Business Report

Report and Reference for the Second Ordinary General Meeting of Shareholders

Contents

1 To Our Shareholders 3 Business Report (Report and Reference for the Second Ordinary General Meeting of Shareholders) 3 Overview of Business 13 Overview of the Company 20 Significant Events following the End of the Fiscal Year 21 Consolidated Balance Sheet 22 Consolidated Statement of Income 23 Notes to Consolidated Financial Statements 27 Independent Auditors Report (Copy) 28 Board of Statutory Auditors Report (Copy) 29 Non-Consolidated Balance Sheet 30 Non-Consolidated Statement of Income 31 Notes to Financial Statements 32 Proposal for Appropriation of Unappropriated Retained Earnings 33 Independent Auditors Report (Copy) 34 Board of Statutory Auditors Report (Copy) (Unaudited) 35 Procedures for Transactions in Fractional Unit Shares 37 SEGA SAMMY Topics 38 IR Information

To Our Shareholders

In the second fiscal year since it was established through the business combination of SEGA CORPORATION and Sammy Corporation, the SEGA SAMMY Group remained focused on building a strong position in the entertainment industry, where competition now transcends the borders that previously separated traditional industry sectors. To that end, we continued working to enhance our profitability by restructuring and investing aggressively in growth fields, including M&A activities.
In pachislot machines, we further reinforced our position as the market leader with the introduction of products that are unique and differentiated from the market, such as Aladdin II Evolution, the latest model in Sammys flagship Aladdin series. In pachinko machines, we steadily strengthened our position in the market, as CR Hokuto No Ken, which leveraged the appeal of the Hokuto No Ken pachislot machine, set a new record for unit sales of Sammy pachinko machines. In amusement machine sales, we effectively utilized SEGAs advanced development capabilities and recorded substantial growth in unit sales of high-value-added products with the success of products such as Star Horse Progress 2 New Generation. We have built a production and distribution system that can respond smoothly to demand and which is focused on major hit titles such as these. In amusement center operations, the MUSHIKING: the King of Beetles childrens card game, which has garnered sustained popularity, and LOVE AND BERRY Dress up and Dance!, which was launched in the previous fiscal year, registered strong growth in installments card sales. Results at existing centers improved from the previous fiscal year due to the strong usage rates for hit titles and gains in operating efficiency. And in the consumer business, the range of initiatives that we have implemented, such as organizational restructuring in Japan and overseas and enhanced development efficiency, have begun to bear fruit,
and overseas, the development companies that we acquired have begun to contribute to our performance. In addition, we benefited from strong performances from listed subsidiaries SEGA TOYS LTD., Sammy NetWorks Co., Ltd., and TMS ENTERTAINMENT, LTD. As a result, the consumer operations segment became profitable in the fiscal year under review. As a result, consolidated net sales in the fiscal year under review rose 7.3%, to 553,240 million, ordinary income increased 14.4%, to 119,500 million, and net income was up 30.9%, to 66,221 million compared to the previous fiscal year. To increase liquidity and expand the range of our investors, on November 18, 2005, we completed a two-for-one stock split. We are planning a year-end regular dividend of 30 per share, which represents an increase of 10 per share when calculated on a post-split basis. I would like to ask for your continued support of the SEGA SAMMY Group in the years ahead as we strive to make continued progress as a comprehensive entertainment company.

