Toy Industry Overview – Annual 2007 April 2008

Housekeeping Presentation (1:15) + Q&A (:45) Syndicated Presentation Two documents – category structure & evaluation Digital Copy of the Deck The NPD Group / Consumer Tracking Service –Recalls and returns not accounted for Data presented is as of January 2008 data release Per National Retail Federation, 2007 has an extra week v Product images are representative of the property

Agenda Toy Industry Overview Toy Categories Boys and Girls Retailers Licensing Kids

Toy Industry Overview

The Big Picture Billions of DollarsBillions of Units -2.0%+0.4% - 5.0%- 4.1% ARP: $ % Source: The NPD Group / Consumer Tracking Service

A Bumpy Road For Toys… Toy Recalls Shaky economy –Toys are discretionary –Toys used to shelter children Competition for Kids’ time is fierce –Digital Kids (consumer electronics, online activities, virtual worlds) –Outrageous +43% growth in Video Games Girls’ toys not performing well –Declines in Barbie, Bratz and Dora –Lack of new movie/TV licenses for girls

The Good News For Toys… Consumers continue to pay higher prices for toys Several segments grew –Online channel (+9%) –Grandfathers (+33%) –Boys Ages 0-8 (+5%) –Connected Web Play (+>200%) Higher birth rates continue (+6%) U.S. HH penetration for toys is high (>90%) Europe is growing (+2%)

Big 5 European Countries Combined Grow Value Sales by 2% Change vs %+9%+1%+4%+2% POS UK: Transformers, Spider-Man, In the Night Garden, HSM, Online Germany: LEGO, Silverlit France: Specialty stores, Toys space in Food, Transformers, LPS Italy: Gormiti craze, LEGO, Dolls: Cicciobello, Baby Alive and Winx Club Spain: Cars, Mickey Mouse, Spider-Man, Pocoyo, Formula 1

Quarterly Trends Show Increasing Declines Total Industry % Dollar Change – by Quarter in 2007 v 2006 Source: The NPD Group / Consumer Tracking Service Per National Retail Federation, January 2007 has an extra week v. January 2006

Movies Helped Some Categories Grow Dollar Sales (MM) Annual 2007 vs Dollar % Change 16% 38% 46% Source: The NPD Group / Consumer Tracking Service

Dollar Share (%) Share Point Change 2007 vs Annual 2006 Ranking Dollar Volume Percent Change 2007 vs Top 10 Corporate Manufacturers, 2007 Dollar Share Innovation, Licensing, Line Extension, Focus Source: The NPD Group / Consumer Tracking Service

Boys +2% Boys Ages 3-5 Soared, Girls Was Down Across The Board Flat +10% +4% -3% Dollar Share/Sales Trend Annual 2007 Girls -7% -10% -6% -7% -2% Source: The NPD Group / Consumer Tracking Service Licensed Toys: Age 3-5: +19% +2 pt.-2 pt. Licensed Toys: Age 0-2: -13%

Toy Categories

Two Supercategories Drove Sales In 2007 Dollar Sales (MM) Annual 2007 vs Dollar % Change Source: The NPD Group / Consumer Tracking Service

Action Figures & Accessories Dollar Sales (MM) Annual 2007 vs Dollar % Change Source: The NPD Group / Consumer Tracking Service

Vehicles Dollar Sales (MM) Annual 2007 vs Dollar % Change Source: The NPD Group / Consumer Tracking Service

Plush Dollar Sales (MM) Annual 2007 vs Dollar % Change Source: The NPD Group / Consumer Tracking Service

Building Sets Dollar Sales (MM) Annual 2007 vs Dollar % Change Source: The NPD Group / Consumer Tracking Service

All Other Toys Dollar Sales (MM) Annual 2007 vs Dollar % Change Source: The NPD Group / Consumer Tracking Service

Arts & Crafts Dollar Sales (MM) Annual 2007 vs Dollar % Change Source: The NPD Group / Consumer Tracking Service

Youth Electronics Dollar Sales (MM) Annual 2007 vs Dollar % Change Source: The NPD Group / Consumer Tracking Service

Games & Puzzles Dollar Sales (MM) Annual 2007 vs Dollar % Change Source: The NPD Group / Consumer Tracking Service

