Medium-Term Management Plan (FY2007.3

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

February 23, 2006

Contents

○ BANDAI NAMCO Group Corporate Philosophy p. 2 (2) Business Strategy ○ Current Fiscal Year Performance p. 2 ① Entertainment Hub Concept p. 14 ○ Medium-Term Management Plan ② Strengthening Overseas Businesses p. 16 ・Formulation of Medium-Term Management Plan p. 6 ・Medium/Long Term Goals and Upcoming Medium- (3) 3-Year Plan Figures (by SBU) p. 17 Term Management Plan p. 6 ・Background of Medium-Term Management Plan p. 7 (4) SBU Strategies ・3-Year Plan Figures (Consolidated) p. 7 ① Toys and Hobby SBU p. 19 ・Medium-Term Management Plan: Group Policies p. 8 ② Amusement Facility SBU p. 20 -- Strengthening, Enriching, and Expanding Portfolio Management -- ③ Game Contents SBU p. 22 ④ Network SBU p. 24 (1) Management Strategy ⑤ ① Strengthening Corporate Governance p. 11 Visual and Music Content SBU p. 25 ② Effectively Utilizing Human Resources p. 11 ③ Building the Optimal Management System p. 12

1 BANDAI NAMCO Group Corporate Philosophy Mission Statement Dreams, Fun and Inspiration BANDAI NAMCO will continue to provide Dreams, Fun and Inspiration to people around the world, through entertainment based on creativity and boundless enthusiasm. Belief Dreams, Fun, and Inspiration are the Key to Happiness The meaning of Dreams, Fun and Inspiration will essentially change over time, but BANDAI NAMCO holds one unshakable belief: that Dreams, Fun and Inspiration will always hold the key to happiness. Basic Philosophy More Passion, More Innovation, More Perceptive ・Unparalleled curiosity and boundless enthusiasm ・Abundant creativity unrestrained by the status quo ・Open to people's needs and satisfaction from giving inspiration Vision To Become the World’s Most Inspiring Entertainment Group BANDAI NAMCO Group will constantly strive to be a pioneer, aiming to deepen and widen the appeal of entertainment and winning the hearts of people worldwide who enjoy having fun. Our ultimate goal is to become the world's most inspiration entertainment group.

Current Fiscal Year Performance

2 Current Fiscal Year Performance

(Millions of yen)

FY Projections 3Q Performance (Ref.) Midterm (Cumulative) Performance Current Previous Change Projections Projections Net Sales 294,000 290,000 ＋4,000 218,974 134,645

Operating 33,500 31,500 ＋2,000 33,985 15,332 Income

Recurring 34,000 32,000 ＋2,000 35,172 15,946 Income

Net Income 14,200 16,000 －1,800 16,115 5,607

Current Year Performance

Toys & Hobby Visual & Music Content

StrongStrong performanceperformance centeredcentered GroupGroup synergysynergy withwith aroundaround Tamagotchi,Tamagotchi, MobileMobile SuitSuit GundamGundam seriesseries girlsgirls’’ toys, toys, andand DataData CarddassCarddass

ⒸBANDAI/WiZ 2004 Ⓒ BIRD STUDIO/SHUEISHA･TOEI ANIMATION

⇒Despite struggling in the U.S., strong overall performance based on portfolio function.

3 Current Fiscal Year Performance

(Millions of yen)

FY Projections 3Q Performance (Ref.) Midterm (Cumulative) Performance Current Previous Change Projections Projections Net Sales 158,000 180,000 －22,000 128,148 85,052

Operating －500 12,700 －13,200 2,769 2,538 Income

Recurring －500 12,100 －12,600 2,875 2,632 Income

Net Income －2,700 8,400 －11,100 2,512 2,526

Current Fiscal Year Performance

Game Contents Amusement ・Among arcade machines, large machines Facility such as Mario Kart Arcade Grand Prix In a tough market performed strongly environment, sales through 3Q at existing retail outlets:

In Japan: 96.9% of same period last year

・Inability to cope with changes in game In North America: console market environment led to poor 97.5% of same period (C)2005 Nintendo last year (C)2005 NAMCO LTD., ALL RIGHTS RESERVED. performance MARIOKART is a registered trademark of Nintendo. Licensed by NINTENDO

⇒Disappointing performance due to inability to make up for console games slump.

