O
C
M
A
N
I
A
D
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BA
rt 2012Annual Repo

The BANDAI NAMCO Group develops entertainment-related products and services in a wide
range of fields, including toys, arcade game machines, home video game software, visualsoftware, network content, and amusement facilities. In April 2012, we started a Mid-term
Plan that includes the vision of “Empower, Gain Momentum, Accelerate Evolution.” Aiming
to be No. 1 with strong conviction, we are committed to being the “Leading Innovator in
Global Entertainment” and recording strong growth.

Our Mission Statement

DREAMS, FUN
AND INSPIRATION
Through our entertainment products and services, BANDAI NAMCO will continue
to provide “Dreams, Fun and Inspiration” to people around the world, based on
our boundless creativity and enthusiasm.

CONTENTS
20

Review of Strategic Business Units (SBUs) Operations and

2

The Strengths of the BANDAI NAMCO Group

4

Looking Back at Previous Mid-term Plans

6

Mid-term Plan of BANDAI NAMCO Group

26

From April 2012 to March 2015

28

Corporate Governance8

Consolidated Financial Highlights

31

Financial Section

10

Board of Directors and Corporate Auditors

65

Corporate Data

12

Top Message

66

Overview of Main Group Companies

Focus Strategies
The BANDAI NAMCO Group’s CSR Initiatives—This section provides more detailed information about the
Mid-term Plan 2012.4-2015.3.
Forward-Looking Statements
The forward-looking statements in this annual report are based on the information available tomanagement as of August 2012 and include various risks and uncertainties. Accordingly,
actual results may differ materially from these projections for a variety of reasons. Major factorsthat could influence actual results include changes in the BANDAI NAMCO Group’s operating
environment, market trends, and exchange rate fluctuations.

Notes
1. All figures in this report are rounded to the nearest unit.
2. FY 2012.3 and the year under review represent the one-year period ended March 31, 2012.
3. Figures in this annual report are as of August 2012.

Our Vision

THE LEADINGINNOVATORIN GLOBALENTERTAINMENTAs an entertainment leader across the ages, BANDAI NAMCO is constantly exploring new areas andheights in entertainment. We aim to be loved by people who have fun and will earn their trust as the“Leading Innovator in Global Entertainment.”

Group Organization:

Strategic Business Units (SBUs)

Toys and Hobby
Core Company: Bandai

NAMCO BANDAI Holdings

Content
Core Company: NAMCO BANDAI Games

Amusement Facility
Core Company: NAMCO

Affiliated Business Companies

1THE STRENGTHSOF THE BANDAI
NAMCO GROUP
In a wide range of business areas, the BANDAI NAMCO Group is conducting speedy
development of its IP (characters and other intellectual property), which has fansaround the world. The full potential of our IP is brought out by our advanced planningand development capabilities, our high levels of technical skill, and our employees,
who are passionate about entertainment. Leveraging these distinctive strengths of
the Group, we will strive to realize sustained growth in the years ahead.

Game software

Distribution of video on
demand (VOD) content

Vending machine
capsule toys

Amusement facilities

2

Toys

ApparelVisual content

Businessdevelopment
capabilities

Social Networking
Services (SNS)Network online games

Technology

Prizes foramusement machines

Content (IP*)
Planning andDevelopment

Human
Resources
Plastic models

Businessdevelopment
capabilities

Music content

Arcade game machines
Cards
Web

Candy toys

* IP: Characters and other intellectual property

3

LOOKING BACKAT PREVIOUS
MID-TERM PLANS
Mid-term Plan

2006.4 – 2009.3

Bolster Management Foundations
Leveraging Synergies• Organizational restructuring• Bolstering financial position• Integrating human resources and corporate cultures(¥ billion)

500

400

459.1

460.5
426.4

42.2
33.4

300

200

22.3

100

0

2007
Net Sales (left scale)4

Operating Income (right scale)

2008

2009

With the objective of achieving further progress in the entertainment industry, the BANDAI NAMCO Groupwas established in 2005 through the management integration of Bandai and NAMCO. Under the Mid-term
Plan that began in April 2006, we took steps to “bolster management foundations,” such as strengthening
our organizations and systems. Under the Mid-term Plan that began in April 2009, our objective was“preparing a global growth foundation” to support global expansion. However, we suffered a major setbackin the first year of the plan, principally in the Content Business, and we recorded a substantial loss.
In response to these challenging circumstances, we implemented the Restart Plan. The objectives of
the Restart Plan are to transform ourselves into a speedy Group, improve our profitability, and strengthen
our financial standing. As a result of these initiatives, our results are recovering. Nonetheless, our performance has not yet returned to the level that was recorded in FY 2007.3, when we generated operating
income of ¥42.2 billion, which remains the highest level achieved since the management integration.

Mid-term Plan

2009.4 – 2012.3

Preparing a Global Growth Foundation
Globalization• Up-front investment of management resources in growth fields• Bolstering profitability of businesses that support up-front investment

Implementing the BANDAI NAMCO Group Restart Planon(¥ billion)

8.5
378.5

4.2
454.2

50

6
34.6

40

394.2
.2

30

3
16.3

20

10

1.9
0

2010
0

2011
1

2012
2 (Years(Years
ended
ended
March
March
31) 31)

5

NEW

2012.4 – 2015.3

MID TERM
PLAN
Mid-term Plan of BANDAI NAMCO Group
From April 2012 to March 2015
The BANDAI NAMCO Group’s mission is to provide “Dreams, Fun and Inspiration” to people aroundthe world, and our vision is to be the “Leading Innovator in Global Entertainment.” With those aims,
we launched the new Mid-term Plan. Under the Mid-term Plan that started in April 2012, we areaiming at recording growth in both Japan and overseas by adhering to our vision of “Empower, Gain
Momentum, Accelerate Evolution” in all aspects of our businesses, including our products and services,business model, operations, and numerical targets.

6Mid-term Vision

Strive to achieve record profit

Operating income:¥42.5

billion

Implement a growth strategy

Net sales:¥480

billionEnhance our business model
to maximize our IP value

BANDAI NAMCO
ID members
Acquire30

million7

Consolidated Financial Highlights
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
For the Years Ended March 31

FY 2012.3• Net sales

Up 15.2%
YOY• Net income

¥

454.2

• Gross profit

Up 20.1%
YOY

¥

167.5
¥

Up 111.8% YOY• Operating income margin
FY 2011.3 4.1%

billionbillion

FY 2011.3%

Gross Profit (¥ billion) /Gross Profit Margin (%)

5.2%

10.7

%

34.6

33.4
167.5
146.0
128.8

24.4

%

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

164.1

394.2

9.1

0.8%

• Return on assets (ROA)

454.2

426.4
378.5

24.7

FY 2011.3

billion

34.6
7.6

Net Sales (¥ billion) /Overseas Sales Proportion (%)

25.1

¥

• Return on equity (ROE)• Operating income

460.5

19.3

Up 944.6%
YOYbillion

139.4

36.9%
7.3

35.6
21.9

34.2

34.0

22.3

7.6%
16.3
4.1

5.2

35.4

18.0%
1.9

2008

2009

2010

2011

2012

Net Income (Loss) (¥ billion)

2008

2009

2010

2011

2012

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

2008

2009

2010

2012

Total Assets (¥ billion) / ROA (%)

260.6
19.3
11.8

229.0

11.7

413.0
213.7

4.3

1.8

0.8

363.4

213.1

325.9

2009

2010

2011

2012

2008

2009

2010

342.2
10.7%

8.8
5.2
0.6

–12.4

–29.9

308.3

9.1%
6.3

8

2011

289.9

32.7

2008

0.5

2011

2012

2008

2009

2010

2011

2012

• Cash flows from operating activities• Sales of Major Characters (Group total)
Mobile Suit Gundam series

Up 73.4%
YOY

¥

39.1

KAMEN RIDER series
ONE PIECE
billion

POWER RANGERS series• Cash dividends per share• Unit sales of video game software

Up ¥2
YOY

¥

Home: 31 titles

26¥

thousandthousandNote: After elimination of localized versions• Sales of existing amusement facilities in Japan

85.62

Free Cash Flows* (¥ billion)

14,327
9,003

Portable: 58 titles• Net income per share (Basic)

Up ¥77.91
YOY

44.7 billion¥ 31.9 billion¥ 28.8 billion¥ 20.2 billion
¥

100.1

YOY

%

Interest-Bearing Debt (¥ billion) /Debt/Equity Ratio* (times)
23.8
20.8

20.0

19.8

16.6

15.2

12.5
9.0

0.08
0.06

3.7

0.7

2008

2009

2010

0.09 times

0.06

0.02

2011

2012

2008

2009

2010

2011

2012

* Free cash flows = Net cash provided by operating activities +Net cash used in investing activities* Debt/equity ratio = Interest-bearing debt / Total shareholders’ equity

Net Sales by Segment (2012)

Reference: Contributions to Net Sales by Geographic Region (2012)

Other

Amusement
Facility
12.4%

5.6%

Toys and
Hobby
36.2%

Europe7.3%
Americas
5.4%

Asia, excluding Japan
4.0%

Japan
83.3%
Content
45.8%
Note: Percentage figures are calculated based on sales before
elimination of internal transactions.

Note: Percentage figures are calculated based on external sales.
Figures are estimates based on management accounting.

9

BOARD OF DIRECTORS ANDCORPORATE AUDITORSAs of June 18, 2012

10

DIRECTORS

1 President and CEO,

Representative Director

Shukuo Ishikawa

2 Executive Vice President,
Representative Director

Kazunori Ueno

3 Director

4 Director

Shuji Ohtsu

5 Director (Part-time)

Yuji Asako

Satoshi Oshita(President and Representative Director,
NAMCO BANDAI Games Inc.)(President and Representative Director,
Bandai Co., Ltd.)

6 Director (Part-time)Masahiro Tachibana

7 Director (Outside)

Manabu Tazaki

8 Director (Outside)

9 Director (Outside)

Nobuo Sayama

Tomohisa Tabuchi(President and Representative Director,
NAMCO LIMITED)CORPORATE AUDITORS
Statutory Auditor (Full-time)

Statutory Auditor (Full-time, Outside)

Statutory Auditor (Outside)

Statutory Auditor (Outside)

Koichiro Honma

Katsuhiko Kohtari

Osamu Sudoh

Kouji Yanase

6
4
5

3

7

9
8

2
1

11

Top Message“Empower,
Gain Momentum,
Accelerate Evolution”
Formulation of a Solid New Mid-term Plan
We will aim to be No. 1 with strong conviction.
The new Mid-term Plan that we launched in April
2012 includes a mid-term vision of “Empower,
Gain Momentum, Accelerate Evolution.” Thesewords incorporate our strong determination to
strive to be No. 1 as we respond to change and as
our operations, results, and employees continue tothrive over the next three years. In this way, theBANDAI NAMCO Group will aim for sustained
growth over the next 10, 50, and even 100 years.
Moving forward, we will do our utmost to achieve
global growth and become the “Leading Innovatorin Global Entertainment.”

12

Shukuo Ishikawa

Kazunori Ueno

President and CEO, Representative Director
NAMCO BANDAI Holdings Inc.

Executive Vice President, Representative Director
NAMCO BANDAI Holdings Inc.

Change in Our Management System

Further strengthening management by shifting
to a system of two representative directors

Review of the Previous Mid-term Plan
(April 2009 to March 2012)previous management system, under which Shukuo Ishikawa

Despite significant challenges in the first year of
the previous Mid-term Plan, results have improved
under the Restart Plan.

was the sole representative director, to a new system with

Under the previous Mid-term Plan (April 2009 to March 2012),

two representative directors. Kazunori Ueno (President andwhich was commenced in April 2009, we worked to prepare a

Representative Director, Bandai Co., Ltd.), who had beenfoundation for global growth. However, in the first year of thatpart-time director, has now become executive vice president,

plan we failed to respond adequately to changes in consumer

representative director of NAMCO BANDAI Holdings.

preferences and in the operating environment, centered on the

In April 2012, NAMCO BANDAI Holdings shifted from the

The purpose of this change was to strengthen the links

Content SBU, and we recorded a substantial loss. In response

between domestic and overseas operations. Kazunori Ueno,

to these difficult circumstances, we implemented the Restart

who has led the growth of the Toys and Hobby SBU and

Plan in 2010 to reinforce our foundation. With the objectives

participated in Group management as a director of NAMCOof transforming ourselves into a speedy Group, improving ourBANDAI Holdings, is an ideal person to help lead the Group.

profitability, and strengthening our financial standing, we moved

Shukuo Ishikawa, as CEO, will be responsible for overall Group

rapidly to implement a range of initiatives, and over the past two

management. The two representative directors will cooperate

years our results have improved significantly.

closely, continually sharing information about important issues
and working together to implement the Mid-term Plan.

Overseas development is a key mid-term challenge
Looking at results under the previous Mid-term Plan, in the Toysand Hobby SBU, we reinforced business development activities

Evaluation of Resultsfor established characters by forging links among operations.

Substantial increase in sales and profits in FY 2012.3
due to strong performance in domestic market

were able to make significant progress with our domestic No. 1

In FY 2012.3, the final year of the previous Mid-term Plan, werecorded a substantial increase in sales and profits. Consolidated
net sales were up 15.2%, to ¥454,211 million, and operating income
increased 111.8%, to ¥34,607 million. Net income rose 944.6%,
to ¥19,304 million. We substantially exceeded the plan that we
had formulated at the beginning of the year, which called for net
sales of ¥400,000 million and operating income of ¥16,500 million.
These results are attributable to the creation of a virtuous
cycle within the Group that facilitates the repeated generation of
hit products. This cycle was fostered by the success of the RestartPlan, which was launched in April 2010 and has enhanced ourability to respond rapidly to changes in the front-line operating
environment in each of our business areas. Another factor has
been the concentration of our know-how in the development of
products and services. However, looking at domestic and overseas
operations, domestic operations recorded extremely favorable
results, but we recorded losses in the U.S. and Europe,and overseas operations are still in the process of recovering.
We are pleased with our overall results, but on the other hand we
recognize that our challenges have once again come to the fore.

In addition, by expanding our targeted customer groups, we
strategy. On the other hand, overseas, where we initially wereaiming for growth, we faced tough sailing under the previousplan, especially in the U.S. and Europe. In the Content SBU, theRestart Plan took effect. We created hit products that met theneeds of the domestic market and started to generate stableearnings. Overall, however, we are still in the process of recovery,
including overseas business development activities for home
video game software operations. In the Amusement Facility SBU,
we implemented strategies by customer segment. Facilities thatare differentiated from those of competitors turned in solid
results, and a range of efficiency improvement measures led tohigher earnings.
Overall, all of our SBUs achieved a certain degree of resultsin Japan, but on the other hand they all faced challenging
conditions overseas. In addition, the Restart Plan is having a
positive effect, but the Content SBU has not yet demonstrated
its true strengths.
With the management integration in 2005, Bandai and
NAMCO brought together a wide range of business areas,
IP (characters and other intellectual property) with fans aroundthe world, technical capabilities cultivated through planning and(For further information about results, please see the Financial Review section on page 33.)

13

Top Message

development, and employees who are passionate about

record-high income, “gain momentum” to reach record-high“Dreams, Fun and Inspiration.” However, we have not yet madesales, and “accelerate evolution” with our IP value model. We

full use of these strengths. In the fiscal year under review, thewill strive to achieve sustained growth over the next 10, 50,

driving force behind the recovery in our results was our ability

and even 100 years. On that basis, our vision incorporates ourto reevaluate our situation and to begin to fully leverage ourcommitment to continuing to respond to change and working

strengths in an autonomous and spontaneous manner. With theto be No. 1 as we strive for continual improvement in our

Mid-term Plan, which is the third plan since the managementbusinesses, results, and employees. Of course, for the BANDAI

integration, I believe that we have finally established a system

NAMCO Group, our goals extend far beyond the next threethat will enable us to fully utilize our true strengths.

years. The Mid-term Plan is just a transit point on the path to ourmajor objectives. Looking ahead 10 years, or 50 years, I believethat the Group must achieve this Mid-term Plan in order toStart of the Mid-term Plan (April 2012 to March 2015)

develop the strength needed to record continued growth as we

Aiming to be No. 1 with strong conviction, guided
by our mid-term vision of “Empower, Gain
Momentum, Accelerate Evolution”

compete in the global marketplace.

Focus Strategies of the Mid-term Plan

In formulating the Mid-term Plan, which was launched in April

purpose. By enhancing the plan in line with the thoughts of

Implementing separate strategies for Japan, where
we aim to be No. 1; the U.S. and Europe, where wewill work to return to profitability; and Asia, where
we will strengthen and cultivate our operations

employees and senior managers, I think that we were able toUnder the Mid-term Plan, we will promote five Focus Strategies.

create a solid Mid-term Plan that reflects the distinctive

These consist of three Business Area Strategies, which will

characteristics of the Company and its operating environment.

be applied separately to each respective business, and two

The Mid-term Plan includes the mid-term vision of

Functional Strategies, which will be applied commonly across2012, we benefited from the participation of a wide range of
employees who work on the front lines. In this way, everyonein the Group can implement the plan with a sense of unified“Empower, Gain Momentum, Accelerate Evolution.” This vision

all businesses.

encapsulates how we will “empower” ourselves to achieve

Focus Strategies under the Mid-term Plan

Toys and Hobby
SBU

Business Area Strategies
BASIC BUSINESS AREAS
Achieve profitable expansion in basic
business areas

PROFIT RECOVERING AREAS
Achieve recovery in low-profit andloss-making businesses

Content [Japan]

Japan

Toys and Hobby[Japan]U.S. &EU

Toys and Hobby[U.S. & EU]

Video Game
Software[Worldwide]

Asia

Toys and Hobby[Asia]

Arcade Games[Asia]NEW GROWTH AREAS
Create and develop new growth areas

Content SBU

Arcade games / Network /Visual & Music

Amusement
Facility SBU
Amusement
Facility [Japan]

Amusement
Facility [Asia]

Functional Strategies
GROUPWIDE NETWORK STRATEGYHUMAN RESOURCES STRATEGY

Numerical targets for the fiscal year ending March 31, 2015

Net Sales
14¥

480 billion

Operating
Income¥42.5 billion

ROE

10%

We have divided our business operations into three areas
and will implement an appropriate strategy for each area.

Accelerating our strategies using IP
as an axis across business areas

The first Business Area Strategy involves Basic BusinessIn advancing our business strategies, the most important thing is

Areas. These are areas, particularly in Japan, in which we havethe implementation of strategies using IP as an axis. Rather thanalready secured a certain level of stable market share and profit.

simply implementing a separate strategy for each content outlet,

Moving forward, we will aim to be No. 1 in each of these Basic

we will implement strategic outlet development using IP as an

Business Areas through growth with a focus on profitability.

axis, thereby laying the groundwork for substantial profits.

The second Business Area Strategy involves Profit

We will strive to accelerate that approach in all SBUs. Moving

Recovering Areas. These areas, principally in the U.S. andforward, we will take into consideration not only the business

Europe, are currently facing difficult conditions but nonethelessarea viewpoint but also other elements, such as timing, region,

have substantial growth potential. Through a change in strategy,

and target age group. In this way, we are implementing a

we will strive to reinforce the foundation for a recovery in profits

rigorous focus in maximizing IP value. Our greatest asset is ourand to return to profitability.

strong, extensive IP portfolio. The extent to which we can draw

The third Business Area Strategy is New Growth Areas,out the potential of our IP will be the key to our ability to follow

mainly in Asia. By conducting business development thatthe vision of “Empower, Gain Momentum, Accelerate Evolution”

leverages the distinctive strengths of the BANDAI NAMCO

and achieve the goals of the Mid-term Plan.

Group, we will aim to record growth, with new businesses andregions serving as growth pillars. Moving forward, we will takeaggressive steps in Asia, targeting future growth.

Strategic implementation
using IP as an axis
By strategically developing thebusiness fields that are ideal foreach IP axis, we will fully leverage
the potential of our superior IP.

Plastic models

Game software

Distribution ofvideo on demand(VOD)content

Arcade game machines

Mobile Suit Gundam
seriesVisual software

Amusement facilities

Network content

Card games

Business Development in an Optimal Region
15

Top Message

Focus Strategy

1 Basic Business Areas

Building solid positions and aiming to be No. 1 in Japan in all businesses
The BANDAI NAMCO Group has established a certain degree

In social games, we will rapidly launch content thatof market share in Japan, and now we will work to reinforce thisleverages the different strengths of three companies. NAMCO

platform as a stable source of earnings for the Group. To that

BANDAI Games Inc., will conduct joint development withend, we will strive to further expand our market share andplatform providers, and NAMCO BANDAI Online Inc., will

earnings in each category.

conduct independent development and operations. BNDeNA

In the Toys and Hobby SBU, we will bolster our strategy

Inc., is a joint venture with a platform provider. With consider-of establishing a dominant No. 1 position in domestic operations

ation for rapidly changing market trends, we will continue toand will aim to secure the No. 1 share in all categories. We will

adapt to changing circumstances and will strive to earn

work to expand and maintain sales of products for preschool

stable profits.
In visual and music content, we will endeavor to expand ourchildren. To that end, we will implement a model leveraging links
among established character operations, such as the Kamen

share. With a focus on the Mobile Suit Gundam series, we will

Rider series and the PRETTY CURE! series. We will also cultivate

launch products for each generation of customers.