Outdoor & Sports Toys Dollar Sales (MM) Annual 2007 vs Dollar % Change Source: The NPD Group / Consumer Tracking Service

Infant / Preschool Dollar Sales (MM) Annual 2007 vs Dollar % Change Source: The NPD Group / Consumer Tracking Service

Dolls Dollar Sales (MM) Annual 2007 vs Dollar % Change Source: The NPD Group / Consumer Tracking Service

Boys and Girls

Boys By Age of Recipient, Dollar Share, % +10% +4% -9% +1% Sales To Boys Were Up Overall Fueled By Growth In Boys Ages 3-8 Source: The NPD Group / Consumer Tracking Service Boys +2% Q4: -9%

Boys, 0-2 Years Old 2007: $2,184MM % Change vs YAG: 0% $ Share of Industry: 11% ARP: $8.88 Top $ Categories (MM) & % Growth/Decline Sesame Street Is Tops With Boys Ages 0-2 Source: The NPD Group / Consumer Tracking Service Top $ Growth Properties (MM) Interesting Findings: Grandfathers, representing 6% of dollar sales, spend 126% more for the average toy, $ Grandmothers (22% of total sales) only spend $9.99 on average. 36% of purchases were for No Special Occasion, as opposed to total toys where only 29% of purchases were for No Special Occasion (Index = 124). - 3% + 15% - 4% - 16% +20%

The 3-5 Boys Group Is The Largest And Growing Source: The NPD Group / Consumer Tracking Service Boys, 3-5 Years Old 2007: $3,224MM % Change vs YAG: +10% $ Share of Industry: 16% ARP: $7.61 Top $ Growth Properties (MM) Interesting Findings: This segment had the strongest growth in three channels: Food/Drug (+39%), Online/Internet (+36%) and Mass Merchant/Discount (+6%) For boys 3-5, Dad’s are up +13% and Grandpa’s are up +49%. Male buyers found these movie licenses especially appealing. +26% - 2% +5% +21% Top $ Categories (MM) & % Growth/Decline +18%

Action Figures Stay On Top for Boys 6-8 With Transformers Driving Growth Source: The NPD Group / Consumer Tracking Service Boys, 6-8 Years Old 2007: $2,161MM % Change vs YAG: +4% $ Share of Industry: 11% ARP: $7.85 Top $ Growth Properties (MM) Interesting Findings: The toy channel experienced 21% growth in this segment. The Food channel also grew (+52%) as did the Online channel (+12%) 24% of all toys purchased for boys 6-8 are for their birthday. This is the highest index (141) for birthday across all age segments. +31% - 8% +19% +22% +28% Top $ Categories (MM) & % Growth/Decline

9-11 Is The Smallest Segment For Boys, And Declining +35% -7% -15% +5% Source: The NPD Group / Consumer Tracking Service Boys, 9-11 Years Old 2007: $1,196MM % Change vs YAG: -9% $ Share of Industry: 6% ARP: $8.17 Top $ Growth Properties (MM) Interesting Findings: Grandparents spend the most money on average for this segment ($11.04) while parents spend the least ($7.17) Target was the only major retailer that grew in this age group (+23%); Wal-Mart (-3%) and Toys R Us (-22%) both declined Top $ Categories (MM) & % Growth/Decline +8% - 1% -43% -18% +3%

Girls, By Age of Recipient Dollars, % -6% -7% +3% -6% Girls Sales Experienced A 7% Decline Overall Source: The NPD Group / Consumer Tracking Service Girls -7%

Girls 0-2 Experienced Largest Sales Declines Source: The NPD Group / Consumer Tracking Service Top $ Growth Properties (MM) Girls, 0-2 Years Old 2007: $1,874MM % Change vs YAG: -10% $ Share of Industry: 10% ARP: $9.43 Interesting Findings: Moms buying for their daughters ages 0-2 declined by nearly $170MM or down -18%. Licensed Toys were down -13% All three major retailers suffered declines: Toys R Us (-15%), Wal-Mart (-10%) and Target (-9%) Top $ Categories (MM) -14% -10% - 4% - 7%