4 Current Fiscal Year Performance

(Millions of yen)

FY Projections 3Q Performance (Ref.) Midterm (Cumulative) Performance Current Previous Change Projections Projections Net Sales 450,000 470,000 －20,000 345,396 218,873

Operating 32,500 44,200 －11,700 35,600 17,546 Income

Recurring 33,000 44,100 －11,100 36,801 18,244 Income

Net Income 11,000 24,400 －13,400 17,711 7,834

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

Management Business Strategy Strategy

5 Formulation of Medium-Term Management Plan BANDAI NAMCO Group Goal To become the world’s most inspiring entertainment group BANDAI NAMCO Group’s objectives in its upcoming medium-term management plan: ■Expand scale by boosting group cooperation ・Achievement of plan goals by developing high-quality content and improving business model ・Effective utilization of content across strategic business units ・FY2009.3: Projected sales = 550 billion yen; projected operating income = 58 billion yen

■Improve profitability through structural reform on business and functional levels ・Pursue high synergy through competition and cooperation among strategic business units ・Reduce costs by integrating back offices ■Use group’s strengths to reinforce win-win relationships with partners -- Entertainment hub concept -- ・Pursue further growth as content provider by enlarging and expanding Strategic Business Units ・Develop and strengthen relations with partner companies; expand operations through alliances

Medium/Long Term Goals and Upcoming Medium-Term Management Plan Medium/Long-Term Goals Medium-Term ¾Sales: 1 trillion yen Management Plan ¾Operating Income: 100 billion yen □ Strategies for achieving 3-Year Targets ¾Overseas Sales: 50% of total ■Expand scale by boosting group cooperation ■Improve profitability through organizational reform at business and functional levels ■Utilize group’s strengths to reinforce win-win relationships with partners [entertainment hub concept]

10 Years Ago (FY96.3) ¾ Sales: 328.4 billion yen □ 3-Year Targets (FY09.3) From a ¾ Operating Income: 29 billion yen Medium/Long-Term Perspective ¾ Overseas Sales: 22.7% of total ¾Sales: 550 billion yen ¾Operating Income: 58 billion yen ¾Overseas Sales: 25% of total

Present (FY06.3) 5 Years Ago (FY01.3) ¾ Sales: 450 billion yen ¾ Sales: 363.5 billion yen ¾ Operating Income: 32.5 ¾ Operating Income: 12.9 billion yen ¾ Overseas Sales: 17.7% of total billion yen ¾ Overseas Sales: 18.4% of Note: Past performance figures total based on simple totals for BANDAI and NAMCO

6 Background of Medium-Term Management Plan Strengthening,Strengthening, Enriching,Enriching, andand ExExpandingpanding PortfolioPortfolio ManagementManagement

-- Coping with increasing management risks from structural changes in market and heightening competition -- Management ・ Management Environment Social demands for transparency in ① Strengthening Corporate Governance management and corporate social responsibility Strategy ・Need to secure and utilize human resources as ② Effectively utilizing Human Resources population ages and has fewer children ③ Building Optimal Management System ・Intensification of M&As that strengthen core business ・Organizational Restructuring ・Rising costs from increase in consumption tax and appreciating Chinese Yuan ・Consolidate Indirect Departments

・Changes in business model from fusion of

Environment broadcasting and communications ① Entertainment Hub Concept Business ・Improving content value from structural changes Business Strategy in media industry (new entrants from outside ・Content Strategy industry) ・Shorter character life cycles ・Domain Strategy ・Intensification of industry restructuring in order ・ to survive Channel Strategy ・Changes in distribution structure (rise of Internet ② Strengthening Overseas sales) ・Shrinking Japanese market due to fewer Businesses children, aging and shrinking population

3-Year Plan Figures (Consolidated) Units: millions of yen FY06.3 FY07.3 FY08.3 FY09.3 (Projected) (Target) (Target) (Target) Net Sales 450,000 470,000 500,000 550,000 Operating Income 32,500 40,000 50,000 58,000 Net Income 11,000 22,000 28,000 32,500 ROA(*) 8.5% 10.0% 12.0% 13.5% ROE(*) 4.5% 8.0% 9.5% 10.0%

•Figures for gross and net assets used to calculate ROA and ROE for FY06.3 derived from average of capital-adjusted figures based on simple totals from the end of FY05.3 and projected figures for the end of FY06.3 Net Sales Operating Income 60,000 600,000 Net Income 15.0% 500,000 50,000 ROA 400,000 40,000 10.0% ROE 300,000 30,000 5.0% 200,000 20,000 100,000 10,000 0.0% 06.3 07.3 08.3 09.3 0 0 ROA: Recurring Income / Avg. Total Assets 06.3 07.3 08.3 09.3 06.3 07.3 08.3 09.3 ROE: Net Income / Avg. Shareholders’ Equity

7 Medium-Term Management Plan: Group Policies

Strengthening,Strengthening, Enriching,Enriching, andand ExpandingExpanding PortfolioPortfolio ManagementManagement

Management Business Strategy Strategy

Pure Holding Company (NBHD) Strategic Business Units (ＳＢＵ)

Strengthening, Enriching, and Expanding Portfolio Management TheThe PortfolioPortfolio ABCABC SpiralSpiral

AArearea (Regional)(Regional) PortfolioPortfolio

CContentontent PortfolioPortfolio BBusinessusiness PortfolioPortfolio

8 Business Portfolio

新規 Expanding Business事業 Domains Expand businesses by further strengthening core strengths (character merchandising, technology, locations) and Create new businesses by utilizing the know-how. FY05.3 FY06.3 FY09.3