Hajime Satomi

Overview of Business

zation initiatives and completed certain mergers and acquisitions in order to expand the Group's business. Main Business Reorganization and Expansion Measures in the Fiscal Year Ended March 31, 2006 (1) On April 1, 2005, SEGA CORPORATION absorbed certain operations spun off from Sammy Corporation through a corporate separation. This step was taken to allow Sammy to specialize in the pachislot, pachinko, and peripheral equipment businesses. This was accomplished by concentrating the Groups overlapping operations, such as Sammys amusement machine sales and home videogame software business, at SEGA. (2) On April 1, 2005, SEGA CORPORATION, SEGA AMUSEMENT CO., LTD., a subsidiary of SEGA, and Sammy Amusement Service Co., Ltd. merged to integrate the functions of the amusement center operations business, which were previously dispersed throughout the Group, and more closely coordinate the amusement machine sales and amusement center operations business. (3) On September 1, 2005, SEGA AMUSEMENTS U.S.A. Inc. (SAU) and Sammy USA Corporation (SUSA) merged to rationalize and raise the efficiency of commercial amusement machine development, manufacturing, and sales in North America. (4) On August 2, 2005, Sammy Corporation acquired shares of H-I System Corporation (H-I System), which specializes in hall computer systems and prize POS systems, and made it a consolidated subsidiary. This step was taken to increase earnings by (1) meeting diverse customer needs through providing total hall services and (2) expanding sales opportunities.
(5) In order to strengthen its imaging business, the Company accumulated shares of TMS ENTERTAINMENT, LTD. (TMS), and on October 7, 2005 TMS was made a consolidated subsidiary. TMS is principally involved in the planning, production and sale of animation, and was previously accounted for as an equity-method affiliate. (6) On October 26, 2005, Sammy Corporation acquired shares of GINZA CORPORATION and made it a consolidated subsidiary to reinforce the development of multiple brands in the pachinko and pachislot machines business.
In terms of business results, the SEGA SAMMY Group posted a favorable performance. This was supported by sales of the Aladdin II Evolution pachislot machine and CR Hokuto No Ken pachinko machine, with both retaining their predecessors popularity; robust sales of Star Horse Progress 2 New Generation, a large-scale game machine supplied by the amusement machine sales business; and continued brisk sales in the childrens card game business, including MUSHIKING: The King of Beetles and LOVE AND BERRY Dress up and Dance! in the amusement center operations business. The success of content for childrens card games also carried over to the consumer business. In these and other ways, the Group is establishing a solid foundation for new content, while capturing groupwide synergies. This creation and utilization of synergies among businesses is a key strength of the SEGA SAMMY Group. As a result, consolidated net sales totaled 553,240 million and ordinary income was 119,500 million. The SEGA SAMMY Group booked impairment losses of 7,194 million on certain amusement centers as extraordinary expenses. Consequently, net income was 66,221 million.

Results by business segment were as follows.
Pachislot and Pachinko Machines
In the pachislot machine business, the SEGA SAMMY Group retained the top share of the market and introduced numerous models offering various game features and high entertainment value, posting total pachislot machine sales of 607 thousand units. This success was attributable to Aladdin II Evolution, which features Aladdin, a character synonymous with Sammy Corporation, as well as Ore No Sora, a game released under the RODEO brand and based on the popular comic book by the same title. In the pachinko machine business, the SEGA SAMMY Group sold 288 thousand units of pachinko machines. Even though the business did not meet the initial target, this figure surpassed sales in the previous fiscal year. In particular, unit sales of CR Hokuto No Ken, the successor to the Hokuto No Ken series of pachislot machines, reached a record-high at Sammy Corporation. In the pachinko ball, token dispensing machine, and other peripheral businesses, the SEGA SAMMY Group took steps to strengthen pachinko parlor total services. To this end, the Group acquired H-I System Corporation, which conducts businesses related to pachinko parlor computers and POS systems for prize items, and made it a subsidiary. As a result of the above, net sales in this segment totaled 265,631 million, down 5.2% year on year, and operating income was 99,847 million, dropping 3.9%.
CR Hokuto No Ken pachinko machine
Buronson Tetsuo Hara/NSP 1983 Sammy
Aladdin II Evolution pachislot machine

Sammy

Main Pachislot Machines and Units Sold
Variety Units sold (thousands)
Main Pachinko Machines and Units Sold
Aladdin II Evolution Ore No Sora Ultraman Club ST Pachislot Umimonogatari Onimusha 3 Others Total
CR-Hokuto No Ken CR-ChoroQ CR-Sakigake Otokojuku CR-ChoroQ Turbo Others Total

23 288

Amusement Machine Sales
In the amusement machine sales business, although sales of existing prize games experienced a cyclical downturn, overall performance was strong, thanks to brisk sales of satellitemodel products. These included Sangokushi Taisen, a network-enabled trading card game launched in the previous fiscal year that remained popular, and Star Horse Progress 2 New Generation, the latest in the Star Horse series, featuring significant upgrades to a broad spectrum of game features. In addition, partial sales under original equipment manufacturing (OEM) agreements also made a positive contribution. As a result, net sales in this segment were 71,512 million, up 13.0%, and operating income was 12,176 million, an increase of 64.0%.