The 3-5 Group Is The Largest Among Girls, But Declining Source: The NPD Group / Consumer Tracking Service Girls, 3-5 Years Old 2007: $2,832MM % Change vs YAG: -6% $ Share of Industry: 14% ARP: $7.47 ( -10%) Top $ Categories (MM) Top $ Growth Properties (MM) Interesting Findings: Grandfather spending grew 66%, the greatest % growth for any segment. He is also overdeveloped for this group as compared to total toys (I = 150) Target grew +5% for girls 3-5. This was the only girl’s segment to see growth for any of the top 3 retailers -14% +6% +4% +19% +27%

Hannah Montana And High School Musical Experience Growth Among Girls 6-8, While Overall Segment Declines Source: The NPD Group / Consumer Tracking Service Girls, 6-8 Years Old 2007: $2,011MM % Change vs YAG: -7% $ Share of Industry: 10% ARP: $8.28 Top $ Categories (MM) Top $ Growth Properties (MM) Interesting Findings: 28% of all volume for Connected Web Play toys are for girls ages 6-8, the highest of any segment. Girls 6-8 was the largest segment for Hannah Montana (53%), High School Musical (38%) and Webkinz (28%). -13% -8% -24% -9% -6%

Girls 9-11 Is The Only Girl’s Segment To Show Growth Source: The NPD Group / Consumer Tracking Service Girls, 9-11 Years Old 2007: $1,168MM % Change vs YAG: +3% $ Share of Industry: 6% ARP: $8.36 Top $ Growth Properties (MM) Interesting Findings: Department/Major Chains (+55%) and All Other channel (+15%) experienced the highest growth percentage of any segment with girls 9-11 This age group had the most influence. 72% of sales resulted from “asking for a toy” and 44% asking for a “specific toy” Top $ Categories (MM) +3% +34% -10% +2% +0%

Retailers

Target Moves Up To #2 Retailer Dollar Share Source: The NPD Group / Consumer Tracking Service $ %Chg +1% -5% -2%

Annual Per Store Sales Declines For The Big 3 Retailers Retailer Dollar Sales Per Store (,000) Wal-MartTargetToys R Us +8% # Stores3,1893,3313, ,3981,4881,537 Source: The NPD Group / Consumer Tracking Service +9% -2% -5% -7% -5% Q4 Chg.-11%-8%-6%

Online Channel Grows +9% Retailer Dollar Share – Online Channel; Annual ’07 vs. ’06; Q4’07 vs. Q4’06 Source: The NPD Group / Consumer Tracking Service Note: Toysrus.com and Amazon.com separated in July 2006; therefore, neither can be compared versus year- ago for Annual trends. $ %Chg -15% +13%* +13% -42% +18% -14% NA +35% NA +58% +1% * <200 transactions: Proper caution should be used in interpretation $ %Chg +9%+3%

Regional Ups & Downs For The Big 3 Retailers Retailer Dollar % Change – Annual 2007 vs $% %Chg Wal-Mart 23% -2% Target 20% +5% Toys R Us 14% -1% $% %Chg Wal-Mart 28% -4% Target 15% +3% Toys R Us 13% -12% $% %Chg Wal-Mart 20% -1% Target 11% -1% Toys R Us 20% -9% $% %Chg Wal-Mart 37% -2% Target 13% -2% Toys R Us 13% +1% WEST (Flat) CENTRAL (-3%) NORTHEAST (-1%) SOUTH (-3%) Source: The NPD Group / Consumer Tracking Service

Pricing Strategy Matters Unit Distribution of Sales by Price Point – Annual % Source: The NPD Group / Consumer Tracking Service 50% 20% 22% +2 pts. -2 pts. +1 pt. -1 pt. flat -2%-5%+1%-2%

US Household Penetration For Toys High Among Dollar Stores Source: The NPD Group / Consumer Tracking Service / Market Summary Report US HH Penetration for Toys (Excluding Internet) – Annual 2007 Dollar Share 28.3%14.5%0.7%1.3%14.2%4.0%

Licensing

Licensed Toys Outperformed The Industry Non-Licensed Toys 73% Licensed Toys 27% Annual 2007 Non-Licensed Toys 74% Licensed Toys 26% Annual 2006 Dollar Share of Licensed vs. Non-Licensed Toys Annual 2006 vs % -3%

