(TRANSLATION ONLY)
Securities Code: 2651
May 1, 2015
To All Shareholders with Voting Rights
Genichi Tamatsuka
President and CEO, Representative Director
Lawson, Inc.
11-2, Osaki 1-chome, Shinagawa-ku, TokyoNOTICE OF THE 40th ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 40th Ordinary General Meeting of Shareholders to be held as follows.
If you are unable to attend the meeting, please exercise your voting rights using either of the methods described below
after reading the attached REFERENCE DOCUMENTS FOR THE GENERAL MEETING OF SHAREHOLDERS.
[Voting in Writing (by Mail)]
Please indicate your approval or disapproval of the matters to be resolved on the Voting Rights Exercise Form
enclosed herewith and return it so that it reaches us by 5:45 p.m. on Monday, May 25, 2015.
[Voting by Electronic Means (Internet, etc.)]
Please exercise your voting rights by 5:45 p.m. on Monday, May 25, 2015 after reading the attached document“Exercising Voting Rights via the Internet, etc.”
1. Date and Time: 10:00 a.m., Tuesday, May 26, 2015
2. Venue: Tokyo International Forum, Hall C, 5-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo
3. Objectives of the Meeting
Reports:
The Business Report, the Consolidated Financial Statements and the Non-Consolidated Financial Statements for the
40th Fiscal Term (from March 1, 2014 to February 28, 2015), and the Audit Reports Thereof
Matters to Be Resolved:
Proposal No. 1: Appropriation of Surplus
Proposal No. 2: Partial Amendments to the Articles of Incorporation
Proposal No. 3: Election of Two (2) Corporate Auditors••

If you attend in person, please present the enclosed Voting Rights Exercise Form at the reception desk on arrival at the meeting.
The reception desk will open at 9:00 a.m. Please arrive a little early because the reception desk can be congested immediately
before the meeting begins.
If you wish to exercise your voting rights by proxy, your proxy is requested to present a document evidencing his/her proxy, suchas a power of attorney, together with the Voting Rights Exercise Form in the proxy’s own name at the reception desk. (Thequalified proxy is limited to one shareholder having voting rights for this meeting as per the relevant provision in the Articles ofIncorporation.)

1

(TRANSLATION ONLY)

BUSINESS REPORT(March 1, 2014, through February 28, 2015)
I. CURRENT STATUS OF THE CORPORATE GROUP
1. Summary of Operations(1) Business Developments and Results of Operations
During the consolidated fiscal year under review, or fiscal 2014 ended February 28, 2015, the Lawson Group(hereinafter, the “Group” or “Lawson”) implemented measures to reinforce its social infrastructure function thatprovides essential items and services at the local level with the aim of realizing the Group’s corporate philosophyof “Creating Happiness and Harmony in Our Communities.”. Based on its analysis of purchase data retrieved
from the multi-partner loyalty program, Ponta, the Group focused on customer relationship management(CRM)*1 and supply chain management (SCM)*2 in order to offer a merchandise assortment that meets the
specific needs of customers in each neighborhood.
Meanwhile, we also focused on promoting internal control and addressing operating risks across the entire
Group based on the 2014 Basic Policy for Improvement of Internal Control Systems. We will continue
promoting internal control across the board including companies that newly joined the Group.
In terms of operating results for the fiscal year under review, gross operating revenue increased to ¥497,913
million (up 2.6% from last year), resulting from an increase of ¥6,780 million in operating revenue due to anincrease in number of franchised stores, and an increase of ¥5,884 million in net sales resulting from acquiring
United Cinemas Co., Ltd. in August and SEIJO ISHII CO., LTD. in October despite a decrease in the number ofcompany-operated stores. As a result, cost of sales increased by ¥1,478 million to ¥128,116 million (up 1.2%
from last year) and selling, general and administrative expenses climbed ¥8,831 million to ¥299,315 million (up3.0% from last year). Thus, operating income increased by ¥2,355 million to ¥70,482 million (up 3.5% from lastyear). Furthermore, despite ordinary income income grew ¥2,834 million to ¥71,714 million (up 4.1% from lastyear), since extraordinary losses increased by ¥4,908 million to ¥14,469 million (up 51.3% from last year) due toclosures of unprofitable LAWSON STORE100 stores and withdrawal of Lawson Mart business, net income
decreased by ¥5,279 million to ¥32,686 million (down 13.9% from last year).
*1 CRM: A marketing management method for providing merchandise and services that meet the specificneeds of customers.
*2 SCM: A business administration method for comprehensively managing all stages of business, fromprocurement to sales, to streamline and optimize the entire business process.
Operating results by business segment were as follows.
[Domestic Convenience Store Business](Merchandise Strategy)
On the merchandise front, we promoted a variety of initiatives in order to enhance satisfaction of customers
visiting our stores. One of those we reviewed is coffee sizes and prices offered on the menu at “MACHI Café”.
In response to high demand from customers, we newly introduced blend coffee and iced coffee in S size at a
price of 100 yen, including tax, while expanding menu options by adding café latte and other items. As a result,
MACHI Café achieved robust sales. We also strengthened our merchandise assortment of ready-made dishes
and daily-delivered foods with the aim of attracting female and senior customers, who usually shop at
supermarkets.
In our lineup of ready-made meals, high-priced items such as Niigata-produced koshihikari rice balls stuffedwith fatty pork, beef harami (innards) and nakaochi kalbi (between-the-ribs) recorded strong sales. Chilled
gyudon (beef bowl) lunch boxes launched in November 2014 were also popular. In addition, we strived to boost
sales in the sandwich category by offering high-value-added fruit sandwiches (Mont Blanc chestnuts, shine
Muscat grapes, etc.) on an ongoing basis.
In the over-the-counter (OTC) fast foods category, “Ougon Chicken Umashio,” a tender and juicy fried2

chicken product flavored with rock salt and black pepper, was well received.
Moreover, as a “Health and wellness in communities,” we also placed emphasis on selling health-oriented
products. Specifically, we offered “Bran Bread*3” on an ongoing basis for carbohydrate-conscious consumers, aswell as “Soba [buckwheat] Noodles Containing Dietary Fiber” approved as food for specified health uses(“Tokuho” in Japanese) and “Pre-cut Vegetables” made with vegetables produced based on the “Nakashima
Farming Method*4” in some areas.
There are currently 22 Lawson Farms in which Lawson, Inc. (hereinafter, the “Company”) holds equity stakes.
The farms continue to assume the role of stably supplying fruits and vegetables to the Group’s stores andfactories that produce Lawson’s original products.
Based on these initiatives, we will further boost Lawson’s corporate brand image as a “Health-promoting
Company.”
In addition to the strengthening of these product line-up, we are increasing our lineup of “Gift Cards*5” offeredat our stores.
In sales promotions, we implemented a point-reward campaign targeting Ponta members to encouragepurchasing with the aim of increasing the rate of repeat visits. Total Ponta members reached 68 million as of theend of February 2015, including members that joined through other participating companies. The sales ratio ofPonta members reached approximately 48%.
*3
Bran: The external layer of wheat. Contains abundant nutrition including dietary fiber, iron, calcium,magnesium, zinc, and copper. The food is noted for its low level of carbohydrate.
*4 Nakashima Farming Method: A cultivation method that supplies appropriate nutrients in accordance withthe growth status of crops and the nutritional balance of the soil (mineral balance). Uses techniques fordeveloping healthy soil based on diagnosis of soil conditions in conjunction with techniques to control thegrowth process of crops to maintain healthy growth.
*5 Gift Cards: Collective term for prepaid cards that can be used for online transactions.
(Store Operations)
In store operations, we continued to reinforce adherence to the Three Essential Practices, which emphasizes(1) serving customers courteously; (2) offering a merchandise assortment focused on basic items with highdemand; and (3) keeping our stores and communities clean, in addition to expanding our lineup of
health-conscious products. Notably, with the increasing number of stores equipped with “MACHI Café” store
employees are more capable of offering products and services in a caring manner through better communication
with customers. We strived to further improve the quality of stores by clarifying the customer service goals to be
pursued by store employees and fostering leaders among them. We will continue to promote merchandise
assortments that best suit customers in each neighborhood by leveraging store-by-store analysis reports on Ponta
members’ purchase data, shelf allocation tailored to the locational characteristics of each store, and sharing ofbest practices presented at monthly area-based meetings where we discuss area strategies with franchise store
owners.
(Store Development and Store Format Strategy)
In opening new stores, the Group prioritized profitability based on its proprietary return on
investment-focused store development standard.
In December 2014, Lawson, Inc. concluded an absorption-type company split agreement with SUNNY
MART Co., Ltd., the parent company of Three-F Chu-Shikoku Co., Ltd. Based on this agreement, we havetaken a phased approach to transforming Three-F stores in Shikoku into LAWSON stores. Effective April 1,
2015, Lawson Kochi, Inc. will be established, with SUNNY MART Co., Ltd. and Lawson, Inc. holding 51% and
49% equity stakes, respectively. LAWSON stores in Kochi prefecture will be operated by Lawson Kochi, Inc.
Furthermore, the Group has been striving to expand the number of stores offering non-prescription drugs, andit reached 104 stores as of the end of February 2015. Moreover, by building partnerships in local area, in
addition to healthcare items including OTC pharmaceuticals, cosmetics, and daily necessities, the stores offer amerchandise assortment of around 5,000 items, twice as many as conventional LAWSON stores. In total, thenumber of Pharmacy Lawson stores equipped with drug-dispensing pharmacies reached 39 as of the end of3

February 2015.
LAWSON MART, a store format that the Group launched in February 2014, has endeavored to capture
customer needs as an evolutionary fresh foods convenience store by fostering its expertise in functioning as asupermarket alternative and to better support the daily lives of customers in residential areas. We have decided toincorporate the expertise developed by LAWSON MART into LAWSON stores. At the same time, with regard
to LAWSON STORE100, we intend to expand its merchandise assortment of fresh foods and value-for-money
100-yen products in order to better support the daily lives of customers. The Group as a whole will thus addressincreasingly polarizing customer needs.
As a result, the total number of LAWSON, NATURAL LAWSON, and LAWSON STORE100 (including
LAWSON MART) stores opened and closed during the fiscal year under review stood at 979 and 400 stores,
respectively, with the total number of stores in Japan reaching 11,900 as of the end of February 2015.
Furthermore, Lawson Minamikyushu, Inc., an affiliated company accounted for by equity method, operates 202
LAWSON chain stores in Kagoshima prefecture and Lawson Okinawa, Inc. operates 174 LAWSON chain storesin Okinawa prefecture as of the end of February 2015.
[Change in Total Number of Stores]
Total stores as of February
28, 2014
LAWSON

Total

Total stores as ofFebruary 28, 2015

10,108525

10,633

107

9

116

1,202

(51)

1,151

11,417483

11,900NATURAL LAWSONLAWSON STORE100 ／LAWSON MART

Change during
fiscal year

Note: 1. Small stores are included in this figure.
2. For change during fiscal year, it includes a decrease of 120 stores based on absorption-type split
contract of Lawson Group and Lawson Minamikyushu, Inc., and an increase of 24 stores based on
absorption-type split contract of Lawson Group and Lawson Kumamoto, Inc. on March 1, 2014.
[Gross Operating Revenues in the Domestic Convenience Store Business]
Gross operating revenues (millions of yen)

Year on Year (%)

395,380

96.4

4

[Net Sales of All Convenience Stores in the Domestic Convenience Store Business by Product Group]
Sales
Percentage of total
Year on Year
Product group(millions of yen)(%)(%)
Processed foods

1,034,355

53.5

97.5

Fast foods

429,212

22.2

105.0

Daily delivered foods

277,210

14.4

100.6

Nonfood products

192,020

9.9

99.6

Total

1,932,798

100.0

99.8

[Other Businesses]
In addition to Domestic Convenience Store Business, the Group is involved in Overseas Business,
Entertainment and Home Convenience Store Business, Financial Services-related Business, Seijo Ishii Businessand other businesses.
With regard to Overseas Business, the Group’s operating companies opened LAWSON stores in Shanghai,Chongqing, Dalian, and Beijing in the People’s Republic of China. In Thailand, Saha Lawson Co., Ltd., a joint
venture between LAP and the SAHA Group, Thailand’s leading distributor of consumer goods, operates stores
under the store brand of LAWSON 108 and 108SHOP. In addition, in Hawaii in the United States, Lawson USA
Hawaii, Inc. operates LAWSON stores. Furthermore, in Indonesia, PT MIDI UTAMA INDONESIA Tbk also
operates LAWSON stores.
[Distribution of Lawson Brand Stores Overseas by Region]
Country/region

Number of stores(as of February
28, 2014)

Changeduring fiscal
year

Number of stores(as of February
28, 2015)

Shanghai Hualian Lawson, Inc.

Shanghai, China

289

65

354

Chongqing Lawson, Inc.

Chongqing, China

77

27

104

Dalian Lawson, Inc.

Dalian, China

18

12

30

Beijing Lawson, Inc.

Beijing, China

5

14

19

Saha Lawson Co., Ltd.

Bangkok, Thailand

29

3

32

Lawson USA Hawaii, Inc.

Hawaii, U.S.A.

4

(1)

3

PT MIDI UTAMA INDONESIA Tbk

Capital City ofJakarta and its
suburbs, Indonesia

61

(13)

48

483

107

590

Company

Total

Note: Saha Lawson Co., Ltd. operates 169 stores other than LAWSON 108.
With regard to Entertainment and Home Convenience Store Business, Lawson HMV Entertainment, whichforms the core of entertainment related business, posted a solid performance led by an increase in ticket sales
and continued to secure top position in the ticketing industry. The number of HMV stores that sell music CDs
and DVDs totaled 53 as of the end of February 2015. Furthermore, United Cinemas Co., Ltd., which became
a consolidated subsidiary in August 2014, operates a total of 331 screens at its cinemas nationwide. We will
strive to offer an even wider selection of products and services to better respond to customer needs, forexample, by expanding our ticketing business.

Furthermore, we entered into a partnership with Amazon Japan K.K. in November 2014 and launched a newservice in Shizuoka prefecture, which enables customers to pick up items ordered online from Amazon at5

LAWSON stores. We will strive to enhance customer convenience by additionally partnering with othercompanies to establish an “Open Platform” based on the networks of LAWSON stores that offer a range ofservices encompassing ordering, collection, and home delivery.
Lawson ATM Networks, Inc., which operates a Financial Services-related Business, continued contributing toconsolidated results owing to an increase in the number of ATMs installed. In this fiscal year 2015, we
strengthened partnership with new financial institution bringing the total number of our financial institution
partners to 71 nationwide (up six from last year), including online banks, and the number of ATMs installed
nationwide to 10,767 (up 649 from last year) as of the end of February 2015.
Finally, in October 2014, Lawson, Inc. acquired all shares of SEIJO ISHII CO., LTD., which operates Seijo
Ishii, a chain of small supermarkets that seeks to develop and manufacture high-value-added products. The
number of company-operated stores of Seijo Ishii reached to 107 stores as of the end of February 2015. Byleveraging the business infrastructure of the Lawson Group, we aim to further reinforce Seijo Ishii’s strengths
and contribute to its enhancement of corporate value. At the same time, we will strive to strengthen ourDomestic Convenience Store Business by absorbing Seijo Ishii’s knowhow acquired as a manufacturing retailer
and expertise in product selection and presentation, including its central kitchen function.
[Gross Operating Revenues in Other Businesses]
Gross Operating Revenues (millions of yen)

Year on Year (%)

108,032

135.5[Environmental and Social Contribution Activities]
The Group’s Social Contribution Division promoted environmental protection and social contribution
activities, working together with franchise store owners and Group employees.
Furthermore, as part of our initiative to reduce environmental impact on the entire supply chain, we will
endeavor to save energy, resources and promote waste reduction not only at LAWSON stores but also
throughout the entire supply chain.
In particular, we promoted the introduction of a state-of-the-art energy-saving chlorofluorocarbon-free(CO2 refrigerant) refrigerator/freezer system with the aim of reducing electricity consumption at our stores.
As of the end of February 2015, the system was installed in approximately 580 stores. Compared toconventional equipment used in our stores, the new system reduces annual CO2 emissions per store byaround 50%, and electricity consumption per store by around 12%. By putting into practical use anenergy-saving package model centered on this system, the Group will aim to achieve its medium-term
energy conservation target of using 20% less electricity per store by fiscal 2020 compared to the fiscal 2010
level. Furthermore, the Group received the Director-General of the Food Industry Affairs Bureau Award at
the Second Food Industry Mottainai Awards in recognition of its contribution to the reduction of CO2
emissions through these efforts to save and generate energy. We will strive to make improvements byverifying the outcome at these stores, and apply our accumulated expertise and knowhow to LAWSON storesnationwide.
In our efforts to undertake social contribution activities at our stores, we continued activity named“Happiness in Communities,” which was combined of three activities “LAWSON Green Fund,” “Support forDreams Fund” and “TOMODACHI Fund.”In addition, the Group issues the Lawson Integrated Report, which incorporates both financial andnon-financial information for all stakeholders, while also making efforts to disclose on its website anincreasingly wider scope of information in the social and environmental fields.
As a member of society, the Group will continue to make unified group-wide efforts to implement initiatives
that aim to address social and environmental issues together with franchised stores, its customers and business
partners.

