18,856 million, a declineAsiaof 5.6%. This decline was due to a decrease of ¥13,113 million in

The Toys and Hobby SBU reported good performance for boys’ toys

short-term borrowings; ¥5,000 million in repayment of bonds;

in the POWER RANGERS series and plastic models in the Mobile Suit

¥2,434 million in repayment of other long-term borrowings; andGUNDAM series. In the Amusement Facility Business, initiatives¥6,073 million in dividends paid. Proceeds from disposal of treasury

surrounding prize games and Group products continued to do well.

stock amounted to ¥8,084 million.

As a result, net sales in Asia were ¥37,061 million, up 15.4%,
and operating income was ¥2,730 million, an increase of 20.2%.

■ Basic Policy on the Distribution of Profits
and the Payment of Dividends■ Financial Position
The Company positions the return of profits to shareholders as one
Total assets were up 5.6% at year-end, to ¥408,490 million. Thisof its highest management priorities. The fundamental policy is togain was attributable to higher accounts receivable stemming frommaintain a stable dividend and increase corporate value whilefavorable sales in the Americas and to increased inventories, such as

becoming an even more competitive Group and preserving a soundwork in process for home-use game software.

financial position. In concrete terms, the Company plans toTotal liabilities were down 7.6%, to ¥124,236 million. This decline
was primarily a result of the repayment of short-term borrowings.

maintain the consolidated dividend payout ratio at a level of 30%,
based on stable annual dividend payments of ¥24 per share. The

Net assets, including minority interests, were up 12.6%, toCompany plans to use retained earnings for more efficient asset¥284,254 million, due mainly to net income of ¥24,252 million andmanagement as well as actively investing in areas that will boost

to proceeds from disposal of treasury stock of ¥8,095 million. As acorporate value going forward, including the development of new

result, the shareholders’ equity ratio increased to 67.1%, frombusiness fields and M&A.

63.0% a year earlier.

In accordance with the Company’s basic policy, per-share dividends

In addition, the current ratio* was 232.1%, compared withfor the year were increased by ¥4.00 per share, to ¥28.00, com-

223.8% a year earlier, and the quick ratio* was 184.4%, comparedprising the base component of ¥24.00 per share—¥12.00 for bothwith 173.0% at the end of the previous fiscal year. The interest

interim and year-end dividends—and a performance-linked compo-

coverage ratio* was 180.1 times, compared with 90.4 times a year

nent of ¥4.00. The consolidated dividend payout ratio was 29.2%.
In the fiscal year ending March 2008, we plan to pay a baseearlier.
* Current ratio: Current assets / Current liabilities
Quick ratio: (Cash and time deposits + Short-term investments +Trade receivables) / Current liabilities
Interest coverage ratio: Operating cash flow / Interest paid

component of ¥24.00 per share—¥12.00 each for interim and yearend dividends—in accordance with our basic policy on the distribution of profits. The decision on year-end dividends will be made inconsideration of our consolidated performance for the year.

■ Cash Flows■ Targets and Management Indicators

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

The Group has adopted return on assets (ROA) and return on¥124,156 million, an increase of 9.7%.

equity (ROE) as medium-term management performance indicators.
The Group’s aim is to create a robust and stable management baseCash Flows from Operating Activities

over the medium term by ensuring all assets are always utilized to

Net cash provided by operating activities was ¥42,493 million, up

maximum efficiency and by effectively using equity. For this

33.6%. This gain was due primarily to ¥43,714 million in income

purpose, the Company has decided on a basic policy for the

before income taxes and minority interests.

application of cash. Specifically, with regard to reserve funds after
the deduction of working capital and outlays for forward capital

38

investments related to operations, the Company considers the

In the Network SBU, we plan to strengthen our profit base byacquisition of treasury stock for the provision of a return to share-developing varied, profit-oriented content. We will also continue toholders and other purposes, after taking into account an overall

focus attention on the provision of new technology for mobile

assessment of expected earnings for the current and next term asphone handsets and solutions for corporations, such as systemwell as capital expenditure items.

development for mobile sites.

The Group aims to attain consolidated ROA of 13.5% andIn the Visual and Music Content SBU, amid predictions ofconsolidated ROE of 10.0% in the fiscal year ending March 2009,

increasing demand for next-generation disk-related products, we

which is the final fiscal year of the medium-term management plan

will focus on the development of compatible products. In Japan, we

launched in April 2006, and will work to enhance management

plan to release approximately 30 items, including AKIRA and Mobile

efficiency in parallel with business expansion.

Police Patlabor Theatrical Version in each format (HD-DVD and
Blu-ray). Also, overseas, we will develop and release products■ Outlook for the Fiscal Year Ending March 2008

consecutively, beginning with FREEDOM.

Although the economic climate is expected to continue to

we are forecasting net sales of ¥480.0 billion, a year-on-year

experience gradual overall growth due to improved corporate

increase of 4.5%; operating income of ¥45.0 billion, a gain of

earnings and increased capital expenditure, there is concern about

6.6%; and net income of ¥26.5 billion, a rise of 9.3%.

As a result of these factors, for the fiscal year ending March 2008

the continuing rise in crude oil prices and climbing interest rates. In
the entertainment business environment surrounding the Group,

Fiscal Year Ending March 2008 (Consolidated Plan)

amid a continuing consumer trend toward increased diversification,
it is expected that the game industry in particular will undergo hugeBusiness Segmentschanges caused by future trends in portable game consoles and(Millions of yen)

Net sales

Operating income¥190,000¥17,800

next-generation game consoles, and it is forecast that the outlook

Toys and Hobby

will continue to be unclear.

Amusement Facility

95,0006,000

Game Contents

150,000

15,000enriching, and expanding its portfolio management, based on the

Network

11,5001,000

three-year medium-term management plan launched in April 2006.

Visual and Music Content

44,000

6,800

Other

19,500800

to the popular DATA CARDDASS with the aim of further widening

Eliminations and corporate(30,000)(2,400)

its target market. Also, in addition to such long-established popular

Total¥480,000¥45,000

In this setting, the Group will push ahead with strengthening,

In the Toys and Hobby SBU, in Japan, new contents will be addedboys’ character series as Juken Sentai Gekiranger and Masked Rider
Den-O, products for girls, which struggled in the fiscal year under

Geographic Segments

review, will be stepped up, with the focus on YES! Pretty Cure 5.
Overseas, as well as continuing to focus on POWER RANGERS
character toys for boys and Tamagotchi, we will expand the BEN10
region, which is mainly popular in America.
In the Amusement Facility SBU, we will endeavor to draw a wide
range of customers with our ever-attractive game machines and byholding various events. Moreover, as well as enlarging the scope ofsales by opening large-scale stores, we will expand profits by(Millions of yen)

Net sales(after eliminations) Operating incomeJapan¥370,000¥36,200

Americas56,0002,500Europe40,000

6,000

Asia

14,0002,800—(2,500)¥480,000¥45,000

Eliminations and corporate
Totalsharing administration know-how for low cost operations.
In the Game Contents SBU, amid extremely uncertain■ Forward-Looking Statements

circumstances in the “between seasons” home video gamesoftware industry, we will continue to develop software for each

Forecasts for the fiscal year ending March 2008 and other future

game console in a balanced manner according to our multiplatformprojections in this annual report are based on information available

strategy. We aim to enlarge our share of the coin-operated gameto the Group at the time they were made and are therefore subject

machine market by releasing popular titles, such as WANGAN

to various risks and uncertainties. Actual results therefore may differ

MIDNIGHT MAXIMUM TUNE 3, as well as investing in large-scalematerially from projections for a variety of factors. Major factors

medal machines.

that could influence results include changes in the Company and
the Group’s operating environment, market trends, and exchange
rate fluctuations.

39

Consolidated Balance Sheets
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
As of March 31, 2006 and 2007

Thousands of
U.S. dollars(note 3)

Millions of yen

2006

2007

2007

AssetsCurrent assets:
Cash and time deposits (note 4)¥ 109,514¥113,711

Short-term investments (notes 4 and 5)

5,547

12,191$

103,270

963,244

Trade receivables (note 6)

70,91178,430664,380

Allowance for doubtful receivables(1,506)(1,948)(16,501)

Inventories (note 7)

27,53032,291

273,537

Deferred tax assets (note 12)

7,038

5,718

48,437

Other current assets

21,601

16,816

142,447

Total current assets

240,635

257,2092,178,814

Investments and other assets:
Investment securities (note 5)

22,522

28,817244,108

Guarantee money deposited

24,91621,023

178,086

Deferred tax assets (note 12)

3,901

4,142

35,087

Other investments and assets

4,822

4,171

35,332

Allowance for doubtful receivables(1,212)(1,296)(10,978)

54,94956,857

481,635

Total investments and other assets

Property, plant and equipment:
Buildings and structures

32,15030,286

256,552

Amusement facilities and machines

87,04885,262722,253Land

22,094

20,598

174,485

Other property, plant and equipment
Total
Less accumulated depreciation
Net property, plant and equipment

55,14165,094551,411

196,433

201,240

1,704,701(122,360)(126,284)(1,069,750)

74,07374,956

634,951

9,917

9,739

82,499Intangible assets:
Goodwill
Other intangible assets

7,077

9,729

82,414

Total intangible assets

16,994

19,468

164,913¥ 386,651¥ 408,490$ 3,460,313

Total assets
See accompanying Notes to Consolidated Financial Statements.