Cancellation of stock acquisition rights and conditions

Favorable conditions

Stock acquisition rights were provided gratis to the employees of the Company and its subsidiaries.

7 Employees of the Group

Number of employees (change from end of previous fiscal year) 6,416 (1,009 up)
Note: The number of employees includes full-time staff and staff on loan, but not temporary employees.
8 Corporate Relationships
(1) Relationships with important subsidiaries and affiliates
Important subsidiaries and others
Company Capital Voting Rights (%) Main Business

Sammy Corporation

18,221 million
SEGA CORPORATION RODEO Co., Ltd. Shuko Electronics Co., Ltd. Sammy Design Co., Ltd. SI ELECTRONICS LTD. H-I System Corporation GINZA CORPORATION Sega Logistics Service Co., Ltd. SEGA Amusements U.S.A., Inc. SEGA Amusements Europe Ltd. Sammy NetWorks Co., Ltd. SEGA TOYS, LTD. TMS ENTERTAINMENT, LTD. SEGA of America, Inc. SEGA Enterprises, Inc. (U.S.A.) SEGA Europe Ltd. NISSHO INTER LIFE CO., LTD. SEGA SAMMY ASSET MANAGEMENT INC. SEGA MUSIC NETWORKS CO., LTD.
60,000 million 100 million 179 million 40 million 244 million 10 million 10 million 200 million $3.9 million 22.132 million 2,286 million 1,713 million 8,816 million $41.9 million $110 million 320.940 million 5,018 million 100 million 400 million
100.0 65.0 *1 99.9 *1 100.0 *1 88.1 *1 100.0 *1 49.0 *1 100.0 *1 100.0 *1 100.0 *1 56.3 52.6 53.1 *1 100.0 *1 100.0 *1 100.0 *1 51.4 100.0 100.0 *1
Development / manufacture / sales of pachinko and pachislot machines Development / manufacture / sales of game machines used in amusement arcades Development / operations of amusement centers Development / sales of home video game software Development / manufacture / sales of pachislot machines Development / manufacture / sales of pachinko and pachislot peripherals Planning / design / construction of pachinko parlors Development / sales of LCD optical imaging system chips Development / manufacture / sales of pachinko and pachislot peripherals Development / manufacture / sales of pachinko and pachislot machines Maintenance service, transportation, and warehouse business Import / manufacture / sales of amusement equipment Import / manufacture / sales of amusement equipment Planning/production of music content for mobile phones, Internet Development / manufacture / sales of toys Planning/production/sales and other activities involving animated movies Development of home video game software Subsidiary company management Development / management of home video game software Sales of home video game software Planning/design/management/construction of displays and commercial facilities Preliminary investigation and consulting concerning real estate and credit Sales of commercial karaoke machine equipment

553,240 324,228 109,867 434,096 119,144

1,404 686

2,909 119,500
26 1,168 7,46,796 (3,018)
10,944 111,923 43,778 1,923 66,221
Note: Figures shown in millions of yen have been rounded down to the nearest million. 22
Notes to Consolidated Financial Statements
1 Significant Accounting Policies Used in Preparation of Consolidated Financial Statements
(1) Scope of Consolidation The consolidated financial statements of SEGA SAMMY HOLDINGS INC. (the Company) include the accounts of seventy two consolidated subsidiaries. For a complete list of major consolidated subsidiaries, refer to the section(1) Relationships with important subsidiaries and affiliates under 8 Corporate Relationships of II. Overview of the Company. During fiscal 2005, the following companies were included in the scope of consolidation as consolidated subsidiaries: Sammy NetWorks Asia Pacific Ltd., TMS ENTERTAINMENT, LTD., GINZA CORPORATION, and ten other companies through the acquisition of shares; DARTSLIVE Co., Ltd. and two other companies, because of the increased importance of their businesses to the Group; and GINZAHANBAI CORPORATION and three other companies that were newly established subsidiaries with investments from the Company. Meanwhile, the following companies were excluded from the scope of consolidation: SEGA AMUSEMENT LTD., and three other companies by merger with consolidated subsidiaries and other companies; Dimps Corporation, OPES LTD. and two other companies, through sale of shares held by the Company; and RTzen, Inc., due to liquidation. The Company has ten non-consolidated subsidiaries, including United Source International Ltd., SEGA Software (Shanghai) Co., Ltd., SEGA TOYS PLUS CO., LTD., Remart Co., Ltd., and TMS MUSIC CO., LTD. All ten non-consolidated subsidiaries are excluded from the scope of consolidation because the combined amounts in assets, net sales, net income, and retained earnings applicable to the equity interest of the Company are immaterial compared to the respective consolidated figures. (2) Application of the Equity Method Eight companies were accounted for by the equity method, including CRI Middleware Co., LTD., Simuline Inc., by accepting allocation of new shares to a third party, and GAMEWORKS CINCINNATI L.L.C., by shares acquisition. The last two companies became equity-method affiliates during the year under review. Meanwhile, shares of former consolidated subsidiary IP4 Inc. held by the Company were sold, also making it an equity-method affiliates.