6(2) Capital Expenditures and Financing
Capital expenditures of the Group during the fiscal year totaled ¥65,823 million, of which ¥55,771 million
was primarily for store facility investment in land and buildings, and ¥8,217 million was for the upgrading of
information systems.
Furthermore, capital expenditures required for facility investments and others carried out in the current period
are devoted from shareholders’ equity.
(3) Changes in Operating Results and Financial Position
1) Changes in Operating Results and Financial Position of the Corporate Group
Fiscal 2011 Fiscal 2012 Fiscal 2013
Category/Fiscal Term
37th Term
38th Term
39th Term
Gross operating revenue
478,957
487,445
485,247(millions of yen)

Fiscal 2014
40th Term
497,913

Ordinary income (millions of yen)

61,72865,926

68,88071,714

Net income (millions of yen)

24,88533,18237,96532,686

Net income per share (yen)249.17332.20380.04327.08

Total assets (millions of yen)

531,453

579,809620,992

764,614

Net assets (millions of yen)

214,662

230,181

250,497263,797

Net assets per share (yen)2,144.00

2,267.17

2,455.25

2,561.25

Fiscal 2013
39th Term

Fiscal 2014
40th Term

1,758,656

1,932,798

298,778

316,340

62,171
33,625336.59589,793
240,648
2,403.21

61,64926,200262.18693,811
243,420
2,432.00(2) Changes in Operating Results and Financial Position of the Company
Fiscal 2011 Fiscal 2012
Category/Fiscal Term
37th Term
38th Term
Net sales of all convenience stores
1,693,435
1,621,328(millions of yen)
Gross operating revenue
272,498
282,752(millions of yen)
Ordinary income (millions of yen)
56,11059,459Net income (millions of yen)
22,46230,314
Net income per share (yen)224.91
303.49Total assets (millions of yen)
500,667
532,619
Net assets (millions of yen)
216,826
227,974
Net assets per share (yen)2,166.35
2,277.90

7

(4) Pressing Issues① Increase franchise store earnings
With the aim of increasing franchise store earnings, the Group will push forward its operational reform inconjunction with franchise stores and reinforce their retail spaces and merchandise appeal from the customers’
perspective.
② Generate synergistic effects within the GroupThe Group will capitalize on its range of store formats tailored to meet an expanded customer base,diversified needs and health-oriented preferences, while strengthening and evolving its merchandise
assortment. In addition, by making maximum use of each Group company’s distinctive features, we will strive
to generate synergistic effects within the Group.
③ Develop Overseas Business
The Group will establish profitable business models that suit each country/region by striving to understandlocal customer needs, differentiate its products and services from competitors, and enhance its brandrecognition.
④ Promote internal control systems and address operating risks
In order to ensure business continuity, it is imperative to foster the Group’s internal control in its entirety
and address operating risks. In addition, we believe that taking a proactive approach to corporate governanceis not only strongly desired by all the stakeholders of the Group, but also the right way to enhance corporate
value. We will therefore continue to focus on promoting internal control and addressing operating risks.
The Group will aim to increase its corporate value by striving to improve customer satisfaction on an
ongoing basis.
We look forward to the continued support and encouragement of our shareholders.

82. Current Status at the End of February 2014
(1) Major Business Operations and Principal Offices(Domestic Convenience Store Business)
1) Lawson, Inc.
Major Business:

Head Office:Principal Offices:2) Lawson Mart, Inc.
Major Business:
Head Office:3) SCI, Inc.
Major Business:
Head Office:Lawson, Inc. primarily operates the Lawson-brand franchise system as well as
undertaking management of company-operated stores as the head office of
LAWSON, NATURAL LAWSON, LAWSON STORE 100 and LAWSON MART
convenience store chains.
Shinagawa-ku, Tokyo
Hokkaido Lawson Branch (Kita-ku, Sapporo), Tohoku Lawson Branch (Aoba-ku,
Sendai), North Kanto Lawson Branch (Shinagawa-ku, Tokyo), South Kanto Lawson
Branch (Shinagawa-ku, Tokyo), Chubu Lawson Branch (Naka-ku, Nagoya), Kinki
Lawson Branch (Suita, Osaka), Chugoku & Shikoku Lawson Branch (Kita-ku,
Okayama) and Kyushu Lawson Branch (Hakata-ku, Fukuoka)
Note: In addition to the above sites, the Company has 87 offices throughout Japan,
including branches.

Lawson Mart, Inc. operates LAWSON STORE100 and LAWSON MART stores,
provides guidance to them, and engages in merchandise-related businesses.
Shinagawa-ku, Tokyo

SCI, Inc. operates the wholesale of meats, such as processed foods and frozen foods,
and packing materials.
Shinagawa-ku, Tokyo[Stores]Number ofstores619

IbarakiNumber ofstores
150

Kyoto

Number ofstores324

Aomori

208

Tokyo

1,597

Shiga

155

Tokushima

130

Akita

184

Kanagawa

862

Nara

131

Kochi

107

Iwate

161

Shizuoka225

Wakayama

124

Fukuoka442

Miyagi227

Yamanashi

111

Osaka

1,036

Saga

67

Yamagata

78

Nagano

150

Hyogo

634

Nagasaki

105

Fukushima

103

Aichi

583

Okayama

145

Oita

166

Niigata

130

Gifu

151

Hiroshima

177

Kumamoto

135

Tochigi

141

Mie

111

Yamaguchi

123

Miyazaki

103

Gunma

93

Ishikawa

102

Tottori

111

Saitama514

Toyama188

Shimane

117

Chiba

463

Fukui

106

Kagawa122

Prefecture
Hokkaido

Prefecture

Prefecture

9Prefecture
Ehime

Total (domestic)

Number ofstores189

11,900(Other Businesses)① Seijo Ishii Business
SEIJO ISHII CO., LTD.
Major Business: SEIJO ISHII CO., LTD. operates a chain of small supermarkets that seeks to develop andmanufacture high-value-added products.

Head Office:Yokohama city, Kanagawa
Note: SEIJO ISHII CO., LTD. became a consolidated subsidiary of Lawson Inc., which
acquired all outstanding shares of SEIJO ISHII CO., LTD. in October 2014.

② Overseas Business
1) Lawson (China) Holdings, Inc.
Major Business: Lawson (China) Holdings, Inc. controls companies that operate overseas businesses in
China.
Head Office:Shanghai, China
2) Shanghai Hualian Lawson, Inc.
Major Business: Shanghai Hualian Lawson, Inc. operates Company-operated convenience stores andfranchise stores.
Head Office:Shanghai, China
3) Chongqing Lawson, Inc.
Major Business: Chongqing Lawson, Inc. operates Company-operated convenience stores.
Head Office:Chongqing, China
4) Dalian Lawson, Inc.
Major Business: Dalian Lawson, Inc. operates Company-operated convenience stores.
Head Office:Dalian, China
5) Lawson Asia Pacific Holdings Pte, Ltd.
Major Business: Lawson Asia Pacific Holdings Pte, Ltd. controls the Company’s subsidiaries andaffiliates that operate overseas businesses (excluding China).
Head Office:Singapore6) Saha Lawson Co., Ltd.
Major Business: Saha Lawson Co., Ltd. operates stores under the store brand of LAWSON 108 and
108SHOP.
Head Office:Bangkok, Thailand③ Entertainment and Home Convenience Store Business
1) Lawson HMV Entertainment, Inc.
Major Business: Sells tickets for various events and music/video software inside LAWSON stores, etc.
Head Office:Shinagawa-ku, Tokyo
2) Lawson HMV Entertainment United Cinema Holdings, Inc.
Major Business: Holding company that owns shares of United Entertainment Holdings Co., Ltd.
Head Office:Shinagawa-ku, Tokyo
Note: Lawson HMV Entertainment United Cinema Holdings, Inc. was established inJuly 2014 by Lawson HMV Entertainment, Inc., the Company’s wholly owned
subsidiary.

103) United Entertainment Holdings Co., Ltd.
Major Business: Holding company that owns shares of United Cinemas Co., Ltd.
Head Office:Shinagawa-ku, Tokyo
Note: Lawson HMV Entertainment United Cinema Holdings, Inc., the Company’s
wholly owned subsidiary, acquired 100% of outstanding shares of UnitedEntertainment Holdings Co., Ltd. in August 2014 and made it and its wholly
owned subsidiary, United Cinemas Co., Ltd., consolidated subsidiaries.
4) United Cinemas Co., Ltd.
Major Business: Constructs and manages multiplex movie theaters
Head Office:Shinagawa-ku, Tokyo④ Financial Services-Related Business
Lawson ATM Networks, Inc.
Major Business: Installs jointly operated ATMs in LAWSON stores, etc.
Head Office:Shinagawa-ku, Tokyo⑤ Consulting Business
BestPractice Inc.
Major Business:
Conducts surveys of convenience stores to give advice and make specificproposals for the improvement of LAWSON stores
Head Office:Shinagawa-ku, Tokyo(2) Employees
1) Employees of the Corporate Group
Designation of Business Segment

Number of Employees

Domestic Convenience Store BusinessYear on Year Change

4,625

85

Seijo Ishii Business

847

847

Overseas Business

969

176

Entertainment and Home Convenience StoreBusiness

971

142

Financial Services-related Business

25

1Consulting Business

169

19

7,606

1,270

Total
2) Employees of the Company
Number of Employees
Year on Year Change
3,679
135

Average Age
39.8

11

Average Years of Service
12.9

(3) Status of Major Business Combinations
1) Important Subsidiaries
Company Name
Common Stock

Shareholding

Lawson Mart, Inc.

¥99 million

100.0 %

SCI, Inc.

¥10 million

100.0 %

¥5,250 million
CNY930 million
CNY353 million
CNY190 million
CNY66 million
S$29 million
THB837 million

100.0 %
100.0 %
94.0 %
100.0 %
98.3 %
100.0 %
49.0 %

Lawson HMV Entertainment, Inc.

¥100 million

100.0 %

Lawson HMV Entertainment United
Cinema Holdings, Inc.

¥2,125 million

100.0 %

United Entertainment Holdings Co., Ltd.

¥100 million

100.0 %

United Cinemas Co., Ltd.

¥100 million

100.0 %

¥3,000 million

76.5 %SEIJO ISHII CO., LTD.
Lawson (China) Holdings, Inc.
Shanghai Hualian Lawson, Inc.
Chongqing Lawson, Inc.
Dalian Lawson, Inc.
Lawson Asia Pacific Holdings Pte, Ltd.
Saha Lawson Co., Ltd.

Lawson ATM Networks, Inc.

Major Business
Domestic Convenience StoreBusiness
Domestic Convenience StoreBusiness
Seijo Ishii Business
Overseas Business
Overseas Business
Overseas Business
Overseas Business
Overseas Business
Overseas BusinessEntertainment and Home
Convenience Store BusinessEntertainment and Home
Convenience Store BusinessEntertainment and Home
Convenience Store BusinessEntertainment and Home
Convenience Store Business
Financial Services-related
Business
Consulting Business

BestPractice, Inc.
¥10 million
100.0 %
Notes:
1. The shareholder percentage includes indirectly held shares.
2. SEIJO ISHII CO., LTD. was made the Company’s consolidated subsidiary as a result of the acquisition of
100% of its outstanding shares by the Company in October 2014.
3. Lawson HMV Entertainment United Cinema Holdings, Inc. was established in July 2014 by Lawson HMVEntertainment, Inc., the Company’s wholly owned subsidiary, and was made its consolidated subsidiary.
Lawson HMV Entertainment United Cinema Holdings, Inc., the Company’s wholly owned subsidiary,acquired 100% of outstanding shares of United Entertainment Holdings Co., Ltd. in August 2014 and made it
and its wholly owned subsidiary, United Cinemas Co., Ltd., consolidated subsidiaries.
4. Smart Kitchen, Inc., which was a consolidated subsidiary of the Company in the previous term, was excluded
from the scope of consolidation due to liquidation in January 2015.

122) Other Important Business Combinations① Important Affiliated Companies
Company Name
Common Stock
Lawson Okinawa, Inc.
¥10 million
Lawson Minamikyushu, Inc.
¥100 million

Shareholding
49.0 %
49.0 %

Major Business
Domestic Convenience Store Business
Domestic Convenience Store BusinessNotes:
1. Lawson Minamikyushu, Inc. has been included within the scope of equity method affiliates due to the rise in
its importance, as the Company owns 49% of its shares.
2. PT MIDI UTAMA INDONESIA Tbk, which was an equity method affiliate of Lawson Asia Pacific Holdings
Pte. Ltd., the Company’s wholly owned subsidiary, in the previous term, was excluded from the scope ofequity method affiliates, since all of its shares owned were sold in December 2014.
② Important Business Alliances
Mitsubishi Corporation holds 32.4% of the total voting rights (32,399 thousand shares) of the Company(including indirect holdings). Recognizing Mitsubishi Corporation as the most important strategic partner, theCompany has entered into an extensive business tie-up agreement with Mitsubishi Corporation for theenhancement of existing businesses and the development of new businesses.

13II. CURRENT STATUS OF THE COMPANY
1. Shares at the End of the Year
(1) Total Number of Shares Authorized to Be Issued: 409,300,000 shares(2) Total Number of Shares Issued and Outstanding: 100,300,000 shares(Including 301,084 shares of treasury shares)(3) Number of Unit (tangen) Shares:
100 shares(4) Number of Shareholders:
30,618(5) Top 10 Major Shareholders:
Investment in the Company
Number of Shares
Shareholding (%)
Held (thousands)
32,089
32.1
2,691
2.7
2,635
2.6
2,092
2.1
1,867
1.9
1,474
1.5

Shareholder’s Name

Mitsubishi Corporation
The Master Trust Bank of Japan, Ltd. (trust account)
Japan Trustee Services Bank, Ltd. (trust account)
NTT DOCOMO, INC.
Nomura Securities Co., Ltd.
JP MORGAN CHASE BANK 380055
MELLON BANK, N.A. AS AGENT FOR ITS CLIENT MELLON
1,381
OMNIBUS US PENSIONBBH FOR MATTHEWS ASIAN GROWTH AND INCOME FUND
1,275
National Mutual Insurance Federation of Agricultural Cooperatives
1,259
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
1,056
Notes:
1. The number of shares held in the above table is based on the register of shareholders.
2. The equity position in the above table is calculated after deducting treasury shares.

14

1.4
1.3
1.3
1.1

2. Status of Stock Acquisition Rights
Stock Acquisition Rights Held by Corporate Officers of the Company as of February 28, 2015
5th Stock
6th (a) Stock
7th (a) Stock
8th (a) Stock
Acquisition
Acquisition Rights Acquisition Rights Acquisition Rights
RightsNumber of option holders and the number of stock acquisition rights (units)
Directors (excluding
0 person0 persons
0 persons
0 personsOutside Directors)(0 units)(0 units)(0 units)(0 units)
2 persons
2 persons
2 persons
2 personsOutside Directors(10 units)(8 units)(8 units)(12 units)
Class and number ofCommon stock
Common stock of Common stock of Common stock ofshares subject to stockof Lawson, Inc.
Lawson, Inc.
Lawson, Inc.
Lawson, Inc.
acquisition rights
1,000
800
800
1,200
Value of property
invested in exercising
¥1
¥1
¥1
¥1
stock acquisition rights(per share)
October 13,
October 27, 2006 September 6, 2007 January 17, 2009
Exercise period
2005 throughthrough May 26,
through Augustthrough December
May 31, 2025
2026
20, 2027
15, 2028
Main exercise
Note 1
Note 2
Note 2
Note 2conditions
9th Stock
10th Stock
11th Stock
Acquisition
Acquisition Rights Acquisition Rights
RightsNumber of option holders and the number of stock acquisition rights (units)
Directors (excluding
0 persons
0 persons
0 personsOutside Directors)(0 units)(0 units)(0 units)
2 persons
2 persons
2 personsOutside Directors(10 units)(10 units)(10 units)
Class and number ofCommon stock
Common stock of Common stock ofshares subject to stockof Lawson, Inc.
Lawson, Inc.
Lawson, Inc.
acquisition rights
1,000
1,000
1,000
Value of property
invested in exercising¥1¥1¥1
stock acquisition rights(per share)
February 18,
February 26, 2011 February 18, 20122010 throughExercise period
through February
through February
February 1,
10, 2031
1, 2032
2030
Main exercise
Note 2
Note 2
Note 2conditions

15

12th (a) Stock
Acquisition Rights

1 persons(65 units)
3 persons(15 units)
Common stock of
Lawson, Inc.
8,000

¥1

April 12, 2013
through March 26,2033
Note 3

13th Stock
Acquisition
RightsNumber of option holders and the numberof stock acquisition rights (units)
Directors (Excluding
1 personsOutside Directors)(53 units)
4 personsOutside Directors(20 units)
Class and number ofCommon stock ofshares subject to stock
Lawson, Inc.
acquisition rights
7,300
Value of property
invested in exercising¥1
stock acquisition rights(per share)
April 10, 2014
Exercise period
through March
23, 2034
Main exercise
Note 3
conditions
Notes:
1. A stock acquisition rights holder may exercise his or her rights only for a period of 5 years from the day afterlosing his or her position as a director of the Company.
2. A stock acquisition rights holder may exercise his or her rights within the exercise period only for a period of 5
years from the day after losing his or her position as either director and/or executive officer of the Company.
3. A stock acquisition rights holder may exercise his or her rights within the exercise period only for a period of
10 days from the day after losing his or her position as either director and/or executive officer of the Company.
The total number of shares subject to stock acquisition rights that remain unexercised as of February 28, 2015, is64,600 shares, accounting for 0.1% of the total number of shares issued and outstanding.

16

3. Directors and Corporate Auditors(1) Positions, Names and Assignments (As of February 28, 2015)
Assignments and Important Concurrent Positions
Note: Important concurrent positions of Outside
Name
Position
Directors given later in (5) Outside Directors andOutside Corporate Auditors
Genichi Tamatsuka
Representative Director,
Store Operations Division Director
President and CEO―Corporate Staff Divisions and Lawson Mart/
Sadanobu Takemasu Representative Director,
Senior Executive Vice President
Lawson Store 100 Business, Corporate Sales andStore Development Division Director―Compliance & Risk Management andMasakatsu Gonai
Director,
Executive Vice President
Human Resources
Reiko Yonezawa
Director
Takehiko Kakiuchi
Director
Emi Osono
Director
Yutaka Kyoya
Director
Sakie Akiyama
Director
Atsuhiko Seki
Standing Corporate Auditor
Shinichi HokariStanding Corporate Auditor
Tetsuo Ozawa
Corporate Auditor
Eiko Tsujiyama
Corporate Auditor
Notes:
1. Five directors (Reiko Yonezawa, Takehiko Kakiuchi, Emi Osono, Yutaka Kyoya and Sakie Akiyama) areoutside directors as stipulated in Article 2, Item 15, of the Companies Act of Japan (the “Companies Act”).
2. Three auditors (standing corporate auditor Shinichi Hokari, corporate auditor Tetsuo Ozawa and corporate
auditor Eiko Tsujiyama) are outside corporate auditors as stipulated in Article 2, Item 16, of the Companies
Act.
3. Standing corporate auditor Shinichi Hokari has assumed responsible posts for many years on the Board ofAudit of Japan and therefore has considerable expertise in finance and accounting.
Corporate auditor Tetsuo Ozawa, lawyer, has practiced law and advised on legal matters and risk management
mainly in relation to the legal affairs of companies and therefore has considerable expertise in finance andaccounting.
Corporate auditor Eiko Tsujiyama has long-term experience as a university professor in accounting andtherefore has considerable expertise in finance and accounting.
4. Changes in appointment, approved with resolutions by the 39th Ordinary General Meeting of Shareholders
held on May 27, 2014 are as follows:
Appointment
Representative Director
Sadanobu Takemasu
Director
Masakatsu Gonai
Director
Sakie Akiyama
Resignation from officeDirector
Yoshiyuki Yahagi
5. Takeshi Niinami retired from director and the chairman of the board’s position on July 31, 2014.

