Last Updated: July 26, 2018  
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To Our Shareholders and Investors

Summary of operating results for the fiscal year ended March 31, 2018

I would like to express my genuine gratitude to our shareholders and investors for your continuing support and understanding.

I am pleased to announce a summary of operating results of our 41st fiscal term (April 1, 2017 to March 31, 2018).

During the fiscal year under review, the Japanese economy continued along a moderate recovery track, due to improved corporate earnings and employment situation driven by economic and monetary policies by the government. Nevertheless, the outlook for personal consumption remained cloudy.

As for the Sanyodo Group's operating environment, the market for sales and rentals of magazines, DVDs, CDs, and so forth continues to shrink due to diversification of consumer behavior options with the mainstreaming of digital books, streaming of video and music, and game apps.

Under this business environment, the Sanyodo Group followed a core concept of "Helping you to encounter books." We expanded sales sections such as stationery, fancy goods, and used books, with a focus on new books and magazines, in line with changing customer needs. At the same time, we developed our stores adjoining classrooms and fitness facilities and others as gbook variety storesh to meet the needs of people who seek to enrich their lives by learning and becoming healthy.

In the fiscal year under review, we opened two schools simultaneously in April: Fujitsu Open College Sanyodo Higashi Totsuka School (Yokohama City, Kanagawa Prefecture) and Fujitsu Open College Sanyodo Fujisawa Plaza School (Fujisawa City, Kanagawa Prefecture), the first schools to open in Kanagawa Prefecture. In November, we opened LuVit TOWN Nakatsugawa store (Nakatsugawa City, Gifu Prefecture). On the other hand, we closed one store, and as a result the number of stores at the end of the fiscal year under review came to 83 stores and six schools.

Furthermore, in November we opened our first full-fledged fitness gym, Sports Club AXTOS Will_G Sanyodo Shidami on the second floor of our Shidami store (Nagoya City, Aichi Prefecture).

As a result, for the fiscal year under review, sales declined 3.6% year on year to 21,327 million yen, operating profit declined 4.5% year on year to 246 million yen, and ordinary profit increased 1.1% year on year to 277 million yen. Profit attributable to owners of parent declined 91.6% year on year to 5 million yen. This reflected the recording of 240 million yen in impairment loss at several stores.

Regarding returns to shareholders, amid a tough operating environment for the existing business, given the Sanyodo Group's profit level at its current stage and its judgement that prioritizing securing funds for implementing initiatives for future business transitions would lead to shareholder returns in the long term, we have decided not to pay dividends again for the fiscal year under review. We ask all our shareholders for their understanding in this regard.

At the Sanyodo Group, through the business format of the gbook variety store,h we will promote not only the existing bookstore business, but also the education and fitness businesses, aiming to provide new value, enjoyment, and convenience to our customers.

We ask for your continued support and cooperation in the future as we rise to new challenges.

July 2018

Chief Executive Officer, President
Kato, Kazuhiro

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