40

Thousands of
U.S. dollars(note 3)

Millions of yen

2006

2007

2007

Liabilities and net assets
Current liabilities:
Short-term borrowings (note 9)¥ 19,888¥ 12,170$ 103,092

Trade payables (note 10)

40,56147,097398,958

Accrued expenses

32,362

31,869269,962

Accrued income taxes (note 12)

6,827

10,875

92,122Other current liabilities (note 12)

7,890

8,818

74,697

107,528

110,829

938,831

Long-term debt (note 9)

12,542

1,133

9,598

Accrued retirement and severance benefits (note 11)

2,970

2,749

23,287

Deferred tax liabilities (note 12)

7,283

5,786

49,013

Total current liabilities
Long-term liabilities:

Other long-term liabilities

4,084

3,739

31,673

Total long-term liabilities

26,87913,407

113,571

Total liabilities

134,407124,236

1,052,402

Net assets:
Common stock (notes 17 and 18)
Authorized 1,000,000,000 shares;
10,00010,00084,710Additional paid-in capital (note 18)

issued 260,580,191 shares

95,772

97,142822,889

Retained earnings (note 15)

164,504

182,389

1,545,015

Treasury stock, at cost; 7,616,892 shares in 2006 and 2,731,047 shares in 2007 (note 17)(11,156)(3,952)(33,477)

259,120

285,579

2,419,137

4,145

4,101

34,740Subtotal
Other securities valuation difference (notes 5 and 12)
Deferred gains or losses on hedges, net of taxes
Land revaluation difference (notes 12 and 16)
Translation adjustment
Subtotal
Stock subscription rights

—

92

779

(21,460)(21,286)(180,313)

1,802

5,684

48,146(15,513)(11,409)(96,648)

—

577

4,888

Minority interests

8,637

9,507

80,534

Total net assets

252,244284,254

2,407,911¥386,651¥408,490$3,460,313

Contingencies (note 21)
Total liabilities and net assets

41

Consolidated Statements of Income
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2006 and 2007

Thousands of
U.S. dollars(note 3)

Millions of yen

2006

2007

2007

Net sales¥450,829¥459,133$3,889,310

Cost of sales

294,264

291,053

2,465,506

156,565

168,080

1,423,804

120,896

125,856

1,066,125

35,66942,224

357,679

Interest and dividend income

960

2,088

17,687

Interest expense

(292)

(237)

(2,008)Gain (loss) on sales of investment securities

3,073

4,827

40,889Loss on valuation of investment securities

(260)

(701)

(5,938)Gross profit
Selling, general and administrative expenses (note 13)
Operating income
Other income (loss):

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

(68)

(267)

(2,262)(3,001)(5,070)(42,948)

(511)

850

7,202

(99)

1,490

12,622

Income before income taxes and minority interests

35,57043,714

370,301

Income taxes (note 12)

19,282

17,570148,835

Minority interests

2,138

1,892

16,026¥ 14,150¥ 24,252$ 205,438

Net income

U.S. dollars(note 3)

Yen

Data per common share (note 14):
Net assets at March 31¥961.36¥1,063.29

$9.01

Basic

54.39

95.73

0.81

Diluted

54.37

95.67

0.81

12.00

28.00

0.24

Net income:

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

42

Consolidated Statements of Changes in Net Assets
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2006 and 2007

Thousands of
U.S. dollars(note 3)

Millions of yen

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

2006

2007

2007

¥ 10,000
10,000¥ 10,000
10,00092,034
—
—
397
3,341
95,772

95,772868
502——
97,142811,283
7,353
4,253
—
—
822,889

158,182
14,150
29
—
—
—
15
303
(4,416)(3,013)(559)(187)
164,504

164,504
24,252
—
31
(29)
295
—
(173)
(6,073)—(418)—
182,389

1,393,511
205,438
—
263
(246)
2,499
—
(1,465)(51,444)—(3,541)—
1,545,015(591)(10,565)(11,156)(11,156)
7,204(3,952)(94,502)
61,025(33,477)

2,932
1,213
4,145

4,145
(44)
4,101

35,112(372)
34,740

—
—
—

—
92
92

—
779
779

(21,163)(297)(21,460)(21,460)
174(21,286)(181,787)
1,474(180,313)(1,870)
3,672
1,802

1,802
3,882
5,684

15,26532,881
48,146

—
—
—

—
577
577

—
4,888
4,888

21,820(13,183)8,637¥252,244

8,637
870
9,507
¥284,254

73,164
7,370
80,534$2,407,911$

84,71084,710See accompanying Notes to Consolidated Financial Statements.

43

Consolidated Statements of Cash Flows
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2006 and 2007

Thousands of
U.S. dollars(note 3)

Millions of yen

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

44

2006

2007

2007

¥ 35,570
19,144
3,001
68
1,348
(3,073)
260
4,455
5,842
(10,892)(2,679)(5,091)
47,953
1,349(352)(17,141)
31,809¥ 43,714
21,201
5,070
267
1,129
(4,827)701(3,111)(3,637)(10,601)
3,465
951
54,322
2,078(236)(13,671)
42,493$ 370,301
179,593
42,9482,262
9,564(40,889)
5,938(26,353)(30,809)(89,801)
29,352
8,055
460,161
17,603(1,999)(115,807)
359,958(351)(9,924)
4,388(3,204)(2,064)783(18,033)
349(1,781)
5,439
(883)
1,964
(1,090)(24,407)133(9,731)568(4,790)(7,595)
6,165(1,103)1(417)
445(2,578)1,556
2,093(15,253)

1,127(82,431)
4,812(40,576)(64,337)
52,224(9,343)8(3,532)
3,770(21,838)
13,181
17,727(129,208)

10,848575(13,399)397
20(10,551)(4,416)(426)(3,013)(19,965)
1,676(10,887)
124,924
10—(13,113)—(7,434)——
8,084(6,073)(320)—(18,856)
2,550
10,934
113,18615
21(111,080)—(62,973)——
68,479(51,444)(2,711)—(159,729)
21,601
92,622
958,797
127
178

(861)
¥113,186—¥124,156—$1,051,724

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

1 Basis of Presentation

to the investments in these companies, there would have been

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

no material effect on the accompanying consolidated financial

consolidated subsidiaries (collectively, “the Company”) havestatements.

prepared their financial statements in accordance with the

All significant intercompany accounts and transactions haveprovisions set forth in the Japanese Securities and Exchange

been eliminated in consolidation. The excess of cost over the

Law and its related accounting regulations, and in conformity

underlying fair value of the net assets of consolidated sub-with accounting principles generally accepted in Japan, whichsidiaries from acquisition is being amortized over a five-year

are different in certain respects as to application and disclo-

period.

sure requirements of International Financial Reporting Standards.
The accounts of overseas subsidiaries are based on their(b) Cash and Cash Equivalents

accounting records maintained in conformity with generally

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

accepted accounting principles prevailing in the respective

demand deposits and all highly liquid investments withcountries of domicile. The accompanying consolidated

original maturities of three months or less to be cash and cash

financial statements have been prepared and translated into

equivalents (note 4).

English from the consolidated financial statements of theCompany prepared in accordance with Japanese GAAP and(c) Foreign Currency Translation

filed with the appropriate Local Finance Bureau of the Ministry

Foreign currency transactions are translated into yen at ratesof Finance as required by the Securities and Exchange Law.

in effect at the dates they are transacted, and the gains orSome supplementary information included in the statutory
Japanese language consolidated financial statements that is
not required for fair presentation is not presented in theaccompanying consolidated financial statements.
In preparing the accompanying consolidated financial statements, certain reclassifications have been made to the con-losses arising from the settlement of the related receivables orpayables are reflected in “Other income (loss)”.
Receivables and payables denominated in foreign currencies
at the balance sheet date are translated at the rates in effectas of the balance sheet dates, and the unrealized gains orlosses are reflected in “Other income (loss)”.

solidated financial statements issued in Japan in order to present

The assets and liabilities of foreign consolidated subsidiaries

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

and affiliates are translated into yen at the rates of exchange

Certain reclassifications have been made to the prior year

in effect at the balance sheet dates. Revenue and expenses of

consolidated financial statements to conform to the presen-

foreign consolidated subsidiaries and affiliates are translated

tation used for the year ended March 31, 2007.

into yen at the average rates of exchange during the year. Gains
and losses resulting from foreign currency transactions are

2 Summary of Significant Accounting Policies

included in “Other income (loss)”, and those resulting from(a) Principles of Consolidation

the translation of financial statements are generally excluded

The accompanying consolidated financial statements include

from the consolidated statements of income and are included in

the accounts of the Company and its significant subsidiaries.

“Translation adjustment” and “Minority interests” in “Net assets”.

Consolidation of the remaining subsidiaries would have had
no material effect on the accompanying consolidated financial(d) Accounting Standards for Income and Expenses

statements. Investments in significant affiliates are stated at

Accounting procedures for video game software production

the Company’s equity in their underlying net assets.

expenses:

Investments in unconsolidated subsidiaries and certain

A distinctive characteristic of video game software is theaffiliates other than those discussed in the previous paragraphproduction through which the software is combined with theare stated at cost, and if the equity method had been applied

content that cannot be separated into identifiable components.

45

The content is considered an important component of each

Foreign consolidated subsidiaries:

video game title which combines the game content andInventories are stated at the lower of cost, determined prin-visual / music data. Once management makes a decision to go

cipally by the first-in, first-out method, or market.

forward in distributing the title, the Company records the

However, both domestic and foreign consolidated subsidiaries

software and content development costs to inventory andstate work-in-process of game software by the specific-cost

advanced payments.

method.

The capitalized production costs (which include inventory
and advanced payments) are amortized to cost of sales based(h) Income Taxeson projected sales volumes.

Current income taxes are accounted for based on income anddeferred income taxes are accounted for under the asset and(e) Short-Term Investments and Investment Securities

liability method. Deferred tax assets and liabilities are recog-

The Company classifies its securities into one of the following

nized for future tax consequences attributable to differences

three categories: held-to-maturity securities, investments in

between the financial statement carrying amounts of existing

unconsolidated subsidiaries and affiliated companies, or otherassets and liabilities and their respective tax bases and operat-

securities.

ing loss and tax credit carryforwards. Deferred tax assets andHeld-to-maturity securities are amortized to face value overliabilities are measured using enacted tax rates expected tothe period remaining to the maturity date. Investments inapply to taxable income in the years in which those temporary

unconsolidated subsidiaries and affiliated companies aredifferences are expected to be recovered or settled. The effect oncarried at cost. Other securities with a market value aredeferred tax assets and liabilities of a change in the tax rate is recog-

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

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

between the acquisition cost and the carrying amount ofother securities, including unrealized gains and losses, is(i) Property, Plant and Equipment

recognized in “Other securities valuation difference” in “Net

The Company and its domestic consolidated subsidiaries:

assets” until realized. Other securities without a market value

Depreciation of property, plant and equipment is principallyare principally carried at cost. The cost of other securities soldcomputed by the declining-balance method based on

is principally computed based on the moving average method.

estimated useful life. The straight-line method is used forbuildings (except for building fixtures) acquired since April 1,(f) Allowance for Doubtful Receivables

1998. The estimated useful lives for Buildings and structures

The allowance for doubtful receivables is provided for possible

and Amusement facilities and machines are 2-50 years andlosses on unrecoverable receivables. For ordinary receivables,

3-15 years, respectively.

the amount of the allowance is based on the historical rate ofForeign consolidated subsidiaries:

loss. For receivables from debtors at risk of bankruptcy andDepreciation of property, plant and equipment is principally

receivables from debtors in bankruptcy or under reorganiza-

computed by the straight-line method based on estimatedtion, the amount of the allowance is based on individually

useful life. The estimated useful lives for Buildings andestimated unrecoverable amounts.

structures and Amusement facilities and machines are 5-50
years and 2-7 years, respectively.