17

[Reference] Members of the Boards and Senior Vice Presidents(Exclude Outside Corporate Auditors) (As of March 1, 2015)
Name

Position and Major Title

Genichi Tamatsuka

Representative Director,

Sadanobu Takemasu

Representative Director,

President and CEO
Senior Executive Vice President―Corporate Staff Divisions and Lawson Store 100 Business,
Store Development Division Director

Masahiro Oyama

Senior Executive Vice President―Merchandising and Merchandising Group Innovation Officer

Masaharu Kamo

Senior Executive Vice President―Strategy of Information Systems and Home CVS Business
Division, Entertainment and Consumer Service Business Division
Director, BPR and Information Systems Division Director, Corporate
Strategy and Planning Division Deputy Director andLawson HMV Entertainment, Inc. Representative Director

Masakatsu Gonai

Director,
Executive Vice President―Compliance & Risk Management and Human Resources andFranchisee Business Support Division Director

Yutaka Yoshitake

Executive Vice President

CFO

Katsuyuki Imada

Executive Vice President

Corporate Strategy and Planning Division Director

Jun Miyazaki

Executive Vice President

Corporate Communications Division Director and Human Resources

Norikazu Nishiguchi

Senior Vice President

Healthcare Business Division Director and BPR & Information
Systems Division Deputy Director

Yuichi Wada

Senior Vice President

Merchandising Division Director

Tetsu Yamada

Senior Vice PresidentInternational Business Division Director

Shuichi Imagawa

Senior Vice President

Sales Strategy and Marketing Division Director

Takaki Mizuno

Senior Vice President

Executive Assistant to CEO (―Western Japan)

Shigeaki Kawahara

Senior Vice President

Lawson Store 100 Business Division Director, Seijo Ishii Business

Hisashi Yasuhira

Senior Vice President

Executive Assistant to CEO (Strengthen Life Support) and Sales

Yasuhiko Hirokane

Senior Vice President

Division Director and Lawson Mart, Inc. Representative Director
Strategy and Marketing Division Deputy Director
Store Operations Division Director and Management Owner
Promotion Division
Kazuya Nobe

Senior Vice President

Home CVS Business Division Director

Tatsushi Sato

Senior Vice President

BPR and Information Systems Division Deputy Director

Hajime Kawamura

Senior Vice President

Franchisee Business Support Division Deputy Director

Motonobu Miyake

Senior Vice PresidentInternational Business Division Deputy Director, Lawson (China)

Atsushi Maeda

Senior Vice President

Merchandising Division Deputy Director

Akihito Watanabe

Senior Vice President

Entertainment and Consumer Service Business Division Deputy

Yasuhiro Iseki

Senior Vice President

Corporate Sales and Store Development Division Deputy Director

Taiki Hasegawa

Senior Vice President

Holdings, Inc. General Manager

Director and United Cinemas Co., Ltd. Representative Director
Entertainment and Consumer Service Business Division Deputy
Director and Sales Strategy and Marketing Division Deputy Director
Akira Ushijima

Senior Vice President

Lawson (China) Holdings, Inc. COO and
Beijing Lawson, Inc. General Manager

18

(2) Amounts of Remuneration, etc., Paid to Directors and Corporate Auditors
Remuneration paid to officers
Total
Total Compensation Paid by
Number ofCompensation
Type (Millions of Yen)
Directors andCategory
Paid
Corporate
Basic(millions ofAuditors
Stock Options
Compensation
Yen)
Applicable
Directors
324
194
130
10
(Including Outside Directors)(Outside Directors)
(48)
(37)
(10)
(5)
Corporate Auditors(Including Outside Corporate
70
70
–
4
Auditors)(Outside Corporate Auditors)
(46)
(46)
(–)
(3)
Total
395
264
130
14
Notes:
1. As of February 28, 2015, the number of directors in office was 8 and that of corporate auditors was 4.
2. The above figures include remuneration paid to 1 director who resigned at the conclusion of the 39th Ordinary
General Meeting of Shareholders held on May 27, 2014, and 1 director who resigned on July 31, 2014.
(3) Policy on Decisions Concerning the Amount of Remuneration Paid to Directors① Basic policy on decisions concerning the amount of remuneration paid to directors
Regarding the amount of remuneration paid to directors, it is the Company’s basic policy to design the
remuneration system in close correlation with shareholder returns while ensuring that it will function
sufficiently as an incentive for the enhancement of corporate value, sustainable growth and improvement ofoperating performance, and reward each director with a sufficient and adequate amount of compensation for
the execution of their duties.
② Decision-making process for the amount of remuneration paid to directors
In order to enhance management transparency, the amount of remuneration paid to directors is determined at
the board of directors meeting based on recommendations by the Company’s Compensation Committee, which
consists exclusively of outside officers (four outside directors and two outside corporate auditor).
Members of the Nomination and Compensation Committee:
Outside Director
Outside Director

Reiko Yonezawa
Outside Director
Takehiko Kakiuchi
Emi Osono
Outside Director
Sakie Akiyama(Vice Committee Chairperson)
Outside Corporate Tetsuo Ozawa
Outside Corporate
Eiko Tsujiyama
Auditor(Committee Chairperson)
Auditor③ Details of remuneration paid to directors
Remuneration paid to the Company’s directors is composed of basic compensation through cash payments
and stock price-linked compensation through the granting of stock options.
[Basic compensation]
Basic compensation of directors is composed of fixed compensation with fixed monthly payments andvariable compensation, which fluctuates in response to the Company’s financial performance for each period.
i) Fixed compensation
The amount of fixed compensation commensurate with the position is determined based on standards
stipulated by internal rules.
ii) Variable compensation
In order to link the remuneration of directors with shareholder returns, the Company has adopted acompensation system that is linked to the Company’s financial performance.
Variable compensation is paid in accordance with earnings indicators such as EPS (consolidated net income
19per share). Regarding nonexecutive directors, including Reiko Yonezawa, Takehiko Kakiuchi Emi Osono,
Yutaka Kyoya and Sakie Akiyama, variable compensation is not applicable as they are focused on theirsupervisory and advisory roles as the Company’s representative directors and in the board of directors
meetings.
[Stock price-linked compensation]
Stock options as stock-based compensation
By incorporating stock options as stock-based compensation linked with stock prices as part of compensation
paid to directors, the Company has a system in which management shares with stockholders the benefits from arise in stock price as well as the risks associated with a price decline. The Company positions stock options ascompensation that is linked to medium to long-term improvement of its corporate value.
Exercise price on stock options as stock-based compensation is ¥1 per share and the amount of units granted isdetermined in accordance with the position of directors. In addition, stock options as stock-based compensation canbe exercised only during designated periods after retirement from office; directors are not allowed to exercise theirstock option rights during their term in office.
④ Limit on the amount of remuneration paid to directors
The limit on the amount of remuneration paid to the Company’s directors is determined at the general
meeting of shareholders in accordance with laws and regulations.
i) Amount of remuneration paid to directors
Resolutions at the general meeting of shareholders as of May 24, 2001: ¥400 million or less per yearii) Amount of stock options granted to directors
Resolutions at the general meeting of shareholders as of May 27, 2014: ¥300 million or less per year
(4) Policy on Decisions Concerning the Amount of Remuneration Paid to Corporate Auditors① Basic policy on decisions concerning the amount of remuneration paid to corporate auditors
Regarding the amount of remuneration paid to corporate auditors, it is the Company’s basic policy to reward
each corporate auditor with a sufficient and adequate amount of compensation for the execution of their duties.
② Decision-making process for the amount of remuneration paid to corporate auditors
The amount of remuneration paid to corporate auditors is determined based on discussions among corporate
auditors and is within the remuneration amount limit resolved at the general meeting of shareholders.
③ Details of remuneration paid to corporate auditors
The Company’s corporate auditors receive basic compensation (fixed compensation) in cash.
The amount of basic compensation is decided based on discussions among corporate auditors, taking into
consideration whether or not they are working on a full-time basis, and segregation of auditing duties. Regarding
retirement benefits, the system itself was abolished.
④ Limit of the amount of remuneration paid to corporate auditors
The limit of the amount of remuneration paid to the Company’s corporate auditors is determined at thegeneral meeting of shareholders in accordance with laws and regulations.
Amount of remuneration paid to corporate auditors
Resolutions at the general meeting of shareholders as of May 29, 2012: ¥80 million or less per year20(5) Outside Directors and Outside Corporate Auditors
1) Relationship between Major Positions Concurrently Held and the Company
Relationship between the
Position
Position in
Name
Details
Company and Company
Concurrently
the Company
Where Position Concurrently
Held
Held
The Company and The R Co.,
Ltd. (Chairperson Reiko
Yonezawa), have a business
relationship consisting ofreception services for theCompany’s head officeOutsideReiko
Director
The R Co., Ltd.
Chairperson
provided by the latter. The
Yonezawa(Independent)
Company entrusted The R
Co., Ltd. to provide services
after receiving bids fromseveral suitable companies
and verifying their economic
efficiency.
The Company and Mitsubishi
Executive Vice
Corporation, of which Mr.
Mitsubishi
President, Group
Kakiuchi is an employee andCorporation
CEO, Living
which is a large shareholder of
OutsideTakehiko
Essentials Groupthe Company, have a businessDirector
Kakiuchirelationshipunderanextensivebusinessalliance
Mitsubishi
Outside director
agreement.
Shokuhin Co., Ltd

OutsideDirector(Independent)

Emi Osono

Hitotsubashi
University
Graduate SchoolofInternational
Corporate
Strategy
Resona Holdings,
Inc.

Professor

Outside director

OutsideDirector

YutakaKyoya

Mitsubishi
Corporation

Division COO,
Foods (Commodity)
Div.

OutsideDirector(Independent)

Sakie
Akiyama

Saki Corporation

CEO and Founder

21

The Company and Mitsubishi
Corporation, of which Mr.
Kyoya is an employee andwhich is a large shareholder of
the Company, have a business
relationshipunderanextensive business allianceagreement.

Position in
the Company
OutsideCorporate
Auditor(Independent)

Name

Position
Concurrently
Held

OutsideCorporate
Auditor(Independent)

Relationship between the Company
and Company Where Position
Concurrently Held

Shinichi
HokariTokyo Fuji Law
OfficeOutsideCorporate
Auditor(Independent)

Details

Tetsuo Ozawa

CEMEDINE
CO., LTD.
Sekisui
Chemical Co.,Ltd.
WasedaUniversity
School ofCommerce andGraduate Schoolof Commerce

Eiko
Tsujiyama

Lawyer(Partner)
Outsidecorporate
auditorOutsidecorporate
auditor

Professor

Mitsubishi
Corporation

Outsidecorporate
auditor

ORIX
Corporation

OutsidedirectorNTT
DOCOMO,
INC.

Outsidecorporate
auditor

Mitsubishi Corporation, for which
Eiko Tsujiyama serves as an outside
corporate auditor, is a large
shareholder of the Company andthere is a business relationshipbetween the two companies basedon a comprehensive businessalliance agreement.
NTT DOCOMO, INC., for which
Eiko Tsujiyama serves as an outside
corporate auditor, is a large
shareholder of the Company andthere is a business relationship in thetelecommunications field between
the two companies based on acomprehensive business allianceagreement.

Shiseido
OutsideCompany,
corporate
Limitedauditor
Note: Where nothing is written in the column Relationship between the Company and company Where Position
Concurrently Held, it means that the Company has no important business or other relationship with thatcompany.

222) Major Activities during the Year
Position in the
Company

Name

Outside Director(Independent)

Reiko Yonezawa

Outside Director

Takehiko Kakiuchi

Outside Director(Independent)

Emi Osono

Outside Director

Yutaka Kyoya

Outside Director(Independent)

Sakie Akiyama

OutsideCorporate Auditor(Independent)

Shinichi Hokari

OutsideCorporate Auditor(Independent)

Tetsuo Ozawa

OutsideCorporate Auditor(Independent)

Eiko Tsujiyama

Major Activities
Ms. Yonezawa attended 11 of 13 board of directors’ meetings held
during the year and appropriately questioned and/or remarked basedon her abundant experience and knowledge as a management
executive. Ms. Yonezawa is also a member of the Company’s
Nomination and Compensation Committee.
Mr. Kakiuchi attended 11 of 13 board of directors’ meetings held
during the year and appropriately questioned and/or remarked basedon his deep knowledge about the consumer lifestyles industry. Mr.
Kakiuchi is also a member of the Company’s Nomination andCompensation Committee.
Ms. Osono attended 11 of 13 board of directors’ meetings held
during the year, and as an academic, appropriately questioned
and/or remarked based on her abundant knowledge of global
corporate management, corporate strategy and organizational
behavior, etc. Ms. Osono is also a vice chairperson of theCompany’s Nomination and Compensation Committee.
Mr. Kyoya attended 11 of 13 board of directors’ meetings held
during the year, and appropriately questioned and/or remarked
based on his abundant knowledge of fields related to the daily livesof consumers.
Ms. Akiyama attended all 11 board of directors’ meetings held
throughout the year during her term in office and, as a management
executive, appropriately questioned and/or remarked based on her
abundant knowledge. Ms. Akiyama is also a member of theCompany’s Nomination and Compensation Committee.
As a standing corporate auditor, Mr. Hokari examined financial
documents and visited relevant establishments and business partners
to examine their business operations and financial situation. Mr.
Hokari monitored and verified the execution of duties of directors
and other personnel including those relating to the improvement ofinternal control systems. Mr. Hokari attended all 13 board of
directors’ meetings and all 16 board of corporate auditors’ meetings
held throughout the year during his term in office and appropriately
questioned and/or remarked based on his deep knowledge financeand accounting and using his experience of assuming responsible
posts for many years on the board of audit of Japan.
Mr. Ozawa attended 12 of 13 board of directors’ meetings and all
16 board of corporate auditors’ meetings held during the year andappropriately questioned and/or remarked based on his abundant
experience and knowledge as a lawyer. Mr. Ozawa is also achairperson of the Company’s Nomination and Compensation
Committee.
Ms. Tsujiyama attended all 13 board of directors’ meetings and all
16 board of corporate auditors’ meetings held during the year andappropriately questioned and/or remarked based on her deep
knowledge of accounting as a university professor in this field. Ms.
Tsujiyama is also a member of the Company’s Nomination andCompensation Committee.

23(6) Judgment Criteria Concerning IndependenceWith the aim of enhancing corporate governance, the Company has specified the following judgment criteria
regarding Independent Directors/Auditors and has appointed outside directors and/or outside corporate auditors
who do not meet the judgment criteria as Independent Directors/Auditors as specified in the rules set forth by the
Tokyo Stock Exchange, Inc.
① Those who are engaged in business operations of the Company’s parent company② Those who are engaged in business operations of the Company’s sister companies③ Those who conduct business transactions with the Group as a major business partner or those who are
engaged in such business operations
Business partner groups that provide the Group with products and/or services and whose total amount ofbusiness transactions with the Group during the latest fiscal year account for 2% or more of theirconsolidated net sales④ The Group’s major business partners or those who are engaged in such business operations
Business partner groups to which the Group provides its products and/or services and for which the Group’s
total amount of business transactions during the latest fiscal year accounted for 2% or more of theCompany’s consolidated net sales (total operating revenues)⑤ Consultants, accounting professionals, and legal professionals who have received any monetary or property
benefits from the Group other than remuneration paid to officers
Consultants, accounting professionals such as certified accountants, and legal professionals such as lawyers
who have received any monetary or property benefits from the Group other than remuneration paid toofficers and who have received remuneration totaling ¥5 million or more per year
⑥ The Company’s major shareholders (those who are engaged in business operations of applicablecorporations in cases where major shareholders are corporations)⑦ Those with close family members who are engaged in business operations of the Group⑧ Those with close family members who are nonexecutive directors or accounting advisors of the Company(in cases where Independent Directors/Auditors are outside corporate auditors)(7) Outline of Liability Limitation Agreements with Outside Directors and Outside Corporate Auditors
The Company has entered into agreements with the outside directors and outside corporate auditors to limit
their liability with regard to the damages outlined under Article 423, Paragraph 1, of the Companies Act,
whereby their liability shall be, at a maximum, the total sum of the amounts set forth in the respective relevant
items of Article 425, Paragraph 1, of the Companies Act.

24

4. Independent Auditor(1) Independent Auditor
Deloitte Touche Tohmatsu LLC(2) Amounts of Remunerations, etc., to be Paid to the Independent Auditor
93 million yen
1) Remuneration to be paid by the Company to the independent auditor2) Sum of money and other property benefits to be paid by the Company and
158 million yen
its subsidiaries to the independent auditor
Note:
1. The audit agreement entered into by the independent auditor and the Company does not clearly distinguishthe amount for the audit under the Companies Act and for the audit under the Financial Instruments andExchange Act, and the two amounts cannot be substantially distinguished from each other. Therefore, theamount in 1) above indicates the total for the two audits.
2. Six of the important subsidiaries of Lawson overseas are subject to audit by an independent auditor otherthan Lawson’s independent auditor.
(3) Nonaudit Services
The Company entrusts the following services, which do not come under the services set forth in Article 2,
Paragraph 1, of the Certified Public Accountant Act (nonaudit services), to the independent auditor:
・Advice and guidance on the preparation of documents translated into English for earnings reports andvarious other financial documents.
(4) Policy on Decisions Concerning Dismissal or Nonreappointment of the Independent Auditor
If the independent auditor violates or infringes the Companies Act, the Certified Public Accountant Act, orother laws or regulations, or the Company considers it necessary to do so, the board of directors shall, after
obtaining the agreement of the Board of Corporate Auditors, submit a proposal for dismissal or
nonreappointment of the independent auditor to a general meeting of shareholders. In addition, the board ofcorporate auditors can dismiss the independent auditor with a unanimous resolution if it determines that any act
or circumstance of the independent auditor falls under any items of Article 340, Paragraph 1, of the Companies
Act.

