Annual Report 2011

Annual Report 2011
Year ended February 28, 2011

Corporate Planning Office
East Tower, Gate City Ohsaki
11-2, Osaki 1-chome, Shinagawa-ku
Tokyo 141-8643 Japan
http://www.lawson.co.jp/company/e/Published in October 2011©1975–2011 LAWSON, INC. All Rights Reserved

Printed in JapanI can pick up my medications at any time
– that too helps keep me healthy.

I get started in the morning withfresh-baked bread and coffee.

[ Businessman, 55 ][ Office worker, 26 ]Happiness and Harmony in Our Community
1

Annual Report 2011

I’m always concerned for my family,
so I’m confident in buying vegetablesfrom Lawson.

My money is from mom. And I’msaving up points with it too.
[ Primary school student, 7 ][ Housewife, 35 ]Annual Report 20112

Corporate Philosophy
Corporate Philosophy

Lawson assures that all corporate activities conform to
its Corporate Philosophy, and that
the Company’s management and employees work
together as a team to realize its goals.
To this end, we ensure that all of our actions
are grounded in our shared values,
no matter what changes may take placein the operating environment.
Our Code of Conduct requires employees
to be responsible for reflecting
our values and standards through their actions.

3

Annual Report 2011

Contents
03

Corporate Philosophy

25

Achieving Sustainable Growth05

Financial Highlights

27

Corporate Governance07

CEO Message to Shareholders

33

Contributing to Our Customers and Communities

15

Convenience Store Operating Group37

Environmental Initiatives

19

Entertainment & e-Commerce Group41

Human Resources

21

Key Indicators of Convenience Store Industry

46

Financial Section

23

Lawson at a Glance

94

Corporate Data and Shareholders Information

Corporate Philosophy

Happiness and Harmony in Our Community
Code of Conduct

Act with utmost consideration for others
Challenge with innovative ideas and actions
Have a strong will to attain the objectives

Forward-Looking Statements Regarding Forecasts and Figures
This annual report contains forward-looking statements about the future plans, strategies, beliefs and performance of the Lawson Group. These forward-looking statements are nothistorical facts. They are expectations, estimates, forecasts and projections based on information currently available to the company and are subject to a number of risks, uncertainties
and assumptions, which, without limitation, include economic trends, competition in the Japanese Convenience store industry, personal consumption, market demand, the tax systemand other legislation. As such, actual results may differ materially from those projected.
In September 2008, Lawson made Ninety-nine Plus Inc. and its subsidiaries into consolidated subsidiaries. Accordingly, Lawson booked equity-method earnings in this company inthe fiscal year ended February 28, 2009 for the six months through the end of the company’s second quarter because Ninety-nine Plus has a March 31 fiscal year-end. Ninety-nine
Plus’s earnings were completely consolidated for its third quarter. Moreover, Ninety-nine Plus changed its fiscal year-end from March 31 to February 28 at its ordinary general meetingof shareholders in June 2009. The fourth-quarter of fiscal 2008 and fiscal 2009 results (11-month fiscal year due to a fiscal year-end change) of the Ninety-nine Plus group have been
consolidated in Lawson's fiscal 2009 results.
Figures in this annual report are rounded to the nearest unit. Lawson's fiscal year-end is the end of February. Due to the discovery of misconduct by two former directors at Lawson's
consolidated subsidiary LAWSON ENTERMEDIA, INC. (LEM), Lawson has retrospectively amended consolidated operating results for the fiscal year ended February 2009, taking into
consideration minority interests in net income of consolidated subsidiaries.

Annual Report 20114

Financial Highlights
Consolidated Eleven-Year Summary

LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28 and 29

2011/2

2010/2

2009/2

2008/2

2007/2¥ 174,325

For the year:
Operating revenues
Franchise commission from franchise stores¥ 197,673¥ 185,656¥ 186,928¥ 177,443

Net sales from Company-operated stores

183,236

232,459

119,099

83,32175,151

Other

60,36949,07743,44940,41333,577

Total operating revenues

441,278

467,192

349,476

301,177

283,053

Operating income

55,54150,27649,186

46,61044,513

Net income

25,387

12,56223,807

22,11920,983

Cash flows from operating activities

72,21040,696

51,71755,77447,596

Cash flows from investing activities(30,522)(42,596)(15,647)(36,525)(31,754)

Cash flows from financing activities(28,799)(27,239)(14,911)(31,973)(736)

Capital expenditure (2)50,326

71,39942,90764,41349,822

Depreciation and amortization (3)33,083

27,46820,87921,46921,352

Total assets¥ 476,037¥ 448,132¥ 436,096¥ 397,108¥ 398,258

Total equity

208,467

198,136

201,167

188,574

199,493

Equity ratio

42.7%

42.8%

44.8%

46.6%

49.0%

Interest-bearing debt

ー

ー

ー

ー

ー

Ratio of interest-bearing debt

ー

ー

ー

ー

ー

Cash and cash equivalents

67,712

54,84383,98262,82375,547

Total number of stores (4)

9,994

9,761

9,527

8,587

8,564

Number of employees (full-time)

5,703

5,236

5,186

3,735

3,614

¥ 255

¥ 127

¥ 240

¥ 215

¥ 202

170

160

160

110

100

66.8%

126.3%

66.6%

51.2%

49.6%

ROE

12.8%

6.5%

12.5%

11.6%

11.3%

ROA

5.5%

2.8%

5.7%

5.6%

5.4%

¥ 1,499,576¥ 1,433,678¥ 1,434,166¥ 1,331,785¥ 1,311,479

183,236

232,459

124,614

83,32175,151

At year-end:

Per share data:
Net income
Cash dividends
Payout ratio
Financial data:

Net sales of all stores:
Net sales by store category
Franchise stores (5)Company-operated stores
Net sales by product category (5)Processed foods¥ 897,426¥ 902,306¥ 844,324¥ 726,750¥ 705,155

Fast foods

321,865

324,197332,894

327,501

324,993

Daily delivered foods

264,169

239,088

186,109

162,625

155,575

Non-food products

199,350

200,544

195,453

198,230

200,907¥ 1,682,812¥ 1,666,136¥ 1,558,781¥ 1,415,106¥ 1,386,630

Net sales of all storesNotes:
1. The U.S. dollar amounts represent translations of Japanese yen at the approximate exchange rate at February 28, 2011, of ¥81.71=$1.
2. Effective from annual report 2006, the composition of capital expenditure has changed to include leases, investments and advances, and construction assistance guarantees.
Please refer to page 55 for details.
3. Including depreciation and amortization of intangible fixed assets.
4. Shanghai stores are not included because SHANGHAI HUALIAN LAWSON CO., LTD. was excluded from the scope of consolidation during the fiscal year ended February 28, 2005.
5. These figures include sales figures reported by franchise stores and are unaudited.

Return on Equity (ROE)All Store Sales and Operating Income Ratio

15

2,000

4.0
All Store Sales (LH)
Operating Income Ratio to All Store Sales (RH)

5

0

5

2001/2 2002/2 2003/2 2004/2 2005/2 2006/2 2007/2 2008/2 2009/2 2010/2 2011/2

Annual Report 2011

3.5

1,000

3.0

500

2.5

0

2.0

2001/2 2002/2 2003/2 2004/2 2005/2 2006/2 2007/2 2008/2 2009/2 2010/2 2011/2

(%)

(%)

(Billions of yen)

10

1,500

Millions of Yen

Thousands of
U.S. Dollars (1)2006/2

2005/2

2004/2

2003/2

2002/2

2001/2

2011/2¥ 170,785¥ 162,963¥ 153,910¥ 149,032¥ 141,621¥ 135,237$ 2,419,202

66,02763,802

67,47980,954

101,353

132,9212,242,516

31,246

27,63024,212

20,34813,142

12,061

738,820

268,058

254,395

245,601

250,334

256,116

280,218

5,400,538

43,86742,941

38,087

34,10736,363

41,279679,733

22,02520,435

18,571

8,861

16,123

16,368

310,696

46,93347,32937,42433,86044,804

52,793

883,735(55,282)(33,297)(40,621)(3,787)(44,031)(54,696)(373,541)(7,795)(13,836)(14,364)(7,247)(58,236)

18,707(352,454)

54,417

46,87348,30375,82859,81032,651

615,910

20,896

19,641

18,49916,071

16,32816,021

404,895¥ 375,107¥ 356,310¥ 354,831¥ 342,599¥ 342,934¥ 387,236$ 5,825,934

175,184

160,282

154,317

151,864

149,827

178,448

2,551,304

46.7%

45.0%

43.5%

44.3%

43.7%

46.1%

ー

ー

ー

ー

3,140

23,530

ー

ー

ー

ー

0.9%

6.1%

ー

60,441

76,58576,38993,994

71,269128,655

828,687

8,366

8,077

7,967

7,721

7,824

7,749

3,585

3,391

3,402

3,462

3,817

4,170

Yen

U.S.Dollars (1)

¥ 216

¥ 198

¥ 176

¥ 82

¥ 146

¥ 148

$ 3.12

90

70

41

41

41

35

2.08

41.8%

35.3%

23.3%

49.8%

28.2%

23.7%

13.1%

13.0%

12.1%

5.9%

9.8%

11.9%

6.0%

5.7%

5.3%

2.6%

4.4%

4.5%

¥ 1,295,704¥ 1,265,275¥ 1,220,819¥ 1,213,088¥ 1,184,204¥ 1,144,717$ 18,352,417

66,02763,802

67,47980,954

101,353

132,9212,242,504¥ 682,006¥ 665,687¥ 625,031¥ 600,508¥ 583,712¥ 562,777$ 10,983,062

312,289

297,369

302,568

303,098

297,030

362,979

3,939,114

150,917

148,134

139,506

138,353

150,862

90,5693,233,007

216,519

217,887

221,192

252,083

253,953

261,3132,439,726¥ 1,361,731¥ 1,329,077¥ 1,288,297¥ 1,294,042¥ 1,285,557¥ 1,277,638$ 20,594,933

ーCash Dividends per Share

Earnings per Share (EPS)
300

200

150
200
(Yen)

(Yen)

100

100
50

0

2001/2 2002/2 2003/2 2004/2 2005/2 2006/2 2007/2 2008/2 2009/2 2010/2 2011/2

0

2001/2 2002/2 2003/2 2004/2 2005/2 2006/2 2007/2 2008/2 2009/2 2010/2 2011/2

Annual Report 2011

6

CEO Message
To Shareholders
To Our Shareholders

President andChief Executive Officer

Takeshi Niinami

7

Annual Report 2011

We aim to achieve sustainable earnings growth andmake ongoing social contributions through our business.
Contribution to communities is just as
important as sustainable earnings growth.
I would like to begin by expressing my profound condolences
to all who have suffered from the Great East Japan
Earthquake, which occurred on March 11, 2011, just after
Lawson’s fiscal year ended on February 28, 2011. We aredetermined to make our best effort to support recovery andrestoration in the damaged areas, including the building of
new communities.
The disaster has reminded me, as CEO of Lawson, howvaluable is our corporate philosophy, “Happiness andHarmony in Our Community” which is the starting point of
Lawson. After the earthquake, I organized an ad hoc teamand told its members “This is an emergency that isthreatening lives in many communities. Let’s do our best in
supporting damage-stricken areas, without worrying
about expenses.” Our top priority was uninterrupted
supply of food, water, and daily necessities. I am gratefulthat all our employees, franchise owners, and suppliers
quickly and voluntarily acted in ways consistent with our
corporate philosophy.
I strongly believe that Lawson’s best social contribution isto realize our mission of “Whatever you want, whenever
and wherever you need” and this is how I manage thecompany. I equally emphasize the maintenance ofsustained growth - which the company has achieved since
I became CEO. Social contribution AND earnings growth

are equally important and neither one is indispensable. In
fiscal 2010, we increased operating income by 10.5%
year-on-year to set a new record-high operating income
for the eighth consecutive year. Contributions to this camefrom measures we took, such as the full-fledged activationof our new backbone IT system (called PRiSM), improved
understanding of customer requirements and preferences
through collection and analysis of card data, and productdevelopment based on our customer profiles and raw
material purchasing capability. In addition to numericalachievement of goals, we succeeded in expanding ourcustomer base by adding women and seniors, both ofwhich are customer groups we have sought to serve better
for many years.
While the earthquake of March will inevitably influence
Lawson in fiscal 2011, we are not intimidated. We will aim
to achieve sustained earnings growth which is our promise
to our shareholders. Our human resources have beenstrengthened, by inviting competent people from outside
to join our management team and by developing nextgeneration management candidates. We will defend andsolidify our base in the disaster-stricken areas and manage
in an aggressive manner in other regions. This is how wewill take up the challenge to achieve record-high income
for the ninth consecutive year.

Details on operating results are available in the Management's Discussion andAnalysis section, starting on page 47.

How Lawson achieves its corporate philosophy

When the Great East Japan Earthquake occurred

Our role as a lifeline

Our meaning
as a small format

Our value as a nationwide
convenience store chain

Happiness and Harmony in Our Community
We reaffirmed our corporate philosophy, which is our starting point
We will realize

Whatever you want, whenever and wherever you need it
Annual Report 20118

Our long-term challenge is to become
the world’s top SPA-type retail chain basedon small catchment areas and achieve
an ROE of 15-20%.

We realize hightotal shareholder returns (TSR).
Estimated for the period between March 2008 and February 201130

Becoming the world’s top SPA*-type retailer based on
small catchment areas is our long-term vision. This is a big
challenge. But this can enable us to create significant
corporate value.
Our target is to achieve operating income of ¥100 billion by
fiscal 2020. We would like to achieve this target as early as
possible by sales growth in our convenience store
business in Japan, through expansion in customer base,and by the entertainment and e-commerce business andoverseas expansion. We also plan to improve theoperating margin for all chain store sales (including all
franchise stores) from the present 3% to 5% throughstructural reforms at the Head Office and at the stores.

20
11.8%
10

(%)

0

-25.7%

Average of
2 majorcompetitors

Tokyo Stock
Exchange
1st Section

-10

-20

-30

Then, we will adopt and carry out appropriate capital
policies so as to achieve an ROE of 15-20%.
Sustainable growth, high ROE, and appropriate capital
policies will be all-important elements to realize high total
shareholder returns (TSR).

-0.4%

Lawson3-year TSR = Total return of a stock (capital gain plus dividends) over three years
Average of 2 major competitors = Simple average of Seven & i Holdings and FamilyMart(Company estimates)* SPA : Specialty store retailer of private label apparel. In this case we use SPA
in a general sense to describe a business model where a single corporation
carries out both production and retail operations for its products in foodbusiness.

We aim an ROE of 15-20%.
Japan: Expanding customer base(focus on women and seniors)

We strive to become
the world's top
SPA-type retailer
based on small
catchment areas.

Sales growth

ROE target of
15-20%

Profitability improvement

Aims operating income of¥100 billion

Fresh food items, healthcare,in-store kitchen, etc.

Entertainment and e-commercebusinesses
Overseas expansion
Structural reform on raw material
procurement and distribution

Operating margin
target for all chain stores: 5%

Structural reform of stores

PRiSM, Ponta card, Mystery Shopper

Structural reformof Head OfficeSustained dividend increase

Capital discipline
Retirement of treasury stock

9

Annual Report 2011

CEO Message To Shareholders

We will rebuild our value chain
and evolve according to our SPA model
to food business.
How can we raise the aggregate operating margin for all
chain store sales to 5%? I believe that the key to achieve
this target is to evolve from conventional convenience
stores to SPA-type convenience stores supported by a
restructured value chain. The conventional stores areprimarily resellers who purchase their merchandise frommanufacturers and wholesalers. This type of operation
creates little added-value. Hence, there is limited room for
margin improvement. The SPA-type stores that are ourobjective would be actively engaged in all processes fromproduct development, raw material procurement, andmanufacturing, to distribution. This would enable us toachieve a high operating margin.
We possess four points of strength, compared to otherconvenience store and supermarket companies. First, wewere the frontrunner in establishing the Raw Material
Purchasing Department in 2003 and have an unequalled
track record of being engaged in manufacturers’ raw
material procurement at our initiative. Our accumulated
experience and knowledge enable us to evaluate and takeappropriate risks. Second, we have insight with regard to
our customers, based on data from use of loyalty card
"Ponta" for purchases. This is a multi-partner shopper
loyalty points program that Lawson participates in (seenext page). Third, we are able to sell out entire lines ofmerchandise through our sales channels, which havealmost reached 10,000 group stores. Fourth, we cancollaborate with Mitsubishi Corporation, our largest
shareholder, which has strength in upstream operations.
By utilizing those points of strength, to give one example,
we have developed the Premium Whipped Cream Rollthrough our participation in processes such as thepurchasing of ingredients. The Premium Roll, which has
become a huge success, has contributed to expansion of
our customer base among women, and has improved our
margin. Lawson is expanding the line of products in which
we are involved through the value chain. Typical examples
are 100 yen-priced “Oyatsu Goro” (literally meaning snacktime), which is a private brand product of small-lot sweetand rice balls made using a premium brand rice called
Niigata Koshihikari. This has helped to differentiate us fromour peers.
Direct participation in the value chain should be further
intensified, given the anticipated rising-price phase of raw
materials in my view. In addition to the broad experience
accumulated by Lawson’s Raw Material Purchasing
Department, I myself used to be engaged in procurementof raw materials when I worked at Mitsubishi Corporation.
Based on these experiences, Lawson has established acheck system to avoid taking excessive risks.

We promote supply chain management by integrating our value chain.
Conventional Convenience Store Model
Operating margin for all
chain stores: 3%

Conventional convenience store model

R&D

Procurement

Manufacturing

Distribution

Sales

POS data
analysis

Wholesale

Boxed lunch factories andvendors

Distribution centerFranchise stores

Our Goal of SPA Model
Enhance integration of value chain, a source of gross profit

R&D
Loyalty card (Ponta)
data analysis

Procurement

Manufacturing

Operating margin for all
chain stores: 5%

Distribution

Sales

Support from Mitsubishi Corporation; establishment of the Raw Material
Purchasing Department; and putting competitive people

PRiSM

We aim to achieve a 5% operating margin in the medium- to long-term.
Annual Report 201110

Use of IT enables our structure to be“visible.”
I believe that supply chain management (SCM*) with anenhanced value chain as well as customer relationshipmanagement (CRM**) with enhanced insights regarding
customers are indispensable for us to evolve into the SPA
model based on small catchment areas which weenvisage. The management that fully uses SCM and CRM
is now possible because we have augmented theworkforce in our IT Department and Marketing Department
and have reduced IT-related expenses by improvement in
CPU processing capabilities.
What we mean by enhanced insights regarding customers
is to be capable of visualizing or ascertaining customer
needs with high accuracy so that they can purchase“whatever they want, whenever and wherever they need.”
Many retail companies use point of sale (POS) data for
analysis of customers. However, the POS data has
limitations to its accuracy as store employees tend to
make mistakes in entering customer age and otherinformation in the database. This is why we have switchedto analysis of purchasing data for multi partner loyalty
program Ponta cardholders who have already registered
their profile data.
The number of Ponta members reached 34 million as ofJuly 2011 and sales to these members represented morethan 30% of Lawson’s store sales. The number of data

entries has become sufficient to analyze customer needs
specifically in small catchment areas for each store. Ponta
cards enable detailed analysis of customer attributes andtheir purchasing activities, resulting in visualization withhigh accuracy. This differs from general loyalty cards that
other retailers and chain restaurant operators use fordiscounts disguised as sales promotion.
We find Ponta card data extremely valuable when planningmerchandise assortment for stores. Since March 2009, we
have gradually introduced the backbone IT system called
PRiSM with the aim of realizing product ordering from thecustomer’s perspective. We strive to improve accuracy inorder placement by creating merchandise assortmentsthat match the customer needs specific to each store andvisualizing (or quantifying) opportunity loss caused byproducts being out of stock.
In addition, we have used the Mystery Shopper program***which I have worked on since I became president. This
helps us visualize the quality of store operation andimprove store management. A structure to create value
without relying only on store workers’ experiences andhunches has been created. Although it may take time, I
believe that this will be our unique strength in the industry.
* Supply Chain Management is the integrated management of processes fromprocurement to sales with the aim of realizing efficiency and optimization of
the whole processes.
** Customer Relationship Management is the marketing method to provide
products and services that fit to each customer needs.
*** The Mystery Shopper program is explained on the chapter on BestPracticeInc. on page 56.

We take up a challenge to become a customer-oriented
SPA-type retailer with SCM and CRM being two pillars.

Understandcustomerneeds

Quantify sales
opportunity
loss
Card data analysis

Procurevalue-added
raw materials

SCM

Ponta Card

New order
placement system

CRM

Place orders
systematicallyTools for realizing customer-oriented
merchandise assortment

Developproducts

Reduce sales
opportunity
loss

Improve gross margin

Grow sales and profits

We fully utilize PRiSM and insights on the customers' purchasing behavior,
based on Ponta card data (34 million members) to

Raise customer satisfaction and realize sustainable growth.
11

Annual Report 2011

CEO Message To Shareholders

Expansion of customer base leads tosustained earnings growth.
In recent years, many investors think that the JapaneseConvenience store industry has matured and has arrived ata phase of decelerated growth rates. However, I strongly
believe that the Convenience store industry is a growthindustry. The Convenience store industry represents
merely 5% of Japan’s total sales of retail industry including
the restaurant industry. This indicates that we still have thegrowth potential to fully capture customer needs in thesubstantially changing society. Considering higher demandin small catchment area formats, the Convenience store
industry should be able to expand its share to over 10% in
the retail and restaurant industries, as I see it.
Convenience stores in Japan typically have men up to
their forties as the major customer group but are facing
two significant demographic changes. First is theaccelerating aging of the population. Seniors prefer to buy
food and necessities in appropriately-sized small
quantities and conveniently-sized packages at nearby
stores, rather than going into a distant large store to buy inbulk. Thus, they can be a suitable customer base forconvenience stores based on small catchment areas.
Second is women’s social advancement. As more baby
boomers are retiring, women are increasingly counted onas an important part of the workforce. When women begin
to work outside the home, they are likely to increase use of
convenience stores where they can quickly buy readymade meals and other food items at whatever time whichsuits them. Lawson has made various decisions andinvestments for expanding its customer base in view ofthese changes. The ratio of customers in their fifties andabove has risen from about 20% in 2004 to around 32% in
2009. As people aged fifties and over are projected torepresent about 40% of Japan’s population in the future,
Lawson will take measures to raise this customer bracket
to 40-50% of sales. Our female customers now accountfor 35% of the total, up from 27% in fiscal 2004. Raising
the representation of women and seniors among ourcustomers will be a driving force for our growth.
In my view, expansion of the customer base requires
diversity in store formats and change in the direction of
product development. With regard to store format, wehave developed various formats including “LAWSONSTORE100” where fresh food items are mainly sold in
appropriately-sized small lots in order to respond toneeds of housewives and seniors, “fresh food-type
LAWSON,” “healthcare-type LAWSON” to satisfy needs ofelderly people, “Natural LAWSON” which targets healthconscious women, and “in-store kitchen-type LAWSON”
which makes “freshly made lunch boxes” available, in
response to needs of women and seniors. After passing
through an experimental stage, we plan to implement
those stores with the underlying aim of expanding thecustomer base. As for products, we will continue todevelop Uchi Café SWEETS and other dessert items,
private brand LAWSON select products for families, chilled
lunch boxes called Lawson Tei (literally meaning Lawson
Eatery), and other items.

We expand customer base.
Customer Breakdown by Age Group (Lawson in Japan)
Aged 50 and over
Aged 20 to 49

20%

Aged less than 20

32%

75%
63%

Source: Company estimates

5%

5%

Fiscal 2004

Fiscal 2009

Annual Report 201112

Lawson’s future investment targets areoverseas markets and e-commerce areas.
Overseas markets are also important. We export our knowhow in small catchment area formats and franchisebusiness that have been accumulated in Japan to othercountries. I am convinced that our knowledge acquired in
the fastest-aging country, Japan, will be a competitive edge
when entering into other countries which will also face thechallenge of an aging population in the future. Up to now,
we have been rather cautious in expanding stores overseas
due to three reasons. Profitless expansion impairs
corporate value, overseas development imposes various
risks, and overseas expansion results in low return. Goingforward, we will accelerate our opening of stores in Asia,
but do so based on our judgment that the time for this has
arrived. In fiscal 2010, we opened stores in Chongqing, thelargest commercial area in southwestern China, following
our entry in Shanghai. In fiscal 2011, we plan to raise ourequity share in our operation in Shanghai and spearhead
efforts to rebuild store management and franchise models.
In terms of human resources, non-Japanese were 30% of
new hires from two years ago. We are thus strengthening
our workforce. As for organization, we set up the Overseas
Group in March 2011 and I became its Group CEO
concurrently with President.
Growth potential does not exist only in stores. Penetrationof smartphones is expected to lower or eradicate
boundaries between the Internet and real stores. Lawson
will tailor business to match changes in customers’purchasing behavior and invest in e-commerce and otherbusinesses that utilize the Internet. In fiscal 2010, Lawson
acquired equity stake in HMV Japan K.K. and Venture
Republic Inc., invited competent experts from outside to
our management, and formed a business alliance with
Yahoo Japan Corporation in e-commerce areas. We havealso advanced in other areas that are unique to Lawson.
They include blending Lawson store with another store
format, synergy effects with LAWSON ENTERMEDIA, INC.,
and utilization of Ponta card data.
With an aim to enhance our existing convenience store
business and the above mentioned new initiatives, Genichi
Tamatsuka, former President and COO of Fast RetailingCo., Ltd., was appointed as Senior Executive Vice
President, Chief Operating Officer of Lawson, and Chief
Executive Officer of its CVS Operating Group. Masaharu
Kamo, former Executive Vice President of the former USEN
Corporation, was appointed as Executive Vice Presidentof Lawson and Chief Executive Officer of its Entertainment& e-Commerce Group. Since I became president of
Lawson, investments in training and development of
human resources have resulted in developing leaders on
the frontline. Our plan is to best utilize the vast experiences
in management of both managers as well as abilities of ourpeople in the field. I am expecting Tamatsuka to manage
the CVS Group and Kamo to make strategic planning andmanage the Entertainment & e-Commerce Group. During
the emergency situation after the Great East Japan
Earthquake, both of them promptly acted and blended wellin Lawson’s operations. I myself will focus more on longerterm management issues, pursuit of alliances, andoverseas development.

From Shanghai and Chongqing to all over Asia

We export our
accumulated know-how inJapan to other countries.
Overseas markets are apart of our "Communities."

DalianBeijingShanghai
ChongqingIndia• Setting up of theOverseas Group• Close dialogues withlocal companies• Hiring of nonJapanese new graduates

Guangzhou

VietnamIndonesia

13

Annual Report 2011

CEO Message To Shareholders

As CEO I am committed tosustained earnings growth of Lawson.

We have also changed our hiring policy so that women
have represented more than half of new hires since 2005
and non-Japanese have accounted for 30% since 2009.
This is based on our judgment that the optimum culture
appreciates different perspectives, rather than to impose
uniformity, as an indispensable belief for sustaining
growth. Lawson’s aim is to reward shareholders who
hold our shares for a long term, through high-levelsustained dividend payment and medium-term stock
price appreciation. We plan to raise the per-share
dividend by ¥5 to ¥175 in fiscal 2011 and enhance
rewarding shareholders by continual increase in the pershare dividend from the ¥41 when I was appointed CEO.

What I find most important as CEO is to achieve boths u s t a i n a b l e e a r n i n g s g r o w t h a n d m a ke s o c i a lcontributions through our busine s s ope rations.
“Maximum economic return” and “maximum social
contribution” can be attained at the same time. This issimilar to the concept of “not OR but AND” by Jim
Collins, an author of Built to Last: Successful Habits of
Visionary Companies. It also resonates with Rongo to
Soroban (The Analects and the Abacus), written by
Shibusawa Eiichi, a Japanese entrepreneur in the Meiji
period whom Peter Drucker evaluates highly. I believe
this is the only way to create our corporate value.

I would like to ask our shareholders and other stakeholders
for their continued support and understanding.

Since I became president and CEO, Lawson achieved
record-high operating income for eight consecutive
years. I will continue to accept the challenge of making
sustained earnings growth. I may concede that shortterm earnings growth can be achieved if investment for
the future were cut back but I will not fall into this trap
as I recognize that this would end up impairing
corporate value. What I have endeavored most strongly
as a key for future growth is training and developmentof human resources with Lawson University (see page44) and transfer of authority to operational fronts. In thestore management area, for example, roughly 80
leaders on the frontline (branch managers) have beendeveloped as candidates for the next-generation
managers of the company.

August 2011

Takeshi Niinami
President andChief Executive Officer

We emphasize sustained earnings growth.
Consolidated operating income in fiscal 2002 = 100
180

LawsonFamilyMart
Seven-Eleven

160

140

120

100

80

2003/2

2004/2

2005/2

2006/2

2007/2

2008/2

2009/2

2010/2

2011/2

2012/2(Initial company forecasts)

We take up the challenge to achieve consecutive earnings
growth despite being in the difficult phase.
We will continue to invest for sustainable growth, at the same time.

Annual Report 201114

Convenience StoreOperating Group
Convenience Store Operating GroupI will help enhance management
execution capability and raise
corporate value.
My name is Genichi Tamatsuka, and I am Chief
Executive Officer of the Convenience Store (CVS)
Operating Group. I became L awson’s advisor in
November 2010 and was appointed as Senior Executive
Vice President and Chief Operating Officer in March
2011. I had decided to join Lawson as I felt a strong
sense of empathy with Lawson’s corporate philosophy“Happiness and Harmony in Our Community” as well aswith Lawson’s executives, who are genuinely working
hard with their earnest desire to realize the corporate
vision of becoming the world’s top small catchment area
SPA-type retailer.
After I joined Lawson, I talked extensively with the
management and leaders on the frontline. I then becameaware of Lawson’s potential, which could not be seenfrom the outside. For example, the high level of IT driven
tools such as PRiSM and Ponta cards, the evaluation
structure based on the use of the Mystery Shopper
program, and the quality of next-generation leaders
exemplify Lawson’s enormous capability, which wasbeyond my expectation. Lawson is not in the same
league as the companies in whose corporate
management or turnaround I had been involved. I havecome to fully under stand why L awson achieved
sustainable earnings growth of 6% on an annualizedbasis for eight consecutive years since Takeshi Niinami
became CEO, while other convenience store chainsrecorded a decline in earnings in some of those years.

