NEWSLETTER November 2018 Holdings Inc. BANDAI NAMCO Mirai-Kenkyusho 5-37-8 Shiba, Minato-ku, Tokyo 108-0014

Interview with the President Mitsuaki Taguchi President & Representative Director, Inc. Record-High Results in First Half of FY2019.3 Strengthening the Creation of New IP in Collaboration with a Wide Range of Partners

In the first half of FY2019.3 (April to September 2018), the BANDAI NAMCO Group achieved record-high results in both consolidated net sales and operating profit. In this issue of the newsletter, BANDAI NAMCO Holdings’ President Mitsuaki Taguchi discusses the trends in each Unit, highly anticipated products and services that will be launched in the second half of the fiscal year, and the future outlook.

Results were favorable in the first half. popularity. Moreover, we saw synergy effects mission with the change from three SBUs to Taguchi: Looking at our consolidated results with initiatives that integrated the three elements five Units. On that basis, we are continuing in the first half of FY2019.3, net sales were of visual, music, and live. to take on challenges. Going forward, we will ¥334.6 billion and operating profit was ¥43.9 leverage this approach and strive to establish billion. We have gotten off to a good start in What about the influence on full-year a new style for the Group. the first fiscal year of the Mid-term Plan. In forecasts? We still face many challenges. In particular, particular, the Toys and Hobby Unit and the Taguchi: Thanks to everyone’s hard work, we we must do even more in the creation of new IP Visual and Music Production Unit recorded had good results in the first half, but at this in order to strengthen the IP axis strategy, which significant gains year on year. The Network point we have not revised or reevaluated the is our most important task. However, we are not Entertainment, Real Entertainment, and IP full-year forecasts. In the second half, the Toys aiming just to increase numbers. We need to foster Creation units also got off to solid starts. Key and Hobby business will have the busy Christ- collaboration among Group businesses and pro- IP* and other products and services turned in mas and New Year sales period, which is its pose a deep and extensive range of new IP that good performances, and all units achieved the largest sales period, and we will also launch can be rolled out over the medium to long term. first-half plans that we announced at the begin- multiple major home video game titles. More- In the creation process, we will need to work ning of the fiscal year. I think that these results over, the operating environment and consumer together with a wide range of partners rather are an indication of how we have successfully purchasing trends are undergoing dramatic than trying to do everything within the Group. strengthened the Group’s portfolio. change, and in this setting it will be difficult This type of IP creation will also require con- to reach our forecasts simply by extending our siderable strength, and accordingly there will What were the factors behind the current performance, especially in the digital be challenges that are difficult for a single growth in the Toys and Hobby Unit and content business. We will carefully reexamine division or company to tackle on its own. That the Visual and Music Production Unit? this situation when the influence of these trends is why we created the BANDAI NAMCO Taguchi: In the Toys and Hobby Unit, favorable on our results becomes clear. Moving forward, Content Fund as one framework for providing results were registered in all categories, including I would like everyone to do their utmost and support for people on the front lines as they toy-related items. In particular, Gundam plastic aim for record-high results while implementing take on challenges. We plan to start full-scale models recorded significant sales gains in Japan forward-looking investments and initiatives. investment in the next fiscal year, but currently and overseas, and solid performances were As for dividends, our interim dividends will we are making selections from among more registered by figures and other collectible items be ¥18 per share. We will consider our annual than 50 proposals. I am sensing a trend through- and by lottery-related products. We are starting dividends in accordance with our basic policy out the Group, as an increasing number of to see the results of our measures to strengthen of providing a return to shareholders that targets people want to plant new seeds. businesses for the mature fan base, which is a total return ratio of 50% or more and based In addition, in China, which we have posi- one of our main strategies under the Mid-term on stable dividend payments of 2% of DOE. tioned as a key market, we are working to Plan. In the Visual and Music Production Unit, further strengthen operations that are already visual and music packaged products for Love How is the progress with the under way. To advance the ALL BANDAI Live! Sunshine!!, THE IDOLM@STER, IDOL- Mid-term Plan? NAMCO concept, we are also making steady iSH7, and other IPs were popular, and live Taguchi: CHANGE is the major theme of the progress with preparations for full-scale roll- events and related activities also enjoyed solid Mid-term Plan, and we have clarified our outs in other businesses.