(g) Inventories
Domestic consolidated subsidiaries:(j) Intangible Assets

Inventories are stated at cost determined on an average cost basis.

Depreciation of intangible assets is computed by the straightline method based on estimated useful life. Software forcompany use is depreciated over 1-5 years.

46

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

the allocation method. Interest rate swaps that meet specificmatching criteria are accounted for using special methods.

Goodwill incurred by foreign subsidiaries is amortized in

As a general rule, the Company assesses the effectiveness ofconformity with accounting principles and practices generally

hedging transactions from the start of the transaction to theaccepted in the country of incorporation.

point at which effectiveness is assessed, comparing the
cumulative changes in the fair value or the cumulative(k) Impairment of Fixed Assetschanges in the cash flows of the hedged item with the

The Company has applied the “Accounting Standard for

cumulative changes in the fair value or the cumulative

Impairment of Fixed Assets” (the “Opinion Concerningchanges in the cash flows of the hedging instrument. The

Establishment of Accounting Standard for Impairment of Fixedassessment is based on the amounts of those changes. In the

Assets” (Business Accounting Deliberation Council, August 9,

event that important conditions are the same for the hedging

2002)) and the “Implementation Guidance for the Accounting

instrument and the hedged assets, liabilities, or scheduledStandard for Impairment of Fixed Assets” (Guidance ontransaction, it is obvious that the hedge is 100% effective, so

Corporate Accounting Standard No. 6, October 31, 2003).

the assessment of effectiveness is not abbreviated. Also, for

The amount of accumulated losses on impairment of fixedinterest rate swaps for which the special methods are applied,

assets is deducted directly from the amount of each asset

the assessment of effectiveness is abbreviated.

pursuant to the Regulations Concerning Financial Statements.

In the event that a hedge loses its effectiveness, hedge
accounting is no longer applied and the recognition of the(l) Derivatives and Hedging Activities

gains or losses on the hedge transaction is no longer deferred.

The Company and its consolidated subsidiaries use derivative
instruments, such as forward exchange contracts and interest rate(m) Provision for Directors’ Bonus:

swap contracts, to reduce market risks stemming from fluctua-

Provision for directors’ bonus in the current fiscal year that is attrib-

tions in foreign exchange rates and interest rates. The Company

utable to the current accounting period is booked, based on

and its consolidated subsidiaries use these derivative instru-

the amount expected to be payable, by the Company and its

ments solely for the purpose of reducing the risk of fluctuations,domestic consolidated subsidiaries against the bonus payment.

such as fluctuations in foreign exchange rates and interest rates,

The “Accounting Standard for Directors’ Bonus” (Theto which they are exposed in the course of their business activi-

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

ties. Accordingly, the Company does not use derivative instru-

Accounting Standard, November 29, 2005) became effective

ments or other financial instruments for speculative purposes.

from April 1, 2006, resulting in operating income and income

Because the Company’s counterparties for derivative

before income taxes and minority interests to be reduced byinstruments are all highly creditworthy financial institutions,¥658 million ($5,574 thousand).

the Company believes that it is exposed to almost no
counterparty risk. Also, derivative transactions are conducted(n) Retirement and Severance Benefitsin accordance with internal rules that specify transaction

The Company has established a retirement lump-sum grantauthority and transaction amount limits, within the scope ofsystem and a defined contribution pension plan. With the excep-

the above policies, and for the intended purposes.

tion of certain companies, domestic consolidated subsidiaries

As a general rule, companies are required to state derivative

have established qualified retirement benefit plans, retirement

instruments at fair value. For derivative instruments that meet the

lump-sum grants, or comprehensive employee pension funds.

standards for hedge accounting, recognition of gains or losses

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

is deferred. In cases where forward foreign exchange contracts

at retirement. Certain foreign consolidated subsidiaries havemeet certain hedging criteria, they are accounted for underestablished defined contribution retirement pension plans.

47

The allowance for retirement benefits for employees isprovided for based on the estimated values of projected

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

benefit obligations and pension plan assets at the end of the
fiscal year. Unrecognized actuarial gain or loss is amortized,(r) Presentation of Net Assets

beginning from the fiscal year following the year in which it is

The “Accounting Standard for Presentation of Net Assets inincurred, using the straight-line method over a period thatthe Balance Sheet” (The Accounting Standards Board of Japan

does not exceed the average remaining years (9 to 17 years)(ASBJ) Statement No. 5 Accounting Standard, December 9,of service of employees as of the end of the fiscal year in2005) and “Guidance on the Accounting Standard for Presenta-

which it is incurred. Certain domestic consolidated subsidiaries

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

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

Standards Board of Japan (ASBJ) Guidance No. 8 Guidance onthat does not exceed the average remaining years of service of

Accounting Standard, December 9, 2005) became effective

employees at the point when the costs are incurred, and, tofrom April 1, 2006.

provide for payment of retirement benefits to directors andUnder the New Accounting Standards, the following items

auditors, they record the amount needed at the end of theare presented differently compared to the previous pre-fiscal year in accordance with internal regulations.

sentation. The net assets section includes unrealized gains(losses) on hedging derivatives, net of taxes. Under the(o) Leases

previous presentation rules, companies were required to

Finance leases, except for those where the legal title to thepresent unrealized gains (losses) on hedging derivatives in theunderlying property is transferred from the lessor to the lessee

assets or liabilities section without considering the related

at the end of the lease term, are accounted for similar

income tax effects. Stock subscription rights and minority

to operating leases. The Company and its consolidated

interests are required to be included in the net assets section

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

under the New Accounting Standards. Under the previous

ferred. However, foreign consolidated subsidiaries account for

presentation rules, companies were required to present stock

finance leases as ordinary purchase or sale transactions insubscription rights and minority interests in the current

accordance with local accounting principles.

liabilities section and between the non-current liabilities andshareholders’ equity sections, respectively.

(p) Appropriation of Retained Earnings

Total shareholders’ equity prior to the adoption of the New

In Japan, retained earnings with respect to a given financial

Accounting Standards would have benn ¥274,077 million

period are appropriated by resolution of the shareholders at a($2,321,703 thousand).

general meeting to be held subsequent to the close of suchfinancial period. The accounts for that period do not,(s) Stock Option

therefore, reflect such appropriations.

The “Accounting Standard for Share-based Payment” (The
Accounting Standards Board of Japan (ASBJ) Statement No. 848(q) Data per Common Share

Accounting Standard, December 27, 2005) and the “Guidance

In computing basic net income per common share, the averageon the Accounting Standard for Share-based Payment” (Thenumber of shares outstanding during each year has been used.

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

Diluted net income per share assumes the dilution that

Guidance on Accounting Standard, May 31, 2006) became

could occur if securities or other contracts to issue common

effective from April 1, 2006, resulting in operating income andstock were exercised or converted into common stock, orincome before income taxes and minority interests to be

resulted in issuance of common stock.

reduced by ¥577 million ($4,888 thousand).

3 Financial Statement Translation
The consolidated financial statements are expressed in yen.
However, solely for the convenience of the reader, the consolidated financial statements as of and for the year ended March
31, 2007 have been translated into U.S. dollars at the rate of ¥118.05=US$1, the approximate exchange rate on the Tokyo
Foreign Exchange Market on March 31, 2007.
This translation should not be construed as an indication that the amounts shown could be converted into U.S. dollars at such rate.

4 Cash and Cash Equivalents
Reconciliations of cash and cash equivalents at March 31, 2006 and 2007 between the balance sheets and the statements ofcash flows are as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2007

2007

¥109,514¥113,711$ 963,244

Short-term investments

5,547

12,191

103,270

Time deposits with maturities in excess of three months(1,875)(1,746)(14,790)¥113,186¥124,156$1,051,724

Cash and time deposits

Cash and cash equivalents per consolidated statement of cash flows

Cash and time deposits of ¥54 million and ¥54 million ($457 thousand) are pledged as collateral for short-term borrowings of¥29 million and ¥23 million ($195 thousand) at March 31, 2006 and 2007, respectively.

5 Short-Term Investments and Investment Securities
Short-term investments and investment securities at March 31, 2006 and 2007 are summarized as follows:
Held-to-maturity securities at March 31, 2006 and 2007 include marketable governmental bond securities with a carrying
amount of ¥10 million and ¥6,017 million ($50,970 thousand), respectively, which approximates market value.
Thousands of
U.S. dollars

Millions of yen

2006

2007

2007

Held-to-maturity securities¥47¥ 6,054$ 51,283

Other securities–marketable

11,54817,878151,444

Other securities–non-marketable

7,190

8,019

67,929Investments in unconsolidated subsidiaries and affiliated companies

9,284

9,057

76,722

Total of short-term investments and investment securities¥28,069¥41,008$347,378

The original cost, carrying amount (market value) and gross unrealized holding gain (loss) for marketable other securities at
March 31, 2006 and 2007 are summarized as follows:
Millions of yen

2006
Original Cost

Gross Unrealized
Holding Gain

Gross Unrealized
Holding Loss

Carrying Amount(Market Value)

Equity securities¥2,971¥8,316¥(128)¥11,159

Debt securities

100

—

(2)

98

Other securities–marketable:

Other

233

62

(4)

291

Total

¥3,304¥8,378¥(134)¥11,548

49

Millions of yen

2007
Original Cost

Gross Unrealized
Holding Gain

Gross Unrealized
Holding Loss

Carrying Amount(Market Value)

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

Debt securities

100

—

(2)

98

Other

223

46

(4)

265

Total

¥9,699¥8,305¥(126)¥17,878

Other securities–marketable:

Thousands of U.S. dollars

2007
Original Cost

Gross Unrealized
Holding Gain

Gross Unrealized
Holding Loss

Carrying Amount(Market Value)$79,424$69,962$(1,017)$148,369

Other securities–marketable:
Equity securities
Debt securities

847

—

(17)

830

Other

1,889

389

(33)

2,245

Total

$82,160$70,351$(1,067)$151,444

Proceeds and gross realized gains and losses from the sale of other securities in the years ended March 31, 2006 and 2007 are
as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2007

2007

Proceeds from the sales of other securities

¥783

¥534

$4,524Gross realized gains from the sales of other securities

489

499

4,227

Gross realized losses from the sales of other securities

—

(1)

(8)

The following is a summary of non-marketable securities at March 31, 2006 and 2007:
Thousands of
U.S. dollars

Millions of yen

2006

2007

2007

Carrying
AmountCarrying
AmountCarrying
AmountUnlisted stock securities¥1,579¥1,763$14,934

Non-listed equity securities, money market fund, etc.