25

III. SYSTEMS TO ENSURE COMPLIANCE OF THE DIRECTORS’ EXECUTION OF DUTIES WITH
LAWS AND REGULATIONS AND THE ARTICLES OF INCORPORATION, AS WELL AS OTHER
SYSTEMS TO ENSURE THE PROPRIETY OF BUSINESS OPERATIONSAt the board of directors’ meeting held on February 18, 2015, based on improvements and the operation of thepreceding “2014 Basic Policy for Improvement of Internal Control Systems,” which was approved at the board of
directors’ meeting held on February 18, 2014, the Company passed a resolution called the “2014 Basic Policy for
Improvement of Internal Control Systems,” as indicated below.
(1) Systems to Ensure Compliance of the Execution of Duties by Directors and Employees with Laws andRegulations and the Articles of Incorporation
1) The board of directors shall determine the improvement policies and plans for internal control systems,
including those for compliance with laws, regulations and the like (the “Compliance”), and receive status
reports thereof periodically.
2) The board of directors shall maintain and improve the supervising function regarding the execution of duties
by the directors by electing outside Directors on an ongoing basis.
3) The corporate auditors shall independently audit the execution of duties by the directors, including the statusconcerning the improvement of the internal control systems.
4) The Internal Audit Department, which is independent from the business-executing bodies, shall audit thestatus concerning the improvement of the internal control systems and recommend improvements thereof,
as required.
5) The board of directors shall maintain and raise the awareness of officers and employees regarding
compliance by thoroughly disseminating the Group Code of Conduct and the Lawson Ethical Mission
Statement by such measures as, including, but not limited to, appointing a Chief Compliance Officer,
establishing a department to oversee compliance, assigning personnel in charge of compliance at eachdepartment, streamlining the rules in relation to compliance, and providing periodic training on ethics andawareness surveys on compliance.
6) The Legal Affairs Department shall be reinforced to fortify foundations for complying with legal
requirements by identifying the laws and regulations applicable to the Company’s businesses andcommunicating the content thereof to the relevant departments and sections.
7) With the aim to strive for the early detection of violations or possible violations of laws, regulations, etc.
across the Group and the entire chain, the Company shall establish and upgrade normal reporting routes forreporting any violations of laws, regulations or internal rules. It shall establish reporting and consulting
systems (internal consulting contact points, group-wide outside consulting contact points and consulting
contact points for employees and business counterparties for Lawson’s franchised stores) that fully protect
those who make such reports.
8) The Company shall never become involved with antisocial forces or bodies that threaten the order andsecurity of society, and shall take a firm stance on, and deal with, improper demands by consulting withlawyers the police and the like.
(2) Systems to Preserve and Manage Information Pertaining to the Execution of Duties by Directors
1) The Company shall record, preserve and manage information relating to decision making at important
meetings such as those of the board of directors and the management council, and authorizing documents,
including those approved by the president, as well as financial, clerical and risk- and compliance-related
information (including information contained in electromagnetic media). Moreover, the Company shall put
in place a system allowing relevant parties to inspect the above information.
2) The Company shall manage and monitor its information systems in a secure manner, in addition tomaintaining the systems, by sufficiently taking into account contingencies.
3) The Company shall establish and maintain rules regarding the management of documents (including
electromagnetic recording media), keep everyone informed about the responsibility and authority for
document management, document storage periods and management methods, and periodically monitor the
status of document storage and management.
264) The Company shall establish and maintain rules regarding the protection of personal information and the
management of trade secrets, and appropriately and safely store and manage personal information andimportant trade secrets.
5) The Company shall establish and maintain an information security system for the Group by putting in placea Chief Information Security Officer and a division that oversees information security with the aim ofpromoting information security in a consolidated and unified manner in view of both risk management andsystem technology security.
6) The Company shall establish and maintain rules regarding the disclosure of important Company information,and upgrade the system for disclosing information that must be disclosed according to the requirements oflaws, regulations and stock exchanges, in an appropriate, timely and fair manner.
(3) Rules and Other Systems Regarding Risk Management
1) The Company shall establish a department to oversee risk management, improve rules related to risk
management, and improve group-wide risk prevention systems during normal operations. Moreover, theCompany shall respond according to the characteristics of risks by identifying risks that might have adverse
effects on the Company’s management in connection with its business purposes in each department,
analyzing the probability of such risk factors materializing and their impact, and evaluating whether intensive
countermeasures should be taken.
2) To ensure the effectiveness of risk management, the Company shall establish a specialist committee(“Compliance & Risk Management Committee”) and clarify the authority and responsibility of thecommittee and its chairperson. Furthermore, the Company shall endeavor to increase awareness about risk
management by assigning risk management staff to departments and associated companies and conducting
risk management training.
3) The Company shall develop contingency systems and formulate policy for contingency response bodies inadvance to prepare for the occurrence or possible occurrence of unanticipated situations or events, whichmight have adverse effects on management of the Company, in order to provide a quick response to any
actual occurrence thereof and to take effective measures to prevent a reoccurrence. In particular, theCompany shall formulate a Business Continuity Plan (BCP) and a Business Continuity Management system
to minimize the business interruption in the event of the occurrence of situations or events inflicting
substantial damage on the Company such as a large-scale natural disaster or an epidemic of a new-type
influenza.
4) In order to be prepared for major earthquakes, the Company shall conduct disaster prevention drills threetimes a year while working to improve effectiveness of the “Disaster Countermeasure Manuals” and the“BCP” system.
(4) Systems to Ensure the Efficient Execution of Duties by Directors
1) The Company shall clarify the functional authority and responsibility of corporate officers and employees for
decision making and execution of business affairs. The Company shall also improve rules for the division ofduties to ensure and encourage more appropriate division of duties and collaboration among organizational
bodies.
2) The Company shall work to raise operational efficiency by simplifying business processes, streamlining theorganization and making appropriate use of IT.
3) In order to promote the proper communication of information and communications between officers andemployees, the Company shall improve systems so that management guidelines and policies are
disseminated to employees by corporate officers and important field information is properly communicatedby employees to corporate officers in a timely manner.
(5) Systems to Ensure the Propriety of Business Operations Conducted by the Corporate Group Consistingof the Company and its Subsidiaries
1) The Company shall endeavor to maintain and enhance the Lawson brand through close collaboration withsubsidiaries and affiliated companies (“Associated Companies”). However, with regard to affiliated27

companies, the Company will work to appropriately establish and maintain systems through phased
implementation, taking into account such factors as relations with other leading shareholders differences inlaws, regulations and business customs and the like of foreign countries.
2) While respecting the independence of Associated Companies, in view of the purpose of the Company’s
equity participation in Associated Companies, the Company shall establish Group regulations such as basic
policies for the management of Associated Companies and management policies thereof, and keep the
Associated Companies fully informed of the Group Code of Conduct.
3) The Company shall appoint designated persons at major Associated Companies to be responsible forpromoting compliance and risk management and promote communications between the Company andmajor subsidiaries with a view to ensuring appropriate business operations across the entire Group.
4) The Internal Audit Department shall cooperate in auditing the status of establishment of internal control
systems at Associated Companies and promote improvements based on the results of audits.
(6) Necessary Systems to Ensure Proper Financial Reporting by the Company and its Group of Companies
1) The Company shall enhance systems for preparing financial statements according to laws, regulations, andaccounting standards and disclosing the same after they have been discussed, examined, and confirmed inaccordance with regulations governing information disclosure in order to report financial information in aproper and timely manner.
2) The Company shall establish a dedicated internal organization in order to properly implement the internal
control reporting system required by the Financial Instruments and Exchange Act as an internal control for
financial reporting. Furthermore, the Company shall establish a system for self-evaluation and third-party
evaluation and improvement through the identification and recording of business processes at importantbusiness bases and the status of Company-wide internal controls. The results of these evaluations of, andimprovements at, the Company and important subsidiaries shall be regularly reported to the board of
directors.
(7) Matters Concerning Employees Where a Corporate Auditor Requests Employees to Assist with Duties
1) The Company shall assign appropriate personnel to the auditors’ office (“Corporate Auditors’ Staff”) as
employees exclusively to assist corporate auditors in the execution of their duties.
2) Corporate Auditors’ Staff may serve concurrently as corporate auditors of Associated Companies.
3) Corporate Auditors’ Staff shall have the authority to conduct investigations necessary for audits by corporate
auditors following the instructions of corporate auditors.
4) The Legal Affairs, Risk Management and Finance and Accounting departments of the Company shall assist
in conducting necessary surveys for audits when requested by any corporate auditor.
(8) Independence of Employees from Directors in the Preceding Item
Performance reviews of Corporate Auditors’ Staff shall be conducted by the standing corporate auditors toensure that Corporate Auditors’ Staff carry out their duties appropriately. Personnel changes require the priorconsent of the standing corporate auditors.
(9) Systems for Directors and Employees to Report to Corporate Auditors and Other Reporting Systems to
the Corporate Auditors
1) Directors and employees of the Company shall report important corporate management and businessadministration matters, as well as the status and results of the execution of their duties, to corporate auditors
so that the corporate auditors can carry out their duties effectively. Such important matters include
compliance- and risk-related issues and other matters relating to internal control.
2) If directors become aware of any fact or event that will likely cause the Company to suffer significant
damage or loss, they shall immediately inform the board of corporate auditors.
3) Reports to corporate auditors shall basically be made in good faith without fail, and shall be made promptly,
if required, in addition to periodic reports.
28

(10) Other Systems to Ensure Effective Audits by Corporate Auditors
1) The representative directors and corporate auditors shall have regular meetings to enhance smoothcommunications with each other.
2) Directors shall cooperate with the corporate auditors with regards to communications, the collection andexchange of information and so on between the corporate auditors and the corporate directors and the like of
Associated Companies so that the corporate auditors can perform their duties appropriately.
3) Directors shall also cooperate in conducting surveys of significant business partners, which the corporate
auditors deem necessary.
4) Directors shall enable the corporate auditors to collaborate with outside experts such as lawyers and certified
public accountants, if any corporate auditor deems it necessary in executing his/her duties.
The above amounts and the number of shares in this Business Report are rounded down to the nearest unit andthe ratios are rounded to the nearest whole number.

29

(TRANSLATION ONLY)

Consolidated Balance Sheet(Millions of yen)
AssetsLiabilities
As of February
28, 2014(for reference)

As ofFebruary 28,
2015

Current assets
Cash and deposits
Accounts receivable-due from
franchised stores
Merchandise
Prepaid expenses

195,784
76,763

223,642
76,758

Accounts receivable-other54,193

Deferred tax assets
Other
Allowance for doubtful accounts
Non-current assets
Property and store equipment
Buildings and structures
Furniture, fixtures, andequipment
Land
Lease assets

Account item

Construction in progress

Other
Intangible assets
Software
Software in progress
Goodwill
Right of trademark
Other
Investments and other assets
Investment securities
Long-term loans receivable
Long-term prepaid expenses
Guarantee deposits

As of February
As of28, 2014
February 28,(for reference)
2015

246,706
9,726

301,069
20,07279,444

83,385

1,405
680

1,507
1,740

－

575

4,481
10,240(2,393)425,208
233,436
128,835

Current liabilities
Accounts payable-trade
Accounts payable-trade for
37,052franchised stores
Due to franchised stores
17,044
Short-term loans payable
12,235Current portion of long-term
58,666loans payable
Lease obligations
5,299
Accounts payable-other
19,164
Income taxes payable(2,578)Deposits received
540,971
Provision for bonuses
274,436
Other
153,375

16,58529,344
14,33087,5852,372
5,232

19,94843,51813,301
103,634
2,976
10,40812,083

14,825

Non-current liabilities

123,788

199,746

8,773
80,767Long-term loans payable
Lease obligations
Provision for retirement
4,810
benefits
Provision for retirement
benefits to executive officers
123
and audit & supervisory board
members
Net defined benefit liability
79,530Long-term guarantee deposited
11,806
Asset retirement obligations
6,993
Other
48,189Total liabilities
11,989550
Net assets
187,004 Shareholders’ equity
18,118
Capital stock
37,232
Capital surplus
9,912
Retained earnings
93,205
Treasury shares
Accumulated other
26,251comprehensive income
Valuation difference on
3,404
available-for-sale securities(1,121)
Revaluation reserve for land
Foreign currency translation
adjustment
Remeasurements of defined
benefit plans
Subscription rights to shares
Minority interests
Total net assets
Total Liabilities and Net Assets
764,614－61,66658,42576,174

11,082

－

408

367

－
32,252
17,874502
370,494

12,95829,992
21,530297
500,816

242,832
58,50647,741138,141(1,556)

252,10758,506
47,696
147,177(1,272)

2,456

4,014

(93)

(393)

(567)

(566)

3,118

5,492

－

(518)

557
4,650
250,497
620,992

223
7,452
263,797764,61432,186
9,596
10,7162,977－
28,48014,902
3,360
9,719
106
391
163,291
12,82133,7278,260
86,150

Deferred tax assets

21,627

Other

1,669

Allowance for doubtful accounts(965)

Total Assets

Account item

620,992

9,640
91,661

Note: Figures as of February 28, 2014, are included in the table above for comparative purposes only.

30

(TRANSLATION ONLY)

Consolidated Statement of Income(Millions of yen)Account item
Operating revenue
Income from franchised stores
Other operating revenue
Net sales
Net sales
Gross operating revenue
Cost of sales

From March 1, 2013 to
February 28, 2014
(for reference)

From March 1, 2014 to
February 28, 2015

242,078

247,68175,009317,088

76,188323,869（168,159)

168,159(174,044)

174,044（126,637)

485,247
126,637(128,116)

497,913
128,116Gross profit
Operating gross profit(45,928)（41,521)358,610369,797

Selling, general and administrative expenses

290,483

299,315

Operating income
Non-operating income

68,12670,482

Interest income
Foreign exchange gains

860
272

830
1,585

Penalty income

142

618

Other
Non-operating expenses

1,920Interest expenses
Loss on cancellation of store lease contract

3,195

1,294
570

Other
Ordinary income

577

1,712

4,746

1,520
1,168
2,442
68,880825

3,514
71,714Extraordinary income
Gain on sales of investment securities
Gain on change in equity

403
－

369
756

Gain on sales of non-current assets
Other

51
11

－
－

466

1,126

Extraordinary losses
Loss on retirement of non-current assets
Impairment loss

2,648
5,744

2,966
8,263

Loss on liquidation of business
Other

－
1,168

1,519
1,719

Income before income taxes and minority interests
Income taxes-current

26,758

Income taxes-deferred(5,136)

9,560
59,785

14,46958,37024,93821,622

312

25,250

Income before minority interests
Minority interests in income

38,163
197

33,120433

Net income

37,96532,686

Note: Figures from March 1, 2013 to February 28, 2014, are included in the table above for comparative
purposes only.

31

(TRANSLATION ONLY)

Consolidated Statement of Changes in Equity(From March 1, 2014 to February 28, 2015)(Millions of yen)
Shareholders’ equity

Balance at beginning of current
periodAccumulated other comprehensive income

Capitalstock

CapitalsurplusRetainedearnings

TreasurysharesTotalshareholders’equity58,50647,741138,141(1,556)

242,832

Valuationdifference on
availablefor-salesecurities

Revaluation
reserve forland

Foreigncurrencytranslation
adjustment

(93)

(567)

3,118

Remeasurementsof defined benefit
plans

－

Total
accumulated
othercomprehensi
ve income

Subscription
rights tosharesMinority
interests

Total net
assets

2,456

557

4,650

250,497

Changes of items during period
Dividends of surplus
Change of scope of equity
methodNet income(22,979)(22,979)(22,979)

(608)

(608)

(608)

32,68632,68632,686

(289)

(289)

(289)

0

0

0

(1)

(1)

465

465

Purchase of treasury shares
Disposal of treasury shares

0

Reversal of revaluation
reserve for land

(1)

Exercise of subscription
rights to shares (delivery oftreasury shares)

(44)

(63)

573

Net changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current period

(299)

1

2,374

(518)

1,557

(334)

2,801

4,024

－

(44)

9,035

284

9,274

(299)

1

2,374

(518)

1,557

(334)

2,801

13,29958,506

47,696

147,177(1,272)

252,107

(393)

(566)

5,492

(518)

4,014

223

7,452

263,797

32

(TRANSLATION ONLY)(Notes to the Consolidated Financial Statements)(Significant Accounting Policies)
1. Scope of consolidation(1) Number of consolidated subsidiaries: 15(Domestic) Lawson HMV Entertainment, Inc.
Lawson ATM Networks, Inc.
BestPractice, Inc.
SCI, Inc.
Lawson Mart, Inc.
Lawson HMV Entertainment United Cinemas Holdings, Inc.
United Entertainment Holdings Co., Ltd.
United Cinemas Co., Ltd.
SEIJO ISHII CO., LTD.
(Foreign)
Chongqing Lawson, Inc.
Shanghai Hualian Lawson, Inc.
Dalian Lawson, Inc.
Lawson (China) Holdings, Inc.
Lawson Asia Pacific Holdings Pte. Ltd.
Saha Lawson Co., Ltd.
Among the companies mentioned above, Lawson HMV Entertainment United Cinema Holdings,
Inc., which was established during the current fiscal year, has been included in the scope of
consolidation.
United Entertainment Holdings Co., Ltd. and its subsidiary United Cinemas Co., Ltd. have been
included in the scope of consolidation as a result of acquisition of shares of United Entertainment
Holdings Co., Ltd. from the current fiscal year.
SEIJO ISHII CO., LTD. has been included in the scope of consolidation as a result of acquisitionof its shares from the current fiscal year.
Smart Kitchen, Inc. was excluded from the scope of consolidation since its liquidation wascompleted as of January 28, 2015.
(2) Names of major nonconsolidated subsidiaries, etc.
(Domestic) LAWSONWILL, Inc.
HATS UNLIMITED CO., LTD.
Food Marketing Japan, Inc.
Seikaken, Inc.
Lawson Syuhan, Inc.
Lawson Staff, Inc.
TOKYO EUROPE TRADE CO., LTD.
(Foreign)
Lawson USA Hawaii, Inc.
Shanghai Le Song Trading Co., Ltd.
Hangzhou Lawson, Inc.
Beijing Lawson, Inc.
BEIJING LUOSONG Co., Ltd.
Nonconsolidated subsidiaries were excluded from the scope of consolidation because they have anegligible impact on total assets, total operating revenues, net income, retained earnings, etc., and do
not interfere with reasonable judgments of the Corporate Group’s financial condition and businessresults.
2. Application of the equity method(1) Number of unconsolidated subsidiaries and affiliated companies to which the equity method
is applied: 2(Domestic) Lawson Okinawa, Inc.
Lawson Minamikyushu, Inc.
Lawson Minamikyushu, Inc., 49% of the shares of which the Company owns, has been includedin the scope of the equity method affiliate starting from the current consolidated fiscal year due toincreasing materiality.
PT MIDI UTAMA INDONESIA Tbk, which had been an equity method affiliate in the previous
consolidated fiscal year, was excluded from the scope of the equity method affiliate since all of its
owned shares were sold.
33