to cover possible losses estimated as a historical write-off ratio of bad debts for general receivables, with the addition of required amounts for doubtful accounts and bankrupt receivables based on a case-by-case assessment of the possibility of collection. b. Accrued employees bonuses Accrued employees bonuses are provided based on the estimated amount to be paid. c. Accrued retirement benefits for employees The Company and its consolidated subsidiaries provided allowance for employees retirement benefits at the balance sheet date based on the estimated amounts of projected benefit obligations and the fair value of the plan assets at that date. Actuarial differences are treated as a lump-sum expense in the following fiscal year. except, SEGA CORPORATION and 3 other subsidiaries that amortize actuarial differences using the straight-line method over a fixed number of years (10 years), but no more than the average remaining service period for employees in service. d. Accrued retirement benefits for directors and statutory auditors The Company and certain domestic consolidated subsidiaries provide an allowance for directors and statutory auditors retirement bonuses to adequately cover payment of such bonuses at the end of the applicable period in accordance with internal regulations. This allowance is stipulated under Article 43 of the Regulation for the Commercial Code. 5. Accounting for lease transactions Finance leases which do not transfer ownership to lessees are accounted for in the same manner as operating leases. 6. Accounting for significant hedge a. Hedge accounting The Company adopts deferred hedge accounting. However, special treatment (under special treatment, the net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities for which the swap contract was executed) is used for qualifying interest rate swap transactions. Moreover, allocation hedge accounting is applied to qualifying foreign exchange forward contracts. b. Hedging instruments and hedged items Hedging instrument: Interest rate swaps, foreign currency forward contracts

Hedged item: Interest on debts, receivables and payables denominated in foreign currencies, investment securities. c. Hedge policy Derivative instruments are used to mitigate risks associated with foreign currency exchange and interest rate fluctuations. As a rule, hedging is only used for items for which actual demand exists, and not for speculative purposes. d. Evaluation of hedge effectiveness Hedge effectiveness is evaluated through comparative analysis of the cumulative fluctuations in the market for the hedged item relative to that for the hedging instrument. For interest rate swaps with special treatment, hedge effectiveness is not evaluated. 7. Accounting method of consumption taxes Consumption taxes are accounted using the net-of-tax method. (5) Valuation of consolidated subsidiaries assets and liabilities The assets and liabilities of consolidated subsidiaries are evaluated using the fair value including the portion attributable to minority shareholders. (6) Amortization of Consolidated Goodwill Consolidated goodwill is amortized over the estimated number of years it takes to realize the benefits of goodwill as long as the reasonable estimation of this period is possible. In all other cases, goodwill is amortized equally over a period of 5 years. (7) Appropriation of earnings The consolidated statement of retained earnings is prepared based on retained earnings appropriations at the companies determined during the fiscal year.

