Medium-Term Management
Plan (FY2007.3 – FY2009.3)
February 23, 2006

Contents○ BANDAI NAMCO Group Corporate Philosophy

p. 2○ Current Fiscal Year Performancep. 2○ Medium-Term Management Plan
・Formulation of Medium-Term Management Plan

(2) Business Strategy① Entertainment Hub Concept

p. 14② Strengthening Overseas Businesses p. 16
p. 6

・Medium/Long Term Goals and Upcoming MediumTerm Management Plan
p. 6(3) 3-Year Plan Figures (by SBU)

・Background of Medium-Term Management Plan

(4) SBU Strategies

p. 7

p. 17

・3-Year Plan Figures (Consolidated)p. 7① Toys and Hobby SBU

p. 19

・Medium-Term Management Plan: Group Policies

p. 8② Amusement Facility SBU

p. 20③ Game Contents SBU

p. 22④ Network SBU

p. 24⑤ Visual and Music Content SBU

p. 25-- Strengthening, Enriching, and Expanding Portfolio Management --(1) Management Strategy① Strengthening Corporate Governancep. 11② Effectively Utilizing Human Resourcesp. 11③ Building the Optimal Management System p. 12

1

BANDAI NAMCO Group Corporate Philosophy
Mission Statement
Dreams, Fun and Inspiration
BANDAI NAMCO will continue to provide Dreams, Fun and Inspiration to people around theworld, through entertainment based on creativity and boundless enthusiasm.

Belief
Dreams, Fun, and Inspiration are the Key to Happiness
The meaning of Dreams, Fun and Inspiration will essentially change over time, but BANDAI
NAMCO holds one unshakable belief: that Dreams, Fun and Inspiration will always hold the
key to happiness.

Basic Philosophy
More Passion, More Innovation, More Perceptive
・Unparalleled curiosity and boundless enthusiasm
・Abundant creativity unrestrained by the status quo
・Open to people's needs and satisfaction from giving inspiration

VisionTo Become the World’s Most Inspiring Entertainment GroupBANDAI NAMCO Group will constantly strive to be a pioneer, aiming to deepen and widen
the appeal of entertainment and winning the hearts of people worldwide who enjoy having fun.
Our ultimate goal is to become the world's most inspiration entertainment group.

Current Fiscal Year Performance2

Current Fiscal Year Performance(Millions of yen)

FY Projections
Change3Q Performance (Ref.) Midterm
Performance(Cumulative)

Current
Projections

Previous
Projections

Net Sales

294,000

290,000＋4,000218,974

134,645

Operating
Income33,50031,500＋2,00033,985

15,332

Recurring
Income34,00032,000＋2,00035,172

15,946Net Income

14,20016,000−1,800

16,115

5,607

Current Year Performance
Toys & Hobby
Strong performance centeredaround Tamagotchi,
girls’
girls’ toys, andData Carddass

Visual & Music Content
Group synergy with
Mobile Suit Gundam seriesⒸ SOTSU AGENCY･SUNRISEⒸBANDAI/WiZ 2004

Ⓒ SOTSU AGENCY･SUNRISE･MBSⒸ BIRD STUDIO/SHUEISHA･TOEI ANIMATION⇒Despite struggling in the U.S., strong overall performance based on portfolio function.

3

Current Fiscal Year Performance(Millions of yen)

FY Projections
Change3Q Performance (Ref.) Midterm
Performance(Cumulative)

Current
Projections

Previous
Projections

Net Sales

158,000

180,000−22,000

128,148

85,052

Operating
Income−500

12,700−13,200

2,769

2,538

Recurring
Income−500

12,100−12,600

2,875

2,632

Net Income−2,7008,400−11,100

2,512

2,526

Current Fiscal Year Performance
Game Contents

・Among arcade machines, large machines
such as Mario Kart Arcade Grand Prix
performed strongly

Amusement
Facility
In a tough market
environment,
sales through 3Q atexisting retail outlets:
In Japan: 96.9% ofsame period last year

・Inability to cope with changes in game
console market environment led to poor
performance(C)2005 Nintendo(C)2005 NAMCO LTD., ALL RIGHTS RESERVED.
MARIOKART is a registered trademark of Nintendo.
Licensed by NINTENDOIn North America:
97.5% of same period
last year⇒Disappointing performance due to inability to make up for console games slump.

4

Current Fiscal Year Performance(Millions of yen)

FY Projections

3Q Performance (Ref.) Midterm
Performance(Cumulative)

Current
Projections

Previous
Projections

ChangeNet Sales

450,000

470,000−20,000

345,396

218,873

Operating
Income32,50044,200−11,700

35,60017,546

Recurring
Income33,00044,100−11,100

36,801

18,244Net Income

11,00024,400−13,400

17,711

7,834

Medium-Term Management Plan
(FY2007.3 – FY2009.3)
Management
Strategy

Business
Strategy5Formulation of Medium-Term Management PlanBANDAI NAMCO Group Goal

To become the world’s mostinspiring entertainment group
BANDAI NAMCO Group’s objectives in its upcoming medium-term management plan:■Expand scale by boosting group cooperation
・Achievement of plan goals by developing high-quality content and improving business model
・Effective utilization of content across strategic business units
・FY2009.3: Projected sales = 550 billion yen; projected operating income = 58 billion yen■Improve profitability through structural reform on business and functional levels
・Pursue high synergy through competition and cooperation among strategic business units
・Reduce costs by integrating back offices■Use group’s strengths to reinforce win-win relationships with partners-- Entertainment hub concept -・Pursue further growth as content provider by enlarging and expanding Strategic Business Units
・Develop and strengthen relations with partner companies; expand operations through alliances