Snacks

BANDAI Apparel Toys & Hobby Toys & Hobby Visual & Music Toys & Hobby Visual & Music Content Visual & Music Content Character Content Network Game Character Contents Amusementﾄ Character Network Technology Facility Technology Network Location Location Amusement Amusement NAMCO Game Facility Facility Game Contents Spa Game Resort Contents Welfare Contents Projects Technology Location

Amusement Facility

Area (Regional) Portfolio

Expand overseas share by rebuilding North American Expanding Global Development business and entering into China market. FY06.3 FY09.3 Eur. Asia Eur. Asia 8.8% U.S. 6.9% 2.3% 3.2% 9.2% U.S. 12.9%

Japan 81.6% Japan 75.1%

Sept. 2005: NBHD Inc. established

Jan. 2006: NBHD (USA) Inc. established

9 Content Portfolio

Content Portfolio Attain the ideal portfolio through integration

New New 20% 35% Licensed Licensed 85% 15% 30% 70% BANDAI NAMCO Original New 30% Original Popular Popular 80% Long- 65% Long- Licensed established established 45% 55% NAMCO BANDAI Original 70% Popular long-established

Group Medium-Term Management Plan Policies Strengthening,Strengthening, EnrichEnriching,ing, andand ExpandingExpanding PortfolioPortfolio ManagementManagement

Management Business Strategy Strategy

Pure Holding Company (NBHD) Strategic Business Units (ＳＢＵ)

①Strengthening Corporate Governance ①Entertainment Hub Concept ②Effectively Utilizing Human Resources ②Strengthening Overseas Businesses ③Building Optimal Management System

10 ① Strengthening Corporate Governance

Becoming a company that continually Measures to take contributes to society and is trusted by society.

Implement brand operation/control standards ➠ Improve corporate brand power Introduce business management tools ➠ Strengthen monitoring of strategy, (Balanced Score Card) performance Enhance CSR and compliance systems ➠ Transparent management, Timely and fair disclosure Roles of NAMCO BANDAI Holdings (NBHD)

RoleRole ValueValue ProvidedProvided toto GroupGroup

①①FormulateFormulate overalloverall groupgroup strategystrategy ①①BrandBrand ②②OptimizeOptimize distributiondistribution ofof group’sgroup’s ②②CultivationCultivation ofof group’sgroup’s corecore humanhuman resourcesresources management resources management resources ③③CoordinationCoordination ofof synergysynergy betweenbetween groupgroup ③③MonitorMonitor groupgroup managementmanagement companiescompanies ④④PR/IRPR/IR forfor groupgroup asas aa wholewhole ④④FinancialFinancial supportsupport ⑤⑤FormForm strategicstrategic partnershipspartnerships withwith otherother ⑤⑤PartnershipsPartnerships andand M&AM&A gearedgeared towardtoward companiescompanies restructuring/expandingrestructuring/expanding businessesbusinesses

② Effectively Utilizing Human Resources

A Workplace That Enhances Abilities Building win-win relationships between companies and employees.

PersonnelPersonnel Exchange Exchange Within Within Group Group ➠ Integrate know-how ・Cross-exchange of top management as well as employees ➠ EmployeeEmployee Training Training Programs Programs Boost development power, cultivate managers ・Programs to boost development power ・Programs to cultivate management leaders ➠ ImplementImplement New New Employment Employment Rules Rules Create an environment where employees can realize their potential ・High-grade professional contract employees ・Specialist personnel system ・Employment system that accommodates life stages

11 ③ Building the Optimal Management System

Creating an organizational structure that Organizational Restructuring Policies maximizes group management efficiency.

Cooperation for growth ➠ Integrate organization ・Merge overlapping divisions in mature markets where market share can be expanded by merging and restructuring SBUs ・Expand market share through streamlining and economies of scale Competition for growth ➠ Maintain current organization ・Competition in growth markets where market share can be expanded by diversifying SBU contacts ・Expand scale by revitalizing organization

Collaboration for efficiency ➠ Shared services ・Consolidate indirect costs by integrating accounting, general affairs, HR, and information systems operations ・Boost earning potential through greater efficiency by encouraging skill-building (multi- functionalization) and optimizing personnel deployment

③ Building the Optimal Management System

SBU Building Measures

NAMCO BANDAI Holdings Inc. Established BANDAI and NAMCO enact management integration. A Corporate Separation The supervision and management of certain BANDAI and NAMCO subsidiaries and affiliates transferred to the parent company

NAMCO BANDAI Holdings (USA) Inc. established US regional stockholding company formed, affiliated operating companies restructured. NAMCO BANDAI Games America Inc. established Bandai Logipal Inc. made into full subsidiary Through stock exchange

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

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

12 ③ Building the Optimal Management System

Group Organization Strategic Business Unit system as of end of March 2006.