(1) (2)

Notes to Consolidated Balance Sheet
Accumulated depreciation of tangible fixed assets 82,670 million Assets pledged
Assets pledged Time deposits Note receivable Buildings/Structure Land 25 million 468 million 349 million 535 million Covered for liabilities Accounts payable - trade Accounts payable - other Accrued liabilities Short-term debt Long-term debt 0 million 0 million 0 million 4 million

337 million

(3) (4)
Debt guarantees Security loaned

497 million

Security loaned with 1,397 million is included in Investment securities (5) Revaluation of Land Consolidated subsidiary SEGA CORPORATION has revalued land for commercial use, pursuant to Japans Law Concerning Revaluation of Land (Law No. 34, March 31, 1998) and Amendments to the Law Concerning Revaluation of Land (Law No. 19, March 31, 2001). SEGA has recorded an item for the revaluation difference of land under shareholders equity. Revaluation method SEGA CORPORATION computed the value of land based on the methodology regarding rational adjustments to valuation of fixed assets stipulated in Article 2-3, and appraisals by licensed real estate appraisers prescribed in Article 2-5 of the Enforcement Ordinance No. 119 (March 31, 1998) pertaining to the Law Concerning Revaluation of Land. Date of the revaluation March 31, million 33,181 million The amount by which the book value of land at the consolidated fiscal year end exceeds the market value: (6) Outstanding balance of overdraft account:

171,812 2,0 168,66 172,203
29,953 287,189 29,945 257,244 257,60,359 60,(116,678) 261,345 433,548

Total assets

433,548
Note: Figures shown in millions of yen have been rounded down to the nearest million. 29
Non-Consolidated Statement of Income
Ordinary items: Operating revenue: Management fees Dividends income Operating expenses: Selling, general and administrative expenses Operating income Non-operating income and expenses: Non-operating income: Interest and dividends income Gain on investments in partnerships Other Non-operating expenses: Interest expenses Non-operating commission expenses Loss on investments in partnerships Other Ordinary income Extraordinary items: Extraordinary expenses: Loss on disposal of fixed assets Loss from revaluation of investment securities Income before income taxes Income taxes-current Income taxes-deferred Net income Interim dividend Unappropriated retained earnings arising form corporate spinoff Cancellation of stocks of subsidiaries Unappropriated retained earnings
Note: Figures shown in millions of yen have been rounded down to the nearest million.

4,717 67,534 5,098

72,251 5,098 67,153

509 66,837

590 66,246

33 66,213

6,504 12,857 12,207

5,853 60,359

Notes to Non-Consolidated Financial Statements
1 Significant Accounting Policies
(1) Valuation of securities a. Held-to-maturity debt securities are stated at amortized cost (straight-line-method). b. Investments in subsidiaries and affiliates are stated at movingaverage cost. c. Other securities Securities with fair market value are stated at fair market value. The difference between acquisition cost and market value is accounted for as net unrealized holding gains or losses on securities in shareholders equity, with cost of sales determined by the moving average method. Other securities without fair market value are stated at moving-average cost. The net amount of equity included in the Companys financial statements from limited liability investment partnerships and similar investments, regarded as marketable securities under Article 2-2 of the Securities and Exchange Law of Japan, is calculated based on the relevant financial statements for the partnership available as of the reporting date stipulated in the partnership agreement. (2) Depreciation of fixed assets a. Tangible fixed assets Depreciation is computed by the declining-balance method. However, buildings (excluding attached equipment) are depreciated using the straight-line method. Useful life for primary assets is as follows: Building: Tools/Furniture: b. Intangible fixed assets Depreciation is computed using the straight-line method. We adopt the straight-line method over the useful life of 5 years for Software for internal use. (3) (4) Accounting for deferred assets All expenses are expensed when incurred. Accounting for allowances a. Accrued employees bonuses (3) 8 - 50 years 3 - 20 years (6) (5) Accrued employees bonuses are provided based on the estimated amount to be paid. b. Accrued retirement benefits for employees The liability for retirement benefits is based on the estimated amount of benefit obligations at the end of the fiscal year. c. Accrued retirement benefits for directors and statutory auditors The amount of the reserve required at the end of the fiscal year for directors and statutory auditors retirement benefits is based on company regulations. This allowance is stipulated under Article 43 of the Regulation for the Commercial Code. Accounting for lease transactions Finance leases that do not transfer ownership to lessees are accounted for in the same manner as operating leases. Accounting method for consumption taxes Consumption taxes are accounted using the net-of-tax method.