(TRANSLATION ONLY)(2) Nonconsolidated subsidiaries and affiliated companies to which the equity method is notappliedNonconsolidated subsidiaries LAWSONWILL, Inc., HATS UNLIMITED CO., LTD., Food
Marketing Japan, Inc., Seikaken, Inc., Lawson Syuhan, Inc., Lawson Staff, Inc., TOKYO EUROPE
TRADE CO., LTD., Lawson USA Hawaii, Inc., Shang Hai Le Song Trading Co., Ltd., Hangzhou
Lawson, Inc., Beijing Lawson, Inc., BEIJING LUOSONG Co., Ltd. and affiliated companies Double
Culture Partners Co., Ltd., Daichi Wo Mamoru Kai, Co., Ltd., Kyodo Classics, Inc., Loyalty
Marketing, Inc., Shang Hai Gong Hui Trading Co., Ltd., Lawson Farm Chiba and others were
excluded from the scope of the equity-method affiliate because net income/loss (corresponding toequity interest) and retained earnings (corresponding to equity interest) of these nonconsolidated
subsidiaries and affiliated companies have minimal influence on the consolidated financial
statements and are negligible even in aggregate.
3. Fiscal year end of the consolidated subsidiaries
The balance sheet date of SEIJO ISHII CO., LTD., Chongqing Lawson, Inc., Shanghai Hualian
Lawson, Inc., Dalian Lawson, Inc., Lawson (China) Holdings, Inc. and Saha Lawson, Co., Ltd. is
December 31. In order to prepare the consolidated financial statements, the Company used thesecompanies’ financial information prepared as of such balance sheet date and significant transactions
which occur between the balance sheet date and the consolidated balance sheet date are adjusted as
required for consolidation. Also the balance sheet date of Lawson HMV Entertainment United Cinema
Holdings, Inc., United Entertainment Holdings Co., Ltd. and United Cinemas Co., Ltd. is March 31. Inorder to prepare the consolidated financial statements, the Company used these companies’ financial
information prepared as of recent quarterly results dates, and significant transactions which occur
between the recent quarterly results dates and the consolidated balance sheet date are adjusted as requiredfor consolidation. The fiscal year end date for the other consolidated subsidiaries corresponds with thebalance sheet date.

4. Summary of significant accounting policies(1) Valuation basis and method for important assets
Marketable securities and investments in securities:
Held-to-maturity debt securities:
Carried at amortized cost (straight-line method)
Available-for-sale securities:
Securities whose market value is readily determinable:
Recorded at market value with net unrealized gains and losses as a separate component of
net assets. The cost of securities sold is determined based on the moving-average method.
Other:
Stated at cost determined by the moving-average method.
Merchandise inventories:
Merchandise:Stated at cost determined mainly by the retail method (the book value in the balance sheet iswritten down based on the decline in profitability).
Merchandise of some consolidated subsidiaries is stated at cost determined by thegross-average method (the book value in the balance sheet is written down based on the
decline in profitability).

34

(TRANSLATION ONLY)(2) Depreciation
Property and store equipment (except for lease assets):
Depreciation is mainly computed using the declining balance method at rates based on
estimated useful lives of the assets. The ranges of useful lives are from 10 to 34 years forbuildings and structures and from 5 to 8 years for furniture, fixtures and equipment.
Intangible assets (except for lease assets):
Amortization of intangible assets is computed by the straight-line method. Costs of software
for internal use are amortized by the straight-line method over 5 years, which is the estimateduseful life. Furthermore, for right of trademark, amortization is mainly computed using thestraight-line method over 20 years.
Lease assets:
In terms of the depreciation method for leased assets related to finance leases that do nottransfer ownership of leased property, the Company applies the straight-line method using thelease term as the useful life and a residual value of 0 yen.
Finance leases without ownership transfer of the leased property to the lessee and for which
the lease inception was before February 28, 2009, are accounted for as operating leasetransactions.
Long-term prepaid expenses:
Amortization of long-term prepaid expenses is computed by the straight-line method.
(3) Accounting policies for important reserves
Allowance for Doubtful Accounts:
Allowance for doubtful accounts is provided at the amount of possible losses from
uncollectible receivables based on the actual rate of losses from bad debt for ordinary
receivables and on estimated recoverability for specific doubtful receivables.
Provision for Bonuses:
Provision for bonuses is provided for payments of employees’ bonuses based on the estimatedamounts.
Provision for Retirement Benefits to Executive Officers and Audit & Supervisory Board
Members:
Provision for retirement benefits to executive officers of the Company and audit &supervisory board members of consolidated subsidiaries is recorded as a liability at 100% of
the amount that would be required if all audit & supervisory board members, executive
officers, and directors terminated their services with the Company at the consolidated balance
sheet date.
(4) Accounting method for retirement benefits:
Allowance for employees’ retirement benefits is provided at the amount accrued based on theretirement benefit liability and pension assets at the balance sheet date for provision for
retirement benefits to employees.
・Period attributable method of estimated amount of retirement benefits
In calculating retirement benefit obligation, in order to attribute estimated amount of
retirement benefits in the period up to the end of the current fiscal year, it is based on thestraight-line attribution basis.
・Cost treatment method of actuarial difference and prior service cost
Prior service cost is amortized starting the fiscal year incurred mainly on a straight-line
basis over a certain period (10 years) within an average remaining service period of
employees at the time of their occurrence.
Actuarial differences are mainly amortized from the following fiscal year on a straight-line
basis over a certain period (10 years) within an average remaining service period of
employees at the time of their occurrence.
Certain consolidated subsidiaries apply the simplified method to estimate the amountrequired for voluntary resignations at the end of the fiscal year as the retirement benefit
liability in order to calculate net defined benefit liability and retirement benefit expenses.

35

(TRANSLATION ONLY)(5) Foreign currency translation and foreign currency financial statements
All short-term and long-term monetary receivables and payables denominated in foreign
currencies are translated into Japanese yen at the exchange rates at the consolidated balance
sheet date. The foreign exchange gains and losses from translation are recognized in the
consolidated statement of income. The consolidated balance sheet accounts as well as revenue
and expense accounts of foreign subsidiaries and affiliated companies are translated into
Japanese yen at the current exchange rate as of the consolidated balance sheet date except forshareholders’ equity, which is translated at the historical rate. Differences arising from suchtranslation are shown as “foreign currency translation adjustments”, a separate component of
net assets.
(6) Amortization of goodwill
Goodwill is amortized on a straight-line basis over the relevant years, depending on the reason
for the occurrence of goodwill, with a maximum of 20 years.
(7) Accounting for consumption tax
Consumption tax is excluded from income and expense.
5. Changes in accounting policies and others(Change in accounting policies)
The Company adopted “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26
issued on May 17, 2012, hereinafter “Accounting Standard Retirement Benefits”) and “Guidance on
Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25 issued on May 17, 2012,
hereinafter “Guidance Retirement Benefits”) from the end of the current consolidated fiscal year
(excluding stipulations stated in the main clause of paragraph 35 of ASBJ Statement No. 26, and themain clause of paragraph 67 of ASBJ Guidance No. 25), changed the method recorded as the net
defined benefit liability that has deducted pension assets from retirement benefit liabilities, andrecorded as net defined benefit liability the unrecognized actuarial difference and prior service cost.
The application of Accounting Standards for Retirement Benefits, etc. has followed the transitional
treatment stipulated in paragraph 37 of ASBJ Statement No. 26, and the impact of the change wascharged to the Remeasurements of defined benefit plans in Accumulated other comprehensive
income at the end of the current consolidated fiscal year.
As a result, at the end of the current consolidated fiscal year, 12,958 million yen was record fornet defined benefit liability. Furthermore, accumulated other comprehensive income decreased by
518 million yen.
The impact on information per share date is described in the relevant section.
(Change in accounting policy that is not easily distinguished from change of accounting
estimation)
Depreciation method of property and store equipment
The Company and domestic consolidated subsidiaries changed the depreciation method forproperty and store equipment (excluding lease assets) from the declining-balance method to thestraight-line method which had been adopted primarily, from the current fiscal year.
The Group, under the policy of placing emphasis on existing stores, reviewed the depreciation
method of its property and store equipment upon the adoption of a strategy to reinforce thecompetitiveness of its existing stores, which includes the utilization of membership card data and therestructuring of the Group. As a result, the depreciation method was changed to the straight-line
method from the current consolidated fiscal year because an even distribution of depreciation isconsidered to be more appropriate going forward since it is anticipated that the number of visiting
customers, which is proportionate to equipment utilization (the main factor behind economic
depreciation), will be maintained as store assets age.
Due to this change, operating income, ordinary income, and income before income taxes andminority interests for the current consolidated fiscal year increased by 9,422 million yen comparedto the previous method.

36

(TRANSLATION ONLY)(Changes in Method of Presentation)
1. In the “Intangible assets” section, “Right of trademark” (¥106 million for the previous fiscal year)
was included in “Other” in the consolidated balance sheet before. Due to an increase in financial
materiality, “Right of trademark” (¥11,989 million for the current fiscal year) is separately
presented for the current fiscal year.
2. In the “Current liabilities” section, “Provision for point card certificates” was separately listed in
the consolidated balance sheet before. Due to a decline in financial materiality, “Provision for point
card certificates” (¥91 million for the current fiscal year) is included in “Other” for the current
fiscal year.
3. In the “Non-operating income” section, “Foreign exchange gains” (¥272 million for the previous
fiscal year) was included in “Other” in the consolidated statement of income before. Due to anincrease in financial materiality, “Foreign exchange gains” (¥1,585 million for the current fiscal
year) is separately presented for the current fiscal year.
4. In the “Non-operating income” section, “Compensation income” was separately listed in the
consolidated statement of income before. Due to a decline in financial materiality, “Compensation
income” (¥365 million for the current fiscal year) is included in “Other” for the current fiscal year.
5. In the “Non-operating income” section, “Penalty income” (¥142 million for the previous fiscal
year) was included in “Other” in the consolidated statement of income before. Due to an increasein financial materiality, “Penalty income” (¥618 million for the current fiscal year) is separately
presented for the current fiscal year.
6. In the “Non-operating income” section, “Share of profit of entities accounted for using equity
method” was separately listed in the consolidated statement of income before. Due to a decline infinancial materiality, “Share of profit of entities accounted for using equity method” (¥365 million
for the current fiscal year) is included in “Other” for the current fiscal year.

37

(TRANSLATION ONLY)(Notes to the Consolidated Balance Sheet)
1. Accumulated depreciation of property and store equipment:

283,656 million yen

2. Revaluation of land used for businessLand used for business was revalued on the basis prescribed by the Law Concerning Revaluation ofLand (Law No. 34, March 31, 1998). The resulting revaluation difference has been included in net
assets as land revaluation difference.
Revaluation method: The value of land is determined based on the notified prices adjusted
reasonably as stipulated in Article 2, Item 4 of the Ordinance Implementing
the Law Concerning Revaluation of Land (Government Ordinance No. 119,March 31, 1998) and the assessed value as stipulated in Article 2, Item 5 ofthe same ordinance.
Date of revaluation: February 28, 2002
The difference between book value and market value of the revalued land as of the consolidatedbalance sheet date was 314 million yen.
3. Collateral assets and liabilities collateralized
Assets pledged as collateral and liabilities collateralized are as follows.
Millions of yen
Cash and deposits

416

In addition to the above, consolidated subsidiary shares to be pledged as collateral are as follows.
Millions of yen
Shares of consolidated subsidiaries(Amount before elimination)

16,614

Collateralized debts are as follows.
Millions of yen
Short-term loans payable

1,000

Current portion of long-term loans payable575

Long-term loans payable

8,425

Total

10,00038

(TRANSLATION ONLY)(Notes to the Consolidated Statement of Income)
1. Impairment loss
The Company and the consolidated subsidiaries (together, the “Group”) recognized an impairment
loss mainly for each store as the smallest category having cash flows.
The carrying amount of those assets was written down to the recoverable amount. The Group
recognized impairment loss as special losses on the following assets due to a decline in the value of therelated asset categories mainly due to continuous operating losses. Furthermore, regarding impairment
loss, part of the unamortized balance resulting from elimination of the difference between investment
and capital of shares acquired from some consolidated subsidiaries, for which profitability has
deteriorated, was recognized as impairment loss.
Category by use

Location
Tokyo

StoresOsaka
OthersOthers

Total

AssetsBuildings and structures; furniture, fixtures andequipment; and others
Buildings and structures; furniture, fixtures andequipment; and others
Buildings and structures; furniture, fixtures andequipment; and others

Millions of yen
1,307
770
4,240

―

Land

29

―

Software17―

Goodwill

1,897

―

―

8,263

Category by fixed assets(Millions of yen)
3,658
464
29
2,172
17
1,897
24

Buildings and structures
Furniture, fixtures and equipment
Land
Leased property
Software
Goodwill
Other

Recoverable value of the assets of the Group is the higher of net selling price or value in use. Net
selling price of land was calculated based on the value appraised by a real estate appraiser or contract
price, and the value in use was calculated by discounting estimated future cash flows to which a
discount rate of 4.8% was mainly applied.
2. Business liquidation loss
The Company recorded losses due to store closures and withdrawal cost of Lawson Mart business due
to business liquidation of the Company and its consolidated subsidiaries in this fiscal year as
extraordinary losses. The company recorded extraordinary loss related to withdrawal cost of Lawson
Mart business due to business liquidation and store closure in this fiscal year.
Breakdown of business liquidation loss
(Millions of yen)
429
370
369
351

Loss on cancellation of rental contracts
Loss on cancellation of FC contracts
Loss on abandonment of goods
Other

In addition, an impairment loss of 2,753 million yen due to the business liquidation is included in "1.
Impairment loss".

39

(TRANSLATION ONLY)(Notes to the Consolidated Statement of Changes in Equity)
1. Number of issued shares and treasury shares
Number of shares
Number of shares
Increase during the Decrease during
at the end of
at the end of theperiodthe periodprevious period
period(thousand shares) (thousand shares)(thousand shares)(thousand shares)
Issued shares
Common stock
100,300－－
100,300
Treasury shares
Common stock (notes)
395
40
135
301
Notes:
1. The 40 thousand share increase in treasury stock resulted from the acquisition of treasury stock
due to the purchase request of dissenting shareholders opposed to a merger (an increase of 40
thousand) and the purchase of stock of less than one share unit (an increase of 0 thousand.)2. The 135 thousand share decrease in treasury stock resulted from the exercise of stock acquisitionrights and the 0 thousand share decrease due to requests for additional purchase of stock of lessthan one share unit.
2. Dividend(1) Dividend payment
Date of resolution
The General meetingof shareholders(May 27, 2014)
The Board of
Directors’ meeting(October 7, 2014)

Class ofsharesAmount ofdividend payment(millions of yen)

Dividend
per share(yen)

Commonstock

10,989110

Commonstock

11,989120

Record date
As ofFebruary 28,
2014
As of
August 31,
2014

Effective date
As of May 28,
2014
As of November
10, 2014(2) Dividends for which the record date is in the current period and the effective date is after the
year-end consolidated balance sheet dateAmount ofClass of Reserve of
Dividend per
Effective
Date of resolution
dividend payment
Record datesharesDividend
share (yen)date(millions of yen)
The General meeting
As of
CommonRetained
As of Mayof shareholders
11,999120
Februarystockearnings
27, 2015(May 26, 2015)
28, 2015
3. Kind and number of stock that can be exercised by outstanding subscription rights to shares(excluding those not yet in the exercisable period)
Common stock
64,600 shares

40

(TRANSLATION ONLY)(Notes to Financial Instruments)
1. Matters relating to the status of financial instruments(1) Policy for financial instruments
LAWSON Group primarily uses short-term deposits, etc., to manage its funds and raises funds asnecessary through borrowings from financial institutions and leasing according to the financing plan.
(2) Nature, extent of risk, and risk management system for financial instruments
Trade receivables, such as accounts receivable-other are exposed to credit risk from businesscounterparties.
Guarantee deposits are exposed to credit risks of lenders, etc. With regard to this risk, theCompany manages credit on a daily basis at the relevant division and seeks early acknowledgement
and minimization of collection concerns due to deterioration in the financial situation, etc.
Investment securities are primarily shares of companies with business relationships and listed
shares which are exposed to the risk of market price fluctuations. With regard to this risk, theCompany monitors the financial conditions of business counterparties on a regular basis.
Among trade payables, most of the accounts payable-trade, accounts payable-trade for franchised
stores, accounts payable-other and deposits received held as a result of bill settlement services havepayment due dates within one month, while most deposits received held as a result of ticket sales
transactions have payment due dates within six months.
Long-term loans payable are mainly for the purpose of funding necessary for M&A, and are due
within 5 years.
The primary purpose of lease obligations related to finance lease transactions is securing the funds
required for capital investments and the maximum redemption dates is 15 years after the
consolidated balance sheet date.
With regard to the liquidity risk associated with fundraising (risk that payments cannot be
executed on the payment due dates), the Company prepares and updates financial plans on a timely
basis and manages liquidity risk by measures including maintaining adequate liquidity on hand.
(3) Fair values of financial instruments
Fair values of financial instruments are based on quoted prices in active markets. If quoted price is
not available, other rational valuation techniques are used instead. Since multiple factors are
considered in the estimation of fair value, the results of the estimation might differ if other valuation
techniques were used.