*IP: Characters and other intellectual property November 2018 1 Interview with the President

Advancing Initiatives in Japan and Overseas will bolster promotions to increase awareness. ­Japanese market, such as developing compatible Gundam: Extreme Vs. 2, which has earned In addition, we will leverage the distinctive titles and sponsoring tournaments. strong reviews. In Osaka, we have opened to Strengthen Our Business for the Mature strengths of BANDAI NAMCO to enhance VR ZONE OSAKA as a new-format facility. Fan Base the provision of value. For example, with What is the situation in the Real We have started to operate new models DRAGON BALL BUCCHIGIRI MATCH, col- Entertainment Unit? of Godzilla VR and other games at this Would you discuss the trends in each facility. We are seeing a very favorable response, laborative initiatives with other Units have Taguchi: Following Yokohama in November, facility, and VR ZONE OSAKA has gotten Unit? and the Chinese market is showing signs of already been initiated. These include DRAGON we will open a Hamleys retail-tainment mall off to a solid start. Taguchi: In the Toys and Hobby Unit, broadcasts future potential that exceeds our previous expec- BALL Dragon Potato, a confectionary food that in Fukuoka in December. This is a collaborative Furthermore, in July we opened the of KAMEN RIDER Zi-O started in September, tations. We will utilize THE GUNDAM BASE is being sold by BANDAI. We plan to continue initiative with Hamleys, which is England’s second TONDEMI, a next-generation and the launch was favorable. This marks a SHANGHAI to do more than just sell Gundam to implement collaborative initiatives with oldest toy store. It will bring together a wide indoor athletic facility, and in October turning point as the 20th series in Heisei KAMEN plastic models. We will also use it as a base companies and products inside and outside the range of features, including real and digital we launched Indoor Adventure Island RIDER. Generations of RIDERs make appear- for the comprehensive provision of information Group. Also, looking at our efforts to strengthen performances, attractions that draw on BANDAI Docodoco, which enables visitors to enjoy ances, and as a result KAMEN RIDER Zi-O is to Chinese fans about Gundam works and other game titles, we recently held a presentation for NAMCO’s distinctive strengths, and game attractions using projection mapping. popular with fans across a wide range of age products and services. developers, and more than 120 people partic- corners. We are positioning this mall as a new Both of these new facilities have enjoyed groups. Related products are also enjoying good In addition, the DRAGON BALL trading ipated. We will implement a variety of measures type of venue. By incorporating performances solid popularity. Moving forward, we will results, including the transformation belt, which card game is popular with the mature fan base, as we work to build platforms, such as advancing with abundant entertainment value, we will continue to aggressively provide these types in Sublimation Inc., a computer graphics pro- is a core item. These are key products for boys, especially in North America. Moving forward, preparations for title development. work to enhance our hospitality skills and create of new venues that leverage the distinctive duction company. The industry has reached and we expect them to do well in the busy we will take steps to build interest in North new forms of entertainment. strengths of BANDAI NAMCO. the point where computer graphics are indis- Christmas and New Year sales period. America, such as holding nationwide tourna- What are the trends in home video In arcade games, we launched Mobile Suit pensable in animation production. Through this For girls, we launched Meets, ments in the U.S., and we will also work to games? investment, we will strengthen our computer a new Tamagotchi model. This product provides expand our business in Europe, South America, Taguchi: In home video games, after the launch We will take the initiative to transform our- graphics production capabilities and enhance the enjoyment of taking care of characters, and and other regions. of VI in October, we plan to our production skills for both hand-drawn and in addition a new application that links Tama- introduce a series of major, high-potential titles selves into a company from which consumers computer-graphic animations. gotchi Meets units enables users of the new What is the situation in the Network in the second half, including , expect great things, even in a future marked model to enjoy communicating with each other. Entertainment Unit? ACE COMBAT7: SKIES UNKNOWN, and Do you have a message for The Toys and Hobby Unit is starting to create Taguchi: In game applications and other network JUMP FORCE. In the future, in addition to by ongoing