Other securities–non-marketable:
5,047

5,706

48,336

Other

564

550

4,659

Total

¥7,190¥8,019$67,929

Other securities with specified maturity dates and held-to-maturity securities at March 31, 2006 and 2007 mature as follows:
Millions of yen

2006
Due:

WithinOne Year

After 1through 5 Years

After 5through 10 Years

¥—

¥10

¥ —

Debt securities:
Governmental bond securities
Corporate bond securities
Total

50

—

—

135

¥—

¥10

¥135

Millions of yen

2007
Due:

WithinOne Year

After 1through 5 Years

After 5through 10 Years¥5,997

¥20

¥—

—

—

37

¥5,997¥20¥37

Debt securities:
Governmental bond securities
Corporate bond securities
Total

Thousands of U.S. dollars

2007
Due:

WithinOne Year

After 1through 5 Years

After 5through 10 Years$50,801

$169

$ —

—

—

313

$50,801

$169

$313

Debt securities:
Governmental bond securities
Corporate bond securities
Total

6 Trade Receivables
Trade receivables at March 31, 2006 and 2007 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2007

2007

Notes receivable¥ 8,218¥ 8,337$ 70,623

Accounts receivable–trade

62,69370,093593,757¥70,911¥78,430$664,380

Total

At March 31, 2007, the Company had ¥684 million ($5,794 thousand) of notes receivable which had matured and was in theprocess of collection. March 31, 2007 was a public holiday and this amount was uncollected and therefore was included in notes
receivable as of March 31, 2007.

7 Inventories
Inventories at March 31, 2006 and 2007 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2007

2007

Finished goods¥ 9,743¥12,049$102,067

Work in process

14,61817,334

146,836

Raw materials and supplies
Total

3,169

2,908

24,634¥27,530¥32,291$273,537

8 Loss on Impairment of Fixed Assets
Based on foreseeable losses and excluding the significant idle assets, assets scheduled for disposal and leased assets, groupings
are conducted according to management accounting classifications based on strategic business units. Assets are spread acrossJapan and abroad, and therefore assets in the amusement facility business are grouped mainly by geographical region.
The book values of the following assets, which exclude reusable assets, were reduced to the collectible amount and theamount of reduction was recorded as an impairment loss in other loss.

51

Thousands ofMillions of yen
U.S. dollars

Location

Minato-ku, Tokyo
Matsudo-shi, Chiba
Ota-ku, Tokyo
Taito-ku, Tokyo
Toshima-ku, Tokyo (Note 1)
Sapporo City, Hokkaido (Note 2)

Items

—
Cultural facility
Parking
Software for Internet
content business
Amusement facility(Theme park)
Amusement facility

Hakodate City, Hokkaido (Note 3)

Amusement facility(Tourist hotel)
Yokohama City, Kanagawa (Note 4) LAN entertainment
business
Ota-ku, Tokyo (Note 5)
Management, sales,
production control, R&D
Shimotsuga-gun, Tochigi (Note 6) Idle assets, assets
scheduled for disposal
Ibaragi City , Osaka (Note 7)
Assets for lease

Classification

2006

2007

Goodwill
Buildings and structures, etc.
Land
Other intangible assets¥1,619
825
531

¥

2007

—
—
—

$

—
—
—

26

—

—

—

1,544

13,079

—

161

1,364

—

1,338

11,334

—

220

1,864

—

1,160

9,826

—
—
¥3,001

486
161

4,117
1,364

¥5,070$42,948

Amusement facilities andmachines, etc.
Amusement facilities andmachines, etc.
Buildings & structures, land
Other intangible assets,other investments and assets, etc.
Buildings & structures, land
Buildings & structures, land, etc.
Buildings & structures, land, etc.

Total

Notes:
1. The Company separately classified the grouping of this asset and recorded an impairment loss since management changed the objective of the asset from generating income from sales
to advertising. Furthermore, the asset was categorized differently in the investment decision process since the group contained facilities that aimed to generate income. The value of theasset was determined to have no value.
2. The fair value of this asset was determined to be significantly impaired due to the decision to close the facility and accordingly, the asset was separated from its group and an impairment
loss was recorded. The asset was determined to have no value.
3. A loss was recorded because it was determined that the carrying book value of the fixed asset would not be recoverable due to the decline in business profits. Fair value was measured
to be the net selling price which was assessed based on real estate appraisals.
4. Assets used for unprofitable businesses which are slated to be disposed have been written down and a loss has been recorded. The recoverable amount was determined to have no value.
5. Assets that have no foreseeable use in the future due to the integration of business units or a relocation of a subsidiary were written down and an impairment loss recorded. The fair valueof real estate assets was measured to be the net selling price which was assessed based on real estate appraisals.
6. Assets that have no foreseeable use in the future due to integration of business units were written down and an impairment loss was recorded. The recoverable value of the real estate assets
was measured to be the net selling price which was assessed based on real estate appraisals and other market information. The fair value of the other assets were determine to have no value.
7. Assets planned to be disposed of and leased assets that have no foreseeable use in the future were written down and an impairment loss recorded. The recoverable amount of theassets to be disposed of was assessed based on liquidation value. The fair value of the leased assets was calculated based on market land prices provided by the government (in the
Rosenka report) and lease income for the remaining period of the agreement.

9 Short-Term Borrowings and Long-Term Debt
Short-term borrowings at March 31, 2006 and 2007 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2006

Bank borrowings
Long-term debt due within one year
Total

2007

¥12,661

¥

760

2007

$

6,438

7,227

11,41096,654¥19,888¥12,170$103,092

The weighted average interest rates on bank borrowings outstanding at March 31, 2006 and 2007 were 0.61% and 4.13%,
respectively.
Thousands of
U.S. dollars

Millions of yen

Loans, principally from banks, maturing in installments through March 31, 2012;
the weighted average interest rates of current installments at March 31, 2007
was 1.09% and non-current installments at March 31, 2007 was 1.41%
0.60% debentures, due March 28, 2007
0.69% debentures, due March 28, 2008
Total long-term debt
Less current installments
Total

52

2006

2007

2007

¥ 4,769
5,000
10,00019,769(7,227)¥12,542¥ 2,543—
10,00012,543(11,410)¥ 1,133$ 21,542—
84,710106,252(96,654)$ 9,598

The aggregate annual maturities of long-term debt outstanding at March 31, 2007 are as follows:
Millions of yen

Thousands of
U.S. dollars

2008¥11,410$ 96,654

2009

596

5,049

2010

346

2,931

2011

96

813

Years ending March 31

2012
Total

95

805

¥12,543$106,252

10 Trade Payables
Trade payables at March 31, 2006 and 2007 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Notes payable
Accounts payable–trade
Total

2006

2007

2007

¥ 7,998¥ 9,079$ 76,908

32,56338,018322,050¥40,561¥47,097$398,958

At March 31, 2007, the Company had ¥1,891 million ($16,019 thousand) of notes payable that had matured and was in theprocess of payment. March 31, 2007 was a public holiday and this amount was unpaid and therefore was included in notes
payable as of March 31, 2007.

11 Retirement and Severance Benefits
The plan’s funded status and amount recognized in the accompanying consolidated balance sheet at March 31, 2006 and 2007 are
as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2007

2007

Projected benefit obligations¥ 14,275¥ 15,381$ 130,292

Plan assets at fair value(11,232)(12,811)(108,522)

Projected benefit obligation in excess of plan assets

3,043

2,570

21,770

Unrecognized loss

(1,180)(525)(4,447)

Employee retirement and severance benefits:

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

10

41

347

1,873

2,086

17,670

192

137

1,161

2,065

2,223

18,831

Officers’ retirement severance benefits:
Accrued retirement and severance benefits
Total accrued retirement and severance benefits

905

526

4,456

¥ 2,970¥ 2,749$ 23,287

Notes:
1. In addition to the above plan assets, plan assets of ¥1,099 million and ¥1,192 million ($10,097 thousand) at March 31, 2006 and 2007, respectively, are managed by a governmental
welfare pension benefit plan, which was jointly established by the Company and various third-party companies. The aforementioned plan assets are computed on a pro-rata allocationof contributions paid.
2. Certain consolidated subsidiaries use a simplified method for calculating projected benefit obligations.

53

Net periodic cost of employee retirement and severance benefits for the years ended March 31, 2006 and 2007 consists of thefollowing:Thousands of
U.S. dollars

Millions of yen

Service cost for benefits earned–net of employee contributions

2006

2007

2007

¥1,415¥1,545$13,087

Interest cost on projected benefit obligation

252

272

2,304

Expected return on plan assets

(188)

(245)

(2,075)

Amortization of unrecognized actuarial gain or loss

291

197

1,669

Amortization of prior service cost

18

16

136

¥1,788¥1,785$15,121

Net periodic cost

Notes:
1. In addition to the net periodic cost of employee retirement and severance benefits, additional retirement payments of ¥175 million and ¥110 million ($932 thousand) are charged to
expense in the years ended March 31, 2006 and 2007, respectively, and are included in “Selling, general and administrative expenses” and “Other income (loss)”.
2. In addition to the net periodic cost of employee retirement and severance benefits, contributions to the governmental welfare pension benefit plan of ¥80 million and ¥102 million($864 thousand) are charged to “Cost of sales” and “Selling, general and administrative expenses” in the years ended March 31, 2006 and 2007, respectively.
3. The defined contribution amount for certain foreign consolidated subsidiaries that have established defined contribution retirement pension systems is recorded as a service cost.