ManagementManagement StrategyStrategy Committee NAMCONAMCO BANDAIBANDAI HoldingsHoldings Inc.Inc. Committee GroupGroup BusinessBusiness ReportReport CSRCSR CommitteeCommittee Affiliated Business Group Affiliated Business Group InternalInternal ControlControl CommitteeCommittee Business Support Strategic Business Units WaigayaWaigaya (weekly (weekly meeting)meeting) Incubation

Group-WideGroup-Wide MeetingsMeetings Visual & Music Content Visual & Music Leader Leader Leader Leader Visual & Music Content Visual & Music Bandai Logipal Leader Amusement Facility Amusement Facility Cross-Entertainment Meetings Game Contents Game Contents

Banalex Toys & Hobby Toys & Hobby Character Strategy Network Network

NAMCO BANDAI Games BANDAI NAMCO Meetings Namco Supporters Games BANDAI NAMCO BANDAI NETWORKS BANDAI NETWORKS BANDAI VISUAL BANDAI VISUAL Content Strategy Meetings Namco Ecolotech NAMCO BANDAI NAMCO BANDAI Visual & Music Content Namco Trading & Network SBU Meetings

Environmental Projects

Rights Liaison Meeting

Shared Service Council

③ Building the Optimal Management System

Consolidation of Indirect Operations Revising operations and raising personnel expertise.

NAMCONAMCO BANDAIBANDAI HoldingsHoldings Inc.Inc. Group SSC (Shared Service Center) launched SSCSSC

AffiliatedAffiliated BusinessBusiness GroupGroup Part of group functions merged

3SBU 3 SBU back offices integrated, Shared service division established Amusement Facility Amusement Facility Game Contents Game Contents Toys & Hobby Toys & Hobby Cost reduction target for 3 main Companies FY07.3 – FY09.3 10 billion yen ⇒ 8.5 billion yen (reduced by15％)

NAMCO and NAMCO BANDAI Games back offices consolidated

13 Group Medium-Term Management Plan Policies Strengthening,Strengthening, EnrichEnriching,ing, andand ExpandingExpanding PortfolioPortfolio ManagementManagement

Management Business Strategy Strategy

Pure Holding Company (NBHD) Strategic Business Units (ＳＢＵ)

①Strengthening Corporate Governance ①Entertainment Hub Concept ②Effectively Utilizing Human Resources ②Strengthening Overseas Businesses ③Building Optimal Management System

① Entertainment Hub Concept

Toys & Hobby

Game Contents New Domain

New Domain Network

Visual & Music Content Amusement New Facility Domain

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

14 ① Entertainment Hub Concept

Bandai Namco Group’s Strengths

CharacterCharacter MerchandisingMerchandising BroadBroad DomainDomain –– 5 5 SBUsSBUs LocationsLocations The ability to produce characters AbilityAbility toto DeliverDeliver ProductsProducts WorldwideWorldwide Amusement Game Toys & Network Visual & Technology Facility Contents Technology Hobby Music GlobalGlobal PresencePresence Content Game development technology NorthNorth America,America, Europe,Europe, AsiaAsia

Strategies Dig Deeper Broaden Horizons Expand Territory ContentContent StrategyStrategy DomainDomain StrategyStrategy ChannelChannel StrategyStrategy Create, obtain, and Expansion by pioneering new Enhance “space-creating” categories capabilities cultivate quality content Venture into new domains Further expand customer contacts

Create/ObtainCreate/Obtain ContentContent StrengthenStrengthen ExistingExisting DomainsDomains ExpandExpand ClientClient ContactsContacts Joint Rights Holders Creators Joint Development with E-commerce Industry Partners CultivateCultivate ContentContent Distribution Venture into New Domains TV Stations Visual Distribution Venture into New Domains Retail Award Merchandising Rights to Theme Parks Strengthen Efforts with Partner Companies Companies Outside Industry

① Entertainment Hub Concept

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

①①ContentContent Strategy Strategy Strategically enhance content creation, acquisition, and cultivation 1. Strengthen group synergy 2. Strengthen ties with external affiliates 3. Promote partnerships with 3rd parties and M&A Cross-Entertainment Cross-Entertainment

②②DomainDomain Strategy Strategy Enlarge scope of content businesses 1. Expand portfolio 2. Create new strategic business units (new businesses) 3. Expand, enhance, and supplement through M&A and alliances

③③ChannelChannel Strategy Strategy Strengthen merchandising and extend contacts between contents and customers 1. Make effective use of existing partner companies’ distribution channels 2. Obtain new distribution channels through new partnerships 3. Forge ties among strategic business units 4. Strengthen network business

15 ② Strengthening Overseas Businesses

Management System Organization close to (USA) NBHNBH (USA) Japanese model NAMCONAMCO BANDAIBANDAI HoldingsHoldings Inc.Inc. Allocation/supervision of management NAMCO BANDAI Holdings (USA) Inc. resources through regional oversight established

In North America BSABSA (Europe)(Europe) Organization set up to RegionalRegional OversightOversight accommodate multiple NAMCO BANDAI NELNEL Holdings (USA) countries Centered around BANDAI S.A., Namco Toys & Hobby Bandai America Inc. SBUs SBU Europe Ltd. implement business NAMCO New game company to be established in Amusement strategies CYBERTAINMENT Facility SBU 2006 INC. Separation of sales and NAMCO BANDAI BHKBHK (Asia)(Asia) Game Contents Games America Inc. production SBU NAMCO AMERICA INC. Market expansion NAMCO Network NETWORKS Bandai Asia (sales) established Jan. 2006 SBU AMERICA INC. Bandai Guangdong (sales) to be Visual & Music Bandai established in Summer 2006 Content SBU Entertainment Inc. * BSA = Bandai SA (France) BHK = Bandai Hong Kong