technical innovation. shareholders? a growing number of products that incorporate content, key titles maintained high levels of developing high-quality games that earn strong Taguchi: We were able to achieve a solid per- digital functions. In December, we will launch popularity, including DRAGON BALL Z evaluations from fans, we will also take steps What is the situation in the Visual and Build Divers is one of the major factors behind formance in the first half of the fiscal year, and UNLIMITIV shoes for elementary school stu- DOKKAN BATTLE, ONE PIECE, and THE to add even more value, such as facilitating Music Production Unit? the solid results of Gundam plastic models in I think this performance was attributable to dents. By digitizing information obtained IDOLM@STER. In addition, a new title — the enjoyment of additional download content. Taguchi: IDOLiSH7 has turned in favorable the Toys and Hobby business. This is because the high evaluations that our products and through communication with a smartphone DRAGON BALL Legends — got off to a In this way, we are working to implement results. The live event that was held in July the animation has stimulated demand for the services received from customers. However, application, these shoes will enable users to favorable start. I believe that these successes measures that encourage fans to play for long was popular, and the tickets sold out. THE plastic models. Gundam Build Divers features we cannot sit back and relax just because our increase their athletic ability while having fun. are a result of our focus on holding effective periods of time. IDOLM@STER and Love Live! Sunshine!! appearances by generations of Gundam plastic results are strong right now. We must continue In addition, in 2019 we will launch AI CARD- events and taking steps to build interest. In Furthermore, in August we participated in also continue to record strong results. We models, and it is popular not only in Japan but striving to create new IP and strengthen estab- DASS, a brand of card games that utilize AI. these ways, we are encouraging fans to enjoy EVO 2018, a fighting game tournament that are taking steps to maximize appeal of main- throughout Asia. In November, Mobile Suit lished IP as we make further progress toward We plan to introduce ZENONZARD, an original playing for long periods of time. Going forward, was held in the U.S. Looking at the number of stay IPs throughout the visual, music, and Gundam Narrative was released in theaters, the construction of a balanced IP portfolio. IP that originated from AI CARDDASS. we will continue working to further enhance registered entrants, DRAGON BALL FighterZ live fields. In particular, live events are starting and I think that the buzz surrounding this product BANDAI NAMCO wants to be a group the quality of our titles and operations. was the No. 1 title, and TEKKEN7 was No. 3. to play a central role in the Group’s business will also have a positive knock-on effect in for which consumers have high expectations, What is the Toys and Hobby Unit This demonstrates the high degree of compat- activities. This is something that we did not stimulating further demand for other Group even in a future operating environment marked doing for the mature fan base? Is the Company making progress with ibility between our titles and e-sports. We are anticipate 10 years ago. Both the scale and products and services. Mobile Suit Gundam by ongoing technical innovation. To that end, Taguchi: To further strengthen and expand our new platforms? also moving forward with a variety of measures the geographic scope of live events are will reach its 40th anniversary in 2019, and in line with our Mid-term Vision of CHANGE, business for the mature fan base in North Amer- Taguchi: For enza, up to this point we have in Japan, and in the future we will continue to expanding, and accordingly we will step up we are preparing a wide range of initiatives to we must work to transcend previous ways of ica, we cooperated with a local partner in the focused on stability, but moving forward we aggressively implement initiatives in the our focus on this growing business. commemorate this milestone, including visual doing things and conventional wisdom, antic- establishment of a new company, BANDAI Looking at IP creation, we plan to launch products and events. For 2020 we are also ipate changes in the times and in our fans, and NAMCO Collectibles LLC, which uses The Magnificent KOTOBUKI. This is a new planning the Gundam GLOBAL CHALLENGE, take steps to adapt accordingly. A major theme the brand BLUEfin. Moving forward, we Groupwide IP that reflects collaboration ini- which will involve making a full-scale Gundam of the Mid-term Plan is CHANGE for the future. will leverage the new company’s broad tiatives including animations, game applications, actually move. We