What impressed me at Lawson and my assignment

Lawson’s assets that impressed me

My assignment• The chain of 10,000 stores,• Make maximum use of Lawson’s assets• The network of franchise stores,• Create a structure that interlinks all group companies• The system infrastructure, the Ponta card,• The Mystery Shopper program,• Enhance the relationships of trust with franchisees
by strengthening business capabilities• Suppliers and employees…

• Develop independent employees and leaders• Disseminate the corporate philosophy

Connect all business processes and enhance management execution capability

Lawson's fans

15

Annual Report 2011

Convey and sell products and services

Marketinformation

Create optimal sales floors and stores

Voice ofLawsons' crews

Manufacture and procure
differentiated products

Users ofconvenience stores

Voice ofcustomers

Design and plan a business

Potential
customers

Lawson's fansAt the same time, I also realized that Lawson’s “intangible
assets” that do not appear in its financial statements havenot been fully utilized. I have become convinced that I canhelp to display such potential within Lawson by joining themanagement team.
My role at Lawson is clear. It is to help resolve Lawson’slong-standing challenge of enhancing management
execution capability and raising corporate value. I share
the responsibility to implement Lawson’s strategies that
had all been borne by Mr. Niinami up to now. I will dedicate
my best efforts to achieving maximum use of Lawson’s
accumulated assets and creating a structure to interlink allgroup companies.
I am particularly responsible for creating value in Lawson’s
convenience store business. I will spend time in the fieldand deepen the relationships of trust with franchiseowners which have been nourished by Mr. Niinami.
Together with our next-generation leaders who have been
fostered at Lawson University or through on-the-job
training (OJT), in particular those 80 branch managers in

the field, I will instill our corporate philosophy of“Happiness and Harmony in Our Community” andaccelerate business growth.
I am convinced that an SPA-type retailer’s work ofplanning, manufacturing, making floor plans, and sellingcannot function separately but will create value only when
they are seamlessly interconnected. As I learned andunderstood this from my own experiences, I will be a linkto enhance execution. By achieving this, Lawson will beable to provide good merchandise at appropriate prices,
expand its customer base, gain more fans, and increase
earnings. Let me repeat that enhanced execution throughthe interlinking of different processes and sections is
Lawson’s challenge as well as my assignment. I highly
value the power of the frontline, the penetration of thecorporate philosophy, the importance of preemptive
action, and an increase in autonomous employees.

Genichi Tamatsuka
Senior Executive Vice President, Chief Operating Officer,
Group CEO and Division Director of Fast Food Divisionof CVS Operating Group of LAWSON, INC.
April 1985

Joined ASAHI GLASS CO., LTD.

July 1998

Joined IBM Japan, Ltd.

December 1998

Joined FAST RETAILING CO., LTD.

November 2002

Appointed as FAST RETAILING’s President and COO

September 2005 Founded Revamp Corporation
Appointed as Revamp’s representative director
Appointed as directors of some retail companies
November 2010

Became an advisor to LAWSON, INC.

March 2011

Appointed as Senior Executive Vice President,
Chief Operating Officer,
Group CEO and Division Director of Fast Food Divisionof CVS Operating Group of LAWSON, INC.

Annual Report 201116

The CVS Group, as the core business division, generates most of Lawson’s profit.
The Group is working to develop the use of PRiSM, bolster fresh foods,
enhance the brand power of original products, and expand in-store kitchens.

Use PRiSM with the aim of minimizing sales opportunity loss
Sales oppor tunit y loss represents missed sales
opportunities arising when merchandise needed bycustomers is sold out. It is a situation that customers findinconvenience, which is undesirable in a harmonious
society, in our view. Previously, purchase data analysis
could not convey appropriate orde r quantit y tofranchisees, who tended to refrain from excessive orderplacement for fear of generating product disposal losses.
This then generated sales opportunity loss. PRiSM was

fully introduced in March 2010 and has enabled
franchisees to visualize or quantify opportunity loss basedon the analysis of sales data obtained through Ponta
cards. This has made franchise owners become more
conscious of reducing opportunity loss. If opportunity loss
in ready-made meals and other products is reduced, salesof high gross margin products will increase and an
improvement in sales as well as the overall gross margin
can be expected.

Aggressively develop LAWSON STORE100
and fresh food-type LAWSON stores (hybrid type)
1. LAWSON STORE100
LAWSON STORE100, which is operated by our subsidiary
Ninety-nine Plus, Inc., is raising its profile amongcustomers in metropolitan areas as the No.1 store brand in
fresh food-t ype convenience stores. It provides
merchandise such as fresh foods (vegetables and fruits),
daily delivered foods (delicatessen items), processed
foods, and non-food products in small quantities andconveniently sized packages at ¥105 (tax included). It
differs from discount stores and is supported by a wide
range of customers including small families, housewives,and seniors. The stores are mainly located in residential
districts of the three major metropolitan areas, namely
Kanto, Kinki, and Chubu, as well as cities designated bygovernment ordinance. The number of stores amounted toabout 1,000 at the end of fiscal 2010, with the target set at
a net increase of 150 or more stores in fiscal 2011 andmedium-term growth potential of up to 3,000 stores.

17

Annual Report 2011

2. Fresh food-type LAWSON stores (hybrid type)
Fresh food-type LAWSON stores (hybrid type) are different
from regular LAWSON stores in aspects ranging from shelf
space to store design. They also differ from LAWSONSTORE100, which is a pure fresh food-type convenience
store, as they are converted or enhanced existing
LAWSON stores with a stronger assortment of fresh foods
and daily delivered foods. We began to develop this format
in 2010, mainly by converting existing regular LAWSON
stores. The number of hybrid type stores increased by
1,000 to a total of about 1,200 in fiscal 2010, and we plan
to further increase the number of stores by 800 or more to
exceed 2,000 by February 2012. This format will be
introduced nationwide, primarily in residential areas. We
plan to maintain regular LAWSON’s strong customer baseof men in their twenties to forties and to add seniors andwomen to its customer base.

Convenience Store Operating Group

Enhance brand power of Lawson original products
We find it important to develop products that are alignedwith our growth strategy of expanding our customer base.
Our original dessert called Uchi Café SWEETS and cooked
pasta brand called Pasta-ya, which were renewed in fiscal
2009 and fiscal 2010, respectively, turned out to be aphenomenal success, partly thanks to an effective media
mix. With the aim of creating the next consecutive brandcategory, we then launched chilled lunch boxes called
Lawson Tei in fiscal 2010.
When developing these original brands, we design

customer-oriented products based on the Ponta card
purchasing data analysis. Then, in coordination with
Mitsubishi Corporation, our unique Raw Material
Purchasing Department arranges to procure high-quality
ingredients and raw materials that can differentiate us fromour competitors. We became closely involved in ourvendors’ manufacturing methods and processes, whereas
we relied on them only to a certain degree in the past.
These initiatives have proved to be effective in enhancing
our corporate value.

SeniorOriginal Product Brand
Fast foods& delicatessen items

Expanding customer baseFresh foods
In-storeprepared foods

Men

Women

Boxed
lunches

Focus on existing customers

Young

In-store kitchen

Healthcare business

Boxed lunches at Lawson and other convenience store
chains are prepared at vendors’ factories in compliancewith strict quality management standards, distributed tostores two or three times a day under the dense
distribution system, and are displayed on store shelves as
fresh foods. However, contrary to restaurant or specialized
box lunch operators, the image of our products not being
prepared in-store remained in customers’ minds, so we
had not been able to capture demand from female andsenior customers, who tend to care about freshness.
Since 2004, we have been experimenting with “freshly
made lunch boxes” and other in-store kitchen items. We
will continue to accumulate know-how in order to beprepared for full-fledged implementation.

In July 2010, we opened a joint MatsumotoKiyoshi and
LAWSON STORE100 store. In August 2010, we also
opened the “Pharmacy Lawson” store, which combined adrug-dispensing pharmacy with a NATURAL LAWSON
format, in conjunction with drug-dispensing pharmacy
operator Qol Co., Ltd.

Annual Report 201118

Entertainment ande-Commerce GroupEntertainment and e-Commerce

Lawson aims to establish
a comprehensive entertainment businessand grow its e-commerce business.
We will realize “360-degree entertainment
services” through M&A and achieve ¥200
billion in trading volume in fiscal 2011.
My name is Masaharu Kamo, and I am Chief Executive
Officer of the Entertainment and e-Commerce Group.
Lawson has developed the entertainment business,
identified as an important growth area, and launchedInternet shopping services ahead of its competitors byinstalling Loppi, the multi-media kiosk terminals atstores since 1997, In fiscal 2010, we turned LAWSONENTERMEDIA, Inc. (LEM) into a wholly-owned subsidiary.
We acquired HMV Japan, Inc., a retailer of CDs, DVDs,
books and others, in December 2010 and we plan to merge
it with LEM in September 2011. Going forward, we will
establish an infrastructure where entertainment-related
merchandise can be purchased at stores, on the Internet,
and through other channels, and provide CDs, DVDs, books,
magazines, event tickets, and goods in a packaged format.
We will thus promote “360-degree entertainment services.”

The mobile Ponta card business will beenhanced to expand our business domainfrom real stores to e-commerce market.
Regarding the card business, LAWSON PASS, which wasintroduced in 2002, was renewed to a multi-partner loyalty

program called Ponta. Along with growth in partners, thenumber of Ponta members reached 34 million as of July
2011. Going forward, the mobile Ponta to be used withsmartphone devices will be introduced to expand ourbusiness domain into the e-commerce market. We aim toincrease the number of our card members to 40 million
within fiscal 2011.

We will offer new Internet services throughcollaboration with Yahoo Japan.
Convenience stores have accumulated strength in actual
merchandise and convenience in being close tocustomers. The stores can further evolve by adding theInternet’s search function and diversity in merchandise
assor tments. Up to now, Lawson has worked onincreasing the number of items for transactions andservicing customers who do not visit our stores. Goingforward, through business alliances with Yahoo Japan
Corporation, both companies will collaborate to offer new
services by utilizing the advantages of Yahoo’s Internet
platform and Lawson’s stores.
In June 2011, we launched a service to provide useful andappealing information to customers near Lawson storeson “Yahoo! Local,” Japan's biggest location-based
service. In the future, items from Yahoo! Shopping online

Image of the EC mall business structure

Number of visitors
per month52.0 million**

Settlement andtransportation

4.3 million

Loppi* (LAWSON Online Shopping)CD, DVD
15%

VentureRepublic Inc.

Catalogue
mail order,
Yahoo!, etc.
Affiliates(3) Lawson's own sales

LAWSON
HOT Station(entertainment)
HMV
Lawson tickets
Books

Natural LAWSONAnnual Report 2011

Approx. ¥200 billion(Plan for fiscal 2011)

LA
W

Books, magazines
35%

SO
N

SO
N

Tickettransaction
40%

Entertainment
business(2) EC mall
Vendors
Furusato(Hometown)
Package* Loppi used to mean multimedia terminals at stores but now indicates Lawson's overall e-commerce services.
** The access number from home or office in June 2011, based on data from Nielsen Online "NetView."

19

Product sales
5%(1) Point mall function

Procurement andsales promotion
Web and systems

4.0 million

LA
W

Management of
My Page and points
Product search

2.8 million

Realize “360-degree
entertainment services”

stores will become available for purchase by shoppers at
Lawson's online mall, Loppi, while members of the Ponta
card program will receive information on special prices
and other opportunities when they do shopping on the
online mall Loppi.
We are also considering enabling users to log-in to Loppi
with their Yahoo! JAPAN ID. At the same time, we plan tosend information that is personalized to match theinterests of each customer by using their Yahoo! JAPAN
ID-based records (i.e., browsing, searches, productpurchases) or their purchase records as a Ponta member.
Furthermore, the diffusion of smartphones, which have ahigh affinity with convenience stores, may present us agreat opportunity, to offer Internet services that can bealso appropriate to devices such as PCs and mobile
phones. One example may be to develop a proprietarysmar tphone application and make it available tocustomers for free.

and product search functions to our customers. In
addition, Lawson will launch a new assurance andguarantee system that allows products to be returned in
the case of defects. This is how we will accelerate theonline shopping mall business, where we can be relied
upon as a partner by our customers in the age of theblending of real (at store) and virtual (online) services. We
are also envisioning plans to distribute more items,
starting with our competitive products such as rice,through our network, based on customers’ purchasing
information on the online mall. By fully utilizing ourcustomer base, merchandise networks, and systeminfrastructure we have obtained through the abovementioned alliances, we aim to create a ¥100 billion
e-commerce business in three years.

Developing the e-commerce mall businessin three layers:
loyalty point mall, e-commerce mall,and use of own distribution for more items.
Lawson’s experts in product purchasing are renowned
for their product knowledge and evaluating skills in theConvenience store industry, where it is said that the most
severe quality standards in Japan are maintained. These
professionals will identify items, mainly food products,
for sale through Lawson’s new online mall Loppi. We will
use the product database owned by Venture Republic
Inc., Lawson's capital and business alliance partner since
January 2011, and provide advanced price comparison

Masaharu Kamo
Executive Vice President,Group CEO of Entertainment & e-Commerce Group,
Division Director of Marketing Office of LAWSON, INC.
President and CEO of HMV Japan, K.K.
April 1992

Joined McKinsey & Company, Inc., Japan

June 1996

Appointed Executive Vice President of Nikkodo Co., Ltd.

November 2000

Served as Executive Vice President of Yusen Broad Networks, Inc.
(present USEN Corporation)

June 2004

Appointed as President of U's BMB Entertainment Co., Ltd.
(Present XING INC.)

July 2010

Appointed as Executive Vice Chairman of XING INC.

August 2010

Appointed as Executive Vice President of LAWSON, INC., (present);
General Manager of its Entertainment Service Department,
and Sub-leader of its Marketing Strategy Group

December 2010

Appointed as President and CEO of HMV Japan, K.K. (present)

March 2011

Appointed as Group CEO of Entertainment & e-Commerce Group andDivision Director of Marketing Office of LAWSON, INC. (present)

Annual Report 201120

Key Indicators of CVS Industry
Key Indicators of Convenience Store Industry

Industry Data (Japan)
Convenience Store Numbers
50,00045,006
41,34040,00037,562(Number of stores)

30,00026,52220,00016,466

10,0000

6,349

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: 2009 FC Statistics, Japan Franchise Association (Announced in October 2010)

Change in Existing Store Sales(Year on Year)

Change in Number of Customers
of Existing Stores (Year on Year)

Change in Spend per Customer
of Existing Stores (Year on Year)

20

20

15

15

15

10

10

10

5

5

5
(%)

(%)

(%)

0

20

0

0

-5

-5

-5

-10

-10

-10

-15

-15

Jan.
2008

Jul.

Jan.
2009

Jul.

Jan.
2010

Jul.

Source: Japan Franchise Association

Jan.
2008

Jul.

Jan.
2009

Jul.

Jan.
2010

-15

Jul.

Jan.
2008

Jul.

Jan.
2009

Jul.

Jan.
2010

Jul.

Source: Japan Franchise Association

Source: Japan Franchise Association

Change in Retail Sales by Format
15
Convenience Store
10

+8.2%

Supermarket
Department Store

5

+0.6%
(%)

0
-5
-6.8%

-10
-15
1Q
2006

2Q

3Q

4Q

1Q
2007

2Q

3Q

4Q

1Q
2008

2Q

3Q

4Q

1Q
2009

2Q

3Q

4Q

1Q
2010

2Q

3Q

4Q

1Q
2011

Source: "Survey of Commerce," Ministry of Economy, Trade and Industry

Convenience Store Sales Share of Japan's Retail Market
7
6
5
(%)

4.8%

5.0%

2000

2001

5.3%

5.4%

5.5%

5.4%

5.5%

5.5%

2002

2003

2004

2005

2006

2007

5.9%

6.0%

6.0%

2008

2009

2010

4
3
2
1
0

Source: "Survey of Commerce," Ministry of Economy, Trade and Industry

21

Annual Report 2011

Industry Data (Japan)
Percentage of Seniors (age 60 and over) in Population

Average Size of Household
3.5

40
Japan

35

3.0

China

30

U.S.A.

2.5

Developed Countries

20

World

(Person)

(%)

25

2.0

15

1.0

10

0.5

5
0

0
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Source: UN, World Population Prospects: The 2008 Revision1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Source: "Household Projections for Japan," National Institute of Population and Social Security
Research, Estimated in March 2008 (Figures for and prior to 2005 are actual).

Number of Convenience Stores in Japan

Convenience Store Chains' Numberof Stores and All Store Sales in Japan
Number of Stores All Store Sales (Millions of Yen)
Seven-Eleven JapanLAWSON
FamilyMart
Circle K Sunks
Mini StopDAILY YAMAZAKI
Seicomart
Cocostore
POPLAR
Three FSAVEON

Others
6,789
Circle K
Sunks
6,274

Seven-Eleven
13,232
Total
45,006stores

FamilyMart
8,717

LAWSON
9,994

Mini Stop's number of stores includes area franchise stores. Their sales amount is ona non-consolidated basis.
Data are for the fiscal year ended December 31, 2010 for DAILY YAMAZAKI andSeicomart, the year ended May 31, 2010 for Cocostore, and the year ended February
28, 2011 for other companies.

Combined Market Share of Top 4 Chains(All Store Sales)
86.2%

70
60

69.1%

50
(%)

40
30

Change in Return on Invested Capital (ROIC)in Comparison to Competitors
Average ROIC for the Period (%)

80

2,947,606
1,682,812
1,440,457
923,185
322,043
216,713
171,106
115,367
90,725
103,41460,870Note: Data as of the end of February 2011, published by each company.
FamilyMart's number of stores includes am/pm stores. Their sales amount is on a nonconsolidated basis.
Lawson's number of stores includes 141 stores operated by LAWSON Okinawa, Inc.
Circle K Sunkus's number of stores includes stores operated by area franchisers but
excludes those operated by 99 ICHIBA Co., Ltd.

Source: Corporate data as of the end of February 2011 from each company's website; 2009
FC Statistics, Japan Franchise Association (Announced in October 2010)

90

13,232
9,994
8,717
6,274
2,042
1,634
1,102
837
700
704
567

16
LAWSONROIC : +1.2%Pt

14
12
10

Average of twocompetitors
ROIC : -3.6%Pt

8
6
4
2
0

20

0

10

Note 1: ROIC = After-tax Operating Profit (@40% tax rate) / Averaged Invested Capital for
the Period (Equity + Interest-bearing Debts)
Note 2: The horizontal axis indicates changes in number of stores(CAGR from fiscal year ended February 2003 to fiscal year ended February 2011).
Note 3: The arrows indicate changes in ROIC from fiscal year ended February 2003 to fiscal
year ended February 2011.

0

2001/2 2002/2 2003/2 2004/2 2005/2 2006/2 2007/2 2008/2 2009/2 2010/2 2011/2
Source: Figures for the CVS sector are calendar-year based. Corporate data are published byeach company. See details on Page 47.

Number of Stores by Region

2.0
3.0
Increase in Number of Stores

4.0

5.0

ROEs of Retailers in the World

6,000

25
LAWSONSeven-Eleven Japan
FamilyMart

5,000

20
ROE in Fiscal 2010 (%)(Number of Store)

4,000
3,000
2,000

Hokkaido Tohoku

Kanto Koshinetsu Hokuriku

Tokai

Kansai Chugoku Shikoku Kyushu /Okinawa
As of the end of February 2011. FamilyMart's number of stores does not include am/pm stores.

Wal-Mart

Wal-Mart
MéxicoTargetTesco
15

Walgreen

Metro

LAWSONJ Sainsbury

Costco10

CVS Caremark

FamilyMart

Seven & i

5

1,000
0

1.0

0

Carrefour

0

10

20

30

40

50

60

70

180

190

200

Market capitalization of February, 28, 2011 (Billions of US Dollars)

Annual Report 201122

Lawson at a Glance
Lawson at a Glance

Lawson's Stores (Japan)

Hokkaido532

Number of Stores by Region(as of February 28, 2011)* Number of convenience stores operated by Lawson's consolidated group.
Includes stores operated by LAWSON Okinawa, Inc.

Chugoku
556

Tohoku
835

Chubu

1,474

Kanto
3,013
Kyushu /Okinawa
1,061

Kinki

2,110
Overseas

Shanghai

Shikoku
413

315
Chongqing4

Number of Stores in Japan (as of February 28 or 29 of each year)
10000

9,527

8000

(Number of Stores)

6,175

6000

2000

23

7,016

7,378

8,077

8,366 8,564

9,994

8,587

5,683

4000

0

6,649

7,683 7,734 7,625 7,821

9,761

10

69

202

337

378

488

767

1,236

1,482 1,670

1,965

2,305

2,710

3,185

3,570 3,770

4,070

4,448

4,836

5,139

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011/2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2

Annual Report 2011

Lawson's Data (Japan)

Ratios of Company-Operated
Stores and Franchise Stores

Breakdown of Stores by Format

Breakdown of Stores by
Franchise Contract Type
(See details on Management's Discussion and Analysis, page 50)

Company-operated
Stores 10%

LAWSON STORE100
and SHOP99 11%

Other 1%Other 3%

NATURAL LAWSON 1%

Type B
14%

Franchise stores
89%

Type G
23%

Type C
60%

LAWSON
88%

Notes: "Other" comprises stores of NATURAL LAWSON, LAWSONSTORE100, and SHOP99. Overseas stores and those
operated by LAWSON Okinawa are excluded.

Breakdown of Selling, Generaland Administrative Expenses

Sales by Product Segment

Advertising andpromotional expenses
5%
Non-food
products
12%

Fast foods
19%

Equipment leasing charges
4%

Rents
30%

Depreciation
14%

Daily
delivered foods
16%
Other
23%

Processed foods
53%

Gross Profit Margin by
Merchandise Category (Non-consolidated)

Personnel
expenses
24%

Existing Store Sales

50.0

110.0
Existing Store Sales

42.2%
40.0

Number of Customers

37.8%
34.6%

Spend per Customer

105.0

30.0
(%)

(%)

24.5%

100.0

20.0
95.0
10.0

90.0

0.0
Fast foods

Daily delivered
foods

Processed
foods

Non-food
products*** The processed foods category include cigarettes.
** Calculation of the gross profit margin for non-food products
includes bill settlement and other commission income.

1Q

2Q

3Q

2008

4Q

1Q

2Q

3Q

2009

4Q

1Q

2Q

3Q

4Q

2010

Notes: Year-on-year change, 3-month arithmetic average

Annual Report 201124

Achieving Sustainable Growth
Achieving Sustainable Growth

Lawson's All Chain Store Sales* in the Past 35 Years(Millions of Yen)* "Future free cash flow is identified as an impor tantelement of corporate value. We believe that all store
sales of the Lawson Group indicate the support from ourcustomers and are also sources of cash flow at Lawson.

¥2.0 trillion

Lawson believes thatsustainable earnings growth
AND ongoing social contributions throughour business are critically important.
¥1.5 trillion

Pursue our corporate philosophy “Happiness and Harmony in Our Community,”build stronger relationships with customers, franchise owners, store crew (parttime and temporary workers), employees, and the community including theenvironment, and continuously improve the quality of our corporate governance.
We believe that these practices lead us to realize sustainable earnings growth
and raise our corporate value.
We publish the Environmental and Social Activities Report each year. Let us
introduce some of those activities from this page to page 44. They encompass
corporate governance initiatives, environmental preservation measures and how
we have established good relationships with customers, franchise owners, store
crew, and employees.

Opened the 1st overseas
store in Shanghai¥1.0 trillion

Merger of Lawson
and Sun Chain¥0.5 trillion

Opened the 1st
LAWSON store

025

Opened the 1st
Sun Chain store

1976/2 1977/2 1978/2 1979/2 1980/2 1981/2 1982/2 1983/2 1984/2 1985/2 1986/2 1987/2 1988/2 1989/2 1990/2 1991/2 1992/2 1993/2 1994/2 1995/2 1996/2 1997/2

Annual Report 2011

Turned HMV Japan, K.K. into a consolidated subsidiary.
Launched private brand LAWSON select.

Expanded private brand Value Linenationwide

Formed business and capitalalliances with Ninety-nine Plus, Inc.

Opened the 1st Natural
LAWSON store

Opened the 1st LAWSONSTORE100 store

1,682,812
1,666,136

Listed in the 1st Sectionof Tokyo Stock Exchange
and Osaka Securities
Exchange

Launched the LAWSONPASS point card

1,558,781

1,415,106

Introduced the multimedia
terminal Loppi in all stores

1,386,630
1,361,731

1,329,077
1,294,042
1,285,557
1,288,297
1,277,638
1,222,880

Driving Forcefor Sustainable Growth• Improve quality ofcorporate governance• Build good relationships withcustomers, franchise owners,
store crew, and employees• Hand-in hand with the community
in environmental preservation,etc.

1998/2 1999/2 2000/2 2001/2 2002/2 2003/2 2004/2 2005/2 2006/2 2007/2 2008/2 2009/2 2010/2 2011/2

Annual Report 201126

Corporate GovernanceCorporate GovernanceDirectors and Corporate Auditors< As of May 26, 2011>

TAKESHINIINAMI
President,
Representative Director and CEO
Years as a director 9 years
Number of LAWSON shares held
7,200 shares

1981
2002
2005
2006
2010

Joined Mitsubishi Corporation
President, Representative Director and Executive Officer, LAWSON, INC.
President, Representative Director and CEO, LAWSON, INC. (Current position)
Executive Director, Access Company, Ltd. (Current position)
Outside Director, ORIX Corporation (Current position)

YOSHIYUKIYAHAGI
Director,
Senior Executive Vice President
and CFOYears as a director 4 years
Number of LAWSON shares held
500 shares
1979 Joined Mitsubishi Corporation
2006 Senior Vice President and Executive Assistant to CEO, LAWSON, INC.

MANABU
ASANO

2007 Executive Vice President and CFO, in charge of Corporate Planning
Office, LAWSON, INC.

Director, Executive Vice President
and CCOIn Charge of CSR2010 Senior Vice President, Mitsubishi Corporation (Current position)2009 Director, Senior Executive Vice President and CFO (Current position)

Years as a director 5 years
Number of LAWSON shares held
3,600 shares

1977 Joined T.V.B Sun Chain Co., Ltd.
2002 Senior Vice President; General Manager, Store Development Division,
LAWSON, INC.

TORU
MORIYAMA

2006 Director, Senior Vice President and CCO in Charge of General Affairs
and Internal Audit, LAWSON, INC.
2010 Director, Executive Vice President andCCO in Charge of CSR (Current position)

Director
Years as a director 5 years
Number of LAWSON shares held
1,200 shares

1977 Joined Mitsubishi Corporation2005 Executive Assistant to CEO, LAWSON, INC.

ATSUHIKO
SEKI

2006 Director, Senior Executive Vice President; General Manager,
Merchandising & Logistics Division, LAWSON, INC.

Standing Corporate Auditor

2011 Executive Vice President, Group CEO, Living Essentials Group,
Mitsubishi Corporation (Current position)

Years as a corporate auditor 1 year
Number of LAWSON shares held
1,200 shares

1977 Joined The Daiei, Inc.
2007 Executive Officer (Other), General Manager, Line Support Division,
LAWSON, INC.
2010 Corporate auditor, LAWSON, INC. (Current position)

27

AnnualAnnualReport
Report2011
2011

2009 Director, LAWSON, INC. (Current position)

Outside Directors and Corporate Auditors< As of May 26, 2011>

HIROSHITASAKA
Director (Outside)
Years as a director 11 years
Number of LAWSON shares held
0 sharesREIKO
OKUTANI

1990 Joined the Japan Research Institute Limited
2000 Fellow, The Japan Research Institute Limited (Current position)
Professor, Graduate School of Tama University (Current position)
Director, LAWSON, INC. (Current position)
President, SophiaBank Limited (Current position)

Director (Outside)
Years as a director 9 years
Number of LAWSON shares held
0 shares2005 Director, Softbank Investment Corporation (now SBI Holdings, Inc.)(Current position)2011 Special Advisor to the Cabinet of Japan (Current position)

1974 Joined Japan Airlines Corporation
1982 President, The R Co., Ltd. (Current position)
2002 Director, LAWSON, INC. (Current position)

TAKEHIKO
KAKIUCHI
Director (Outside)
Years as a director 6 years
Number of LAWSON shares held
0 shares

MUNEHIKONAKANO
Standing Corporate
Auditor (Outside)

1979 Joined Mitsubishi Corporation

Years as a corporate auditor 5 years
Number of LAWSON shares held
0 shares2005 Director, LAWSON, INC. (Current position)
Director, Kentucky Fried Chicken Japan, Ltd. (Current position)2008 Director, The Nisshin OilliO Group, Ltd. (Current position)2011 Senior Vice President, General Manager, Living Essentials Group CEO
Office (Concurrently)
Division COO, Foods (Commodity) Division, Mitsubishi Corporation(Current position)

TETSUO
OZAWA
Corporate Auditor (Outside)
Years as a corporate auditor 8 years
Number of LAWSON shares held
0 shares1974 Joined Mitsubishi Corporation
2006 Corporate auditor, LAWSON, INC.(Current position)

EIKO
TSUJIYAMA
Corporate Auditor (Outside)
Years as a corporate auditor
Newly appointed
Number of LAWSON shares held
0 shares1973 Admitted to the Japan Bar, joined Tokyo Fuji Law Office (Current
position)
2003 Outside corporate auditor, LAWSON, INC. (Current position)

1974 Registered as a certified public accountant

2004 Outside corporate auditor, Monex Group, Inc. (Current position)

1991 Professor, Faculty of Economics, Musashi University

2007 Outside corporate auditor, CEMEDINE CO., LTD. (Current position)

2003 Professor, Graduate School of Commerce, Waseda University(Current position)2008 Outside corporate auditor, Mitsubishi Corporation (Current position)2010 Outside corporate auditor, ORIX Corporation (Current position)2011 Outside corporate auditor, LAWSON, INC. (Current position)

AnnualAnnualReportReport2011 201128

Basic Policy on Corporate GovernanceWe firmly believe that meeting the expectations of our
stakeholders, which can be categorized in seven groups,
namely, our customers, franchise owners, store crews,
business partners, employees, shareholders, and thecommunities, will lead to maximize corporate value of theLawson Group. With a solid understanding of this goal, we
pledge to always act sincerely and considerately while
adhering to all laws, our Corporate Philosophy, Corporate

Conduct Charter, and Code of Ethics. We believe in theimportance of enhancing the soundness and transparencyof our management and further developing our corporate
governance system.
Lawson’s system to monitor and verify the execution ofduties and management, and its internal control system
are described in the following chart.