② Strengthening Overseas Businesses

Business Strategy NBHUNBHU(North(North America)America) Expand local and localized content ⇒ Content Strategy Selection and focus ⇒ Conform to customer needs More efficient operation of AM facilities Power Rangers Patlabor TM & © 2006 BVS Entertainment, Inc. and BVS International N.V. All Rights PAC-MAN Ⓒ HEADGEAR Ⓒ1980,2001,2002,2003 NAMCO LTD., ⇒ Shift to revenue share operation Reserved. Used under license by Bandai America Incorporated. ABC logo: /BANDAI VISUAL/TFC ALL RIGHTS RESERVED. TM & © ABC Inc. All Rights Reserved. BSABSA (Europe)(Europe) NELNEL Enhance business portfolio for Europe region Reinforce product strategies for each target Bellflower Bunny POCOYO Dragon Ball Z Ⓒ 2004 Euro Visual. Ⓒ 2004 Zimkia Entertainment S.L. Ⓒ Bird Studio/SHUEISHA, TOEI ANIMATION Licensed by Granada Ventures. Ⓒ BANDAI 2005 BHKBHK (Asia)(Asia)

From production base to sales base Build foundation in China market ⇒ Establish Character Merchandising model FY09.3 sales targets Toys & Hobby: 5 billion yen Masked Rider Φ’s Mobile Suit Gundam Ultraman Tiga SEED DESTINY Ⓒ 2003 ISHIMORI PRO・TV ASAHI・ADK・TOEI Ⓒ 1996 TSUBURAYA PRODUCTIONS Amusement facility: 1 billion yen Ⓒ SOTSU AGENCY・SUNRISE・MBS

16 3-Year Plan Figures (by SBU)

Net Sales Units: billions of yen 600 550.0 500.0 470.0 500 450.0 Toys & Hobby 210.0 190.0 Amusement Facility 400 180.0 182.0 Game Contents 300 114.0 90.0 104.0 Network 79.0 200 Visual & Music Content 170.0 129.2 153.0 153.0 Affiliated Business Group 100 12.0 13.5 14.5 16.0 41.9 37.5 40.0 42.0 Elimination 23.0 19.0 21.5 22.0 0 -17.1 -23.0 -23.0 -24.0 06.3 07.3 08.3 09.3 (projection) (plan) (plan) (plan)

3-Year Plan Figures (by SBU) 80 Operating Income Units: billions of yen

58.0 60 50.0 Toys & Hobby 19.0 40.0 Amusement Facility 32.5 16.5 40 8.0 Game Contents 15.7 7.0 18.7 Network 4.8 20 20.0 24.0 Visual & Music Content 2.3 13.0 9.6 Affiliated Business Group 1.8 1.9 2.1 2.3 5.6 6.4 6.7 7.0 Elimination 0 0.7 0.5 0.5 ー4.7ー 0.8 -2.5 -2.8 -2.8 06.3 07.3 08.3 09.3 (projection) (plan) (plan) (plan)

17 3-Year Plan Figures (by SBU)

SBU Medium-Term Plans Transfer authority to SBUs and give them the responsibility of achieving 3-year plan figures. Top row: Net Sales Bottom row: Operating Income Units: billions of yen FY 06.3(projection) FY 07.3(plan) FY 08.3(plan) FY 09.3(plan) 182.0 180.0 190.0 210.0 Toys & Hobby 18.7 15.7 16.5 19.0 79.0 90.0 104.0 114.0 Amusement Facility 2.3 4.8 7.0 8.0 129.2 1,53.0 153.0 170.0 Game Contents 9.6 13.0 20.0 24.0 12.0 13.5 14.5 16.0 Network 1.8 1.9 2.1 2.3 41.9 37.5 40.0 42.0 Visual & Music Content 5.6 6.4 6.7 7.0 23.0 19.0 21.5 22.0 Affiliated Businesses －0.8 0.7 0.5 0.5 －17.1 －23.0 －23.0 －24.0 Corporate Elimination －4.7 －2.5 －2.8 －2.8 450.0 470.0 500.0 550.0 Totals 32.5 40.0 50.0 58.0 7.2％ 8.5% 10.0% 10.5%

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

SBU Strategies

18 Toys & Hobby SBU

Medium-Term Vision Medium-Term Vision EnvironmentalEnvironmental AnalysisAnalysis Constantly strive to create unique value 1. Shrinking market due to lower birth rate for customers with advancements in 2. Move towards oligopoly of large firms due to industry restructuring character merchandising. 3. Diversification of customer needs 4. Changes in structural industry 3-Year3-Year PlanPlan FiguresFigures Domestic Overseas 250.0 Net Sales 210.0 Medium-TermMedium-Term StrategyStrategy 200.0 182.0 180.0 190.0