IP with media tie-ins. Our share in the market for products forIn the Amusement Facility SBU, we will leverage theelementary school boys is expanding favorably, and we will

Group’s distinctive strengths and aim for a No. 1 share. We willcontinue to introduce new IP in this market. We will also intro-

move forward with sales activities coordinated by customer

duce strategic products for girls, infants, and older consumers. In

segment, stepping up our efforts to introduce facilities andthese ways, we will strengthen and expand our operations.

services for specific target groups, such as families as well as

In the Content SBU, we will strive to be No. 1 in each fieldstudents and older consumers. In addition, we will leverage theof business. In arcade game machines, we will utilize a range ofknow-how that we have cultivated to develop facilities with new

methods of selling machines, such as a revenue-sharing system.

value that utilizes IP. Other initiatives will include enhancing ourMoreover, we will strengthen the links with amusement facilities.

operations at facilities and our supply chains, standardizing

Through these initiatives, we will strive to expand our share in theservices, and implementing efficient store management.

domestic market.
Example of model leveraging links with Toys and Hobby SBU operationsToys

In the PRETTY CURE! series, we are developing Cure Decor items that arelinked to toys in a variety of categories, thereby expanding the IP touchpoints.

Bath salts
Cure Decor

Vending machine
capsule toys

Candy toys

16

ApparelFocus Strategy

2 Profit Recovering Areas

Eliminating losses and restoring profitability in the U.S. and Europe
Domestic operations are generating favorable results, but

In this setting, we have completed the first phase ofbusiness development in the U.S. and Europe has been a major

measures to build a stronger foundation in the U.S. and Europe.

challenge since the previous Mid-term Plan. To record growth

These measures included organizational restructuring in the U.S.

over the medium to long term, we must succeed in generating

and the consolidation of our sales bases in Europe. In this way,

growth in the U.S. and Europe. We took steps to strengthen ourour overseas bases have been reorganized into an optimal

foundation as one facet of the Restart Plan and are starting tosystem, with a focus on sales and marketing.

see the results of those initiatives. In the future, we will do our

In development, the development department of NAMCO

utmost to restore profitability and stability in our Toys and Hobby

BANDAI Games, which had about 1,000 employees, was spun

operations in the U.S. and Europe and in home video gameoff into a separate company to establish NAMCO BANDAI

operations around the world.

Studios Inc. This step was taken to further advance awarenessIn the U.S. and Europe, the Toys and Hobby SBU willof the concept of the multiple content outlet strategy from theadvance a strategy of integrated brand management. For coreuser’s perspective, with an IP axis. We believe that employee

IP, such as the POWER RANGERS series, we will transition to

motivation will be enhanced by the establishment of a new develop-

an integrated brand management system in the U.S. andment environment through the clarification of responsibility andEurope. Specifically, planning and marketing functions will beauthority and the introduction of development-focused systems andconsolidated in the U.S., thereby increasing efficiency andframeworks. In this way, we will pursue higher quality and efficiency

maximizing IP value. First, we will work to expand sales in theand at the same time aim to be an organization that generates newboys category and also implement the principles of selection and

IP that will become pillars of the Group’s future operations.

concentration for IP in other categories. In this way, we will

In regard to our lineup of titles, we will work to implement

launch new products and strengthen our operations. In the Toysbalanced business development with a strict focus on franchiseand Hobby SBU, our top priority since the previous Mid-term

titles that have strong track records. In addition, we will takePlan has been to rebuild and strengthen the POWER RANGERS

steps to increase efficiency and profitability through links with aseries. With characters that are popular around the world, thevariety of content outlets. Furthermore, we will provide products

series has high potential, and we will work to further strengthenand services in a variety of formats to meet diversifying user

our POWER RANGERS business development activities in theneeds, such as hybrid packs combining games and visual

years ahead.

products and the implementation of download sales following

In the Content SBU’s home video game software operations,the launch of packaged software.

the effects of the Restart Plan and the organizational shift to an
IP axis have generated hit products in Japan, and we are starting
to see an improvement in earnings. In FY 2010.3, about half ofthe titles that we sold were unprofitable. By consolidating thedevelopment function in Japan and applying the principles of
selection and concentration to our lineup of titles, for the year
under review this percentage reached an appropriate level for thisentertainment field, where it is necessary to take on challenges.

Toys and Hobby SBU’s sales of POWER RANGERS series
products in the U.S. and Europe (¥ billion)

Providing home video game software in a variety of formats,such as online games with no basic charges for home-use
console machines

Percentage of unprofitable titles in home video
game software (%)

17.5

51

15.5

15.1

11.1
9.0 (Forecast)

33
5.0

33

31

31

4.2

27

1.8

2006

2007

2008

2009

Note: For the fiscal year ended March 31

2010

2011

2012

2013

2007

2008

2009

2010

2011

2012

Note: For the fiscal year ended March 31

17

Top Message

Focus Strategy

3 New Growth Areas

Aiming for new growth in Asia, where we can utilize links with
operations in JapanIn Asian markets, which are highly receptive to IP that is popular

In the Content SBU’s arcade game machines, we will takein Japan, it is possible to develop our businesses horizontallyan aggressive approach in not only Asia but also emerging

with Japan. Moving forward, in the Asian region, where we cancountries in other regions. We will take steps to strengthen ourdevelop our businesses horizontally with Japan, we will strengthenbusiness development, such as developing and launching

our business development activities in each operational area,machines for which local needs are high. One example isworking to develop them into the Group’s future earnings pillars.

redemption machines, machines that disburse tickets in

The Toys and Hobby SBU will move ahead with a strategy
of conducting Japan-originated business activities simultane-

accordance with game results.
The Amusement Facility SBU will utilize IP in undertaking

ously in Asia. In addition to strengthening existing IP, we will

full-fledged overseas facility development, centered on Asian

reinforce links between Japan and Asia in hobby operations,markets. We have already conducted test development in China

such as plastic models, and in collectible toys operations, suchusing IP from Japan. In consideration of the results of this verifica-

as toys for older consumers. Furthermore, on the official

tion testing, we will establish character-themed amusement

GUNDAM.INFO web site, we will provide information in multiple

facilities in Asia.

languages, and we will utilize events to further strengthen theprovision of information linked with Japan. In April 2012, webegan Internet sales in Hong Kong, and in the future we will
gradually expand the areas covered by these operations.

GUNDAM.INFO

Focus Strategy

Official shopping site in Hong Kong

4 Groupwide Network Strategy

Aiming to establish a new business model through the acquisitionof 30 million BANDAI NAMCO ID members
The Groupwide Network Strategy is one of the Groupwide

media and services, we will use this system as a marketing

Functional Strategies. Under this strategy, we will establish atool for the direct dissemination of information to users.

system in which a single BANDAI NAMCO ID links the wide

We aim to obtain 30 million IDs during the three-year period

range of web sites and network services offered by the entire

covered by the Mid-term Plan and to establish a business

BANDAI NAMCO Group. In this way, we will expand usermodel utilizing a network that leverages BANDAI NAMCO’s

touchpoints with our products and services and increase

distinctive strengths.

convenience for users. Furthermore, using links with existing

Focus Strategy

5 Human Resources Strategy

We will aggressively discover and develop the human resources who willtake a central role in the Group’s future.
The Human Resources Strategy, which is one of the Groupwide

from inside and outside the Group and aggressively create hits.

Functional Strategies, will be the engine that drives a variety

In accordance with this approach, we will continue to stepof the Group’s strategic initiatives. The Group’s key humanup the hiring of new graduates around the world and implement

resources concepts are autonomous, global, and productive.

strategic human resources transfers among SBUs and regions.

“Autonomous” refers to people who can lead the Group with

In addition, we will implement training programs to develop

passion and a strong sense of responsibility. “Global” indicatescandidates for senior management positions. In these ways,

people who can open up new spheres of borderless activity

we will aggressively discover and develop the human resources

without being limited by national borders or business fields.

who will take a central role in the Group’s future.

“Productive” refers to people who can incorporate resources18

Shareholder Return

In Closing

For FY 2012.3, performance-based dividend of ¥2 pershare added to the base level of stable dividends
The Company considers the return of profits to shareholders

Leveraging our true strengths and continuing
to “Empower, Gain Momentum, Accelerate
Evolution”

to be one of its most important management issues. Our basic

The BANDAI NAMCO Group was established in 2005 with thepolicy for the payment of dividends is to continue to pay

objective of achieving further progress in the entertainment

dividends and raise enterprise value while further strengthening

industry. However, we have not been able to realize growth that

the Group’s competitiveness and maintaining a sound financial

is in line with the expectations of our stakeholders. I believe that

position. The Company is maintaining the consolidated dividend

we have finally established a foundation that will enable us topayout ratio at a level of 30%, based on stable annual dividend

fully leverage our true strengths under the Mid-term Plan thatpayments of ¥24 per share. In FY 2012.3, we paid a dividend

started in April 2012. First, we will do our utmost to achieve theof ¥26 per share, comprising a stable base portion of ¥24 pergoals for FY 2013.3. Also, without being overly focused on theshare and a performance-based portion of ¥2 per share.

plan’s final year, we will aim to achieve record-high sales andAiming to increase capital efficiency, after appropriation ofdividends from the consolidated net income for the period, theprofit as rapidly as possible and link those results to growth for
the Group over the medium to long term.

Company may attribute a portion of the remaining balance to the

Even with businesses that are No. 1 in Japan, we will notacquisition of its own shares, with comprehensive consideration

slacken our resolve. Rather, we will maintain a sense of urgencyof aspects such as the level of cash held, operating performance,

as we aim to achieve a dominant No. 1 position. In businesses

share price trend, and plans for large-scale investments.

that are not yet No. 1, we will work resolutely to take on the

In FY 2012.3, in accordance with a resolution of the Board ofchallenges that we face. In the U.S. and Europe, where

Directors, the Company acquired 16,806,264 shares of treasury

our operations are in the process of recovery, we will strive tostock at a total cost of ¥16,561 million.

establish a foundation for a return to profitability as rapidly as
possible. In Asia, which has strong growth potential, we will

For the fiscal years ended March 31

2008

2009

2010

2011

2012

Cash Dividends per Share (Yen)

24

24

24

24

26

management integration, and we have established a system that

18.7

50.1

—

311.3

30.4

can dynamically utilize our business fields, IP, technical capabili-

Dividend Payout Ratio (%)

move aggressively. It has been more than six years since theties, and the passion of our employees in a speedy manner. ThisTo efficiently advance the reinforcement of our global

Mid-term Plan has been positioned as the first step in displaying

management foundation, we will also consider M&A transactions

the true strengths of the BANDAI NAMCO Group. Targeting ourand up-front investment, such as development investment.

mid-term vision of “Empower, Gain Momentum, Accelerate

We will actively consider M&A transactions in the entertainment

Evolution,” we will continue responding to change and working

field when we believe that mutual synergies can be expected,

to achieve continuous progress. Our operating environment isfollowing a careful evaluation of investment conditions.

changing at a dramatic pace, but there will be no change in theimportant role that entertainment plays in people’s lives. We havea sense of pride and responsibility about our mission—providing
Dreams, Fun and Inspiration—and moving forward we will continue
to provide high-quality entertainment to people around the world.
I would like to ask our shareholders, investors, and otherstakeholders for their continued support and guidance as
the BANDAI NAMCO Group continues to “Empower, Gain
Momentum, Accelerate Evolution” in the years ahead.
August 201219

Review of Strategic Business Units (SBUs) Operations and Focus Strategies

TOYS AND HOBBYBusiness Performance
For the fiscal years ended March 31

Net sales
Segment income
Segment income margin

Millions of yen
2010

2011

2012

% change

Forecasts
for 2013

Targetsfor 2015¥148,844¥158,374¥177,994

12.4%¥170,000¥220,000

10,787

13,813

16,11316.7%

15,00022,000

7.2%

8.7%

9.1%

—

8.8%

10.0%

Sales Ratio in the Fiscal Year
Ended March 31, 201236.2%
Note: The percentage figure is calculated based onsales before elimination of internal transactions.

Sales of Major Characters (Group total)

Billions of yen

For the fiscal years ended March 31

2010

2011

2012

MARKET DATA

Mobile Suit Gundam series

¥34.6

¥38.2

¥44.7

Size of Japan’s Toy Market (¥ billion)

Kamen Rider series

20.0

26.4

31.9

ONE PIECE

4.3

15.5

28.8

Sales of Major Characters (Toys and Hobby in Japan)
For the fiscal years ended March 31

2010

Billions of yen
2011

2012

Kamen Rider series

¥17.5

¥23.0

¥28.3

Mobile Suit Gundam series

14.4

13.4

15.6

Super Sentai (POWER RANGERS) series

10.5

9.2

13.0

647.4

669.4

692.0

2010

2011

2012

Source: Survey by the Japan Toy Association

Results in FY 2012.3: Key Points

Japan: Results were favorable, centered on established character toys and card games• Toys in the Kamen Rider series and the Super Sentai (POWER RANGERS) series earned extremely high popularity throughbusiness development activities linking categories.
• A substantial contribution to results was made by card games, including digital card games, such as DRAGON BALL HEROES,
and trading card games, such as Battle Spirits.
• New business development initiatives included a Little Battle eXperience series plastic model that earned strong popularity,
centered on elementary school boys. Collectible toys for adults also recorded favorable results.

Overseas: The POWER RANGERS series turned in solid results, but overall conditions were challenging• In the U.S., POWER RANGERS SAMURAI, the first new product in the POWER RANGERS series in two years, recorded strong
results.
• In Europe, we developed products in new categories, such as toys for girls and toys for infants. However, sales did not reach thelevels of the previous fiscal year, in which results were solid, especially for popular character toys.
• In Asia, results were favorable, centered on products utilizing characters that are popular in Japan.

These long-establishedcharacters for boys
have been popular for
many years.
This plastic model of the
Mobile Suit Gundam series
has sold more than
400 million units.

20

Girls’ toys from the PRETTY CURE!
series, which is in its ninth year andhas earned sustained popularity.

With the launch ofappealing IPs, card
games have provenpopular with a wide
range of customers.

MID-TERM VISION

True Globalization
Become “the premier company” in the characterbusiness by extending our strength globally

Kazunori Ueno
Executive Vice President and Representative Director, NAMCO BANDAI Holdings Inc.
President and Representative Director, Bandai Co., Ltd.

In the domestic market, which the Toys and Hobby SBU has

marketing for mainstay characters, shifting to a unified system

positioned as a Basic Business Area, we will aggressively

in the U.S. We will establish a system for product develop-

implement our “overwhelming No. 1 strategy.” We aim

ment and resource allocation from a worldwide perspective,

to achieve a No. 1 share in all categories and will strive toworking to expand our IP and geographic scope over the

secure stable revenues and profits from this Basic

mid-term. In FY 2013.3, we will step up our initiatives, with

Business Area.

our top priority on guiding the growth of the POWER

In the U.S. and Europe, which are positioned as Profit

RANGERS series, which has gotten off to a solid start.

Recovering Areas, we will shake off market conditions, which

In Asia, which has been positioned as a New Growth Area,

remain challenging, and advance our strategy of integrated

the markets are highly receptive to Japan-originated content,

brand management in the U.S. and Europe. To makeand accordingly we will move ahead with our strategy of

maximum use of our know-how in the character business—

conducting Japan-originated business activities simultane-

one of our strengths—we integrated the development andously in Asia.

Overview of Focus Strategies• Basic Business Areas: Become overwhelming
No. 1 in Japan
We will strive to achieve a No. 1 share in all categories bystrengthening the development of our long-establishedcharacters and expanding target customer age groups.
• Profit Recovering Areas: Carry out integrated brandmanagement in the U.S. and Europe
To rebuild operations in the U.S. and Europe, we will integrate
brand management by consolidating development andmarketing functions in the U.S., thereby increasing efficiency
and maximizing IP value. We will work to expand our market
share, centered on the category of action figures in boy’s
toys. In other categories, we will implement the principles of
selection and concentration in IP in preparation for the launchand strengthening of products.

Toys from the POWER
RANGERS series, whichhave been popular in the
U.S. and Europe.

The Tamagotchi series of
established products for girls.

• New Growth Areas: Conduct Japan-originated businessactivities simultaneously in Asia
In Asian markets, we will strengthen linked development ofcontent that is popular in Japan, treat Japan and Asia as asingle unified market, and conduct tightly integrated businessactivities, from the provision of information to the sale ofproducts. In particular, we will strengthen links between Japanand Asia in hobby operations, such as plastic models, and incollectible toys operations, such as products for adults.
• Enhance competitiveness through value chain reform
As a measure to link different regions, in development andproduction we will reform our value chain to enable faster
responses and the manufacturing of products at morecompetitive prices.

We are actively developing the market
for infants’ products, such as the Baby
Labo series.

The Little Battle eXperience series,
which was introduced in 2011,
has earned a growing share of themarket for toys for elementary
school boys.

21

Review of Strategic Business Units (SBUs) Operations and Focus Strategies

CONTENT
Business Performance

Millions of yen
Targetsfor 2015

2010

2011

2012

¥167,471¥179,917¥225,504

25.3%¥239,000¥220,000

Segment income (loss)(7,761)

3,092

17,003449.9%

22,50020,000

Segment income margin

—%

1.7%

7.5%

—

9.4%

9.1%

For the fiscal years ended March 31

Net sales% change

Forecasts
for 2013

Sales Ratio in the Fiscal Year
Ended March 31, 201245.8%
Note: The percentage figure is calculated based onsales before elimination of internal transactions.

Net Sales Breakdown

MARKET DATA

Billions of yen

For the fiscal years ended March 31

Share of Unit Sales by Domestic Game Companies (2011)

2010

2011

2012

¥ 44.0¥ 56.0¥ 73.4Home video game software

77.0

81.2

86.0

Network content

19.1

18.4

33.6

LEVEL-5 3.9%

Others, elimination

27.3

24.3

32.5

TECMO KOEI 4.1%

¥167.4¥179.9¥225.5Arcade game machines

Total

Pokémon 2.4%

Others 19.6%
Nintendo 20.8%

Sony ComputerEntertainment Japan 3.2%
NAMCO BANDAI
Games

16.3%

SEGA 4.3%
KONAMI 6.8%
Square Enix 9.2%

Capcom 9.4%

Source: Famitsu Game White Paper 2012, Published by ENTERBRAIN, INC.
(Period: December 27, 2010, to December 25, 2011)

Results in FY 2012.3: Key Points

Domestic operations all recorded favorable results, but overseas conditions were challenging, despite
efforts to reinforce our foundation.
Arcade game machines:• Contributions to results were made by the latest machines in popular series, such as WANGAN MIDNIGHT MAXIMUM TUNE 4,
by repeat sales of established prize machines, and by sales of prizes.
Home video game software:• DARK SOULS was popular in the U.S. and Europe, and in Japan popular games included Tales of XILLIA, ONE PIECE Kaizoku
Musou, and AKB1/48 Idol to Guam de Koishitara.
Network content:• Favorable results were recorded by social games, such as the Mobile Suit Gundam series and ONE PIECE Grand Collection.
Visual and music content:• Mobile Suit Gundam UC (Unicorn) and TIGER & BUNNY visual packaged software earned solid popularity.

Game software
Targeting a wide range of customers, we offer a well-balanced
lineup of software for multiple platforms.

22

Arcade game machines
Our business in this field centers on
machines that can only be enjoyedat amusement facilities.

MID-TERM VISION

Become the No. 1 Content
Company in Japan and
Borderless Development
We will offer our customers any genre of content, such asgames, visual content, and music content, and we will alsodeliver them overseas
Satoshi Oshita
Director, NAMCO BANDAI Holdings Inc.
President and Representative Director, NAMCO BANDAI Games Inc.

The Content SBU has positioned the domestic market as

In the Asian market, which is positioned as a growtha Basic Business Area. We will endeavor to implement thefield, we will strengthen business development of arcadeconcept of “reconstruct existing business: strategy ofgame machines and, in addition, will aggressively approachachieving No. 1 share” in arcade game machines, in network

emerging country markets.

content, and in visual content where we have a strong base.

The key to growth in the Content SBU is the maximiza-

In home video game software, which is positioned astion of IP value. We have begun to establish a model for thea Profit Recovering Area, we are seeing improvement as a

maximization of IP value through the development of IP axis

result of measures to increase efficiency. In the future, bythat provide seamless combinations of multiple outlets, which

advancing the strategy of maximizing business integration

we are advancing under the Restart Plan. In the future, working

using IP as an axis, we will bolster the development of

together with Toys and Hobby and Amusement Facility SBUs,

strategic IP outlets. In addition, we will accelerate the creation

we will further accelerate the borderless development of IP.

of original IP. Responding rapidly to customer needs, we will
strive to further increase content value.

