Securities Code: 2651
May 2, 2011
To All Shareholders With Voting Rights
Takeshi Niinami
Representative Director
LAWSON, INC.
11-2, Osaki 1-chome, Shinagawa-ku, TokyoNOTICE OF THE 36th ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 36th 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 23, 2011.
[Voting by Electronic Means (Internet, etc.)]
Please exercise your voting rights by 5:45 p.m. on Monday, May 23, 2011 after reading the attached document“Exercising Voting Rights via the Internet, etc.”
1. Date and Time: 10:00 a.m., Tuesday, May 24, 2011
2. Venue: Tokyo International Forum, Hall C, 5-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo(Please note the venue has been changed from last year. See the Map attached at the end of this notice.)
3. Objectives of the Meeting
Reports:
The Business Report, the Consolidated Financial Statements and the Non-Consolidated Financial Statements for the 36th
Fiscal Term (from March 1, 2010 to February 28, 2011), 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
Proposal No. 4: Presentation of Retirement Benefits to a Retiring Corporate Auditor•••

If you attend in person, please present the enclosed Voting Rights Exercise Form at the reception desk on arrival at the meeting.
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, such asa power of attorney, together with the Voting Rights Exercise Form in the proxy’s own name at the reception desk. (The qualified
proxy is limited to one shareholder having voting rights for this meeting as per the relevant provision in the Articles ofIncorporation.)
If any amendment is made to this notice, such amendment will be posted on the Company’s Website.
Results of resolutions will also be posted on the Company’s Website .
(http://www.lawson.co.jp/company/ir/index.html)

1

(TRANSLATION ONLY)
BUSINESS REPORT(March 1, 2010 through February 28, 2011)
I. CURRENT STATUS OF THE CORPORATE GROUP
1. Summary of Operations(1) Business Developments and Results of Operations
During fiscal 2010, the year ending on February 28, 2011, some recovery was seen in the overall consumer market,
although consumer preferences for lower prices due to the prolonged recession continued to exert an adverse effect to someextent. Signs of recovery also began to emerge in the convenience store (CVS) industry in and after October 2010.
In this operating environment, the LAWSON Group (the "Company") took the following actions with the aim of improving
customer satisfaction in CVS operations and other businesses to realize its corporate philosophy of "Happiness andHarmony in Our Community."
In terms of our operating results, total operating revenues decreased 5.5% year-on-year to ¥441,277 million. This was
mainly due to a ¥41,363 million decline in net sales resulting from a fall in the number of Company-operated stores, whichmore than offset a ¥12,016 million increase in franchise commissions paid by franchised stores, which increased in number.
Ordinary income, however, increased by ¥5,153 million, or 10.4%, to ¥54,594 million. Net income also increased by¥12,824 million, or 102.1%, to ¥25,386 million, mainly as a result of the fact that, in the previous fiscal year, an
extraordinary loss of ¥12,616 million was posted in relation to the misappropriation of funds by former directors of theconsolidated subsidiary LAWSON ENTERMEDIA, INC., as well as a ¥1,936 million loss on prior period adjustment.
Operating results by business segment were as follows:
Convenience Store Operations
Merchandise Strategy and Services
On the merchandise front, we offered a wide variety of attractive items that pleasantly surprised customers with their value
for money. This was made possible by bringing in innovative ideas in the ingredients procurement process, including
procuring high-quality food materials in bulk.
In the rice dishes category (rice balls/boxed lunches/sushi), we reduced prices to promote sales for some popular items inthe series of rice balls made with a branded rice, Niigata-grown Koshihikari, and launched a high-end line of Niigata-grown
Koshihikari rice balls, adopting new upscale ingredients. In addition, our Onigiri-ya rice ball brand renewal in November,
under which we switched to using Niigata-grown Koshihikari for all our white rice balls, was well received by manycustomers. Our Gohoubi-no-hitotoki (Enjoy a luxurious time) series of deluxe boxed lunches, which was launched under theconcept of satisfying both the stomach and the soul, was also tremendously popular among customers. We also launched aseries of chilled lunch boxes in January.
In the dessert category, our Uchi Café SWEETS line, including the Premium Roll Cake Series, was a great hit, contributing
to the category’s enhanced performance.
In sales promotions, the Company focused on campaigns anticipated to bring a high return on investment (ROI) such as the
Rilakkuma Fair, Miffy Campaign, Evangelion Campaign, and Keion!! Fair, which are centered on tie-ups with popularcharacters.
On the services front, the Company's bill settlement services processed approximately 169 million transactions forcustomers, representing a total transaction value of ¥1,639.2 billion. Meanwhile, ATMs (automatic teller machines) were
installed in stores in 6 new prefectures, bringing the total number of prefectures with LAWSON stores that have ATMs to
46.
The Company also established a system for issuing the Ponta multi-partner shopping point card instantly in stores.
Companies from diverse business categories participate in the Ponta card program operated by LOYALTY MARKETING,
INC. The number of companies participating in the program has increased, expanding card membership to over 30 million.
The number of LAWSON customers holding Ponta cards is ever on the rise, notably those with Ponta cards issued by othercompanies.

