To Our Shareholders,

In the fiscal year just ended, profits reached their highest level in six years on strong worldwide sales. This performance was particularly gratifying because it occurred in the face of several negative forces.

While America continued to enjoy robust growth, Europe began to display the first signs of an economic slowdown. Also, continuing economic difficulties in Japan, characterized by growing unemployment and reduced personal spending, worked against virtually all entertainment companies. Additionally, since the yen was appreciated higher at the end of March 1999 in comparison with one year ago, it was necessary to book a significant amount of exchange loss.

We believe our ability to overcome these forces stems from significant moves to diversify our business and our unrelenting commitment to the quality of our games.

Revenues for total Nintendo 64 software, led by the enthusiastic worldwide reception of The Legend of Zelda: Ocarina of Time, have increased steadily. Game Boy hardware featuring our first color handheld display technology and boosted by the insatiable appetite for Pokemon products, has not shown any sign of sales decline. These facts illustrate the first benefit of diversification. Our commitment to fully back Game Boy, now into its second decade of category leadership, acts as a powerful buffer to the traditionally highly competitive nature of the dedicated console business. Secondly, because many of our products appeal seamlessly to a worldwide audience, we are able to better withstand the economic hardships in one part of the glove with robust sales in other more prosperous territories.

Thirdly, we have leveraged the family popularity of games featuring Mario, Yoshi, and Donkey Kong to intensify our appeal among more targeted audiences. For example, Pokemon is particularly attractive to grade school players, while titles like Zelda and GoldenEye have proven extremely popular with older consumers.

Finally, we also have diversified the development of our games. Once our internal teams in Japan created virtually all first-party products, but the work now reaches to the talented developers at Rare Limited in England, and to several groups in the U.S., including our recently-formed Nintendo Software Technology Corporation [NSTC] at our North American headquarters.

But while we continue to diversify and decentralize some operations, we will not retreat in any way from our historic insistence on industry-leading quality. The ability of Nintendo to aggressively compete in each successive generation of technology -- 8-bit, 16-bit, handheld and 64-bit -- is a testament to our insistence that our products simply entertain better. The public is unerring in its ability to quickly identify and demand those products which meet their standards of excellent. To lose touch with their reality is often a fatal oversight.

Of course, periodically it is necessary to improve the technology on which games are produced in order to meet public expectations. We will soon reach another of these moments. Although the vast majority of sales will continue to derive from current systems for the coming fiscal year, there will be a decided switch to new machines as we move into 2001.

We have recently announced a series of alliances which we firmly believe will move Nintendo to the forefront of the next-generation of technology. The next Nintendo home system will feature proprietary chip designs from both Art-X and IBM, allowing the creation of previously impossible games. We also have selected Matsushita Electric Industrial Co., Ltd., best know for its Panasonic products, to provide both the media and DVD-based playback devices for the system. In doing so, we will eliminate the higher cost and slower production times common to silicon cartridges; and just as important, provide significant safeguards against the growing scourge of software piracy, which today particularly afflicts the CD-ROM-based interactive entertainment.

In the year ahead, despite sizeable investments in research and development and continued economic uncertainty in some parts of the world, we expect continued growth in sales and historic-high profits for our company.

Sincerely,

Hiroshi Yamauchi

President

Nintendo Co., Ltd.