Overview of Focus Strategies• Basic Business Areas: Reconstruct existing business:
Strategy of achieving No. 1 share
In the domestic market, we aim to establish dominant
No. 1 positions in major product categories. In arcade
game machines, we will utilize diversified methods of sellingmachines, such as a revenue-sharing system. In addition, we
will strengthen the link with amusement facilities. In visualand music content, we will work to expand our share in the
animation market and will aggressively develop new IP.
In network content, we will expand the scope of our IP lineup
and make stable operations a key focus.
• Profit Recovering Areas: Maximize business integration
using IP as an axis
We will be providing content to various exits using IP as an axis
and strategically transmit IP to new regions and exits where we

Prizes for amusement machines
We are aggressively using popular IP.

can demonstrate our strengths. With the newly established
NAMCO BANDAI Studios, we will step up initiatives to increase
our development capabilities, technical capabilities, and speed,
and we will further accelerate the creation of original IP.
• Functional Strategy: Groupwide Network Strategy: Forma network strategy scheme
As a Groupwide project, we will establish a system underwhich a single BANDAI NAMCO ID links the wide range of web
sites and network services offered by the entire BANDAI
NAMCO Group. Using links with existing media and services,
we will use this system as a marketing tool for the direct
dissemination of information to users.

Network content
We are conducting the stable development of social
games and online games as a new IP outlet.

Motion pictures
We offer superior products in a rangeof formats, such as theatrical release,packaged media, and online distribution.

23

Review of Strategic Business Units (SBUs) Operations and Focus Strategies

AMUSEMENTFACILITY
Business Performance

Millions of yen% change

Forecasts
for 2013

Targetsfor 2015

For the fiscal years ended March 31

2010

2011

2012

Net sales¥65,363¥62,338¥61,033–2.1%¥60,000¥70,000

Segment income

285

1,779

2,381

33.8%

1,500

3,500

Segment income margin

0.4%

2.9%

3.9%

—

2.5%

5.0%

Sales Ratio in the Fiscal Year
Ended March 31, 2012

12.4%
Note: The percentage figure is calculated based onsales before elimination of internal transactions.

Total Number of Amusement Facilities (March 31, 2012)
RegionRegional total

Facilities

Number of which that are:Directly managed
Revenue-sharing
facilities
facilities*

Others(¥ billion)

Japan

227

211

14

2

North America

995

22

973

0

Europe

13

12

1

0

Asia

30

10

20

0

Total

1,265

255

1,008

2

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

MARKET DATA

Size of Japan’s Amusement Facility Market

595.0

2008

515.0

2009

476.0

2010

Source: Leisure White Paper 2011, Japan Productivity Center

Results in FY 2012.3: Key Points

Favorable results were recorded by differentiated facilities that utilize characters, and sales at existing
facilities in Japan rose 0.1%.
• In an uncertain market environment in Japan, existing facility sales were favorable, rising 0.1%. In particular, popularity
was earned by differentiated facilities in shopping centers at which customers can experience the distinctive worldsof characters.
• As we stepped up our specialization in core operations with the objective of raising profitability, we transferred certain operations.
• Overseas, in a difficult market environment, sales declined in the U.S. and Europe. However, through the application of theprinciples of selection and concentration in our facilities, we made favorable progress with profits.

NAMCO Namjatown offers a range of entertainment,
including attractions, food, and character events.

24

A movable amusement facility, installed for limited periods of time, with a theme of charactersMid-Term VISION

Become an Overwhelming
Leader in the Market
Strive to obtain 300% customer satisfaction and 30%
market share
Masahiro Tachibana
Director, NAMCO BANDAI Holdings Inc.
President and Representative Director, NAMCO LIMITEDIn the Amusement Facility SBU, our basic policy is to further

characters. We will also offer character-based events.

extend our strengths in the domestic market and to stabilize

In addition, we will take steps to further enhance facility

revenues and profits in the U.S. and European markets.

content and formulate plans in line with the worlds ofAccordingly, in the domestic market, in sales we will develop

characters and the preferences of customers. Through thesefacilities and services that reflect an accurate grasp ofinitiatives, we will work to stabilize profit.

customer preferences in each target group. In facility

In addition, in Asia, which is a new growth area, wemanagement, we will enhance our operations at facilities andhave positioned Japan and other Asian countries as aour supply chains and work to improve service and increase

single, integrated market. On that basis, we will take steps

efficiency. In addition, under the concept of differentiatedto introduce Japanese know-how and expand

facility development, we will continue to implement package

operations, such as developing character-based facilities.

facility initiatives utilizing the BANDAI NAMCO Group’s unique

Overview of Focus Strategies•	
Basic Business Areas: Advance marketing by customer
segment	In domestic operations, we will aim for an overwhelming
No. 1 share and move ahead with sales activities by target
customer segments. We will step up our efforts to introduce
facilities and services for specific target groups, such as
families as well as students and senior citizens.

• New Growth Areas: Develop models to utilize IPat facilities
	Using our know-how in the area of character merchandising,
we will differentiate our facilities through the creation of added
value. We will start developing a new type of facility byintegrating our expertise in the operation of character-based
facilities and theme parks.

• Basic Business Areas: Establish chain store management	Facility management initiatives will include enhancing ouroperations at facilities and our supply chains, standardizing
services, and implementing efficient store management.

• New Growth Areas: Explore overseas markets
	In Asian markets, we will step up links with Japan and undertake full-fledged facility development using IP. We have alreadyopened an Ultraman facility in China and verified the responseof customers. Over the medium term, we will build facilities in
Asia using IP that is popular in local markets.

Amusement facilities that enable customers to experience
the worldview of characters

The Group is developing a variety of facilities fora wide range of age groups.

This long-established amusement
facility was opened in 1853 in
Asakusa, in the Shitamachi
region of Tokyo.

25

The BANDAI NAMCO Group’s CSR Initiatives

The BANDAI NAMCO Group aims to provide “Dreams, Fun and

CSR activities, from FY 2011.3, the Group has formulated theInspiration” and promote CSR management. To that end, we“BANDAI NAMCO Group’s Important CSR Themes.” We have

have created the “CSR Concept” and the “CSR Initiatives,” which

begun to implement activities for CSR themes that are especiallyincorporate three types of social responsibilities.

important, and in those endeavors we draw on the characteristics

With the goal of improving the effectiveness of the Group’sof each SBU.

BANDAI NAMCO Group’s CSR Policy
Mission“Dreams, Fun and Inspiration”

CSR Action Concept“Fun for the future!”
The Group’s CSR Initiatives

Compliance Charter

1. Environmental and Social Responsibilities
2. Economic Responsibilities
3. Legal and Ethical Responsibilities

Rules related to appropriate products and services / fair dealings,
respect for all employees, information disclosure, respect for andusage of intellectual property, protection of information andresources, rejection of anti-society groups, harmony with theenvironment, and harmony with society.

BANDAI NAMCO Group’s Important CSR Themes
Safety and Cleanliness of Products and Services
Environmental Consideration

Policies Regarding Influence on Society of the Group’s Content
and Products
Supply Chain Management

Each SBU and affiliated business company sets up priority initiatives andworks to identify specific activities related to its business operations.

CSR Concept

At BANDAI NAMCO, CSR activities are “Fun for the Future.”
Our work is to provide inspiration to customers by realizing the individual ideas of “Dreams, Fun andInspiration.”funfor thefuture
楽しみながら、楽しい未来へ。

26

In turn, those “Dreams, Fun and Inspiration” provide healing and encouragement as they spread around theworld. We believe that “Dreams, Fun and Inspiration” can change the world, and even change the future.
As a company that provides “Dreams, Fun and Inspiration,” our relationship with the natural environmentand society will be guided by the key phrase “Fun for the Future.” We will implement CSR activities that leadto happiness for stakeholders by featuring fun today while also contributing to the creation of fun tomorrow.
We believe that entertainment can contribute to society by fostering mutual communication and inspiration
among people around the world and creating a future filled with fun.

Topics“BANDAI NAMCO Forest” at Shiga Kogen

Manufacture of safe, reliable products

The BANDAI NAMCO Groupparticipates in forest support
activities in Nagano Prefecture.
The Group provides support forforest management activities atthe 47-hectare “BANDAI NAMCO
Forest” at Shiga Kogen andworks to help foster a deeper
understanding of forest conservation issues.
“BANDAI NAMCO Forest” at Shiga Kogen

Dropping products to test for quality

Product raw materials and packaging and wrapping initiatives

Moving toward low-environmental-impact
packaging (using pulp molds)

In all of our business fields,
we follow all legal and industry
quality and safety standards.
We have also established ourown more-rigorous in-housestandards, and we pay carefulattention to safety.

Wide-ranging environmental impact reduction activities

We are implementing measures
to reduce packaging, such as
decreasing packaging spaceratios, developing packaging-free
products, using packaging thatutilizes low-environmental-impact
materials, reducing plastic model
runners, and reducing packaging
materials for amusement
machines.
Bandai Hobby Center (plastic model plant)

Social contribution activities

At the Bandai Hobby Center, inthe city of Shizuoka, we are
implementing a range of environmental conservation initiatives,
such as solar power generation
and resource recycling. Moreover,
BANDAI LOGIPAL INC. has
acquired Green Management
Certification, which is given totransportation companies that
implement low-environmentalimpact operations.

Universal design initiatives
We are conducting a variety ofactivities to promote a deeper
understanding of culture,science, and entertainment.
These include the Omocha-noMachi 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.

From the viewpoint of universal
design, which focuses on making
things easy to use for as many
people as possible, we are taking
steps to increase usability, suchas improving packaging to makeit easier to open.

Omocha-no-Machi Bandai Museum
Example of a package designed sothat it is easy to open

Initiatives to motivate and support human resources

BANDAI NAMCO Awards

We have a system of awards torecognize products and businessmodels that contribute to increasing
Group value from a variety ofviewpoints, such as profitability,
topicality, and innovation(BANDAI NAMCO Awards). Other
initiatives include active exchangesof human resources among
Group companies and entertainment training. In these ways, wewill continue working to promote
dynamic corporate activities.

Supporting reconstruction activities following theGreat East Japan Earthquake
In partnership with Save theChildren Japan (SCJ), we areoffering a range of activities, suchas events for children. In addition,
we have introduced a system
offering choices of complimentary gifts for shareholders. Oneof the choices is to make adonation to support activities
for children.
Events for children

27Corporate GovernanceOur highest management priority is the provision of benefits to all of our stakeholders, who support our businessactivities. We believe that to achieve ongoing growth in enterprise value over the long term, the continuous
enhancement of corporate governance is an important management issue. The Group aims to be a corporategroup that is trusted by society and that makes an ongoing contribution to society. While striving to raise management soundness, transparency, and efficiency, we will build a corporate governance system that facilitates
rapid information disclosure.
Corporate Governance System
NAMCO BANDAI Holdings is working to enhance management
oversight. As of June 18, 2012, the Company had nine directors,
including three outside directors. Moreover, to respond rapidly tochanges in the management environment and to further clarify
the responsibilities of directors, the term of directors has been
set at one year or less.
The Company uses the statutory auditor system and has
established the Board of Statutory Auditors. The Company believes
that the auditing system based on the statutory auditors, including
outside statutory auditors, is an effective means of implementing themanagement oversight function. Our outside directors and outside
statutory auditors have the important duty of monitoring management through the implementation of objective, neutral auditing andsupervision based on their high levels of independence and specialized knowledge. We believe that they are contributing to thebolstering of our internal control systems.
In regard to internal audits, the Internal Auditing Division audits
business execution by conducting on-site audits or document auditsof each Company division in accordance with internal auditing rules.
The Internal Auditing Division reports the results of those audits tothe president. In addition, the Internal Auditing Division formulates
basic guidelines for internal audits within the Group and monitors theimplementation of internal audits at each Group company in accordance with the Group’s internal auditing rules. In regard to audits by
the statutory auditors, the four statutory auditors (of whom two arestanding statutory auditors and three are outside statutory auditors),
attend important meetings, such as meetings of the Board of Directors.
In addition, in accordance with the Board of Corporate Auditors’
regulations, the audit standards for Corporate Auditors, and implementation standards and auditing plans related to internal control
systems, the statutory auditors conduct audits regarding the statusof business execution by the directors. The Internal Auditing Division,
the statutory auditors, and the independent auditors continually
exchange opinions and maintain close ties. The status of the Group’sbusiness operations is monitored, issues are identified and understood, and recommendations for resolving those issues are provided.
As shown in the table on page 30, the Company holds a variety of
top management meetings and has established a system that facilitates
rapidly tracking and responding to Group management information.
Moreover, the Company has established the Personnel Committee,
which objectively and neutrally considers personnel and compensation issues regarding directors, as well as other matters about which
it has received inquiries, in particular from the president and representative director. (The majority of the committee members are fromoutside directors.)

General Meeting of Shareholders
Appointment /Dismissal

Appointment /Dismissal

Board of Directors

Auditing

9 directors(of whom 3 are outside directors)
Appointment /Dismissal /Supervision

Board of Statutory Auditors

Independent Auditors

4 statutory auditors(of whom 3 are outside statutory auditors)

Dismissal

Auditing

President andRepresentative Director

Personnel Committee
Reports

Directions

Cooperation

Reports

Internal Auditing Division
Directions

Appointment /Dismissal

Account Auditing /Reports on Results

Committees

Group CSR Committee

Group CSR Subcommittee

Reports

SBU Quarterly Report MeetingGroup Risk Compliance Committee

Group Management MeetingGroup Information Security Committee

Content Business Strategy Meeting
Asia Strategy Meeting

Support

Auditing

Internal Control Committee
Policy Directions

Reports

Policy Directions

BANDAI NAMCO Group Companies
As of June 18, 201228

Message from Outside Officers

Nobuo Sayama
Director (Outside)

Osamu Sudoh
Statutory Auditor (Outside)

I was appointed as an outside director in June 2011. In general, I think that participating inmeetings of a company’s board of directors leads to a deep understanding of the level of thecompany’s corporate governance. There are many types of companies. For example, someare run by an autocrat and the board meetings have no discussions, and in others there isan absence of leadership and the board of directors does not fulfill its functions. In my firstyear of attendance at meetings of NAMCO BANDAI Holdings’s Board of Directors, I experienced a truly well-balanced relationship among the leadership of the president, the ability to
execute and the sense of responsibility of the leaders of each division, and the checks andbalances provided by the outside officers. I am participating in the Personnel Committee,
and I believe that it is functioning well, in an extremely fair manner, in regard to both thedirection of the committee and the people engaging in discussions. I am convinced that thistype of rigorous corporate governance is linked to favorable results.
I believe that the role of an outside officer is not to contribute to a company’s so-called
daily operations but rather to act as a check on the frameworks and direction of thecompany and to help rectify any problems as needed. My areas of specialty are M&A andmanagement. Over many years, I worked in close contact with the managers of a large
number of companies, and in the past year I have observed the executives of BANDAI
NAMCO. In my judgment, the management of BANDAI NAMCO is at a high level, evenamong listed companies in Japan. Nonetheless, the Company itself is undergoing a processof change as a result of the changes in its operating environment. The turmoil in Japanesesociety is deepening, and as we move forward I will do my utmost as an outside director tohelp the Company to generate results that satisfy customers, shareholders, and otherstakeholders and to further enhance the corporate culture.

At meetings of the Board of Directors of NAMCO BANDAI Holdings, we receive periodic
reports about the results of the Group’s operating companies. On that basis, we arepresented with important issues (resolutions) regarding the operational management of theoperating companies, together with a substantial volume of related materials. Based onthese reports and materials, discussions are held in a truly free and open-minded manner.
If a proposal from an executive division is not accepted as a result of this process, then the
proposal can be re-submitted. I know that this can be time-consuming for the executive
divisions, but I believe that it represents the true value of governance. I also believe that thecareful explanation of proposals by the executive divisions, without concern for the hard work
involved, is one factor in the effectiveness of governance by the Board of Directors. If I wereto make a suggestion, it might be helpful if we were able to read the proposal materials evenmore quickly.
As an attorney, I have worked in bankruptcy proceedings for nearly 30 years, and as aresult I am relatively well versed in the signs of a company in trouble. Accordingly, when
considering individual proposals and reported matters, I look at company management fromthe viewpoint of whether or not there are signs of trouble. With consideration for the duties
that have been entrusted to outside corporate auditors by the shareholders, I believe that it
is my role to focus first on the interests of shareholders and the interests of stakeholders,and make a decision on each issue on that basis.
Overall, in implementing the holding company format, I believe that the Company has
achieved a harmonious and successful division of responsibilities between NAMCO BANDAI
Holdings and the operating companies.

29

Corporate Governance

Meeting Name
Board of Directors

ScheduleMonthly andotherwise asneededAgenda / Purpose
Participants
Decisions/reports on matters stipulated by law, items to be resolved in
Directors, statutory auditors, other designatedaccordance with authority standards, reports on the status of operational employees
execution, reports regarding CSR, crisis management, and compliance

SBU Quarterly Report
Meeting

Quarterly

Consolidated numerical reports, SBU reports, other items to be reported

Directors, statutory auditors, other designatedemployees

Group Management
Meeting

Quarterly

Deliberations regarding issues extending across SBUs, other Groupmanagement issues, strategic deliberations

Full-time directors, other designated employees

Waigaya Meeting

WeeklyWeekly reports regarding the departments for which directors are
responsible

Full-time directors, other designated employees

Content Business
Strategy Meeting

Quarterly

Sharing of information about SBU initiatives related to the Group’s
important IP

Directors with related responsibilities, directors frommajor subsidiaries with related responsibilities, otherdesignated employees

Asia Strategy Meeting

Semiannually

Deliberations regarding issues in executing business strategies, risk
management and medium-to-long-term Group regional strategies in Asia

Directors with related responsibilities, directors frommajor subsidiaries with related responsibilities, otherdesignated employees

Group CSR Committee

Semiannually

Deliberations and information sharing regarding the Group’s important
CSR strategies, consideration of resolutions, items to be reported, anddeliberations at meetings of Board of Directors, overall supervision ofGroup CSR subcommittees, overall supervision of progress of important
items for each SBU and affiliated company

Full-time directors, other designated employees

Furthermore, the Group comprises three SBUs and the affiliatedbusiness companies, which principally provide support services
to the SBUs. In each SBU, operating strategies for Japan andoverseas are formulated and implemented, with the lead role takenby the SBU’s core company.
The Company, which is a holding company, monitors each SBU;
holds meetings of Groupwide committees, such as the SBU
Quarterly Report Meeting, the Group Management Meeting, theWaigaya Meeting, the Content Business Strategy Meeting, the Asia
Strategy Meeting, and the Group CSR Committee; and, for theGroup as a whole, shares the status of operations and considers andformulates strategies.
The Board of Directors has decided fundamental policies regarding
internal control systems as stipulated by the Companies Act. In
regard to the internal control reporting system under the Financial
Instruments and Exchange Act, the Company’s Internal Control
Committee formulates policies regarding the establishment andevaluation of internal control systems in the Group, shares information, and conducts internal Group monitoring. The committee alsopresents internal control system reports, and the Board of Directors
makes decisions on fundamental issues.
In addition, the Group Information Security Committee has been
established with the objective of decision making, implementation
reporting, and information sharing in regard to the Group’s
information security activities overall.

Outside Directors and Outside Statutory Auditors
Of the Company’s nine directors, three meet the conditions foroutside director. The Company is working to strengthen the management oversight function. In addition, of the four statutory auditors(including two full-time statutory auditors), three meet the conditions
for outside statutory auditor. They work together and monitor theCompany’s internal control situation on a daily basis.
The status of audits by internal auditors, audits by the statutory
auditors, and audits by the independent auditors are reported to theBoard of Directors. By attending meetings of the Board of Directors,
the outside directors track the status of these audits and work tomaintain close ties.
In addition to tracking the status of internal audits reported atmeetings of the Board of Directors, outside statutory auditors track
the status of audits by the statutory auditors at meetings of theBoard of Statutory Auditors and maintain cooperative relationships
with the internal auditors and the other statutory auditors. In addition,30

all members of the Board of Statutory Auditors, including outside
statutory auditors, receive explanations from the independent
auditors of the status of account audits on a quarterly basis. In thisway, they track the status of these audits and maintain cooperative
relationships with the independent auditors.
Furthermore, through matters brought to the Board of Directors,
outside directors and outside statutory auditors track the status ofinternal control departments (all of the Company’s departments).
In addition, they attend the SBU Quarterly Report Meeting, wherereports on the status of the Group’s operations are made; strengthen
the supervisory function; and provide advice as needed.