Medium/Long Term Goals
and Upcoming Medium-Term Management Plan
Medium/Long-Term Goals
Medium-Term
Management Plan

¾Sales: 1 trillion yen¾Operating Income: 100 billion yen□ Strategies for achieving 3-Year Targets¾Overseas Sales: 50% of total■Expand scale by boosting group cooperation■Improve profitability through organizational reform at business andfunctional levels■Utilize group’s strengths to reinforce win-win relationships with partners[entertainment hub concept]

10 Years Ago (FY96.3)¾ Sales: 328.4 billion yen¾ Operating Income: 29 billion yen¾ Overseas Sales: 22.7% of total

5 Years Ago (FY01.3)¾ Sales: 363.5 billion yen¾ Operating Income: 12.9 billion yen¾ Overseas Sales: 17.7% of total□ 3-Year Targets (FY09.3) From a
Medium/Long-Term Perspective¾Sales: 550 billion yen¾Operating Income: 58 billion yen¾Overseas Sales: 25% of total

Present (FY06.3)¾ Sales: 450 billion yen¾ Operating Income: 32.5
billion yen¾ Overseas Sales: 18.4% of
total

Note: Past performance figures
based on simple totals for
BANDAI and NAMCO

6

Background of Medium-Term Management Plan

Strengthening,
Strengthening, Enriching,
Enriching, andand Expanding
Expanding Portfolio
Portfolio Management
Management-- Coping with increasing management risks from structural changes in market and heightening competition --② Effectively utilizing Human Resources③ Building Optimal Management System
・Organizational Restructuring
・Consolidate Indirect Departments① Entertainment Hub Concept

Business
Strategy

Business
Environment

・Changes in business model from fusion ofbroadcasting and communications
・Improving content value from structural changes
in media industry (new entrants from outsideindustry)
・Shorter character life cycles
・Intensification of industry restructuring in orderto survive
・Changes in distribution structure (rise of Internet
sales)
・Shrinking Japanese market due to fewer
children, aging and shrinking population① Strengthening Corporate GovernanceManagement
StrategyManagement
Environment

・Social demands for transparency inmanagement and corporate social responsibility
・Need to secure and utilize human resources as
population ages and has fewer children
・Intensification of M&As that strengthen corebusiness・Rising costs from increase in consumption tax
and appreciating Chinese Yuan

・Content Strategy
・Domain Strategy
・Channel Strategy② Strengthening Overseas
Businesses

3-Year Plan Figures (Consolidated)
Units: millions of yen

Net Sales
Operating Income
Net Income
ROA(*)
ROE(*)

FY06.3

FY07.3

FY08.3

FY09.3(Projected)(Target)(Target)(Target)470,000
40,00022,00010.0%
8.0%

500,000
50,00028,00012.0%
9.5%

550,000
58,00032,50013.5%
10.0%

450,000
32,50011,0008.5%
4.5%•Figures for gross and net assets used to calculate ROA and ROE for
FY06.3 derived from average of capital-adjusted figures based on simple
totals from the end of FY05.3 and projected figures for the end of FY06.3

Net Sales

600,000

60,000500,000

50,000400,000

40,000300,000

30,000200,000

20,000100,000

10,000

0

0

06.3

07.3

08.3

09.3

Operating Income
Net Income

15.0%

ROA
ROE

10.0%

5.0%

0.0%
06.3

06.3

07.3

08.3

09.3

07.3

08.3

09.3

ROA: Recurring Income / Avg. Total Assets
ROE: Net Income / Avg. Shareholders’ Equity

7

Medium-Term Management Plan: Group Policies

Strengthening,
Strengthening, Enriching,
Enriching, andand Expanding
ExpandingPortfolio
Portfolio Management
Management

Management
Strategy

Business
Strategy

Pure Holding Company (NBHD)

Strategic Business Units (ＳＢＵ)

Strengthening, Enriching, and Expanding
Portfolio Management

The
The Portfolio
Portfolio ABC
ABC Spiral
SpiralArea
Area (Regional)(Regional) Portfolio
Portfolio

Content
Content Portfolio
Portfolio

Business
Business Portfolio
Portfolio

8

Business Portfolio
Expanding Business Domains
新規事業

Expand businesses by further strengthening core strengths (character merchandising,technology, locations) and Create new businesses by utilizing the know-how.
FY05.3

FY06.3

FY09.3SnacksBANDAI

ApparelToys & Hobby
Visual & Music
Content

Toys & Hobby

Toys & Hobby

Visual & Music
Content

Visual & Music
Content

Character
Network

Game
Contents
Amusementﾄ
Facility

Network

Network

CharacterTechnology
Location
Amusement
Facility

NAMCO

Amusement
Facility

Game
Contents

Game
Contents

Game
Contents

CharacterTechnology
Location

WelfareProjects

Spa
ResortTechnology
Location
Amusement
Facility

Area (Regional) Portfolio
Expand overseas share by rebuilding North American

Expanding Global Development business and entering into China market.

