Asia Pacific Region, changes in currency exchange rates contributed 1 percentage point of revenue growth for fiscal 2007. While the majority of countries within the region reported double-digit sales increases for the year, China continues to be the primary driver of growth within the region, as revenues increased nearly 26% on a currency-neutral basis. The revenue growth in China is primarily due to expansion in both the number of stores selling NIKE product, as well as sales through existing doors. Constant-currency revenues in Japan increased only slightly during fiscal 2007. Despite sustained softness in the Japan market, we are starting to see positive signs, including higher gross margins, improvements in sell through at retail and improving futures conversion trends.

The growth in footwear revenue for fiscal 2007 reflected increased unit sales, most notably in China and Korea, partially offset by lower average selling prices, which resulted primarily from strategies to improve consumer value in Japan and Korea, combined with a change in the mix of products sold across the region. The year-over-year increase in apparel revenue was also driven by increased demand in China and Korea.

The increase in pre-tax income for the Asia Pacific Region for fiscal 2007 was driven by higher revenues, improved gross margins and favorable foreign currency translation, which more than offset higher selling and administrative expenses. The gross margin improvement versus the prior year was primarily driven by better inventory management, improved year-over-year hedge rates and reduced warehousing costs. The improvement in margins was partially offset by higher sales incentives, most notably in Japan, combined with efforts to improve consumer value in Japan and Korea. The increase in selling and administrative expenses during fiscal 2007 was attributable to increased investments in demand creation, most notably the Just Do It and Force Basketball campaigns. Overall business growth across the region, combined with retail expansion in China and Korea, also contributed to an increase in operating overhead expenses.

Fiscal 2006 Compared to Fiscal 2005

In the Asia Pacific Region, changes in currency exchange rates reduced revenue growth by 1 percentage point for fiscal 2006. Excluding the changes in currency exchange rates, revenues for each Asia Pacific product business unit were higher than fiscal 2005. Excluding changes in currency exchange rates, footwear revenues reflected increased unit sales (driven by increased unit sales across most countries and categories), partially offset by lower average selling prices (due to strategies to improve consumer value in Japan). The increase in apparel revenues was driven by increases across sport performance and sport culture categories. Increased revenue in China (driven by expansion of retail distribution and strong consumer demand) was the primary growth driver for fiscal 2006, partially offset by lower sales in Japan driven by lower average selling prices due to investments in consumer value and a challenging retail marketplace.

The increase in fiscal 2006 pre-tax income for the Asia Pacific Region was