41

(TRANSLATION ONLY)
2. Matters relating to the fair values of financial instruments
The carrying amount, fair values, and difference as of February 28, 2015, are as follows. (Financial
instruments whose fair value cannot be reliably determined are not included as described in “(Note 2)
Financial instruments whose fair values cannot be reliably determined.”)(Millions of yen)
Carrying
Fair value
Difference
amount(1) Cash and deposits
76,75876,758－58,666(2) Accounts receivable-other(2,473)
Allowance for doubtful accounts (*1)
56,19356,193－(3) Investment securities
5,575
5,575
－
Available-for-sale securities
93,205(4) Guarantee deposits(487)
Allowance for doubtful accounts (*1)
92,71889,755(2,963)
Total assets
231,245
228,282(2,963)(1) Accounts payable-trade and103,458－
103,458
Accounts payable-trade for franchised stores(2) Accounts payable-other
43,51843,518－(3) Deposits received
103,634
103,634－(4) Long-term loans payable (*2)
59,00059,000－(5) Lease obligations (*2)
96,12296,005(116)
Total liabilities
405,734
405,617(116)(*1) Allowance for doubtful accounts related to accounts receivable-other and guarantee deposits havebeen deducted.
(*2) Long-term loans payable and lease obligations include liabilities maturing within one year.
(Note 1) Method of calculating the fair values of financial instruments
Assets(1) Cash and deposits and (2) Accounts receivable-other
The carrying values of cash and deposits and accounts receivable-other approximate fair value
because of their short maturities.
(3) Investment securities
The fair values of investment securities are measured at the quoted market price on the stock
exchange for the equity instruments.
(4) Guarantee deposits
The fair values of guarantee deposits are determined by discounting future cash flows, whichreflect the collectability, using the yield rate of government bonds for the remaining period.
Liabilities(1) Accounts payable-trade and Accounts payable-trade for franchised stores, (2) Accounts
payable-other and (3) Deposits received
The carrying values of accounts payable—trade and deposits received approximate fair value
because of their short maturities.
(4) Long-term loans payable
The current price of long-term loans payable is calculated from the current value, derived bydiscounting the total amount of principal and interest by the expected rate of interest if a similar new
loan is made.
(5) Lease obligations
The fair values of lease obligations are determined by discounting the cash flows related to the
obligations at the Group’s assumed corporate discount rate.

42

(TRANSLATION ONLY)(Note 2) Financial instruments whose fair values cannot be reliably determined
Category

Carrying amount (millions of yen)

Unlisted equity securities
1,312
Investments in subsidiaries and affiliated companies
9,784
Other
1,445
Because financial instruments listed above do not have market prices and their fair values cannot
be reliably determined, they are not included in “(3) Investment securities.”

43

(TRANSLATION ONLY)(Notes to Income Taxes)
1. Components of deferred tax assets and liabilities(Millions of yen)
1,063
1,030
14,838
348
6,584
1,011
3,559
13,5197,577
49,533(13,759)
35,774Enterprise taxes payable
Accrued employees’ bonuses
Excess of depreciation
Excess of amortization of software
Net defined benefit liability
Allowance for doubtful accounts
Impairment loss
Tax loss carry forwards
Other
Subtotal of deferred tax assets
Less valuation allowances
Total deferred tax assets
Right of trademark
Total deferred tax liabilities(4,223)(4,223)

Deferred tax assets-net

31,551

2. Revision of deferred tax assets due to change of statutory tax rate
On March 31, 2014, a tax reform law was enacted in Japan by which the Special Income Tax for
Reconstruction was no longer levied from fiscal years beginning on or after April 1, 2014. As a result,the normal effective statutory tax rate used to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary differences decreased from 38% to 35.6% for the fiscal
years beginning on or after March 1, 2015.
The effect of this change is immaterial.
3. Change of corporate tax rates after the consolidated balance sheet date
On March 31, 2014, a tax reform law was enacted in Japan which reduced corporate tax rates fromfiscal years beginning on or after April 1, 2014. As a result, the normal effective statutory tax rate used
to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary
differences decreased from 35.6% to 33.1% for the fiscal years beginning on or after March 1, 2016 anddecreased to 32.3% for the fiscal years beginning on or after March 1, 2017.
Due to this change in the tax rate, deferred tax assets (net of deferred tax liabilities) is expected todecrease by 2,198 million yen and income taxes-deferred is expected to increase by 2,156 million yen.

44

(TRANSLATION ONLY)(Notes to Retirement Benefits)
1. Outline of the adopted retirement benefit system
For employees’ retirement benefits, the Company and some consolidated subsidiaries adopt a funded
defined benefit type lump-sum retirement allowance plan and a defined contribution type pension plan.
The lump-sum retirement allowance plan (unfunded, but some are funded as a result of setting an
employee pension trust) pays a lump sum as a retirement benefit based on salary and length of service ofthe employee.
The lump-sum retirement allowance plan employed by some consolidated subsidiaries calculates
liabilities related to retirement benefits and retirement benefit expenses by the simplified method.
2. Defined benefit plan (excluding plans for which the simplified method is applied)(1) Adjustment sheet for the beginning of term and end of term balance of retirement benefits(Millions of yen)
Retirement benefit liabilities – balance at the beginning of term
17,416
Service cost
1,405Interest cost
208
Actuarial differences
85
Amount of retirement benefit paid
(803)
Other
35
Retirement benefit liabilities – balance at the end of term
18,347(2) Adjustment sheet for the beginning of term and end of term balance of pension assets(Millions of yen)
Pension assets – balance at the beginning of term
5,588
Actuarial differences0
Pension assets – balance at the end of term
5,589
(3) Adjustment sheet for end of term balance of the retirement benefit liability and pension
assets, and net defined benefit liability that were recorded in the consolidated balance sheet(Millions of yen)
Retirement benefit liability of the funded pension plan
17,053Pension assets(5,589)11,463Retirement benefit liability of the unfunded pension plan
1,294
Net amounts of liabilities and assets recorded in the balance sheet
12,758Net defined benefit liability
Net amounts of liabilities and assets recorded on the balance sheet

12,75812,758(4) Breakdown of retirement benefit expenses
Service cost
Interest cost
Amortization of actuarial differences
Amortization of prior service cost
Other
Retirement benefit expenses of defined retirement plans(Millions of yen)
1,405
208
114
4
(8)
1,724

(5) Retirement of defined benefit plans
A breakdown of the items recorded in adjusted benefits (tax effect before deduction) is asfollows.
(Millions of yen)
Unrecognized of prior service cost
29
Unrecognized of actuarial differences
712
Total
741

45

(TRANSLATION ONLY)(6) Matters related to pension assets① Breakdown of pension assets
The ratio of major categories to total pension assets is as follows:
Cash and deposits
100%
Total
100%
Note: Regarding pension assets, it is the retirement benefit trust that was set up for the
lump-sum year plan.
② Method of establishing long-term expected rate of return
In order to decide the long-term expected rate of return of pension assets, the Company hastaken into consideration the current and expected allocation of pension assets and the current
and expected long-term rate of return from various assets that constitute pension assets.
(7) Matters related to actuarial assumptions
Major actuarial assumptions as of the end of the current consolidated accounting period
Discount rate
1.2% (mainly)
Long-term expected rate of return0%
3. Defined-benefit plan for which the simplified method is applied
Adjustment sheet for the beginning of term and end of term balance of net defined benefit liability
for the plan for which the simplified method is applied(Millions of yen)
Net defined benefit liability – balance at the beginning of term
192
Retirement benefit expenses
9
Amount of retirement benefit paid
(1)
Net defined benefit liability – balance at the end of term
200
Adjustment sheet for end of term balance of the retirement benefit liability and pension assets, andliabilities and assets related to retirement benefits that were recorded in the consolidated balance sheet(Millions of yen)
Retirement benefit liability of the unfunded pension plan200
Net amounts of liabilities and assets recorded in the consolidated balance sheet
200
Net defined benefit liability
Net amounts of liabilities and assets recorded in the consolidated balance sheet
Retirement benefit expenses
Retirement benefit expenses calculated by the simplified method:

200
200

9 million yen

4. Defined-contribution plan
Required contributions to defined contribution plans of certain consolidated subsidiaries were 331
million yen.
(Notes to Per-share Data)
1. Net assets per share
2,561.25 yen
2. Net income per share
327.08 yen
Note: As described in "Changes in Accounting Policies", the Company follows the specifictransitional provisions set forth in paragraph 37 of Accounting Standard Retirement
Benefits.
As a result, net assets per share for the fiscal year decreased by 5.18 yen.

46

(TRANSLATION ONLY)(Notes to Business Combinations, etc.)
Business combinations by the acquisition
1. Acquisition of United Entertainment Holdings Co., Ltd. and United Cinemas Co., Ltd.
(1) Outline of business combination① Name of the absorbed business and summary of its business
Name of business: United Entertainment Holdings Co., Ltd. and United Cinemas Co., Ltd.
Business summary: Construction of movie theatres and management of the business② Main reason for the business combination
1. The absorbed business has been developing its business in the movie industry, which the Company
has been interested in, and is seeing steady revenue growth in the movie business, which has alarge number of participants and boasts continuous stable growth.
2. The absorbed business has a strong connection to the entertainment business, which the Groupis engaged in, and the Company expects a mutual increase in customers and businesssynergies.
③ Date of business combination
August 28, 2014
④ Legal form of business combination
Acquisition of shares⑤ Name of company after the business combination
There is no change.
⑥ Acquire of voting rights
100％⑦ Main reason for the decision to acquire the company
The Company's consolidated subsidiary Lawson HMV Entertainment United Cinemas
Holdings, Inc. has acquired the stock of United Entertainment Holdings, Inc. by cash.
(2) Period in which the acquired company’s results are included in the consolidated financial
statements
From September 1, 2014 to December 31, 2014
(3) Acquisition cost and component
Acquisition priceCosts directly required for the acquisition
Acquisition cost

Cash and deposits
Advisory costs(Millions of yen)
12,97343
13,017(4) Amount, cause, amortization method and period of goodwill generated① Amount of goodwill generated
9,563 million yen② Cause of the generation of goodwill
Mainly excess earning power that is anticipated from the low-cost business model in whichstable growth is expected.
③ Method and period of amortization
Straight-line method over 20 years(5) The amount and major breakdown of assets received and liabilities assumed on the date of
the business combination(Millions of yen)
Current assets
3,947
Non-current assets
7,307
Total assets
11,254Current liabilities
4,764
Non-current liabilities
3,035
Total liabilities
7,800

47

(TRANSLATION ONLY)

2. Acquisition of SEIJO ISHII CO., LTD.
(1) Outline of business combination① Name of the absorbed business and summary of its business
Name of business: SEIJO ISHII CO., LTD.
Business summary: Food retailing, import, wholesale, food manufacture and restaurant
operations business② Main reason for the business combination
The Company and the acquired company are both engaged in retail manufacturing and analliance with the acquired company, which has product appeal and sales power that exceed thoseof ordinary supermarkets, has the potential to generate a significant synergy.
③ Date of business combination
October 31, 2014 (acquisition date)
September 30, 2014 (deemed acquisition date)④ Legal form of business combination
Shares acquisition⑤ Name of company after the business combination
There is no change.
⑥ Acquisition of voting rights
100％⑦ Main reason for the decision to acquire the company
The company acquired the stock of SEIJO ISHII CO., LTD.
(2) Period in which the acquired company’s results are included in the consolidated financial
statements
From October 1, 2014 to December 31, 2014
(3) Acquisition cost and component
Acquisition priceCosts directly required for the acquisition
Acquisition cost

Cash and deposits
Advisory costs(Millions of yen)
36,138131
36,269(4) Amount, cause, amortization method and period of goodwill① Amount of goodwill
28,743 million yen② Cause of the generation of goodwill
Mainly excess earning power that is anticipated from the business model of a high revenue retailmanufacturing business in which stable growth is expected.
③ Method and period of amortization
Straight-line method over 20 years(5) Amount and category allocated to intangible assets other than goodwill, and amortization
period of category
Category
Right of trademark
Amount of money
12,000 million yen
Amortization period
20 years(6) The amount and major components of assets accepted and liabilities assumed on the date of thebusiness combination(Millions of yen)
Current assets
14,441
Non-current assets
15,417
Total assets
29,858Current liabilities
28,218Non-current liabilities
1,836
Total liabilities
30,05548

(TRANSLATION ONLY)

Nonconsolidated Balance Sheet(Millions of yen)
Assets
Account item
Current assets
Cash and deposits
Accounts receivable-due from
franchised stores
Merchandise
Prepaid expenses

Liabilities
As of February
28, 2014(for reference)

As ofFebruary28, 2015

154,456
61,026

155,079
50,760

As of February
As of28, 2014
February 28,(for reference)
2015

2,885
21,565
13,441
1,627
6,027
469
188,679
2,275

Current liabilities
Accounts payable-trade
Accounts payable-trade for
37,831
franchised stores
Due to franchised stores
864
Short-term loans payable to11,036
subsidiaries and associates
Lease obligations
3,481
Accounts payable-other
38,822
Income taxes payable
3,843
Accrued expenses
8,476
Deposits received(36)
Provision for bonuses
538,731
Other
256,432
125,784 Non-current liabilities
Long-term loans payable
19,491
Lease obligations
12,419Provision for retirement benefits
9,587
Provision for retirement benefits
84,361
to executive officers
Long-term guarantee deposited
4,788
Asset retirement obligations
23,339
9,027
Other
5,026
Total liabilities
8,788
Net assets
496 Shareholders’ equity
Capital stock
258,959
Capital surplus
8,205

26,146

61,903

Legal capital surplus

47,696

47,696

11,936

9,377

Other capital surplus

44－

33,72536,477136,084

139,241－

22,992727

727

33,273852
10,278

Short-term loans receivable
Accounts receivable—other
Deferred tax assets
Other
Allowance for doubtful accounts
Non-current assets
Property and store equipment
Buildings
Structures

7,446
35,743
3,644
2,849
(658)
435,337
225,091
112,115
15,019Furniture, fixtures, and equipment
Land

10,543
8,773

Lease assets

75,754

Construction in progress
Intangible assets
Software
Software in progress
Goodwill
Other
Investments and other assets
Investments securities
Shares of subsidiaries andassociates
Investments in capital ofsubsidiaries and associates
Long-term loans receivable
Long-term loans receivable fromsubsidiaries and affiliates
Long-term prepaid expenses
Guarantee deposits

Account item

Retained earnings
Legal retained earnings

228,549
1,566

267,717
1,604

83,88987,148

1,007

1,111

23,27030,88015,14015,232
12,0931,800
70,566
2,122
1,860
120,595－

17,912
23,641
11,377
1,829
85,304
2,166
4,742
182,673
50,00059,755
10,09072,655
10,837365309

32,43017,476477
349,144

29,94318,649278
450,390

240,775
58,50647,741

244,172
58,506
47,696

Other retained earnings
General reserve
50,000Retained earnings brought
Deferred tax assets
21,313
23,10685,356
forwardOther
Treasury shares
1,218
1,739
(1,556)
Valuation and translation
Allowance for doubtful accounts
(963)
(899)
(684)
adjustments
Valuation difference on(116)
available-for-sale securities
Revaluation reserve for land
(567)
Subscription rights to shares
557
Total net assets
240,648
Total Assets
589,793
693,811
Total Liabilities and Net Assets
589,793
Note: Figures as of February 28, 2014, are included in the table above for comparative purposes only.
7,763
85,264

9,542
86,51349

50,00088,514(1,272)
(975)
(408)
(566)
233
243,420
693,811

(TRANSLATION ONLY)

Nonconsolidated Statement of Income(Millions of yen)
From March 1, 2013 to
February 28, 2014
(for reference)

Account item

From March 1, 2014 to
February 28, 2015

Operating revenue
Income from franchised stores

234,454

253,241

Other operating revenue
Net sales

31,568266,023

31,600284,841

Net sales
Gross operating revenue(32,755)

32,755
298,778(31,498)

31,498316,340(23,336)

23,336(22,401)

22,401

Cost of sales
Gross profit
Operating gross profit(9,418)Selling, general and administrative expenses
Operating income(9,096)
275,441

293,938

213,998
61,443232,972
60,966

Non-operating income
Interest and dividend income

1,114

1,110

Foreign exchange gains

276

1,671

142
1,181

618
733

Penalty income
Other
Non-operating expenses
Interest expenses

2,714

1,042

1,312

Loss on cancellation of store lease contract

542

1,163

Loss on debt waiver of subsidiaries and affiliates
Other

－
401

576
396

Ordinary income
Extraordinary income

1,986
62,171Gain on extinguishment of tie-in shares
Gain on liquidation of subsidiaries and affiliates
Gain on sales of investments in capital of subsidiaries andassociates
Gain on sales of investment securities
Other
Extraordinary losses
Loss on retirement of non-current assets
Impairment loss
Loss on valuation of investments in capital of subsidiaries
and affiliates
Loss on debt waiver of subsidiaries and associates
Loss on valuation of bonds of subsidiaries and associate
Provision of allowance for doubtful accounts for subsidiaries
and associates
Other
Income before income taxes
Income taxes – current

94
156

586

－

403
62

－
－

2,494
5,212

2,508
5,831

52

4,384

2,400
203

－
－

600

－

548
23,553

11,51151,8073,449
61,649

95
－

1,148

4,132

1,200

250

13,92447,975

21,840

Income taxes – deferred(5,370)18,182(65)
21,775
Net income
33,625
26,200Note: Figures from March 1, 2013 to February 28, 2014, are included in the table above for comparative
purposes only.

