I would like to begin by extending a warm personal thank you to all of our valued shareholders and investors.

In recent years, the winter sports market has been in decline. However, competitive sports like baseball and soccer continue to grow. As consumers become more aware of their health and diet, the wellness is also expanding. Domestically, sports and recreational activities like walking, hiking, and golf that popular with Japan's retiring Baby Boomers are predicted to grow. Japan's population is aging rapidly, and as the number of middle-aged and older individuals suffering from metabolic syndrome continues to grow, the need for an active lifestyle is clearer now than ever before. Sports are increasingly recognized as an important part of long-term health, and the need for approachable recreational sporting activities is at an all-time high.

The XEBIO Group believes that it is our mission to provide a highly entertaining "Hall of Fame" retail atmosphere for competitive and recreational sports and outdoor activities, including walking and fitness. Through our Super Sports XEBIO sports megastores and Tokyo-centered subsidiary Victoria Inc., we have striven to provide new ideas for a healthy and rich sporting life.
Sales of winter sports gear, including ski and snowboard wear and equipment, have suffered greatly due to recent warm winters. We have filled out our competitive sports equipment lineup to meet the needs of school clubs and athletes from beginners to experts. Baseball has done particularly well as a result of last year's World Baseball Classic and the accomplishments of Japanese players in the American Major Leagues. Both school teams and the overall fan base are growing. Sales of soccer gear continue to rise with the increased popularity of the sport, and futsal-related sales have also shown strong growth. Golf equipment sales have been slow in anticipation of 2008 restrictions on high restitution performance clubs. However, decent growth in the ladies' market has helped entry-level sales and kept the market relatively strong.

In this increasingly tough business climate, increasing customer satisfaction, trust, and loyalty is the key to qualitative business expansion toward our goal of being the "only one" sports business. We are committed to implementing all of the measures necessary to meet the expectations of our shareholders and other stakeholders.

We look forward to your continued support and guidance.

President and CEO
Tomoyoshi Morohashi