Corporate Governance System (As of May 25, 2011)

General Meeting of Shareholders
Appointment / dismissal

Appointment / dismissal

Board ofDirectors

Consultation

Compensation
Committee

Outside directors 3(incl. 2 independent officers)
In-house directors 4
Total 7

ProposalAppointment / dismissal / supervision

Board ofCorporate
Auditors

Audit

Outside auditors 3(incl. 2 independent officers)
In-house auditor 1
Total 4

Dismissal

Audit

Proposal / report

Appointment / dismissal

Certified Public
Accountant(independent auditor)

Audit

Account auditing

Operational Organization
CEO
Financial Reporting Internal
Control Committee

Internal Audit Office

Executive Committee
Meeting

Internal audit and guidance for
improvement

CCO(Chief Compliance Officer)

Compliance and Risk
Management Committee
Proposal and promotion ofcompliance and risk management measures

Executive officers

Headquarters

Serving concurrently as directors 2
Executive officers 16
Total 18

CVS GroupEntertainment & e-Commerce GroupInternational Group

Investment

Subsidiaries andaffiliates

29

Annual Report 2011

Comment

Legal
CounselCorporate GovernanceCorporate Governance System (As of May 25, 2011)
Item

Description

Corporate organization:

Company with a Board of Corporate Auditors

Chairman of the Board of Directors:

Outside Director

Number of Directors

7 (including 3 Outside Directors)

Number of Board of Directors’ meetings in FY10:13 (including 2 extraordinary meetings)

Outside Directors’ attendance rate at Board of
Directors’ meetings in FY10:Approximately 87% (including extraordinary meetings)

Number of Corporate Auditors:

4 (including 3 Outside Corporate Auditors)

Outside Corporate Auditors’ attendance rate at
Board of Directors’ meetings in FY10:Approximately 91.7% (including extraordinary meetings)

Major committee meetings attended by
Corporate Auditors:

Board of Directors’ meetings, Executive Committee meetings, Financial Reporting Internal Control Committee
meetings, Compliance and Risk Management Committee meetings, Board of Corporate Auditors’ meetings

Number of Board of Corporate Auditors’ meetings
15 (including 3 extraordinary meetings)
in FY10:Outside Corporate Auditors’ attendance rate at
Board of Corporate Auditors’ meetings in FY10:Approximately 98%

Appointment of Independent Officers:

Appointed 1 Outside Director and 1 Outside Auditor

Average age of Directors and Corporate Auditors: 58
Independent Auditor:

Deloitte Touche Tohmatsu LL

Internal Audit DivisionInternal Audit Office
We are focusing on the following five areas, in accordance with the Fiscal 2011 Basic Policy on Development andOperation of the Internal Control System, as revised in February 2011:

Overview of the internal control system:

1. Improvement of supervising and auditing functions through continuous appointment of outside directors andoutside auditors (independent officers)
2. Enhancement of the Internal Audit Division corresponding to growth in the Sales Division, subsidiaries, andaffiliates
3. Ensuring that subsidiaries and affiliates are thoroughly familiar with the Lawson Corporate Conduct Charterand appointing persons responsible for promoting compliance risk management at major subsidiaries andaffiliates
4. Establishment of necessary systems to ensure proper financial reporting
5. Early discovery of risk information regarding operations across the whole Lawson chain via expansion of theinternal whistleblower and consulting system to franchise stores and trading partners
Appointment of an executive responsible for compliance and risk management(Chief Compliance Officer (CCO))

Compliance system:

Appointment of compliance officers at all headquarters divisions and seven regional headquarters
Monthly meeting of Compliance and Risk Management Committee, chaired by the CCO, and quarterly meetingsof the Affiliated Company Compliance Officers Committee, to identify the Lawson Group compliance issues andassess risk exposure, and to deliberate on ways to prevent illegal or improper actions

Support system provided for Outside
Directors and Corporate Auditors:

As a rule, the secretariat of the Board of Directors distributes the agenda one week in advance of Board
meetings, and is also responsible for other support measures.
The same secretariat reports, as necessary, on important events or incidents.
The Compensation Committee, which is made up entirely of Outside Directors and Outside Corporate Auditors,
and which met two times in fiscal 2010, determines compensation for Directors and presents its
recommendations to the Board of Directors for final approval.

Compensation for Directors:

Approximately 30% of annual compensation is linked to business results.
Compensation paid to all Directors is reported in the annual securities report and Business Report.
Other compensation includes stock-compensation-type stock options that can be exercised (exercise price: ¥1)
after a Director retires.
Mitsubishi Corporation holds 32.5% of the Company’s voting rights, including indirectly held rights. Lawson istreated as an equity-method affiliate by Mitsubishi Corporation. (As of February 28, 2011)

Special factors with an important bearing
on corporate governance:

Disclosure policy:

Two subsidiaries, fresh food CVS operator Ninety-nine Plus Inc. and ticket sales business operator LAWSONENTERMEDIA, INC. , were delisted from the JASDAQ market of the Osaka Securities Exchange Co., Ltd. in June
2010. Both subsidiaries became Lawson’s wholly-owned subsidiaries through share exchange in order to realize
more integrated organizational operation and faster decision-making processes in business operations.
Basic Principles for Information Disclosure are presented on Lawson's IR site:
http://www.lawson.co.jp/company/corporate/disclose.html
The Company discloses material information, including presentation materials used in meetings to announce
business results, in both Japanese and English, on the IR site, without delay.
Regulations concerning risk management have been established, thus putting in place a system for ordinarily
preventing risks from materializing and for quickly dealing with them if they do.

Risk management system:

Two dedicated committees, the Compliance and Risk Management Committee and the Affiliated Company
Compliance Officers Committee, meet to discuss risk.
Disaster Countermeasure Manuals have been prepared and placed at each office. In the event of a large disaster,a disaster headquarters will be established to promptly implement countermeasures.

Other initiatives:

Disclosure of voting results of the General Meeting of Shareholders
http://www.lawson.co.jp/company/ir/library/pdf/ketsugi/ketsugi_36r.pdf

Annual Report 201130

Evolving Corporate Governance
Measures to reinforce group management system
L awson has been reinforcing its groupm a n a g e m e n t s y s te m , a s t h e n u m b e r o f
subsidiaries and affiliates has increased in recent
years and their influence on the whole Lawson
Group has risen. By taking serious lessons fromthe scandal at subsidiary LAWSON ENTERMEDIA,
which was uncovered in fiscal 2009, Lawson
has sincerely strived to establish measures toprevent the recurrence of a scandal at thecompany and its related companies. From thefirst half of fiscal 2010, we internally clarified
internal allocation of the assignment of control
and support to related companies, enhanced the
support structure, and maintained continuous

monitoring of the funds status of major subsidiaries
and affiliates. In addition, from the second half,
Lawson began to centrally manage the funds ofmajor related companies. Moreover, we worked onenhancing guidance to improvement by checking
the state of authority allocation and the risk
management system, as well as groupwide internal
auditing. We also embarked on establishing a
structure that will facilitate communications
between Lawson and related companies toensure that the Group’s management policies
permeate those companies and are better
implemented. We plan to continue to promotethese measures.

Hiroshi Tasaka
Message from an outside director

Lawson’s Board of Directors always holds extremely sophisticated discussions
when they meet. In my view, one of the reasons is that outside directors, who havelong first-hand experience in business management, do not hesitate to express
their candid opinions even to the CEO. This practice is thoroughly accepted. It has
been enabled by the management who make all the information available tooutside directors and listen earnestly to all of their opinions, including harsh criticalviews. I sincerely hope this culture will continue to be honored.

Reiko Okutani
Message from an outside director

Lawson’s management is always mindful of its social presence and has achallenging spirit to respond to changes in the times in areas such as how
convenience stores should match people’s lifestyles, how to provide merchandise,and how to create value in Lawson or develop human resources in the global
society. At the same time, Lawson is committed to observe compliancethoroughly. I find that these two elements have been well adopted in its
management in a balanced manner.

31

Annual Report 2011

Corporate Governance

Adoption of executive officer system and change in number of directors
As of July 2011, the Board of Directors comprised
a small team of seven members, of which three
are outside directors. Two of those three are
independent officers. We adopted the executive
officer system in 2002 and reduced the number of

directors significantly from 20 in 2001. In addition,from the viewpoint of promoting diversity, in linewith our corporate policy, a female director and afemale auditor have joined our Board of Directors
and Board of Corporate Auditors, respectively.

Number of Directors

2001

2011

20 directors

7 directors(including one outside director)(including three outside directors)

Annual Report 201132

Contribution to Our Customers
and Communities
Contribution to Our Customers and Communities

The Great East Japan Earthquake of March 11, 2011 has reminded us of the important role ofconvenience stores in their communities. In Japan, among other attributes, Lawson has thenature of social infrastructure formed by the day to day activities of “mom and pop” storesthroughout the nation. Retail shops, logistics depots, and our kitchens where we prepare box
lunches are linked as a supply chain. This supply chain, we confirmed, is valuable not just for thewell-being of the company but also that of the communities it serves.

What Lawson Did After the Earthquake
The first 10 days
The earthquake and tsunami struck the Tohoku region on
March 11, 2011. They greatly damaged Lawson stores in
the region and Ibaraki and Chiba prefectures as well.
While public authorities had not yet been able to take
immediate action to assist recovery efforts, we had justdone that, partly because we were in the private sector.
The first ten days were most crucial. What can we do andwhat shall we do, prior to the time that the government
became active in collecting goods and materials, werethe challenges we faced.
Specifically, the stricken communities were in need off o o d s t h a t p e o p l e c o u l d i m m e d i a te l y e a t . O u r
production facilities and distribution systems were vitalto service those communities at the time of such

33

Annual Report 2011

calamity and emergency.
Fuel was desperately needed in the stricken areas but
trucks, tank trucks, and drivers were all in short supply.
Nevertheless, it did not deter the owner of one of ourfranchise stores in Kyoto, who used his own tank truck todeliver fuel. With the cooperation of Japan Post, one of
our alliance par tners, we were also able to makedeliveries of goods to the people in the disaster-hit areas.
Moreover, virtually our entire supply chain, from Hokkaido
to Okinawa, cooperated to restock and support ourstores in the afflicted areas.
We were thus able to overcome difficulties of the first ten
days, with the help of our stakeholders.

Swift re-opening of a temporary store

LAWSON van in work in the disaster-stricken areas

The second 10 days
What was of paramount importance in the second tendays was to reopen many stores as quickly as possible.
We devoted our best ef for ts to reopening thoseestablishments to fulfill our intended function – to be“convenient neighborhood stores” filled with daily
necessities. In doing this we became aware of the functionof convenience stores, in the private sector, as a source of
support for the public sector.

After that, while electric power supply was gradually
restored, shortages of goods were not alleviated on anationwide basis. This was because the Tohoku region
was a center of production. Lawson was no exception andwas hard pressed to obtain needed merchandise, but wemobilized the entire resources of the company in order toprovide the stricken areas with the needed products, even
if it meant a degree of sacrifice in serving other areas.

Annual Report 201134

CEO Niinami serving customers in the disaster-stricken LAWSON store

35

Nuclear reactor problem

Convenience stores as social infrastructure

The next challenge we confronted was the problems
created by the problems at the Fukushima No. 1 nuclear
reactor. In a radius of 30-40 kilometers of the power plant,
which is outside the government-imposed 20km exclusionzone and the 20 to 30km "stay indoors" zone, false rumors
spread and residents were on the point of evacuating theareas, devastating their communities. Partly in response to
the needs of the calamity-hit communities, we had
decided to reopen stores. When we contacted franchiseowners on this matter, we were encouraged by their
willingness to cooperate with us to meet community
needs, and we were able to reopen stores.
After that, our competitors also reopened stores in this30-40km radius of the plant. Lights started to shine again
along shopping streets and at local stores. As these areas
were able to maintain functioning as the communities, we
received appreciative words for our contribution from thegovernment, the local municipalities, and our customers
in the area.

At schools in the disaster-stricken areas, school lunches
were in short supply. In order to fulfill our function as a partof social infrastructure, we delivered our box lunches toschools. Our response was favorably reported by social
media, resulting in receiving appreciative words of “Let’s
go to LAWSON” from local residents. Perhaps theirappreciation was a factor in the double-digit year-to-yearincrease in May sales at existing Lawson stores in the
Tohoku region. We thus had the first hand experience ofsocial contribution resulting in economic benefits. We canengage in social activities such as this because we have a
supply chain that starts with purchasing of materials,
foods and other items, factory or kitchen processing, andlogistics functions that deliver merchandise to our stores.

Annual Report 2011

Contributing to Our Customers
and Communities

Energy-creating store, corresponding to needs to save electric power

Using light-emitting diodes (LEDs)

Social significance of convenience storesConserving electric power

Several matters came to our attention as a result of theearthquake. We learned that the social context of an aging
society means it is increasingly important to be able to buy
things close to, not far from, home.
Convenience stores have to change, so as to better matchthe needs of older persons and women. Convenience
stores are at present not permitted to sell medicines. In
the future, however, it is certainly possible that throughderegulation and M&A activity this situation will change.
We think that at that time convenience stores will welldemonstrate their strength in terms of using supply chain
functions to deliver to customers goods and services not
now handled by us.

As a consequence of Fukushima nuclear reactor problems
a summer shortage of power supply to the Tohoku andTokyo Metropolitan regions was forecast, and how toconserve power became a critical issue. We came to thinkthat the convenience of being opened around the clock,entailing a high level of power use for cooling and heating,refrigeration, ventilation and lighting, made it that much
more important to conserve power. We are looking toinnovation as a means of resolving that important social
problem. We can greatly decrease our use of electricity by,for example, changing over to use of light-emitting diodes(LEDs) for lighting. This has the effect of reducing thegeneration of carbon dioxide, contributing to a better
environment, and lowering our electric bill – a combinationof social and economic benefits.
This in particular is one of the mandates imposed on
Lawson – to do business for sustainable growth AND besocially responsible at the same time.

Annual Report 201136

Environmental Initiatives
Environmental Initiatives

Lawson’s Initiatives in Environmental Protection Activities
Lawson Group’s environmental management
We find it indispensable to tackle environmental issues
on a group-wide basis in order to create corporate value.
In June 2010, we adopted the new Lawson Group
Environmental Policy, in which we state our commitment
to being environmentally conscious in all aspects of ourbusiness and to working with and for the local communities
in which we operate. We will seek to help leave the Earthin a healthy state for future generations, with an emphasis
on protecting biodiversity and mitigating global warming.

Lawson Group Environmental Policy
Basic Commitment

The Lawson Group is committed to leaving a rich world for future generations.
We will consider the environment in every aspect of our business activities andstrive to achieve sustainable development and coexistence with local communities.
Policies
1. Helping build a low-carbon society

2. Considerations in the developmentof products and services

3. Active participation in social
contribution activities

We will give proper consideration to the effect on
the natural environment and local communities at
every stage in the cycle of products and services,from procurement of raw materials through tosales and disposal.

We will actively participate in social contribution
activities, getting involved as a member of local
communities in efforts to promote greenery andbeautification of local areas, and other initiatives.

4. Continuous improvements

5. Observing laws and regulations

6. Promotion of communication

We will strive to preserve the environment by
utilizing our environmental management systems
to make continuous improvements, which will bemeasured against objectives and targets.

We will observe laws and internal rules relating toenvironmental preservation activities.

We w i l l f o s t e r g r e a t e r a w a r e n e s s a b o u tenvironmental preser vation by promoting
education, and will also promote communication
with stakeholders.

To help combat global warming, we will work inour business activities to conserve energy andresources, and to reduce waste.

Towards a low carbon society

Aim to reduce CO2 emission by 10% per store

Lawson is taking two key approaches to environmental
management. One of those approaches is the setting andachievement of voluntary targets for reducing CO 2
emissions from our business activities. The other is theprovision of services that will help our customers to reduce
CO2 emissions. Through these two approaches, we areworking together with our customers, franchise owners
and store crews to help create a low carbon society.

The voluntary target that we set ourselves in 2008 was toreduce CO2 emissions by 10% per store over fiscal 2006
levels by fiscal 2012 based on electricity consumption.
This amounts to a total yearly reduction of 60,000 tons inemissions compared with fiscal 2006. In fiscal 2010 theamount of CO2 emissions was 70.4 tons per store.

Lawson Group's Environmental Management

Volume of CO2 Emissions by Use of Electricity per Store80
70.6

Achievementof a low-carbon
society

69.8

70.4
63.5

Lawons's
activities
to reduce
CO2 emissions

Environmental
activities withcustomers

Promote installationof energy-efficientequipment

Propose eco-friendly
practices to do in dailyliving such as shopping

Annual Report 2011

71.2

60

( To n )

37

71.4

40

20

0

2007/2

2008/2

2009/2

2010/2

2011/2

2012/2(Target)* The CO2 emission coefficient used for power consumption was 3.68
tons-CO2/ten thousand kWh for FY2006.

Lawson Group's Environmental Activities
FY2010 Environmental Activities Results
Item

Activity

Savingresources

Achievement
Levels*2

Achievement Status

New stores: 100% installation of energy efficient equipment(1) LED lighting and automated lighting adjustment systems;(2) Combined refrigeration and air conditioning system;(3) Energy efficient signage;(4) Toilet sensors.

New stores: 100% installation of energy
efficient equipment of (1) to (4)Existing stores: implement energy conservation measures(1) Replace freezers;(2) Replace air conditioners;(3) Install condensation prevention heater control units.

Existing stores:(1) Freezers' deployment 103.4%;(2) Air conditioners' deployment 107.9%;(3) Condensation prevention heater control
units' deployment 100.7%[Delivery trucks]
Reduce CO2 emissions bypromoting eco-driving andintroducing eco tires.

Reduce CO2 emissions per store by 15% compared with
FY2007.

Reduced per store CO2 emissions by 16.9%
compared with FY2007 to 7,550 kg-CO2 .
Raised eco-tire deployment targets from
363 trucks to 399 trucks.

[Company cars](1) Promote eco-driving andintroduce eco tires;(2) Reduce CO2 emissions byintroducing electric vehicles.

(1) Improve company car fuel efficiency by 3% by the end of
FY2010 compared with FY2009;(2) Introduce 30 electric vehicles. The accumulated total
target is 70 units.

(1) Improved fuel efficiency by 0.3% year-onyear;(2) Introduced 21 electric vehicles to total 61(87.1% vs. the target).

Promote companywide mitigationof global warming (reduction of
CO2 emissions).

(1) Compile energy database;(2) Create energy efficient stores.

(1) Implemented database registration works
and grouping;(2) Assessed additional measures andstandardized specification planning.

Reduce plastic shopping bag
usage.

(1) Reduce by asking customers if they want shopping bags
and by expanding the point system;(2) Promote Bring Your Own Bag program. A handout rate
per store±0% vs. FY2009(35% reduction in the weight of shopping bags used per
store compared with FY2000).

Achieved a handout rate per store of 76.0%.
(Weight of shopping bags used per store
reduced by 25.1% compared with FY2000.)
Convenience store eco-bags distributed: 2.6
million in total(1) Reduce packaging weight;(2) Use non-petroleum based
packaging materials (paper,
biodegradable plastic).

Reduce CO2 emissions from incineration of packaging by
8% compared with FY2006.

(1) Completed to make packaging for ricedishes and delicatessen and bakery items
lighter and thinner and shopping bags thinner.
(2) Continued to use thin-walled containers
made from polylactic acid (PLA). Reduced CO2
emissions from incineration of packaging by
24.8% compared with FY2006.

Eliminate handout of papermaterials by stores.

Reduce paper consumption by using computer systems forthe distribution of materials to stores.

Eliminated distribution of paper materials tostores.

Adhere to advertising display
standards for sales promotion
materials, and comply withdisposal laws.

(1) Develop materials based on advertising display
standards;(2) Check disposal volumes and comply with disposal laws.

(1) Developed materials in complaince withadvertising display standards;(2) Checked disposal volumes and compliedwith disposal laws.

Reduce store air conditioning,refrigeration and lighting
electricity consumption.

SavingenergyTargets

Reducing
waste

Increase food recycling ratio.

Increase food recycling ratio by at least 6 percentage points
compared with FY2007 (22.5%).

Achieved food recycling ratio of 34.7%.*3(1) Used water recycling: 8,361 stores;(2) Recycling into feed and compost: 1,354
stores:(3) Thermal recycling: 142 stores

Contributing
to localcommunities

Continue collecting donations
through the Lawson Green Fund.

(1) Collect donations for the Lawson Green Fund at all
stores;(2) Promote participation in greening projects;(3) Promote, educate, and support projects by regional
branches.

(1) FY2010 collections: 0.24 billion yen
Total collections to date: 3.26 billion yen(2) Greening projects: 100 in FY2010

Promotinguse andeducation

Combat global warming throughactivities with customers.
(Promote CO2 Offset program).

FY2010 Co2 offsets of 7,000 tons
(1) Promote CO2 Offset program (Use points and Loppi);(2) Continue selling products with CO2 emissions credits.

FY2010 CO2 offset volume: 3,389 tons
Total CO2 offset to date: 12,839 tons

Notes
1. Including area franchise stores in Japan (excluding food recycling ratio, etc.)
2. Achievement Levels: Quantitative assessment: 100%
, 70% or more
, Less than 70%
Qualitative assessment: Implementation completed, Implementation in progress, Not implemented
3. Recycling ratio excluding curbing of food waste generation: 29.7%
4. Including stores operated by Ninety-nine Plus Inc. (LAWSON STORE100 and SHOP99)

Major Initiatives in Fiscal 2011
Energy saving : As a response to concerns over power shortages, LEDs will be used for in-store lighting at all of our stores (over 10,000)
including existing stores in fiscal 2011. We will also promote delivery trucks' efficient driving (eco-driving) and aim to reduce the amount of
CO2 emissions in truck distribution by 18% per store over the fiscal 2007 level.
Resource saving : To reduce the use of plastic shopping bags and disposable chopsticks, Lawson store crews will continue the practice to
ask customers whether they need them or not. We are also promoting Bring Your Own bags and chopsticks. Moreover, we will endeavor to
reduce the weight of packaging and use containers made of eco-friendly materials. Our target is to reduce CO2 emissions through reduced
incineration of packaging by 10% over the fiscal 2006 level.
Reduction in waste : To reduce food waste, we will continue to strive to reduce oil used to fry fast foods as well as boxed lunches and otherfoodstuffs that have passed their sell-by dates. We target a food recycling ratio of 30.5% or more.

Annual Report 201138

Environmental Preservation Initiatives at Stores
Introduction of “energy-creation” store with latest eco-friendly equipment
energy-saving equipment have been installed to help
reduce CO2 emissions in the store, with the target of
reducing electricity consumption by about 20% over the
fiscal 2006 level. The Kyotanabe store was constructedby rigorously selecting the construction materials andstructure used in order to reduce the quantity of
construction materials. At the same time, the store
p r o m ote d th e u s e of r e cyc l e d m a te r i a l s a t t h e
procurement stage and has been implementing thereuse, reduce, and recycle policy.

Lawson opened the latest eco-friendly store in Kyotanabe
city, Kyoto on December 1, 2010. This store uses electricity
generated by a solar power generation system for in-store
lighting and cash registers and uses rainwater to cool
down external air-conditioning units. Lithium-ion battery
systems have also been installed for the storage of powerthat is generated from the solar power generation system
so that the store can maintain its function as a lifeline in
the community even in times of earthquakes, typhoons, orother natural disasters. In addition, various types ofMain features of an “energy creation” store (Lawson Kyotanabe-Yamate-Nishi Store)
01 Solar power generation panels
02 Glass facade with no eaves tofacilitate cleaning
03 No excessive bare ceilings

01

02

03

04 Use of LED lighting,which reduces electricity
consumption by about 50%
05 Skylights that enable sunlightto flow in

04

05

06

06 Lithium-ion battery systems for
power storage and a backup
power supply in times of
emergency

Action plan for 25% reduction in power consumption
accumulated data around the clock for 365 days, whichenabled us to draw up a realistic plan with highly precise
reduction targets. Since the Great East Japan Earthquake
occurred on March 11, 2011, Lawson has implemented
various measures to save electricity, such as suspending
the use of air conditioning and turning off some lighting
during the daytime. In April, we decided to install LED instore lighting at all stores across Japan and we are
currently in the process of implementing this policy. By
combining measures such as changing the temperature
settings for in-store air conditioning and turning off somelighting during the daytime, we aim to achieve the 25%
reduction target. These efforts will also result in saving
electricity expenses at franchise stores.

To respond to power shortage concerns in the summer of
2011, we are taking measures to save electricity whiletargeting a 25% reduction in electricity consumption
during peak times (from 9 am to 8 pm, from July to
September) at 3,400 stores that are located within the
coverage areas of Tokyo Electric Power and Tohoku
Electric Power. Specific measures implemented at stores
since July 2011 are listed in the chart below. Thesecomprehensive measures were determined based on
knowledge and testing results on energy-saving storesthat had been accumulated from May 2008 through joint
research with the Yashiro Lab at the University of Tokyo’s
Institute of Industrial Science. We conducted tests at eight
stores in dif fering environments nationwide andMeasures to save power consumption at stores
Reduction by equipment installation(Target: Approx. 10,000 LAWSON stores in Japan)

Reduction by store operations(Target: Approx. 3,000 LAWSON stores within the
coverage areas of Tokyo Electric Power and Tohoku
Electric Power) Common items

Items to implement, depending on the statusof equipment

Implemented items

Target reduction rates

Install LED in-store lightings

Approx. 5%

Suspend use of a hot heater of cold temperature switchable cases

3%

Suspend lighting for refrigeration and freezer cases (9 am to 8 pm)

2%

Change the temperature settings for in-store air conditioning (+2°c)

2%Turn off air conditioner and lighting in the backroom when not in use

2%Clean all kinds of filters (once a week)2%

Suspend use of water heaters and jet towel hand dryers

1%

Check in-store ventilation air volume, etc.

3%

Turn off some in-store lighting during the daytime (9 am to sunset)

2%

Change the temperature settings for freezers (+1°c)

1%Refrain use of electric fryers or pots during the peak time of other electric appliances

2%
Approx. 25%

Total

39

(Implemented from July 1, 2011 to September 30, 2011)

Annual Report 2011

Environmental Initiatives

Major Indicators of CO2 Emission Reduction
Logistics Efficiency Improvement: Reduction in CO emissions per store by delivery trucks
2

Fiscal 2010 target

Fiscal 2010 result

15.0%

Fiscal 2011 target

18.0%

16.9%

in CO emissions from the incineration of packaging of boxed lunches,
Reduction in Use of Packaging: Reduction
delicatessen items, etc. (compared with fiscal 2006)
2

Fiscal 2009 result

Fiscal 2011 target

Fiscal 2010 result

23.0%

10.0%

24.8%

CO2 Offset Program: Fiscal 2010 result of 3,389 tons to total 16,228 tons
Fiscal 2010 result

Fiscal 2009 result

Fiscal 2011 target

3,389tons

5,647tons
Green fund donationsfor 20 years with customers

5,000tons

Lawson Green Fund Activities Overview(from September 1992 to the end of February 2011)

Twenty years have passed since we launched the Lawson
Green Fund in 1992 to help ensure the survival of precious
forest resources. Accumulated donations by customers
amounted to ¥3,260 million by the end of February 2011.
These donations have supported a great many forest
improvement projects and school afforestation projects inJapan and abroad through the National Land Afforestation
Promotion Organization.

Donations¥3,260 million

Projects supported

2,603

Area covered*

6,038 haNumber of trees in improved forest stands*

Approx. 15.09 million* Area and number of trees are calculated from Lawson Green Fund
donation totals and past results of Lawson Green Fund activities, basedon certain assumptions.

Lawson Green Fund Donations
50
Lawson Green Fund
Disaster Relief Fund*

27.5
29.4

40

(Million of Yen)

2.3

7.7
4.5

20
15.4

16.6

4.0

9.3
4.5
19.2

19.0

17.7

23.2

0.7

7.1

4.5

6.4

30

24.7

23.8

3.6
25.4
23.3

24.5

19.6
17.5

15.4
10.7

9.6

10

7.9

9.8

1994

1995

2.4
0

1992

1993

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

* Lawson Green Fund is replaced by Disaster Relief Fund in the event of a major disaster.

Annual Report 201140

Human Resources
Human Resources

Hand in Hand with Franchise Owners and Crews
The franchise business is Lawson’s core business. We believe that
not only employees but also franchise owners and store crews(part-time and temporary workers) must share our philosophy andwork with enthusiasm. This is the base for creating corporate
value. Lawson’s Head Office supports store management invarious ways.

Franchise owners and Lawson are partners in conducting joint business.
Franchise owners and Lawson are partners on an equal footing who jointly develop business. We share the samephilosophy and goals, and work together to share profits for the sake of mutual harmony and benefits.

Local
Communities

Joint BusinessFranchiseStoresHead Office

Role of Franchise Owners

Role of Head Office

Procure and manage merchandise (assortment,
freshness, inventories), service customers, maintaincleanliness, safety, and amenity

Develop products and provide product information
Provide information system
Distribute merchandise

Employ, train, and manage store crews

Develop ads and promotional campaigns
Store management guidance by supervisors
Education and training
Take care of accounting services

Manage sales and expenses

Lease equipment and fixtures

Accounting services
on stores’ behalf
The Head Office handles accounting
services on the stores’ behalf so thatfranchise owners can focus on their store
management.