150.0 1. Strengthen overseas businesses 146.0 137.0 136.5 132.5 100.0 (especially US, China)

50.0 64.0 45.5 47.5 53.0 2. Strengthen domestic businesses through 0.0 content strategy and media policy 25.0 FY2006.3 FY2007.3 FY2008.3 FY2009.3 20% Operating Income ⇒ Entertainment hub concept 20.0 19.0 18.7 15% 15.7 16.5 15.0 10.3% 11.2 3. Create unique value (new businesses) 12.8 10% 10.0 10.0 9.0% 10.0 8.7% 8.7% 5% 4. Improve cost structure 5.0 7.8 5.9 5.7 6.5 0.0 0% FY2006.3 FY2007.3 FY2008.3 FY2009.3

Toys & Hobby SBU Medium-TermMedium-Term StrategyStrategy Strengthening Domestic Businesses Through Strengthening Overseas Businesses Content Strategy and Media Policy (US) Reconstruct businesses through swift Implement content strategy and media policy management reform in response to changes in industry structure (Europe) Strengthen regional, business portfolios ⇒ entertainment hub concept (Asia) Establish foundation for character merchandising in China market Aim to be #1 in all categories

Goal: Increase overseas sales to 30% or more Goal: Increase market share of total net sales (weighted average) to 35%

Creating Unique Value (New Businesses) Improving Cost Structure Reform business creation process and pioneer new domains along customer and value axes Revise operational processes for project ⇒ expand the entertainment hub development/production

(Customer Axis) Females, age 13 and up, and seniors Improve cost structure through distribution (Value Axis) Fusion of products and services, etc. reform, etc.

Goal: Generate 5 billion yen in sales with new Goal: Raise operating margin to 9% by businesses improving profitability

19 Toys & Hobby SBU Medium-Term Management Plan

2006 Character Topics

Power Rangers: Mystic Force Tamagotchi Series NAMCO Joint Project th The 30 Power Rangers series Total Worldwide Sales: 17 million (end of Dec. 2005)

Tamagotchi Café (tent.)

Amusement Facility SBU

Medium-TermMedium-Term VisionVision EnvironmentalEnvironmental AnalysisAnalysis 1. Changes in business revenue structure Achieve diversification in the 2. Diversification of customer tastes, time entertainment facility business in order to consumption expand revenue. 3. Anticipated increase of consumption tax

Domestic Overseas Factors in Declining Trend 3-Year3-Year PlanPlan FiguresFigures Factors in Declining Trend 150.0 1. Changes in cost structure of location Net Sales 114.0 business 104.0 → Lack of speedy response to changes 100.0 90.0 79.0

98.8 89.0 2. Diversification of customer needs 50.0 76.5 66.0 → Slow to develop innovative facilities

3. Delay in profit-improvement plan for 13.0 13.5 15.0 15.2 0.0 North American business 10.0 FY2006.3 FY2007.3 FY2008.3 FY2009.3 15% → Slow to expand revenue share Operating Income 8.0 8.0 7.0 10% Medium-TermMedium-Term StrategyStrategy 6.0 4.8 1. Improve profitability by reforming cost structure 6.7% 7.0% 4.0 7.5 5.3% 6.6 5% 2. Attract more customers through synergy 2.3 4.6 2.0 2.9% 3. Expand customer base by diversifying business 2.2 categories 0.0 0.1 0.2 0.4 0.5 0% FY2006.3 FY2007.3 FY2008.3 FY2009.3 4. Establish profit base for overseas businesses

20 Amusement Facility SBU

Medium-TermMedium-Term StrategyStrategy Improve Profitability by Reforming Attract More Customers Through Synergy Cost Structure Increase revenue by scrapping smaller stores and Use customer contacts and cooperation between opening large ones group companies to operate and design machines Increase efficiency through sensible deployment of for customer-suggestion facilities personnel to existing stores and shift revision Attract more family-type customers by developing Mobilize personnel from existing stores to new new facilities that make use of characters business opportunities Enhance channel strategy and expand businesses Implement new payment systems, such as by utilizing group’s content to fullest extent not only electronic money at own stores, but also in conjunction with other companies

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

Amusement Facility SBU

NewNew Store Store Space Space in in FY2007.3 FY2007.3

21 Game Contents SBU

VisionVision forfor GameGame ContentsContents SBUSBU To become the world’s premier quality game maker, constantly providing games that are fun, enjoyable, and satisfying.