Accounting Standards for Impairment of Fixed Assets Effective from the year ended March 31, 2006, the Company and its subsidiaries adopted the new accounting standard for impairment of fixed Assets (Opinion Concerning Establishment of Accounting Standard for Impairment of Fixed Assets issued by the Business Accounting Deliberation Council on August 9, 2002) and the implementation guidance for the accounting standard for impairment of fixed assets (the Financial Accounting Standard Implementation Guidance No. 6 issued by the Accounting Standards Board of Japan on October 31, 2003). The adoption of this new accounting standard had no effect on the financial statements.
3 Notes to Non-Consolidated Balance Sheet
(1) (2) Accumulated depreciation of tangible fixed assets 77 million In addition to fixed assets listed on the balance sheet, significant fixed assets used on lease contracts included vehicles for sales. Receivables from and payables to affiliates Short-term receivables from affiliates Short-term payables to affiliates 5,670 million 168,897 million
Net assets on the balance sheet that increased due to mark-to-market valuations defined by Article 124, No. 3 of the Regulation for the Commercial Code: 521 million 30,000 million
4 Notes to Statement of Income
(1) Transactions with Affiliates Management fees Dividends income SG&A expenses Non-operating transactions (2) Net income per share 4,717 million 67,534 million 193 million 107 million 249.71
Outstanding balance of overdraft account:
Outstanding balance of commitment line contract: 50,000 million The amount of the overdraft account is limited to the outstanding balance of the commitment line. Pursuant to the commitment line contract, any amount exceeding the limit shall be repaid by the following business day. (6) Total number and type of shares issued and outstanding at the fiscal year-end, and total number and type of treasury stock held at the fiscal year-end Shares issued and outstanding Treasury stock 283,229,476 common shares 31,254,693 common shares
Proposal for Appropriation of Unappropriated Retained Earnings

(Unit: yen)

(Appropriation of retained earnings) Unappropriated retained earnings Appropriation: Dividends (Ordinary dividend of 30 per share) Bonuses to directors and statutory auditors (Amount paid to statutory auditors) Other reserve Retained earnings carried forward

Audit Report

This Board of Statutory Auditors, having received reports from and consulted with each of the Statutory Auditors on the methods and results of their audits concerning the performance by the Directors of their duties during the Second business year, from April 1, 2005 through March 31, 2006, have prepared this audit report and hereby report as follows: 1. Method of Audit by Statutory Auditors in Outline: In accordance with the auditing policies and apportionment of work specified by the Board of Statutory Auditors, each Statutory Auditor, in addition to attending meetings of the Board of Directors and other important meetings, has received reports on business from the Directors and others, has examined documents and so on containing important decisions, has investigated the conditions of business and assets at the Company and other important places of business, has requested the Companys subsidiaries to report on their operations, has visited significant subsidiaries where necessary and has investigated their conditions of business and assets. In addition, the Statutory Auditors have received reports and explanations from the independent auditors and have examined the accounting documents and detailed statements auxiliary thereto. In addition to the above methods, where necessary the Statutory Auditors have obtained reports from the Directors and others and have examined in detail the circumstances in connection with competitive dealings by Directors, dealings involving conflicting interests between Directors and the Company, the furnishing of benefits or profits by the Company gratuitously, out-of-the-ordinary dealings between the Company and subsidiaries or stockholders and the acquisition and disposition by the Company of its own shares. 2. Results of Audit: (1) The auditing methods and results of the independent auditors, KMPG AZSA & Co., are recognized as being proper. (2) The business report is recognized as being in accordance with laws and regulations and the Articles of Incorporation and as properly indicating the conditions of the Company. (3) Reviewing the item on the agenda concerning the appropriation of retained earnings in light of the conditions of the Companys assets and other circumstances, there are no matters that ought to be pointed out. (4) As the auxiliary detailed statements correctly indicate the matters that should be recorded therein, there are no matters that ought to be pointed out. (5) With respect to the performance of their duties by the Directors, no improper acts or material facts that violated laws and regulations or the Articles of Incorporation are recognized. Further, no breach of his duty by a Director was recognized in connection with competitive dealings by Directors, dealings between Directors and the Company, the furnishing of benefits or profits by the Company gratuitously, out-of-the-ordinary dealings between the Company and subsidiaries or shareholders, acquisition and disposition by the Company of its own shares and so on.