Compliance and Risk Management
The BANDAI NAMCO Group has formulated standards for compliance and instituted a system that appropriately ensures the strict
observance of laws and regulations, ethical standards, and internal
regulations on a Groupwide basis. Under the Group’s compliancesystem, the director in charge of compliance has overall responsibility
for compliance throughout the Group and leads the Group Risk
Compliance Committee. This committee, which is the top compliance entity, promptly considers and determines what action to takewhen there is a compliance violation or the possibility of a compliance violation in the Group. The Group Risk Compliance Committee
works to prevent the occurrence of a wide range of risk events,
strives to ensure prompt responses if a risk event does occur, andaudits and supervises important matters regarding compliance forthe entire Group.
In risk management, the Group works to prevent the occurrenceof risk events and to rapidly identify the causes of risk events. In theevent of the occurrence of a risk event, the Group establishes an
emergency contact network, and in the event of the emergence ofrisk event information, including information about violations of laws
or regulations, such information is immediately reported to the president. The Group is working to minimize any influence on operations
through the implementation of rapid and accurate responses.
In addition, the Company has formulated the Group Compliance
Charter and has published the BANDAI NAMCO Group ComplianceHandbook to ensure thorough knowledge of compliance throughout
the Group. In addition, the Group implements training activities,
such as through an education system utilizing the Group’s intranet.
Furthermore, the presidents of Group operating companies submit
written oaths pledging strict compliance with the charter.

FINANCIAL SECTION
Contents
32 Consolidated Six-Year Financial Summary
33 Financial Review
36 Consolidated Balance Sheets
38 Consolidated Statements of Operations andConsolidated Statements of Comprehensive Income
39 Consolidated Statements of Changes in Net Assets
40 Consolidated Statements of Cash Flows
41 Notes to Consolidated Financial Statements
64 Independent Auditors’ Report31Consolidated Six-Year Financial Summary
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
For the Years Ended March 31

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

2007

2008

2009

2010

2011

2012

Net sales¥459,133¥460,474¥426,400¥378,547¥394,179¥454,211

Gross profit

168,080

164,073

146,023

128,753

139,415

167,503

Selling, general and administrative
expenses

125,856

130,662

123,675

126,869

123,077

132,896

Operating income

42,22433,411

22,3481,884

16,33834,607

Recurring income*1

45,61636,19824,513

1,908

16,39934,960Net income (loss)

24,252

32,67911,830(29,929)

1,848

19,304

Capital expenditures

27,925

34,115

17,481

14,41813,43917,456

Depreciation and amortization

21,201

24,75922,54618,98918,001

18,142

Cash flows from operating activities

42,49335,00019,301

10,582

22,562

39,112

Total assets¥408,490¥413,023¥363,445¥325,936¥308,269¥342,172

Total current assets

257,209267,713230,086

217,763

210,934

240,920

Total current liabilities

110,829

101,649

84,30486,605

86,105

107,946

Total net assets

284,254289,944

260,579

229,012

213,693

213,126

Net income (loss) per share (basic)¥95.73¥128.65¥47.95¥(123.98)¥ 7.71¥85.62

Cash dividends

28.00

24.00

24.00

24.00

24.00

26.00

Return on equity (ROE)*2 (%)

9.4

11.7

4.3

–12.4

0.8

9.1

Return on assets (ROA)* (%)

11.5

8.8

6.3

0.6

5.2

10.7

Selling, general and administrative
expenses to net sales (%)

27.4

28.4

29.0

33.5

31.2

29.3

Operating income margin (%)

9.2

7.3

5.2

0.5

4.1

7.6

Net income margin (%)

5.3

7.1

2.8

–7.9

0.5

4.3

Shareholders’ equity ratio (%)

67.1

69.4

70.9

69.5

68.8

61.8

Debt/equity ratio (times)

0.05

0.06

0.08

0.06

0.02

0.09

For the Year:At Year-End:Per Share Data (Yen):

Main Financial Indicators:

3*1 Recurring income is a Japanese accounting term denoting income before extraordinary items.
*2 ROE = Net income (loss) / Average total shareholders’ equity (= Net assets – Stock acquisition rights – Minority interests)*3 ROA = Recurring income / Average total assets

32

Financial Review

Overview of Performance in the
Fiscal Year Ended March 31, 2012
In this fiscal year, harsh economic conditions continued, due tofactors related to the Great East Japan Earthquake, such as theextensive damage it caused and electric power shortages, as wellas other factors such as the depressed economy in North America
and Europe and the rapid appreciation of the yen. As for the entertainment industry, weak individual consumption and other factors
have added further uncertainty to the outlook.
In this environment, the BANDAI NAMCO Group (“the Group”)
pressed ahead with the development of its global managementfoundation, in the final fiscal year of the three-year Mid-term Plan
that started in April 2009, and sought to realize medium- tolong-term growth.
On the business front, long-established character toys andperipheral toy category products such as cards in the Toys andHobby Business and arcade game machines, network content,
and home video game software in the Content Business contributed
to performance. In the Amusement Facility Business, existing-facility
sales in Japan trended favorably.
Net Sales
On a consolidated basis, the BANDAI NAMCO Group’s net sales
were ¥454,211 million, a year-on-year increase of 15.2%.
Cost of Sales
Cost of sales was ¥286,708 million, and the ratio of cost of sales
to net sales declined to 63.1%, from 64.6% in the previous year.
As a result, gross profit was ¥167,503 million, and the gross profit
margin increased to 36.9%, from 35.4% in the previous year.

SG&A Expenses
Selling, general and administrative (SG&A) expenses were ¥132,896
million, up 8.0%, and the ratio of SG&A expenses to net sales
decreased to 29.3%, from 31.2% in the previous year. Principal items
included advertising expenses of ¥33,385 million, directors’
remuneration and employees’ wages of ¥34,536 million, employees’
retirement and severance benefits of ¥1,394 million, and researchand development expenses of ¥17,866 million.
Operating Income
Operating income was ¥34,607 million, an increase of 111.8%,
and the operating income margin rose to 7.6%, from 4.1% in theprevious year.
Other Income (Loss)
In other income (loss), loss on sales and disposal of fixed assets
increased to ¥925 million, compared with ¥322 million in theprevious fiscal year. However, loss on valuation of investment
securities declined to ¥1,406 million, from ¥2,103 million in theprevious fiscal year. In addition, other items netted out to a loss of¥1,073 million, down from ¥1,948 million in the previous fiscal year.
As a result, other loss was ¥4,199 million.
Net Income
The BANDAI NAMCO Group recorded net income of ¥19,304 million,
an increase of 944.6% from the previous fiscal year. The net income
margin in the year under review was 4.3%, and net income per sharerose substantially, reaching ¥85.62, compared with ¥7.71 in theprevious fiscal year.

Results by Segment
Net sales (Millions of yen)Segment income (Millions of yen)

2012

2011

Year on year

2012

2011

Year on year

Toys and Hobby¥177,994¥158,374¥19,620¥16,113¥13,813¥2,300Content

225,504

179,91745,587

17,003

3,092

13,911

Amusement Facility

61,03362,338(1,305)

2,381

1,779

602

Other

27,482

18,504

8,978

2,051

810

1,241

Toys and Hobby BusinessIn the Toys and Hobby Business, domestically, products in the
KAMEN RIDER series and the Super Sentai series (POWER
RANGERS series) proved extremely popular as a result of productcategories being developed in coordination with each other. Also
contributing to this business’s results was strong performance bycard games, including digital card games such as DRAGON BALLHEROES and trading card games such as Battle Spirits. In new
developments, the Little Battlers plastic models gained popularity,
mainly among elementary-school-age boys, and highly collectabletoys for adults also performed well.
Overseas, in the North American region, POWER RANGERSSAMURAI toys, the first new creation in the POWER RANGERS series
in two years, proved popular, and sales in the Asian region, mainlyof character products popular in Japan, trended favorably. In theEuropean region, products were developed in new categories,
including toys for girls and for pre-school-aged children, but
performance did not reach the level of the previous fiscal year,
when this business’s solid performance centered mainly on popularcharacter toys.

As a result, net sales in the Toys and Hobby Business were¥177,994 million (year-on-year increase of 12.4%), and operating
income was ¥16,113 million (year-on-year increase of 16.7%).
Content BusinessIn the Content Business, in the arcade game machines area,in addition to the latest arcade game machines for popular series
such as Wangan Midnight Maximum Tune 4, repeat sales ofwell-established prize machines and sales of prizes and the like
contributed to performance.
In home video game software, the popular title in North America
and Europe was DARK SOULS, for PlayStation 3 and Xbox 360.
Domestically, games such as TALES OF XILLIA and ONE PIECEKAIZOKU MUSOU for PlayStation 3 and AKB1/48 Idol to Guam de
Koishitara . . . for PlayStation Portable proved highly popular. In
addition, in the network content area, social games such as the
Mobile Suit Gundam series and ONE PIECE Grand Collection
performed extremely well. In the visual and music content areas,visual package software such as Mobile Suit Gundam UC (Unicorn)
and TIGER & BUNNY also proved popular.

33

As a result, net sales in the Content Business were ¥225,504
million (year-on-year increase of 25.3%), and operating income was¥17,003 million (year-on-year increase of 449.9%).
Amusement Facility BusinessIn the Amusement Facility Business, domestically, differentiatedfacilities located in shopping centers that offer customers theopportunity to experience the distinctive worldview of specificcharacters were particularly popular. Within a market environmentthat is difficult to read, existing facilities performed favorably, with
net sales rising to 100.1% of the result for the previous fiscal year.
In addition, in implementing the plan to specialize in core businesses
with the objective of increasing profitability, transfers of somebusinesses were carried out.
In the challenging market environment presented by countries
outside Japan, sales declined in North America and Europe,
but profits trended favorably, due to selection and concentrationof stores.
As a result, net sales in the Amusement Facility Business were¥61,033 million (year-on-year decrease of 2.1%), and operating
income was ¥2,381 million (year-on-year increase of 33.8%).
Other Businesses
Other Businesses consist of companies that conduct businesses
such as logistics support, building management, and printing foreach of the Group’s businesses. During this fiscal year, suchbusinesses related to group support expanded, while efforts werealso made to improve the efficiency of their operations.
As a result, net sales in the Other Businesses were ¥27,482 million(year-on-year increase of 48.5%), and operating income was ¥2,051
million (year-on-year increase of 153.2%).

Financial Position
As of March 31, 2012, total assets stood at ¥342,172 million, an
increase of ¥33,903 million from the end of the previous year. The
main factors contributing to this increase were increases of ¥18,833
million in cash and time deposits, ¥11,839 in trade receivables, and¥2,809 million in deferred tax assets due to accounting treatmentthat assumes the application of the consolidated taxation regime,
while there was a decrease of ¥7,324 million in work-in-processincluded in inventories.
Total liabilities amounted to ¥129,046 million, an increase of¥34,470 million from the end of the previous fiscal year. The main
factors contributing to this increase were increases of ¥12,101 million
in trade payables; ¥12,883 million in long-term borrowings, due to
new borrowings; and ¥3,344 million in short-term borrowings.
Total net assets at the end of the year stood at ¥213,126 million,a decrease of ¥567 million from the end of the previous year. Thisdecline was mainly due an increase of ¥16,565 million in treasury
stock as a result of the acquisition of treasury stock through tender
offer and through open market purchase. This offset an increase of¥13,758 million in retained earnings due to the favorable consolidated results, as well as an increase of ¥2,420 million in unrealized
gains or losses on other securities, net of tax. The treasury stock
was retired, and additional paid-in capital and treasury stock eachdeclined by ¥17,678 million.
As a result, the equity ratio declined to 61.8%, from 68.8% at theend of the previous fiscal year. The current ratio* was 223.2%,
compared with 245.0% a year earlier; the quick ratio* was 165.0%,

34

compared with 172.1%; and the interest coverage ratio* was 337.2
times, compared to 42.0 times.
* Current ratio: Total current assets / Total current liabilities
Quick ratio: (Cash and time deposits + Short-term investments +Trade receivables ) / Total current liabilities
Interest coverage ratio: Cash ﬂows from operating activities /Interest paid

Cash Flows
As of the end of the year, cash and cash equivalents were up¥17,997 million from the end of the previous year, to ¥107,327 million.
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥39,112 million, an
increase of 73.4%. Principal outﬂows included income taxes paid of¥13,834 million, compared with ¥10,437 million in the previous year,
and increase in trade receivables of ¥12,667 million, compared with
¥8,155 million in the previous year. Principal inﬂows included income
before income taxes and minority interests of ¥30,408 million,
compared with ¥11,460 million in the previous year; depreciation andamortization of ¥18,142 million, compared with ¥18,001 million in theprevious year; and increase in trade payables of ¥12,634 million,
compared with ¥3,669 million in the previous year.
Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥15,264 million, an
increase of 107.0% from the previous year. Principal outﬂows
included purchases of property, plant and equipment and of intangible assets, which totaled ¥14,530 million, compared with ¥9,313
million in the previous year.
Cash Flows from Financing Activities
Net cash used in financing activities was ¥5,932 million, down 68.5%
compared with the previous fiscal year. Proceeds from long-termborrowings, which were not recorded in the previous year, were
¥20,050 million. However, increase in treasury stock, net, was¥16,565 million, compared with ¥4,171 million in the previous year;
cash dividends paid were ¥5,546 million, compared with ¥5,797
million in the previous year; and repayment of long-term borrowings
was ¥5,167 million, compared with ¥8,657 million in the previous year.

Basic Policy on the Distribution of Proﬁts and the
Payment of Dividends
The Company positions the return of profits to stockholders as oneof its highest management priorities. The fundamental policy is tomaintain a stable dividend and increase corporate value while
becoming an even more competitive Group, and preserving a soundfinancial position. The Company is maintaining the consolidated
dividend payout ratio at a level of 30%, based on stable annual
dividend payments of ¥24 per share.
The Company has paid dividends of ¥26 per share for the year
ended March 31, 2012, including the stable dividend portion of¥24 and a results-linked dividend of ¥2. For the year ending
March 31, 2013, the Company plans to pay the stable dividend
portion of ¥24 per share.
In addition, after appropriation of dividends from the consolidated
net income for the period, the Company has resolved to attribute a
portion of the remaining balance to the acquisition of its own shares,
with comprehensive consideration of aspects such as the level ofcash held, operating performance, share price trend, and plan forlarge-scale investments. The Company’s acquisition of treasury
stock in the year ended March 31, 2012, as described below, weremade in accordance with this basic policy.
Resolution made by the Board of Directors at a meeting held on
February 25, 2011
Period of acquisition: February 28, 2011 to December 31, 2011
(Actual acquisition period: April 19, 2011 to December 28, 2011)
Total number of shares acquired: 16,806,264 shares
Total amount for share acquisition: ¥16,561 million

to promote differentiated facilities that offer the opportunity toexperience the distinctive worldviews of the BANDAI NAMCO
Group’s characters. Overseas, we will work to increase profitability
in Europe and the United States through a range of initiatives toincrease efficiency. In Asia, we will start to develop facilities using
popular characters.
In light of the above considerations, the consolidated projections
for the fiscal year ending March 31, 2013, are as follows: net sales of¥455,000 million, a year-on-year increase of 0.2%; operating incomeof ¥36,500 million, a year-on-year increase of 5.5%; and net incomeof ¥21,500 million, a year-on-year increase of 11.4%.

Targets and Management Performance Indicators

Consolidated Plan for the Fiscal Year Ending March 31, 2013

The Group has adopted ROE (Return on Equity) as a management
performance indicator. Looking ahead, we will work to further
expand profits by implementing the strategies outlined in the
Mid-term Plan. In addition, by effectively utilizing stockholders’ equity,
we aim to achieve consolidated ROE of 10% or higher in the fiscal
year ending March 31, 2015, the final year of the Mid-term Plan.

Outlook for the Fiscal Year Ending March 31, 2013
Future economic conditions are expected to remain difficult, with
consumer spending in Japan sluggish and business conditions in
Europe weak. Another factor will be the inﬂuence of the strong yen.
These factors are expected to have an impact on the entertainment
industry, in which the BANDAI NAMCO Group is extensively
involved, resulting in ongoing uncertainty in the BANDAI NAMCO
Group’s operating environment. In this setting, we will implement
initiatives targeting growth, based on our three-year Mid-term Plan.
This plan, which was launched in April 2012, includes the mid-term
vision of “Empower, Gain Momentum, Accelerate Evolution.”In the Toys and Hobby Business, for the Japanese market, we
will work to strengthen links among categories, with a focus on toys.
These initiatives will be implemented through long-establishedcharacter toys, such as the KAMEN RIDER series, POWER
RANGERS series, and PRETTY CURE series. In addition, whileaiming for an overwhelming No. 1 position in Japan, we will launch
products, aiming at expanding our customer base, such as card
games, plastic models for elementary school students, and products
for adults. Overseas, the Group will strengthen integrated brandmanagement in Europe and the United States to improve profitability,with a focus on the core products in the POWER RANGERS series.
Also, in Asia we will strive to record growth through development
activities linked with Japan, centered on plastic models andproducts for adults that are popular in Japan.
In the Content Business, in arcade game machines, we will aim for
growth through reinforced development and sales of machines thatoffer new entertainment value, diversification of sales methods, andstepped up development targeting emerging countries, centered on
Asia. In home video game software, we will work to increase profitability through the timely release of franchise titles linked with arcade
game machines and titles that meet customer needs. We will also
strengthen social games through timely content provision andappropriate management, and reinforce sales of visual packaged
software for the Mobile Suit Gundam series. In these ways, we will
work to maximize content value.
In the Amusement Facility Business, in Japan we will step up
marketing by customer segment in order to offer facilities andservices that match each target group. In addition, we will continue

Segments
Toys and Hobby
Content
Amusement Facility
Other
Adjustments
Consolidated(Millions of yen)

Net sales¥170,000
239,000
60,00025,000(39,000)¥455,000

Segment income¥15,000
22,5001,500
1,000(3,500)¥36,500

Forward-Looking Statements
Forecasts for the next year and other future projections in this annual
report are based on information available to the Group at the timethey were made and are therefore subject to various risks anduncertainties. Actual results therefore may differ materially fromprojections for a variety of factors. Major factors that could inﬂuence
results include changes in the Company and the Group’s operating
environment, market trends, and exchange rate ﬂuctuations.

35

Consolidated Balance Sheets
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
As of March 31, 2011 and 2012

Thousands of
U.S. dollars(note 3)

Millions of yen

2011

2012

2012

$ 1,301,363

AssetsCurrent assets:
Cash and time deposits (notes 4 and 12)¥ 88,126¥ 106,959

Short-term investments (notes 4, 5 and 12)

2,818

2,074

25,234

Trade receivables (notes 6 and 12)

57,263

69,102

840,759

Allowance for doubtful receivables
Inventories (note 7)

(820)

(678)

(8,249)41,70137,040450,663

Deferred tax assets (note 13)

6,592

8,734

106,266

Other current assets

15,254

17,689215,221210,934

240,920

2,931,257

Investment securities (notes 5 and 12)

21,17022,177

269,826

Deferred tax assets (note 13)

5,760

6,427

78,197

Other investments and assets

21,181

21,664

263,585

Allowance for doubtful receivables(1,905)(1,711)(20,818)

46,20648,557590,790

Buildings and structures

24,16025,253

307,251

Amusement facilities and machines

61,61860,593

737,231Land

10,786

11,389138,569

Other property, plant and equipment

68,42374,870910,938

164,987

172,105

2,093,989(122,395)(127,605)(1,552,561)

42,59244,500541,428

Total current assets

Investments and other assets:

Total investments and other assets

Property, plant and equipment:

Total
Less accumulated depreciation
Net property, plant and equipment

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

36

8,537

8,195

99,708¥308,269¥ 342,172$ 4,163,183

Thousands of
U.S. dollars(note 3)

Millions of yen

2011

2012

2012

Liabilities and net assets
Current liabilities:
Short-term borrowings (notes 9 and 12)

¥

3,429

¥

6,773

$

82,407

Trade payables (notes 10 and 12)

36,641

48,742593,041

Accrued expenses

29,95732,864

399,854

Accrued income taxes (notes 12 and 13)

7,980

9,360

113,882

Other current liabilities (notes 9, 13 and 22)

8,098

10,207

124,188

86,105

107,946

1,313,372

Total current liabilities

Long-term liabilities:
Long-term borrowings (notes 9 and 12)—

12,883

156,747

Accrued retirement and severance benefits (note 11)

2,764

3,141

38,216

Deferred tax liabilities (note 13)

1,245

983

11,960

Other long-term liabilities (notes 9 and 22)

4,462

4,093

49,799Total long-term liabilities

8,471

21,100256,722

Total liabilities

94,576129,046

1,570,094

121,669

Net assets:
Shareholders’ equity
Common stock (note 19)
Authorized: 1,000,000,000 shares
Issued: 240,000,000 shares in 2011, 222,000,000 shares in 2012

10,00010,000Additional paid-in capital

69,92452,246635,673

Retained earnings (note 17)
Treasury stock, at cost; 3,497,884 shares in 2011 and
2,308,176 shares in 2012 (note 19)

159,492

173,250

2,107,921(3,496)(2,383)(28,994)

235,920

233,113

2,836,269

448

2,868

34,895

3

230

2,798

Land revaluation, net of tax (note 18)(6,492)(6,409)(77,978)

Foreign currency translation adjustments

Subtotal
Accumulated other comprehensive income (loss)
Unrealized gains or losses on other securities, net of tax (note 5)
Deferred gains or losses on hedges, net of tax(17,776)(18,358)(223,360)

Subtotal(23,817)(21,669)(263,645)

Minority interests

1,590

1,682

20,465

Total net assets

213,693

213,126

2,593,089

Total liabilities and net assets¥308,269¥342,172$4,163,183

37

Consolidated Statements of Operations andConsolidated Statements of Comprehensive Income
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2012

Consolidated Statements of Operations
Thousands of
U.S. dollars(note 3)

Millions of yen

2011

2012

2012

¥394,179
254,764
139,415
123,077
16,338¥454,211
286,708
167,503132,896
34,607$5,526,354
3,488,357
2,037,997
1,616,936
421,061

389
(143)
246
(2,103)(322)(997)(1,948)(4,878)

450
(137)
(3)
(1,406)(925)(1,105)(1,073)(4,199)5,475(1,667)(37)(17,107)(11,254)(13,444)(13,055)(51,089)

Income before income taxes and minority interests

11,46030,408369,972

Income taxes (note 13)

9,471

10,949133,216

Income before minority interests

1,989

19,459236,756

141

155

1,886

1,848

¥ 19,304$ 234,870

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses (note 14)
Operating income
Other income (loss):
Interest and dividend income
Interest expense
Gain (loss) on sales of investment securities, net
Loss on valuation of investment securities
Gain (loss) on sales and disposal of fixed assets, net
Loss on impairment of fixed assets (note 8)
Other

Minority interests
Net income¥

U.S. dollars(note 3)

Yen

Data per common share (note 16):
Net assets at March 31
Net income:
Basic
DilutedCash dividends applicable to period (note 17)

2011

2012

2012

¥896.83¥962.45$11.71

7.71
7.71
24.00

85.62
—
26.00

1.04
—
0.32

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income
Thousands of
U.S. dollars(note 3)

Millions of yen

Income before minority interests
Other comprehensive income (loss)
Unrealized gains or losses on other securities, net of tax
Deferred gains or losses on hedges, net of tax
Land revaluation, net of tax
Foreign currency translation adjustments
Share of other comprehensive income (loss) of associates accounted forusing equity method
Total other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive income (loss) attributable to:
Owners of the parent
Minority interests
See accompanying Notes to Consolidated Financial Statements.