FY09.3

FY06.3Eur. Asia
8.8% 3.2%

Eur. Asia
U.S. 6.9% 2.3%

U.S.
12.9%

9.2%

Japan
81.6%

Japan
75.1%

Sept. 2005: NBHD Inc. establishedJan. 2006: NBHD (USA) Inc. established9Content Portfolio
Content Portfolio

Attain the ideal portfolio through integrationNew

New 20%
20%

35%
35%

Licensed

Licensed

30%
30%
BANDAI
Original

85%

70%
Popular
65% Longestablished

NAMCO
Original

New 30%30%

Licensed

45%
45%

55%

NAMCO
BANDAI
Original

70% Popular

15%
15%

Popular

80% Longestablishedlong-establishedGroup Medium-Term Management Plan Policies
Strengthening,
Strengthening, Enriching,
Enriching, andand Expanding
ExpandingPortfolio
Portfolio Management
Management

Management
Strategy

Business
Strategy

Pure Holding Company (NBHD)

Strategic Business Units (ＳＢＵ)①Strengthening Corporate Governance②Effectively Utilizing Human Resources③Building Optimal Management System①Entertainment Hub Concept②Strengthening Overseas Businesses

10① Strengthening Corporate GovernanceBecoming a company that continuallycontributes to society and is trusted by society.

Measures to take

Implement brand operation/control standards➠

Improve corporate brand power

Introduce business management tools(Balanced Score Card)➠

Strengthen monitoring of strategy,
performance

Enhance CSR and compliance systems➠

Transparent management,
Timely and fair disclosure

Roles of NAMCO BANDAI Holdings (NBHD)
Role
Role

Value
Value Provided
Provided toto GroupGroup①① Formulate
Formulate overall
overall group
group strategy
strategy①① BrandBrand②② Optimize
Optimize distribution
distribution ofof group’sgroup’smanagement
management resources
resources③③ Monitor
Monitor group
group management
management②② Cultivation
Cultivation ofof group’sgroup’s core
core human
human resources
resources④④ PR/IR
PR/IR forfor groupgroup asas aa wholewhole③③ Coordination
Coordinationofof synergy
synergy between
between group
group
companies
companies④④ Financial
Financial support
support⑤⑤ FormForm strategic
strategic partnerships
partnerships with
with otherothercompanies
companies⑤⑤ Partnerships
Partnerships andand M&A
M&A geared
geared toward
towardrestructuring/expanding
restructuring/expanding businesses
businesses② Effectively Utilizing Human Resources
A Workplace That Enhances Abilities Building win-win relationships between
companies and employees.

Personnel
PersonnelExchange
ExchangeWithin
WithinGroup
Group

➠

Integrate know-how

・Cross-exchange of top management as well as employees➠

Boost development power,
cultivate managers
・Programs to boost development power
・Programs to cultivate management leaders

Employee
EmployeeTraining
TrainingPrograms
Programs➠
Implement
ImplementNew
NewEmployment
EmploymentRules
Rules

Create an environment where
employees can realize theirpotential
・High-grade professional contract employees
・Specialist personnel system
・Employment system that accommodates life stages

11

③ Building the Optimal Management System
Creating an organizational structure that

Organizational Restructuring Policies maximizes group management efficiency.

Cooperation

for growth➠ Integrate organization

・Merge overlapping divisions in mature markets where market share can be expanded bymerging and restructuring SBUs・Expand market share through streamlining and economies of scaleCompetition

for growth➠ Maintain current organization

・Competition in growth markets where market share can be expanded by diversifying SBU contacts
・Expand scale by revitalizing organization

Collaboration for efficiency ➠ Shared services
・Consolidate indirect costs by integrating accounting, general affairs, HR, and information
systems operations
・Boost earning potential through greater efficiency by encouraging skill-building (multifunctionalization) and optimizing personnel deployment③ Building the Optimal Management System
SBU Building Measures
NAMCO BANDAI Holdings Inc. Established
BANDAI and NAMCO enact management integration.

A Corporate Separation
The supervision and management of certain BANDAI and NAMCO
subsidiaries and affiliates transferred to the parent company

NAMCO BANDAI Holdings (USA) Inc. establishedUS regional stockholding company formed, affiliated operating companies restructured.

NAMCO BANDAI Games America Inc. established
Bandai Logipal Inc. made into full subsidiary
Through stock exchange

NAMCO BANDAI Games Inc. will be establishedFacility operation business spun off from Namco,
Bandai’s video game business absorbed into Namco.

BANPRESTO CO., LTD. will be made intofull subsidiary (planned)
Through stock exchange (monetary issue)

12③ Building the Optimal Management System
Group Organization

Strategic Business Unit system as of end of March 2006.
Management
Management Strategy
Strategy
Committee
Committee

NAMCO
NAMCO BANDAIBANDAI Holdings
Holdings Inc.
Inc.

Group
Group BusinessBusiness Report
ReportCSR
CSR Committee
Committee

AffiliatedAffiliated BusinessBusiness GroupGroup
Business Support
Incubation

Internal
Internal Control
Control Committee
Committee

Strategic Business Units

Waigaya
Waigaya (weekly(weekly meeting)meeting)

Group-WideGroup-Wide Meetings
Meetings
LeaderCross-Entertainment Meetings
Character Strategy
Meetings

BANDAIVISUAL
VISUALBANDAIBANDAINETWORKSNETWORKSBANDAI

NAMCOBANDAIBANDAIGames
Games
NAMCO

Network
Network

Visual && Music
Music Content
Content
VisualLeaderLeader

NAMCO
NAMCO

Namco Trading

Game Contents
Contents
Game

Namco Ecolotech

LeaderNamco Supporters

BANDAIBANDAI

Toys && Hobby
Hobby
Toys

Banalex

Amusement Facility
Facility
Amusement

LeaderBandai Logipal

Content Strategy Meetings
Visual & Music Content& Network SBU
Meetings
Environmental Projects
Rights Liaison Meeting
Shared Service Council③ Building the Optimal Management System
Consolidation of Indirect Operations Revising operations and raising personnel expertise.
NAMCO
NAMCO BANDAIBANDAI Holdings
Holdings Inc.
Inc.