May 18, 2006 Board of Statutory Auditors, SEGA SAMMY HOLDINGS INC. Kazutada Ieda, (Full-time) Statutory Auditor Akio Kioi, Statutory Auditor Ryoichi Arai, Statutory Auditor Toshio Hirakawa, Statutory Auditor
Note: Statutory Auditors Akio Kioi and Toshio Hirakawa are outside statutory auditors that fulfill the qualification requirement as provided in Article 18, Paragraph 1, of the Law for Special Exceptions to the Commercial Code Concerning Audits, of Kabushiki Kaisha.
Procedures for Transactions in Fractional Unit Shares
Request for additional purchase
If holdings are less than 100
Increase to a whole trading unit* (100 shares)
First, confirm whether or not you are using the system for deposit and transfer of securities, and then complete the following procedures for an additional purchase.
* A trading unit is the minimum number of shares for trading. Voting rights are allocated to shareholders in accordance with whole trading units.
Shareholders using the system for deposit and transfer of securities
Shareholders not using the system for deposit and transfer of securities Obtain a request for additional purchase Ask Mitsubishi UFJ Trust and Banking Corporation for a request for additional purchase of fractional unit shares. Procedures to be completed at a office or by mail After filling in the required information on the request for additional purchase of fractional unit shares, present the form at the office or by mail and pay the estimated amount.
What is the estimated amount? Estimated amount = (the number of additional shares you want to purchase) x (the previous days closing price on the Tokyo Stock Exchange) x 1.3 Note: Amounts less than 1,000 are rounded up. In anticipation of price fluctuations, a higher amount is required to be paid. The difference between the estimated amount and the actual cost of the additional purchase will be settled later.
Please consult with your securities company
Payment settlement and share transfer After confirmation of the price and the cost of the additional purchase, the difference between the estimated amount and the actual cost of the additional purchase will be settled. Subsequently, the shares will be sent by delivery-certified mail.
shares (fractional unit shares)

held at Makuhari Messe near Tokyo. This years expo,
Sammy Bolsters Pachislot and Pachinko Machines Business through Tie-Up with GINZA CORPORATION
In October 2005, Sammy announced a business and capital tieup with GINZA CORPORATION which is active in the development, production, and sales of pachislot and pachinko machines. In pachislot machines, Sammy has maintained the top share of the market through a multiple brand strategy incorporating its original Sammy brand, the RODEO brand of subsidiary RODEO Corporation, and units supplied to partner companies. In pachinko machines, however, Sammy has offered only the Sammy brand. To achieve growth over the medium to long
the 25th, was a major success, with more than 30,000 attendees over two days, including both fans and industry insiders. SEGAs booth was the largest in the exposition hall and the center of attention, as large numbers of attendees lined up for a chance to see SEGAs exciting offerings, such as Vir tua Fighter 5, the latest version of the fighting game, and new versions of trading card games. SEGA communicated a message that was clear and well received.

IR Information

Internet Streaming Webcast of the General Meeting of Shareholders
SEGA SAMMY HOLDINGS extends an invitation to view an Internet streaming webcast of its General Meeting of Shareholders. The streaming webcast can be accessed on Tuesday, June 20, 2006, at the Companys web site. URL: http://www.segasammy.co.jp/live.html

New Web Site Launched

On April 1, 2006, SEGA SAMMY HOLDINGS launched a completely revised web site. The revision, which was designed to facilitate a deeper understanding of the operational activities of the entire Group, includes an easy-to-understand design and enhanced search capabilities. Particular attention was paid to the needs of shareholders and investors, and accordingly information and capabilities of interest to shareholders and potential
Access ID A shareholders access ID and a password are required to view the Internet webcast. Your access ID is your shareholders number, which can be found on the bottom right of the exercise of voting rights form mailed to you. Your password is your sevendigit postal code. If you have changed your address since April 1, 2006, please note that the postal code used on your exercise of voting rights form has been registered as your password. Therefore, please use that postal code to view the webcast.