Actuarial assumptions and the basis for the calculation of retirement and severance benefits in 2006 and 2007 are as follows:
2006

2007

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

Discount rate

1.3%~2.0%

1.3%~2.0%

Expected rate of return on plan assets

2.0%~3.0%

1.5%~3.0%

10 years

10~11 years

Method of the benefit attribution

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

10~17 years

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

12 Income Taxes
The Company and its domestic consolidated subsidiaries are subject to Japanese corporate, inhabitant and enterprise taxes basedon income which, in the aggregate, resulted in a normal tax rate of approximately 40.6% in 2006 and 2007.
Income tax expenses reflected in the accompanying consolidated statements of income for the years ended March 31, 2006
and 2007 consist of the following:Thousands of
U.S. dollars

Millions of yen

Current

54

2006

2007

2007

¥14,468¥17,823$150,978Deferred

4,814

(253)

(2,143)

Total¥19,282¥17,570$148,835

Reconciliation of the normal tax rate and the effective tax rate as a percentage of income before income taxes and minority
interests for the years ended March 31, 2006 and 2007 is as follows:
2006

2007

Normal tax rate

40.6%

40.6%

Increase in valuation allowance related to deferred tax assets

11.3

1.6

Entertainment expenses not deductible for tax purposes

1.2

1.0

Amortization of goodwill

0.9

1.7

Corporate inhabitant tax on per capita basis

0.7

0.6

Reversal of deferred tax liabilities for retained earnings
of foreign consolidated subsidiaries
Other
Effective tax rate

—

(5.1)

(0.5)

(0.2)

54.2%

40.2%

Significant components of deferred tax assets and liabilities at March 31, 2006 and 2007 are as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2007

2007

¥ 9,323¥ 9,186$ 77,814

Deferred tax assets:
Land revaluation difference
Excess depreciation of fixed assets

3,387

4,589

38,873Losses carried forward

3,261

3,387

28,691

Loss on valuation of advance payments

1,892

1,270

10,758Inventory valuation losses

1,785

1,626

13,774

Accrued employee bonuses

1,526

1,348

11,419Allowance for doubtful receivables

1,357

321

2,719

Loss on impairment of fixed assets

655

1,890

16,010Accrued enterprise taxes, etc.

845

1,066

9,030

Retirement and severance benefit accruals

776

824

6,980

Excess amortization of deferred assets

764

—

—

Research and development costs

497

443

3,753

4,452

5,058

42,84730,52031,008262,668

Valuation allowance(17,973)(19,514)(165,303)

Total deferred tax assets

12,547

11,494

97,365(4,511)(3,652)(30,936)

Other securities valuation difference(3,388)(3,325)(28,166)

Inventory revaluation(1,199)(867)(7,344)

Other
Total gross deferred tax assets

Deferred tax liabilities:
Retained earnings of foreign consolidated subsidiaries

Land revaluation difference

(891)

(784)

(6,641)

Reserve for deferred income tax

(164)

(147)

(1,245)

Other
Total gross deferred tax liabilities
Net deferred tax assets

(39)

(104)

(881)

(10,192)(8,879)(75,213)¥ 2,355¥ 2,615$ 22,152

55

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

Millions of yen

Current assets–Deferred tax assets

2006

2007

2007

¥ 7,038¥ 5,718$ 48,437

Investments and other assets–Deferred tax assets

3,901

4,142

35,087

Current liabilities–Other (deferred tax liabilities)(1,301)(1,459)(12,359)

Long-term liabilities–Deferred tax liabilities
Total(7,283)(5,786)(49,013)¥ 2,355¥ 2,615$ 22,152

13 Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2006 and 2007 are as follows:
Thousands of
U.S. dollars

Millions of yen

Marketing

2006

2007

2007

¥ 31,056¥ 31,031$ 262,863

Directors’ remuneration and employees’ wages

28,22029,426249,267

Retirement and severance benefits

1,125

1,163

9,852

Provision for directors’ bonus

—

658

5,574

Director retirement benefits

187

138

1,169

Research and development

20,24018,004

152,512

798

398

3,371

39,27045,038381,517¥120,896¥125,856$1,066,125

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

14 Reconciliation of Differences between Basic and Diluted Net Income per Common Share
The reconciliation of the differences between basic and diluted net income per common share for the years ended March 31,
2006 and 2007 is as follows:
Thousands of
U.S. dollars

Millions of yen

Net income
Unappropriated bonuses to directors and corporate auditors
Net income available to common stock

2006

2007

2007

¥14,150¥24,252$205,438

(418)

—

—

13,732

24,252

205,438

Effect of dilutive securities:
(5)

—

—

Net income for diluted EPS calculation

Stock options in certain consolidated subsidiary¥13,727¥24,252$205,438

Average number of common shares outstanding

252,488

Thousands of shares

253,331

253,331

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

8

183

183

252,496

253,514

253,514

Yen

U.S. dollars

Net income per common share:

56

Basic

¥54.39¥95.73$0.81

Diluted

54.37

95.67

0.81

15 Retained Earnings and Dividends

16 Land Revaluation Difference

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

In accordance with the “Law Concerning Land Revaluation

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

additional paid-in capital and legal earnings reserve must be

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

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

liabilities, was reported as “Land revaluation difference” in

Certain foreign consolidated subsidiaries are also required to“Net assets”.

appropriate their earnings to legal reserves under the laws of
the respective countries.

Revaluation method:

The Company’s retained earnings includes legal reserves of

The fair value of land is determined based on official notice¥1,645 million and ¥1,645 million ($13,935 thousand) at

prices that are calculated by the method assessed and publishedMarch 31, 2006 and 2007, respectively. Proposed appro-by the Commissioner of the National Tax Agency. The Com-

priations of retained earnings have not been reflected in the

missioner assesses and publishes the method to calculate landconsolidated financial statements at the end of the fiscal year.

value that forms the foundation for calculating taxable value

The Company’s approved appropriations of retained earningsof land value tax prescribed in “Article 16 of Land Value Tax

at March 31, 2007 were cash dividends of ¥4,127 million

Law (Law No. 69, promulgated on May 2, 1991)”, as stipulated($34,960 thousand). In addition, a mid-year dividend may bein “Article 2-4 of the Ordinance Implementing the Law Con-

paid based on approval by the Board of Directors, which is

cerning Land Revaluation (Cabinet Order No. 119, promulgatedsubject to limitations. The mid-year dividend in 2007 wason March 31, 1998)”. Reasonable adjustments are made to the¥3,127 million ($26,489 thousand).

official notice prices.
The land carrying amount was revalued in fiscal 2002.

17 Common Stock and Treasury Stock
The changes in the number of common stock and treasury stock for the year ended March 31, 2007 were as follows:
Common stock (number of shares)
March 31, 2006 and 2007
Treasury stock (number of shares)
March 31, 2006
Repurchase of fractional shares
Increase in the shareholder ratio for affiliates to which the equity method applies
Treasury stock acquired by affiliated companies to which the equity method applies
Sale of fractional shares
Sale of treasury stock through private placements
March 31, 2007

260,580,191

7,616,892
6,191
17
8,069
(122)
(4,900,000)
2,731,047

57

18 Stock Option Plan
The following is the stock option plan at March 31, 2007.
Resolution date of general
June 26, 2006

June 26, 2006

June 26, 2006

Position and number of beneficiaries

shareholders’ meeting

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

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

Common stock 126,300

Common stock 149,700

Common stock 1,817,000

and subsidiaries (573)Amount to be paid upon exercise of stock
subscription rights (yen)Grant dateConditions for exercising rights

1

1

1,754

July 18, 2006

July 18, 2006

July 18, 2006

(Note 2)

(Note 3)(Note 4)

Not specified

Not specified

From July 18, 2006 to July 9, 2008

From July 10, 2009

From July 10, 2009

From July 10, 2008

to June 30, 2014

to June 30, 2014

to June 30, 2010

Items relating to the transfer of stock

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

NAMCO BANDAI Holdings Inc.

NAMCO BANDAI Holdings Inc.

NAMCO BANDAI Holdings Inc.

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

stock subscription rights

stock subscription rights

1,550.90

1,550.90

219.07

Required tenure
Applicable period for exercising rights

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

Notes:
1. As to the method for estimating the number of effective rights of stock options, since it is difficult to rationally estimate the number of expired options at a future date, the number ofpreviously expired options was therefore used.
2. If, after subscription rights are allocated, the Company’s stock price growth rate up to the start of the period for exercising those rights does not exceed the TOPIX (Tokyo Stock Price
Index) growth rate, those subscription rights cannot be exercised. The Company’s stock price growth rate shall be calculated as the average closing price for common shares of theCompany on the Tokyo Stock Exchange on each of the days within the previous three months prior to the month in which the starting date for the period for exercising the subscription
rights falls (except if there is no trading) divided by the average closing price for common shares of the Company on the Tokyo Stock Exchange on each of the days within three months
prior to the month in which the allotment date falls (except if there is no trading). The TOPIX growth rate is calculated in the same way as the Company’s stock price growth rate.
3. The annual target of business performance and evaluation period (3 years from the time of the issuance of rights to the time it is possible to exercise those rights) shall be determined,with the sales and operating income, etc. of the strategic business unit—to which the subsidiary officer who is the target of the allotment belongs (hereinafter referred to as“Subscription Right Holder”) at the time of issuance of the subscription rights—used as the evaluation index, and the ratio of achievement of that target shall be measured for eachfiscal year during that evaluation period. If the ratio of achievement at the end of the evaluation period is above 50% on average during the evaluation period, those rights may be
exercised. However, even in that case, the number of shares that can be acquired by exercising those rights shall be based on a ratio equivalent to the average ratio of achievement(maximum of 100%).
4. (i) Any person receiving an allotment of subscription rights (hereinafter referred to as “Holder(s) of Subscription Rights”) must be an employee of the Company or of its Group
Companies at the time those rights are issued.
(ii) Regardless of the regulation in (i), if the Holder of Subscription Rights leaves the Company due to his or her own personal reasons, that person may only possess and exercise thecorresponding rights up to 6 months from the time of leaving. However, he or she may not possess and exercise the corresponding rights beyond the period for exercising thoserights. In addition, if that person leaves upon the Company’s request or for any other reason that the Company accepts, those rights and the period for exercising those rights shallremain unchanged.
5. Black-Scholes Model is used for estimating fair market price for stock options.