Group SSC (Shared Service
Center) launched

SSC
SSC
AffiliatedAffiliated BusinessBusiness Group
Group

Part of group functions merged

3SBU

3 SBU back offices integrated,
Shared service division establishedGame Contents
Contents
Game

Amusement Facility
Facility
Amusement

Toys && Hobby
Hobby
Toys

Cost reduction target for 3 main
Companies FY07.3 – FY09.3
10 billion yen ⇒ 8.5 billion yen(reduced by15％)

NAMCO and NAMCO BANDAI
Games back offices consolidated

13

Group Medium-Term Management Plan Policies
Strengthening,
Strengthening, Enriching,
Enriching, andand Expanding
ExpandingPortfolio
Portfolio Management
Management

Management
Strategy

Business
Strategy

Pure Holding Company (NBHD)

Strategic Business Units (ＳＢＵ)①Strengthening Corporate Governance②Effectively Utilizing Human Resources③Building Optimal Management System①Entertainment Hub Concept②Strengthening Overseas Businesses① Entertainment Hub Concept

Toys & Hobby
Game
Contents
New
DomainNew
DomainNetwork

Visual & Music
Content
New
DomainAmusement
Facility

The “Entertainment Hub Concept” is the vision for the BANDAI NAMCO Group
in our medium-term business strategy. It coordinates synergy between thevarious companies within the Group and enables each SBU to fulfill its role(business strategy) to its maximum potential. At the same time, it encourages
the Group to make use of other companies both in the industry and fromoutside the industry as partners.

14

① Entertainment Hub Concept
Bandai Namco Group’s Strengths
Character
Character Merchandising
Merchandising

Broad
Broad Domain
Domain –– 55 SBUs
SBUs

The ability to produce characters

Locations
Locations
Ability
Abilityto
to Deliver
DeliverProducts
ProductsWorldwide
Worldwide

Technology
Technology

Toys &
Hobby

Game development technology

Amusement Game
Network Visual &Facility Contents
Music
Content

GlobalGlobal Presence
Presence
North
North America,
America, Europe,
Europe, Asia
Asia

Strategies

Broaden Horizons

Dig Deeper

Content
ContentStrategy
Strategy

Domain
Domain Strategy
Strategy
Expansion by pioneering new
categories
Venture into new domains

Create, obtain, andcultivate quality content

Create/Obtain
Create/Obtain Content
Content
Joint Rights Holders Creators

Strengthen
Strengthen Existing
Existing Domains
Domains

Joint Development with
Industry Partners
VentureVenture into
into NewNew Domains
Domains

Cultivate
Cultivate Content
Content
TV Stations Visual Distribution
Strengthen Efforts with Partner Companies

Award Merchandising Rights toCompanies Outside Industry

Expand Territory

ChannelChannel Strategy
Strategy
Enhance “space-creating”
capabilities
Further expand customer contacts

ExpandExpand Client
Client Contacts
Contacts
E-commerce
Distribution
RetailTheme Parks① Entertainment Hub Concept
Our Strategies

Making the entertainment hub concept a reality at a higher dimension.

Cross-Entertainment
Cross-Entertainment①①Content
ContentStrategy
Strategy

Strategically enhance content creation, acquisition, and cultivation
1. Strengthen group synergy
2. Strengthen ties with external affiliates
3. Promote partnerships with 3rd parties and M&A②②Domain
DomainStrategy
Strategy

Enlarge scope of content businesses
1. Expand portfolio
2. Create new strategic business units (new businesses)
3. Expand, enhance, and supplement through M&A and alliances③③Channel
ChannelStrategy
StrategyStrengthen merchandising and extend contacts between contents
and customers
1. Make effective use of existing partner companies’ distribution
channels
2. Obtain new distribution channels through new partnerships
3. Forge ties among strategic business units
4. Strengthen network business15

② Strengthening Overseas Businesses
Management System
NAMCO
NAMCO BANDAIBANDAI Holdings
Holdings Inc.
Inc.
Allocation/supervision of management
resources through regional oversight
In North America

Regional
Regional OversightOversight

NAMCO BANDAI
Holdings (USA)Toys & Hobby

Bandai America Inc.

SBU

SBUs
implement
businessstrategies

Game Contents

NAMCO
CYBERTAINMENT
INC.
NAMCO BANDAI
Games America Inc.

SBU

NAMCO AMERICA INC.

Amusement
Facility SBU

NAMCO
NETWORKSAMERICA INC.

Network
SBU

Visual & Music

BandaiEntertainment Inc.

Content SBU

(USA)
NBH
NBH (USA)

Organization close to
Japanese model

NAMCO BANDAI Holdings (USA) Inc.
established
Organization set up toaccommodate multiple
countries
Centered around BANDAI S.A., Namco
Europe Ltd.
New game company to be established in2006
Separation of sales and(Asia)BHK
BHK (Asia)
production
Market expansion(Europe)
BSA
BSA (Europe)
NEL
NEL

Bandai Asia (sales) established Jan. 2006
Bandai Guangdong (sales) to beestablished in Summer 2006
* BSA = Bandai SA (France) BHK = Bandai Hong Kong

② Strengthening Overseas Businesses
Business Strategy(NorthAmerica)
America)NBHU
NBHU (North

Power Rangers

TM & © 2006 BVS Entertainment, Inc. and BVS International N.V. All Rights
Reserved. Used under license by Bandai America Incorporated. ABC logo:
TM & © ABC Inc. All Rights Reserved.

