In North America, inventory shortages became especially obvious in December.  We’ve heard reports that the best selling titles there were "Brain Age" and "More Brain Age."  The situation was similar in Europe.  "Nintendo DS" sold very well in both regions, especially in December.

  We understand that "Wii Fit" is being enjoyed by family members playing together. Unfortunately, however, it is too soon after the launch date to make any detailed analysis.

  The main reason for the high profit ratio in the December quarter is a lower percentage of operating expenses compared to sales, thanks to strong shipments worldwide in the holiday peak season.

  We manufactured and retained some amount of hardware for the Thanksgiving and Christmas holiday season, and we also air shipped some units that were originally slated for delivery in January.

  Such an activity was taken independently by the retailer, and they decided to do this based upon the January shipment estimates we had communicated to them.  As our shipments to them take place in January, it will be accounted for our January sales.

  As we have not disclosed U.S. dollar nor Euro sales estimates for the 4th quarter (January-March 2008), we cannot make a detailed explanation with specific amounts.  Instead, let us try to explain using actual U.S. dollar sales results through the 3rd quarter (April-December 2007) as an example.  We adopted a 117.29 yen per dollar average exchange rate for dollar sales actually incurred through the 3rd quarter (April-December 2007).  If the average exchange rate during the 4th quarter (January-March 2008) is 110 yen per dollar, then the 12-month average of the yen-dollar exchange rate will become 115.47 yen.  Our U.S. dollar sales through the 3rd quarter (April-December 2007) were approximately 4 billion dollars.  If the average dollar-yen exchange rate for the 4th quarter (January-March 2008) is at exactly the same rate that Nintendo has estimated, then the 9-month U.S. dollar sales will be decreased by an amount calculated by multiplying this U.S. dollar sales amount by 1.82 yen, which is the difference between the said former-9-month average and 12-month average exchange rates.  The opposite effect will be applied to purchases with U.S. dollars for the impact on gross margin, with a slightly different formula adopted for this purpose.  In addition, as to the effects on non-operating profit and loss account items, the assets and liabilities held in foreign currencies at the end of the fiscal year will be affected as a result of their reevaluations with the exchange rates applied at that time.  For your information, we held assets and liabilities denominated in U.S. dollars worth approximately $4.4 billion (net) for major accounts, and the impact will be caused by either an increase or decrease of those items during the 4th quarter (January-March 2008).

  The combination of all these effects will be reflected there.

  The major reason is the impact of the exchange rates.  We are calculating and reporting our non-Japanese yen sales by applying average exchange rates.  When the yen becomes stronger in the 4th quarter (January-March 2008), that affects not only the final three months of January, February and March 2008 but also the already ended 9 months’ sales through the 3rd quarter (April-December 2007).  This negative effect for the full year of sales shall be reflected in 4th quarter results  (January-March 2008).  In addition, the ratio of expenditures to sales is expected to rise, and the ratio of "Wii" hardware sales, which has less profitability, among total sales is also expected to increase.

  As a rule, we are using marine transportation to ship our hardware products to sales territories, but due to very strong demand during the holiday sales season, we have shipped a part of those shipments slated for January by air.  So, there is little room, if any, for an increase.

  We have come up with our shipment projections by taking various factors into consideration, such as the actual sales results through December, sales estimates of existing and the new software slated to launch in January-March and input from our licensees.