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Now moving on to the reasons for the change in operating income from 36.6 billion yen to 9.9 billion yen.

The reason for increased income was an improvement of 27.3 billion yen in the sales volume and mix. This is comprised of three factors: (1) 3.9 billion yen decrease in Japan due to sluggish sales of Legacy, Impreza, and minicars.

(2) Overseas increase of 20.9 billion yen. Sale volume was increased, but the mixture was deteriorated.

(3) 10.3 billion yen increase due to inventory adjustment, etc.
An increase of 4.3 billion yen due to reduced research and development expenses (38.4 billion yen 34 billion yen, figures rounded). New models development has been completed temporarily. We are also working to rationalize advanced development.

On the other hand, the 33 billion yen loss due to foreign exchange fluctuations was one reason for the decrease in income. This can be broken into: a 28.2 billion yen loss from an approximately 14 yen appreciation against the U.S. dollar; a 1.4 billion yen loss from an approximately 7 yen appreciation against the Euro; and, a 3.4 billion yen loss from an approximately 17 yen appreciation against the Canadian dollar.

SG&A expenses and others increased by 23.2 billion yen. This is comprised of four factors: (1) 10.7 billion yen decrease due to increased fixed manufacturing cost, (Fuji Heavy Industries (FHI) -10.9 billion, SIA +0.2 billion yen), and increased cost of suppliers' dies (-4.3 billion yen) plus increased fixed processing cost (-6.6 billion yen) at FHI. At SIA a decrease in the cost of suppliers' dies (+$13M) compensated for increased fixed processing cost (-$11M), for +$2M to income. (2) 8 billion yen decrease due to increased SG&A expenses. FHI (+0.1 billion yen) together with domestic dealers (+0.9 billion yen) reduced SG&A expenses. However, there were -0.6 billion yen at SOA, -1.8 billion yen in Canada, and -6.6 billion yen at others. At SOA, it was -$5M, although they reduced incentives per vehicle by $150 ($1,650 $1,500) for a +$15M benefit, advertising costs and the like increased (-$20M). (3) The increase of costs associated with warranties was -3.9 billion yen, (4) the remaining -0.6 billion yen was procurement exchange-rate adjustments.

There was a 2.1 billion yen decrease due to reduction in the cost of materials, of which -3.1 billion yen was for FHI, and +1 billion yen for SIA. Included in this, -15.6 billion yen (of which -13.1 billion yen was for FHI, and -2.5 billion yen for SIA) were increased raw material prices due to the so-called worsening steel materials and market conditions (As material cost reduction, 10 billion yen for FHI, and 3.5 billion yen for SIA).

Accordingly, operating income decreased by 26.7 billion yen.