41

Annual Report 2011

Minimum guarantee system

Owner support system

The Head Office guarantees* the minimum
amount of annual franchisee revenues.

This is a system where an employee isdispatched from the Head Office to run astore when an owner has to be absent.
This enables franchise owners take days
off at ease.

* This does not guarantee franchisees' profit
after operating expenses.

Supervisors(SV)Supervisors form a bridge between franchise owners and the Head Office and support owners in theirstore management. They understand the store’s problems and issues, come up with proposals forsolution, and share valuable internal and other information so as to gain the trust of the owner and work
together to achieve sales and profit growth.

Lawson seminars
Lawson seminars are held once a year at eight locations across Japan. They serve as a forum forowners to exchange information relating to Lawson’s management policies, product trends, andindividual store data analysis. The CEO always participates in the seminars, an important occasion tointeract with owners.

Franchise owners’ meetings
The town meeting, an assembly in which nationwide franchiseowners and Lawson’s management exchange opinions, has evolved
into the franchise owners’ meeting. This is an occasion for frankheated debates on various themes such as Lawson’s management,
products, sales promotion, and recycling of food waste.

Direct line to the CEO
Lawson has established a direct channel of communications forowners, store managers, and crews to express their opinions andideas to the CEO, who makes sure to check and respond to eachcomment. In fiscal 2010, the CEO received 315 valuable opinions
and ideas.

Mystery Shopper programThis is an on-site inspection program carried out by an external agency. The undercover researcher
actually uses a store, taking the role of a customer, and makes an objective and quantitative assessmentof the merchandise assortment, hospitality, and cleanliness. The results are compared with those ofcompetitors’ stores and are fed back to franchise owners.

Training programs
When new stores are launched, Lawson arranges a basic management course to ensure understandingof basic store management. After opening, various training sessions continue at a branch office training
center and in various other formats.

Recruitment and start-up support for store crews
Lawson has developed its own exclusive website for the
recruitment of store crews, which is regarded as effective inconnecting crew candidates with stores. We also have a system
to support a start-up for crews who desire to have their own
stores in the future.

Annual Report 201142

Enable Employees to Work Vigorously with Enthusiasm
Our employees, who always aim to grow and work vigorously withenthusiasm, build the foundation of our corporate value. Lawson has
strived to establish training programs, a good working environment,
and a structure to encourage in-house communication, in order todevelop a corporate culture in which each employee can fully exert
his or her capability and express opinions freely. What we emphasize
most during this process is to ensure all the workforce to share
Lawson’s corporate philosophy and code of conduct.

Hire non-Japanese students
Lawson set a policy to recruit one-third of new hires from non-Japanese students in fiscal 2008, as we
believe that Lawson’s future should be confided to human resources with diverse characteristics andvalues. We also need personnel who will take the role of overseas development. In fiscal 2009, 17 nonJapanese joined Lawson as new hires. We had 68 non-Japanese employees as of May 2011. We willcontinue to welcome personnel with diverse cultural background and promote the creation of more flexible
and vigorous workplaces.

Promote use of women workers
Women workers represented 15.2% of Lawson’s employees at the end of May 2011 and we believe it iscritically important to raise that ratio. The ratio of women among directors and auditors increased from 9%
to 18%, while the ratio of women among executives needs to be raised more. We had hired primarily maleworkers for many years but have changed our policy to make women represent about one-half of new hires
since fiscal 2005. We are creating more flexible and supportive work environments so that employees canrealize a good balance between work and private life. We obtained the Kurumin certification, which was
granted by the Ministry of Health, Labour and Welfare to companies that support employees’ parenting of
the next generation and a work-life balance.

New Hires in Fiscal 2011
Ratio of Non-JapaneseRatio of Women

Non-Japanese
32.8%

Women
46.6%
Men
53.4%

Japanese
67.2%

Non-Japanese 19
Japanese3943Annual Report 2011

out of 58

Women
Men

27
31

out of 58

Human Resources

Encourage internal communications
In fiscal 2008, we launched the Lawson Genki Project, whose main activities are now aimed at motivating
employees. (Genki literally means to be vibrant and cheerful in Japanese.) As one of these activities, anationwide sports contest is held by teams from the Head Office and branches which have won
preliminary matches. This is aimed at enabling employees to learn and understand about each other by
doing sports together and to cultivate a sense of unity as a team. In fiscal 2009 and 2010, a softballcontest was held and the matches were broadcast live via the in-house Intranet. From fiscal 2010, theClub Activity Campaign was launched in order to encourage more communication among colleagues.
Lawson has also been using its portal site, which can be accessed by all employees, since fiscal 2009. On
this site, employees can access timely information such as CEO messages, blogs, internalannouncements, and banners. This is helping to keep people abreast of the integrated information, whichhelps to raise operational efficiency and encourages more communication.

Lawson University’s unique training program
Lawson makes considerable investments in cultivating personnel. Its unique training program called Lawson
University is based on an integrated training system for personnel of various jobs, ranks, and aims. Our
objective is to cultivate a professional team of personnel with a high business promotion capacity meldedwith adherence to our corporate philosophy. The Lawson Learning Center (LLC) was established near the
Head Office and offers various programs. The next-generation leader training program is regarded as one of
the most important programs and the management frequently appears in front of the class as instructors.
We have also introduced the e-learning system for employees to study by themselves with their PC. The
Head Office employee training program is targeted at personnel ranging from new hires to management
candidates in various careers and at various times, based on the objective of fostering autonomous thinkers
and creating an organization which can keep learning.

Education and training
programs for franchise
store staff

Training programs for
franchise store staff
Aim to improve store
management capabilities

Store-opening training
Training for crew leaders
Training for existing store managers

Lawson University

Training Center
Provision of values

Training programs for
employees

Next-generation
management training

Leader training I II III, Executive training

Specialized courses

Courses for each operation; courses for store employees, store
managers, store supporters, and supervisors(SV); courses formerchandise development staff (AMD and MD), and RFC(ARFC and RFC), branch director; and courses on PRiSM andarea strategies

Core skills

Leadership training, facilitation training
How to solve problems, coaching, project management
training

Basic courses

What Lawson employees need to know
Business model, corporate philosophy, franchise business

Lawson learning systeme-learning system

Job rotation, evaluation of achievements

Annual Report 201144

Happiness and Harmony in Our Community

45

Annual Report 2011

Financial Section

INDEX

47

Management's Discussion and Analysis

61

Consolidated Balance Sheets

63

Consolidated Statements of Income

64

Consolidated Statements of Changes in Equity

66

Consolidated Statements of Cash Flows67

Notes to Consolidated Financial Statements

91

Independent Auditor's Report

Annual Report 201146

Management’s Discussion and Analysis
Industry Overview

customer base with the main targets being families, seniors, andhousewives was proceeded, primarily through the aggressive
introduction of private brands. The industry entered a phase
where the strength of convenience stores as neighborhood
stores is being reevaluated.
In this climate, the Convenience store industry struggled in thefirst half, due to the prolonged impact of deflation. However, inthe calendar year 2010 (from January to December 2010), thetop ten convenience store operators recorded a 0.8% year on
year decrease in existing store sales, which represented a
reduction of the rate of decrease, due to the following factors: 1)
favorable sales of high-margin beverages resulting from theunusually hot weather in the peak demand season of summer
and thereafter; 2) the beginning of a recovery in sales of ricedishes and other core products categories in the Convenience
store industry stemming from the cooling of excessive priceIn fiscal 2010, while the impact of consumers’ preference forlow-priced items lingered particularly in the first half due topersistent economic sluggishness, a hint of improvement inpersonal consumption emerged, as the summer was unusually
hot and retailers’ low-price competition ran its course. However,consumption recovered slowly and remained in the balance.
Among retailers, supermarkets carried out a discount war evenduring the phase of surging prices for fresh foods in the spring offiscal 2010, which eroded their profitability and resulted inintensified low-price competition, particularly in the first half. In
the department store sector, the dynamism led by industry
realignment came to a halt and the focus shifted to restructuringof stores and personnel.
In the Convenience store industry, a move to expand the(Billions of Yen, %)Retail Industry Market Size andConvenience Store Share*

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

Total retail industry annual sales

135,666

132,328

135,477

135,081

135,257

135,055

133,712

132,446

132,280

136,808

139,435

Convenience store sector annual sales

8,114

7,981

7,943

7,490

7,399

7,360

7,289

7,096

6,980

6,846

6,680

Convenience store share

6.0%

6.0%

5.9%

5.5%

5.5%

5.4%

5.5%

5.4%

5.3%

5.0%

4.8%

Source: "Current Survey of Commerce," Ministry of Economy, Trade and Industry* Annual sales amounts of the retail industry and the Convenience store sector are calendar-year based.

(Billions of Yen, %)Share of Convenience Store Market Held by
Top Four* Chains (Net sales of all stores)

2010**

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

LAWSON

1,683

1,666

1,559

1,415

1,387

1,362

1,329

1,288

1,294

1,286

1,278
2,047

Seven-Eleven Japan

2,948

2,785

2,763

2,574

2,534

2,499

2,441

2,343

2,213

2,114

FamilyMart

1,440

1,274

1,246

1,122

1,069

1,032

998

954

932

899

843

923

902

940

902

911

920

934

902

892

860

448

Circle K Sunkus*
Total

6,994

6,627

6,508

6,013

5,901

5,813

5,702

5,487

5,331

5,159

4,616

(Estimated market share of top 4 chains)

86.2%

83.0%

81.9%

80.3%

79.8%

79.0%

78.2%

77.3%

76.4%

75.4%

69.1%

Convenience store sector

8,114

7,981

7,943

7,490

7,399

7,360

7,289

7,096

6,980

6,846

6,680

Source: Data published by each company* Figures for the fiscal year ended February 28, 2001 are the combined figures of Circle K and Sunkus.
C&S Co., Ltd. for the fiscal years from 2001 to 2003** Figures for top 4 chains are fiscal-year based and figures for the Convenience store sector are calendar-year based.
(Number of stores)

Convenience Store Numbers

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

Convenience store numbers

45,00644,391

43,22843,08742,643

41,34041,11440,64439,80938,27437,562

Source: "2009 JFA Franchise Chain Statistics," Japan Franchise Association. The number of convenience stores is calendar-year based.

competition, improved consumer sentiment, and strong sales ofhigh grade products with high unit prices; 3) significant growth insales of cigarettes thanks to a smaller-than-expected loss ofcustomers following the cigarette tax hike of October 1, 2010
and an increase in per-unit prices associated with the tax hike.

Management Measures in FY2010
Lawson executed the following management measures in theyear ended February 28, 2011 with the aim of achieving
sustainable medium- to long-term earnings growth by realizing
stores that enable customers to experience “Whatever you want,whenever and wherever you need it.”I. Short-Term Measures
1.

47

We implemented measures to enhance the quality (Q),service (S), and cleanliness (C) of franchise store owners.

Annual Report 2011

Those three elements are the keystone for all of Lawson’s
growth-oriented measures. As a result, the ratio of visits by
Mystery Shoppers to top-rank stores increased.
2.

We implemented measures to improve the gross margin,
which is Lawson’s highest-priority key performanceindicator (KPI).
(1) We executed structural reform initiatives to streamline
raw materials and distribution.
(2) The use of PRiSM, the backbone IT system, enabled
the analysis of sales data gained from loyalty cards
to be reflected in order placement, resulting insystematic order placement and a reduction inopportunity loss.
The above two measures helped improve the grossmargin on products excluding cigarettes by 0.5
percentage point. The 1.4% year on year growth rate

Products and Services Overview

for existing store gross profit exceeded the 0.8%
growth rate for existing store sales.
3.

We implemented measures to promote sales and bolster
merchandise assortment based on the use of Ponta cards,
a multi-partner loyalty program. We also worked to acquire
more card members and improve their rate of visits to ourstores, in order to promote measures related to Ponta cards
and enhance merchandise assortment at each store throughcustomer relationship management (CRM). As a result, thenumber of Ponta card members exceeded 30 million by theend of fiscal 2010, and this is anticipated to further promote
CRM by boosting the level of analysis of customer data.

4.

By leveraging our advantages in raw material procurement
and utilizing our data analysis of Ponta card holders, wedeveloped and sold high-grade products that satisfy local
needs and tastes in respective communities.

5.

We promoted franchising of the LAWSON STORE100 fresh
food convenience store format.
Ninety-nine Plus Inc, which operates fresh food convenience
stores as a Lawson consolidated subsidiary, is expanding
its customer base by offering appealing products such as
fresh foods and daily delivered foods to housewives andseniors. In order to promote franchise (FC) businesses that
demonstrate strength in the small catchment area business,
we promoted franchising of LAWSON STORE100 stores, bycreating new LAWSON STORE 100 FC packages.

6.

We strengthened governance within the Lawson Group.
With the aim of preventing any recurrence of LAWSONENTERMEDIA's alleged misconduct incident that was
uncovered in February 2010, we executed proposals
submitted by the third-party investigating committee thatcomprised outside experts. At the same time, we turned
Ninety-nine Plus Inc. and LAWSON ENTERMEDIA, INC. into
wholly-owned subsidiaries on July 1, 2010 in order tostrengthen consistent governance from the Head Office ofthe parent company.

II. Medium- to Long-Term Measures1.

2.

We implemented multi-format strategies to match eachlocation with the aim of expanding the customer base.
(1) Fresh food-type stores: Opening, remodeling, andpromoting LAWSON STORE100 and fresh food-type
LAWSON (hybrid-type)(2) Healthcare-type store: Opening Pharmacy LAWSON
convenience stores that combine a drug dispensing
pharmacy, and opening joint MatsumotoKiyoshi and
LAWSON STORE100 stores(3) In-store kitchen-type LAWSON: On an experimental
basis, we made freshly made lunch boxes anddelicatessen items available in 41 stores.
We began preparation for our full-fledged entry into
overseas markets by opening new stores in Chongqing,
China, in addition to Shanghai.

Specific measures taken by each segment are described below.

The consumer market in fiscal 2010 was a year characterized bya swing back from an extreme price-focused trend to a valuefocused trend, with a correction from the excessive low-pricewars that persisted from fiscal 2009 occurring from the second
half of fiscal 2010. Lawson responded by developing andlaunching value-added products that leverage the inherent valueof convenience stores. Specifically, we addressed these changes
in customer needs and sourced high-quality ingredients in large
quantities through bulk purchasing.
Rice category (rice balls, lunch boxes, and sushi)
1. Reinforcement of rice balls
We lowered prices of popular items in the “Niigata
Koshihikari Rice Ball Series” to make them more affordable
to our customers. At the same time, we launched the highpriced “Zeitaku (Luxury) Niigata Koshihikari Rice Ball Series”
by using high-grade ingredients.
2.

Offering high value-added boxed lunches
We launched a series of upscale boxed lunches called“Gohoubi-no-hitotoki” (Enjoy luxury time), based on theconcept of “boxed lunches that offer customers extra
satisfaction.” Without following low-priced competition, we
implemented quality-focused product development strategies.

3.

Launch of chilled lunch boxes
In January 2011 we launched a series of chilled luncheswith vegetables and various other ingredients, which satisfy
the needs and tastes of female and senior customers.

In the dessert category, the renewal of our original brand called“Uchi Café SWEETS” in fiscal 2009 continued to show an
outstanding performance, resulting in favorable growth of about
20% year on year in existing store sales of desserts (nonconsolidated). In particular, the Premium Roll Cake Series was aphenomenal success, with a variety in types of cream andsponge cake. Its accumulated sales reached 86 million units by
the end of February 2011.
In sales promotion activities, we focused on programs that were
projected to yield a high return on investment (ROI). We ran
campaigns chiefly on tie-ups with well-known characters suchas the Rilakkuma Fair, the Miffy Campaign, the Evangelion
Campaign, and the Keion!! Fair.
On the services front, our stores handled 169 million billsettlement transactions, including public utility charges; thechain handled transactions amounting to ¥1,639.2 billion on
behalf of third parties in this way. Furthermore, ATM machines
were installed in six more prefectures, bringing the number ofprefectures with LAWSON stores that have ATMs to 46.
In the card business, we joined the Ponta multi-partner loyalty
program in March 2010. Loyalty Marketing, Inc., a wholly owned
subsidiary of Mitsubishi Corporation, operates the Program andvarious companies, including GEO Corporation, which rents
DVDs and CDs, are participating in it. We strove to provide
convenient and appealing services to cardholders, such as
expansion of the range of products eligible for bonus points andcampaigns to award more points for purchases. As of the end of
February 2011, the number of cardholders exceeded 30 million
and sales to card members represented over 30% of total sales.

Annual Report 201148

Store Operations
In store operations, we worked on creating sales floors andmerchandise assortments that suit customers' needs in local
communities, based on an analysis of purchase data of Ponta
card members, through the use of PRiSM. Our IT system has
also enabled the visualization of sales opportunity loss (missed
sales opportunities arising when merchandise needed bycustomers is sold out) and made franchise owners become
more conscious of merchandise assortments. Furthermore, we
continued to implement the “Mystery Shopper” program withthe aim of raising customer satisfaction, which we are doingb y p ro m o t i n g t h e T h re e C h a l l e n g e P r a c t i c e s * — t h eenhancement of quality (Q), service (S), and cleanliness (C).
The Three Challenge Practices are the keystone for LAWSON
store operations. These efforts helped to strengthen store
operation capabilities.

In fiscal 2011, our goals are to open about 200 new
LAWSON STORE100 stores and to convert about 150
company operated stores to franchise ones.
2.

*The Three Challenge Practices are points that franchise store owners,
employees and store crews (part-time and temporary workers) must pay
particular attention to in running LAWSON stores. They are (1) ensuring
merchandise assortments are matched to individual locations, (2) serving
customers courteously, and (3) maintaining stores and surrounding areas clean.

Store Development and Store Formats
Development of LAWSON Stores
We took steps to open stores that are projected to generatehigh earnings relative to investment, based on the concept ofReturn on Investment (ROI) and adhering to proprietary store
opening standards. This entailed concentrating on opening
new stores mainly in major metropolitan areas in the Kanto,
Chubu and Kinki regions.
Regarding conventional convenience stores, the scope for
opening new stores is limited due to fierce competition withhomogeneous convenience stores opened by other companies.
Given this situation, we pushed ahead with the opening offormats suited to each location, by leveraging our strength inmultiple formats.
Initiatives with formats other than regular LAWSON stores thatfeature blue signs saying LAWSON in white letters during thepast fiscal year were as follows.

II. Healthcare-Type Convenience Stores
1.

NATURAL LAWSON for Health-Conscious Customers
NATURAL LAWSON is a convenience store format
targeting mainly working women and health-conscious
customers, based on the key words of “beauty,” “health”
and “comfort.” The first store opened in 2001. In 2004, one
business division in the Head Office was spun off as
NATURAL LAWSON, Inc., a wholly owned subsidiary of
Lawson. As a subsidiary, NATURAL LAWSON succeeded
in developing a product concept and unique corporate
culture that are distinct from the Head Office. NATURALLAWSON has therefore been able to develop products thatbreak the conventional convenience store mold. With
NATURAL LAWSON having achieved its initial goal ofestablishing a new brand strongly supported by female
customers, Lawson integrated this company back into
Lawson's Head Office in 2007. As the second stage,
Lawson is continuing to develop the format to meet moreneeds of health-conscious consumers by developing
unique products and making the format more distinctivefrom the conventional convenience store format.
The number of NATURAL LAWSON stores amounted to 90(including 35 franchise stores) at the end of February 2011.

2.

Measures to Enhance Healthcare Business
Following the June 2009 enforcement of amendments to
the Pharmaceutical Affairs Law, we are taking the following
measures, as opportunities to boost pharmaceutical

I. Fresh Food-Type Convenience Stores
1.

49

LAWSON STORE100 Fresh Food Convenience Stores
We have been developing fresh food-type convenience
stores to satisfy new customer groups such as housewives
and seniors, whose needs are not fully captured byconventional convenience stores. This fresh food-typeformat is operated by our subsidiary, Ninety-nine Plus Inc.
In fiscal 2010, we opened 124 stores in this format, fewer
than the initial plan of 200 store openings. Our original plan
was to fully utilize the capabilities of Lawson's Store
Development Team by planning to turn it into a wholly
owned subsidiary in February 2010. However, the
LAWSON ENTERMEDIA incident delayed the creation of
the subsidiary until July 2010 and more time was required
to establish the group-wide store development structure.
On the other hand, another strategic move in franchising
has been developing as planned. We converted about 150
company operated stores to franchise stores as initiallyplanned and we are transforming ourselves into afranchise business that is strong in small catchment areabusiness. We had 1,044 LAWSON STORE100 stores on
February 28. 2011.

Annual Report 2011Fresh Food-Type LAWSON Stores (hybrid type)
With the aim of developing store formats that meet local
customer needs, we are converting and enhancing existing
LAWSON stores into fresh food-type LAWSON stores(hybrid type) with stronger fresh food assortments. Theseenhanced LAWSON stores offer products targeting newcustomer segments (women and seniors), with a focus on
fresh foods and daily delivered foods. The concept behindthese enhanced LAWSON stores is the same as fresh food
LAWSON STORE100 stores, that is, to strengthen themerchandise assortment for women and senior customers
to expand Lawson's customer base, and to make conscious
efforts to open stores in residential areas.
Fresh food-type LAWSON stores differ from LAWSONSTORE100 stores in the following way.
(1) Fresh food-type LAWSON is based on the conventional
LAWSON store and is a remodeled format that
introduces fresh foods and daily delivered foods inthe assortment (including some new stores). This
format can therefore be introduced nationwide,primarily in residential areas with a small catchment
area in the background.
(2) LAWSON STORE100 stores are opened in areas
with an extensive customer base within the small
catchment area, such as in the three major metropolitan
areas and cities designated by government ordinance.
We reformed or opened about 1,000 fresh food-type
LAWSON stores in fiscal 2010, resulting in a total of 1,186
stores. We plan to reform or open about 800 stores infiscal 2011.

increase one of the advantages of convenience stores asneighborhood stores, that is, being close to local
communities (in customers' residential areas). The numberof experimental stores that provide in-store prepared lunchboxes and delicatessen items to customers amounted to
41 stores by the end of February 2011.
In fiscal 2012, we will establish infrastructure to ensure fullscale medium-term growth by using the knowledge andexpertise we have gained through such operations andsolving issues such as the control of personnel expenses.

businesses for convenience stores. In July 2010, we
opened a joint MatsumotoKiyoshi and LAWSONSTORE100 store. We expect that MatsumotoKiyoshi, with
its strength in branding power for young women, andLawson, with its strength in housewives and seniors, will
create synergies that appeal to customers.
In addition, thanks to personnel exchanges with
MatumotoKiyoshi Holdings Co., Ltd., we were able toincrease the number of our personnel who hold Registered
Pharmaceuticals Salesperson qualifications to 65 and thenumber of our stores which sell over-the-counter
medications reached 35.
Lawson began trialing the Pharmacy Lawson format,
which combines a drug-dispensing pharmacy with aconvenience store and sells not only over-the-counter
medications but also prescribed drugs and otherpharmaceuticals in fiscal 2003. In fiscal 2008, we signed abusiness alliance with drug-dispensing pharmacy operator
Qol Co., Ltd. to enhance our healthcare business. Since
the opening of the first store with a dispensing pharmacy
in August 2010, the number of stores with this format
amounted to four by the end of February 2011.
3.

Future Store-Opening Strategy
Lawson will open the optimal format for an area by fully
leveraging the distinctive features of multiple formats to meetarea needs and customer needs: “LAWSON,” “NATURALLAWSON,” “LAWSON STORE100,” and “Fresh Food-Type
LAWSON” stores. The last one is a remodeling format of theconventional LAWSON store.
Armed with multiple formats, Lawson will be able to avoid
competition to open same type stores with other market players
and to cater to areas where conventional convenience stores
could not be opened in the past, thus allowing it to respondflexibly based on the conditions of a candidate location.
Furthermore, in overseas operations, Lawson began to open
stores in Chongqing, China in July 2010 in order to make useof its 15 years of experience in Shanghai.

In-Store Kitchen
Lawson stepped up initiatives to bolster the introduction of“freshly made lunch boxes and delicatessen items,” which
are in high demand among women and seniors, in order to

Number of Stores in the Lawson
Network in Japan (Consolidated)

2011/2**

2010/2**

2009/2*

2008/2

2007/2

2006/2

Number of stores

9,994

9,761

9,527

8,587

8,564

8,366

Openings*

550

607

501

452

700

717

Closings*

317

373

414

429

502

428

Net increase (decrease)

233

234

940

23

198

289

* Since Ninety-nine Plus Inc. was made into a consolidated subsidiary from the year ended February 28, 2009, stores operated by Ninety-nine Plus Inc. are includedin the data above from the year ended February 28, 2009 onwards.
** Figures for the years ended February 28, 2011 and February 28, 2010 include 141 and 136 stores operated by LAWSON Okinawa, Inc., in the respective fiscal year.

Number of Storesby FC Contract Type(Consolidated, Japan)(Number of stores, %)2011/2

2010/2

2009/2*

2008/2

2007/2

2006/2

Stores Share (%)

Stores Share (%)

Stores Share (%)

Stores Share (%)

Stores Share (%)

Stores Share (%)

B

1,216

12.2

1,258

12.9

1,322

13.9

1,369

15.9

1,512

17.7

1,674

20.0

G

2,057

20.6

2,001

20.5

2,041

21.4

2,123

24.7

2,209

25.8

2,272

27.2

C

5,284

52.9

5,074

52.0

4,863

51

4,641

54

4,367

51

4,011

47.9

35

0.4

27

0.3

22

0.2

15

0.2

5

0.1

1

0

Franchise stores

NATURAL LAWSONLAWSON STORE100 /SHOP99SubtotalCompany-operated stores

268

2.7

167

1.7

114

1.2

–

–

–

–

–

–

8,860

88.7

8,527

87.4

8,362

87.8

8,148

94.9

8,093

94.5

7,958

95.1

Stores Share (%)

Stores Share (%)

Stores Share (%)

Stores Share (%)

Stores Share (%)

Stores Share (%)

LAWSON

129

1.3

207

2.1

283

3

291

3.4

296

3.5

323

3.9

NATURAL LAWSON

55

0.6

62

0.6

71

0.7

76

0.9

95

1.1

50

0.6

LAWSON STORE100 /SHOP99

809

8.1

829

8.5

811

8.5

72

0.8

80

0.9

35

0.4

Subtotal

993

9.9

1,098

11.2

1,165

12.2

439

5.1

471

5.5

408

4.9

141

1.4

136

1.4

9,994

100

9,761

100

9,527

100

8,587

100

8,564

100

8,366

100

Area FCs**
Total* Since Ninety-nine Plus Inc. was made into a consolidated subsidiary from the year ended February 28, 2009, stores operated by Ninety-nine Plus Inc. are
included in the data above from the year ended February 28, 2009 onwards.
** Stores operated by LAWSON Okinawa, Inc.

Annual Report 201150

Outline of Store Contracts (Conventional LAWSON Stores)
Contract typeC
G
B
Contract term
10 years from store opening day
Owner conditions
At least 20 years old, 2 full-time store workers
Land and buildings
Provided by Lawson
Prepared by franchisee
Investment in store construction and interior decoration expenses
Borne by Lawson
Borne by franchisee
Signage and business fixtures
Provided by Lawson
Franchise fee ¥1.5 million (Contract fee, training expenses, and store opening preparation commission, each ¥500,000) (excluding tax)
Payment by franchisee
at time of contract*
Investment¥1.5 million (Including payment for some merchandise purchased on behalf of the store)
Guarantee deposit provided by franchisee
Not required
Average monthly sales x 2 months
Not required
Head Office income**
Gross profit x 50%
Gross profit x 45%
Gross profit x 34%
Burden of utility expenses
Franchisee
Minimum guarantee (annual)**(thousands of yen)
21,00022,20022,200* The amount is paid by the franchisee to the Head Office at the time of the franchising contract. In addition, the franchisee needs to separately prepare a total of¥500,000, including cash register float at time of store opening.
** The Head Office income and minimum guarantee are in the case of stores operating on a 24-hour basis.

Outline of LAWSON STORE100 Contracts
Contract typeLand and buildings
Contract stores
Contract term

VL-C
VL-S
VL-B
Provided by Ninety-nine Plus
Use land and buildings owned by franchiseeStores already being operated by Ninety-nine Plus as LAWSON STORE100 Land and buildings owned by franchisee
10 years since the opening
5 years since the opening
10 years since the opening¥2.55 million (consumption tax included)
Breakdown Franchise fee ¥1.05 million (consumption tax included)
Payment by franchisee at		Contract fee ¥262,500
Necessarytime of contract*		Training expenses ¥262,500
expenditure		Store opening preparation comission ¥525,000
Investment ¥1.5 million (including payment for some merchandise purchased on behalf of the store)
Other expenses
Store opening expenses: Approx. ¥500,000 (i.e., supply of changes for cash registers, licensing fee for operation)
Store construction and interior decoration
Borne by Ninety-nine Plus
Borne by franchisee
Investment
Business fixtures
Borne by Ninety-nine Plus
Minimum guarantee*¥21 million per year
¥22.2 million per year
[Franchisee's percentage of sales fees] [Franchisee's percentage of sales fees]
On gross profit (monthly)
On gross profit (monthly)

Head Office income¥1–3,000,000
Gross profit x 34% ¥1–2,500,000
Gross profit x 26%¥3,000,001–4,500,000 Gross profit x 43% ¥2,500,001–3,000,000 Gross profit x 48%¥4,500,001–5,400,000 Gross profit x 55% ¥3,000,001–3,500,000 Gross profit x 58%
Over ¥5,400,001
Gross profit x 68% Over ¥3,500,001
Gross profit x 68%

Gross profit X 27%* The amount is paid by the franchisee to the Head Office at the time of the franchising contract. In addition, the franchisee needs to separately prepare a total of¥500,000, including cash register float at time of store opening.
** The Head Office income and minimum guarantee are in the case of stores operating on a 24-hour basis.

Overview of Resultsmonths (from January 2009 to February 2010). On a nonconsolidated basis, sales increased 2.1% to ¥1,502,754 million.