Four Of The Top 10 Licensors Showed Growth % Chg. ’07 vs. ‘06 Dollar Volume (MM) Top 10 Licensors, Ranked on Annual 2007 Dollar Sales Source: The NPD Group / Consumer Tracking Service Annual 2006 Ranking

Six Of The Top 10 Manufacturers Of Licensed Toys Have 75% Or More Of Their Portfolio Tied To Licenses % of Total Sales Licensed Licensed Dollar Volume (MM) Top 10 Manufacturers for Licensed Toys, Ranked on Annual 2007 Licensed Dollar Sales Source: The NPD Group / Consumer Tracking Service

Annual 2006 Ranking Dollar Volume (MM) Top 10 Properties - Ranked on Annual 2007 Dollar Sales A Perspective On Top Properties Annual 2007 vs % Change Source: The NPD Group / Consumer Tracking Service

Top 3 Licenses Tie For #1 Annual 2006 Ranking Annual 2007 vs % Change Dollar Volume (MM) Licensed Sales Only, Brand Data Excluded Top 10 Licenses - Ranked on Annual 2007 Dollar Sales Source: The NPD Group / Consumer Tracking Service

Annual ‘07 Dollar Volume (MM) Spider-Man Climbed To #1 Growth License Spot Annual ‘07 vs. ’06 % Change Absolute $ Growth Change Annual ‘07 vs. Annual ‘06 (MM) Top 10 Absolute Dollar Growth Licenses Source: The NPD Group / Consumer Tracking Service Are You Smarter Than a 5 th Grader? $40

Top 10 Licenses By Descending Dollars for Ages 0-2, Only Sesame Street, Winnie The Pooh, & Thomas and Friends Have Licensing Staying Power For Kids Ages 0-2 Source: The NPD Group / Consumer Tracking Service SESAME STREET 2 WINNIE THE POOH WINNIE THE POOH & FRIENDS DORA THE EXPLORER 3BLUES CLUES BOB THE BUILDER DORA THE EXPLORER WINNIE THE POOH & FRIENDS THOMAS AND FRIENDS 4 DISNEY STD.CHARACTE RSBARBIE MICKEY & FRIENDSCARE BEARS THOMAS AND FRIENDS WINNIE THE POOH & FRIENDSCARS THE MOVIE 5BARBIEJOHN DEEREBLUES CLUES THOMAS AND FRIENDS DISNEY PRINCESS CARS THE MOVIE DISNEY PRINCESS 6JEEPTONKA THOMAS AND FRIENDS MICKEY & FRIENDS THOMAS AND FRIENDSCARE BEARS DISNEY PRINCESS WINNIE THE POOH & FRIENDS 7 THOMAS AND FRIENDS DISNEY STD.CHARACTE RSTONKA DISNEY PRINCESSJEEPCABBAGE PATCH 8TONKA THOMAS AND FRIENDSBARNEY BOB THE BUILDERWIGGLESJOHN DEERE SPIDERMAN 9BARNEY BOB THE BUILDER SPONGEBOB SQUAREPANTSTONKASPIDERMAN SPONGEBOB SQUAREPANTS GO DIEGO GO! 10TOY STORYJEEP MAGNA DOODLE SPONGEBOB SQUAREPANTS MICKEY & FRIENDSSPIDERMAN MICKEY & FRIENDSBACKYARDIGANS

Top 10 Licenses By Descending Dollars for Ages 3-5, Source: The NPD Group / Consumer Tracking Service BARBIE SPIDERMAN DORA THE EXPLORER 2POKEMON THOMAS AND FRIENDSSPIDERMAN DISNEY PRINCESS CARS THE MOVIE 3TOY STORY POWER RANGERS THOMAS AND FRIENDSSPIDERMAN DORA THE EXPLORERSTAR WARS THOMAS AND FRIENDS DISNEY PRINCESS 4BLUES CLUESTONKA POWER RANGERS BARBIE THOMAS AND FRIENDSCARS THE MOVIESPIDERMAN 5 WINNIE THE POOH BOB THE BUILDER THOMAS AND FRIENDSPOWER RANGERSSPIDERMANBARBIE THOMAS AND FRIENDS 6 POWER RANGERSHOT WHEELSJEEPCARE BEARS BATMANSPIDERMANBARBIE 7HOT WHEELSMONSTERS, INC.TOY STORY DORA THE EXPLORER THOMAS AND FRIENDSBARBIEPOWER RANGERS 8TONKATOY STORYSTAR WARSHULK NINJA TURTLES(TMNT) POWER RANGERSSTAR WARS 9CHEVROLETSCOOBY DOO DISNEY PRINCESSJEEP SPONGEBOB SQUAREPANTS DISNEY ALL OTHER 10SESAME STREET WINNIE THE POOHTONKATRANSFORMERS SPONGEBOB SQUAREPANTS NINJA TURTLES(TMNT)SESAME STREETGO DIEGO GO! Only Barbie and Power Rangers Have Consistently Made The Top 10 Licenses List Since 2000 For Kids Ages 3-5