have high expectations for On that basis, the BANDAI NAMCO Group distribution infrastructure as well as its and toys and hobby products. Furthermore, we this initiative. will strive to approach change as an opportunity marketing know-how, which is aligned are working aggressively in IP creation from Furthermore, broadcasts of DOUBLE rather than something to be afraid of. We want with the preferences of local fans. In this a variety of angles, including collaboration with DECKER! Doug & Kirill, a new TIGER & our fans around the world to expect great things way, we expect to boost our sales of prod- external partners. BUNNY animation series project, have been from BANDAI NAMCO. ucts in North America. started, and we also plan to release a theatrical In China, we opened THE GUNDAM Please discuss the latest activities at version of Love Live! Sunshine!!. We have a BASE SHANGHAI in August. This is the IP Creation Unit. number of exciting projects in the pipeline. THE GUNDAM BASE SHANGHAI IDOLiSH7 live events Taguchi: Currently, the TV animation Gundam In production, we made an equity investment our flagship Gundam plastic model ©創通・サンライズ ©BNOI/アイナナ製作委員会 2 BANDAI NAMCO NEWS November 2018 3 Closeup

October, and starting in December there are which was opened in October at Tachikawa developed by was Leveraging abundant human resources and plans for multiple launches of major numbered Takashimaya S.C. in Tokyo. Both of these used at a number of events. For example, strong technologies and production titles, such as GOD EATER 3 and attractions utilize projection mapping tech- BANDAI NAMCO Entertainment held a mixed 7: SKIES UNKNOWN. We hope that fans will nology. The people working on these projects reality (MR) live event at the DMM VR THE- capabilities to create diverse entertainment enjoy experiencing the enhanced expression discussed how to use projection mapping, ATER for THE IDOLM@STER. Also, Ryo and game play that these titles offer. These are which is a visual technology, in order to max- from the creators group supercell produced a BANDAI NAMCO Studios Inc. was established in 2012 when the development titles that will be rolled out worldwide, and imize the fun of the attractions. We built a live event by the virtual artist EGOIST. Our function was split off from BANDAI NAMCO Games Inc. (currently, BANDAI accordingly our objective was to offer leading-edge prototype of the attractions in-house, which BanaCAST technology enabled the characters NAMCO Entertainment Inc.). Today, BANDAI NAMCO Studios is a group of content that can address global demand. To that were used for a cycle of repeated testing and to be faithfully reproduced, so that it was almost professional creative engineers that handle content planning, production, end, the development of these games involved improvement. In this way, we aimed to create as if they were really on the stage. By utilizing development, and operation. The company continually takes on the challenges of researching and creating new technologies, without limiting itself to existing a wide range of engineers and companies. fun attractions that can be enjoyed by a wide motion capture techniques and adding real- titles. In this section of the newsletter, Hajime Nakatani, president of BANDAI Looking at titles from outside the Group, range of users. time character movements and voices, we were NAMCO Studios, discusses the company’s strengths and future outlook. we were in charge of the development of Super In addition, the BanaCAST (BANDAI able to implement realistic interaction with Smash Bros. Ultimate, a major Nintendo title NAMCO Character Streaming Technology) customers at the venues. for the that is scheduled for Would you describe BANDAI NAMCO of scale. We have a workforce of more than launch in December 2018. This title reflects Studios’ business activities? 1,000 people with a wide range of know-how. the full use of our technical and production Leveraging future-focused ambitions and Nakatani: BANDAI NAMCO Studios conducts From planning and production to hardware/ capabilities. ideas to take on the challenge of manufactur- planning and development of network content, software prototyping and sound, visual, and ing products with distinctive strengths home video games, arcade games, and other art production, we can address diverse needs Are there other products that incorpo- Hajime Nakatani products. We principally work with titles with comprehensive, flexible proposal and rate distinctive ideas from BANDAI President and Representative Director BANDAI NAMCO Studios Inc. launched by BANDAI NAMCO Entertainment. implementation capabilities. NAMCO Studios? What is the source of BANDAI small hits, we will strive to create 10 mega-hits. In October 2018, our research, planning, and Nakatani: We conducted the planning and NAMCO Studios’ diverse technologies