PatlaborⒸ HEADGEAR/BANDAI VISUAL/TFC

PAC-MANⒸ1980,2001,2002,2003 NAMCO LTD.,ALL RIGHTS RESERVED.

Expand local and localized content⇒ Content Strategy
Selection and focus⇒ Conform to customer needs
More efficient operation of AM facilities⇒ Shift to revenue share operation(Europe)
BSA
BSA (Europe)
NEL
NEL

Enhance business portfolio for Europe region
Reinforce product strategies for each target
Bellflower BunnyⒸ 2004 Euro Visual.

Masked Rider Φ’sⒸ 2003 ISHIMORI PRO・TV ASAHI・ADK・TOEIPOCOYOⒸ 2004 Zimkia Entertainment S.L.
Licensed by Granada Ventures.

Mobile Suit Gundam
SEED DESTINYⒸ SOTSU AGENCY・SUNRISE・MBS

Dragon Ball ZⒸ Bird Studio/SHUEISHA, TOEI ANIMATIONⒸ BANDAI 2005

Ultraman Tiga
Ⓒ 1996 TSUBURAYA PRODUCTIONS(Asia)BHK
BHK (Asia)

From production base to sales base
Build foundation in China market⇒ Establish Character Merchandising model
FY09.3 sales targets Toys & Hobby: 5 billion yen
Amusement facility: 1 billion yen

16

3-Year Plan Figures (by SBU)Net Sales

Units: billions of yen

550.0

600
500
400

450.0

470.0

500.0
Toys & Hobby

210.0
182.0

300

180.0

Game Contents

104.0

129.2

153.0

153.0

12.0
41.9
23.0
-17.1

13.5
37.5
19.0

14.5
40.0
21.5

16.0
42.0
22.0

06.3

07.3

08.3

09.3

(projection)(plan)(plan)(plan)

200

0

114.0

90.0

79.0

100

Amusement Facility

190.0

-23.0

Network

170.0

Visual & Music Content
Affiliated Business Group-23.0

Elimination-24.0

3-Year Plan Figures (by SBU)
80

Operating Income

Units: billions of yen

58.0

60

50.0

Toys & Hobby

19.0
40

32.5

40.0

15.7
18.7
20

0

2.3
9.6
1.8
5.6
ー4.7ー 0.8
06.3
(projection)

16.5
7.0

4.8

8.0

Amusement Facility
Game Contents
Network

24.0

13.0
1.9
6.4
-2.5 0.7
07.3

20.0
2.1
6.7
-2.8 0.5
08.3

2.3
7.0
-2.8 0.5
09.3(plan)(plan)(plan)

Visual & Music Content
Affiliated Business GroupElimination17

3-Year Plan Figures (by SBU)
SBU Medium-Term Plans
Top row: Net Sales

Transfer authority to SBUs and give them the responsibility ofachieving 3-year plan figures.

Bottom row: Operating Income
FY 06.3(projection)

Toys & Hobby

Amusement Facility

Game Contents

Network

Visual & Music Content

Affiliated Businesses

Corporate Elimination

TotalsUnits: billions of yen
FY 07.3(plan)

FY 08.3(plan)

FY 09.3(plan)

182.0

180.0

190.0

18.7

15.7

16.5

210.0
19.0

79.0

90.0

104.0

114.0

2.3

4.8

7.0

8.0

129.2

1,53.0

153.0

170.0

9.6

13.0

20.0

24.0

12.0

13.5

14.5

16.0

1.8

1.9

2.1

2.3

41.9

37.5

40.0

42.0

5.6

6.4

6.7

7.0

23.0

19.0

21.5

22.0

−0.8

0.7

0.5

0.5

−17.1

−23.0

−23.0

−24.0

−4.7

−2.5

−2.8

−2.8

450.0

470.0

500.0

550.0

32.5

40.0

50.0

58.0

7.2％

8.5%

10.0%

10.5%

Medium-Term Management Plan
(FY2007.3 - FY2009.3)
SBU
Strategies

18Toys & Hobby SBU
Medium-Term
Medium-Term Vision
VisionEnvironmental
Environmental Analysis
Analysis

Constantly strive to create unique value
for customers with advancements incharacter merchandising.

3-Year
3-Year Plan
Plan Figures
Figures

250.0

Net Sales
200.0

Domestic Overseas

Medium-Term
Medium-Term Strategy
Strategy

210.0
190.0

182.0

180.0

136.5

132.5

45.5

47.5

53.0

64.0

FY2006.3

FY2007.3

FY2008.3

FY2009.3

150.0

1. Strengthen overseas businesses(especially US, China)

146.0
137.0

100.0

50.0

0.0

25.0

20%

Operating Income
20.0
15.0

19.0

18.7
15.7

16.5

10.0
8.7%

10.0
8.7%

5.9

5.7

6.5

7.8

FY2006.3

FY2007.3

FY2008.3

FY2009.3

10.3%
12.8

10.0

11.2
9.0%

0.0

2. Strengthen domestic businesses throughcontent strategy and media policy⇒ Entertainment hub concept

15%

3. Create unique value (new businesses)
10%

5%

5.0

1. Shrinking market due to lower birth rate
2. Move towards oligopoly of large firms due
to industry restructuring
3. Diversification of customer needs
4. Changes in structural industry

4. Improve cost structure0%

Toys & Hobby SBU
Medium-Term
Medium-Term Strategy
StrategyStrengthening Overseas Businesses(US)

Reconstruct businesses through swift
management reform(Europe) Strengthen regional, business portfolios(Asia)
Establish foundation for character
merchandising in China market
Goal: Increase overseas sales to 30% or moreof total net sales

Creating Unique Value (New Businesses)

Strengthening Domestic Businesses ThroughContent Strategy and Media Policy Implement content strategy and media policy
in response to changes in industry structure⇒ entertainment hub concept
 Aim to be #1 in all categories
 Goal: Increase market share(weighted average) to 35%
Improving Cost Structure Reform business creation process and pioneer
new domains along customer and value axes
⇒ expand the entertainment hub

 Revise operational processes for project
development/production(Customer Axis) Females, age 13 and up, and seniors(Value Axis) Fusion of products and services, etc.

