The 76th Annual General Meeting of Shareholders

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13	I was a fan of the late President Hiroshi Yamauchi, who forcefully spoke of being genuine or fake as the most important thing in making things and products. So from this, I think Nintendo values uniqueness and making things that are different from other companies. I remember Mr. Yamauchi talking about how Nintendo did not depend on the strengths of others, but did things using its own strengths. Will there not be side effects from the partnership with DeNA?
13	Kimishima: First, please understand that the need to continue making unique products that are different from other companies' is firmly embedded in our management approach, and this will continue to be of utmost importance. In addition, I would like to extend my appreciation to you for remembering the words of Mr. Yamauchi. Regardless of our partnership with DeNA, there is no question that we must undertake the important task of creating new things. Meanwhile, DeNA does have very good technology and experience when it comes to analyzing how to get things to consumers and how to understand consumer reactions after delivery. We believe that we can make products that are even more unique based on consumer feedback. As such, I'd like to be clear that we are confident that our current business partnership with DeNA will move us in a positive direction, not a negative one, in terms of making unique products.

I was a fan of the late President Hiroshi Yamauchi, who forcefully spoke of being genuine or fake as the most important thing in making things and products. So from this, I think Nintendo values uniqueness and making things that are different from other companies. I remember Mr. Yamauchi talking about how Nintendo did not depend on the strengths of others, but did things using its own strengths. Will there not be side effects from the partnership with DeNA?

Kimishima:

First, please understand that the need to continue making unique products that are different from other companies' is firmly embedded in our management approach, and this will continue to be of utmost importance. In addition, I would like to extend my appreciation to you for remembering the words of Mr. Yamauchi.

Regardless of our partnership with DeNA, there is no question that we must undertake the important task of creating new things. Meanwhile, DeNA does have very good technology and experience when it comes to analyzing how to get things to consumers and how to understand consumer reactions after delivery. We believe that we can make products that are even more unique based on consumer feedback. As such, I'd like to be clear that we are confident that our current business partnership with DeNA will move us in a positive direction, not a negative one, in terms of making unique products.

14	I have a question about your earnings forecast for this fiscal year. With the Wii U effectively withdrawing from the market, Wii U hardware sales are projected at 800,000 units, and with the 3DS also having peaked, there is a slight decline in projected sales volume. This makes the operating income target of 50% year-on-year growth to ¥45 billion look less than fully credible. There is also a sense that the company's projections could be revised downward substantially around the end of the calendar year or the beginning of the new calendar year, and that the NX launch date could be postponed. As such, I would appreciate hearing what you can tell us about the basis for the ¥45 billion operating income target, and any detailed breakdown of this figure.
14	Kimishima: The Nintendo 3DS business has already surpassed cumulative global hardware sales of 58 million units. We believe that the Nintendo 3DS business will generate sufficient profit as long as we can deliver the software titles that are planned for release. The Pokémon series is marking its 20th year since the first title was released, and the series has topped total sales of 200 million games worldwide. Pokémon Sun and Pokémon Moon are the latest series titles, scheduled for release in November 2016, and we expect these to make a substantial profit contribution. While we announced our shipment forecast of 800,000 Wii U hardware, we are forecasting total sales of ¥500 billion for this fiscal year, about the same as last year. I am not currently able to talk about concrete figures for unit sales, but we are planning for NX to make up for falling Wii U sales. Software for NX will also contribute to sales and profit. We are preparing to release around five smart device applications (including Miitomo) by next March, and predict that the smart device business will also contribute to profit. One factor that merits caution, however, is the UK's decision to leave the EU. While we still do not have a clear picture of how this will affect exchange rates, a continued strong yen may impact our sales and profit, as overseas sales account for more than 70% of our total sales.

I have a question about your earnings forecast for this fiscal year. With the Wii U effectively withdrawing from the market, Wii U hardware sales are projected at 800,000 units, and with the 3DS also having peaked, there is a slight decline in projected sales volume. This makes the operating income target of 50% year-on-year growth to ¥45 billion look less than fully credible. There is also a sense that the company's projections could be revised downward substantially around the end of the calendar year or the beginning of the new calendar year, and that the NX launch date could be postponed. As such, I would appreciate hearing what you can tell us about the basis for the ¥45 billion operating income target, and any detailed breakdown of this figure.