3-Year Plan Figures 3-Year Plan Figures Domestic Overseas Medium-Term Strategy 200 Medium-Term Strategy Net Sales 170.0 153.0 153.0 (HVG) 1. Revise target strategy 150 129.2 2. Restructure development process 115.0 3. Selection and Focus on overseas 100 106.5 116.0 businesses 105.3 1. Develop products to suit customer needs 50 (Arcade)

55.0 2. Aim to be #1 in category 37.0 46.5 23.9 0 3. Carry out operational reform FY2006.3 FY2007.3 FY2008.3 FY2009.3 (WMC) 1. Utilize NBG content to fullest extent 30 20% Operating Income 2. Create links with home videogame 25 24.0 software and amusement machine games 20.0 15% 20 14.1% 13.1% 3. Expand revenue overseas 15 13.0 19.6 (P7) 1. Become a proactive partner maker by 9.6 16.7 10% 10 8.5% continuing to create quality content 7.4% 11.0 5 10.8 5% * HVG: Home Videogame software 4.4 2.0 3.3 Arcade: coin operated game machines for amusement facilities 0 -1.2 WMC: videogame software for mobile phones FY2006.3 FY2007.3 FY2008.3 FY2009.3 P7: content for pachinko/pachislot -5 0% NBG: NAMCO BANDAI Games Inc.

Game Contents SBU (Home Videogame Software)

EnvironmentalEnvironmental AnalysisAnalysis FactorsFactors inin PerformancePerformance RevisionRevision

1. Uncertain market environment due to 1. Major underperformance among big titles diversifying and changing customer NAMCO Titles ・PS2 “SoulCalibur 3” (Nov. 05, 270K units short of initial plan) tastes ・PS2 “Tales of Legendia” (Aug. 05. 310K units short of initial plan) 2. Changes in sales share by platform ・PS2 “Critical Velocity” (Oct. 05. 320K units short of initial plan) ・PS2 “Urban Reign” (Sep. 05, 180K units short of initial plan) ・Xbox360 “Ridge Racer 6” (Dec. 05, 110K units short of initial plan)

PS2 GameCube Game Boy Advance Nintendo DS PSP BANDAI Titles ・PS2/GC “One Piece Pirate Carnival” 2004 (Nov. 05, 270k units short of initial plan) (units sold) ・PS2 “Fighting for One Piece” (Sep. 05, 190K units short of initial plan) 2005 ・PS2 “Eureka Seven TR.1” (Oct. 05, 160K units short of initial plan) (units sold)

2. Financial strategy tailored to uncertain market NAMCO BANDAI environment (titles released) Stricter re-evaluation of inventory assets 0% 20% 40% 60% 80% 100% (works in progress) toward a more muscular

Source: NBHD Research financial standing

22 Game Contents SBU (Home Videogame Software)

BackgroundBackground ofof PoorPoor PerformancePerformance PriorityPriority MeasuresMeasures 1. Lack of response to changes in 1. Revise target strategies Respond to customer needs with title lineup balanced environment (market, customers, etc.) between existing and next-generation platforms Loss of revenue opportunities due to lack of Increase customer appeal of quality group franchises, titles for casual users merchandising, and technology through integration Lack of ability to cultivate new markets 2. Restructure development process Stricter unit sales estimates, appropriate cost progress management 2. Issues in development process Build shared development environment; balance Mismatch between market and sales between efficient development and strong high-end projections technology Drop in profit due to cost-effect unbalance Optimal deployment of creators

3. Selection and Focus on overseas businesses Pursue cost synergy through integration 3. Poor performance among overseas Select strong titles that meet customers’ needs businesses 4. Work toward a new business model Failure of major titles to achieve targets due to Actively accommodate billing methods for new changes in US market content and networking on next-generation platforms

Game Contents SBU (Home Videogame Software) Major Titles in FY2007.3 NAMCO Label: Approx. 40 Titles Planned NDS Tales of the Tempest 04/2006 XB360 Love FOOTBALL Spring 2006 PS2 Xenosaga Episode III: “Also Sprach Zarathustra” Spring 2006 PSP TEKKEN DARK RESSURECTION Spring 2006 PSP Portable Resort 2006 NDS Phantom Thief Russo 2006 PS2 Kyokara Maoh! Hajimari no Tabi 2006 BANDAI Label: Approx 50 Titles Planned PSP Dragon Ball Z: Shin Budokai 04/2006 PSP Neon Genesis Evangelion 2 Artificial World -Another Case- 04/2006 PS2 .hack//GU Vol. 1 05/2006 PS2 .hack//GU Vol. 2 09/2006 PS2 .hack//GU Vol. 3 12/2006 NDS Tamagotchi 2 2006 PS2 Super Dragon Ball Z 2006 PSP Every Extend Extra 2006 BANPRESTO: Approx 20 Titles Planned PS2 Super Robot Wars Series, etc.