Top 10 Licenses By Descending Dollars for Ages 6-8, For Kids Ages 6-8, Hot Entertainment Licenses Made It Into The Top 10 In 2007 Source: The NPD Group / Consumer Tracking Service POKEMONBARBIE YU-GI-OH STAR WARS 2BARBIEPOKEMONSTAR WARSBARBIESPIDERMANYU-GI-OHCARS THE MOVIESPIDERMAN 3STAR WARSHARRY POTTERSPIDERMANBEYBLADEBARBIE DISNEY PRINCESS 4 POWER RANGERS YU-GI-OHSPIDERMAN POWER RANGERS DISNEY PRINCESSBARBIE HANNAH MONTANA 5DIGIMONSTAR WARSHARRY POTTERHULK NINJA TURTLES(TMNT)BATMANYU-GI-OH CARS THE MOVIE 6CHEVROLETDIGIMONPOKEMONTRANSFORMERS DISNEY PRINCESSSPIDERMAN POKEMON 7 POWERPUFF GIRLS POWER RANGERS BEYBLADE CABBAGE PATCH POWER RANGERSBARBIE 8 BRITNEY SPEARSWWFZOIDSPOKEMONCARE BEARS POWER RANGERS DORA THE EXPLORER HIGH SCHOOL MUSICAL 9WWFNASCARTRANSFORMERSHARRY POTTER SPONGEBOB SQUAREPANTS DISNEY ALL OTHERBATMAN DORA THE EXPLORER 10HOT WHEELSDRAGON BALL ZRAPUNZELHUMMERPOKEMONCARE BEARS SPONGEBOB SQUAREPANTSWWE

Licensed Toys Became More Important Overall And In Six Supercategories As Compared To Last Year 2007 Dollar Share of Licensed vs. Non-Licensed Toys By Supercategory Share Chg. from 2006 for Licensed Source: The NPD Group / Consumer Tracking Service

Young Boys Saw Growth Due In Part To Licenses Such As Cars, Spider-Man and Pokemon Boys +7% Dollar Share of Licensed Toys by Gender and Age of Recipient, Annual 2007 Girls -5% -13% -8% +10% +18% Source: The NPD Group / Consumer Tracking Service +6% +19% -13% +11% -13% -3% -10% +3 pt.-3 pt.

Ages 2-4 Is The Sweet Spot For Boys Licensed Toys Individual Age Distribution of Licensed Toys for Boys, Annual 2005, 2006 and 2007, Dollar Volume (MM) Gains in ages 6-8 mostly due to Star Wars & Spider-Man. Gains in ages 2-4 mostly due to Thomas & Friends, Cars the Movie and Spider-Man. Source: The NPD Group / Consumer Tracking Service

Girls 5 And Under Saw Declines In Licensed Toys, 64% Individual Age Distribution of Licensed Toys for Boys vs. Girls, Annual 2005, 2006 and 2007, Dollar (MM)* Licensed Sales Only, Brand Data Excluded Declines in ages 2-4 mostly due to Dora the Explorer, Sesame Street & Cabbage Patch Gains in ages 7-10 mostly due to Hannah Montana and High School Musical Source: The NPD Group / Consumer Tracking Service

Where Are The Licensed Toys For Girls? Age Distribution of Licensed Toys for Boys vs. Girls, Annual 2007, Dollar Volume (MM) Licensed Sales Only, Brand Data Excluded Source: The NPD Group / Consumer Tracking Service Total Gap widened to $1.3 billion