38

2011

2012

2012

¥ 1,989¥19,459$236,756

465
(77)
—
(6,928)

2,452
226
83
(637)

29,8332,750
1,010(7,750)(49)(6,589)¥(4,600)

(32)
2,092
¥21,551(389)
25,454$262,210¥(4,676)76¥21,452
99$261,005
1,205

Consolidated Statements of Changes in Net Assets
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2012

Thousands of
U.S. dollars(note 3)

Millions of yen

2011

2012

2012

¥ 10,000¥ 10,000$ 121,669

10,00010,000121,669

79,96069,924

850,7604200Retirement of treasury stock(10,078)(17,678)(215,087)

Balance at end of year

69,92452,246635,673

163,454

159,492

1,940,528

1,848

19,304

234,870

(13)

—

—

(5,797)(5,546)(67,477)

159,492

173,250

2,107,921

Balance at beginning of year

(9,455)(3,496)(42,536)

Net change during year

5,959

1,113

13,542

Shareholders’ equity
Common stock (note 19):
Balance at beginning of year
Balance at end of year
Additional paid-in capital:
Balance at beginning of year
Disposal of treasury stock

Retained earnings (note 17):
Balance at beginning of year
Net income
Change in scope of consolidation
Cash dividends
Balance at end of year
Treasury stock (note 19):

Balance at end of year

(3,496)(2,383)(28,994)¥235,920¥233,113$2,836,269

Balance at beginning of year

19

448

5,451

Net change during year

429

2,420

29,444

Balance at end of year

448

2,868

34,895

Total shareholders’ equity
Accumulated other comprehensive income (loss)
Unrealized gains or losses on other securities, net of tax (note 5):

Deferred gains or losses on hedges, net of tax:
Balance at beginning of year

80

3

37

Net change during year

(77)

227

2,761

Balance at end of year

3

230

2,798

Land revaluation, net of tax (note 18):
Balance at beginning of year

(6,492)(6,492)(78,988)

Net change during year

—

83

1,010

Balance at end of year

(6,492)(6,409)(77,978)

Balance at beginning of year

(10,900)(17,776)(216,279)

Net change during year

(6,876)(582)(7,081)

Balance at end of year

(17,776)(18,358)(223,360)¥ (23,817)¥(21,669)$ (263,645)

Balance at beginning of year

810

—

—

Net change during year

(810)

—

—

Balance at end of year———
19,345

Foreign currency translation adjustments:

Total accumulated other comprehensive income (loss)
Stock acquisition rights:

Minority interests:
Balance at beginning of year

1,536

1,590

Net change during year

54

92

1,120

Balance at end of year

1,590

1,682

20,465¥213,693¥213,126$2,593,089

Total net assets at end of year
See accompanying Notes to Consolidated Financial Statements.

39

Consolidated Statements of Cash Flows
NAMCO BANDAI Holdings Inc. and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2012

Thousands of
U.S. dollars(note 3)

Millions of yen

2011

2012

2012

¥ 11,460¥ 30,408$ 369,972

18,001

18,142

220,732

Loss on impairment of fixed assets

997

1,105

13,444

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

322

925

11,254
5,293

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization

Loss on disposal of amusement facilities and machines

426

435

Loss (gain) on sales of investment securities, net

(444)

(81)

(986)

Loss on valuation of investment securities

2,103

1,406

17,107

Decrease (increase) in trade receivables(8,155)(12,667)(154,119)

Decrease (increase) in inventories(1,850)

4,082

49,665Acquisition of amusement facilities and machines(4,126)(2,926)(35,600)

Increase (decrease) in trade payables

3,669

12,634

153,717

Other

10,754(870)(10,585)

33,15752,593639,894

379

469

5,706

SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

(537)

(116)

(1,411)(10,437)(13,834)(168,317)

22,562

39,112475,872

Cash flows from investing activities:
Decrease (increase) in time deposits, net
Purchases of property, plant and equipment

(709)

(85)

(1,034)(6,643)(9,883)(120,246)

Sales of property, plant and equipment

1,110

34

414

Purchases of intangible assets(2,670)(4,647)(56,540)

Purchases of investment securities

(92)

(239)

(2,908)

Sales of investment securities

605

337

4,100

Proceeds from redemption of investment securities

—

24

292

Payments for investments in capital of subsidiaries and affiliates—(1,235)(15,026)

8——

Payments of loans receivable

Sales of subsidiary shares affecting the scope of consolidation(1,372)(544)(6,619)Collection of loans receivable

1,161

435

5,293

Payments of guarantee money deposited

(371)

(393)

(4,782)

Collection of guarantee money deposited

1,221

900

10,950

379

32

390

(7,373)(15,264)(185,716)

Other
Net cash used in investing activities
Cash flows from financing activities:
Increase (decrease) in short-term borrowings, net

(105)

1,383

16,827

Proceeds from long-term borrowings—

20,050243,947

Repayment of long-term borrowings(62,867)(8,657)(5,167)

Proceeds from capital paid by minority interests

—

25

304

Payment of lease obligations

(73)

(78)

(949)

Decrease (increase) in treasury stock, net(4,172)(16,564)(201,533)

Cash dividends paid

(5,797)(5,546)(67,477)

(21)

(35)

(426)
(72,174)

Cash dividends paid to minority interests(18,825)(5,932)

Effect of exchange rate changes on cash and cash equivalents

Net cash used in financing activities(4,838)81986

Net increase (decrease) in cash and cash equivalents(8,474)

17,997

218,968

Cash and cash equivalents at beginning of year

97,777

89,3301,086,872

27

—

—

¥ 89,330¥107,327$1,305,840

Increase in cash and cash equivalents due to consolidation of additional subsidiaries
Cash and cash equivalents at end of year (note 4)
See accompanying Notes to Consolidated Financial Statements.

40

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

1 Basis of Presentation
NAMCO BANDAI Holdings Inc. (“the Company”) and its consolidated

GAAP and filed with the appropriate Local Finance Bureau of thesubsidiaries have prepared their financial statements in accordance

Ministry of Finance as required by the Financial Instruments andwith the provisions set forth in the Japanese Financial Instruments

Exchange Act.

and Exchange Act and its related accounting regulations, and inSome supplementary information included in the statutory

conformity with accounting principles generally accepted in Japan

Japanese-language consolidated financial statements that is not(Japanese GAAP), which are different in certain respects as torequired for fair presentation is not presented in the accompanying

application and disclosure requirements of International Financial

consolidated financial statements.

Reporting Standards (IFRSs).
The accounts of overseas subsidiaries are based on their

In preparing the accompanying consolidated financial statements,
certain reclassifications have been made to the consolidated

accounting records maintained in conformity with IFRSs or accounting

financial statements issued in Japan in order to present them inprinciples generally accepted in the United States (U.S. GAAP).

a form that is more useful to readers outside Japan.

The accompanying consolidated financial statements have been

Certain reclassifications have been made to the prior year

prepared and translated into English from the consolidated financial

consolidated financial statements to conform to the presentation

statements of the Company prepared in accordance with Japanese

used for the year ended March 31, 2012.

2 Summary of Significant Accounting Policies(a) Principles of Consolidation

The assets and liabilities of foreign consolidated subsidiaries and

The accompanying consolidated financial statements include

affiliates are translated into yen at the rates of exchange in effectthe accounts of the Company and its significant subsidiaries.

at the balance sheet date. Revenue and expenses of foreign consoli-

Consolidation of the remaining subsidiaries would have had no

dated subsidiaries and affiliates are translated into yen at the averagematerial effect on the accompanying consolidated financial state-

rates of exchange during the year. Gains and losses, resulting fromments. Investments in significant affiliates are accounted for using

the translation of foreign currency financial statements are generally

the equity method.

excluded from the consolidated statements of operations and are

Investments in unconsolidated subsidiaries and certain affiliates
other than those accounted for using the equity method are statedincluded in “Foreign currency translation adjustments” and “Minority
interests” in “Net assets” in the Consolidated Balance Sheets.

at cost. If the equity method had been applied to the investments inthese companies, there would have been no material effect on the(d) Accounting Standards for Income and Expenses

accompanying consolidated financial statements.

Video Game Software Revenue Recognition:

All significant intercompany accounts and transactions have been
eliminated in consolidation.

Consolidated subsidiaries operating in the United States recognize
revenue in accordance with “Software Revenue Recognition”
of Financial Accounting Standards Board (FASB) Accounting(b) Cash and Cash Equivalents

Standards Codification No. 985-605, treating video game software

In reporting cash ﬂows, the Company considers cash on hand, demandwith online functions as software products with multiple-element

deposits, and all highly liquid investments with original maturities ofarrangements. Unless the vendor can objectively and reasonably

three months or less to be cash and cash equivalents.

identify the fair value of undelivered elements specified by thevendor, recording of any revenue attributable to video game(c) Foreign Currency Translation

software is deferred until all the elements are delivered.

Foreign currency transactions are translated into yen at rates in

Accounting for video game software production expenses:

effect at the dates they are transacted, and the gains or losses

A distinctive characteristic of video game software is the process

arising from the settlement of the related receivables or payables

through which the software is highly integrated with content thatare included in “Other income (loss)” in the Consolidated

cannot be separated into identifiable components.

Statements of Operations.

The content is considered to be an important component of each

Receivables and payables denominated in foreign currencies

video game title, which includes the game content and visual/musicat the balance sheet date are translated at the rates in effect asdata. Once management makes a decision to go forward in distrib-of the balance sheet date and the unrealized gains or losses areuting a title, the Company records the software and content devel-

included in “Other income (loss)” in the Consolidated Statements

opment costs as inventories.

of Operations.

The capitalized production costs are amortized to cost of sales
based on projected sales volumes.

41

(e) Short-Term Investments and Investment Securities

which is based on the “Practical Solution on Tentative

Other securities with fair value are principally carried at fair value. The

Treatment of Tax Effect Accounting Under Consolidated Taxationdifference, net of tax, between the acquisition cost and the carrying

System (Part 1)” (Accounting Standards Board of Japan Practicalamount of other securities with fair value is recognized in “Unrealized

Issues Task Force (PITF) No. 5, issued on March 18, 2011) andgains or losses on other securities, net of tax” in “Net assets” until“Practical Solution on Tentative Treatment of Tax Effect Accounting

realized. Other securities without fair value are principally carried at

Under Consolidated Taxation System (Part 2)” (Accounting

cost. The cost of other securities sold is principally computed basedStandards Board of Japan PITF No. 7, issued on June 30, 2010).

on the moving average method.
(i) Property, Plant and Equipment(f) Allowance for Doubtful Receivables

The Company and its domestic consolidated subsidiaries:

The allowance for doubtful receivables is provided for possible losses

Depreciation of property, plant and equipment is principallyon unrecoverable receivables. For ordinary receivables, the amountcomputed by the declining-balance method based on estimatedof the allowance is based on the historical rate of loss. For receiv-

useful lives. The straight-line method is used for buildings (except forables from debtors at risk of bankruptcy and receivables from debtors

building fixtures) acquired since April 1, 1998. The estimated usefulin bankruptcy or under reorganization, the amount of the allowance

lives for Buildings and structures and Amusement facilities andis based on individually estimated unrecoverable amounts.

machines are 3–50 years and 3–15 years, respectively.
Foreign consolidated subsidiaries:(g) Inventories

Depreciation of property, plant and equipment is principally computed

Domestic consolidated subsidiaries:

by the straight-line method based on estimated useful lives. The

Inventories are stated at cost determined by the average costestimated useful lives for Buildings and structures and Amusement

method. The value stated on the balance sheet is calculated byfacilities and machines are 5–50 years and 3–7 years, respectively.

writing down the carrying amount based on declining profitability.
Foreign consolidated subsidiaries:(j) Intangible Assets

Inventories are stated at the lower of cost, determined principally

Amortization of intangible assets is computed by the straight-lineby the average cost method, or net realizable value.

method based on estimated useful lives. Software for internal use

Both domestic and foreign consolidated subsidiaries state gamesoftware work in process by the specific-cost method. The value

is amortized over 1–5 years.
Goodwill is amortized over 5 years using the straight-line method.

stated on the consolidated balance sheets is calculated by writing
down the carrying amount based on declining profitability.

(k) Leases
Depreciation of leased assets is computed by the straight-line(h) Income Taxes

method over the period of the lease with a residual value of zero.

Current income taxes are accounted for based on income. DeferredFinance lease transactions, other than those in which title to leased

income taxes are accounted for under the asset and liability method.

assets are determined to be transferred to lessees, which started onDeferred tax assets and liabilities are recognized for future tax

or before March 31, 2008, are stated by applying the accounting

consequences attributable to dif ferences between the financial

treatment applicable to ordinary operating lease transactions.

statement carrying amounts of existing assets and liabilities and theirrespective tax bases and operating loss and tax credit carryforwards.

The Company and its consolidated subsidiaries use derivative instru-

rates expected to apply to taxable income in the years in whichments, such as forward foreign exchange contracts and interest rate

those temporary differences are expected to be recovered or settled.

swap contracts, to reduce market risks arising from ﬂuctuations in

The effect on deferred tax assets and liabilities of a change in theforeign exchange rates and interest rates. The Company and its

tax rate is recognized in income in the period that includes theconsolidated subsidiaries use these derivative instruments solely forenactment date.

the purpose of reducing the risks resulting from such ﬂuctuations to

In this consolidated fiscal year, the Company and some of its

which they are exposed in the course of their ordinary businessdomestic consolidated subsidiaries have applied for approval of theactivities. Accordingly, the Company and its consolidated subsid-

use of a consolidated taxation regime in which the Company is theiaries do not use derivative instruments or other financial instruments

consolidated parent corporation and the consolidated taxation

for speculative purposes.

regime will be adopted from the next consolidated fiscal year. As a42(l) Derivatives and Hedging Activities

Deferred tax assets and liabilities are measured using enacted tax

The Company and its consolidated subsidiaries’ counterparties

result, accounting from this consolidated fiscal year has been carriedfor derivative instruments are all highly creditworthy financial

out on the basis of the adoption of the consolidated taxation regime,

institutions and, therefore, the Company believes that it is exposedto almost no counterparty risk. Derivative transactions are

Accrued retirement and severance benefits for employees in

conducted in accordance with internal rules that specify transaction

respect of defined benefit plans is provided for based on theauthority and transaction amount limits.

estimated values of projected benefit obligations and pension plan

As a general rule, derivative instruments are stated at fair value.

assets at the end of the fiscal year. Unrecognized actuarial gain or

For derivative instruments that meet the criteria for hedge

loss is amortized, beginning from the fiscal year following the year

accounting, recognition of unrealized gains or losses is deferred.

in which it is incurred, using the straight-line method over a period

In cases where forward foreign exchange contracts meet certainthat does not exceed the average remaining years of service ofhedging criteria, the hedged receivables and payables are

employees as of the end of the fiscal year in which it is incurredtranslated at the corresponding forward foreign exchange contract(9–19 years). Certain domestic consolidated subsidiaries amortize

rate (the “Allocation Method”).

prior service costs over a fixed period (10–11 years) that does not

The Company and its consolidated subsidiaries assess theexceed the average remaining years of service of employees at theeffectiveness of hedging transactions from the start of the transac-

point when the costs are incurred. Provision for retirement benefits

tion to the point at which effectiveness is assessed by comparing

to directors and corporate auditors of certain domestic consolidated

the cumulative changes in the fair value or the cumulative changes insubsidiaries is provided based on the amount payable at the end of

the cash ﬂows of the hedged item with the cumulative changes in

the fiscal year in accordance with internal regulations.

the fair value or the cumulative changes in the cash ﬂows of thehedging instrument. In the event that critical terms are the same for(o) Provision for Losses from Business Restructuring

the hedging instrument and the hedged assets, liabilities, or sched-

Provision for losses from business restructuring is provided baseduled transaction, it is assumed that the hedge is 100% effective,on the estimated losses to be incurred on restructuring of operations.

so the assessment of effectiveness is not performed.
In the event that a hedge becomes ineffective, hedge accounting is(p) Provision for Sales Returns

no longer applied and the recognition of the gains or losses on the

The Company and its consolidated subsidiaries provide for losses

hedge transaction is no longer deferred.

on returned goods after the end of the fiscal year based on historicexperience.

(m) Provision for Directors’ Bonuses
Accrued bonuses for directors are provided for based on the(q) Provision for Loss on Disasterestimated amounts to be paid in respect of the fiscal year.

Provision for loss on disaster is provided based on the estimatedamount at the end of the fiscal year for expenditures to restore assets(n) Accrued Retirement and Severance Benefits

damaged by the Great East Japan Earthquake.

The Company and certain domestic consolidated subsidiaries haveestablished defined benefit corporate pension plan and retirement(r) Appropriation of Retained Earnings

lump-sum benefit system as defined benefit plan, and defined

In Japan, retained earnings with respect to a given financial period

contribution pension plan as defined contribution plan. Otherare appropriated by resolution of the shareholders at a general meeting

domestic consolidated subsidiaries (excluding domestic consolidated

to be held subsequent to the close of such financial period. The

subsidiaries with no retirement benefit system) have establishedaccounts for that period do not, therefore, reﬂect such appropriations.

defined benefit corporate pension plan, retirement lump-sum benefit
system, and comprehensive employee pension funds as defined(s) Data per Common Sharebenefit plan. Certain consolidated subsidiaries have established

In computing basic net income per common share, the average

defined contribution pension plan and smaller corporate retirement

number of shares outstanding during each year has been used.

allowance mutual aid plan as defined contribution plan. Moreover,

Diluted net income per share assumes the dilution that could

additional benefits may be paid at retirement. Certain foreign

occur if securities or other contracts to issue common stock wereconsolidated subsidiaries have established defined benefit pension

exercised or converted into common stock, or resulted in issuanceplans, retirement lump-sum benefit system, and defined contributionof common stock.

pension plans.

