FISCAL YEAR 2004 FINANCIAL REVIEW NISSAN REPORTED A RECORD YEAR IN TERMS OF REVENUES, OPERATING INCOME, NET INCOME,  SALES AND PRODUCTION VOLUME IN FISCAL 2004. NISSAN ACHIEVED TWO OF ITS THREE COMMITMENTS FOR NISSAN 180: AN 8 PERCENT OPERATING PROFIT MARGIN AND ZERO NET AUTOMOTIVE DEBT.  THE REMAINING COMMITMENT IS THE ACHIEVEMENT OF ONE MILLION ADDITIONAL UNIT SALES.  AT MID-YEAR 2005, GLOBAL SALES AT 1,809,000 UNITS WERE SLIGHTLY AHEAD OF THE COMMITMENT TO REACH 3,597,000 UNITS BY THE END OF SEPTEMBER 2005. PERFORMANCE Nissan Annual Report 2004 12 Net Sales Operating Income In General Overseas Markets, including Mexico, operating profits came to ¥84.8 billion, an increase of 28.5 percent compared to last year. This was primarily due to the consolidation of Dongfeng Motor and Yulon Nissan Motor. Inter-regional eliminations were negative ¥0.4 billion. Operating profit in Europe was ¥56 billion, an increase of 13.8 percent compared to last year, owing to a better mix and higher contributions from Russia.  Due to higher volumes, profitability in the U.S. and Canada increased 7.9 percent from last year and totaled  ¥379.7 billion.  By region, operating profits in Japan came to ¥341.1 billion, a decrease of 3.2 percent compared to last year. This was mainly due to unfavorable exchange rate fluctuations and an increase in R&D expenses, which reached a record level.  Consolidated operating profit improved by 4.4 percent from last year to a record ¥861.2 billion. This resulted in an operating profit margin of 10.0 percent. Operating profit was affected by the following factors: Consolidated net sales came to ¥8,576.3 billion, up 15.4 percent from last year. A higher volume and mix had a positive impact of ¥707.0 billion. Movements in foreign exchange rates produced a negative impact of ¥173.0 billion. Changes in the scope of consolidation, including Dongfeng Motor and Yulon Nissan Motor, raised revenues by ¥432.0 billion. • The effect of foreign exchange rates produced a ¥78 billion negative impact for the full year. The depreciation of the U.S. dollar against the yen resulted in a negative impact of ¥74 billion, with an additional ¥13 billion from other currencies. The appreciation of the euro resulted in a positive impact of ¥9 billion. • The change in the scope of consolidation produced  a positive impact of ¥31 billion. This was primarily from the consolidation of Dongfeng Motor and Yulon Nissan Motor. • The impact of the higher volume and mix contributed ¥284 billion. This was mainly driven by an increase in U.S. sales volume. • Selling expenses increased by ¥114 billion, also mainly due to the increase of sales in the U.S. • The improvement in purchasing costs amounted to ¥131 billion. • General, administrative and other expenses increased by ¥25.7 billion. • Warranty costs increased by ¥41 billion, partly due to greater volume. • Cost reductions from manufacturing efficiencies were offset by costs associated with expanding the Canton plant’s capacity, which resulted in a ¥15 billion increase in manufacturing and logistics expenses. • An additional ¥44 billion was allocated to R&D to reinforce product and technology development. • Product enrichment and the cost of regulations had  a negative impact of ¥92 billion.