50

(TRANSLATION ONLY)

Nonconsolidated Statement of Changes in Equity(From March 1, 2014 to February 28, 2015)(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings
Retained
Generalearnings
Reservebrought
forwardTotal
retainedearnings

TreasurysharesTotalshareholders’equity85,536

136,084(1,556)

240,775

Dividends of surplus(22,979)(22,979)(22,979)

Net income

26,20026,20026,200

Balance at the beginning of current
period (as of March 1, 2014)
Changes of items during period

Capital
stock

Legal
retainedearnings

Other
capitalsurplusTotal
capitalsurplusLegalretainedearnings

58,506

47,69644

47,741727

50,000Purchase of treasury shares
Disposal of treasury shares

00Reversal of revaluation reserve for
land

Exercise of subscription rights toshares (delivery of treasury shares)
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at end of current period－－

58,506

47,696

(44)

(44)

(44)
－

(44)
47,696

51

(289)

(289)

0

0
(1)

(1)

(1)

(63)

(63)

573

465

－

－

3,157

3,157

284

3,397

727

50,00088,514

139,241(1,272)

244,172

(TRANSLATION ONLY)(Millions of yen)
Valuation and translation adjustments
Valuation difference
Total
Revaluation reserveon availablevaluation and translation
for landfor-sale securities
adjustments
Balance at the beginning of current
period (as of March 1, 2014)
Changes of items during period

(116)

(567)

(684)

Subscription rights toshares557

Total
net assets
240,648

Dividends of surplus(22,979)

Net income

26,200Purchase of treasury shares(289)

Disposal of treasury shares

0

Reversal of revaluation reserve for land

(1)

Exercise of subscription rights toshares (delivery of treasury shares)
Net changes of items other thanshareholders’ equity
Total changes of items during period

(292)

1

(290)

(334)

(625)

(292)

1

(290)

(334)

2,772

Balance at end of current period

(408)

(566)

(975)

223

243,420

465

52

(TRANSLATION ONLY)(Notes to the Nonconsolidated Financial Statement)(Significant Accounting Policies)
1. Valuation of securities
Marketable securities and investments in securities:
Held-to-maturity debt securities:
Carried at amortized cost (straight-line method)
Available-for-sale securities:
Securities whose market value is readily determinable:
Recorded at market value with net unrealized gains and losses as a separate component of net
assets. The cost of securities sold is determined based on the moving-average method.
Other:
Stated at cost determined by the moving-average method.
Investments in subsidiaries and affiliated companies:
Stated at cost determined by the moving-average method.
2. Valuation of merchandise inventories:
Merchandise:Stated at cost determined mainly by the retail method (the book value in the balance sheet iswritten down based on the decline in profitability).
3. Depreciation
Property and store equipment (except for lease assets):
Depreciation is mainly computed using the declining balance method at rates based on estimateduseful lives of the assets. The ranges of useful lives are from 10 to 34 years for buildings andfrom 5 to 8 years for furniture, fixtures and equipment.
Intangible assets (except for lease assets):
Amortization of intangible assets is computed by the straight-line method. Costs of software forinternal use are amortized by the straight-line method over 5 years, which is the estimated usefullife.
Lease assets:
In terms of the depreciation method for leased assets related to finance leases that do not transfer
ownership of leased property, the Company applies the straight-line method using the lease termas the useful life and a residual value of 0 yen.
Finance leases without ownership transfer of the leased property to the lessee and for which thelease inception was before February 28, 2009, are accounted for as operating lease transactions.
Long-term prepaid expenses:
Amortization of long-term prepaid expenses is computed by the straight-line method.
4. Accounting policies for important reserves
Allowance for Doubtful Accounts:
Allowance for doubtful accounts is provided at the amount of possible losses from uncollectible
receivables based on the actual rate of losses from bad debt for ordinary receivables and on
estimated recoverability for specific doubtful receivables.
Provision for Bonuses:
Accrued employees’ bonuses are provided for payments of employees’ bonuses based on theestimated amounts.
Provision for Retirement Benefits:
Provision for retirement benefits is provided at the amount calculated based on the retirement
benefit liability and pension assets at the balance sheet date.
・Period attributable method for estimated amount of retirement benefits
In calculating retirement benefit liability, in order to attribute the estimated amount of
retirement benefits in the period up to the end of the current fiscal year, it is based on thestraight-line attribution basis.
・Cost treatment method of actuarial difference and prior services cost
Prior service cost is mainly amortized, starting the fiscal year incurred, on a straight-line basis
53

(TRANSLATION ONLY)
over a certain period (10 years) within an average remaining service period of employees.
Actuarial differences are mainly amortized from the following fiscal year on a straight-line
basis over a certain period (10 years) within an average remaining service period of employees
at the time of their occurrence.
Provision for Retirement Benefits to Executive Officers and Audit & Supervisory Board
Members:
Provision for retirement benefits to executive officers of the Company and audit & supervisoryboard members of consolidated subsidiaries is recorded as a liability at 100% of the amount thatwould be required if all audit & supervisory board members, executive officers, and directors
terminated their services with the Company at the consolidated balance sheet date.
5. Accounting for consumption tax
Consumption tax is excluded from income and expense.
6. Changes in accounting method(Change of accounting policy which is not easily distinguished from change of accounting estimation)
Depreciation method of property and store equipment
The Company and domestic consolidated subsidiaries changed the depreciation method for property andstore equipment (excluding lease assets) from the declining-balance method to the straight-line method which
had been adopted primarily, from the current fiscal year.
The Group, under the policy of placing emphasis on existing stores, reviewed the depreciation method of its
property and store equipment upon the adoption of a strategy to reinforce the competitiveness of its existing
stores, which includes the utilization of membership card data and the restructuring of the Group. As a result,the depreciation method was changed to the straight-line method from the current fiscal year because an even
distribution of depreciation is considered to be more appropriate going forward since it is anticipated that the
number of visiting customers, which is proportionate to equipment utilization (the main factor behind
economic depreciation), will be maintained as store assets age.
Due to this change, operating income, recurring profit, and income before income taxes and minority
interests for the current fiscal year increased by 9,404 million yen compared to the previous method.

54

(TRANSLATION ONLY)(Changes in Method of Presentation)
1. In the “Current liabilities” section, “Provision for point card certificates” was separately listed in thenonconsolidated balance sheet before. Due to a decline in financial materiality, “Provision for point cardcertificates” (¥90 million for the current fiscal year) is included in “Other” for the current fiscal year.
2. In the “Non-operating income” section, “Compensation income” was separately listed in thenonconsolidated statement of income before. Due to a decline in financial materiality, “Compensation
income” (¥351 million for the current fiscal year) is included in “Other” for the current fiscal year.
3. In the “Non-operating income” section, “Penalty income” (¥142 million for the previous fiscal year) was
included in “Other” in the nonconsolidated statement of income before. Due to an increase in financial
materiality, “Penalty income” (¥618 million for the current fiscal year) is separately presented for thecurrent fiscal year.
4. In the “Extraordinary income” section, “Gain on extinguishment of tie-in shares” (¥95 million for theprevious fiscal year) was included in “Other” in the nonconsolidated statement of income before. Due toan increase in financial materiality, “Gain on extinguishment of tie-in shares” (¥94 million for the current
fiscal year) is separately presented for the current fiscal year.
5. In the “Extraordinary loss” section, “Loss on valuation of stocks of subsidiaries and affiliates” wasseparately listed in the nonconsolidated statement of income before. Due to a decline in financial
materiality, “Loss on valuation of stocks of subsidiaries and affiliates” (¥338 million for the current fiscal
year) is included in “Other” for the current fiscal year.
6. In the “Extraordinary loss” section, “Loss on valuation of investments in capital of subsidiaries andaffiliates” (¥52 million for the previous fiscal year) was included in “Other” in the nonconsolidated
statement of income before. Due to an increase in financial materiality, “Loss on valuation of investments
in capital of subsidiaries and affiliates” (¥4,384 million for the current fiscal year) is separately presented
for the current fiscal year.

55

(TRANSLATION ONLY)(Notes to the Nonconsolidated Balance Sheet)
1. Accumulated depreciation of property and store equipment:

247,172 million yen

2. Due from/to subsidiaries and affiliated companies
Short-term receivables due from subsidiaries and affiliated companies
Long-term receivables due from subsidiaries and affiliated companies
Short-term payables due to subsidiaries and affiliated companies
Long-term payables due to subsidiaries and affiliated companies

12,349 million yen
233 million yen
6,397 million yen
241 million yen

3. Guarantee obligations
We guarantee the deposit liabilities of the following subsidiary.
Lawson HMV Entertainment, Inc.

1,075 million yen

4. Revaluation of land used for businessLand used for business was revalued on the basis prescribed by the Law Concerning Revaluation of Land (Law
No. 34, March 31, 1998). The resulting revaluation difference has been included in net assets as land
revaluation difference.
Revaluation method: The value of land is determined based on the notified prices adjusted reasonably as
stipulated in Article 2, Item 4 of the Ordinance Implementing the Law Concerning
Revaluation of Land (Government Ordinance No. 119, March 31, 1998) and theassessed value as stipulated in Article 2, Item 5 of the same Ordinance.
Date of revaluation: February 28, 2002
The difference between book value and market value of the revalued land as of the balance sheet date was 314
million yen.

56

(TRANSLATION ONLY)(Notes to the Nonconsolidated Statement of Income)1. Transactions with subsidiaries and affiliated companies
Operating transactions(Millions of yen)
11,3532,301
20,809410

Operating revenues
Goods purchased
Selling, general and administrative expenses
Transactions other than operating transactions

2. Long-lived assets
The Company identified each store as the smallest cash-generating unit.
The Company recognized an impairment loss on the following assets that declined in value mainly due tocontinuous operating losses. The carrying amounts of those assets were written down to the recoverable
amount and were recorded as extraordinary losses.
Category by use

Location
Tokyo

Stores

Osaka
Other

Other
Total
Category by fixed assets–––

AssetsBuildings and structures
Furniture, fixtures, equipment, and others
Buildings and structures
Furniture, fixtures, equipment, and others
Buildings and structures
Furniture, fixtures, equipment, and others
Land
Software–Millions of yen
1,296
770
3,718
29
15
5,831

(Millions of yen)
Buildings
3,316
Structures
128
Furniture, fixtures, and equipment
319
Land
29
Lease assets
1,998
Software
15
Other
24
The recoverable value of the impaired assets is calculated based on net selling price or value in use. Net selling
price of land was calculated based on the value appraised by a real estate appraiser or expected contract price,and the value in use was calculated by discounting estimated future cash flows to which a discount rate of 4.8%
was applied.
(Notes to the Nonconsolidated Statement of Changes in Equity)
Number of treasury shares
Common stock
301,084 shares

57

(TRANSLATION ONLY)(Notes to Accounting for Income Taxes)
1. Components of deferred tax assets and liabilities(Millions of yen)Enterprise taxes payable
Accrued employees’ bonuses
Loss on write-down of investments in affiliated companies
Excess of depreciation
Excess of amortization of software
Provision for retirement benefits
Allowance for doubtful accounts
Impairment loss
Other
Subtotal of deferred tax assets
Less valuation allowances
Total deferred tax assets

873
771
2,716
12,933
320
5,854
267
3,548
3,387
30,764(3,724)
26,950

Deferred tax assets-net

26,9502. Revision of deferred tax assets due to change of statutory tax rate
On March 31, 2014, a tax reform law was enacted in Japan by which the Special Income Tax for
Reconstruction was no longer levied from fiscal years beginning on or after April 1, 2014. As a result, thenormal effective statutory tax rate used to recognize deferred tax assets and liabilities for the expected future tax
consequences of temporary differences decreased from 38.0% to 35.6% for the fiscal years beginning on or after
March 1, 2015.
The effect of this change is immaterial.
3. Change of tax rate corporate tax rates after the balance sheet date
On March 31, 2014, a tax reform law was enacted in Japan which reduced corporate tax rates from fiscal
years beginning on or after April 1, 2014. As a result, the normal effective statutory tax rate used to recognize
deferred tax assets and liabilities for the expected future tax consequences of temporary differences decreased
from 35.6% to 33.1% for the fiscal years beginning on or after March 1, 2016 and decreased to 32.3% for the
fiscal years beginning on or after March 1, 2017.
Due to this change in the tax rate, deferred tax assets (amount after deducting the deferred tax liabilities) is
expected to decrease by 2,063 million yen and income taxes-deferred is expected to increase by 2,042 million
yen.

58

(TRANSLATION ONLY)(Notes to Leases)
Finance leases without ownership transfer of the leased property to the lessee and for which the lease inception was
before February 28, 2009:
1. Pro forma information related to acquisition cost, accumulated depreciation, and net leased property(Millions of yen)
Acquisition
Accumulated
Accumulated
Net leased
cost
depreciation
impairment loss
property
Furniture, fixtures, and equipment
7,757
7,185
428
144
2. Obligations under finance leases(Millions of yen)
609
1
611

Due within one year
Due after one year
Total
Allowance for impairment loss on leased property243

3. Lease payments, transfer from allowance for impairment loss on leased property, depreciation expense,
interest expense, and impairment loss
(Millions of yen)
Lease payments
1,823
Transfer from allowance for impairment loss on leased property
140
Depreciation expense
1,685Interest expense
38
Impairment loss
8
4. Computation method of depreciation expense
Depreciation expense which is not reflected in the accompanying nonconsolidated statement of income iscomputed by the straight-line method, assuming the lease period as the useful life and no residual value.
5. Computation method of interest expense
The difference between the total lease contract amount and the acquisition cost is assumed to be the interest,and interest expense is computed by the interest method.

59

(TRANSLATION ONLY)(Notes to Related-Party Transactions)
Subsidiaries and affiliates

Attribute Company nameBusiness line
or profession

Equityownership

Relationship
Business

percentage RelationshipDirector’s
posts held
concurrently

Descriptionoftransactions
Repayment

SCI Inc.

Domestic

DirectConvenience

holding

store business100.0%

of funds
SCM

No

Borrowingof funds
Borrowinginterest
Repayment

Financial
Lawson ATM

services-

Networks, Inc.

relatedbusiness

Directholding
76.5%

of funds

Placement ofATMs in the
LAWSON

No

storesBorrowingof funds
Borrowing

Subsidiaryinterest

Lawson HMVEntertainment,
Inc.

Entertainment/Home
conveniencebusinessSEIJO ISHII

Seijo Ishii

CO., LTD.

business

Repayment

Sale ofDirecttickets andholding

software for100%

music andof funds
Yesholding
100%

of funds
Borrowing

video

DirectBorrowinginterest
Loaning ofOperation ofsupermarkets

No

funds
Loaning
interest

Transaction

Endingamountbalance(millions of

Account itemyen)(millionsof yen)18,00021,300

Short-termloans payable

3,800

0
1,500
3,900

Short-termloans payable

16,200713,70015,500

Short-termloans payable

9,500

6
Long-term
19,000loans

19,000receivable38

Accruedinterest

Transaction conditions and the policies for determining those conditions:
1. The Company manages the funds of some subsidiaries centrally and there are lending and borrowing
transactions between the Company and its subsidiaries.
2. The interest rates for loans and borrowings are determined rationally taking into account market interest rates.

60

9

(TRANSLATION ONLY)
Subsidiaries of an affiliated company of the Company

Attribute

Company

Business line

nameor profession

Subsidiaries
of anaffiliatedcompany oftheEquityownership

Relationship
Business

percentage relationshipDirector’s
posts held
concurrently

Descriptionoftransactions

Accountbalanceitem(millionsYen)of yen)Accounts
payabletrade

Reverse-company-

Holds 0.3％

operated

Shokuhinprocessed

ownershipCo., Ltd.

foods

in the(purchases

company

for theCompany

amount(millions offor theSales of

Yes

EndingPurchases

Mitsubishi

VendorTransaction

11,221stores(571,046)

franchised
stores)867

Accounts
payabletrade for

44,868

franchised
storesTransaction conditions and the principles on the decision thereof:
The terms and conditions for purchase transactions are determined to be same as those for other generalbusiness transactions. Except for purchases made for the franchised stores, the Company acts as an alternative
payer, not as a direct party for the purchase.
(Notes to Per-Share Data)
1. Net assets per share
2. Net income per share

2,432.00 yen
262.18 yen

The above figures and the number of shares in these balance sheets, statements of income and related notes arerounded down to the nearest unit and the ratios are rounded to the nearest whole number.

61

(TRANSLATION ONLY)INDEPENDENT AUDITOR'S REPORT
April 6, 2015
To the Board of Directors of
Lawson, Inc.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Shigeo Kawashima

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Junichi Fujii

Pursuant to the fourth paragraph of Article 444 of the Companies Act, we have audited the consolidated financial
statements, namely, the consolidated balance sheet as of February 28, 2015 of Lawson, Inc. (the "Company") andits consolidated subsidiaries, and the related consolidated statements of income and changes in net assets for the
fiscal year from March 1, 2014 to February 28, 2015, and the related notes.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparationand fair presentation of the consolidated financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the62

(TRANSLATION ONLY)
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of theconsolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of Lawson, Inc. and its consolidated subsidiaries as of February 28, 2015, and the results of theiroperations for the year then ended in accordance with accounting principles generally accepted in Japan.
Emphasis of Matter
As discussed in “Change in accounting policy that is not easily distinguished from change of accounting
estimation”, the Company changed its depreciation method for property and store equipment (excluding leaseassets) from the declining-balance method to the straight-line method. Our opinion is not qualified in respect of thismatter.
Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required
under the provisions of the Certified Public Accountants Act.
The above represents a translation, for convenience only, of the original report issued in the Japanese language.

63

(TRANSLATION ONLY)INDEPENDENT AUDITOR'S REPORT
April 6, 2015
To the Board of Directors of
Lawson, Inc.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Shigeo Kawashima

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Junichi Fujii

Pursuant to the first item, second paragraph of Article 436 of the Companies Act, we have audited the financial
statements, namely, the balance sheet as of February 28, 2015 of Lawson, Inc. (the "Company"), and the related
statements of income and changes in net assets for the 40th fiscal year from March 1, 2014 to February 28, 2015,
and the related notes and the accompanying supplemental schedules.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements and theaccompanying supplemental schedules in accordance with accounting principles generally accepted in Japan, andfor such internal control as management determines is necessary to enable the preparation of financial statements
and the accompanying supplemental schedules that are free from material misstatement, whether due to fraud or
error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements and the accompanying supplemental
schedules based on our audit. We conducted our audit in accordance with auditing standards generally accepted inJapan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements and the accompanying supplemental schedules are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements and the accompanying supplemental schedules. The procedures selected depend on theauditor's judgment, including the assessment of the risks of material misstatement of the financial statements andthe accompanying supplemental schedules, whether due to fraud or error. In making those risk assessments, the64(TRANSLATION ONLY)
auditor considers internal control relevant to the entity's preparation and fair presentation of the financial
statements and the accompanying supplemental schedules in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of the financial
statements and the accompanying supplemental schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the financial statements and the accompanying supplemental schedules referred to above present
fairly, in all material respects, the financial position of Lawson, Inc. as of February 28, 2015, and the results of its
operations for the year then ended in accordance with accounting principles generally accepted in Japan.
Emphasis of Matter
As discussed in “Change in accounting policy that is not easily distinguished from change of accounting
estimation”, the Company changed its depreciation method for property and store equipment (excluding leaseassets) from the declining-balance method to the straight-line method. Our opinion is not qualified in respect of thismatter.
Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required
under the provisions of the Certified Public Accountants Act.
The above represents a translation, for convenience only, of the original report issued in the Japanese language and"the accompanying supplemental schedules" referred to in this report are not included in the attached financial
documents.