I. Sales Figures
Total Net Sales (Consolidated)
Consolidated net sales of LAWSON stores in fiscal 2010, ended
February 28, 2011, exceeded the initial plan of ¥1,663,000 millionby ¥19,812 million and rose 1.0% year on year, to ¥1,682,812
million. Net sales were above plan mainly because sales atexisting stores were favorable, as described from the following.
The year-on-year increase was small, as net sales in fiscal 2009
consolidated Ninety-nine Plus Inc.'s net sales for a period of 14

Existing Store Sales (Consolidated)
Consolidated existing store sales (including sales of Ninetynine Plus Inc.) increased 0.7% year on year, while existing store
sales on a non-consolidated basis exceeded the initial plan by
2.3 percentage points and were up 0.8% year on year. By
region, the Chubu area was comparatively weak because of
the effects of a lackluster manufacturing sector, while the
Tohoku area was strong.

Growth Rate of Existing Store Sales, Average Number of Customers andAverage Spend per Customer in Existing Stores (Non-Consolidated)

2011/2

2010/2

2009/2

2008/2

2007/2Growth rate of existing store sales (YoY)

+0.8%

-4.1%

+6.5%

-0.8%

-1.8%

Number of customers

+0.4%

-1.0%

+5.7%

-1.1%

-1.8%

Average spend per customer

+0.4%

-3.1%

+0.8%

+0.4%

+0.0%

Growth rate of average number of customers
and average spend per customer at existing stores

Sales by Product Category (Consolidated, total net sales)
On a consolidated basis, daily delivered foods were the only
product category that posted year-on-year sales growth but
the comparison was distorted due to the inclusion of 14
months of sales at Ninety-nine Plus Inc. in total net sales forthe previous year.
On a non-consolidated basis, daily delivered foods andprocessed foods recorded year-on-year growth of 13.6% and1.9%, respectively. The following details below are on a nonconsolidated basis.

51

Annual Report 2011

Sales of daily delivered foods were affected by the transfer tothis category of items such as delicatessen items from fast foods
following a change in categorization. Excluding this factor, sales
increased 8.3% year on year. Such significant growth was driven
by sales growth of over 20% in desserts on an all-store basis,
stemming from the phenomenal success of original desserts,
and favorable sales of ice cream products resulting from theunusually hot summer.
Sales of processed foods increased from the previous year,
thanks to a 6% increase in cigarette sales on an all-store basis,recorded by the pasta category, due to strong sales of therenewed brand line of Pasta-ya, sales of sandwiches were alsofavorable thanks to the effects of the loyalty point program
campaign. The non-food category posted a 3.5% year-on-year
decrease in sales because of sluggish sales of structurally
depressed products such as books and magazines.

as a decrease in sales volume caused by higher tax rates wasoffset by a rise in unit prices.
In the fast foods category, sales decreased from the previous
year but increased 2.2% year on year on an actual basis whenexcluding the impact of the change in categorization with thedaily delivered foods category. In addition to significant growth(Millions of Yen, %)Sales by Product Category (Consolidated, total net sales)

2011/2

2010/2

2009/2

2008/2

2007/2

Fast foods

321,865

324,197332,894

327,501

324,993Share
Daily delivered foods
Share
Processed foods
Share(Cigarettes)(Share)Total food sales

19.5%

21.4%

23.1%

23.4%

239,088

186,109

162,625

155,575

15.7

14.3

11.9

11.5

11.2

897,426

902,306

844,324

726,750

705,155

53.3

54.2

54.2

51.4

50.9

382,167

358,600

342,450

249,745

238,406

22.7

21.5

22.0

17.6

17.2

1,483,462

1,465,592

1,363,328

1,216,876

1,185,724

Share
Non-food products
Share
Net sales of all stores

19.1%
264,169

88.2

88.0

87.5

86.0

85.5

199,350

200,544

195,453

198,230

200,907

11.9

12.0

12.5

14.0

14.5

¥1,682,812¥1,666,136¥1,558,781¥1,415,106¥1,386,630

100

100

100

100

100

Share (%)
Breakdown of Product Category
Category

Products Included

Fast foods

Rice dishes, noodles, sandwiches, delicatessen items, fast foods on the counter, etc.

Daily delivered foods

Bakery items, desserts, ice cream, fresh foods, etc.

Processed foods

Soft drinks, alcoholic beverages, processed foods, confectionery, cigarettes, etc.

Non-food products

Daily necessities, books, magazines, online merchandise sales and services

Gross Profit Margin by Product Segment(Non-Consolidated, total net sales)
The overall gross profit margin was 30.6%, 0.2 percentage
point higher than in fiscal 2009 but 0.3 percentage point below
plan. As mentioned earlier, the lower margin than initial plan
was caused by the cigarette tax hike on October 1, 2010. The
positive impact of the unit price hike outweighed the negative
impact of a reduction in sales volume, but as sales of lowmargin cigarettes were higher than initially estimated, theproduct mix deteriorated.
The gross profit margin for all products excluding cigarettes wasin line with the initial plan and rose significantly, ending up 0.5
percentage point higher than in fiscal 2009. This was mainly
supported by structural reform initiatives aimed at improving thegross profit margin, such as streamlining of raw materials
procurement and distribution.
In the fast foods category, the margin improved by 0.5
percentage point year on year because of the aforementioned
raw materials procurement initiatives aimed at enhancing added
value (refer to page 10). Improvement was particularly striking infast foods on the counter and cooked noodles.

In the daily delivered foods category, the margin improved 0.3
percentage point year on year, thanks to the effect of improved
markup terms for each product, especially bakery items, andstrong sales of high-margin ice cream products during theunusually hot summer.
In the processed foods category, the gross profit margin
declined 0.1 percentage point year on year due to the greater
share of cigarette sales in the product mix. Their share increased
by 0.9 percentage point, from 24.0% in fiscal 2009 to 24.9% in
fiscal 2010. Margins on processed foods other than cigarettes
improved year on year due to the optimization of manufacturer
inventories, resulting from more systematic ordering linked to
product development (linking the merchandise assortment atstores with product development), and the benefits of improved
distribution efficiency.
In the non-food products category, the margin improved
significantly, rising 1.4 percentage points year on year, due tomargin improvement for daily necessities, resulting from more
systematic ordering and a limited number of products in themerchandise assortment, as well as growth in commission
business including ticket sales and bill settlement.
(%)

Gross Profit Margin by Product Segment (Non-Consolidated)

2011/2

2010/2

2009/2

2008/2

2007/2

Fast foods

36.5%

37.8%

37.3%

36.1%

36.3%

Daily delivered foods

34.6

34.3

33.7

33.6

33.8

Processed foods*

24.5

24.6

24.8

26.3

26.4

Non-food products**

42.2

40.8

39.5

38.5

38.0

Gross profit margin

30.6

30.4

30.1

31.2

31.3

* The processed foods category includes cigarettes.
** Calculation of the gross profit margin for non-food products includes bill settlement and other commission income.

2011/2

2010/2

2009/2

2008/2

2007/2

2006/2

Bill settlements (millions of yen)

¥1,639,203¥1,553,832¥1,506,531¥1,412,335¥1,294,004¥1,165,255

Number of transactions (millions)

169.8

162.2

156.6

149.9

140.9

130.6

Commission income (millions of yen)

9,027

8,651

8,415

8,275

8,141

7,507

Bill Settlement Services (Non-Consolidated)

Annual Report 201152

II. Consolidated Income Statement Items

Inc. decreased by ¥4,200 million from the previous year, when
14 months of SG&A expenses were accounted for. Rents roseby ¥2,661 million, or 3.8%, thanks to an increase in the openingof mainly C-type franchise stores.
Personnel expenses decreased by ¥1,210 million, or 3.3%, on a
non-consolidated basis due to a decrease in personnel expenses
for store crews (part-time and temporary workers) associatedwith 85 fewer company-operated stores than the previous fiscal
year. On a consolidated basis, personnel expenses decreased by¥2,813 million, or 4.6% year on year, to ¥58,020 million. This
reflects a decrease of ¥2,000 million due to a reaction to theinclusion of 14 months of personnel expenses at Ninety-nine Plus
Inc. in total personnel expenses for the previous year.
Advertising and promotional expenses decreased by ¥1,188
million, or 9.8% year on year, to ¥10,977 million. Lawson
introduced the concept of return on investment (ROI) in
advertising and sales promotion and focused on a limited
number of more efficient promotional activities (i.e., campaigns
which focused on a particular target customer group). We also
rationalized the use of loyalty points program.
IT-related costs on a non-consolidated basis amounted to ¥14,700
million, up ¥1,000 million from the previous year. This increasereflected a reaction to the previous year's efforts to rationalize
expenses for existing IT systems, which were implemented at
the time of system replacement, as well as the full-year operationand depreciation of software used in the PRiSM.

Total Operating Revenues
Total operating revenues comprise net sales from companyoperated stores, franchise commission from franchise stores,
and other operating revenues.
Total operating revenues decreased by ¥25,914 million, or 5.5%,
to ¥441,278 million, but these exceeded the initial plan by ¥6,278
million. The main reasons for the decrease were a reaction to theinclusion of 14 months of sales at Ninety-nine Plus Inc. in total
net sales for the previous year and a shift in some companyoperated stores to franchise stores in the parent company.
Operating revenues exceeded the initial plan mainly because offavorable existing store sales, good daily sales at new stores in
the parent company, and a ¥12,017 million increase in franchisecommission from franchise stores thanks to progress inconversion to franchise stores.
As a breakdown, net sales from company-operated storesamounted to ¥183,236 million, while franchise commission from
franchise stores and other operating revenues were ¥197,673
million and ¥60,369 million, respectively.
Selling, General and Administrative (SG&A) Expenses
SG&A expenses decreased by ¥558 million, or 0.2% year on
year, to ¥242,636 million. SG&A expenses were approximately¥1,900 million less than planned. The main reason for the yearon-year decrease was that SG&A expenses of Ninety-nine Plus

(Millions of Yen, %)Breakdown of Main SG&A Expenses

2011/2

2010/2

2009/2

2008/2

2007/2

2006/2

Personnel expenses*¥58,020¥60,833¥46,203¥39,927¥37,888¥35,450

ShareAdvertising and promotional expenses
Share
Rents
Share
Equipment leasing charges
Share
Depreciation and Amortization
Share
Depreciation expenses**
Share
Amortization expenses
Share
Other
Share
Total
Share

23.9%

25.0%

21.8%

20.6%

20.7%

20.2%

10,977

12,166

13,781

9,385

9,693

9,177

4.5

5.0

6.5

4.9

5.3

5.2

73,231

70,57062,32358,56255,31851,236

30.2

29.0

29.4

30.3

30.2

29.1

10,22913,443

14,98818,414

17,475

16,734

4.2

5.5

7.1

9.5

9.5

9.5

33,084

27,46820,87921,445

21,34820,893

13.6

11.3

9.9

11.1

11.7

11.9

24,52921,053

16,752

16,63016,18515,859

10.1

8.7

7.9

8.6

8.8

9.0

8,554

6,414

4,126

4,815

5,163

5,034

3.5

2.6

1.9

2.5

2.8

2.9

57,09358,71153,75545,65341,44642,402

23.5

24.1

25.4

23.6

22.6

24.1

¥242,636¥243,194¥211,932¥193,390¥183,169¥175,894

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%* Effective from the fiscal year ended February 28, 2007, expenses for temporary employees have been included in “Personnel expenses,” whereas they werepreviously recorded under “Other.” Expenses for temporary employees included in “Personnel expenses” in fiscal 2006 were ¥1,375 million, while expenses for
temporary employees included in “Other” in fiscal 2005 were ¥750 million.
** Due to the application of new accounting standards for leases, depreciation expenses for fiscal 2009 and fiscal 2010 include depreciation and amortization oflease assets treated as sale-and-purchase transactions.

Operating Income
Operating income increased ¥5,265 million, or 10.5% year on
year, to ¥55,541 million and was ¥5,041 million, or 10.0% higher
than initially planned. It also incorporated ¥1,711 million inincome from Ninety-nine Plus Inc. Operating income relative tototal net sales was 3.3%.
Income before Income Taxes and Minority Interests
Income before income taxes and minority interests increasedby ¥14,536 million, or 48.7%, to ¥44,411 million. Extraordinary
losses of ¥10,184 million were recorded. Major items were a¥1,304 million loss mainly on sales of a guest house for training
franchise owners, a ¥4,990 million charge for impairment of

53

Annual Report 2011

long-lived assets, including close to a ¥2,000 million loss on
the existing IT system of Ninety-nine Plus Inc. accompanying
its introduction of the PRiSM, and a ¥3,018 million charge forloss on disposal of property and store equipment. However,these factors were offset by the absence of an improprietyrelated loss of ¥12,616 million related to the alleged
misappropriation of funds by two former directors of theconsolidated subsidiary LAWSON ENTERMEDIA, INC. of theprevious year.
Net Income
As a result of the above, net income increased ¥12,825 million, or
102.1%, to ¥25,387 million. Net income per share was ¥254.61.

Financial Position

franchised stores,” as the end of February 2010 was a bank holiday
and deposits by many franchise stores were delayed for a day.

I. Consolidated Balance Sheets
Current Assets
Total current assets increased by ¥12,811 million, or 9.7%, fromthe end of fiscal 2009 to ¥145,010 million. This was mainly
attributable to an improvement in operating cash flow, primarily
due to a ¥14,536 million increase in income before income taxes
and minority interests as a reaction to the previous fiscal year's
booking of an impropriety-related loss caused by the alleged
misappropriation of funds by two former directors of theconsolidated subsidiary LAWSON ENTERMEDIA, INC. Hence,
cash and cash equivalents increased ¥12,869 million, or 23.5%
year on year, to ¥67,712 million.
Property and Store Equipment, Investments and Other Assets
Net property and store equipment rose by ¥13,525 million, or
9.3% from a year ago, to ¥158,834 million. This was mainly
attributable to an increase in lease assets such as fixturesassociated with store openings and IT investments, stemmingfrom the application of new lease accounting standards.
Investments and other assets increased by ¥1,569 million to¥172,193 million.
Current Liabilities
Total current liabilities increased by ¥8,099 million, or 4.4%, to¥192,596 million. The main factors were an ¥8,210 million, or
11.2%, increase to ¥81,399 million in accounts payable due toan increase in total net sales excluding cigarettes and the impactof a ¥3,312 million increase stemming from the application of
new lease accounting standards.
Long-Term Liabilities
Total long-term liabilities rose ¥9,475 million, or 14.5%, to ¥74,974
million. There was a ¥1,572 million decrease in guarantee deposits
received from franchise stores due to a decrease in the numberof G-type franchise stores, which operate under franchise
agreements requiring the payment of a guarantee deposit. On theother hand, there was a ¥8,843 million increase stemming fromthe application of new lease accounting standards.
Total Equity
Total equity, including minority interests, amounted to ¥208,467
million at the end of February 28, 2011, representing a ¥10,331
million, or 5.2%, year-on-year increase. Net income amounted to¥25,387 million and cash dividends of ¥16,422 million were paid,
resulting in an increase of ¥5,436 million in retained earnings to¥99,608 million.

II. Special Account Items on the Balance Sheets
The following items are special features of Lawson's
financial statements.
Due from Franchised Stores
Lawson makes bulk purchases of products ordered by all
franchise stores and calculates and pays amounts payable forthese to the vendors on their stores' behalf. Lawson records thecost of the merchandise in the “Accounts receivable—Due from
franchised stores” account since such costs are recovered from
franchise stores. “Due from franchised stores” represents mainly
the obligations of franchise stores to the Head Office for theseamounts at the balance sheet date. As of February 28, 2011, thisasset account was ¥16,159 million, ¥4,632 million lower than a year
ago. This was a reaction to a temporary increase in “Due fromAccounts Receivable—Other
Other accounts receivable such as income due from vendors isincorporated in “Other” in “Accounts receivable” on the balance
sheet. This includes income due (i.e., the amount of card sales
by franchise stores). With regard to trade, trade for franchise
stores and trade for company-operated stores are accounted forin separate account items. However, payments due to card
issuing companies are all due from Lawson, a contracted party
with card companies. “Other” in “Accounts receivable” isdisplayed in one account item.
The constituent elements of this item stood at ¥29,286 million at
February 28, 2011, an increase of ¥2,840 million.
Long-Term Loans Receivable
This account mainly represents money paid to landlords (ownersof land and buildings for stores) to help with construction, andinvestments and finance from the Head Office to franchise stores.
Funds pledged to landlords for opening stores used to bebooked in the lease deposits account but are now booked under“Long-term loans receivable.” As of February 28, 2011, thisaccount was ¥2,102 million higher than a year ago at ¥31,826
million, because of an increase in money paid to landlords to help
with construction for store openings.
Lease Deposits
This account represents leasehold deposits paid to landlordsequivalent to several months' rent under lease agreements at
Lawson. As of February 28, 2011, this account was ¥81,655
million, a decrease of ¥1,551 million.
Due to Franchised Stores
This account represents Head Office obligations to franchise
stores. All franchise stores make remittances of cash proceedsfrom daily sales to the Head Office. If franchise store remittancesof cash proceeds from daily sales to Lawson exceed the balanceof “Accounts receivable—Due from franchised stores,” theexcess is shown on the balance sheet as “Accounts payable—
Due to franchised stores.” As of February 28, 2011, this accountwas ¥1,179 million, up ¥154 million from a year ago.
Money Held as AgentThis account mainly comprises money held on behalf of third
party companies for which Lawson provides bill settlement
services, including public utility charges. “Money held as agent”
continued to increase, up 5.5% year on year to ¥1,639,203
million because of a rise in the number of transactions and thenumber of companies for which settlement services were
provided. However, because of the calendar, there was one
additional monthly payment to third-party companies in February
2011, which resulted in a year-on-year decrease of ¥3,517 million
to ¥62,341 million in this account at February 28, 2011.
Guarantee Deposits Received From Franchised Stores
This represents guarantee deposits received by Lawson fromstore owners operating under FC-G contracts. As of February
28, 2011, this account was ¥37,139 million, ¥1,572 million lessthan the previous year, due to the repayment of guarantee
deposits to franchise stores, associated with contract renewals
or terminations, despite an increase of 56 in the number of FC-G
contract stores.

Annual Report 201154

Capital Expenditure, Etc.
In fiscal 2010, capital expenditure on a consolidated basis
totaled ¥50,326 million, down ¥21,073 million from a year
ago. New store investments decreased by ¥6,212 million to¥13,675 million as a result of decreased store openings (downfrom 607 in the previous fiscal year to 550). Existing store
investments increased by ¥831 million to ¥8,934 million,

reflecting an increase in conversions to fresh food-type
LAWSON stores (hybrid type). IT-related investments
decreased by ¥1,930 million to ¥7,479 million, mainly because
a series of investments in the backbone IT system PRiSM
was completed. Leases decreased by ¥19,685 million to¥16,691 million mainly because IT-related investment (Loppi
and electronic ordering system) peaked out.
Details of major capital expenditures are as follows:(Millions of Yen)

Breakdown of Capital Expenditure

2011/2

2010/2

2009/2

2008/2

2007/2

New store investments¥13,675¥19,887¥15,635¥12,387¥23,444

Existing store investments

8,934

8,101

6,747

7,493

5,887

IT-related investments

7,479

9,409

12,064

7,733

4,662

Other

1,003

629

3,886

2,260

(1,395)Investments subtotal

31,091

38,02638,331

29,87332,598Investments and advances

2,544(3,004)(14,564)

19,6903,013

Leases*

16,69136,37619,14014,85014,211

Total¥50,326¥71,399¥42,907¥64,413¥49,822* The amount equivalent to the acquisition cost of leased property acquired during each fiscal year. The amount of repayments of lease obligations is ¥8,785 million
in fiscal 2010.

Breakdown of Depreciation

2011/2

2010/2

2009/2

2008/2

2007/2

Depreciation expenses*¥24,529¥21,053¥16,752¥16,630¥16,185

Amortization expenses

8,554

6,414

4,126

4,838

5,167

Total depreciation and amortization

33,083

27,46820,87921,46921,352* Due to the application of new accounting standards for leases, depreciation expenses for fiscal 2009 and fiscal 2010 include depreciation and amortization oflease assets treated as sale-and-purchase transactions.

Cash Flows
Operating activities provided net cash of ¥72,210 million,¥31,514 million more than in the previous fiscal year. This was
mainly attributable to a significantly higher year-on-year resultfor income before income taxes and minority interests due to a
substantial increase in operating income on favorable sales
during fiscal 2010 and a reaction to the previous fiscal year's
booking of an impropriety-related loss caused by the alleged
misappropriation of funds by two former directors of theconsolidated subsidiary LAWSON ENTERMEDIA, INC.
Investing activities used net cash of ¥30,522 million, ¥12,074
million less than in the previous fiscal year. The main reasons
were an increase in proceeds from the withdrawal of time
deposits that exceeded a decrease in payments into time
deposits and a decrease in store openings that resulted in adecrease in payments accompanying purchases of property
and store equipment.
As a result of changes in cash flows from operating andinvesting activities, free cash flow—the difference between thetwo figures—increased by ¥43,588 million to ¥41,688 million.
Financing activities used net cash of ¥28,799 million, ¥1,560
million more than in the previous fiscal year. This reflects anincrease in cash dividends paid of ¥556 million and paymentsof ¥3,510 million for the purchase of the company's own sharesin association with turning Ninety-nine Plus Inc. and LAWSONENTERMEDIA, INC., into wholly-owned subsidiaries.
As a result, cash and cash equivalents at the end of the fiscal
year increased by ¥12,869 million from a year earlier to total¥67,712 million.

55

Annual Report 2011

Capital Policy: Dividends and Purchaseof Treasury Stock
Lawson regards returning profits to shareholders as one of its
most important management policies, and is run with recognition
that the level of capital cost should reflect the profit expectationsof investors toward Lawson. We therefore seek to select anddevelop businesses that achieve earnings above the cost ofcapital, using ROE, an indicator of capital efficiency, as the mostimportant management indicator. We ensure financial soundness
by securing the necessary level of internal reserves forinvestment aimed at achieving sustained corporate growth overthe medium to long term so as to maintain high profitability. We
also pursue optimal capital efficiency by distributing profits
through dividends and the purchase and cancellation of treasury
stock based on what we consider to be an appropriate capitalcomposition. Our medium to long term goal is ROE of 15% to 20%.
Our dividend yield on February 28, 2011 was 4.2%. (Pleaserefer to page 6 for details on our cash dividends per share). For
fiscal 2011, we plan to increase the cash dividend per share by¥5 to ¥175.
Regarding dividend policy, we have not employed a specifictarget for the payout ratio. Rather, as a way to improve capitalefficiency, we intend to efficiently manage the ample free cash
flow we are creating by rewarding shareholders.
During the four-year period from fiscal 2001 to fiscal 2004,
Lawson cancelled approximately ¥43.0 billion of treasury stock.
In fiscal 2007, we bought back more treasury stock,repurchasing approximately 5.3 million shares for approximately¥21.0 billion from October 2007 to January 2008. We cancelled
a total of 5 million shares of treasury stock in February 2008.

Overview of Consolidated Subsidiaries
and Equity-Method Affiliates
Consolidated results for fiscal 2010 include the performance ofnine members of the Lawson Group—seven consolidated
subsidiaries and two affiliates accounted for under the equity
method. These subsidiaries and affiliates are broadly engaged
in four categories of business: convenience store operations,entertainment and e-commerce operations, financial services,and overseas operations. The business operations and fiscal
results of companies included within the scope of consolidation
are presented below.

Convenience Store Operations
Ninety-nine Plus Inc. (Consolidated subsidiary)
Established in October 2000, Ninety-nine Plus operates the
fresh food convenience store format “LAWSON STORE100,”and has grown rapidly as a pioneer in Japan of a fresh foods
store format that provides everything from fresh food and otherdaily food items, to sundries at a single price. Lawson signed abusiness and equity alliance agreement with Ninety-nine Plusin 2007. Fresh food convenience stores have won strong
acceptance from housewives and seniors by strengthening themerchandise assortment of fresh and daily delivered foods atstores in small catchment areas. This is highlighted by a higher
percentage of these groups in the customer mix comparedwith conventional convenience stores. In 2007, Ninety-nine
Plus carried out an increase in capital by a third-party allotmentof shares to Lawson. In January 2008, Ninety-nine Plus
increased its capital by another third-party allotment of shares
to Lawson, to strengthen its business alliance with Lawson andto raise funds to open more stores. As a result, Lawson
became the leading shareholder in Ninety-nine Plus with anequity interest of 34.2%. In September 2008, Lawson
conducted a tender offer for Ninety-nine Plus's shares, raising
its equity interest to 76.8%.

On May 1, 2009, VALUE LAWSON, INC., a Lawson subsidiarythat developed the “LAWSON STORE100” format and ran afresh food convenience store operation, and Ninety-nine Plus
merged, with the latter as the surviving company. The goal ofthe merger was to generate even greater alliance benefits andbecome the unrivalled leader in the fresh food convenience
store sector by sharing expertise in the sale of fresh foods anddaily delivered foods, and jointly developing the private brand
Value Line, featuring products in appropriately-sized small
quantities and conveniently-sized packages.
Since Ninety-nine Plus ended its fiscal year on March 31 until
fiscal 2008, Lawson's equity-method earnings in Ninety-nine
Plus in fiscal 2007 included earnings for the nine months
through the end of Ninety-nine Plus's third quarter. In fiscal
2008, Lawson recorded as equity-method earnings nine monthsof earnings from Ninety-nine Plus's fourth quarter in fiscal 2007
to the end of its second quarter in fiscal 2008. Ninety-nine Plus
was then completely consolidated from its third quarter in fiscal
2008. Ninety-nine Plus changed its fiscal year-end from March
31 to February 28 at its ordinary general meeting ofshareholders in June 2009. As a result of this change, Ninetynine Plus's fiscal 2009 was an 11-month transitional fiscal year.
Moreover, Lawson's consolidated results for fiscal 2009 also
included three months' results of Ninety-nine Plus for the fourth
quarter of fiscal 2008, to make 14 months.
Ninety-nine Plus was listed on the JASDAQ market, but was
delisted in June 2010 and became a wholly owned subsidiaryof Lawson by a share exchange in July 2010. Lawson's
investments to Ninety-nine Plus have amounted to ¥16,700
million since fiscal 2007.
In fiscal 2010, Ninety-nine Plus recorded a decrease in sales fora technical reason, namely a reaction to the previous year's
14-month business result. It also posted extraordinary losses of¥2,800 million for impairment loss on the old IT systemassociated with a switch to the PRiSM. As a result, the Ninetynine Plus recorded an ¥800 million net loss.
(Millions of Yen)

Ninety-nine Plus Inc.

2011/2

2010/2*

2009/3

2008/3¥142,228¥135,410¥134,246¥122,997

Operating income

1,772

1,792

261

401

Net income (loss)

(840)

1,673

(504)

47

Number of stores

1,077

996

856

837

Total operating revenues* Fiscal 2009 was an 11-month transitional fiscal year due to a change in fiscal year closing to the end of February.
Lawson's consolidated operating profit for fiscal 2009 included 14-month operating profit of Ninety-nine Plus, amounting to ¥2,160 million, the sum of the 4th
quarter of fiscal 2008 and 11 months of fiscal 2009.

BestPractice Inc. (Consolidated subsidiary)This company was established in 2004 as a wholly owned
subsidiary. BestPractice implements Mystery Shopper on-site
inspections of convenience stores to determine the status ofoperations and offers advice and proposals to improve
LAWSON stores at the operational level. Under the Mystery

Shopper program, an employee of BestPractice objectively
and quantitatively evaluates convenience store operations
and merchandise assortments from a customer's perspective
as an undercover researcher. The results are fed back to
Lawson's Head Office and franchise owners.
(Millions of Yen)

BestPractice Inc.

2011/2

2010/2

2009/2

2008/2

2007/2

Total operating revenues¥1,131

¥991

¥982

¥919

¥885

Operating income

235

91

50

8

82

Net income (loss)

130

59

(1)

1

45

LAWSON Okinawa, Inc. (Equity-method affiliate)
In January 2009, Lawson and SAN-A CO., LTD., a leading
retailing group in Okinawa, agreed to form a business alliance in

Okinawa Prefecture, Japan. Through this alliance with SAN-A,
which is highly popular in Okinawa, Lawson aims to create
products and stores better meshing with Okinawa, which is

Annual Report 201156

known for its unique way of life and food preferences. To thisend, we established LAWSON Okinawa, Inc. as a wholly owned
subsidiary in October 2009. In December 2009, we madeLAWSON Okinawa into a joint venture by transferring 51% of its
total outstanding shares to SAN-A.
LAWSON Okinawa recorded operating income of ¥600 million in

fiscal 2010, driven by favorable business results in the second
half of the year.
We will continue to develop the LAWSON chain in Okinawa
Prefecture through LAWSON Okinawa by creating stores that
better meet the needs of the local community.

(Millions of Yen)

LAWSON Okinawa, Inc.

2011/2

2010/2

2009/2

2008/2

Total operating revenues¥3,347¥733––

Operating income

601

109

–

–

Number of stores

141

136

–

–

Entertainment and E-commerce Operations
LAWSON ENTERMEDIA, INC. (Consolidated subsidiary)This subsidiary was established as a ticket sales company
in 1992 as RIZA JAPAN, and in 1996 was renamed LAWSONTICKET INC., becoming a consolidated subsidiary of Lawson
in 1997. In terms of number of tickets handled, the company is
one of the largest players in the ticket sales industry in Japan.
The company sells tickets to concerts, sporting events,
theaters, movies and other attractions, primarily through Loppi
multimedia terminals at LAWSON stores, and is particularly
strong in sales of tickets for J-Pop* and sporting events. In
March 2009, LAWSON TICKET carried out an absorption-typemerger, absorbing Lawson's wholly owned subsidiaryi-Convenience, Inc. The aim of the merger was to make fullest
use of the combination of LAWSON TICKET's customer baseand i-Convenience's expertise in the e-commerce business. In
July 2009, LAWSON TICKET was renamed LAWSONENTERMEDIA, INC.
The main source of revenues is sales commission on ticket
sales. The total operating revenue account which is mainlycomprised of commissions is recorded in other operating
revenues in Lawson's consolidated financial statements.
In fiscal 2010 strong sales in tickets related to events andleisure contributed to record operating income of ¥1,100
million, which was a little better than planned and a slightly
higher than in fiscal 2009.
The company was listed on the JASDAQ market but was
delisted in June 2010 and became a wholly owned subsidiaryof Lawson by means of a share exchange in July 2010.
*Japanese popular music generally popular among the relatively younger generation(Millions of Yen)

LAWSON ENTERMEDIA, INC.