Blockbuster movies scheduled for 2008 – Boy Oh Boy! Batman - The Dark Knight (July ‘08) RATED R Indiana Jones and the Kingdom of the Crystal Skull (May ‘08) Speed Racer (May ‘08) Wall-E (June ‘08) Harry Potter and the Half-Blood Prince (November’ 08) Hannah Montana/ Miley Cyrus: Best of Both Worlds Concert Tour (February ‘08) Kung Fu Panda (June ‘08) The Incredible Hulk (June ‘08) Iron Man (May ‘08) High School Musical 3: Senior Year (October ‘08) Star Wars: The Clone Wars (August ‘08)

Kids!

Where Is Money Being Spent For Kids? Source: The NPD Group / Kids Share of Wallet Kids Age 0-14

Apparel Sales To Kids Grew With Disney Taking The Top Spot And Many Store Brands Making The List Disney Carters Old Navy Gap The Children’s Place Hanes Faded Glory (Wal-Mart) Gymboree Cherokee Oshkosh B Gosh Fruit Of The Loom Arizona Jean (JCP) Nike Top Apparel Brands – Kids 0-13 Years Old – Annual 2007 Source: The NPD Group / Consumer Tracking Service – Children’s Wearer Segment

McDonald’s (15%) Burger King (4%) Wendy’s (3%) Taco Bell Pizza Hut KFC Sonic Dunkin Donuts Subway Dominos Restaurant Traffic Was Up +1% for Kids 0-12 Source: The NPD Group / Consumer Tracking Service – FoodService Top QSR Restaurants for Kids 0-12, Annual 2007

Video Games Continue Strong Growth As Traditional Toys’ Growth Levels Off Note: Toy data reflects multiple methodologies. Significant changes were made in both 2002 and Source: The NPD Group / Consumer Tracking Service +43% $22B $18B

Among Kids, Girls Show Higher Rate Of Growth Video Games Industry Dollar Sales - Millions Annual ’07 vs. ’06 % Change 22% 16% 40% 45% Source: The NPD Group / Consumer Tracking Service

Portable Gaming Is Hot For Kids Unit Share, Kids 12 & Under DS replacing GBA Source: The NPD Group / Consumer Tracking Service

Licenses Drive Top Games For Kids 78.3 million units of games sold for kids 12 & under in 2007 equating to $2.4 B Source: The NPD Group / Consumer Tracking Service

Kids Were Into These Big Games Too! Source: The NPD Group / Consumer Tracking Service

Skechers Nike Stride Rite Heelys Vans Crocs Timberland Faded Glory Smart Fit (Payless) Adidas Kids Footwear Was Up +3%: Brands Matter! Top Footwear Brands – Kids 0-13 Years Old – Annual 2007 Source: The NPD Group / Consumer Tracking Service – Footwear Children’s Wearer Segment

Top Music Artists (CD & Digital Albums) Kids 0-12 Years Old – Annual 2007 Source: The NPD Group / Consumer Tracking Service

Top VHS/DVD Sales/Rentals Kids 0-12 Years Old As Primary Viewers – Annual 2007 Source: The NPD Group / VideoWatch

Kids’ Personal Ownership And Usage Of Consumer Electronics (2007) Ownership Usage P – Portable NP – Non-Portable Source: The NPD Group / Kids & Consumer Electronics Wave 3

Electronics: Average Age Of Initial Kid Use Continues To Decline Age Source: The NPD Group / Kids & Consumer Electronics Wave 3

Most Of Kids “Digital” Time Is Spent On Games And Music % of Time Spent on Digital Activities Across 4 Key Devices (PDMP, Computer, Cell Phone, Video Game Systems) Source: The NPD Group / Kids & Digital Content 2007 Edition

Boys Are From Mars, Girls Are From Venus Movie licensesTV licensesVideo GamesWeb Connected Play Online Channel DadMomLicensed ToysARPBirthday No Special Occasion Top 3 Retailers Combined

Industry Landscape Opportunities Higher Birth RatesGrandparentsGrowth In EuropeToy SafetyHigher PricesNew TV Licenses for Girls