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

43

(t) Accounting Changes and Error Corrections

Statement No. 24, issued on December 4, 2009) and “Guidance

Any accounting changes and corrections of past errors made afteron Accounting Standard for Accounting Changes and Error

the beginning of the consolidated fiscal year ended March 31, 2012

Corrections” (Accounting Standards Board of Japan Guidance

are subject to the “Accounting Standard for Accounting Changes

No. 24, issued on December 4, 2009).

and Error Corrections” (Accounting Standards Board of Japan

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, 2012 have been translated into U.S. dollars at the rate of ¥82.19=U.S.$1, theapproximate exchange rate on the Tokyo Foreign Exchange Market on March 31, 2012.
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 as of March 31, 2011 and 2012 between the amounts shown in the consolidated balance sheets
and the consolidated statements of cash ﬂows are as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and time deposits
Short-term investments
Time deposits with maturities in excess of three months
Cash and cash equivalents

2011

2012

2012

¥88,126¥106,959$1,301,363

2,818

2,074

25,234(1,614)(1,706)(20,757)¥89,330¥107,327$1,305,840

Cash and time deposits of ¥4 million and ¥3 million ($37 thousand) are pledged as collateral for bank transaction guarantees
as of March 31, 2011 and 2012, respectively.

5 Short-Term Investments and Investment Securities
Short-term investments and investment securities as of March 31, 2011 and 2012 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Held-to-maturity securities
Other securities with fair value
Other securities without fair value
Investments in non-consolidated subsidiaries and affiliated companies
Contributions to investment partnerships
Total

2011

2012

¥

¥
—
13,842
1,443
8,879
87
¥24,251

26
13,165
1,460
9,337
—
¥23,9882012$—
168,414
17,557108,030
1,059$295,060

Note: The fair values of held-to-maturity securities are the same as those on the consolidated balance sheets.

The original cost, carrying amount (fair value), and gross unrealized holding gain (loss) for other securities with fair value as of March 31,
2011 and 2012 are summarized as follows:
Millions of yen

2011

Other securities with fair value:
Equity securities
Other
Total

44

Original cost

Gross unrealized
holding gain

Gross unrealized
holding loss

Carrying amount(fair value)¥ 9,1273,241¥12,368¥2,495—¥2,495¥(1,548)(151)¥(1,699)¥10,075
3,090¥13,165

Millions of yen

2012

Other securities with fair value:
Equity securities
Other
Total

Original cost

Gross unrealized
holding gain

¥7,745
2,147¥9,892¥3,966
1¥3,967Gross unrealized
holding loss

¥(17)
—
¥(17)

Carrying amount(fair value)¥11,694
2,148¥13,842

Thousands of U.S. dollars

2012

Other securities with fair value:
Equity securities
Other
Total

Original cost

Gross unrealized
holding gain

$ 94,233
26,122$120,355$48,25412$48,266

Gross unrealized
holding loss$(207)—$(207)

Carrying amount(fair value)$142,280
26,134$168,414

The following is a summary of the carrying amount of other securities without fair value as of March 31, 2011 and 2012:
Thousands of
U.S. dollars

Millions of yen

2011

2012

2012

Carrying
amountCarrying
amountCarrying
amount¥1,460¥1,443$17,557¥1,460¥1,443$17,557

Other securities without fair value:
Unlisted securities
Total

Proceeds and gross realized gains and losses from the sales of other securities in the years ended March 31, 2011 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

2011
Equity securities

2012

¥505

¥233

2012
$2,835

Debt securities
Corporate bond securities

100

—

—

Proceeds from the sales of other securities

605

233

2,835

Gross realized gains from the sales of other securities

252

56

681

Gross realized losses from the sales of other securities

(6)

(59)

(718)

6 Trade Receivables
Trade receivables as of March 31, 2011 and 2012 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2011

2012

2012

Notes receivable¥ 3,416¥ 6,065$ 73,792

Accounts receivable-trade

53,75962,972

766,176

88

65

791

¥57,263¥69,102$840,759

Lease receivables and investment assets
Total

45

7 Inventories
Inventories as of March 31, 2011 and 2012 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2011

2012

2012

Finished goods and merchandise¥10,553¥12,908$157,051

Work in process

26,741

19,417236,245

Raw materials and supplies

4,407

4,715

57,367¥41,701¥37,040$450,663

Total

8 Loss on Impairment of Fixed Assets
Evaluation of fixed asset impairment is performed by grouping assets according to management accounting classifications based on
strategic business units, excluding significant idle assets, assets scheduled for disposal, and leased assets. In the amusement facility
business, the individual facility is the smallest unit used in management accounting and is the basic unit for evaluating impairment.
The carrying amounts of the following assets, which exclude reusable assets, were reduced to the recoverable amount. The amounts ofreduction recorded as an impairment loss in “Other income (loss)” for the years ended March 31, 2011 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

Strategic business unit
Toys and Hobby

Content
Amusement Facility

Assets scheduled for
disposalAmusement facility

Other

Assets for business use

Toys and Hobby

Software for Internet
content business
Assets scheduled for
disposalAssets for business use

Content

Assets for business use

Amusement Facility

Assets scheduled for
disposalAssets for rental use
Amusement facility

Other

Total

46

Items
Software for Internet
content business
Assets for business use

Assets scheduled for
disposal

Classification

Location

Other intangible assets

Seoul, KOREA (Note 1)

Other property, plant andequipment
Investments and otherassets (other)
Other property, plant andequipment
Buildings and structures,and other assets
Amusement facilities andmachines, and otherassetsAmusement facilities andmachines, and otherassetsOther intangible assets,
and other assets
Other property, plant andequipment
Other intangible assets

Taito-ku, Tokyo (Note 3)

Buildings and structures,and other assets
Other property, plant andequipment
Other intangible assets,
and other assets
Other intangible assets,
and other assets
Land
Amusement facilities andmachines, and otherassetsBuildings and structures,and other assets
Land, and other assets

2011

2012

¥253

¥

—

2012
$

—

28

—

—

28

—

—

15

—

—

83

—

—

364

—

—

205

—

—

20

—

—

1

—

—

—

322

3,917

—

31

377

—

27

329

—

256

3,114

—
—

27
27

329
329

—

228

2,774

—

98

1,192

—
—

66
6

803
73

—
—
¥997

14
3
¥1,105170
37$13,444

Taito-ku, Tokyo (Note 4)
Cergy-pontoise,
FRANCE (Note 1)
Shinagawa-ku, Tokyo,
and others (Note 5)
Essex, U.K., andothers (Note 2)
Nakagami-gun, Okinawa,
and others (Note 1)
Tyne and Wear, U.K.,
and others (Note 1)
Sapporo City,
Hokkaido (Note 1)
Seoul, KOREA (Note 2)
Kyoto City, Kyoto, andothers (Note 6)
Cergy-pontoise,
FRANCE (Note 1)
Shinagawa-ku, Tokyo(Note 2)
Shinagawa-ku, Tokyo,
and others (Note 5)
Ota-ku, Tokyo (Note 8)
Koto-ku, Tokyo, andothers (Note 1)
Staffordshire, U.K., and others(Note 2)
Norfolk, U.K., and others(Note 1)
Narashino City, Chiba (Note 6)
Shinagawa-ku, Tokyo (Note 5)
Nagoya City, Aichi (Note 7)

Notes:1. Impairment loss was recorded because it was forecasted that the carrying amount of these fixed assets could not be recovered due to the decline in business profitability.
In addition, these assets were determined to have no fair value.
2. Impairment loss was recorded because it was forecasted that the carrying amount of these fixed assets could not be recovered due to the decline in business profitability.
The recoverable amount was measured as the estimated value in use based on forecast future cash ﬂows.
3. Impairment loss was recorded on these fixed assets, for which no future use is anticipated. The recoverable amount was evaluated as a memorandum value.
4. It was determined that the profit assumed at the time of acquisition was unlikely to be realized. Therefore, the total balance was recorded as impairment loss.
5. Impairment loss was recorded on these fixed assets, for which no future use is anticipated. In addition, these assets were determined to have no fair value.
6. Impairment loss was recorded because it was judged that the recoverable amount of these fixed assets had decreased substantially due to the decision to close the facility.
In addition, these assets were determined to have no fair value.
7. Impairment loss was recorded because the decision was made to sell this real estate asset. The recoverable amount of the real estate was measured based on the estimated net selling
price, which was assessed based on real estate appraisals.
8. Impairment loss was recorded because it was judged that the recoverable amount of these fixed assets had decreased substantially due to the change in use from a rental building toa rental parking lot. The recoverable amount was measured based on the estimated net selling price, which was assessed based on its roadside land price.

9 Borrowings and Lease Obligations
Borrowings and lease obligations as of March 31, 2011 and 2012 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2011
Carrying
amount2012

Weighted
averageinterest rate (%)

Weighted
averageinterest rate (%)

Carrying
amountShort-term borrowings

¥

96

4.15%

¥ 1,440$ 17,520

1.08%

Long-term borrowings due within one year

3,333

0.75

5,333

64,887

0.78

Lease obligations due within one year

66

3.14

66

803

4.62

Long-term borrowings (Less current portion)——

12,883

156,747

0.80

156

1.87

119

1,448

3.00

¥3,651—¥19,841$241,405—

Lease obligations (Less current portion)
Total

Note: The terms of the Company’s major borrowings include the following restrictive financial covenants.
(1) The Company shall maintain the amount of net assets on the consolidated balance sheet as of the closing dates of the interim and end of each fiscal year (the “Interim or End of
Fiscal Year”) at 75% or above of whichever is greater: (i) the amount of net assets on the consolidated balance sheet as of the closing date of the immediately preceding Interim or
End of Fiscal Year or (ii) the amount of the net assets on the consolidated balance sheet as of the closing date of the year ended March 31, 2011.
(2) With respect to the recurring income or loss on the consolidated statements of operations for each fiscal year-end, the Company shall not record recurring losses for two
consecutive fiscal years.
(3) From the date of this loan agreement and until all obligations to the lender and its agents under the terms of this agreement have been fulfilled, the Company shall maintain theownership ratio (direct or indirect) at 100% with respect to Bandai Co., Ltd., NAMCO BANDAI Games Inc., and NAMCO LIMITED.

The aggregate annual maturities of long-term borrowings and lease obligations outstanding as of March 31, 2012 are as follows:
Years ending March 31

2013
2014
2015
2016
2017
Total

Millions of yen

Thousands of
U.S. dollars¥ 5,399$ 65,690

5,438

66,164

4,547

55,323

2,017

24,541

1,000

12,167¥18,401$223,885

10 Trade Payables
Trade payables as of March 31, 2011 and 2012 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2011

2012

2012

Notes payable¥ 5,150¥ 8,624$104,928

Accounts payable-trade

31,491

40,118488,113¥36,641¥48,742$593,041

Total

47

11 Retirement and Severance Benefits
The plans’ funded status and amounts of accrued retirement and severance benefits as of March 31, 2011 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

Projected benefit obligations
Plan assets at fair value
Projected benefit obligation in excess of plan assets
Unrecognized loss
Unrecognized prior service cost
Net retirement and severance benefits recognized on the consolidated balance sheets
Prepaid pension cost
Total

2011

2012

2012

¥(14,999)¥(15,891)$(193,344)

9,949

10,354125,976(5,050)(5,537)(67,368)

2,618

2,668

32,461

(311)

(266)

(3,236)(2,743)(3,135)(38,143)

21

6

73

¥ (2,764)¥ (3,141)$ (38,216)

Notes: 1. In addition to the above plan assets, plan assets of ¥311 million and ¥277 million ($3,370 thousand) as of March 31, 2011 and 2012, 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 based on a pro-rata
allocation of contributions paid.
2. Certain consolidated subsidiaries use a simplified method for calculating projected benefit obligations.

Net periodic cost of employee retirement and severance benefits for the years ended March 31, 2011 and 2012 consists of the following:Thousands of
U.S. dollars

Millions of yen

Service cost for benefits earned, net of employee contributions
Interest cost on projected benefit obligations
Expected return on plan assets
Amortization of unrecognized actuarial gain or loss
Amortization of prior service cost
Total

2011

2012

2012

¥1,691¥1,597$19,432

252

266

3,236

(285)

(269)

(3,273)

407

368

4,477

(55)

(42)

(511)

¥2,010¥1,920$23,361

Notes: 1. In addition to the net periodic cost of employee retirement and severance benefits, contributions to a governmental welfare pension benefit plan are charged to Cost of sales andSelling, general and administrative expenses. Contributions to the governmental welfare pension benefit plan of ¥29 million and ¥15 million ($183 thousand) were charged to Cost of
sales and Selling, general and administrative expenses in the years ended March 31, 2011 and 2012, respectively. Also, additional discretionary retirement allowances of ¥194 millionand ¥199 million ($2,421 thousand) were charged to Selling, general and administrative expenses in the years ended March 31, 2011 and 2012, respectively.
In addition, for certain consolidated subsidiaries, due to the transfer and restructuring of operations, additional retirement allowances of ¥849 million and ¥592 million ($6,594
thousand) were recognized as other income (loss) in the years ended March 31, 2011 and 2012, respectively.
2. The retirement benefit expense for the Company and certain consolidated subsidiaries that use a simplified calculation method is recorded as service cost.
3. The defined contribution expenses for the Company and certain consolidated subsidiaries that have established defined contribution retirement pension systems is recorded as aservice cost.
4. The contributions of certain consolidated subsidiaries that simultaneously participate in the Smaller Enterprise Retirement Allowance Mutual Aid Scheme are recorded as service cost.
5. Retirement benefit expenses to the amount of ¥6 million ($73 thousand) due to the change in the Company’s retirement benefit scheme are recognized as Other income (loss).

Actuarial assumptions and the basis for the calculation of retirement and severance benefits in 2011 and 2012 are as follows:
2011

2012

“Benefits/years-of-service” approach“Benefits/years-of-service” approach

Discount rate

1.25%~2.0%

1.25%~2.0%

Expected rate of return on plan assets

2.5%~3.1%

2.5%~3.02%

Period of amortization of unrecognized prior service cost

10~11 years

10~11 years

Period of amortization of unrecognized actuarial gain or loss

9~19 years(from the year following
the year incurred)

9~19 years(from the year following
the year incurred)

Method of benefit attribution48

12 Financial Instruments
1. Financial Instruments(1) Policy for financial instruments
The Company and its consolidated subsidiaries manage funds by means of highly secure financial instruments only and procures funds
through borrowing from banks and other methods, such as issuing corporate bonds.
The Company and its consolidated subsidiaries utilize derivatives to hedge the risks noted below and do not engage in speculative transactions.
(2) Contents and risks of financial instruments
With regard to credit risk posed by customers with respect to trade receivables, the Company and its consolidated subsidiaries manage
balances by counterparty and due date, and credit information on major customers is updated at least once a year to minimize such credit
risk. The Company and its consolidated subsidiaries have a system for immediately sharing within the Company and its consolidated
subsidiaries adverse credit and other information regarding counterparties in the event that such information is received.
As of March 31, 2011 and 2012, designated large customers were counterparties for 15.6% and 13.7% of trade receivables, respectively.
Receivables denominated in foreign currencies arising as a result of the fact that the Company and its consolidated subsidiaries conductbusiness on a global basis are subject to foreign exchange rate ﬂuctuation risk. The Company and its consolidated subsidiaries manage
balances by counterparty and currency, and in addition the Company and its consolidated subsidiaries track market trends and, as necessary,utilize forward foreign exchange contracts for hedging.
Short-term investments and investment securities are principally money market funds and the shares of companies with which theCompany has a business relationship. These investments are exposed to the risk of ﬂuctuations in market prices. The market price isconfirmed at least once per quarter, and the holdings are reevaluated once per year with consideration of market conditions and relationships
with counterparties.
Trade payables substantially all have due dates within one year. Certain trade payables are denominated in foreign currencies and are
exposed to the risk of ﬂuctuations in foreign exchange rates. In the same manner as receivables, the Company and its consolidated
subsidiaries manage balances by counterparty and currency, and in addition the Company and its consolidated subsidiaries track market
trends and, as necessary, utilize forward foreign exchange contracts for hedging.
Borrowings are used mainly to procure funds needed for capital expenditures and for investment financing. Variable rate borrowings are
exposed to the risk of ﬂuctuations in interest rates. With consideration of market trends, the Company and its consolidated subsidiaries
implement hedging as necessary through the use of interest-rate swaps or interest-rate options.
Trade payables, borrowings, and accrued income taxes are exposed to liquidity risk. The Company and its consolidated subsidiaries
manage this risk through the formulation and revision of monthly funding plans for the Company and its consolidated subsidiaries.
Derivative transactions are used for hedging purposes. With regards to hedging methods and hedged items, hedging policies, andmethods of assessing the effectiveness of hedging transactions, for which hedge accounting is applied, please refer to “2 Summary of
Significant Accounting Policies—(l) Derivatives and Hedging Activities.”
Derivative transactions are executed and managed according to internal rules that determine trading authority and limits on amounts
traded. Derivatives are used in ways that minimize credit risk, and thus transactions are carried out only with highly creditworthy financial
institutions.
(3) Supplementary explanation on the fair value of financial instruments
The fair value of financial instruments includes, in addition to the value determined based on market prices, valuations calculated ona reasonable basis if no market price is available. However, as certain variables are used for these calculations, the result of suchcalculations may vary if different assumptions are used.
The contract amounts of derivative transactions in Note “21 Foreign Exchange Risk Management and Interest Rate Risk Management”
in the Notes to Consolidated Financial Statements should not be considered indicative of the market risk associated with the derivative
financial instruments.

49

2. Fair Value of Financial Instruments
The carrying amounts of financial instruments as stated in the consolidated balance sheets, their fair values as of March 31, 2011 and 2012,
and the differences between carrying amounts and fair values are as stated below. This table does not include assets for which it was judged
extremely difficult to assess the fair value. (Note 2 below)
Millions of yen

Thousands of U.S. dollars

2011

2012

2012
Carrying
amountCarrying
amountFair value—¥106,959¥106,959—

69,102

69,102—

840,759

840,759—(2,524)

21,18722,597

1,410

257,781274,936

17,155¥1,410 $2,399,903 $2,417,058$17,155

Carrying
amountFair value

Difference(1) Cash and time deposits¥ 88,126¥ 88,126¥(2) Trade receivables(3) Short-term investments
and investment securities
Total assets

57,26357,263

20,376

17,852Difference¥

Fair value— $1,301,363 $1,301,363

Difference$—¥165,765¥163,241¥(2,524)¥197,248¥198,658(1) Trade payables

36,64136,641—

48,742

48,742—593,041

593,041—(2) Short-term borrowings

3,429

3,429

—

6,773

6,773

—

82,407

82,407—(3) Accrued income taxes

7,980

7,980

—

9,360

9,360

—

113,882

113,882—(4) Long-term borrowings

—

—

—

12,883

12,883—

156,747

156,747¥ 48,050¥ 48,050¥—¥ 77,758¥ 77,758¥—$ 946,077 $ 946,077

$

—

¥

¥

¥

—

¥

¥

¥

—

$

$

—

Total liabilities
Derivative financial instruments*

(107)

(107)

270

270

3,285 $

3,285—

* Assets and Liabilities derived from derivative transactions are stated on a net basis. Items for which the total is a net liability are shown in parentheses.
Notes: 1. Method for calculating the fair value of financial instruments and derivative transactions
Assets(1) Cash and time deposits and (2) Trade receivables
Will be settled within a short period of time, their fair values are almost identical with the carrying amount.
(3) Short-term investments and investment securities
The fair value of these investments is stated at the quoted price on the stock exchange or the price as provided by counterparty financial institutions. In addition,with regard to short-term investments and investment securities by holding purpose, please refer to “5 Short-Term Investments and Investment Securities” in the Notes toConsolidated Financial Statements.
Liabilities(1) Trade payables, (2) Short-term borrowings, and (3) Accrued income taxes
Since these are readily convertible into cash, their fair values are almost identical with the carrying amount.
(4) Long-term borrowings
The fair value of long-term borrowings is calculated by discounting the total principle and interest by the current market interest rate for comparable debt.
Derivative financial instruments
Please refer to “21 Foreign Exchange Risk Management and Interest Rate Risk Management” in the Notes to Consolidated Financial Statements.
2. Financial instruments for which fair value is extremely difficult to determine
Millions of yen
2011

Thousands of U.S. dollars
2012

2012
Carrying amount¥1,443
1,534
87$17,557
18,664
1,059

Carrying amountUnlisted stocks
Stocks of affiliated companies (unlisted stocks)
Contributions to investment partnerships¥1,4602,152—

As these instruments do not have readily available market values, and their fair values are extremely difficult to determine, they are not included in “(3) Short-term investments andinvestment securities” in the table above.