 Improve cost structure through distribution
reform, etc.

 Goal: Generate 5 billion yen in sales with new
businesses

 Goal: Raise operating margin to 9% byimproving profitability

19

Toys & Hobby SBU Medium-Term Management Plan
2006 Character Topics
NAMCO Joint Project

Tamagotchi Series

Power Rangers: Mystic Forceth

The 30 Power Rangers series

Total Worldwide Sales: 17 million(end of Dec. 2005)

Tamagotchi Café (tent.)Ⓒ 2006 TV ASAHI･TOEI AG･TOEIⒸ BANDAI/WiZ 2004

New Digimon

NAMCO Game Character Merchandising

The wait is over!

ACE COMBAT 5

Let’s TV Play
Namco NostalgicⒸ Akiyoshi Hongo, TOEI ANIMATION, Fuji TVⒸ 2004 NAMCO LTD., ALL RIGHTS RESERVED.

Ⓒ 1982 NAMCO LTD., ALL RIGHTS RESERVED.

Amusement Facility SBU
Medium-Term
Medium-Term Vision
VisionEnvironmental
Environmental Analysis
Analysis

Achieve diversification in theentertainment facility business in order toexpand revenue.

1. Changes in business revenue structure
2. Diversification of customer tastes, time
consumption
3. Anticipated increase of consumption tax

150.0

Domestic Overseas

3-Year
3-Year Plan
Plan Figures
Figures

114.0

1. Changes in cost structure of location
business

98.8

2. Diversification of customer needs

Net Sales
104.0
100.0

Factors
Factors inin Declining
Declining Trend
Trend→ Lack of speedy response to changes

90.0
79.0

50.0

0.0

10.0
8.0

66.0

76.5

89.0

→ Slow to develop innovative facilities

13.0

13.5

15.0

15.2

FY2006.3

FY2007.3

FY2008.3

FY2009.3

3. Delay in profit-improvement plan for
15%

8.0

Operating Income
7.0

10%
6.0

4.8

4.0

2.3
2.0
0.0

2.9%
2.2

5.3%
4.6

6.7%
6.6

7.0%
7.5
5%

0.1

0.2

0.4

0.5

FY2006.3

FY2007.3

FY2008.3

FY2009.3

0%

North American business→ Slow to expand revenue share

Medium-Term
Medium-Term Strategy
Strategy
1. Improve profitability by reforming cost structure
2. Attract more customers through synergy
3. Expand customer base by diversifying businesscategories
4. Establish profit base for overseas businesses

20Amusement Facility SBU
Medium-Term
Medium-Term Strategy
Strategy
Improve Profitability by Reforming
Cost Structure

Attract More Customers Through Synergy Increase revenue by scrapping smaller stores andopening large ones
 Increase efficiency through sensible deployment of
personnel to existing stores and shift revision
 Mobilize personnel from existing stores to new
business opportunities
 Implement new payment systems, such as
electronic money

 Use customer contacts and cooperation between
group companies to operate and design machines
for customer-suggestion facilities Attract more family-type customers by developing
new facilities that make use of characters Enhance channel strategy and expand businesses
by utilizing group’s content to fullest extent not onlyat own stores, but also in conjunction with othercompanies

Expand Customer Base by
Diversifying Business Categories

Establish Revenue Base forOverseas Businesses

Strengthen store development for each target
customer group:Age 20-40: Internet Space Chi-Kou-Raku
Families and Seniors: Spa Business
Preschoolers: Shima-Shima Town
Seniors: Gensou Koubou (tent.)Goal: 30 billion yen in sales from new
businesses in FY2009.3(US) Expand profit base while keeping risk low byeliminating non-performing stores andexpanding revenue share; develop and testmarket facilities in new business categories(Europe) Stabilize revenue by adding more stores(Asia) Port Japanese business model to Asia witheye toward expanding in Asian markets

Amusement Facility SBU
New
NewStore
StoreSpaceSpaceininFY2007.3
FY2007.3

21

Game Contents SBU
VisionVision forfor GameGame Contents
Contents SBU
SBU
To become the world’s premier quality game maker, constantly providing games
that are fun, enjoyable, and satisfying.
3-Year
3-Year Plan
Plan Figures
Figures

Domestic Overseas

200

Net Sales

170.0

150

153.0

153.0

116.0

106.5

37.0

46.5

55.0

FY2007.3

FY2008.3

FY2009.3

115.0
105.3
50

23.9
0
FY2006.3

20%

30
25

Operating Income

24.0
20.0

20

14.1%

13.1%

15

13.0
9.6

10
5

7.4%
10.8

0

-1.2
FY2006.3

-5

19.6

8.5%
11.0

16.7

2.0

3.3

4.4

FY2007.3

FY2008.3

FY2009.3

1. Revise target strategy
2. Restructure development process
3. Selection and Focus on overseas
businesses(Arcade) 1. Develop products to suit customer needs
2. Aim to be #1 in category
3. Carry out operational reform(WMC)
1. Utilize NBG content to fullest extent
2. Create links with home videogame
software and amusement machine games
3. Expand revenue overseas(P7)
1. Become a proactive partner maker bycontinuing to create quality content
(HVG)

129.2
100

Medium-Term
Medium-Term Strategy
Strategy

15%

10%

5%

0%

* HVG: Home Videogame software
Arcade: coin operated game machines for amusement facilities
WMC: videogame software for mobile phones
P7: content for pachinko/pachislot
NBG: NAMCO BANDAI Games Inc.