Stock options granted at April 18, 2007 are as follows:
Resolution date of general shareholders’ meeting
Position and number of beneficiaries
Type and number of shares
Amount to be paid upon exercise of stock subscription rights (yen)Conditions for exercise of stock subscription rights
Applicable period for exercising rights
Items relating to the transfer of stock subscription rights

June 26, 2006
Employees of subsidiaries (231)
Common stock 583,000
1,895(Note 1)
From April 1, 2009 to June 30, 2010
(Note 2)

Notes:
1. (i) Any person receiving an allotment of subscription rights (hereinafter referred to as “Holder(s) of Subscription Rights”) must be an employee of the Company or of its Group
Companies at the time those rights are issued.
(ii) Regardless of the regulation in (i), if the Holder of Subscription Rights leaves the Company due to his or her own personal reasons, that person may only possess and exercise thecorresponding rights up to 6 months from the time of leaving. However, he or she may not possess and exercise the corresponding rights beyond the period for exercising thoserights. In addition, if that person leaves upon the Company’s request or for any other reason that the Company accepts, those rights and the period for exercising those rights shallremain unchanged.
2. Approval of the directors of NAMCO BANDAI Holdings Inc. is required for the transfer of stock subscription rights.

58

The ordinary general meeting of shareholders of NAMCO BANDAI Holdings Inc. held on June 25, 2007 approved the adoption of
the following stock option plan.
Position of beneficiaries

Directors of the Company

Directors of subsidiaries

Type and number of shares

Common stock upper limit

Common stock upper limitof 115,000 per yearof 315,000 per year

Amount to be paid upon exercise of stock subscription rights (yen)Conditions for exercise of stock subscription rights
Applicable period for exercising rights

Items relating to the transfer of stock subscription rights

11(Note 1)

(Note 2)

From July 10, 2010

From July 10, 2010

to June 30, 2015

to June 30, 2015

(Note 3)(Note 3)

Notes:
1. If, after subscription rights are allocated, the Company’s stock price growth rate up to the start of the period for exercising those rights does not exceed the TOPIX (Tokyo Stock Price Index)
growth rate, those subscription rights cannot be exercised. The Company’s stock price growth rate shall be calculated as the average closing price for common shares of the Company on
the Tokyo Stock Exchange on each of the days within the previous three months prior to the month in which the starting date for the period for exercising the subscription rights falls(except if there is no trading) divided by the average closing price for common shares of the Company on the Tokyo Stock Exchange on each of the days within three months prior to themonth in which the allotment date falls (except if there is no trading). The TOPIX growth rate is calculated in the same way as the Company’s stock price growth rate.
2. The annual target of business performance and evaluation period (3 years from the time of the issuance of rights to the time it is possible to exercise those rights) shall be determined, withthe sales and operating income, etc. of the strategic business unit—to which the subsidiary officer who is the target of the allotment belongs (hereinafter referred to as “Subscription Right
Holder”) at the time of issuance of the subscription rights—used as the evaluation index, and the ratio of achievement of that target shall be measured for each fiscal year during that
evaluation period. If the ratio of achievement at the end of the evaluation period is above 50% on average during the evaluation period, those rights may be exercised. However, even inthat case, the number of shares that can be acquired by exercising those rights shall be based on a ratio equivalent to the average ratio of achievement (maximum of 100%).
3. Approval of the directors of NAMCO BANDAI Holdings Inc. is required for the transfer of stock subscription rights.

19 Leases
1. Lessee
The Company and its subsidiaries occupy offices and other facilities under various finance and operating lease arrangements.
(1) Finance leases
Finance leases, except for those where the legal title to the underlying property is transferred to the lessee, are accounted forsimilar to operating leases. Title does not transfer for any of the Company’s leases.
The original cost and accumulated depreciation of assets under such finance leases at March 31, 2006 and 2007 are as follows:
Thousands of
U.S. dollars

Millions of yen

Original cost at inception of leases

2006

2007

2007

$11,080¥1,239¥1,308Less accumulated depreciation

(522)

(649)

(5,498)Assets under finance lease, net

¥ 717

¥ 659

$ 5,582

Future minimum payments due under finance leases as of March 31, 2006 and 2007 are as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2007

2007

Due within one year

¥237

¥250

$2,118Due after one year

480

409

3,465

¥717

¥659

$5,583Total

The lease expense and depreciation expense for such finance leases for the years ended March 31, 2006 and 2007 are as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2007

2007

Lease expense

¥239

¥259

$2,194

Depreciation expense

239

259

2,194

59

(2) Operating leases
Future minimum payments required under operating leases at March 31, 2006 and 2007 are as follows:
Thousands of
U.S. dollars

Millions of yen

Due within one year
Due after one year
Total

2006

2007

2007

¥1,798¥ 2,147$18,187

6,380

8,057

68,251¥8,178¥10,204$86,438

2. Lessor
Finance leases
Finance leases, except for those where the legal title to the underlying property is transferred from the lessor to the lessee, areaccounted for similar to operating leases.
The acquisition cost, accumulated depreciation and net value of assets under such finance leases included in fixed assets at
March 31, 2006 and 2007 are as follows:
Thousands of
U.S. dollars

Millions of yen

Acquisition cost

2006

2007

2007

$12,080¥1,497¥1,426

Less accumulated depreciation

(879)

(714)

(6,048)Assets under finance leases, net

¥ 618

¥ 712

$ 6,032

Future minimum payments due under finance leases at March 31, 2006 and 2007 are as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2007

2007

Due within one year

¥294

¥267

$2,262

Due after one year

409

555

4,701

¥703

¥822

$6,963

Total

Lease income and depreciation expense for finance leases for the years ended March 31, 2006 and 2007 are as follows:
Thousands of
U.S. dollars

Millions of yen

60

2006

2007

2007

Lease income

¥357

¥283

$2,397

Depreciation expense

320

238

2,016

20 Foreign Exchange Risk Management and Interest Rate Risk Management
Derivative financial instruments are comprised principally of foreign exchange contracts and interest rate swaps. These
instruments are used to reduce the risks of changes in foreign exchange rates and interest rates; they are not used for speculation.
The Company is exposed to credit risk related to nonperformance by the counterparties to foreign exchange contracts andinterest rate swaps, but the Company does not expect any problems with nonperformance due to the high credit ratings of thecounterparties.
Contract amounts, market values and gains or losses from valuation of foreign exchange contracts outstanding at March 31,
2006 and 2007 are set forth as follows. The contracted amounts in themselves should not be considered indicative of the market
risk associated with the derivative financial instruments.
Millions of yen

Thousands of U.S. dollars

2006
Contract
AmountEstimated
Fair Value2007
Unrealized
Gain (Loss)

2007

Contract
AmountEstimated
Fair Value

Unrealized
Gain (Loss)

Contract
AmountEstimated
Fair Value

Unrealized
Gain (Loss)

Foreign exchange contracts
Sold:
British Pounds

¥ 964

¥ 958

6

¥1,308¥1,329¥ (21)$11,080$11,258$ (178)

Yen

590

547

43

965

937

28

8,175

7,937

238

Won

178

185

(7)

115

118

(3)

974

1,000

(26)

2,396

2,497

101

3,288

3,165

(123)

27,853

26,811(1,042)

—

—

¥143

—

—

¥(119)——$(1,008)¥

Purchased:
U.S. dollars
Total

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

21 Commitments and Contingent Liabilities
Contingent liabilities as of March 31, 2006 and 2007 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2007

2007

¥86

¥86

$729

Guarantee for lease agreement made by a business partner of a foreign
consolidated subsidiary61

22 Segment Information(1) Business segments
Millions of yen

2006
Toys and
Hobby

Amusement
Facility

Game
Contents¥176,474¥80,770¥128,448

Network

Visual andMusic Content

Other

Subtotal¥12,196¥42,280¥10,661¥450,829

Eliminations
and Corporate

Consolidated¥¥450,829

Net sales and Operating
income:Sales to externalcustomers
Intersegment transactions

—

4,534

525

2,326

325

1,048

10,14318,901(18,901)—

181,008

81,295

130,774

12,521

43,32820,804

469,730(18,901)

450,829

operating expenses

161,923

79,406

121,068

10,68537,141

19,616429,839(14,679)

415,160

Operating income¥ 19,085¥ 1,889¥

9,706¥ 1,836¥ 6,187¥ 1,188¥ 39,891¥ (4,222)¥ 35,669¥136,692¥60,181¥113,800¥10,578¥36,928¥20,742¥378,921¥ 7,730¥386,651

5,055

9,293

2,240

151

527

1,184

18,450694

19,144

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

825

—

557

1,619

—

—

3,001

—

3,001

8,457

11,168

1,458

253

1,595

510

23,441579

24,020Eliminations
and Corporate

Consolidated¥—-¥459,133

Millions of yen

2007
Toys and
Hobby

Amusement
Facility

Game
Contents

Network

Visual andMusic Content

Other

Subtotal¥179,474¥87,863¥127,389¥12,082¥41,955¥10,370¥459,133

6,112

333

11,798408

1,052

10,531

30,234(30,234)—

185,586

88,196

139,187

12,49043,007

20,901

489,367(30,234)

459,133

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

168,183

84,192

127,677

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

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

416,909880¥ 9,497¥ 1,018¥ 44,312¥ (2,088)¥ 42,224¥151,547¥65,144¥119,103¥11,191¥42,268¥23,571¥412,824¥ (4,334)¥408,490

8,054

8,707

4,423

173

664

1,640

23,661(159)

23,502

486

3,753

670

—

—

208

5,117

(47)