50

3. Maturity analysis of financial assets and securities with contractual maturities
Millions of yen

Withinone year
Cash and time deposits
Trade receivables

2011
More than More than
one year, five years, More than
within five within ten ten years
years
years

¥ 88,126¥ —¥—56,998261

4Thousands of U.S. dollars

Withinone year2012
More than More than
one year, five years, More than
within five within ten ten years
years
years

2012
More than More than
one year, five years, More than
within five within ten ten years
years
years

Withinone year¥— ¥106,959

¥ —

¥—

¥— $1,301,363

$

—

$—

$—

—

68,300802——

831,001

9,758

—

—

Short-term investments andinvestment securities
Held-to-maturity securities
Corporate bonds
Total

—

25

—

—

—

—

—

—

—

—

—

—

¥145,124

¥285

¥ 4

¥— ¥175,259

¥802

¥—

¥— $2,132,364$9,758$—$—13 Income Taxes
The Company and its domestic consolidated subsidiaries are subject to Japanese corporate, inhabitant, and enterprise taxes based on
income which, in the aggregate, resulted in a normal tax rate of approximately 40.6% for the years ended March 31, 2011 and 2012.
Income tax expenses reﬂected in the accompanying consolidated statements of operations for the years ended March 31, 2011 and 2012
consist of the following:Thousands of
U.S. dollars

Millions of yen

Income taxes—current
Income taxes for previous years
Income taxes—deferred
Total

2011

2012

2012

¥10,946—(1,475)¥ 9,471¥15,710(127)(4,634)¥10,949$191,143(1,545)(56,382)$133,216

Reconciliation of the normal tax rate and the effective tax rate as a percentage of income before income taxes and minority interests for theyears ended March 31, 2011 and 2012 is as follows:
Normal tax rate
Entertainment expenses not deductible for tax purposes
Corporate inhabitant tax on per capita basis
Directors’ bonuses
Effect of changes in tax rates on net deferred tax assets
Amortization of goodwill
Differences of tax rates of foreign consolidated subsidiaries
Change in valuation allowance for deferred tax assets
Tax credit for research and development expenses
Impact of adoption of consolidated tax payment system
Reversal of stock acquisition rights
Other
Effective tax rate

2011

2012

40.6%

40.6%

3.8

1.0

1.9

0.8

3.5

1.9

—

4.0

7.4

0.5

3.5

(0.8)

26.7

(2.0)

(2.2)

(3.2)

—

(7.0)

(1.9)

—

(0.7)

0.2

82.6%

36.0%

51

Significant components of deferred tax assets and liabilities as of March 31, 2011 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

Deferred tax assets:
Losses carried forward
Inventory valuation losses
Excess depreciation of fixed assets
Accrued employee bonuses
Accrued retirement and severance benefits
Loss on valuation of advance payments
Accrued enterprise taxes and others
Loss on impairment of fixed assets
Research and development expenses
Allowance for doubtful receivables
Unrealized gains or losses on other securities
Land revaluation
Other
Total gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Retained earnings of foreign consolidated subsidiaries
Unrealized gains or losses on other securities
Land revaluation
Reserve for advanced depreciation of fixed assets
Other
Total deferred tax liabilities
Net deferred tax assets

2011

2012

2012

¥ 15,797
8,090
4,694
2,700
1,226
1,078
939
901
480
756
2
3,036
6,477
46,176(33,962)
12,214¥ 15,790
7,459
4,894
3,957
1,098
959
885
853
546
453
2
2,662
7,246
46,804(30,605)
16,199$ 192,116
90,75359,545
48,145
13,35911,668
10,768
10,378
6,643
5,512
24
32,38888,162569,461(372,369)
197,092

(397)
(344)
(674)
(115)
(184)
(1,714)¥ 10,500

(296)
(765)
(591)
(96)
(296)
(2,044)¥ 14,155(3,601)(9,308)(7,191)(1,168)(3,601)(24,869)$ 172,223

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

2011

2012

2012

¥ 6,592¥ 8,734$106,266

Investments and other assets–Deferred tax assets

5,760

6,427

78,197

Current liabilities–Other (deferred tax liabilities)

(607)

(23)

(280)

(1,245)(983)(11,960)¥10,500¥14,155$172,223

Long-term liabilities–Deferred tax liabilities
Total

Correction of amounts of deferred tax assets and deferred tax liabilities due in part to a change in the income tax rate, and others
The “Act to partially revise the Income Tax Act and others in order to construct a tax system corresponding to changes in the structureof economic system” (Act No. 114 of 2011) and the “Special measures act to secure the financial resources required to implement policy
on restoration after the Great East Japan Earthquake” (Act No. 117 of 2011) were promulgated on December 2, 2011, and from theconsolidated fiscal years beginning on April 1, 2012, the corporation tax rates have been reduced and a special reconstruction corporation
tax has been imposed.
Pursuant to these changes, the effective statutory tax rates used in calculating deferred tax assets and deferred tax liabilities will change
from 40.6% to (i) 38.0% for temporary differences and other factors such as carryforward of unused tax losses that are forecasted to beresolved in the period between the consolidated fiscal year beginning on April 1, 2012 and the consolidated fiscal year beginning on April 1,
2014, and to (ii) 35.6% for temporary differences that are forecasted to be resolved in the consolidated fiscal year beginning on April 1,2015 and thereafter.
As a result of these changes in the tax rate, the amount of deferred tax assets (deferred tax assets less deferred tax liabilities) decreasedby ¥1,060 million ($12,897 thousand) while deferred gains or losses on hedges, the unrealized gains or losses on other securities, net of tax,
and the adjustment for income taxes by ¥1 million ($12 thousand), ¥132 million ($1,606 thousand) and ¥1,194 million ($14,527 thousand)respectively. In addition, deferred tax liabilities for land revaluation decreased by ¥83 million ($1,010 thousand) and revaluation, net of tax,
increased by the same amount.

52

14 Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2011 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

2011

2012

2012

¥ 28,782¥ 33,385$ 406,193

Directors’ remuneration and employees’ wages

32,012

34,536420,197

Employees’ retirement and severance benefits

1,470

1,394

16,961Advertising expenses

Provision for directors’ bonuses
Research and development expenses

965

1,365

16,60816,091

17,866217,374

Allowance for doubtful receivables, investments, and other assets

88

—

—

43,66944,350539,603¥123,077¥132,896$1,616,936

Other
Total

15 Other Comprehensive Income
The components of Other comprehensive income (loss) for the year ended March 31, 2012 are as follows:
Millions of yen

Thousands of U.S. dollars

2012

Unrealized gains or losses on othersecurities
Deferred gains or losses on hedges
Land revaluation
Foreign currency translation
adjustments
Share of other comprehensive income(loss) of associates accounted forusing equity method
Total

2012
Tax effect

Net oftax effectAmountsarising

Reclassification
adjustments¥3,050298—¥(598)(72)
83¥2,452
226
83$20,927(1,679)—$16,181
5,305
—

119

(637)

—

(637)

(9,198)1,448

5¥1,890(32)¥2,679—¥(587)(32)(450)¥2,092 $ 9,600

61$22,995

Amountsarising

Reclassification
adjustments

Beforetax effect¥1,720(138)—¥1,330
436
—

(756)

(37)
¥ 789

Beforetax effectTax effect

Net oftax effect$37,108 $(7,276) $29,832
3,626
(876)
2,750
—
1,010
1,010
(7,750)—(7,750)

(389)
—
(389)
$32,595 $(7,142) $25,453

16 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, 2011 and 2012is as follows:
Thousands of
U.S. dollars

Millions of yen

2011

2012

2012
$234,870

Net income¥1,848¥19,304

Net income available to common stockholders

1,848

19,304

Net income for diluted net income per share calculation¥1,848¥—234,870$—

Thousands of shares

Average number of common shares outstanding
Effect of dilutive securities:
Stock options

239,810

225,465

31—

Average number of common shares for diluted net income per share calculation

239,841—
Yen

U. S. dollars

Net income per common share:
Basic

¥7.71

¥85.62$1.04

Diluted

7.71

—

—

Note: Diluted net income per common share is not presented for the year ended March 31, 2012 because no diluted securities were outstanding.

53

17 Retained Earnings and Dividends

18 Land Revaluation

In Japan, in the event a dividend distribution of surplus is made, theIn accordance with the “Law Concerning Land Revaluation” (Lawlesser of an amount equal to 10% of the dividend or the excess, if

No. 34, promulgated on March 31, 1998), the land used for business

any, of 25% of common stock over the total of additional paid-in

purposes was revalued and “Land revaluation, net of tax” wascapital and legal earnings reserve must be set aside as a legal

reported in “Net assets.”

reserve until the aggregate amount of capital surplus and the legal
reserve equals 25% of stated capital.

Revaluation method:

Certain foreign consolidated subsidiaries are also required to

The fair value of land is determined based on official notice prices

appropriate their earnings to legal reserves under the laws of thethat are calculated by the method assessed and published by therespective countries.

Commissioner of the National Tax Agency. The Commissioner

The Company’s retained earnings includes legal reserves ofassesses and publishes the method to calculate land value that

¥1,645 million and ¥1,645 million ($20,015 thousand) at March 31,

forms the foundation for calculating taxable value for land value

2011 and 2012, respectively. Proposed appropriations of retained

tax prescribed in “Article 16 of Land Value Tax Law” (Law No. 69,

earnings have not been reﬂected in the consolidated financial state-promulgated on May 2, 1991), as stipulated in “Article 2-4 of thements at the end of the fiscal year. The Company’s approved appro-

Ordinance Implementing the Law Concerning Land Revaluation”

priations of retained earnings for the year ended March 31, 2012

(Cabinet Order No. 119, promulgated on March 31, 1998).

were cash dividends of ¥3,077 million ($37,438 thousand). In addition,

Reasonable adjustments are made to the official notice prices.

a mid-year dividend may be paid based on approval by the Board

Unrealized losses for land of ¥959 million ($11,668 thousand) wereof Directors, which is subject to limitations. The mid-year dividend

recognized based on the difference between the land carrying

for the year ended March 31, 2012 was ¥2,706 million ($32,924

amount, which was revalued as of March 31, 2002, and the fair value

thousand).

of the land as of March 31, 2012.

19 Common Stock and Treasury Stock
The changes in the number of common stock and treasury stock for the years ended March 31, 2011 and 2012 were as follows:
Common stock (number of shares)
Number of shares at beginning of year2012
240,000,000

Retirement of treasury stock(10,000,000)(18,000,000)

Number of shares at end of year

240,000,000

222,000,000

2011

2012

Treasury stock (number of shares)
Number of shares at beginning of year

8,540,776

3,497,884

Purchase of treasury stock as per a decision made by the Board of Directors

5,000,000

16,806,264(10,000,000)(18,000,000)(42,892)

4,028

3,497,884

2,308,176

Retirement of treasury stock
OthersNumber of shares at end of year

54

2011
250,000,000

20 Leases
As lessee
The Company and its consolidated subsidiaries occupy offices and other facilities and use various assets under finance and operating leasearrangements.
(1) Finance leases
Finance lease transactions other than those in which title to leased property are determined to be transferred to lessees, which started onor before March 31, 2008, are stated by applying the accounting treatment applicable to ordinary operating lease transactions.
The pro-forma original cost and accumulated depreciation of assets under such finance leases as if they had been accounted for as
finance leases as of March 31, 2011 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

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

2011

2012

2012

¥ 246
(204)
¥ 42

¥ 132
(124)
¥ 8

$ 1,606(1,509)$97

Future minimum payments due under finance leases as of March 31, 2011 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

2011
Within one year
Over one year
Total

2012

¥33
9
¥42

¥8
—
¥8

2012
$97
—
$97

Lease expense and pro-forma depreciation expense for such finance leases as if they had been accounted for as finance leases for theyears ended March 31, 2011 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

2011
Lease expense
Depreciation expense

2012

¥71
71

¥29
29

2012
$353
353

(2) Operating leases
Future minimum payments required under operating leases as of March 31, 2011 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

Within one year
Over one year
Total

2011

2012

2012

¥2,7085,608¥8,316¥1,1585,044¥6,202$14,089
61,370$75,45955

21 Foreign Exchange Risk Management and Interest Rate Risk Management
Derivative financial instruments are comprised principally of forward foreign exchange contracts and interest rate swaps. These
instruments are used to reduce the risks of changes in foreign exchange rates and interest rates, but are not used for speculation.
The Company is exposed to credit risk related to nonperformance by the counterparties to forward foreign exchange contracts and interest
rate swaps, but the Company does not expect any instances of nonperformance due to the high credit ratings of the counterparties.
Contract amounts, fair values, and gains or losses from valuation of forward foreign exchange contracts outstanding as of March 31, 2011
and 2012 are as follows. The contract amounts in themselves should not be considered indicative of the market risk associated with thederivative financial instruments.
(1) Derivative transactions not qualifying for hedge accounting
Millions of yen

Thousands of U.S. dollars

2011

2012

2012

Contract
amountEstimated
fair value

Unrealized
gain (loss)

Contract
amountEstimated
fair value

Unrealized
gain (loss)

Contract
amountEstimated
fair value

Unrealized
gain (loss)¥1,222¥(128)¥(128)¥1,886¥ 1¥ 1$22,947

$ 12

$ 12

65

(0)

(0)

696

(34)

(34)

8,468

(414)

(414)

Forward foreign exchange
contracts
Sold:
Yen
U.S. dollars
Purchased:
Yen

1

(0)

(0)

1

(0)

(0)

12

(0)

(0)

U.S. dollars

228

16

16

—

—

—

—

—

—

Total

¥1,516¥(112)¥(112)¥2,583

¥(33)

¥(33)

$31,427$(402)$(402)

Notes: 1. Method of calculating fair value
Calculated based on prices provided by counterparty financial institutions.
2. For certain of the above forward foreign exchange contracts, hedge accounting is applied for the transactions between consolidated subsidiaries in non-consolidated financial
statements, but these transactions have been eliminated in the consolidated financial statements, and as a result these transactions are not treated as effective hedges of thehedged assets and/or liabilities in the consolidated financial statements.

(2) Derivative transactions qualifying for hedge accounting
Millions of yen

Hedge accounting
methodDeferred2011
Hedging method

Hedged items

Forward foreign exchange contracts
Sold:
Yen
Accounts receivable-trade
Polish zloty
Accounts receivable-trade
U.S. dollars
Accounts receivable-trade
Purchased:
U.S. dollars
Accounts payable-trade
HK dollars
Accounts payable-trade
Yen
Accounts payable-trade
Chinese yuan
Accounts payable-non trade

Total
Foreign exchange
allocation method
Total
Calculated based on prices provided by counterparty financial institutions.

56

2012

2012

Contract
amountEstimated fairvalue

Contract
amountEstimated fairvalue

Contract
amountEstimated fairvalue

¥ 4,034
271
111

¥(17)
(3)
1

¥4,509
23
7

¥ 76
(0)
(0)

$ 54,860
280
85

$ 925
(0)
(0)

6,225
60
—
—
¥10,701

23
1
—
—
¥ 5

3,482
89
70
1,011
¥9,191

210
7
3
7
¥303

42,365
1,083
852
12,301$111,826

2,555
85
37
85
$3,687

31
106
17
154

1
(3)
0
¥ (2)

—
230
—
¥ 230

—
12
—
¥ 12

—
2,798
—
$ 2,798

—
146
—
$ 146

Forward foreign exchange contracts
Purchased:
Yen
Accounts payable-trade
U.S. dollars
Accounts payable-trade
GB pounds
Other

Note: Method of calculating fair value

Thousands of U.S. dollars¥

22 Asset Retirement Obligations
Asset retirement obligations as of March 31, 2011 and 2012 are summarized as follows:
1. Overview of asset retirement obligations
Obligation for restoration to original condition accompanying real estate lease contracts for amusement facilities.
2. Method of calculating amounts of asset retirement obligations
In calculating the amount of asset retirement obligations, the estimated period of use is determined based on period of the lease contract
and the useful life of the building (principally 15 years), and the discount rate is principally 2%.
3. Change in total amount of asset retirement obligations in the years ended March 31, 2011 and 2012
Thousands of
U.S. dollars

Millions of yen

Balance at beginning of the year
Increase due to acquisition of property, plant and equipment
Adjustment due to passage of time
Decrease due to fulfillment of asset retirement obligations
Other
Balance at end of year

2011

2012

2012

¥1,777¥1,859$22,618
1,144

81

94

25

23

280

(13)

(158)

(1,922)

(11)

4

49

¥1,859¥1,822$22,169

23 Commitments and Contingent Liabilities
Commitments as of March 31, 2011 and 2012 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2011
Guarantee of obligation resulting from rental contracts of unconsolidated subsidiary

¥—

2012
¥172

2012
$2,09324 Segment Information
The reportable segments of the Company are components of the Group whose separate financial information is available and which areperiodically evaluated by the Board of Directors in deciding how to allocate management resources and in assessing performance.
The Group is made up of three strategic business units (“SBU”), one for each business domain, namely the Toys and Hobby SBU, theContent SBU, and the Amusement Facility SBU, and the affiliated business companies that mainly serve a supporting role for these strategic
business units. The major company of each strategic business unit leads the planning and promotion of the business strategies of thestrategic business unit for Japan and overseas.
Accordingly, the Group has the following three reportable segments: Toys and Hobby Business, Content Business, and Amusement
Facility Business.
The Toys and Hobby Business conducts manufacturing and sales of toys, candy toys, and products for vending machines. The Content
Business conducts the manufacturing and sales of arcade game machines and production and sales of home-use video game software,and video-related products. The Amusement Facility Business conducts the operation of amusement facilities.
The methods for accounting for reportable segments are the same as those described in Note “2 Summary of Significant Accounting
Policies.” Segment income in the segment information below is based on operating income, and segment assets are based on total assets.
Amounts of inter-segment transactions are based on the prevailing market price.

57

Millions of yen

2011
Reportable Segment

Net sales
To external customers
Inter-segment sales and transfers
Total
Segment income
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Loss on impairment of
fixed assets
Investments in associates
accounted for using equity
methodIncrease in property, plant andequipment and intangible
assetsToys and
Hobby

Content

Amusement
Facility

Subtotal

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated
total (Note 3)¥154,707
3,667¥158,374
13,81399,386¥170,653
9,264¥179,917
3,092
119,044¥62,26870¥62,338
1,779
34,154¥387,628
13,001¥400,629
18,684
252,584¥ 6,551
11,953¥18,504810
17,980¥394,179
24,954¥419,133
19,494
270,564¥—(24,954)¥(24,954)(3,156)37,705¥394,179—¥394,179
16,338308,269

¥

¥

2,435
1,792

¥ 6,184
148¥ 18,095
1,943

¥

471
—

¥ 18,566
1,943

¥

(565)
282

¥ 18,001
2,225

325

83

588

996

1

997

—

997

1,097

—

138

1,235

7,344

8,579

—

8,579

7,075

1,688

4,185

12,948220

13,168271

13,4399,476
3Millions of yen

2012
Reportable Segment

Net sales
To external customers
Inter-segment sales and transfers
Total
Segment income
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Loss on impairment of
fixed assets
Investments in associates
accounted for using equity
methodIncrease in property, plant andequipment and intangible
assets58

Toys and
Hobby

Content

Amusement
Facility

Subtotal

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated
total (Note 3)¥172,151
5,843¥177,994
16,113
95,180¥211,569
13,935¥225,504
17,003140,901¥60,888145¥61,033
2,381
35,158¥444,608
19,923¥464,531
35,497271,239¥ 9,603
17,879¥27,482
2,051
20,360¥454,211
37,802¥492,013
37,548291,599¥—(37,802)¥(37,802)(2,941)
50,573¥454,211—¥454,211
34,607342,172¥ 11,126
—

¥

2,469
229

¥ 5,5451¥ 19,140
230

¥

486
—

¥ 19,626230¥ (1,484)143¥ 18,142
373

379

311

398

1,088

17

1,105

—

1,105

492

—

126

618

7,512

8,130

—

8,130

10,148

2,535

3,018

15,701

537

16,2381,218

17,456

Thousands of U.S. dollars

2012
Reportable Segment
Toys andHobby

Net sales
To external customers
Inter-segment sales and transfers
Total
Segment income
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Loss on impairment of
fixed assets
Investments in associates
accounted for using equity
methodIncrease in property, plant andequipment and intangible
assetsContent

Amusement
Facility

Other(Note 1)

Subtotal

Total

Adjustments(Note 2)

Consolidated
total (Note 3)$2,094,550 $2,574,145
71,091
169,546$2,165,641 $2,743,691
196,046
206,875
1,158,048 1,714,333$740,820 $5,409,515
1,764
242,401$742,584 $5,651,916
28,969431,890427,765 3,300,146$116,839 $5,526,354
217,533
459,934$334,372 $5,986,288
24,954
456,844247,719 3,547,865$$ 135,368 $—

30,0402,786$ 67,466 $ 232,874
12
2,798

$

$ (18,055) $ 220,732
1,740
4,538

4,611

3,784

4,842

13,237207

13,444—

13,444

5,986

—

1,533

7,519

91,39898,917—

98,917

123,470

30,84336,720191,033

6,534

197,567

14,819212,386

5,913 $ 238,787—
2,798— $5,526,354(459,934)—$(459,934) $5,526,354(35,783)
421,061
615,318 4,163,183

Notes: 1. “Other” which is not a reportable segment, includes logistics services for the Group’s SBUs, building management, and others.
2. Details of “Adjustments” are as follows:(1) The adjustment to segment income of -¥3,156 million for the year ended March 31, 2011 includes elimination of inter-segment transactions of ¥-255 million and corporate
expenses not allocated to reportable segments of -¥2,901 million. The adjustment to segment income of -¥2,941 million (-$35,783 thousand) for the year ended March 31, 2012,
includes elimination of inter-segment transactions of -¥149 million (-$1,813 thousand) and corporate expenses not allocated to reportable segments of -¥2,792 million (-$33,970
thousand). Principal corporate expenses are expenses related to administrative divisions not belonging to reportable segments.
(2) The adjustment to segment assets of ¥37,705 million for the year ended March 31, 2011 includes elimination of inter-segment transactions of -¥7,328 million and corporate
assets not allocated to reportable segments of ¥45,033 million. The adjustment to segment assets of ¥50,573 million ($615,318 thousand) for the year ended March 31, 2012
includes elimination of inter-segment transactions of -¥11,715 million (-$142,536 thousand) and corporate assets not allocated to reportable segments of ¥62,288 million($757,854 thousand). Principal corporate assets are cash and deposits, investment securities, and assets related to administrative divisions not belonging to reportablesegments.
(3) The adjustment to depreciation and amortization expense of -¥565 million for the year ended March 31, 2011 includes elimination of inter-segment transactions of -¥812 million
and depreciation and amortization expense not allocated to reportable segments of ¥247 million. The adjustment to depreciation and amortization expense of -¥1,484 million(-$18,055 thousand) for the year ended March 31, 2012 includes elimination of inter-segment transactions of -¥1,697 million (-$20,647 thousand) and depreciation andamortization expense not allocated to reportable segments of ¥213 million ($2,592 thousand).
(4) The adjustment to amortization of goodwill of ¥282 million for the year ended March 31, 2011, and ¥143 million ($1,740 thousand) for the year ended March 31, 2012 are related
to goodwill not allocated to reportable segments.
(5) The adjustment to property, plant and equipment and intangible assets of ¥271 million for the year ended March 31, 2011, and ¥1,218 million ($14,819 thousand) for the year
ended March 31, 2012 are related to corporate assets not allocated to reportable segments.
3. Segment income is reconciled to operating income on the consolidated statements of operations.