2011/2

2010/2

2009/2

2008/2

2007/2

Total operating revenues¥9,864¥10,022¥7,620¥6,960¥6,533Operating income

1,111

1,099

791

636

836

Net income (loss)

1,870(11,887)(1,445)*423

507* Prior-year results were adjusted following the booking of an impropriety-related loss due to alleged misappropriation of funds by twoformer directors.

HMV Japan K.K. (Consolidated subsidiary)
HMV Japan is a music/video software retailer under the HMV
brand. It was established in 1990, opened its first store in
Shibuya, Tokyo in the same year, and became the Internet- based
HMV Online electronic commerce business in 1999. In 2007,
HMV Japan Holdings Co., Ltd, which is wholly owned by Daiwa
Securities SMBC Principal Investments Co., Ltd., including
indirect holdings, acquired all shares of the company. Lawson
acquired all shares of HMV Japan K.K. from HMV Japan Holdingsin December 2010, with an aim to strengthen its entertainment
related business. Lawson will use HMV's branding power andinfrastructure for electronic commerce business, seek to bringsynergy impacts by blending with LAWSON ENTERMEDIA, INC.,
and promote the Lawson Group's entertainment business.
In fiscal 2010, HMV Japan's restructuring of unprofitable stores
resulted in generating approximately ¥100 million profit for its
three-month contribution to Lawson's consolidated results (fromNovember 2010 to January 2011).
Cross Ocean Media, Inc. (Consolidated subsidiary)
In March 2010, this company was jointly established by Lawson,
ASATU-DK Inc., and NTT DOCOMO, Inc. to promote electronic
advertising business via digital signage. It generated about ¥400
million operating loss in fiscal 2010 due to initial costs related tostart-up of operations.

57

Annual Report 2011

Financial Services
LAWSON ATM Networks, Inc. (Consolidated subsidiary)This consolidated subsidiary was established in 2001 withinvestments by Lawson, Mitsubishi Corporation and several
banks to run ATM operations for LAWSON stores. The
company began installing ATMs and started ATM services atsome LAWSON stores from 2001. The company's ATM
business installs jointly operated ATMs in LAWSON stores inregions where agreement has been reached with partnerbanks. As of February 28, 2011, LAWSON ATM Networks had
formed alliances with a total of 42 partner banks, thatencompass the major city bank groups, regional banks, andInternet banks. The company's main source of revenue is feesfrom banks for the commissioned operation of ATMs, that areincluded in the “Operating Revenues: Other” account of
Lawson's consolidated statements of income. Its main
expenses are operating center outsourcing fees, ATM line
charges and ATM leasing charges.
LAWSON ATM Networks recorded a significant growth inoperating income, up 29.3% year on year to ¥3,100 million, asa result of nationwide installation of ATMs in fiscal 2010.
LAWSON ATM Networks installed 1,548 ATMs in fiscal 2010
to make a total of 8,526 ATMs in 47 prefectures as ofFebruary 28, 2011. Lawson holds a 44.0% stake in LAWSONATM Networks.

(Millions of Yen)

LAWSON ATM Networks, Inc.

2011/2

2010/2

2009/2

2008/2

2007/2

Total operating revenues¥20,825¥18,570¥16,964¥14,900¥11,907

Operating income

3,159

2,444

1,439

1,201

866

Net income

1,788

1,412

589

718

509

Number of ATM Machines Installed

2011/2

2010/2

2009/2

2008/2

2007/2

Number of ATM machines installed

8,526

6,978

5,970

5,643

4,245

(Units)Overseas Business
CHONGQING LAWSON CO., LTD. (Consolidated subsidiary)With the aim of opening the first Japanese convenience store
in inland China, by responding to invitation by the Chongqing
City's government, Lawson established this company in April
2010 and opened its first store, equipped with a training facility,
in Chongqing in July 2010. The number of stores reached fourby the end of February 2011, with a further milestone of 30
stores within 2011 and 200 stores within 5 years. Chongqing
City is one of the largest cities in the world, with a population of
32 million inhabitants, and is the fourth largest directly
governed city in China after Beijing, Shanghai, and Tianjin.
Chongqing's economy has enjoyed six consecutive years of
double-digit growth, outperforming the overall growth rate for

China and that of the coastal centers such as Shanghai. Latentdemand for convenience stores is mounting in Chinese inland
cities as they continue their remarkable growth.
SHANGHAI HUALIAN LAWSON CO., LTD.*(Equity-method affiliate)This company has been developing a chain of LAWSON storesin Shanghai, China, since 1996. In 2004, Lawson relinquished21.0% of its 70.0% equity interest in the company to partner
Hualian Group Corporation**, leaving Lawson with a current
stake of 49.0%, to foster expansion through operation by local
partners. At the end of December 2010, there were 317 storesin operation, of which 248 were franchise stores.

(Millions of Yen)

SHANGHAI HUALIAN LAWSON CO., LTD.

2010/12

2009/12

2008/12

2007/12

2006/12

Total operating revenues¥5,402¥6,313¥6,670¥7,265¥6,355

Operating income

14

2

13

77

20

Number of stores

317

300

300

287

291

* SHANGHAI HUALIAN LAWSON CO., LTD. closes its accounts in December.
** Hualian Group Corporation transferred its 51% stake to Shanghai Bailian Group Co., Ltd. in December 2008 along with the cancellation of Hualian Group
Corporation’s corporate registration.

Business Cooperation and Alliances
The main business cooperation and alliances are as follows.
Please refer to the item on convenience store operations under“Overview of Consolidated Subsidiaries and Equity-Method
Affiliates” on page 56 of this report for information concerning
the equity-based alliance with Ninety-nine Plus Inc.

Mitsubishi Corporation
Lawson formed a comprehensive tie-up, including a capitalalliance, with Mitsubishi Corporation in February 2000.
Mitsubishi Corporation is Lawson's leading shareholder, withan equity interest of 32.5% (including indirect holdings) as ofFebruary 28, 2011. The two firms have built a cooperative
relationship in areas such as personnel resources and store
development, new businesses, and product development,
including procurement of raw materials.

improve the level of convenience for customers and contributeto regional communities across Japan.

NTT DOCOMO, INC.
In 2006, Lawson signed a business alliance agreement, including
capital alliance, with NTT DOCOMO, INC. Lawson sold2,092,000 shares of treasury stock, representing 2.0% of total
issued shares (at the time), to NTT DOCOMO for about ¥9.0
billion. In 2007, this alliance led to the introduction of iD™
electronic money services provided by NTT DOCOMO in all
LAWSON stores and the launch of the LAWSON PASS iD™
service. The latter service allows holders of the LAWSON PASS
Visa credit card issued by Credit Saison Co., Ltd. (at the timeissued by LAWSON CS Card), to use the iD™ service.
*iD™ is a mobile phone-based credit card payment service enabling shopping,etc., via NTT DOCOMO's Osaifu-Keitai® wallet services. iD™ is a trademark
and registered trademark of NTT DOCOMO.

Japan Post Holdings Co., Ltd.

Qol Co., Ltd.

Lawson formed a business alliance in 2002 with the then Postal
Services Agency. After this announcement, the two worked on
various initiatives, specific examples are installment of mailboxes
in LAWSON stores (2003), opening of convenience stores inside
post offices (2003) and handling of You-Pack parcels (2004). In
2008, Lawson signed an agreement for a comprehensive
business alliance with Japan Post Holdings. Moving forward, thetwo companies will develop initiatives that effectively utilize theirrespective business resources to jointly open stores and expand
joint distribution and deliveries, for example. The goals are to

In December 2008, Lawson signed a business allianceagreement with drug-dispensing pharmacy operator Qol Co.,
Ltd. Through personnel exchanges, Lawson is working todevelop Registered Pharmaceuticals Salespersons*, and in fiscal
2010 began opening stores that combined a drug dispensing
pharmacy with a convenience store.
*A newly established qualification following the June 2009 enforcement ofa m e n dm e nt s to th e Ph a r m ac e u ti c a l Af fa ir s L aw, th e “ Re gis te re d
Pharmaceuticals Salesperson” qualification allows the holder to sell over-thecounter medications (Type 2 and 3). The law requires holders to have aminimum of one year's experience.

Annual Report 201158

MatsumotoKiyoshi Holdings Co., Ltd.
Lawson entered a business alliance with MatsumotoKiyoshi
Holdings Co., Ltd. in August 2009. MatsumotoKiyoshi Holdings
operates urban and suburban drugstores, pharmacies, andcombination drugstore/pharmacies throughout Japan in avariety of store formats according to regional characteristics
and location. In fiscal 2009, the Lawson and MatsumotoKiyoshi
groups began examining options for mutually leveraging theirrespective management resources, such as buying power andinfrastructure. The two groups also carried out personnel
exchanges, assigning staff members to each other with theobjective of acquiring each other's specialist knowledge.
Lawson has accepted MatsumotoKiyoshi personnel who holdRegistered Pharmaceuticals Salesperson qualifications in order
to conduct trial pharmaceutical sales at convenience stores. In
fiscal 2010, the first joint stores of MatsumotoKiyoshi and
LAWSON STORE100 were opened.
Looking ahead, the two companies plan to begin opening pilot
stores in a new format that combines a drugstore with aconvenience store. Both companies also plan to do researchon experimental stores of a new format that combine adrugstore and a convenience store.

Outlook for Fiscal 2011
In fiscal 2011, the overall Japanese economy is expected tomake a gradual recovery. Although uncertain factors such as
sluggish recovery of the consumer market, the summer power
shortage caused by aftereffects of the Great East Japan
Earthquake and the nuclear power problem are likely to persist,the post-earthquake consumption appears to show a sign ofrecovery much stronger than being concerned. On the other
hand, prices of resources and various raw materials continued
to surge in the overseas commodity markets, while risk of
inflationary pressure is gradually emerging even in theJapanese market.
With regard to the Convenience store industry operating
environment, if Lawson focuses on conventional format stores,
which predominantly provide merchandise assortments andservices for the core target of young male customers,
addressing only customers' need to save time andconvenience, it will be forced into a war of attrition with otherhomogenized convenience stores in a mature market. This willin turn make it increasingly difficult to achieve stable andsustainable growth in an environment of changing customer
needs and in an aging society that faces a falling birthrate.
In this environment, Lawson is aiming to realize its corporate
philosophy, “Happiness and Harmony in our Community.” To
this end, we will promote the following management measures
to improve customer satisfaction. We believe this will result in
improved corporate earnings through maintenance andexpansion of our customer base, increased earnings for
franchise owners, and higher corporate value. By carrying out
the following management measures, in fiscal 2011 we plan to
improve consolidated operating income 3.5% year on year to¥57,500 million, but to decrease consolidated net income by22.0% year on year to ¥19,800 million, due to extraordinary
loss associated with the earthquake and extraordinary loss
caused by asset retirement obligations.
Create customer-oriented merchandise assortments
Aiming to offer floor space that meets the needs of customers ineach local community, Lawson will continue to utilize data from59

Annual Report 2011

the Ponta cards and create customer-oriented merchandise
assortments that satisfy customer needs. We will also improveaccuracy in placing orders for products, in order to reduce sales
opportunity loss and product disposal loss. We will further
enhance product development capabilities, which are
indispensable for creating customer-oriented merchandise
assortments and improving ordering accuracy.
Provide appealing services through the Ponta loyalty
program
The number of participating companies in Ponta is expected torise to make it more convenient to customers. Jointly with otherpartners, Lawson plans to implement broader-based marketing
analysis and sales promotion measures in order to provide more
appealing services for customers.
Promote fresh food-type convenience store
In the growth business of fresh food-type convenience store,
Lawson will continue to expand LAWSON STORE100 and fresh
food-type convenience store operations, primarily to serve
residential areas. In particular, we will meet customers' needs indining-in (cooking and eating at home) and expand the customer
base to include more seniors and women, in addition to men in
their 20's and 30's, who are the main customers in conventional
convenience stores.
Respond to demand for pharmaceuticals and healthcare
We will expand sales of pharmaceuticals and strengthen
development and sales of health-oriented foods by utilizing
know-how accumulated at NATURAL LAWSON for helping torealize healthy and pleasant lifestyle that customers are seeking
for. Based on the concept of “food is medicine,” we will keep
contributing to customers' healthy and enriched living.
Full-scale development of entertainment and e-commerce
related businessWe aim to provide entertainment-related merchandise and othermerchandise assortment that meet customer needs both inactual stores and on the Internet. Leveraging business allianceswith other companies, we will provide new services in the
e-commerce area.
Expand overseas aggressively
The Lawson Group has been opening LAWSON stores inShanghai and Chongqing, China. As China has high economic
growth prospects, we will consider more store openings andexpansion into other major cities. Furthermore, we willconsider expanding into other countries after carefully
studying local situations.
Reinforce group internal controls
By taking serious lessons from LAWSON ENTERMEDIA's
scandal, which was uncovered in fiscal 2009, Lawson has
sincerely worked on preventive measures against recurrenceof a scandal at the company and its subsidiaries andaffiliates. From the first half of fiscal 2010, we have internallyclarified internal allocation of assignment of control andsupport to those related companies, enhanced the support
structure, and maintain continuous monitoring of the funds
situation of major related companies. In addition, from thesecond half, Lawson began to centrally manage the funds ofthose major companies. Moreover, we worked on enhancing
guidance for improvement by checking the authority

allocation situation and the risk management system, andauditing within the group.
Lawson has also revised and implemented its Related
Companies Management Regulations in order to strengthen
guidance on managing risks and establishing internal control
in its subsidiaries and affiliates. In addition, we began toestablish a structure that facilitates communications between
Lawson and related companies so that the Group's
management policies permeate the companies and are better
implemented. We plan to continue to promote these measures.
Lawson will report regularly to the Board of Directors on
evaluations and improvements at Lawson and major
subsidiaries. Furthermore, Lawson will follow its “Fiscal 2010
Basic Policy on Development and Operation of Internal
Control System” to implement the necessary arrangement for
ensuring legal compliance, information storage and control
and risk management.

Business Risk Factors
The seven major risks that may influence the Lawson Group's
performance and financial position are described below.
Sufficiently aware that these risks may occur, the Lawson Group
conducts risk management and responds in the best manner
possible in case a risk materializes. Nevertheless, these risks are
only within the range of what can be forecast based on
information currently available to Lawson, and we do not believethat they cover all potential risks relating to the Lawson Group'sbusiness operations.
Risks relating to changes in the business environment
Because the Lawson Group's main business is the operation of
convenience stores, changes in consumer expenditure producedby changes in the economic environment, business cycle trends,
or changes in consumer behavior triggered by weather
conditions, calamitous disasters, as well as changes incompetition with other companies in the convenience store
sector or different retail sectors, may impact the Lawson Group's
earnings and financial condition.
Risks relating to food safety, hygiene management andlabeling
In the convenience store business, the Lawson Group's corebusiness, we sell food products to customers. From the
manufacturing process to sales in stores, in cooperation with
suppliers, the Lawson Group strictly observes high quality
standards by performing thorough management and also
performs rigorous hygiene management and sales data
management within stores, at the same time as properly
labeling items in terms of consumption date, expiry date, place
produced, ingredients or raw materials used, and so forth.
However, in the event of a serious incident such as foodpoisoning or contamination by foreign matter, or foodmislabeling, the resulting loss of customer trust could influence
the Group's performance and financial position. Should suchan incident occur, the Group intends to make the utmost effort
to minimize the effect on customers and maintain customer
trust by making a public announcement as quickly as possible
through the mass media and other channels.
Risks relating to handling of personal information
In the process of business operations, the Lawson Grouphandles personal information of customers, shareholders,

suppliers, franchise owners and other parties. The Group
recognizes that the leakage of personal information andimproper access to personal information are serious risks.
Consequently, we have devised what we believe to be the best
possible information security measures and formulated a policy
to protect personal information. We have also ensured that
personnel within Lawson are thoroughly aware of thesematters. However, should personal information be leaked or
divulged outside Lawson under any circumstances, the Lawson
Group's performance or financial position may be affected.
Legal and regulatory risks
The Lawson Group operates numerous stores in all of Japan's
47 prefectures and in Shanghai and Chongqing, China, and the
majority of stores operate 24 hours a day. Because of this, inoperating its business, Lawson must comply with various laws
and regulations regarding store development, store operations,hygiene management, product transactions, environmental
protection, and other matters in Japan and China, and mustobtain various permits and licenses. Therefore, should events
arise such as an unforeseen change in laws or regulations or achange in the enforcement methods of administrative
authorities, new compliance costs could arise, which could
have an impact on the Lawson Group's performance or
financial position.
Risks relating to franchise operations
In the Convenience store business, the Lawson Group's main
business, Lawson has adopted the franchise system. Based on
franchise agreements concluded with franchise owners,
Lawson operates a chain of stores via store brand names thatare owned by the Lawson Group. Therefore, if the brand imageof the overall chain is affected by illegal or improper actions at
a franchise store, there may be an impact on the Lawson
Group's performance or financial position. Furthermore. thefranchise system is designed to encourage improved businessperformance for both franchise stores and Lawson, based on arelationship of mutual trust. If this relationship of trust between
Lawson and franchised owners is damaged for any reason,
and, as a consequence, many franchise agreements arecancelled, there may be an impact on the Lawson Group's
performance or financial position.
Risks relating to disasters
Lawson is a national chain with stores located throughout
Japan's 47 prefectures, as well as in China. Therefore, anearthquake, typhoon or other natural disaster that physicallydamages Lawson Group stores or other facilities, could have an
impact on the Lawson Group's performance or financial position.
Furthermore, in order to continue to fulfill its social function,
Lawson will continue to run convenience stores based on abusiness continuity plan even if there is an outbreak of a newstrain of influenza or other infectious disease. However, any
unanticipated temporary closure of stores could affect theLawson Group's performance or financial position.
Risks involving damage to IT systems
Failure of the Group's IT system or information network system
due to a computer virus, or natural disasters such as anearthquake in the Tokyo Metropolitan area, could delay thedelivery of products to stores and cause the suspension of store
services. Such developments could influence the Lawson
Group’s performance or financial position.

Annual Report 201160

Consolidated Balance Sheets
LAWSON, INC. and Consolidated Subsidiaries
February 28, 2011 and 2010

Thousands of
U.S. Dollars

Millions of Yen
ASSETS

2011

2010

2011*

¥ 67,712¥ 54,843$ 828,687

CURRENT ASSETS:
Cash and cash equivalents
Marketable securities (Note 4)
Time deposits

2,500
10,104

9,174

123,657

Due from franchised stores (Notes 3 and 8)

16,15920,791

197,760

Other

29,28626,446358,414

Accounts receivable:(98 )(156 )(1,199 )Inventories

Allowance for doubtful accounts

7,012

4,447

85,816

Deferred tax assets (Note 13)

4,944

4,587

60,507

Prepaid expenses and other current assets

9,891

9,567

121,049

145,010132,199

1,774,691

6,610

6,527

80,896

Buildings

193,512

184,4462,368,278

Furniture, fixtures and equipment

61,15657,241

748,452

Total current assets

PROPERTY AND STORE EQUIPMENT (Note 5):
Land (Note 6)

Lease assets (Notes 2.m and 15)

51,05531,435624,832

Total

312,333

279,649

3,822,458

Accumulated depreciation(153,499 )(134,340 )(1,878,583 )

158,834

145,309

1,943,875

Net property and store equipment

INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 4)

642

512

7,857

Investments in associated companies

2,943

2,042

36,018Long-term loans receivable

31,82629,724389,499

Goodwill

7,717

4,249

94,444

Software27,902

29,674341,476

Lease deposits

81,65583,206

999,327

Deferred tax assets (Note 13)

13,253

15,274

162,196

Claims in bankruptcy and reorganization

15,372

13,631

188,129

Other assets

6,930

6,948

84,812(16,047 )(14,636 )(196,390 )

172,193

170,624

2,107,368¥ 476,037¥ 448,132$ 5,825,934

Allowance for doubtful accounts

Total investments and other assets

TOTAL
See notes to consolidated financial statements.

* U.S. dollar amounts are translated from Japanese yen, solely for the convenience of readers, at the rate of ¥81.71 = US$1, the approximate exchange rate prevailingon the Tokyo Foreign Exchange Market on February 28, 2011.

61

Annual Report 2011

Thousands of
U.S. Dollars

Millions of Yen
LIABILITIES AND EQUITY

2011

2010

2011*

¥ 81,399¥ 73,189$ 996,194

CURRENT LIABILITIES:
Accounts payable:
Trade (Notes 7 and 16)
Due to franchised stores (Note 8)

1,179

1,025

14,429Other

21,13522,423

258,660

Current portion of long-term debt (Note 9)

8,017

4,730

98,115

Income taxes payable

10,6739,852

130,620

Money held as agent

62,341

65,858762,954

Accrued expenses and other current liabilities

7,852

7,420

96,096

192,596

184,497

2,357,068

7,530

6,207

92,155

Total current liabilities

LONG-TERM LIABILITIES:
Liability for employees' retirement benefits (Note 10)
Allowance for retirement benefits to executive officers and corporate
auditors
Guarantee deposits received from franchised stores and other
Allowance for impairment loss on leased property(Note 15)

235

217

2,876

37,13938,711

454,522

667

471

8,163

28,77819,492352,197

625

401

7,649

74,97465,499917,562

Common stock—authorized, 409,300,000 shares in 2011 and 2010;
issued, 100,300,000 shares in 2011 and 99,600,000 shares in 2010

58,50758,507716,032

Capital surplus

47,696

41,520583,723

Long-term debt (Note 9)
Other

Total long-term liabilities

EQUITY (Notes 11 and 20):

Stock acquisition rights
Retained earnings
Net unrealized (loss) gain on available-for-sale securities
Land revaluation difference (Note 6)
Foreign currency translation adjustments
Treasury stock—at cost, 433,040 shares in 2011 and 432,190 sharesin 2010
Total
Minority interests

Total equity

TOTAL

406

346

4,969

99,60894,172

1,219,043

(5 )

14

(61 )

(634 )(634 )(7,759 )

1

66

12

(1,694 )(1,714 )(20,732 )203,885

192,277

2,495,227

4,582

5,859

56,077

208,467

198,136

2,551,304¥ 476,037¥ 448,132$ 5,825,934* U.S. dollar amounts are translated from Japanese yen, solely for the convenience of readers, at the rate of ¥81.71 = US$1, the approximate exchange rate prevailingon the Tokyo Foreign Exchange Market on February 28, 2011.

Annual Report 201162

Consolidated Statements of Income
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

Thousands of
U.S. Dollars

Millions of Yen
2011

2010

2011*

OPERATING REVENUES:Franchise commissions from franchise stores¥ 197,673¥ 185,656$ 2,419,202

Net sales from Company-operated stores

183,236

232,459

2,242,516

Other

60,36949,077

738,820

Total

441,278

467,192

5,400,538

Cost of sales (Note 16)

143,101

173,722

1,751,328

Selling, general and administrative expenses

242,636

243,194

2,969,477

Total

385,737

416,916

4,720,805

Operating income

55,54150,276

679,733

(322)

303

(3,941)COSTS AND OPERATING EXPENSES:OTHER INCOME (EXPENSES):Interest (expense) income—net
Equity in earnings of associated companies

312

62

3,818

Loss on disposal of property and store equipment(3,018)(3,899)(36,935)

Loss on sales of property and store equipment(1,304)(30)(15,959)

Impairment of long-lived assets (Note 5)(4,990)(3,904)(61,070)

Impropriety-related loss

(12,616)

Gain on sale of investment in subsidiaries

1,629

Other—net(1,808)(1,946)(22,126)

Other expenses—net(11,130)(20,401)(136,213)

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

44,411

29,875543,520

Current

16,552

18,393

202,570

Deferred

1,668(1,152)

20,414

18,22017,241

222,984

(804)

(72)

(9,840)NET INCOME¥ 25,387¥ 12,562$ 310,696

PER SHARE OF COMMON STOCK (Notes 2.q and 18):

2011

2010

Net income—basic¥ 254.61¥ 126.67$ 3.12

Net income—diluted

254.31

126.54

3.11

Cash dividends applicable to the year

170.00160.002.08

INCOME TAXES (Note 13):

Total
MINORITY INTERESTS IN NET INCOME

Yen

U.S. Dollars
2011* U.S. dollar amounts are translated from Japanese yen, solely for the convenience of readers, at the rate of ¥81.71 = US$1, the approximate exchange rate prevailingon the Tokyo Foreign Exchange Market on February 28, 2011.

63

Annual Report 2011

Consolidated Statements of Changes in Equity
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

Thousands of Shares/Millions of Yen

BALANCE, MARCH 1, 2009

Common Stock
SharesAmount
99,600¥ 58,507

CapitalSurplus

Stock
Acquisition
Rights¥ 41,520¥ 275

Net income
Year-end cash dividends,¥80 per share
Interim cash dividends,¥80 per share
Reversal of revaluation
reserve for land
Treasury stock—at cost—purchase of treasury stock
Others—net
BALANCE, FEBRUARY 28, 2010

Retained
Earnings

Net Unrealized
Gain (Loss) on
Available-forSale Securities

Land
Revaluation
Difference¥ 97,811¥ (41)¥ (969)

55

335

14

(634)

12,562(7,933)(7,933)(335)

71
99,600Net income
Year-end cash dividends,¥80 per share
Interim cash dividends,¥85 per share
Increase by shareexchanges
Treasury stock—at cost—purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Others—net

1,602

BALANCE, FEBRUARY 28, 2011

100,300

58,507

41,520346

94,172
25,387(7,933)(8,489)6,176(902 )(3,529 )60¥ 58,507¥ 47,696

¥ 406

(19 )
¥ 99,608¥ (5 )¥ (634 )Thousands of Shares/Millions of Yen
Foreign
Currency
Translation
Adjustments
BALANCE, MARCH 1, 2009

¥ 59

Net income
Year-end cash dividends,¥80 per share
Interim cash dividends,¥80 per share
Reversal of revaluation
reserve for land
Treasury stock—at cost—purchase of treasury stock
Others—net

7

BALANCE, FEBRUARY 28, 2010

66

Treasury Stock
SharesAmount(432)¥ (1,713)(1)

Net income
Year-end cash dividends,¥80 per share
Interim cash dividends,¥85 per share
Increase by shareexchanges
Treasury stock—at cost—purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Others—net(65 )BALANCE, FEBRUARY 28, 2011

¥1

(432)

(903)
902

(433 )

Minority
Interests

Total(1,714)(3,510)1
3,529¥ (1,694 )¥ 195,449¥ 5,718

Total
Equity¥ 201,167

12,562

12,562(7,933)(7,933)(7,933)(7,933)

(335)

(335)

(1)
468

141

(1)
609

192,277

5,859

198,136

25,38725,387(7,933)(7,933)(8,489)(8,489)

6,176

6,176

(3,510)1(3,510)1(24 )(1,277 )(1,301 )¥ 203,885¥ 4,582¥ 208,467

Annual Report 201164

Consolidated Statements of Changes in Equity
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

Thousands of U.S. Dollars

BALANCE, FEBRUARY 28, 2010

CommonStockCapitalSurplus

Stock
Acquisition
Rights$ 716,032$ 508,139$ 4,234

Retained
Earnings

Net Unrealized
Gain (Loss) on
Available-forSale Securities

Land
Revaluation
Difference$ 1,152,515$ 171$ (7,759)

Net income

310,696

Year-end cash dividends, $0.98 per share(97,087)

Interim cash dividends, $1.04 per share(103,892)

Increase by share exchanges

75,584

Treasury stock—at cost—purchase oftreasury stock
Disposal of treasury stock
Retirement of treasury stock(43,189)

Others—net

BALANCE, FEBRUARY 28, 2011735

$ 716,032$ 583,723$ 4,969(232)$ 1,219,043$ (61)$ (7,759)

Thousands of U.S. Dollars (Note 1)
Foreign
Currency
Translation
Adjustments

BALANCE, FEBRUARY 28, 2010

$ 808

TreasuryStock$ (20,977)$ 2,353,163$ 71,705

Total
Equity$ 2,424,868

Net income

310,696

310,696

Year-end cash dividends, $0.98 per share(97,087)(97,087)

Interim cash dividends, $1.04 per share(103,892)(103,892)

75,58475,584(42,957)(42,957)(42,957)

13

13

13

Increase by share exchanges
Treasury stock—at cost—purchase oftreasury stock
Disposal of treasury stock
Retirement of treasury stock
Others—net

BALANCE, FEBRUARY 28, 2011
See notes to consolidated financial statements.