23 Game Contents SBU (Arcade, Mobile, Pachinko, Pachislot)

EnvironmentalEnvironmental AnalysisAnalysis (Arcade) Concentration toward larger stores, diversifying customer tastes (WMC) Expansion of needs to rich content, borderless content needs (P7) Concentration of needs toward popular machine types

Medium-TermMedium-Term StrategyStrategy

(Arcade) Aim to be #1 in Category (Mobile) Expand Content Seek out consumers’ needs and develop Continually release NAMCO BANDAI products for them Games’ quality content assets for mobile platforms Aim to be #1 in all categories Continually launch content links with home video and amusement machine games (Pachinko/Pachislot) Transform Expand Overseas Revenue from OEM to Partner Attain the position of “partner” by creating Create content that can be utilized all over quality content and high quality hardware, the world to expand overseas revenue and offering original machines

Network SBU

Medium-TermMedium-Term VisionVision EnvironmentalEnvironmental AnalysisAnalysis

Make the leap forward to becoming 1. Enriched network infrastructure (broadband environment, etc.) an all-round network company. 2. Mobile phones with greater capacity and more advanced functions Domestic 3-Year3-Year PlanPlan FiguresFigures 3. Start of One Seg Broadcasting for mobile 20 phones Net Sales

15 Medium-TermMedium-Term StrategyStrategy 10 16.0 Boost development toward becoming 13.5 14.5 12.0 5 an all-round network company 1. Expand general networking power by content 0 business, solution business, e-commerce FY2006.3 FY2007.3 FY2008.3 FY2009.3 5 20% business, and marketing business Operating Income 4 2. Entertainment portal site concept 15.0% 15% 14.1% 14.5% 14.4% 3 3. Make effective use of BANDAI NAMCO 10% Group assets 2

2.3 5% 1 1.8 1.9 2.1

0 0% * Overseas figures included in Game Contents SBU (WMC) FY2006.3 FY2007.3 FY2008.3 FY2009.3

24 Network SBU Medium-TermMedium-Term StrategyStrategy Entertainment Portal Site Concept Channel Strategy Based on 4 Businesses “Virtual Theme Park” – a one-stop ◆Content Business source for fun and enjoyment Venture into visual content distribution business ◆All content - games, sound, characters, (mobile and PC) e-commerce – compiled into one site Expand rich content ◆Solution Business ◆ Implementation of Marketing increases Expand image recognition engine and offer as value-added, while Solution provides service support to Content. Expand solution business for corporations ◆E-commerce Business Mobile commerce – expand partner companies Character commerce – develop as service

SoundSound VisualVisual ◆Marketing Business FromFrom PC PC FromFrom mobile mobile GameGame UtilityUtility ContentContent business business Move into internet advertising business Standby Standby E-commerceE-commerce Food screen Food screen businessbusiness Character E-commerce Character Communication E-commerce Active Promotion of M&A Communication

SolutionSolution businessbusiness Examine and promote M&A from a variety of angles in order to expand and MarketingMarketing businessbusiness accelerate businesses

Visual and Music content SBU

Medium-TermMedium-Term VisionVision EnvironmentalEnvironmental AnalysisAnalysis A content production business group that 1. Arrival of next-generation hardware platforms can create quality content and achieve 2. Expansion of non-package market efficient management 3. Increase in content value due to structural changes in media industry (entry of companies from other industries) 3-Year3-Year PlanPlan FiguresFigures Domestic Overseas 60.0 Net Sales Medium-TermMedium-Term StrategyStrategy 42.0 40.0 42.0 40.0 37.5 1. Create and obtain high-quality original content 2. Make effective use of content with multi-platform

39.2 strategy 20.0 41.4 35.5 37.5 3. Diversify from visual business into music and publishing businesses 0.0 0.6 2.0 2.5 2.8 4. Secure position as content supplier in visual/music FY2006.3 FY2007.3 FY2008.3 FY2009.3 10 30% distribution business Operating Income 8 7.0 5. Rebuild business foundation overseas 5.7 6.4 6.7 6 20% (especially in US) 17.1% 16.8% 16.7% 4 7 13.6% 6.3 6.6 6.9 2 10%

0 0.1 0.1 0.1 -1.3 -2 0% FY2006.3 FY2007.3 FY2008.3 FY2009.3

25 Visual and Music content SBU Medium-TermMedium-Term StrategyStrategy Create and Obtain Original Content Multi-Platform Strategy Create high-quality content centered around SUNRISE Inc. Maximize revenue by efficiently making Actively invest in visual content by boosting functions content compatible with multiple platforms across the board Maximize profits by re-using past content Create visual content from other SBUs’ content and products

Enter Music and Publishing Businesses Strengthen Content Distribution

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

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

Visual and Music content SBU “The Wings of Rean” – Original work and general ”Mobile Suit Z Gundam 3: Love is the Pulse of supervision by Yoshiyuki Tomino the Stars” (Opens in theaters ・Produced by SUNRISE March 4) ・Advance broadband distribution on BANDAI “Mobile Suit Z CHANNEL starting in Gundam 2: “Lovers” December ・DVD released ・DVD release in April by February 24 by BANDAI VISUAL BANDAI VISUAL ・Limited broadband distribution in February on BANDAI CHANNEL © SUNRISE, BANDAI VISUAL, BANDAI CHANNEL “.hack//Roots” – premiering in April

“.hack//GU” – release in BANDAI VISUAL USA May, September, and 1st release in the U.S. December by NAMCO BANDAI Games “PATLABOR: THE MOVIE LIMITED COLLECTOR’S EDITION“ Release date: April 25, 2006

26 www.bandainamco.co.jp

Note on Projections

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