59For the years ended March 31, 2011 and 2012, additional segment information is as follows:
1. Information by product and service
This information is included in the segment information above.
2. Information by geographic region
Net sales and property, plant and equipment
Millions of yen

2011
Net sales
Property, plant and equipment

Japan

Americas

EuropeAsia, excluding Japan

Total¥307,660
37,245¥29,691
1,674¥37,274
1,954¥19,5541,719¥394,179
42,592Millions of yen

2012
Net sales
Property, plant and equipment

Japan

Americas

EuropeAsia, excluding Japan

Total¥372,617
37,671¥26,542
1,590¥33,678
1,590¥21,374
3,649¥454,211
44,500Thousands of U.S. dollars

2012
Japan

Net sales
Property, plant and equipment$4,533,605
458,341

Americas

EuropeAsia, excluding Japan$322,935
19,345$409,758
19,345$260,056
44,397

Total$5,526,354
541,428

3. Information by major customer
Year ended March 31, 2011

Year ended March 31, 2012

60

Name

Net sales

Name of related segment

Happinet Corporation¥43,047 million

Toys and Hobby, Content

Name

Net sales

Name of related segment

Happinet Corporation¥47,522 million($578,197 thousand)Toys and Hobby, Content

4. By reportable segment, information regarding the amount of amortization of goodwill and negative goodwill for the years ended March 31,
2011 and 2012, and the unamortized balance of goodwill and negative goodwill as of March 31, 2011 and 2012, is as follows:
Millions of yen

2011

Amortization of goodwill
Unamortized balance of goodwill
Amortization of negative goodwill
Unamortized balance of negative goodwill

Toys and Hobby

Content¥3———¥1,792384
4
9

Amusement Facility

Other (Note 1)

¥148
1
—
—

¥ —
—
114
—

Corporate andeliminations (Note)

¥282
342
—
—

Total

¥2,225727
118
9Millions of yen

2012
Toys and Hobby

Amortization of goodwill
Unamortized balance of goodwill
Amortization of negative goodwill
Unamortized balance of negative goodwill

¥—
—
—
—

Content

¥229
155
3
6

Amusement Facility

¥1
—
—
—

Other (Note 1)

¥—
—
—
—

Corporate andeliminations (Note)

¥143
199
—
—

Total

¥373
354
3
6

Thousands of U.S. dollars

2012

Amortization of goodwill
Unamortized balance of goodwill
Amortization of negative goodwill
Unamortized balance of negative goodwill

Toys and Hobby

Content$————$2,786
1,886
37
73

Amusement Facility

$12
—
—
—

Other (Note 1)

Corporate andeliminations (Note)

Total

$—
—
—
—

$1,7402,421——$4,5384,307
3773

Notes: 1. The amount of “Other” is the negative goodwill related to logistics services for each of the Group’s strategic business units.
2. The amount of “Corporate and eliminations” is the amount related to investment securities transferred from domestic consolidated subsidiaries to the Company on account of thebusiness combination.

61

25 Related Party Disclosures
Transactions with Related Parties
Year ended March 31, 2011
Transactions by consolidated subsidiaries of the Company with non-consolidated subsidiaries and affiliated companies of the Company
Type

Company

Affiliatedcompany

Happinet
Corporation

Address

Capital orcontribution
to capital

Taito-ku, Tokyo ¥2,751 million

Content ofbusiness

Ratio ofvoting rights
ownership

Relationshipwith related
partyContent

Transaction
amountAccount
items

Balance
as of March 31,
2011

Wholesaler ofToys, Video games,
and Amusement
products

Holding
directly 26.4%
indirectly 0.3%

Sales
agencySales ofproducts,
and others(Note 2)¥43,047 million

Accounts
receivabletrade¥8,929 million

Notes: 1. The above “Transaction amount” does not include consumption tax; the balance includes consumption tax.
2. Transaction terms and policy for determining transaction terms
For the transaction stated above, the products were sold on the same terms as general transactions with third parties in the ordinary course of business.

Year ended March 31, 2012
Transactions by consolidated subsidiaries of the Company with non-consolidated subsidiaries and affiliated companies of the Company
Type

Company

Address

Capital orcontribution
to capitalContent ofbusiness

Ratio ofvoting rights
ownership

Relationshipwith related
partyContent

Transaction
amountAccount
items

Balance
as of March 31,
2012

Affiliatedcompany

Happinet
Corporation

Taito-ku, Tokyo¥2,751 million($33,471
thousand)

Wholesaler ofToys, Video games,
and Amusement
products

Holding
directly 26.3%
indirectly 0.3%

Sales
agencySales ofproducts,
and others(Note 2)

¥47,522 million($578,197
thousand)Accounts
receivabletrade¥9,461 million($115,111
thousand)

Notes: 1. The above “Transaction amount” does not include consumption tax; the balance includes consumption tax.
2. Transaction terms and policy for determining transaction terms
For the transaction stated above, the products were sold on the same terms as general transactions with third parties in the ordinary course of business.

26 Significant Subsequent Events
At the 7th General Meeting of Shareholders held on June 18, 2012, a
resolution was passed granting stock compensation-type stock options(stock acquisition rights), with conditions, to directors of the Company.

2. Various conditions for grant of stock acquisition rights(1) Persons to whom stock acquisition rights are allotted
Stock acquisition rights shall be allotted to the Directors of theCompany (excluding Outside Directors). Excluding the three

1. Reason for issue of stock acquisition rights
The remuneration system for the Company’s Directors (apart from
Outside Directors) makes its basic policy the promotion of the sharing

stock acquisition rights

value with the Company’s shareholders and enhancing the morale

The maximum number of shares of common stock of theand motivation of the Directors to improve the Company’s performance.

Company to be delivered upon exercise of stock acquisition

In addition, accompanying the start of the “Mid-term Plan ofrights per year is 120,000 (0.05% of shares issued). In the

BANDAI NAMCO Group (from April 2012 to March 2015)” (theevent that the Company carries out a share split or share“Mid-term Plan”) announced in February 2012, we have taken steps

consolidation, the number of shares to be delivered upon

to make the relationship between performance and remuneration

exercise of stock acquisition rights will be adjusted in accor-

significantly clearer and to place more weight on performance-based

dance with the following formula; provided, however, that such

remuneration in the Directors’ remuneration in order to strongly orient

adjustment will only be carried out with respect to the number

their focus to achieving the goals defined in the Mid-term Plan. As oneof shares to be delivered upon exercise of stock acquisition

part of that effort, we have introduced a new system for allotting stockrights that are yet to be exercised at the time of the share split

compensation-type stock options on condition that the predefinedor share consolidation, and any fraction of less than one shareperformance goals are achieved.

resulting from such adjustment will be rounded down.

Because the performance requirements have been imposed forthese stock compensation-type stock options, not as a condition forexercising the options but as a condition for being allotted the options,the stock compensation-type stock options will not be granted to the
Directors if those performance requirements are not satisfied.

62

Outside Directors, there are six eligible directors.
(2) Class and number of shares to be delivered upon exercise of

Number of shares
Number of shares=x
after adjustment
before adjustment

Ratio of share split orshare consolidation

Furthermore, if the number of shares to be delivered upon

(7) Exercise period for stock acquisition rights

exercise of stock acquisition rights needs to be adjusted

The exercise period for stock acquisition rights will be decided

because the Company carries out an absorption-type merger

by the Company’s Board of Directors but must not exceed 20

or a consolidation-type merger with another company withyears from the allotment date of the stock acquisition rights.

succession to the stock acquisition rights provided for in this(8) Conditions on exercise of stock acquisition rights

proposal or because the Company carries out an incorpora-

A person who has received an allotment of the stock acquisi-tion-type company split or an absorption-type company split,tion rights may, within the period specified in the Paragraph

the Company will make the necessary adjustment in the(7). “Exercise period for stock acquisition rights,” exercise

number of the shares as well.

those stock acquisition rights between one and ten days after(3) Total number of stock acquisition rights

the date on which that person loses his or her position as a

The maximum number of stock acquisition rights to be allotted

Director, Auditor, or employee of the Company or of a subsid-

per year is 1,200. The number of shares to be delivered uponiary of the Company.

exercise of one stock acquisition right is 100 shares. (If,however, the number of shares is adjusted as provided for in
the Paragraph (2). above, then the number of shares to bedelivered upon exercise of one stock acquisition right will be
adjusted in the same manner.)(4) Requirements for allotment of stock acquisition rights(9) Restrictions on assignment of stock acquisition rights
Any assignment of stock acquisition rights requires theapproval of the Board of Directors of the Company.
(10) Other details concerning stock acquisition rights
Other details concerning stock acquisition rights will be determined at the Board of Directors’ meeting of the Company at

If the requirement stated in (i) below is satisfied, then stock

which matters concerning the offering of such stock acquisi-

acquisition rights will be allotted up to a maximum of 60 million

tion rights will be resolved.

yen per year. If, in addition to the requirement stated in (i), therequirement stated in (ii) is also satisfied, then stock acquisitionrights will be allotted up to a maximum of 120 million yen
per year.
If, however, neither of the requirements stated in (i) or (ii) is
satisfied, then no stock acquisition rights will be allotted.
(i) The Company’s consolidated operating income is 42,500
million yen or greater in any of the fiscal years from the fiscal
year ending March 2013 through the fiscal year ending
March 2015;(ii) The Company’s consolidated operating income is 53,000
million yen or greater in any of the fiscal years from the fiscal
year ending March 2013 through the fiscal year ending
March 2015.
(5) Price for issuance of stock acquisition rights
The price for issuance of each stock acquisition right will becalculated based on the Black-Scholes model, an impartial
method of valuing stock acquisition rights. The person who
receives an allotment of the stock acquisition rights will,
instead of paying the price for issuance of the stock acquisitionrights in cash, offset his or her obligation to pay for issuance ofthe stock acquisition rights against the recipient’s right to his
or her remuneration from the Company.
(6) Amount to be paid upon exercising stock acquisition rights
The amount to be paid upon exercising each stock acquisitionright will be one yen per share to be issued or transferred by
the exercise of each stock acquisition right, multiplied by the
number of shares to be granted.

63

Independent Auditors’ Report

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

We have audited the accompanying consolidated financial statements of NAMCO BANDAI Holdings Inc. and its consolidated subsidiaries,
which comprise the consolidated balance sheets as at March 31, 2012 and 2011, and the consolidated statements of operations, statementsof comprehensive income, statements of changes in net assets and statements of cash flows for the years then ended, and a summary ofsignificant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance withaccounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits inaccordance with auditing standards generally accepted in Japan. Those standards require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in thecircumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of NAMCO BANDAI Holdings
Inc. and its consolidated subsidiaries as at March 31, 2012 and 2011, and their financial performance and cash flows for the years then endedin accordance with accounting principles generally accepted in Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2012 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.

64July 17, 2012

Tokyo, Japan

Corporate Data
As of March 31, 2012

Corporate Name:

NAMCO BANDAI Holdings Inc.

Head Office:

NAMCO BANDAI Mirai Kenkyusho	4-5-15, Higashi-Shinagawa, Shinagawa-ku, Tokyo 140-8590, 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
Stock Information:

Number of Shares Authorized: ..............1,000,000,000 shares
Number of Shares Issued: .......................222,000,000 shares
Number of Shareholders: .............................................40,337
Number of Shares per Trading Unit:........................100 shares

Major Shareholders:Ownership Breakdown:

Name% of Total

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

4.80%

Japan Trustee Services Bank, Ltd. (Trust Account)

4.16%

MAL Ltd.

3.16%

XIL, LTD.

2.70%

Masaya Nakamura

2.68%

MELLON BANK, N.A. AS AGENT FOR ITS CLIENTMELLON OMNIBUS US PENSION

2.11%

The Nomura Trust and Banking Co., Ltd. (Retirement
and Severance Benefits Trust,
The Bank of Tokyo-Mitsubishi UFJ Account)

2.07%

Japan Trustee Services Bank, Ltd. (Trust Account 9)

2.03%

Northern Trust Co (AVFC) Sub A/C American Client

1.88%

Nintendo Co., Ltd.

1.73%

Individuals, etc.

Financial institutions

16.71%

26.04%

Brokerages
0.94%

Other corporate
entities
13.69%

Foreign corporate
entities and others
42.62%©2012 TV ASAHI・TOEI AG・TOEI ©2011 ISHIMORIPRO・TV ASAHI・ADK・TOEI ©SOTSU・SUNRISE ©ABC・TOEI ANIMATION ©BIRD STUDIO/SHUEISHA・FUJI TV・TOEI ANIMATION ©BANDAI2010, 2012 ©SCG Power Rangers LLC ©BANDAI・WiZ 2004 ©T.YANASE/
FRÖEBELKAN・TMS・NTV ©L5/PDS・TX ©SOTSU・SUNRISE・MBS ©SOTSU・SUNRISE ©SOTSU・SUNRISE・MBS ©2012 NAMCO BANDAI Games Inc. ©2012 Ubisoft Entertainment. All Rights Reserved. Assassin s Creed, Ubisoft, and the Ubisoft logo are trademarks of
Ubisoft Entertainment in the U.S. and/or other countries. ©2012NBGI © 尾田栄一郎／集英社・フジテレビ・東映アニメーション ©2012NBGI ©2011 NBGI ©Michiharu Kusunoki/Kodansha Ltd. All rights reserved. ©2011 NAMCO BANDAI Games Inc. All trademarks and copyrights
associated with the manufacturers, cars, models, trade names, brands and visual images depicted in this game are the property of their respective owners. All rights reserved. © 尾田栄一郎／集英社・フジテレビ・東映アニメーション ©SOTSU・SUNRISE ©SOTSU・SUNRISE・MBS©SOTSU・SUNRISE © 尾田栄一郎／集英社・フジテレビ・東映アニメーション ©NBGI ©SOTSU・SUNRISE ©SUNRISE/T&B PARTNERS, MBS ©SUNRISE/T&B MOVIE PARTNERS ©SOTSU・SUNRISE ©SOTSU・SUNRISE・MBS ©2012 TV ASAHI・TOEI AG・TOEI ©BANDAI・
WiZ/TOKYO・2011Team Tamagotchi TV ©2012Gullance (Thomas) Limited. © 秋本治・アトリエびーだま／集英社・ADK ©TSUBURAYAPRO

65

OVERVIEW OF MAIN GROUP COMPANIESAs of April 2, 2012

NAMCO BANDAI Holdings Inc.

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

NAMCO BANDAI Holdings (USA) Inc.

Pure holding company as regional headquarters in the U.S.

NAMCO Holdings UK LTD.

Pure holding company in the U.K.

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

Planning, production, and sales of toys, plastic models, candy toys, vending machine
products, apparel, and sundries, etc.

MegaHouse Corporation

Planning, development, production, and sales of toys, candy toys, figures, general games,
and other products

CCP Co., Ltd.

Planning, development, manufacturing, and sales of toys, hobby commodities, and homeelectric appliances

Plex Co., Ltd.

Planning, design, development, and sales of character-based products

Seeds Co., Ltd.

Planning, development, and manufacturing of toys; contract operations for various types ofinspecting and testing

People Co., Ltd.*

Planning, development, and sales of toys and bicycles for young children (JASDAQ)TSUBURAYA PRODUCTION CO., LTD.*

Development of visual products and management of copyrights

Sun-Star Stationery Co., Ltd.*

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

BANDAI AMERICA INCORPORATEDSales of toy-related products

BANDAI S.A.

Regional headquarters company in Europe; sales of toy-related products

BANDAI U.K. LTD.

Sales of toy-related products

BANDAI ESPAÑA S.A.

Sales of toy-related products

BANDAI POLSKA sp.zoo

Sales of toy-related products

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

Regional headquarters company in Asia; import, export, manufacturing, and salesof toy-related products

BANDAI KOREA CO., LTD.

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

BANDAI (GUANGZHOU) CO., LTD.

Planning and sales of toy-related products

BANDAI INDUSTRIAL CO., LTD.

Manufacturing of toy-related products

BANDAI (SHENZHEN) CO., LTD.

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

Content Strategic Business Unit
NAMCO BANDAI Games Inc.

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

NAMCO BANDAI Studios Inc.

Planning and development of games and other content

D3 PUBLISHER INC.

Planning, development, and sales of game software

B.B.STUDIO Co., Ltd.

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

VIBE Inc.

Development and provision of network content

NAMCO BANDAI Online Inc.

Planning, development, and operation of online games and other software* Companies accounted for by the equity method66

BNDeNA Inc.

Development and sales of smartphone content

Banpresto Co., Ltd.

Planning, development, and sales of amusement prizes

Banpresto Sales Co., Ltd.

Sales of arcade machines and prizes, etc.

BANDAI VISUAL CO., LTD.

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

Lantis Co., Ltd.

Planning, manufacturing, sales, and management of musical content

Sunrise Inc.

Planning and production of animation for TV and theatrical release; management andadministration of copyrights

SUNRISE MUSIC Publishing Co., Ltd.

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

Bandai Channel Co., Ltd.

On-demand delivery of content, such as animations

NAMCO BANDAI Live Creative Inc.

Planning and production of events and live performances, etc.

I WILL Co., Ltd.

Development and training of artist management

NAMCO BANDAI Games America Inc.

Sales and marketing of game software

NAMCO AMERICA INC.

Sales of arcade machines

NAMCO BANDAI Games Europe S.A.S.

Sales and marketing of game software

NAMCO EUROPE LTD.

Sales of arcade machines

BANPRESTO (H.K.) LTD.

Manufacturing and production management of arcade machines and prizes

BANDAI ENTERTAINMENT INC.

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

Amusement Facility Strategic Business Unit
NAMCO LIMITED

Planning and operation of amusement facilities

Pleasure Cast Co., Ltd.

Planning and operation of amusement facilities

Hanayashiki Co., Ltd.

Planning and operation of Asakusa Hanayashiki amusement park

NAMCO ENTERTAINMENT INC.

Planning and operation of amusement facilities in the U.S.

NAMCO OPERATIONS EUROPE LTD.

Planning and operation of amusement facilities in the U.K.

NAMCO ENTERPRISES ASIA LTD.

Planning and operation of amusement facilities in Hong Kong

SHANGHAI NAMCO LTD.*

Planning and operation of amusement facilities in China

Affiliated Business Companies
BANDAI LOGIPAL INC.

Cargo trucking operations, logistics management, etc.

LOGIPAL EXPRESS INC.

Transportation, distribution, warehousing, etc.

NAMCO BANDAI Business Arc Inc.

Support of Group operations and administration, etc.

Artpresto Co., Ltd.

Planning and designing of various printed materials

Happinet Corporation*

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

Sotsu Co., Ltd.*

Planning and development of advertising and copyright business (JASDAQ)

Italian Tomato Ltd.*Management of directly operated restaurants; franchise operations* Companies accounted for by the equity method67

www.bandainamco.co.jp/

Printed in Japan