65

Minority
Interests

Total

Annual Report 2011

43,189(796)$ 12$ (20,732)(293)(15,628)(15,921)$ 2,495,227$ 56,077$ 2,551,304

Consolidated Statements of Cash FlowsLAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

Thousands of
U.S. Dollars

Millions of Yen
2011

2010

2011

¥ 44,411¥ 29,875$ 543,520

OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes paid

(15,677)(17,723)(191,861)

Depreciation and amortization

33,084

27,468404,895

Impairment of long-lived assets

4,990

3,904

61,070

Provision for allowance for doubtful accounts

1,352

10,30916,546

Loss on disposal of property and store equipment

1,468

1,981

17,966

Loss on sales of property and store equipment

1,304

30

15,959Equity in earnings of associated companies

(312)

(62)

(3,818)Other—net

1,382

79

16,913

Increase in claims in bankruptcy and reorganization(1,789)(12,637)(21,895)

Decrease in accounts receivable

3,394

651

41,537(Increase) decrease in prepaid expenses and other current assets

(215)

1,451

(2,632)

57

840

698

Increase (decrease) in accounts payable

3,678(9,133)45,013(Decrease) increase in money held as agent

Changes in assets and liabilities:

Decrease in inventories(3,560)5,197(43,569)(Decrease)increase in accrued expenses and other liabilities

(744)

609

(9,105)

Increase in allowance for retirement benefits to employees andexecutive officers and corporate auditors

959

1,172

11,737

Decrease in guarantee deposits received from franchise storesand other(1,572)(3,315)(19,239)

27,79910,821

340,215

72,21040,696

883,735

Payments into time deposits(26,304)(12,584)(321,919)

Proceeds from withdrawal of time deposits

25,374

3,414

310,537

Total adjustments
Net cash provided by operating activities
INVESTING ACTIVITIES:

Purchases of marketable securities
Proceeds from redemption of marketable securities(2,800)
2,500

4,100

30,596

Acquisition of a subsidiary, net of cash acquired

455

5,568

Acquisition of a subsidiary, net of cash paid

(809)

(9,901)

Purchases of property and store equipment(22,883)(26,144)(280,051)

Purchases of software and other intangible assets(7,511)(9,042)(91,923)

Decrease in lease deposits—net

2,299

290

28,136

Increase in long-term loans(2,069)(2,041)(25,321)(7,955)Acquisition of associated companies

(650)

(110)

Proceeds from sale of investment in subsidiaries

225

3,224

2,754

(1,149)(903)(14,062)(30,522)(42,596)(373,541)

Repayments of long-term debt

(8,867)(11,311)(108,518)

Cash dividends paid

(16,422)(15,866)(200,979)

Purchase of treasury stock(3,510)

Other—net
Net cash used in investing activities
FINANCING ACTIVITIES:Cash dividends paid to minority shareholders
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS(42,957)(62)(28,799)(27,239)(352,454)

(20)

(244)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

12,869(29,139)

157,496

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

54,84383,982

671,191¥ 67,712¥ 54,843$ 828,687

CASH AND CASH EQUIVALENTS, END OF YEAR

See notes to consolidated financial statements.

Annual Report 201166

Notes to Consolidated Financial Statements
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in
conformity with accounting principles generally accepted in Japan ("Japanese GAAP"), which are different in certain
respects as to application and disclosure requirements from International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been madeto the consolidated financial statements issued domestically in order to present them in a form which is more familiar
to readers outside Japan. In addition, certain reclassifications have been made in the 2010 financial statements toconform to the classifications used in 2011.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which LAWSON,
INC. (the "Company") is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar
amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥81.71
to $1, the approximate rate of exchange at February 28, 2011. Such translations should not be construed as
representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
Mitsubishi Corporation ("Mitsubishi") owns 32,399 thousand shares of common stock of the Company (including
indirect holdings) as of February 28, 2011, which represent 32.5% of the total voting rights of the Company.
Accordingly, Mitsubishi is a principal shareholder.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

Consolidation—The consolidated financial statements include the accounts of the Company and its seven (four in 2010)
subsidiaries (collectively, the "Companies"). Consolidation of the remaining subsidiary would not have a material effect on
the accompanying consolidated financial statements.
Under the control or influence concept, those entities in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated, and those entities over which the Companies have the ability to
exercise significant influence are accounted for by the equity method.
Investments in two (two in 2010) associated companies are accounted for by the equity method.
Investments in the remaining associated companies are stated at cost. If the equity method of accounting had been
applied to the investments in these entities, the effect on the accompanying consolidated financial statements would
not be material.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized
profit included in assets resulting from transactions within the Companies is eliminated.
HMV JAPAN K.K. became consolidated subsidiary this fiscal year, after the acquisition of all of HMV JAPAN K.K.'s
common shares issued and outstanding held by HMV Japan Holdings Co., Ltd. (5,001 shares) through a transfer ofshares on December 1, 2010.
The excess of the cost of the Company's investments in consolidated subsidiaries and associated companies overthe fair value of the net assets at the dates of acquisition is being amortized over a period not exceeding 20 years.

b.

Business Combination—In October 2003, the Business Accounting Council (the “BAC”) issued aStatement of Opinion, “Accounting for Business Combinations”, and in December 2005, the Accounting Standards
Board of Japan (the "ASBJ") issued ASBJ Statement No.7, “Accounting Standard for Business Divestitures” andASBJ Guidance No.10, “Guidance for Accounting Standard for Business Combinations and Business Divestitures.”
The accounting standard for business combinations allows companies to apply the pooling of interests method of
accounting only when certain specific criteria are met such that the business combination is essentially regarded asa uniting-of-interests. For business combinations that do not meet the uniting-of-interests criteria, the business

67

Annual Report 2011

combination is considered to be an acquisition and the purchase method of accounting is required. This standard
also prescribes the accounting for combinations of entities under common control and for joint ventures.
In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement
No.21, “Accounting Standard for Business Combinations.” Major accounting changes under the revised accounting
standard are as follows: (1) The revised standard requires accounting for business combinations only by thepurchase method. As a result, the pooling of interests method of accounting is no longer allowed. (2) The current
accounting standard accounts for the research and development costs to be charged to income as incurred. Underthe revised standard, in-process research and development (IPR&D) acquired in the business combination iscapitalized as an intangible asset. (3) The previous accounting standard provided for a bargain purchase gain
(negative goodwill) to be systematically amortized over a period not exceeding 20 years. Under the revised standard,
the acquirer recognizes the bargain purchase gain in profit or loss immediately on the acquisition date after
reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been identified after
a review of the procedures used in the purchase allocation.
The Companies applied this accounting standard for business combinations undertaken on or after April 1, 2010.
c.

Franchise Agreement and Basis of Recognizing Franchise Commission—The Company operates principally in asingle industry commonly classified as the convenience store business with its own stores and franchised stores. The
Company allows each independent franchisee to operate relatively small-sized convenience stores using specific designs
and the LAWSON brand names, and provides related managerial or technical know-how under a franchise agreement.
Under the agreement, all franchised stores are provided with a variety of services and advice on the operation of
convenience stores from the Company as the franchisor. In return, such franchised stores are required to pay continuing
franchise commissions to the Company based on certain percentages of the respective franchised store's gross margin. As
the franchisor, the Company accounts for franchise commissions on an accrual basis by reference to the gross margin
earned by each franchised store and the applicable commission percentage. According to the franchise agreement, afranchised store may pay additional guarantee deposits equal to twice the average monthly sales amounts of the respective
store and pay a lower commission percentage.
The term of a franchise agreement is effective primarily for 10 years from the commencement date of a new store's
operation as a franchised store, and may be extended or renewed upon expiration subject to renegotiation ofcontract terms between the Company and the franchisee.
The franchise agreement usually provides that the franchised store shall make a cash payment to the Company inthe amount of ¥3 million upon commencement. Upon receipt of such payment, ¥1.5 million is credited to incomeof the Company as "Operating revenues—franchise commissions from franchised stores" for services related tothe opening of the LAWSON store. The remaining amount received by the Company is credited to the "Due tofranchised stores" account and then applied to working capital for purchases of merchandise and supplies for the
franchised store.
As part of the contractual obligations of the franchisor under the agreement, the Company generally provides
franchisees with furniture, fixtures and equipment designed for the LAWSON stores. In some cases, franchisees
may also be provided with the land or buildings for the stores. However, the Company does not require thefranchisees to make lease payments related to the stores. Instead, a higher percentage applicable to the grossmargin would be used as the basis for determining the franchise commissions. The portion of franchise commission
attributable to property and store equipment leases is not separately accounted for by the Company.

d.

Cash and Cash Equivalents—Cash and cash equivalents include cash on hand, demand deposits and short-term
investments, which mature or become due within three months of the date of acquisition and which are readily convertible
into cash and are exposed to insignificant risk of changes in value.

e.

Inventories—Substantially all inventories are stated at the lower of cost, determined by the retail method as generally
applied in the retail industry, or net selling value. Inventories of certain consolidated subsidiaries are stated at the lower ofcost, determined by the specific identification method, or net selling value.

Annual Report 2011

68

f.

Marketable and Investment Securities—Marketable and investment securities are classified and accounted for,depending on management's intent, as follows: (1) held-to-maturity debt securities, which are expected to be held tomaturity with the positive intent and ability to hold to maturity are reported at amortized cost and (2) available-for-salesecurities, which are not classified as the aforementioned securities, are stated at fair value based on market quotation.
Unrealized gains and losses, net of applicable taxes, are reported in a separate component of equity. The cost of securities
sold is determined based on the moving-average method.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. For
other-than-temporary declines in fair value, non-marketable available-for-sale securities are reduced to net realizablevalue by a charge to income.

g.

Property and Store Equipment—Property and store equipment are stated at cost except for land (see Note 6).
Depreciation is computed mainly by the declining-balance method at rates based on the estimated useful lives of theassets. The range of useful lives is principally from 10 to 34 years for buildings and structures and from 5 to 8 years forfurniture, fixtures and equipment.
The useful lives for lease assets are the terms of the respective leases.

h.

Long-Lived Assets—The Companies review their long-lived assets for impairment whenever events or changes incircumstance indicate the carrying amount of an asset or asset group, mainly by each store, may not be recoverable. An
impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of theundiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset
group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its
recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of
the assets or the net selling price at disposition.

i.

Software—Software used by the Companies is amortized using the straight-line method based on the estimated useful life
(mainly 5 years).

j.

Employees' Retirement Benefits—The Company and a certain domestic subsidiary have defined benefit lump-sum
severance indemnity plans which cover substantially all of their employees. The Company established a trust fund for its
lump-sum severance indemnity plan.
The Companies account for the liability for retirement benefits based on the projected benefit obligations and plan
assets at the balance sheet date.
In addition to the lump-sum severance indemnity plan, the Company has a defined contribution plan for severance
payments. The Company recognizes expenses in the period when the contribution was called for.

k.

Allowance for Retirement Benefits to Executive Officers and Corporate Auditors—The provisions are calculated tostate the liability at 100% of the amount that would be required if all executive officers and corporate auditors resigned as ofeach balance sheet date.

l.

Stock Options—In December 2005, the ASBJ issued ASBJ Statement No. 8, "Accounting Standard for Stock Options,"
and related guidance. The standard and guidance are applicable to stock options granted on and after May 1, 2006. This
standard requires companies to recognize compensation expense for employee stock options based on the fair value atthe date of grant and over the vesting period as consideration for receiving goods or services. The standard also requires
companies to account for stock options granted to non-employees based on the fair value of either the stock option or the
goods or services received. In the balance sheet, the stock option is presented as a stock acquisition right in a separate
component of equity until exercised. The standard covers equity-settled, share-based payment transactions, but does notcover cash-settled, share-based payment transactions. In addition, the standard allows unlisted companies to measure
options at their intrinsic value if they cannot reliably estimate fair value. The Company has applied this accounting standard
for stock options to those granted on and after May 1, 2006.

69

Annual Report 2011

Notes to Consolidated Financial Statements
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

m. Leases—In March 2007, the ASBJ issued ASBJ Statement No. 13, "Accounting Standard for Lease Transactions," whichrevised the previous accounting standard for lease transactions issued in June 1993. The revised accounting standard forlease transactions was effective for fiscal years beginning on or after April 1, 2008.
Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased
property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as
operating lease transactions if certain "as if capitalized" information was disclosed in the notes to the lessee's
financial statements. The revised accounting standard requires that all finance lease transactions be capitalized torecognize lease assets and lease obligations in the balance sheet. In addition, the accounting standard permits
leases which existed at the transition date and which do not transfer ownership of the leased property to the lessee
to be accounted for as operating lease transactions.
The Companies applied the revised accounting standard effective March 1, 2009. In addition, the Companies
continues to account for leases which existed at the transition date and which do not transfer ownership of theleased property to the lessee as operating lease transactions.
All other leases are accounted for as operating leases.
n.

Income Taxes—The Companies provide for income taxes applicable to all items included in the consolidated
statements of income regardless of when such taxes are payable. Deferred income taxes are recorded to reflect the
impact of temporary differences between assets and liabilities recognized for financial reporting purposes and suchamounts recognized for tax purposes. These deferred taxes are measured by applying currently enacted tax laws to
the temporary differences.

o.

Appropriations of Retained Earnings—Appropriations of retained earnings at each year-end are reflected in the
consolidated financial statements for the following year upon shareholders' approval.

p.

Foreign Currency Financial Statements—The balance sheet accounts of an associated company denominated inforeign currencies are translated into Japanese yen at the current exchange rate as of the balance sheet date except for
equity, which is translated at the historical rate. Differences arising from such translation are shown as "Foreign currencytranslation adjustments" in a separate component of equity. Revenue and expense accounts of an affiliated company
denominated in foreign currencies are translated into yen at the current exchange rate.

q.

Per Share Information—Basic net income per share is computed by dividing net income available to commonshareholders by the weighted-average number of common shares outstanding for the period.
The number of shares used in computing net income per share was 99,705 thousand shares for 2011 and 99,167
thousand shares for 2010.
Diluted net income per share for the years ended February 28, 2011 and 2010 is computed by using the weightedaverage number of common shares outstanding adjusted to include the potentially dilutive effect of stock options
that were outstanding during the year.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends
applicable to the respective years including dividends to be paid after the end of year.

r.

New Accounting Pronouncements
Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method—The
current accounting standard requires to unify accounting policies within the consolidation group. However, thecurrent guidance allows to apply the equity method for the financial statements of its foreign associated company
which have been prepared in accordance with generally accepted accounting principles in their respective
jurisdictions without unification of accounting policies.
In March 2008, the ASBJ issued ASBJ Statement No.16, “Accounting Standard for Equity Method of Accounting for

Annual Report 201170

Investments.” The new standard requires adjustments to be made to conform the associate’s accounting policies for
similar transactions and events under similar circumstances to those of the parent company when the associate’s
financial statements are used in applying the equity method unless it is impracticable to determine adjustments. In
addition, financial statements prepared by foreign associated companies in accordance with either International
Financial Reporting Standards or the generally accepted accounting principles in the United States tentatively may
be used in applying the equity method if the following items are adjusted so that net income is accounted for inaccordance with Japanese GAAP unless they are not material: (1) amortization of goodwill; (2 ) scheduled
amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; (3) expensing
capitalized development costs of R&D; (4) cancellation of the fair value model accounting for property, plant, andequipment and investment properties and incorporation of the cost model accounting; (5) recording the prior years'
effects of changes in accounting policies in the income statement where retrospective adjustments to the financial
statements have been incorporated; and (6) exclusion of minority interests from net income, if contained.
The Companies will adopt the new standard for equity method of accounting for investments newly incurred after
March 1, 2011.
Asset Retirement Obligations—In March 2008, the ASBJ published a new accounting standard for asset
retirement obligations, ASBJ Statement No.18 “Accounting Standard for Asset Retirement Obligations” and ASBJ
Guidance No.21 “Guidance on Accounting Standard for Asset Retirement Obligations.” Under this accounting
standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that resultsfrom the acquisition, construction, development and the normal operation of a tangible fixed asset and is associatedwith the retirement of such tangible fixed asset.
The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset
retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If areasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation
is incurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be
made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized
by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement costis subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, theliability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of theoriginal estimate of undiscounted cash flows are reflected as an increase or a decrease in the carrying amount of theliability and the capitalized amount of the related asset retirement cost.
The Companies will adopt the new standard for asset retirement obligations newly incurred after March 1, 2011.
Accounting Changes and Error Corrections—In December 2009, ASBJ issued ASBJ Statement No. 24“Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No. 24 “Guidance on
Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments under this standard
and guidance are as follows:(1) Changes in Accounting Policies - When a new accounting policy is applied with revision of accounting standards,
the new policy is applied retrospectively unless the revised accounting standards include specific transitional
provisions. When the revised accounting standards include specific transitional provisions, an entity shall comply
with the specific transitional provisions. (2 ) Changes in Presentations - When the presentation of financial
statements is changed, prior period financial statements are reclassified in accordance with the new presentation.
(3) Changes in Accounting Estimates - A change in an accounting estimate is accounted for in the period of thechange if the change affects that period only, and is accounted for prospectively if the change affects both theperiod of the change and future periods. (4) Corrections of Prior Period Errors - When an error in prior period
financial statements is discovered, those statements are restated.
The Companies will adopt the new standard and guidance for accounting changes and corrections of prior period
errors which are made from the beginning of the fiscal year that begins on or after March 1, 2012.

71

Annual Report 2011

Notes to Consolidated Financial Statements
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

Segment Information Disclosures—In March 2008, the ASBJ revised ASBJ Statement No. 17 “AccountingStandard for Segment Information Disclosures” and issued ASBJ Guidance No.20 “Guidance on AccountingStandard for Segment Information Disclosures.” Under the standard and guidance, an entity is required to reportfinancial and descriptive information about its reportable segments. Reportable segments are operating segments
or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity
about which separate financial information is available and such information is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment
information is required to be reported on the same basis as is used internally for evaluating operating segment
performance and deciding how to allocate resources to operating segments.
The Companies will adopt the new standard and guidance for segment information disclosures newly incurred after
March 1, 2011.

3. ACCOUNTS RECEIVABLE—DUE FROM FRANCHISED STORES
Under the franchise agreement, the Company is responsible for providing architectural and design services withrespect to the franchised stores' facilities, for training of the franchisees' personnel, and for the centralized
processing of invoices from suggested vendors of merchandise and subsequent payments of amounts payable tosuch vendors.
The EDP system of the Company generates a record of merchandise purchased by each franchised store andaccumulates the amounts payable to respective vendors. Under the franchise agreement, the Company, as arepresentative for all franchised stores, pays amounts payable to the vendors on the stores' behalf. When themerchandise is received by each franchised store, the Company records the cost of the merchandise in the"Accounts receivable—due from franchised stores" account since such costs shall be subsequently recovered fromthe respective franchised stores.
The "Accounts receivable—due from franchised stores" account represents net amounts recoverable from thefranchised stores.

4. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of February 28, 2011 and 2010, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2011
Current—Bonds
Non-current—Marketable and other equity securities

2010

2011

¥ 2,500¥ 642

512$ 7,857

The costs and aggregate fair values of marketable and investment securities at February 28, 2011 and 2010, wereas follows:

Annual Report 201172

Millions of Yen
February 28, 2011
Securities classified as—
Available-for-sale—equity securities

Unrealized
Gains

Cost

Unrealized
Losses

¥166

¥ 22

Fair
Value

¥144

February 28, 2010
Securities classified as:
Held-to-maturity¥ 2,500

Available-for-sale—equity securities¥1¥ 2,500

56

¥ 13

43

Thousands of U.S. Dollars
February 28, 2011

Cost

Securities classified as—
Available-for-sale—equity securities$ 2,031

Unrealized
Gains

Unrealized
Losses

$ 269

Fair
Value

$ 1,762

Available-for-sale securities whose fair value is not readily determinable as of February 28, 2010 were as follows. The
similar information for 2011 is disclosed in Note 17.
Carrying AmountMillions of Yen
2010
Available-for-sale—Equity securities¥ 469

Proceeds from sales of available-for-sale securities for the years ended February 28, 2011 and 2010 were ¥54 million($661 thousand) and ¥0 million, respectively. Gross realized gains on these sales, computed on the moving-average
cost basis, were ¥1 million ($12 thousand) for the year ended February 28, 2011. Gross realized losses on thesesales for the years ended February 28, 2011 and 2010 were ¥13 million ($159 thousand) and ¥2 million, respectively.

5. LONG-LIVED ASSETSThe Companies mainly identify each store as the smallest cash generating unit. The Companies recognize an
impairment loss in the case where the value of long-lived assets has declined, primarily as a result of due tocontinuous operating losses. The carrying amounts of those assets written down to the recoverable amounts and an
impairment loss is recorded in other expenses in the consolidated statements of income.
The Companies recognized an impairment loss in the following asset categories for the years ended February 28,
2011 and 2010:73

Annual Report 2011

Notes to Consolidated Financial Statements
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

Thousands of
U.S. Dollars

Millions of Yen
Category

StoresRelated Assets

Location

2011

Buildings andTokyo¥ 1,223¥ 427$ 14,968

Furniture, fixtures

Osaka

192

191

2,350

and equipment

Others

2,130

2,786

Software
Other

2010

1,439

26,06817,611

Goodwill

500

Others
Total

2011

6
¥ 4,99073¥ 3,904$ 61,070

The above-noted assets, which incurred impairment losses for the years ended February 28, 2011 and 2010,
consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2011

2010

2011

Fixed assets and lease assets:
Land
Buildings¥ 395¥ 2,043

2,125

381

273

4,663

Lease assets

1,095

442

13,401

Software

1,439

Furniture, fixtures and equipment

Goodwill

17,611500

OthersTotal$ 25,003

32

169

392

¥ 4,990¥ 3,904$ 61,070

The recoverable amount of these assets was measured based on net selling price or value in use. The net selling
price of land was calculated based on the appraised value by a real estate appraiser or an expected contract price.
The value in use was calculated by discounting estimated future cash flows. The discount rate used was mainly
3.3% and 4.9% for the years ended February 28, 2011 and 2010, respectively.

6. LAND REVALUATION
Under the "Law of Land Revaluation," promulgated on March 31, 1998 and revised on March 31, 1999 and 2001, theCompany chose a one-time revaluation of its own-use land to a value based on real estate appraisal information as
of February 28, 2002.
The resulting land revaluation difference represents unrealized depreciation of land and is stated, net of income
taxes, as a component of equity. There was no effect on the consolidated statements of income. Continuous
readjustment is not permitted unless the land value subsequently declines significantly.
As at February 28, 2011, the carrying amount of the land after the above one-time revaluation exceeded the market
value by ¥269 million ($3,292 thousand).

7. ACCOUNTS PAYABLE—TRADE
The balances of "Accounts payable—trade" represent the amounts payable to vendors for merchandise purchased
by Company-operated stores and franchised stores. The Company centralizes all merchandise purchasing

Annual Report 201174

procedures both for Company-operated stores and franchised stores and makes collective payments to vendors(see Note 3).
Accounts payable—trade as of February 28, 2011 and 2010, were summarized below:
Thousands of
U.S. Dollars

Millions of Yen

Accounts payable—trade for franchised stores

2011

2010

2011

¥ 68,384¥ 61,765$ 836,911

13,015

11,424

159,283¥ 81,399¥ 73,189$ 996,194

Accounts payable—trade for Company-operated stores
Total

8. ACCOUNTS PAYABLE—DUE TO FRANCHISED STORESThe cost of merchandise supplied to franchised stores is recorded as "Accounts receivable—due from franchised
stores" as described in Note 3.
All franchised stores make remittances of cash proceeds from daily sales to the Company. In certain instances, theremittance from a franchised store exceeds the balance of "Accounts receivable—due from franchised stores." In
the accompanying consolidated balance sheets, such excess balances are presented as "Accounts payable—due
to franchised stores."

9. CURRENT PORTION OF LONG-TERM DEBT AND LONG-TERM DEBT
The current portion of long-term debt consisted of notes to banks and lease obligations at February 28, 2011 and 2010.
The annual interest rates applicable to the current portion of long-term debt ranged from 2.24% to 3.28% at
February 28, 2011 and ranged from 1.51% to 3.59% at February 28, 2010.
Long-term debt less the current portion at February 28, 2011 and 2010 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Loans from banks and leasing companies, due serially through 2017 with interest rates
ranging from 1.00% to3.28% (2011) and from 1.51% to 3.59% (2010)—Unsecured
Less current portionLong-term debt, less current portion

2011

2010

2011

¥ 36,795¥ 24,222$ 450,312(8,017)(4,730)(98,115)¥ 28,778¥ 19,492$ 352,197

Annual maturities of long-term debt as of February 28, 2011 for the following five years (and thereafter) are as follows:

75

Annual Report 2011

Notes to Consolidated Financial Statements
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

Year Ending
February 28 or 29

Millions of Yen

Thousands of
U.S. Dollars

2012¥ 8,017$ 98,115

2013

8,544

104,565

2014

7,972

97,565

2015

5,609

68,6452016 and thereafter

6,653

81,422¥ 36,795$ 450,312

Total

10. EMPLOYEES' RETIREMENT BENEFITSThe Company and a certain domestic subsidiary each have a defined benefit lump-sum severance indemnity plan.
Under the plans, employees terminating their employment are entitled to retirement benefits determined based on
the rate of pay, years of service and certain other factors at the time of termination. Such retirement benefits are
made in the form of a lump-sum severance payment from the Company or from a certain subsidiary. Employees areentitled to larger payments if the termination is involuntary, by retirement at the mandatory retirement age, by death,or by voluntary retirement at certain specific ages prior to the mandatory retirement age.
The funded status of these plans as of February 28, 2011 and 2010 was as follows:
Thousands of
U.S. Dollars

Millions of Yen
2011

2010

2011

¥ 13,676¥ 12,528$ 167,372(5,577)(5,576)(68,253)

Unrecognized prior service cost

(527)

(702)

(6,450)

Unrecognized actuarial loss

(42)

(43)

(514)

¥ 7,530¥ 6,207$ 92,155

Projected benefit obligation
Fair value of plan assets

Net liability

The costs of defined benefit pension plans are accrued based on amounts determined principally using an actuarial
method. Additionally, the Company and a certain subsidiary each have a defined contribution plan. The costs ofdefined contribution plans are charged to expense when incurred.
The components of net periodic benefit costs for the years ended February 28, 2011 and 2010 were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2011

2010

2011

Service cost

¥ 1,029¥ 972$ 12,593

Interest cost

249

242

3,047

Amortization of prior service cost

175

176

2,142

Recognized actuarial loss

85

137

1,040

Contribution to defined contribution plan

271

272

3,317

¥ 1,809¥ 1,799$ 22,139

Net periodic benefit costs

Annual Report 201176

Assumptions used for the years ended February 28, 2011 and 2010, were as follows:

Discount rate
Expected rate of return on plan assets

2011

2010

2.0%

2.0%

0%

0%

Amortization period of prior service cost

10 years

10 years

Recognition period of actuarial gain/loss

10 years

10 years

11. EQUITY
Japanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions
in the Companies Act that affect financial and accounting matters are summarized below:a.

Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the yearend dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as; (1)having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and (4)the term of service of the directors is prescribed as one year rather than two years of normal term by its articles ofincorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time during the
fiscal year if the company has prescribed so in its articles of incorporation.
The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject toa certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The Companies Act provides certain limitations on theamounts available for dividends or the purchase of treasury stock. The limitation is defined as the amountavailable for distribution to the shareholders, but the amount of net assets after dividends must be maintained at
no less than ¥3 million.

b.

Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on theequity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve andadditional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional
paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common
stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among
the accounts under certain conditions upon resolution of the shareholders.

c.

Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock byresolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available
for distribution to the shareholders which is determined by specific formula. Under the Companies Act, stockacquisition rights are presented as a separate component of equity. The Companies Act also provides thatcompanies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisitionrights are presented as a separate component of equity or deducted directly from stock acquisition rights.