Game Contents SBU (Home Videogame Software)
Factors
Factors in
in Performance
Performance Revision
Revision

Environmental
Environmental Analysis
Analysis
1. Uncertain market environment due todiversifying and changing customer
tastes2. Changes in sales share by platform

PS2

GameCubeGame Boy AdvanceNintendo DS

1. Major underperformance among big titles
NAMCO Titles
・PS2 “SoulCalibur 3”(Nov. 05, 270K units short of initial plan)
・PS2 “Tales of Legendia” (Aug. 05. 310K units short of initial plan)
・PS2 “Critical Velocity”(Oct. 05. 320K units short of initial plan)
・PS2 “Urban Reign”(Sep. 05, 180K units short of initial plan)・Xbox360 “Ridge Racer 6” (Dec. 05, 110K units short of initial plan)PSP

BANDAI Titles
・PS2/GC “One Piece Pirate Carnival”(Nov. 05, 270k units short of initial plan)
・PS2 “Fighting for One Piece”(Sep. 05, 190K units short of initial plan)
・PS2 “Eureka Seven TR.1” (Oct. 05, 160K units short of initial plan)

2004(units sold)2005(units sold)

NAMCO
BANDAI(titles released)

0%

20%

Source: NBHD Research

40%

60%

80%

100%

2. Financial strategy tailored to uncertain market
environment
Stricter re-evaluation of inventory assets(works in progress) toward a more muscularfinancial standing

22

Game Contents SBU (Home Videogame Software)
Priority
Priority Measures
Measures

Background
Background ofof Poor
Poor Performance
Performance
1. Lack of response to changes inenvironment (market, customers, etc.)
Loss of revenue opportunities due to lack of
titles for casual users
Lack of ability to cultivate new markets

2. Issues in development processMismatch between market and sales
projections
Drop in profit due to cost-effect unbalance

3. Poor performance among overseas
businesses
Failure of major titles to achieve targets due tochanges in US market

1. Revise target strategies
Respond to customer needs with title lineup balanced
between existing and next-generation platforms
Increase customer appeal of quality group franchises,
merchandising, and technology through integration
2. Restructure development process
Stricter unit sales estimates, appropriate costprogress management
Build shared development environment; balance
between efficient development and strong high-end
technology
Optimal deployment of creators
3. Selection and Focus on overseas businesses
Pursue cost synergy through integration
Select strong titles that meet customers’ needs
4. Work toward a new business modelActively accommodate billing methods for newcontent and networking on next-generation platforms

Game Contents SBU (Home Videogame Software)
Major Titles in FY2007.3
NAMCO Label: Approx. 40 Titles Planned
NDS
XB360
PS2
PSP
PSP
NDS
PS2

Tales of the Tempest
Love FOOTBALL
Xenosaga Episode III: “Also Sprach Zarathustra”
TEKKEN DARK RESSURECTION
Portable Resort
Phantom Thief Russo
Kyokara Maoh! Hajimari no Tabi

04/2006
Spring 2006
Spring 2006
Spring 2006
2006
2006
2006

BANDAI Label: Approx 50 Titles Planned
PSP
PSP
PS2
PS2
PS2
NDS
PS2
PSP

Dragon Ball Z: Shin Budokai
Neon Genesis Evangelion 2 Artificial World -Another Case.hack//GU Vol. 1.hack//GU Vol. 2.hack//GU Vol. 3
Tamagotchi 2
Super Dragon Ball Z
Every Extend Extra

04/2006
04/2006
05/2006
09/2006
12/2006
2006
2006
2006

BANPRESTO: Approx 20 Titles Planned
PS2

Super Robot Wars Series, etc.

23Game Contents SBU (Arcade, Mobile, Pachinko, Pachislot)
Environmental
Environmental Analysis
Analysis(Arcade) Concentration toward larger stores, diversifying customer tastes(WMC) Expansion of needs to rich content, borderless content needs(P7) Concentration of needs toward popular machine types

Medium-Term
Medium-Term Strategy
Strategy(Arcade) Aim to be #1 in Category(Mobile) Expand Content

 Seek out consumers’ needs and develop
products for them
 Aim to be #1 in all categories

 Continually release NAMCO BANDAI
Games’ quality content assets for mobile
platforms
 Continually launch content links withhome video and amusement machine
games(Pachinko/Pachislot) Transformfrom OEM to Partner

Expand Overseas Revenue
 Create content that can be utilized all over
the world to expand overseas revenue Attain the position of “partner” by creating
quality content and high quality hardware,and offering original machines

Network SBU
Medium-Term
Medium-Term Vision
VisionEnvironmental
Environmental Analysis
AnalysisMake the leap forward to becoming
an all-round network company.