5,070

9,063

10,679

4,220

157

1,437

2,369

27,925—27,925

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

62

Thousands of U.S. dollars

2007
Toys and
Hobby

Amusement
Facility

Game
Contents

Network

Visual andMusic Content

Other

Subtotal

Eliminations
and Corporate

Consolidated

Net sales and Operating
income:Sales to externalcustomers$1,520,322 $744,287 $1,079,111 $102,346$355,400 $ 87,844 $3,889,310 $— $3,889,310

Intersegment
transactions

51,775

2,821

99,941

3,456

8,911

89,208256,112

1,572,097

747,108

1,179,052

105,802364,311

177,052

4,145,422(256,112) 3,889,310

operating expenses

1,424,676

713,189

1,081,550

98,348283,863

168,430

3,770,056(238,425) 3,531,631

Operating income$ 147,421 $ 33,919 $7,454$ 80,448 $Subtotal(256,112)—

Cost of sales and97,502 $8,622 $ 375,366 $ (17,687) $ 357,679

Assets, Depreciation,
Impairment losses andCapital expenditures:
AssetsDepreciation$1,283,753 $551,834 $1,008,920 $ 94,799
37,467

1,465$358,052 $199,669 $3,497,027 $ (36,714) $3,460,313

68,22573,757

5,625

of fixed assets

4,117

31,791

5,676

—

—

Capital expenditures

76,77390,46235,7481,330

12,173

13,892200,431(1,347)

199,084

1,762

43,346(398)

42,94820,068236,554—

236,554

Loss on impairment

Notes:
1. The industry segments used above are those used for internal management purposes.
(Changes in accounting policy)
As part of the group restructuring plan, a reorganization was implemented, splitting off the Amusement Facility Management Business from NAMCO Limited (currently NAMCO
BANDAI Games Inc.) and newly establishing NAMCO LIMITED on March 31, 2006. Under this reorganization, the structure of each Group’s strategic business unit has been more clearly
defined and in order to present details of the Group’s products and services more appropriately, NAMCO LIMITED’s welfare and senior citizens facilities business and all the operationsof Yunokawa Kanko Hotel Co., Ltd. have been moved from “Other” to “Amusement Facility Business”. In addition NAMCO BANDAI Games Inc.’s incubation business was transferredfrom “Other” to “Game Contents Business”.
2. Main products in each business segment:(1) Toys and Hobby: toys, candy toys, products for vending machines, cards, plastic models, apparel, sundries, stationery.
(2) Amusement Facility: amusement facilities operation.
(3) Game Contents: home-use video game software, commercial-use video game machines, prizes for amusement arcade machines.
(4) Network: mobile contents.
(5) Visual and Music Content: video products, video software, on-demand video distribution.
(6) Other: transportation and storage of products, leases, real estate management, printing, development and sales of environmental devices.
3. Unallocatable operating expense included in the “Eliminations and Corporate” column under “Operating expenses” was ¥5,812 million and ¥2,539 million ($21,508 thousand) for theyears ended March 31, 2006 and 2007, respectively. The majority of these costs represent administrative costs incurred by the general administration department of the Company,
Bandai Co., Ltd. and NAMCO Limited (presently NAMCO BANDAI Games Inc.) in 2006 and the Company and NAMCO BANDAI Holdings (USA) Inc. in 2007.
4. Assets included in the “Eliminations and Corporate” column under “Assets” approximated ¥24,800 million and ¥34,674 million ($293,723 thousand) as of March 31, 2006 and 2007,
respectively. The significant assets included in the amounts were surplus operating funds (cash and time deposits) of the Company, long-term investment funds (investment securities)
and assets held by the administrative sections.
5. Depreciation includes depreciation on goodwill, but does not includes extraordinary depreciation on fixed assets.

63

6. As described in the “Summary of Significant Accounting Policies (m), (r) and (s), the “Accounting Standard for Directors’ Bonus” (The Accounting Standards Board of Japan (ASBJ)
Statement No. 4 Accounting Standard, November 29, 2005) and the “Accounting Standard for Share-based Payment” (The Accounting Standards Board of Japan (ASBJ) Statement
No. 8 Accounting Standard, December 27, 2005) and the “Guidance on the Accounting Standard for Share-based Payment” (The Accounting Standards Board of Japan (ASBJ)
Guidance No. 11 Guidance on Accounting Standard, May 31, 2006) were adopted from fiscal 2007.
The adoption of the new accounting standards had the following effect on operating income by each segment.
Millions of yen

Directors’ bonus
Stock options
Operating income

Toys and
Hobby
(177)
(100)
(277)

Amusement
Facility
(48)
(32)
(80)

Game
Contents
(99)
(100)
(199)

Directors’ bonus
Stock options
Operating income

Toys and
Hobby(1,499)(847)(2,346)

Amusement
Facility
(407)
(271)
(678)

Game
Contents
(839)
(847)
(1,686)Visual andMusic Content
(162)
―
(162)

Other
(61)
―
(61)

Subtotal
(547)
(232)
(779)

Eliminations
and Corporate
(111)
(345)
(456)

Consolidated
(658)
(577)
(1,235)

Thousands of U.S. dollars
Visual and
NetworkMusic Content―(1,372)―――(1,372)

Other
(517)
―
(517)

Subtotal(4,634)(1,965)(6,599)Eliminations
and Corporate(940)(2,923)(3,863)

Consolidated(5,574)(4,888)(10,462)

Network―――

7. In prior years, Data Carddass hardware and software were depreciated based on a useful life of 5 years, in fiscal 2007, the useful life for hardware and software was changed to
3 years and 1 year, respectively.
The change in accounting estimate caused operating loss to increase by ¥561 million ($4,752 thousand) and operating income decreased by the same corresponding amount inToys and Hobby Business segment.
The information for the year ended March 31, 2006 was based on the previous business segment classification.
Millions of yen

2006
Toys and
Hobby

Amusement
Facility

Game
Contents

Network

Visual andMusic Content

Other

Subtotal¥176,474¥78,793

4,534

592

181,008

operating expenses
Operating income (loss)

Eliminations
and Corporate

Consolidated¥128,105¥12,196¥42,280¥12,981¥450,829

2,326

325

1,048

10,09018,915¥—¥450,829(18,915)—

79,385130,431

12,521

43,32823,071

469,744(18,915)450,829

161,923

76,878

119,980

10,68537,141

23,243429,850(14,690)415,160¥ 19,085¥ 2,507¥ 10,451¥ 1,836¥ 6,187¥ (172) ¥ 39,894¥ (4,225)¥ 35,669¥136,692¥57,910¥113,800¥10,578¥36,928¥23,212¥379,120¥ 7,531¥386,651

5,055

9,164

2,107

151

527

1,446

18,450694

19,144

825

—

557

1,619

—

—

3,001

—

3,001

8,457

10,979

1,404

253

1,595

753

23,441579

24,020Net sales and Operating
income:Sales to externalcustomers
Intersegment transactions
Subtotal
Cost of sales andAssets, Depreciation,
Impairment losses andCapital expenditures:
AssetsDepreciation
Loss on impairmentof fixed assets
Capital expenditures64

(2) Geographic segments
Millions of yen

2006

Japan

Americas

EuropeAsia,
ExcludingJapan

Subtotal

Sales to external customers¥365,823¥42,769¥31,231¥11,006¥450,829—¥450,829

Intersegment transactions

8,497

1,335

13

21,10630,951(30,951)—

Subtotal

374,320

44,104

31,244

32,112

481,780(30,951)

450,829

Cost of sales and operating expenses

336,706

47,38826,91429,841

440,849(25,689)

415,160¥ 37,614¥ (3,284)¥ 4,330¥ 2,271¥ 40,931¥ (5,262)¥ 35,669¥291,500¥32,543¥34,087¥15,898¥374,028¥12,623¥386,651

Eliminations
and Corporate

Consolidated

Eliminations
and Corporate

Consolidated

Net sales and Operating income:Operating income (loss)
Assets¥Millions of yen

2007

Japan

Americas

EuropeAsia,
ExcludingJapan

Subtotal

Sales to external customers¥356,249¥52,316¥37,763¥12,805¥459,133

Intersegment transactions

11,1991,674—

24,25637,129Net sales and Operating income:¥—-¥459,133(37,129)—

Subtotal

367,448

53,99037,76337,061

496,262(37,129)

459,133

Cost of sales and operating expenses

334,320

50,61332,51034,331

451,774(34,865)

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

Eliminations
and Corporate

Consolidated

Operating income
AssetsThousands of U.S. dollars

2007
Asia,
Excluding
Japan

Japan

Americas

EuropeSubtotal

Sales to external customers$3,017,781$443,168$319,890

Intersegment transactions

94,86814,180—205,471314,519

Subtotal

3,112,649

457,348

319,890313,942

4,203,829(314,519) 3,889,310

Cost of sales and operating expenses

2,832,021

428,742

275,392

290,817

3,826,972(295,341) 3,531,631

Net sales and Operating income:Operating income
Assets$108,471 $3,889,310 $— $3,889,310(314,519)—$ 280,628$ 28,606$ 44,498$ 23,125 $ 376,857 $ (19,178) $ 357,679$2,629,936$316,561$387,666$179,915 $3,514,079 $ (53,765) $3,460,31365Notes:1. Definition of geographic segments and main countries and regions in geographic segments:(1) Foreign geographic segments are defined by geographic region, similarity of economic activities, interrelation of business activities, etc.
(2) The main countries and regions in each geographic segment are as follows:
1) Americas: United States and Canada
2) Europe: France, United Kingdom and Spain
3) Asia, Excluding Japan: Hong Kong, Thailand and Korea
2. Unallocatable operating expense included in the “Eliminations and Corporate” column under “Operating expenses” was ¥5,812 million and ¥2,539 million ($21,508 thousand) for theyears ended March 31, 2006 and 2007, respectively. The majority of these costs represent administrative costs incurred by the general administration department of the Company,
Bandai Co., Ltd. and NAMCO Limited (presently NAMCO BANDAI Games Inc.) in 2006 and the Company and NAMCO BANDAI Holdings (USA) Inc. in 2007.
3. Assets included in the “Eliminations and Corporate” column under “Assets” approximated ¥24,800 million and ¥34,674 million ($293,723 thousand) as of March 31, 2006 and 2007,
respectively. The significant assets included in the amounts were surplus operating funds (cash and time deposits) of the Company, long-term investment funds (investment securities)
and assets held by the administrative sections.
4. As described in the “Summary of Significant Accounting Policies (m), (r) and (s), the “Accounting Standard for Directors’ Bonus” (The Accounting Standards Board of Japan (ASBJ)
Statement No. 4 Accounting Standard, November 29, 2005) and the “Accounting Standard for Share-based Payment” (The Accounting Standards Board of Japan (ASBJ) Statement
No. 8 Accounting Standard, December 27, 2005) and the “Guidance on the Accounting Standard for Share-based Payment” (The Accounting Standards Board of Japan (ASBJ)
Guidance No. 11 Guidance on Accounting Standard, May 31, 2006) were adopted from fiscal 2007.
The adoption of the new accounting standards had the following effect on operating income by each segment.