By increasing the precision of mega-hit creation, development functions in the areas of amuse- A number of attention-getting titles development for two attractions opened by and ideas? we will be able to reduce manufacturing costs, ment facility content and amusement machines have been launched. BANDAI NAMCO Amusement Inc. — Nakatani: I think it is our strong spirit of and the funds that are freed up in that way were split off to establish BANDAI NAMCO Nakatani: Looking at this fiscal year, in home Nigekiru at the VS PARK amusement facility, inquiry. Our mission includes searching around can then be used for new development and through the accumulation of smaller ideas. I Amusement Lab Inc. Both companies will video games SOULCALIBUR VI from BANDAI which was opened in April at EXPOCITY in the world for new technologies without limiting marketing initiatives. To establish that type believe that we should aim to cultivate a cor- continue working together closely as we advance NAMCO Entertainment was launched in Osaka, and Indoor Adventure Island Docodoco, ourselves to Japan. This is also one of the of favorable cycle within the company, we porate culture in which people are always actively content development initiatives. We will imple- objectives of the BANDAI NAMCO Accel- will implement the PDCA cycle and work to discussing the ideas that fuel that process. ment multifaceted activities, such as developing erator project, under which BANDAI NAMCO implement manufacturing that offers true value home video games, arcade games, network On the front lines of production activities at BANDAI NAMCO Studios Studios advances projects. (BANDAI NAMCO to customers, that is, manufacturing products content, and other products for a single title, Accelerator is a project that recruits and sup- with distinctive strengths. as we did with TAIKO: DRUM MASTER and ports business ideas from startups.) New the Mobile Suit Gundam: Extreme Vs. series. technologies are rapidly being created one What is your policy regarding work? after another, and we are always taking steps Nakatani: To give shape to the seeds of ideas What the key strengths of BANDAI to foster the proposal of new projects. We are and technologies, I think we must have ambitious, NAMCO Studios? continually working to find interesting new forward-looking objectives and then work ener- Nakatani: In markets around the world, we things, research them, and figure out how to getically to realize those objectives. I think it are seeing a large number of products and best match them up with the Group’s multiple is often the case that ideas which can be achieved services that leverage new technologies, such content outlets. I think that those initiatives easily don’t amount to very much in the end. as artificial intelligence (AI), the Internet of have taken shape. Ideas are put through to a process of trial and Things (IoT), augmented reality (AR), and error, which in turn results in the generation of virtual reality (VR). In addition to the game What issues does BANDAI NAMCO new ideas and improvements that we can utilize. Developing home video games Motion capture development that we have been implementing, Studios face? In this way, I think that for the first time we will we are also responding to this trend by con- Nakatani: The Group is now implementing be able to implement manufacturing in a manner ducting R&D to further enhance and extend full-scale overseas development initiatives. In that delights customers. leading-edge technologies that are entirely this setting, we face the urgent task of building When BANDAI NAMCO Studios was new. This is one of our strengths. In addition, a foundation for the development of products established, we announced that our motto would we have established an environment that enables that can capture the interest of customers around be Innovation through Creativity. This motto us to implement thorough development activ- the world. To that end, in planning and devel- incorporates the idea that we want to leverage ities that are focused on the production of opment we need to work together with others everyone’s creativity and foster innovation.  high-quality content. For example, our in-house Live event for THE in Japan and overseas who have high levels of When people hear the word innovation, they IDOLM@STER using facilities include specialized sound effect and technologies from technical skills, ideas, and planning capabilities. frequently think of large-scale reforms, but motion capture studios. BANDAI NAMCO Studios We will also strive to achieve further improvement actually there are many historical examples of ©窪岡俊之 ©BANDAI NAMCO Moreover, we also have an edge in terms Entertainment Inc. in manufacturing. Rather than aiming for 100 situations in which innovation was fostered

4 BANDAI NAMCO NEWS November 2018 5