1. Enriched network infrastructure(broadband environment, etc.)
2. Mobile phones with greater capacity andmore advanced functions
3. Start of One Seg Broadcasting for mobile
phonesDomestic

3-Year
3-Year Plan
Plan Figures
Figures20

Net Sales
15

Medium-Term
Medium-Term Strategy
Strategy
Boost development toward becoming
an all-round network company

10

5

12.0

13.5

14.5

16.0

0

5

FY2006.3

FY2007.3

FY2008.3

FY2009.3

20%

Operating Income
4

15.0%

14.1%

14.5%

14.4% 15%

3
10%
2
1

1.8

1.9

2.1

2.3

FY2006.3

FY2007.3

FY2008.3

FY2009.3

0

1. Expand general networking power by content
business, solution business, e-commercebusiness, and marketing business
2. Entertainment portal site concept
3. Make effective use of BANDAI NAMCO
Group assets

5%0%* Overseas figures included in Game Contents SBU (WMC)

24

Network SBU
Medium-Term
Medium-Term Strategy
StrategyEntertainment Portal Site Concept

Channel Strategy Based on 4 Businesses“Virtual Theme Park” – a one-stopsource for fun and enjoyment◆Content Business◆All content - games, sound, characters,
e-commerce – compiled into one site
◆Implementation of Marketing increases
value-added, while Solution provides
support to Content.

Venture into visual content distribution business(mobile and PC)
Expand rich content◆Solution Business
Expand image recognition engine and offer asserviceExpand solution business for corporations◆E-commerce Business
Mobile commerce – expand partner companies
Character commerce – develop as service
From
FromPC
PC

Sound
Sound

Game
Game

VisualVisualStandbyStandbyscreenscreenCharacter
Character

From
Frommobile
mobileUtility
Utility

Content
Contentbusinessbusiness
E-commerce
E-commercebusinessbusiness◆Marketing BusinessMove into internet advertising business

Food
Food

Active Promotion of M&A

E-commerce
E-commerce

Communication
Communication

 Examine and promote M&A from a varietyof angles in order to expand andaccelerate businesses

Solution
Solution businessbusiness
MarketingMarketing businessbusiness

Visual and Music content SBU

60.0

Medium-Term
Medium-Term Vision
VisionEnvironmental
Environmental Analysis
Analysis

A content production business group thatcan create quality content and achieve
efficient management

1. Arrival of next-generation hardware platforms
2. Expansion of non-package market
3. Increase in content value due to structuralchanges in media industry (entry of companies
from other industries)

3-Year
3-Year Plan
Plan Figures
Figures

Domestic Overseas

Net Sales

Medium-Term
Medium-Term Strategy
Strategy

42.0
37.5

40.0

20.0

0.0

10

41.4

35.5

40.0

37.5

42.0

39.2

0.6

2.0

2.5

2.8

FY2006.3

FY2007.3

FY2008.3

FY2009.3

6.7

7.0

6.3

16.8%
6.6

16.7%
6.9

0.1

0.1

0.1

FY2007.3

FY2008.3

FY2009.3

30%

Operating Income
8

5.7

6
4

6.4
17.1%

7 13.6%20%

20

1. Create and obtain high-quality original content
2. Make effective use of content with multi-platform
strategy
3. Diversify from visual business into music andpublishing businesses
4. Secure position as content supplier in visual/music
distribution business
5. Rebuild business foundation overseas(especially in US)

10%

-1.3

-2

0%
FY2006.3

25

Visual and Music content SBU
Medium-Term
Medium-Term Strategy
Strategy
MultiMulti-Platform Strategy

Create and Obtain Original Content
 Create high-quality content centered around
SUNRISE Inc.
 Actively invest in visual content by boosting functions
across the board
 Create visual content from other SBUs’ content andproducts

 Maximize revenue by efficiently making
content compatible with multiple platforms
 Maximize profits by re-using past content

Enter Music and Publishing Businesses

Strengthen Content Distribution

 Release sound and print content (opening/ending
themes, TV soundtrack CDs) related to visual content
 In addition to existing package distribution, sell Web
content and other digital data over the Internet
 Make a serious venture into music business throughalliances with other companies Boost functionality as content transmission media
 Expand number of contents distributions bystrengthening ties with rights holders
 Differentiate through advance broadband
distribution, etc.
 Build animation portal sites

Build Business
Foundation Overseas

 Narrow release titles down to high-quality and group titles
 Make effective use of past products through multi-platform expansion
 Launch visual content distribution business Develop high-quality, high-value added products

Visual and Music content SBU“The Wings of Rean” – Original work and generalsupervision by Yoshiyuki Tomino”Mobile Suit Z Gundam 3: Love is the Pulse of
the Stars”(Opens in theaters
March 4)・Produced by SUNRISE
・Advance broadband
distribution on BANDAICHANNEL starting in
December・DVD release in April by
BANDAI VISUAL“Mobile Suit Z
Gundam 2: “Lovers”
・DVD released
February 24 by
BANDAI VISUAL
・Limited broadband
distribution in
February on BANDAICHANNEL© SUNRISE, BANDAI VISUAL, BANDAI CHANNEL“.hack//Roots” – premiering in April© SOTSU AGENCY, SUNRISE“.hack//GU” – release in
May, September, andDecember by NAMCO
BANDAI GamesBANDAI VISUAL USA
1st release in the U.S.
“PATLABOR: THE MOVIELIMITED COLLECTOR’SEDITION“
Release date: April 25, 2006

© HEADGEAR/BANDAI VISUAL/TFC© 2006 .hack Conglomerate26www.bandainamco.co.jp
Note on Projections
This document contains forward-looking statements and information related to BANDAI NAMCO Group
that are based on our beliefs as well as various assumptions made on the basis of information currently available to us.
The words "plan," "target," "estimation," "projection," "intend," "will" and similar expressions,as they relate to us, are intended to identify forward-looking statements and information.
Actual results could differ materially from those projected in such forward-looking statements.

27