Kimishima:

The Nintendo 3DS business has already surpassed cumulative global hardware sales of 58 million units. We believe that the Nintendo 3DS business will generate sufficient profit as long as we can deliver the software titles that are planned for release. The Pokémon series is marking its 20th year since the first title was released, and the series has topped total sales of 200 million games worldwide. Pokémon Sun and Pokémon Moon are the latest series titles, scheduled for release in November 2016, and we expect these to make a substantial profit contribution.

While we announced our shipment forecast of 800,000 Wii U hardware, we are forecasting total sales of ¥500 billion for this fiscal year, about the same as last year. I am not currently able to talk about concrete figures for unit sales, but we are planning for NX to make up for falling Wii U sales. Software for NX will also contribute to sales and profit.

We are preparing to release around five smart device applications (including Miitomo) by next March, and predict that the smart device business will also contribute to profit.

One factor that merits caution, however, is the UK's decision to leave the EU. While we still do not have a clear picture of how this will affect exchange rates, a continued strong yen may impact our sales and profit, as overseas sales account for more than 70% of our total sales.

15	Nintendo's core business is in the game industry, and the biggest problem there is the rising cost in terms of time and money needed to develop one game. How are you addressing this problem?
15	Kimishima: The cost of developing game software has certainly grown over the last ten years. This is a big challenge, as there is no simple formula to calculate the size of how popular a game is going to be with consumers. That said, I think that developing with this in mind will be increasingly important. Genyo Takeda (Senior Managing Director, Technology Fellow): The thinking for a long time was that computer performance for a game should be dedicated entirely to the consumer’s enjoyment, but now times have changed and the common sense is that computer performance should also be used to improve productivity in making the game software itself. But what is most important is how we achieve balance. I am going to let Mr. Miyamoto speak, as he has spent a lot of time and energy on raising the productivity of software development while doing this balancing act. Miyamoto: In striking that balance, while it's important that we do not overextend by putting an excessive amount of content in our games, the only solution is how to make software that sells well. There will be big hits somewhere in our business, and they support the games that fail and allow us to take on other challenges. So our basic premise is to create software that will sell in the range of at least two million units. We simply couldn't recoup our costs if we only released games in Japan that had sales of around 300,000 units, so the global market is our standard. Takahashi: I also think the key word here is balance. This has a lot of aspects, such as knowing when we need to dedicate a lot of time and people to something and when we do not. Or ways to leverage game engines that are used for general purposes, and how to create our own game engines that lots of others can also make easy use of. For NX, we are thinking about many different development techniques based on these considerations.

Nintendo's core business is in the game industry, and the biggest problem there is the rising cost in terms of time and money needed to develop one game. How are you addressing this problem?

Kimishima:

The cost of developing game software has certainly grown over the last ten years. This is a big challenge, as there is no simple formula to calculate the size of how popular a game is going to be with consumers. That said, I think that developing with this in mind will be increasingly important.

Genyo Takeda (Senior Managing Director, Technology Fellow):

The thinking for a long time was that computer performance for a game should be dedicated entirely to the consumer’s enjoyment, but now times have changed and the common sense is that computer performance should also be used to improve productivity in making the game software itself. But what is most important is how we achieve balance. I am going to let Mr. Miyamoto speak, as he has spent a lot of time and energy on raising the productivity of software development while doing this balancing act.

Miyamoto:

In striking that balance, while it's important that we do not overextend by putting an excessive amount of content in our games, the only solution is how to make software that sells well. There will be big hits somewhere in our business, and they support the games that fail and allow us to take on other challenges. So our basic premise is to create software that will sell in the range of at least two million units. We simply couldn't recoup our costs if we only released games in Japan that had sales of around 300,000 units, so the global market is our standard.

Takahashi:

I also think the key word here is balance. This has a lot of aspects, such as knowing when we need to dedicate a lot of time and people to something and when we do not. Or ways to leverage game engines that are used for general purposes, and how to create our own game engines that lots of others can also make easy use of. For NX, we are thinking about many different development techniques based on these considerations.

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