77

Annual Report 2011

Notes to Consolidated Financial Statements
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 201012. STOCK OPTIONSThe Company and a certain domestic subsidiary have stock option plans as an incentive for directors, executive
officers and selected employees.
The following is a summary of the Company's stock option plans:
Number of
Options Granted

Date of Grant

Exercise Price

Exercise Period

9 directors and
24 executive officers

114,000 shares2005.10.12¥4,160($50.91)

From October 12, 2007
to December 31, 2010

5th Stock Option

9 directors

22,400 shares2005.10.12¥1($0.01)

From October 13, 2005
to May 31, 2025

6th (a) Stock Option

9 directors

21,300 shares2006.10.26¥1($0.01)

From October 27, 2006
to May 26, 2026

6th (b)Stock Option

9 directors and
14 executive officers

83,000 shares2006.10.26¥4,053($49.60)

From October 28, 2008
to October 26, 2011

7th (a) Stock Option

7 directors

18,000 shares2007.9.5¥1($0.01)

From September 6, 2007
to August 20, 2027

7th (b) Stock Option

14 executive officers

45,000 shares2007.9.5¥3,949($48.33)

From September 7, 2009
to August 20, 2012

8th (a) Stock Option

7 directors

26,400 shares2009.1.16¥1($0.01)

From January 17, 2009
to December 15, 2028

8th (b) Stock Option

11 executive officers

36,000 shares2009.1.16¥5,174($63.32)

From January 18, 2011
to December 15, 2013

9th Stock Option

7 directors

21,500 shares2010.2.17¥1($0.01)

From February 18, 2010
to February 1, 2030

10th Stock Option

7 directors

18,900 shares2011.2.25¥1($0.01)

From February 26, 2010
to February 10, 2031

Stock Option

Persons Granted

4th Stock Option

The following is a summary of Ninety-nine Plus Inc.'s stock option plans:

Stock Option

Persons Granted

2nd Stock Option

9 directors and auditors
226 managers(including store manager)
58 Ninety-nine Plus
Kansai Inc.'s managers(including store manager)

Number of
Options Granted

Date of Grant

Exercise Price

Exercise Period

3,824 shares2003.10.31¥90,000($1,101.46)

From September 4, 2005
to September 3, 2010

Annual Report 201178

The stock option activity is as follows:
4th
Stock
Option5th
Stock
Option6th (a)Stock
Option6th (b)Stock
Option7th (a)Stock
Option7th (b)Stock
Option8th (a)Stock
Option8th (b)Stock
Option9th
Stock
Option10th
Stock
OptionNinety-nine
Plus Inc.'s 2nd
Stock Option(Shares)Year Ended
February 28, 2010
Non-vested
February 28, 2009—
Outstanding

42,00036,000Granted

21,500Canceled
Vested(42,000)(21,500)

February 28, 2010—
Outstanding

36,000

VestedFebruary 28, 2009—
Outstanding

100,600

15,00021,30080,00018,000

Vested26,400976

42,00021,500Exercised(848)

Canceled(24)

February 28, 2010—
Outstanding

100,600

15,00021,30080,00018,00042,00026,40021,500104

Year Ended
February 28, 2011Non-vested
February 28, 2010—
Outstanding

36,000Granted18,900Canceled
Vested(36,000)(18,900)

February 28, 2011—
Outstanding
VestedFebruary 28, 2010—
Outstanding

100,600

15,00021,30080,00018,00042,00026,400

Vested21,50036,000104
18,900Exercised
Canceled(100,600 )February 28, 2011—
Outstanding
Exercise price(104)
15,00021,30080,00018,00042,00026,40036,00021,50018,900¥4,160¥1¥1¥4,053¥1¥3,949¥1¥5,174¥1¥1¥90,000($50.91)($0.01)($0.01)($49.60)($0.01)($48.33)($0.01)($63.32)($0.01)($0.01)($1,101.46)

Average stock priceat exercise
Fair value priceat grant date

79

Annual Report 2011

¥3,178¥618¥2,852¥397¥3,477¥582¥2,652¥2,689($38.89)($7.56)($34.90)($4.86)($42.55)($7.12)($32.46)($32.91)

Notes to Consolidated Financial Statements
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

The assumptions used to measure the fair value of the 9th stock options (2010) and 10th stock option (2011)were as follows:
9th Stock Option

10th Stock Option

Estimate method

Black-Scholes option pricing model

Black-Scholes option pricing model

Volatility of stock price34.43%

31.33%

Estimated remaining outstanding period

10 years

10 years

Estimated dividend¥160 per share¥165 per share

Risk-free interest rate

1.35%

1.25%

13. INCOME TAXESThe Company and its domestic subsidiaries are subject to a number of different taxes based on income, which in
the aggregate, resulted in a normal effective statutory tax rate of approximately 40.7% for the years ended February
28, 2011 and 2010.
The tax effects of significant temporary differences and tax loss carryforwards, which resulted in deferred tax
assets and liabilities at February 28, 2011 and 2010, are as follows:
Thousands of
U.S. Dollars

Millions of Yen
2011

2010

2011

Deferred tax assets:
Accrued enterprise taxes

¥ 935

¥ 906

$ 11,443

Accrued employees' bonuses

1,562

1,135

19,116

Excess of depreciation

6,832

5,371

83,613

788

919

9,644

Employees' retirement benefits

5,333

4,797

65,267

Allowance for doubtful accounts

3,377

5,807

41,329Impairment loss

3,288

2,396

40,240

Excess of amortization of software

Loss on replacement of computer system

412

Tax loss carryforwards

5,421

1,523

66,344

Other

3,305

3,671

40,450Less valuation allowance(10,304)(7,076)(126,105)

Total

20,537

19,861

251,341

Deferred tax liabilities—Affiliates' stock(paid-in capital decrease)
Net deferred tax assets

2,340¥ 18,197

28,638¥ 19,861$ 222,703

Annual Report 201180

At February 28, 2011, certain domestic subsidiaries have tax loss carryforwards aggregating to approximately¥13,217 million ($161,755 thousand) which are available to be offset against taxable income of such subsidiaries infuture years. These tax loss carryforwards, if not utilized, will expire as follows:

Millions of Yen

Thousands of
U.S. Dollars

2013¥ 1,267$ 15,506

2014

1,158

14,172

2015

220

2,692

2016

934

11,431

2017

1,386

16,962

2018

8,252

100,992¥13,217$161,755

Year Ending February 28 or 29

Total

14. SUPPLEMENTAL INFORMATION FOR CASH FLOWS(1) Finance lease assets and finance lease obligations regarded as non-cash transactions incurred for the year
ended February 28, 2011 amounted to ¥19,518 million ($238,869 thousand).
(2) Consolidated subsidiaries, Ninety-nine Plus Inc. and LAWSON ENTERMEDIA, INC., became wholly owned
subsidiaries of the Company through a share exchange during the year ended February 28, 2011. Capital surplus
increased by ¥6,176 million ($75,584 thousand) as a result of this share exchange.
(3) HMV JAPAN K.K. became consolidated subsidiary this year, after an increase in the number of shares owned on
December 1, 2010.
The breakdown of assets and liabilities of the acquired company, at the time of acquisition was as follows:

Current assets
Non-current assets
Goodwill

Millions of Yen

Thousands of
U.S. Dollars

2011

2011

¥ 5,417$ 66,295

2,716

33,240608

7,441

Current liabilities(5,475)(67,005)

Non-current liabilities(1,369)(16,755)

Acquired price of stock

1,897

23,216

Cash and cash equivalents of acquired company

1,088

13,315Difference: Acquisition of a subsidiary, net of cash acquired¥ (809)$ (9,901)

15. LEASESThe Companies lease certain store facilities, machinery, computer equipment, office space and other assets.
Obligations under finance leases and future minimum payments under noncancelable operating leases at February
28, 2011 and 2010 were as follows:

81

Annual Report 2011

Notes to Consolidated Financial Statements
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

Millions of Yen
2011

Thousands of U.S.Dollars
2010

2011

FinanceleasesOperatingleasesFinanceleasesOperatingleasesFinanceleasesOperatingleasesDue within one year

¥ 7,953¥ 785¥ 4,641¥ 782$ 97,332$ 9,607

Due after one year

28,254

1,321

19,4101,606

345,784

16,167¥ 36,207¥ 2,106¥ 24,051¥ 2,388$ 443,116$ 25,774

Total

Pro forma Information of Leased Property Whose Lease Inception Was before February 28, 2009
ASBJ Statement No. 13, "Accounting Standard for Lease Transactions" requires that all finance lease transactions
be capitalized to recognize lease assets and lease obligations in the balance sheet. However, the ASBJ Statement
No. 13 permits leases without ownership transfer of the leased property to the lessee and whose lease inception
was before March 31, 2008 to continue to be accounted for as operating lease transactions if certain "as if
capitalized" information is disclosed in the note to the financial statements. The Companies applied ASBJ Statement
No. 13 effective March 1, 2009 and accounted for such leases as operating lease transactions. Pro forma informationof leased property whose lease inception was before February 28, 2009 was as follows:
Thousands of
U.S. Dollars

Millions of Yen
Furniture, Fixtures and Equipment and Other Assets

2011

2010

2011

Acquisition cost

¥ 44,128¥ 53,955$ 540,056

Accumulated depreciation

27,881

29,057341,219

Accumulated impairment loss

1,128

1,149

13,805¥ 15,119¥ 23,749$ 185,032

Net leased property

Obligations under finance leases:
Thousands of
U.S. Dollars

Millions of Yen
2011

2010

2011

Due within one year

¥ 6,970¥ 8,944$ 85,302

Due after one year

10,077

16,909123,326¥ 17,047¥ 25,853$ 208,628

Total

Allowance for impairment loss on leased property of ¥760 million ($9,301 thousand) and ¥452 million as of February
28, 2011 and 2010 is included in obligations under finance leases.
The imputed interest expense portion which is computed using the interest method is excluded from the above
obligations under finance leases.

Annual Report 201182

Depreciation expense, interest expense and other information under finance leases:
Thousands of
U.S. Dollars

Millions of Yen

Depreciation expense

2011

2010

2011

¥ 8,973¥ 11,161$ 109,815

Interest expense

631

912

7,722

Lease payments

9,290

11,697

113,695

Reversal of allowance for impairment loss on leased property

553

512

6,768

Impairment loss

861

439

10,537

Depreciation expense and interest expense, which are not reflected in the accompanying consolidated statements
of income, are computed by the straight-line method and the interest method, respectively.

16. RELATED PARTY TRANSACTIONS
Balances and transactions of the Company with subsidiaries of Mitsubishi as of and for the years ended February
28, 2011 and 2010 were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2011

2010

2011

Accounts payable—trade¥ 5,560¥ 5,810$ 68,046

Purchases

77,99485,960954,522RYOSHOKU LIMITED:

Food Service Network Co., Ltd.:
Accounts payable—trade20,11916,455

246,224

Purchases

237,581

221,5882,907,612

Purchase prices and other conditions are determined at an arm's length basis.
Balances and transactions of Ninety-nine Plus Inc., a consolidated subsidiary of the Company, with subsidiaries ofMitsubishi as of and for the years ended February 28, 2011 and 2010 were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2011

2010

2011

Accounts payable—trade¥ 5,002¥ 4,553$ 61,216

Purchases

59,32472,569726,031

RYOSHOKU LIMITED:

Purchase prices and other conditions are determined at an arm's length basis.

83

Annual Report 2011

Notes to Consolidated Financial Statements
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

17. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESIn March 2008, the ASBJ revised ASBJ Statement No. 10 "Accounting Standard for Financial Instruments" andissued ASBJ Guidance No. 19 "Guidance on Accounting Standard for Financial Instruments and Related
Disclosures." This accounting standard and the guidance are applicable to financial instruments and related
disclosures at the end of the fiscal years ending on or after March 31, 2010 with early adoption permitted from the
beginning of the fiscal years ending before March 31, 2010. The Companies applied the revised accounting standard
and the new guidance effective February 28, 2011.
(1) Policy for Financial Instruments
The Companies primarily use short-term deposits, etc. to manage its funds and raise funds as necessary
through borrowings from financial institutions and leasing according to the financial plan. The Companies do not
engage in derivative transactions.
( 2 ) Nature, Extent of Risk and Risk Management System for Financial Instruments
Trade receivables such as other accounts receivable are exposed to credit risk from business counterparties.
Long-term loans receivable (primarily referring to construction cooperation funds which are loaned to the owners
when a store opens and loans to franchised stores) and lease deposits are exposed to credit risk from theowners, etc. The department responsible manages liabilities regarding these risks on a daily basis with the aimof early detection and reduction of concerns associated with the collectability of debt due to deterioration in thefinancial conditions of the owners.
Marketable securities are government bonds which are financial instruments with low risk and high liquidity.
Investment securities are primarily shares of companies with business relationships and listed shares of which
are exposed to the risk of market price fluctuations. With regard to this risk, the Company monitors the financial
conditions of bond issuers and business counterparties on a regular basis.
Among trade payables, most of the accounts payable—trade and deposits held as a result of bill settlement
services have payment due dates within one month, while most deposits held as a result of ticket sales
transactions have payment due dates within six months.
The primary purpose of long-term debt and lease obligations related to finance lease transactions is securing
the operating capital and funds required for capital investments, and their maximum redemption dates are twoyears and seven years after the balance sheet date, respectively.
Deposits received from franchisees and lessees are primarily operational deposits received from franchised
stores based on franchise contracts are returned to franchised stores after the expiry of the franchise contract
term (contract term is 10 years in principle).
With regard to the liquidity risk associated with fund raising (risk for which payment cannot be executed on thepayment due date), the Company prepares and updates financial plans on a timely basis and manages liquidity
risk by measures including maintaining liquidity on hand.
( 3) Fair Values of Financial Instruments
Fair values of financial instruments are based on the quoted price in active markets. If quoted price is notavailable, other rational valuation techniques are used instead. The result of estimation might differ if othervaluation techniques were taken.

Annual Report 201184

Millions of Yen
February 28, 2011

Carrying
AmountFair Value

Cash and cash equivalents

Unrealized
Gain/Loss¥ 67,712¥ 67,712

Time deposits

10,104

10,104

Accounts receivable

45,36345,363

Investment securities

642

642

Long-term loans receivable

31,706

31,783¥ 77

Lease deposits

81,13071,795(9,335)

19

19

Total

¥ 236,676¥ 227,418

Claims in bankruptcy and reorganization¥ (9,258)

Accounts payable¥ 103,713¥ 103,713

Money held as agent

62,341

62,341Long-term debt (include current portion of long-term debt)

36,79536,969¥ 174

Guarantee deposits received from franchised stores and other37,13932,761(4,378)

Total¥ 239,988¥ 235,784¥ (4,204)

February 28, 2011

Carrying
AmountFair Value

Cash and cash equivalents$ 828,687$ 828,687

Time deposits

123,657

123,657

Accounts receivable

555,171555,171

Investment securities

7,857

7,857

Long-term loans receivable

388,031

388,973$ 942

Lease deposits

992,901

878,656(114,245)

233

233

Total

$ 2,896,537$ 2,783,234

Accounts payable$ 1,269,283$ 1,269,283

762,954762,954

Thousands of U.S. Dollars

Claims in bankruptcy and reorganization

Money held as agent

Unrealized
Gain/Loss$ (113,303)

Long-term debt (include current portion of long-term debt)

450,312452,442$ 2,130

Guarantee deposits received from franchised stores and other454,522400,942(53,580)$ 2,937,071$ 2,885,621$ (51,450)

Total

Cash and cash equivalents, time deposits and accounts receivable
The carrying values of cash and cash equivalents, time deposits and accounts receivable (include allowance for
doubtful accounts) approximate fair values because of their short maturities.
Investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for theequity instruments, and at the quoted price obtained from the financial institution for certain debt instruments.

85

Annual Report 2011

Notes to Consolidated Financial Statements
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

Long-term loans receivable
The fair values of long-term loans receivable (include allowance for doubtful accounts) are determined bydiscounting the cash flows related to the loans at the interest rate deemed to be applied for similar loans.
Lease deposits
The fair values of lease deposits (include allowance for doubtful accounts) are determined by discounting future
cash flows which reflect the collectability with the yield rate of government bonds during the remaining period.
Claims in bankruptcy and reorganization
The fair values of claims in bankruptcy and reorganization (include allowance for doubtful accounts) are stated atbook value because the estimated amount of bad debt is calculated based on collectability, and fair values are close
to the amount which can be calculated by deducting the estimated amount of current bad debt from the carrying
value on the consolidated balance sheets on the balance sheet date.
Accounts payable and money held as agent
The carrying values of accounts payable and money held as agent approximate fair value because of theirshort maturities.
Long-term debt (including current portion of long-term debt)
The fair values of long-term debt are determined by discounting the cash flows related to the debt at the Companies'
assumed corporate discount rate.
Guarantee deposits received from franchised stores and other
The fair values of guarantee deposits received from franchised stores and other are determined by discounting
future cash flows based on the estimated repayment amount with the yield rate of government bonds during theremaining period.
(4) Financial Instruments Whose Fair Value Cannot Be Reliably Determined
Carrying AmountFebruary 28, 2011

Millions of Yen

Thousands of
U.S. Dollars

Investments in equity instruments that do not have a quoted market price in an active market¥ 391$ 4,785

Investments in unconsolidated subsidiaries and affiliated companies

1,875

22,947106

1,297

Due after
1 Yearthrough
5 Years

Due after
5 Years
through
10 Years

Due after
10 Years

Others( 5 ) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen

February 28, 2011

Due in1 Yearor Less

Cash and cash equivalents¥ 67,712

Time deposits

10,104

Accounts receivable

45,445Long-term loans receivable

3,280¥ 10,781¥ 11,027¥ 6,738

Lease deposits

4,529

18,047

20,55938,520¥ 131,070¥ 28,828¥ 31,586¥ 45,258

Total

Annual Report 201186

Thousands of U.S. Dollars

February 28, 2011

Due in1 Yearor Less

Cash and cash equivalents$ 828,687

Time deposits

123,657

Accounts receivable

556,174

Due after
1 Yearthrough
5 Years

Due after
5 Years
through
10 Years

Due after
10 YearsLong-term loans receivable

40,142$ 131,942$ 134,953$ 82,462

Lease deposits

55,428220,867

251,609471,423$ 1,604,088$ 352,809$ 386,562$ 553,885

Total

18. NET INCOME PER SHARE
A reconciliation of the differences between basic and diluted net income per share ("EPS") for the years ended
February 28, 2011 and 2010 is as follows:
Millionsof YenThousandsof Shares

Year Ended February 28, 2011

Net
IncomeWeightedAverage
SharesBasic EPS—Net income available to commonshareholders¥ 25,387

99,705

Effect of dilutive securities—Stock options

Yen

U.S. Dollars

EPS¥254.61$ 3.12$ 3.11

121

Diluted EPS—Net income for computation¥ 25,387

99,826¥254.31¥ 12,562

99,167¥126.67

Year Ended February 28, 2010
Basic EPS—Net income available to commonshareholders
Effect of dilutive securities—Stock options

102

Diluted EPS—Net income for computation¥ 12,562

99,269¥126.54

19. BUSINESS COMBINATION
Transactions under Common Control
For the year ended February 28, 2011
(A share exchange making Ninety-nine Plus Inc. a wholly owned subsidiary of the Company on July 1, 2010)
1.

Name and businesses of combined companies, legal framework of business combination, name of company
subsequent to the combination, and overview of the transaction, including its objectives(1) Names and business description of the company under business combination
Names of company
under business combination:

Ninety-nine Plus Inc.

Business description: 		Single-price store LAWSON STORE 100, direct management of

					

87

Annual Report 2011

SHOP99 and roll out of the franchise chain

Notes to Consolidated Financial Statements
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

(2) Legal framework of the business combination
Through share exchange, the Company became the parent company, and Ninety-nine Plus Inc. became thewholly owned subsidiary.
(3) Name of company subsequent to the combination
There was no change in the name of the company.
(4) Overview of the transaction, including its objectives
A mid increasingly fierce competition in the store opening and product development areas in the convenience
store industry, it has become inevitable for medium- to long-term growth to open more stores in the optimal
format based on the area strategy and provide products to protect life which exceed customers' expectation
more promptly than ever in order to sustain and expand the franchise commission from franchised stores.
To achieve this, the Company conducted this share exchange with the belief that it is the best policy to reinforce
the competitiveness of the LAWSON Group as a whole by establishing a system that will enable functional
decision-making, the further unification of both companies, sharing know-how, and further enhancing thecollaborative structure to improve productivity with effective utilization of the Companies' operational capital.
2.

Overview of accounting treatment of transaction
This acquisition was treated as transaction under common control in accordance with "Accounting for Business
Combinations" (issued by the BAC on October 31, 2003) and "Accounting Standard for Business Divestitures" andASBJ Guidance No. 10, "Guidance for Accounting Standard for Business Combinations and Business Divestitures"(issued by the ASBJ on December 26, 2008).

3.

Information concerning the additional acquisition of shares in the subsidiaries(1) The acquisition cost and its breakdown
Equivalent value of the acquisition:		

¥5,069 million ($62,036 thousand)Costs directly incurred for the acquisition:¥108 million ($1,322 thousand)Total:					¥5,177 million ($63,358 thousand)

The Company's shares are valued based on the share price on the shares issued.
(2) The exchange ratio for each class of share, the approach to calculating the share exchange ratio, the number ofshares distributed, and their valuation(a) The class of shares and the exchange ratios
Common stock: The Company 1, Ninety-nine Plus Inc. 33(b) Approach to calculating the share exchange ratio
To ensure the fairness and appropriateness of the share exchange, the Company appointed Mitsubishi UFJ
Securities Co., Ltd. and Ninety-nine Plus Inc. appointed Ernst & Young Transaction Advisory Services Co.,
Ltd. as independent third party appraisers and requested them to calculate share exchange ratios. The twoparties to the combination negotiated based on those calculations and decided that the above shareexchange ratio was appropriate.
(c) Number and valuation of the shares issued
Shares issued:		

1,314,951 shares of the Company's common stock

Value of shares delivered:¥5,069 million ($62,036 thousand)(3) Amount of goodwill, reason for the recognition and method and period of amortization(a) Amount of goodwill: 		

¥2,324 million ($28,442 thousand)Annual Report 201188

(b) Reason for the recognition of goodwill
Difference between the increase in equity of the combined company held by the Company and theacquisition cost(c) Method and period of amortization
Straight-line amortization for 20 years(A share exchange making LAWSON ENTERMEDIA, Inc. ("LEM") a wholly owned subsidiary of the Company
on July 1, 2010)
1.

Name and business of combined companies, legal framework of business combination, name of company
subsequent to the combination, and overview of the transaction, including its objectives(1) Name and business description of the company under business combination
Name of company
under business combination:

LEM

Business description: 		

Ticket sales, e-commerce, advertising, Web marketing,				other information distribution and management business, etc.

(2) Legal framework of the business combination
Through share exchange, the Company became the parent company, and LEM became the wholly
owned subsidiary.
(3) Name of company subsequent to the combination
There was no change in the name of the company.
(4) Overview of the transaction, including its objectives
As entertainment is seen as more attractive as content and recognition of the influence of entertainment in
attracting customers to the stores increases in the convenience store industry, movement in competitors
including business alliances and capital alliances with ticket sales agencies has become marked since last year.
This share exchange was conducted as a result of the Company's belief that the acquisition of LEM as a wholly
owned subsidiary of the Company will lead to improved operational efficiency through unified organizational
management, prompt decision-making and redeployment of management resources while leveraging thestrengths of LEM, and that this will ultimately contribute to reinforcing the LAWSON Group's competitivenessand enhancing the corporate value.
2.

Overview of accounting treatment of transaction
This acquisition was treated as transaction under common control in accordance with "Accounting for Business
Combinations" (issued by the BAC on October 31, 2003) and "Accounting Standard for Business Divestitures" andASBJ Guidance No. 10, "Guidance for Accounting Standard for Business Combinations and Business Divestitures"(issued by the ASBJ on December 26, 2008).

3.

Information concerning the additional acquisition of shares in the subsidiaries(1) The acquisition cost and its breakdown

89

Equivalent value of the acquisition:		

¥1,107 million ($13,548 thousand)Costs directly incurred for the acquisition:¥143 million ($1,750 thousand)Total:					¥1,250 million ($15,298 thousand)Annual Report 2011

Notes to Consolidated Financial Statements
LAWSON, INC. and Consolidated Subsidiaries
Years Ended February 28, 2011 and 2010

The Company's shares are valued based on the share price on the shares issued.
(2) The exchange ratio for each class of share, the approach to calculating the share exchange ratio, the number ofshares distributed, and their valuation(a) The class of shares and the exchange ratios
Common stock:

The Company 1, LEM 21(b) Approach to calculating the share exchange ratio
To ensure the fairness and appropriateness of the share exchange, the Company appointed Mitsubishi UFJ
Securities Co., Ltd. and LEM appointed PricewaterhouseCoopers Co., Ltd. as independent third party
appraisers and requested them to calculate share exchange ratios. The two parties to the combination
negotiated based on those calculations and decided that the above share exchange ratio was appropriate.
(c) Number and valuation of the shares issued
Shares issued:		

287,238 shares of the Company's common stock

Value of shares delivered:¥1,107 million ($13,548 thousand)(3) Amount of goodwill, reason for the recognition and method and period of amortization(a) Amount of goodwill: ¥1,250 million ($15,298 thousand)(b) Reason for the recognition of goodwill
Revenue surplus to be expected as a result of business expansion and enhanced efficiency of operations(c) Method and period of amortization
Straight-line amortization for five years

20. SUBSEQUENT EVENTSAppropriation of Retained Earnings
The following appropriation of retained earnings was approved at the general shareholders meeting held on
May 24, 2011:

Millions of Yen

Thousands of
U.S. Dollars¥ 8,489$ 103,892

Cash dividends, ¥85 ($1.04) per share

Damage of the Earthquake Off the Pacific Coast of Tohoku
As a result of the earthquake which occurred on March 11, 2011, off the Pacific coast of Tohoku, some of the
LAWSON Group stores in the Tohoku region and the Kanto region (mainly Ibaraki Prefecture) have been affected.
Some merchandise and fittings fell, tipped over or broke and buildings have been damaged or suffered from power
outages. Some of the stores, mainly in Iwate and Miyagi Prefectures, remained closed or opening hours wereshortened. In addition, due to the influence of the planned power outages mainly in the Kanto region, opening hours
have been shortened for some stores and there has been a delay in the delivery of goods.
The extent of the damage to the Companies caused by this earthquake is currently being studied. The influence on
the Companies' operational activities, etc., the outlook for recovery and the amount of damage including the cost of
repairs are about ¥5,000 million ($61,192 thousand).
*

*

*

*

*

*

Annual Report 201190

Independent Auditor's Report91

Annual Report 2011

Annual Report 201192

Directors, Corporate Auditors and Executive Officers(As of July 5, 2011)

Members of the Boards

Takeshi Niinami

President and CEO;Group CEO, International Group;
President, LAWSON University

Yoshiyuki Yahagi

Chief Financial Officer (CFO)

Manabu Asano

Chief Compliance Officer (CCO);
In Charge of CSR;
General Manager, Administration Department, LAWSON ENTERMEDIA, INC.

Toru Moriyama

Group CEO, Living Essentials Group,
Mitsubishi Corporation

Hiroshi Tasaka

Professor, Graduate School of Tama University

Reiko Okutani

President, The R Co., Ltd.

Takehiko Kakiuchi

General Manager, Living Essentials Group CEO Office(Concurrently)
Division COO, Foods (Commodity) Division, Mitsubishi Corporation

Standing Corporate
Auditors

Munehiko Nakano

Auditors

Tetsuo Ozawa

LawyerEiko Tsujiyama

Professor, Graduate School of Commerce, Waseda University

Genichi Tamatsuka

Chief Operating Officer (COO);

Senior Executive Vice
Presidents

Atsuhiko Seki

Takatoshi Kawamura
Executive Vice Presidents

Senior Vice Presidents

93

Annual Report 2011

Group CEO, CVS Operating Group;
Divison Director, Fast Food Division, CVS Operating Group

Executive Assistant to CEO;Assistant to Group CEO, CVS Operating Group

Syuichi Imagawa

Group COO, CVS Operating Group;
Divison Director, Regional Offices Support Division,
CVS Operating Group;
Division Director, Management Owner Promotion Division,
CVS Operating Group

Masaharu Kamo

Group CEO, Entertainment & e-Commerce Group;
Division Director, Marketing Office;President and CEO, HMV Japan K.K.

Shigeaki Kawahara

Executive Assistant to CEO;Assistant to Group CEO, CVS Operating Group;
Senior Executive Vice President, Ninety-nine Plus Inc.

Norikazu Nishiguchi

Exective Assistant to CEO in charge of BPR;
Deputy Division Director, Management Owner Promotion Division,
CVS Operating Group

Takaki Mizuno

Region Director, Chubu LAWSON Branch, CVS Operating Group

Hajime Nakai

Division Director, Merchandizing & Logistics Division,
CVS Operating Group;
Deputy Division Director, Fast Food Division, CVS Operating GroupJun Miyazaki

Division Director, Coporate Communications Office

Masahiro Oyama

Deputy Division Director, Merchandizing & Logistics Division,
CVS Operating Group;
Deputy Division Director, Fast Food Division, CVS Operating Group

Tatsushi Satou

Chief Information Officer (CIO);
Division Director, Information Systems Office

Kei Murayama

Chief Human Resources Officer (CHO);
Division Director, Human Resources Office

Ichiro Kijima

Division Director, New Business Initiative Division

Hisashi Yasuhira

Region Director, Tohoku LAWSON Branch, CVS Operating Group

Atsushi Maeda

Deputy Division Director, Merchandizing & Logistics Division,
CVS Operating Group

Kazuo Togasa

Deputy Division Director, Regional Offices Support Division,
CVS Operating GroupCorporate Data
(As of February 28, 2011, consolidated)

Company NameLAWSON, INC.

Number of Employees

5,703

Address

Head Office:East Tower, Gate City Ohsaki
11-2, Osaki 1-chome,
Shinagawa-ku, Tokyo
141-8643 Japan

Business Activities

Franchise chain development of"LAWSON," "LAWSON STORE 100," and"NATURAL LAWSON"

All Store Sales¥1,682.8 billion

Number of Stores

9,994 (in Japan)

Operating Areas

All 47 prefectures in Japan;
Shanghai, China (joint venture);
Chongqing, China

President & CEO Takeshi Niinami
Established

April 15, 1975

Capital¥58,506.644 million

Note: The number of stores is a sum of total number of LAWSON and NATURAL LAWSON stores operated by LAWSON, INC., LAWSON stores operated by
LAWSON Okinawa, Inc., and LAWSON STORE100 and SHOP99 stores operated by Ninety-nine Plus, Inc.

Shareholder Information(As of February 28, 2011, consolidated)

Authorized Shares409,300,000

Shares Issued

100,300,000

Shareholders

40,921

Stock Exchange Listings

Tokyo Stock Exchange (1st Section)
Osaka Securities Exchange (1st Section)

Stock Transfer Agent

Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-8212, Japan

Major Shareholders
Number of Shares Percentage of Total
Held (Thousands)
Shares Held*

1. Mitsubishi Corporation

32,08932.13

2. Marubeni Foods Investment Co., Ltd.

4,786

4.79

3. Japan Trustee Services Bank, Ltd. (Trust account)

4,262

4.27

4. The Master Trust Bank of Japan, Ltd. (Trust account)

3,870

3.88

5. State Street Bank and Trust Company 505223(Standing proxy: Mizuho Corporate Bank, Ltd., Settlement Sales Department)

3,162

3.17

6. NTT DOCOMO, Inc.

2,092

2.10

7. The Chase Manhattan Bank NA, London SL, Omnibus Account(Standing proxy: Mizuho Corporate Bank, Ltd., Settlement Sales Department)

1,440

1.44

8. Deutsche Securities Inc.

1,330

1.33

9. Rabobank Nederland Tokyo Branch (Standing proxy: The Bank of Tokyo-Mitsubishi UFJ,. Ltd.)

1,080

1.08

883

0.88

10. State Street Bank and Trust Company 505225(Standing proxy: Mizuho Corporate Bank, Ltd., Settlement Sales Department)* The above shareholding ratios exclude treasury stock (433,040 shares).

Stock Price on the Tokyo Stock Exchange
(Yen)
6,000

4,000

2,000
2002/2

Dividend

2003/2

2004/2

2005/2

2006/2

2007/2

2008/2

2009/2

2010/2

2011/2

2003/2

2004/2

2005/2

2006/2

2007/2

2008/2

2009/2

2010/2

2011/2

Interim dividend

20

20

35

45

50

55

80

80

85

Year-end dividend

21

21

35

45

50

55

80

80

85

Annual dividend

41

41

70

90

100

110

160

160

170

Stock price as ofFebruary 28 or 29

2,855

3,780

3,980

4,350

4,540

4,000

4,250

3,885

4,025

(Yen)

Annual Report 201194

Annual Report 2011

Annual Report 2011
Year ended February 28, 2011

Corporate Planning Office
East Tower, Gate City Ohsaki
11-2, Osaki 1-chome, Shinagawa-ku
Tokyo 141-8643 Japan
http://www.lawson.co.jp/company/e/Published in October 2011©1975–2011 LAWSON, INC. All Rights Reserved

Printed in Japan