65

(TRANSLATION ONLY)<Copy of the Audit Report of the Board of Corporate Auditors>
AUDIT REPORTRegarding the execution of duties by the Directors for the 40th business term from March 1, 2014 to
February 28,2015, we have prepared this Audit Report, through due deliberations based on the audit reports
prepared by each Corporate Auditor, and hereby report as follows:
1. Auditing Methods Employed by the Corporate Auditors and Board of Corporate Auditors and Details of
Such Methods
We have established audit policies, audit programs and other guidelines for the current term, and received
the reports from each Corporate Auditor regarding their execution of audits and results thereof, as well asreports from the Directors, other relevant personnel, and the Accounting Auditor regarding the execution of
their duties, and asked for explanations as necessary.
Each Corporate Auditor, pursuant to the auditing standards of Corporate Auditors established by the Boardof Corporate Auditors, has followed the audit policies and audit programs for the current term, communicatedwith the Directors, officers, internal audit department and other relevant employees, endeavored to collectinformation and develop the audit environment, attended the Board of Directors meetings, the management
meetings, Compliance & Risk management meetings, Internal Control over Financial Reporting committee
meetings and the like, and other important meetings, received reports from the Directors, officers, internal
audit department and other relevant employees regarding the execution of their duties, asked for explanations
whenever necessary, reviewed important authorized documents and the like, and investigated the status ofoperations and assets at the head office, branches, and other principal offices and stores.
In addition, pursuant to the audit items and audit methods regarding internal control system established by
the Board of the Corporate Auditors, we have monitored and verified the resolution of the Board of Directors,
described in business report, regarding the organization of the system as prescribed by item (vi) of paragraph
4, Article 362 of the Companies Act and paragraph 1 and paragraph 3, Article 100 of the Ordinance for
Enforcement of the Companies Act and the status of the development and operation of the system based onsuch resolution (Internal Control System), as the system necessary to ensure that the execution of the duties
by the Directors complies with laws and regulations and the Articles of Incorporation and other system
necessary to ensure the properness of operations of a Stock Company. In connection with internal control
over financial reporting, we received reports from the Directors and other relevant personnel, and Deloitte
Touche Tohmatsu LLC regarding the status of evaluation and audit of such internal control respectively, andasked for explanations whenever necessary. With respect to subsidiaries, we have communicated andexchanged information with the Directors, Corporate Auditors and other relevant personnel of subsidiaries,
requested the subsidiaries to report on their business where necessary, and investigated their status ofoperations and assets.

Based on the above methods, we have examined the business report andsupplementary schedules thereof for this business term.
Furthermore, we have monitored and verified whether Accounting Auditor maintained its independent66

position and implemented appropriate audit, and we received reports from Accounting Auditor regarding thestatus of the execution of its duties and, whenever necessary, asked for explanations. In addition, we havereceived the notice from the Accounting Auditor that “System for ensuring that the duties are performed
properly” (matters set forth in each item of Article 131 of the Company Accounting Regulations) is organizedin accordance with the “Quality Control Standards for Audits” (Business Accounting Council, October 28,2005) and the like, and, when necessary, asked for explanations. Based on the above methods, we haveexamined the “consolidated financial statements (consolidated balance sheet, consolidated statement ofincome, consolidated statements of changes in stockholder’s equity, and notes to consolidated financial
statements)” and “non-consolidated financial statements (balance sheet, statement of income,non-consolidated statements of changes in stockholder’s equity, and notes to non-consolidated financial
statements) and supplementary schedules thereof” for this term.
2. Result of Audit(1) Result of Audit of Business Report and Other Relevant Documents
1. We have found that business report and the supplementary schedules thereof fairly present the statusof the Company, in conformity with the applicable laws and regulations and the Articles ofIncorporation.
2. Regarding the execution of duties by the Directors, we have found no misconduct or material matterthat violates applicable laws and regulations or the Articles of Incorporation.
3. We have found that the content of the resolution of the Board of Directors regarding the Internal
Control System is adequate. In addition, we have found no matters on which to give remarks in regard
to the relevant description in the business report and execution of duties by the Directors concerning
Internal Control System.
(2) Result of Audit of Consolidated Financial Statements
We have found that methods and the result of the audit by the Accounting Auditor, Deloitte
Touche Tohmatsu LLC, are adequate.
(3) Result of Audit of Non-consolidated Financial Statements and Supplementary Schedules thereof.
We have found that methods and the result of the audit by the Accounting Auditor, Deloitte
Touche Tohmatsu LLC, are adequate.
April 08, 2015
The Board of Corporate Auditors of Lawson, Inc.
Standing Corporate Auditor

Atsuhiko Seki

Standing Corporate Auditor

Shinichi Hokari(Outside Corporate Auditor)
Corporate Auditor

Tetsuo Ozawa(Outside Corporate Auditor)
Corporate Auditor(Outside Corporate Auditor)

67

Eiko Tsujiyama

(TRANSLATION ONLY)REFERENCE DOCUMENT FOR THE GENERAL MEETING OF SHAREHOLDERS
Proposals and References
Proposal No. 1: Appropriation of Surplus
The Company regards the ROE (consolidated return on equity) as a significant management indicator and has been
conducting business activities with the aim of achieving an ROE of 20% from a medium-term perspective. In addition,
one of our key measures for shareholder returns has been the continuous and steady payment of dividends while
securing internal reserves necessary for future business development during the course of sustainable growth of theLawson Group. Based on this policy, we have been increasing dividends on a continuous basis since the initial listingof the Company in July 2000.
We intend to increase year-end dividends for the current fiscal term by ¥10 per share, from ¥110 per share in theprevious term to ¥120 per share. Accordingly, full-year dividends including interim dividends of ¥120 per share will be¥240 per share, an increase of ¥20 per share from the previous fiscal term.
We intend to continue to place emphasis on the distribution of profit to shareholders into the future.
We will endeavor to raise the Company’s corporate value by appropriating internal reserves for necessary business
investments such as opening new stores, renovating existing stores and new business development.
Year-end dividends:(1) The assignment of the dividend property to shareholders and total amount thereof:¥120 per share of the Company’s common stock to a total of ¥11,999,869,920(2) Effective date of the dividends from surplus:
Wednesday, May 27, 2015

68

(TRANSLATION ONLY)[Reference: Changes in Dividends and Consolidated Dividend Payment Ratio]
Year-end dividend per share (Yen)Interim dividend per share (Yen)Dividend per share (Yen)(Plan)(Plan)

35th Term

36th Term

37th Term

38th Term

39th Term

40th Term(Year ended
Feb. 2010)(Year ended
Feb. 2011)(Year ended
Feb. 2012)(Year ended
Feb. 2013)(Year ended
Feb. 2014)(Year ended
Feb. 2015)

Interim dividend
per share
Year-end dividend
per share
Annual dividend
per share
Consolidated net
income per share
Consolidated
dividend payment
ratio
ROE

Consolidated dividend payment ratio (%)

Consolidated dividend payment ratio (%)

35th Term

36th Term

37th Term

38th Term

39th Term

40th Term(Current Period)

¥80

¥85

¥87

¥100

¥110

¥120

¥80

¥85

¥93

¥100

¥110

(Plan) ¥120

¥160

¥170

¥180

¥200

¥220

(Plan) ¥240

¥126.67¥254.61¥249.17¥332.20¥380.04¥327.08126.3%

66.8%

72.2%

60.2%

57.9%

(Plan) 73.4%

6.5%

12.8%

12.0%

15.2%

16.1%

13.0%

(Notes)
1. In the 37th term, ROE (consolidated return on equity) declined compared to the previous period as a result ofan extraordinary loss of ¥11,753 million, which included loss due to the Great East Japan Earthquake and loss
on adjustment for changes in accounting standards for asset retirement obligations. ROE excluding these
extraordinary factors is 15.1%.
2. The amounts of the 35th term is the retroactively adjusted amounts reflecting the loss on the prior period
adjustment of ¥1, 936 million recognized in the 35th term.
3. Consolidated dividend payment ratio is calculated based on annual dividend per share divided by consolidated
net income per share.

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Proposal No. 2: Partial Amendment to the Articles of Incorporation
1. Reasons for amendment
The Company proposes that the Articles of Incorporation be partially amended as follows.
(1)

Based on the Lawson Group’s corporate philosophy of “Creating Happiness and Harmony in Our
Communities,” the Company primarily focuses on the business of the franchise headquarters ofconvenience stores.
The Group also provides a wide range of products and services related to entertainment under theslogan of “360-degree Entertainment Services” mainly through our subsidiary, Lawson HMVEntertainment, Inc., and last year acquired all shares of United Cinemas Co., Ltd., an operator of movie
theaters in Japan. In order to seek clarification on the Group’s business purposes, we propose that“Business related to movies” be added to Article 2 (Purpose of Incorporation), item 4 of the current
Articles of Incorporation.
In addition, we have been working hard a home delivery business that enables customers to enjoy thebenefits of a convenience store from the comfort of their home, and propose adding “Consigned freight
forwarding business” to Article 2 (Purpose of Incorporation), item 11 of the current Articles ofIncorporation, so as to establish an efficient distribution network by becoming a consigned freight
forwarding operator.
(2) The Company’s Articles of Incorporation has set Article 24 (Contracts for Limitation of Liability with
Outside Directors) and Article 32 (Contracts for Limitation of Liability with Outside Corporate Auditors)
so as to facilitate outside directors and outside corporate auditors to adequately fulfill their expected roles.
Following the recent expansion in the range of directors and corporate auditors with whom a contract forlimitation of liability can be entered into by the Act for Partial Revision of the Companies Act (Act No. 90
of 2014), the Company proposes to amend the provisions of Article 24 and Article 32 of the current
Articles of Incorporation. Prior consent of all corporate auditors has been obtained for submitting theamendment to Article 24 of the current Articles of Incorporation to this general meeting of shareholders.

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2.

Particulars of amendments
Particulars of proposed amendments are described below.
(Suggested amendments are underlined in the text.)
Current Provision of the Articles of Incorporation
Proposed Amendments
Article 2: Purpose of Incorporation
Article 2: Purpose of Incorporation
The Company shall be organized for the purpose of
The Company shall be organized for the purpose ofoperating the following businesses:
operating the following businesses:
1.
～
3.
4.

1.
～
3.

(Omitted)

4.

Business related to entertainment includingmusic, theaters and other events(No change)

Business related to entertainment includingmusic, movies, theaters and other events

5.
～ (No change)
10.

5.
～ (Omitted)
10.
11. Transportation business and warehousingbusiness

11. Transportation business, consigned freight
forwarding business and warehousingbusiness12.
～ (Omitted)
23.

12.
～ (No change)
23.

Article 24: Contracts for Limitation of Liability with
Outside Directors
In accordance with the provisions of Article 427,
paragraph 1 of the Companies Act, the Company may
enter into agreements with Outside Directors underwhich their liabilities for damage provided for in Article
423, paragraph 1 of the said Act shall be restricted tothe sum of the amount stipulated in laws andregulations.

Article 24: Contracts for Limitation of Liability with
Directors
In accordance with the provisions of Article 427,
paragraph 1 of the Companies Act, the Company may
enter into agreements with Directors (excluding persons
who are executive directors, etc.) under which their
liabilities for damage provided for in Article 423,
paragraph 1 of the said Act shall be restricted to the sumof the amount stipulated in laws and regulations.

Article 32: Contracts for Limitation of Liability with
Outside Corporate Auditors
In accordance with the provisions of Article 427,
paragraph 1 of the Companies Act, the Company may
enter into agreements with Outside Corporate Auditors
under which their liabilities for damage provided for in
Article 423, paragraph 1 of the said Act shall be
restricted to the sum of the amount stipulated in laws
and regulations.

Article 32: Contracts for Limitation of Liability with
Corporate Auditors
In accordance with the provisions of Article 427,
paragraph 1 of the Companies Act, the Company may
enter into agreements with Corporate Auditors underwhich their liabilities for damage provided for in Article
423, paragraph 1 of the said Act shall be restricted tothe sum of the amount stipulated in laws andregulations.

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Proposal No. 3: Election of Two (2) Corporate Auditors
The term of office of Mr. Tetsuo Ozawa and Ms. Eiko Tsujiyama, both Corporate Auditors, expires at theconclusion of this 40th Ordinary General Meeting of Shareholders. Accordingly, we propose that you elect two (2)Corporate Auditors.
The Board of Corporate Auditors has given prior consent for this proposal.
The nominees for corporate auditors are as follows.
No.

Name
(Date of birth)[Candidate for
Outside Corporate
Auditor]Brief Personal History, Position and Important Concurrent Positions
April 1973
May 2003
June 2007
June 2014

Registered as a practicing attorney. Joined Tokyo
Fuji Law Office. (to date)Outside Corporate Auditor for Lawson, Inc.
(current position)
Outside Corporate Auditor for Cemedine Co.,
Ltd. (current position)
Outside Corporate Auditor for Sekisui ChemicalCo., Ltd. (current position)

Number of theCompany’s
Shares Held

400

Tetsuo Ozawa(June 28, 1947)

1[Reasons for nomination as Outside Corporate Auditor and reasons behind our judgment that the person
would be able to perform the obligations of an Outside Corporate Auditor appropriately]
Mr. Tetsuo Ozawa has been nominated as a candidate for Outside Corporate Auditor of the Company, as
he possesses abundant experience mainly in the area of corporate legal affairs ranging from legislation torisk management from a legal point of view and broad-ranging knowledge as a lawyer, and also currently
provides appropriate supervision to business execution by the Company’s directors. The Company expects
Mr. Ozawa to continue to adequately fulfill his role as an outside corporate auditor for the reasons referred
to above.
Mr. Ozawa has been registered as an Independent Director/Auditor with the Tokyo Stock Exchange
pursuant to the rules specified by the exchange.
[Term of Outside Corporate Auditor for Lawson, Inc.]
Mr. Ozawa has served as an outside corporate auditor for the Company since May 2003, and will haveheld this position for 12 years at the conclusion of this general meeting of shareholders.
[Particular conflicts of interest between the Candidate and Lawson, Inc.]
There are no particular conflicts of interest between the Candidate and Lawson, Inc.
[Attendance at Board of Directors’ Meetings and Corporate Auditors’ Meetings]
Out of a total of 13 Board of Directors’ Meetings, Mr. Ozawa attended 12. (Attendance rate: 92.3%)
Out of a total of 16 Corporate Auditors’ Meetings, Mr. Ozawa attended 16. (Attendance rate: 100%)

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No.

Name
(Date of birth)

Brief Personal History, Position and Important Concurrent
PositionsRegistered as a Certified Public Accountant
Assistant Professor, College of Humanities,
Ibaraki University
April 1985
Assistant Professor, Faculty of Economics,
Musashi University
April 1991
Professor, Faculty of Economics, Musashi
University
April 2003
Professor, School of Commerce and The
Graduate School of Commerce, Waseda
University (current position)
400
Eiko Tsujiyama
June 2008
Outside Corporate Auditor for Mitsubishi(December 11,
Corporation (current position)
1947)
June 2010
Outside Corporate Auditor for ORIX
Corporation (current position)
May 2011
Outside Corporate Auditor for Lawson, Inc.
(current position)
June 2011
Outside Corporate Auditor for NTT DOCOMO,
INC. (current position)
June
2012
OutsideCorporate Auditor for Shiseido Co.,
2
Ltd. (current position)[Reasons for nomination as Outside Corporate Auditor and reasons behind our judgment that the person
would be able to perform the obligations of an Outside Corporate Auditor appropriately]
Ms. Eiko Tsujiyama has been nominated as a candidate for Outside Corporate Auditor of the Company,
as she possesses abundant experience serving on the Financial Services Agency’s Business Accounting
Council, the National Tax Agency’s National Tax Council, etc. as an academic expert as well as a deep
knowledge of finance and accounting as a university professor (in accounting); and also currently provides
appropriate supervision to business execution by the Company’s directors. The Company expects her tocontinue to adequately fulfill her role as an outside corporate auditor for the reasons referred to above.
Ms. Tsujiyama has been registered as an Independent Director/Auditor with the Tokyo Stock Exchange
pursuant to the rules specified by the exchange.
[Term of Outside Corporate Auditor for Lawson, Inc.]
Ms. Tsujiyama has served as an outside corporate auditor for the Company since May 2011, and will haveheld this position for four years at the conclusion of this general meeting of shareholders.
[Particular conflicts of interest between the Candidate and Lawson, Inc.]
There are no particular conflicts of interest between the Candidate and Lawson, Inc.
[Attendance at Board of Directors’ Meetings and Corporate Auditors’ Meetings]
Out of a total of 13 Board of Directors’ Meetings, Ms. Tsujiyama attended 13. (Attendance rate: 100%)
Out of a total of 16 Corporate Auditors’ Meetings, Ms. Tsujiyama attended 16. (Attendance rate: 100%)
Notes:
1. In accordance with Article 32 of the current Articles of Incorporation, Lawson, Inc. has concluded the following
liability limitation agreements with Mr. Tetsuo Ozawa and Ms. Eiko Tsujiyama. Under the liability limitationagreement concluded with the Company, Outside Corporate Auditor assume liability for damages specified in
Article 423, Paragraph 1 of the Companies Act within the limit not exceeding the amount stipulated by laws andregulations, provided that they have performed duties which resulted in a cause of such liability in good faithwithout committing acts of gross negligence.
2. The appointment of the Independent Directors/Auditors is based on “(6) Criteria for Independence” on page 23.
3. The nominees’ Brief Personal History, Position and Important Concurrent Positions are as of April 9, 2015.
[Candidate for
Outside Corporate
Auditor]

April 1974
August 1980

Number of theCompany’s
Shares Held73