Directors’ bonus
Stock options
Operating income

Directors’ bonus
Stock options
Operating income

Japan
(547)
(232)
(779)

Japan
(4,634)(1,965)(6,599)Americas―――

Europe―――Millions of yen
Asia,
Excluding
Japan
―
―
―

Subtotal
(547)
(232)
(779)

Eliminations
and Corporate
(111)
(345)
(456)

Consolidated
(658)
(577)
(1,235)

Americas―――

Thousands of U.S. dollars
Asia,
Excluding
Europe
Japan
―
―
―
―
―
―

Subtotal(4,634)(1,965)(6,599)Eliminations
and Corporate(940)(2,923)(3,863)

Consolidated(5,574)(4,888)(10,462)

5. In prior years, Data Carddass hardware and software were depreciated based on a useful life of 5 years, in fiscal 2007, the useful life for hardware and software was changed to
3 years and 1 year, respectively.
The change in accounting estimate caused operating loss to increase by ¥561 million ($4,752 thousand) and operating income decreased by the same corresponding amountin Japan geographic segment.

(3) Foreign sales
Millions of yen

2006

Foreign sales

2007

Americas

Europe

Asia

Total

Americas

Europe

Asia

Total

¥43,406¥31,537¥10,844¥ 85,787¥53,719¥41,267¥17,814¥112,800

9.6%

7.0%

2.4%

11.7%

9.0%

3.9%

Consolidated sales
Share of sales to customers outside Japan

459,133

450,829
19.0%

24.6%

Thousands of U.S. dollars

2007
Americas

Foreign sales

EuropeAsia$455,053 $349,572 $150,902 $ 955,527

Consolidated sales
Share of sales to customers outside Japan

3,889,310
11.7%

Notes:
1. Foreign sales are defined as total sales by the Company and its consolidated subsidiaries in countries and regions other than Japan.
2. Segmentation by country or by region and the main countries and regions in each geographic segment are as follows:(1) Foreign geographic segments are defined by geographic region, similarity of economic activities, interrelation of business activities, etc.
(2) The main countries and regions in each geographic segment are as follows:
1) Americas: United States, Canada and Latin America
2) Europe: France, United Kingdom, Spain, Middle East and Africa
3) Asia, Excluding Japan: Hong Kong, Singapore, Thailand, Korea, Australia, China and Taiwan

66

Total

9.0%

3.9%

24.6%

23 Significant Subsequent Events
1. Acquisition of Treasury Stock

2. Retirement of Treasury StockAt the Board of Directors’ Meeting of April 18, 2007, theOn June 20, 2007, based on Article 178 of the Corporation

Company decided to purchase treasury stock as follows, based

Law, the Company’s Board of Directors approved and executedon Article 156 of the Corporation Law and Article 165,

the retirement of treasury stock, which is summarized as

Paragraph 3 of the same law:follows:(1) Reason for acquisition:(1) Reason for retirement:

In order to implement a flexible capital policy that utilizes

In order to improve capital efficiency and increase

assets effectively and responds to changes in businessshareholder value

conditions(2) Type of share to be acquired:
Common stock of the Company(3) Total number of shares to be acquired:
5,000,000 shares (maximum)(4) Total amount of shares to be acquired:¥10,000 million (maximum)(5) Acquisition method:(2) Retirement method:
Charged to additional paid-in capital(3) Type of shares retired:
Common stock of the Company(4) Number of shares retired:
4,500,000 shares(5) Date of retirement:
June 20, 2007

Repurchase on the Tokyo Stock Exchange market(6) Period of acquisition:
From May 10, 2007 to September 30, 2007
Furthermore, the Company repurchased 4,980,000 shares(¥9,960 million) by June 12, 2007 with no planned future
repurchases.

24 Additional Information
1. Change in Useful Life for Fixed Assets

2. Litigation

Previously, Data Carddass hardware and software wereOn October 5, 2006, a lawsuit for damages in the commercial

depreciated based on a useful life of 5 years however productbusiness has been filed against the Company and its consol-

cycles were shortened due to escalating competition, andidated subsidiaries in the U.S.A. by Game Ballers, Inc. inaccordingly the useful life for hardware and software was

California, U.S.A. The matter is currently under dispute and inchanged to 3 years and 1 year, respectively, from fiscal 2007.

arbitration.

Due to this change, depreciation of ¥561 million ($4,752
thousand) was added to “Selling, general and administrative
expenses” and an “Extraordinary depreciation of fixed assets”
of ¥246 million ($2,084 thousand) for fiscal 2006 was added
to other loss. For fiscal 2007, operating income decreased by¥561 million ($4,752 thousand) and income before income
taxes and minority interests decreased by ¥807 million ($6,836
thousand).

67

Independent Auditors’ Report

To the Board of Directors of
NAMCO BANDAI Holdings Inc.:

We have audited the accompanying consolidated balance sheets of NAMCO BANDAI Holdings Inc. and consolidated
subsidiaries as of March 31, 2007 and 2006, and the related consolidated statements of income, changes in net assets andcash flows for the years then ended, expressed in Japanese yen. These consolidated financial statements are the responsibilityof the Company’s management. Our responsibility is to independently express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis forour opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of NAMCO BANDAI Holdings Inc. and subsidiaries as of March 31, 2007 and 2006, and the consolidated
results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally
accepted in Japan.
Without qualifying our opinion, we draw attention to the following:(1) As discussed in Note 2 to the consolidated financial statements, effective from the year ended March 31, 2007, NAMCO
BANDAI Holdings Inc. and consolidated domestic subsidiaries applied Accounting Standard for Directors’ Bonuses.
(2) As discussed in Note 2 to the consolidated financial statements, effective from the year ended March 31, 2007, NAMCO
BANDAI Holdings Inc. and consolidated domestic subsidiaries applied Accounting Standard for Shared-Based Payments.
(3) As discussed in Note 23 to the consolidated financial statements, the Board of Directors approved the purchase of treasury
stock on April 18, 2007. Furthermore, the Board of Directors approved the retirement of treasury stock on June 20, 2007,
which the Company concurrently retired on the same day.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31,
2007 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts
and, in our opinion, such translation has been made on the basis described in Note 3 to the consolidated financial statements.

Tokyo, Japan
June 25, 200768

Corporate Data
(As of March 31, 2007)

Corporate Name: NAMCO BANDAI Holdings Inc.
Head Office: 9th Floor, Taiyo Seimei Shinagawa Building, 2-16-2, Konan,
Minato-ku, Tokyo 108-0075, Japan
URL: www.bandainamco.co.jp
Capital: ¥10 billion
Stock Exchange Listing: Tokyo Stock Exchange, First Section (Code number: 7832)
Main Business: Planning and execution of medium- and long-term management strategies for the
BANDAI NAMCO Group; provision of support for business strategy implementation
by Group companies and management of business activities.
1,000,000,000 shares
Stock Information: Number of Shares Authorized:
Number of Shares Issued:
260,580,191 shares
Number of Shareholders:
29,693
Number of Shares per Trading Unit:
100 shares
Note: From May 10, 2007, to June 12, 2007, the Company acquired 4,980,000 shares of its own stock.
On June 20, 2007, 4,500,000 shares of treasury stock were cancelled.

Major Shareholders:

Name% of Total

Japan Trustee Services Bank, Ltd. (Trust Account)

5.7

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

5.7

Masaya Nakamura

5.5

MAL Ltd.

4.0

State Street Bank and Trust Company

3.4

Morgan Stanley & Co. Incorporated

3.2

The Silchester International Investors International Value Equity Trust

3.2

Sanka Ltd.

2.8

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

2.2

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

1.9

Ownership Breakdown:

Individuals, etc. 18.48%

Financial institutions 27.08%

Brokerages 0.73%
Foreign corporate entities
and others 40.21%

Other corporate entities 13.50%

TM & ©BVS Entertainment, Inc. and BVS International N.V. All rights reserved. ©BANDAI, WiZ 2004-2007 ©BIRD STUDIO/SHUEISHA , TOEI ANIMATION ©BANDAI 2007 ©2007 TV ASAHI • TOEI AG • TOEI ©SOTSU •SUNRISE ©TSUBURAYA PRODUCTIONS ©BANDAI, WiZ 2004 Original works ©1976 Osamu Akimoto Animation Series and products derived thereof ©1996-2006 ADK ©SOTSU • SUNRISE ©BIRD
日本野球機構承認
STUDIO/SHUEISHA, TOEI ANIMATION ©2006 NBGI ©Michiharu Kusunoki/Kodansya Ltd. All rights reserved. ©2003-2007 NAMCO BANDAI Games Inc. ©SOTSU • SUNRISE ©2007 NBGI （社）
NPB BIS プロ野球公式記録使用 ©SOTSU • SUNRISE • MBS ©BANDAI NETWORKS ©MEGAHOUSE 2006 ©BANDAI NETWORKS Othello is a registered trademark. ©2006 FUJITV KIDS ©BANDAI NETWORKS ©D3
PUBLISHER, GIGA-RENSYA ©EIICHIRO ODA/SHUEISHA ©BANDAI NETWORKS ©SOTSU • SUNRISE • MBS ©SUNRISE/PROJECT GEASS • MBS Character Design©2006 CLAMP ©SUNRISE • BANDAI VISUAL ©2006
FREEDOM COMMITTEE

69

NAMCO BANDAI Holdings Inc.

Annual Report 2007

NAMCO BANDAI Holdings Inc.
Annual Report 2007www.bandainamco.co.jp

Printed in Japan