2

Store Operations
In store operations, we promoted sales spaces and merchandise assortments tailored to the needs of each neighborhood
through analysis of purchase data collected from the Ponta card program by utilizing PRiSM, our core IT system that wasdeveloped to place orders from the perspective of customers. PRiSM has enhanced franchise owners’ awareness of theimportance of optimal merchandise assortment by quantifying the sales opportunities we lose as a result of being out ofstock of items customers need and visualizing the effect that can be enjoyed by reducing these lost opportunities. The
Company has thus strengthened its guidance to franchise owners to enable them to offer the exact merchandise customers
need on a timely basis, aiming to further boost customer satisfaction.
Store Development, Store Format Strategy
In opening new stores, the Company focused on maximizing return on investment (ROI), strictly adhered to its proprietarygroup standards for opening stores, and prioritized profitability.
In terms of store format strategy, the Company leveraged the LAWSON, NATURAL LAWSON and LAWSON STORE100
formats to promote new store openings and store renovations that match customer needs in each neighborhood.
The Company also proactively pursued renovation of conventional LAWSON stores into LAWSON stores that focus on
fresh foods, especially in residential areas with a high demand for fresh food. The number of these stores now exceeds
1,000.
In an effort to reinforce its capacity to cater to healthcare needs, the Company opened new stores that combine
MatsumotoKiyoshi and LAWSON STORE 100. In addition, we now operate 35 stores that market over-the-counter (OTC)
drugs by increasing licensed sales personnel based on human resources exchange with MatsumotoKiyoshi Holdings Co.,
Ltd. Starting from August 2010, the Company also launched Pharmacy LAWSON, an integration of drug-dispensing
pharmacies and NATURAL LAWSON stores, in partnership with Qol Co., Ltd., which operates a chain of drug-dispensing
pharmacies.
[Change in Total Number of Stores] (March 1, 2010 to February 28, 2011)
LAWSON
NATURALLAWSONLAWSONSTORE100 and
SHOP99Total stores as of
8,540
89
996
February 28, 2010
Change during fiscal
146
1
81
year
Total stores as of
8,686
90
1,077
February 28, 2011

(Stores)
Total

9,625
228
9,853

As of February 28, 2011, the number of LAWSON stores operated by equity-method affiliate LAWSON Okinawa, Inc. in
Okinawa Prefecture was 141.
In overseas operations, the Company opened its first store in Chongqing in China in July 2010, expanding its area of
operations from Shanghai. CHONGQING LAWSON CO., LTD., in which LAWSON has a 100% equity interest, operates 4
stores as of February 28, 2011. SHANGHAI HUALIAN LAWSON CO., LTD., a Chinese equity-method affiliate, wasoperating 315 stores in Shanghai, China, as of February 28, 2011
Corporate Social Responsibility (CSR) Activities
In the CSR field, the CSR Promotion Office continued to lead environmental protection and social contribution activities,
working together with franchise owners and employees.
In June 2010, we established the LAWSON Group Environmental Policy that expresses our determination to consider theenvironment in all aspects of our business and to work for the local communities in which we operate, in the hope of
passing on the bountiful blessings of the Earth to the next generation.
As part of our efforts to help create a low-carbon society, the Company set targets for reducing the CO2 generated by power
consumption at each store, and actively installed energy-saving devices, including LED lighting for signs and in stores, notonly at new stores, but also at existing stores.
In a collaborative effort with customers to fight global warming, the Company launched a carbon offset program in April
2008 which allows customers to contribute to reducing CO2 by purchasing carbon credits using their accumulated shopping
points or cash, or by purchasing products designated for carbon offset. As of February 28, 2011, approximately 15,000 tons3

of CO2 had been offset through this program. In addition, the LAWSON Green Fund, active since 1992, in combination
with donation drives for regions hit by disasters such as torrential rain, raised a total of approximately ¥316 million in fiscal
2010.
Moving forward, working together with customers, the Company will continue its environmental protection and social
contribution activities.
Other Activities
In response to the misconduct that took place in fiscal 2009 within our subsidiary LAWSON ENTERMEDIA, INC., we
implemented measures to strengthen internal control within the Company. Specifically, LAWSON examined the status of
the distribution of authorities and risk management framework at its affiliates and regularly monitored the status of theirfunds. We also provided stronger guidance to affiliates in order to improve their management by expanding the number of
items audited by our internal audit division. In the second half of the fiscal year, LAWSON revised its Affiliate Management
Regulation to clarify the division of responsibilities with respect to management of, and assistance given to, its affiliates andpromoted area-specific initiatives such as the centralized management of funds. We intend to continue to promote themeasures we are implementing.
Ninety-nine Plus Inc. became a LAWSON wholly-owned subsidiary as a result of a share exchange agreement with
LAWSON effective July 1, 2010
[Total Operating Revenues in the Convenience Store Business]
Total Operating Revenues (¥ millions)405,467

Year-over-Year (%)
91.8[Net Sales at All LAWSON Stores in the Convenience Store Business]
Product Group
Sales (¥ millions)Composition Ratio (%)
Processed foods
897,426
53.3
Fast foods
321,865
19.1
Daily delivered foods
264,169
15.7
Non-food products
199,350
11.9
Total
1,682,812
100.0Year-over-Year (%)
99.5
99.3
110.5
99.4
101.0

Note: Some merchandise that was classified under fast food in the first half of the previous fiscal period has been reclassified
under daily delivered goods in the presentation for the first half of the current fiscal period. The effect of the change is
8,913 million yen

Other Businesses
In addition to convenience store operations, the Company is involved in entertainment/e-commerce business, financial
services, and other businesses.
LAWSON ENTERMEDIA, INC. which undertakes ticket sales as part of its entertainment/e-commerce business, recorded astrong performance in sales of event and leisure-related tickets. On July 1, 2010, LAWSON concluded a share exchange
agreement with LAWSON ENTERMEDIA, INC. making it a wholly-owned subsidiary.
In addition, with the aim of expanding and reinforcing our ticket sales business and building a framework that allows us tooffer a wider range of items online as well as offline by fortifying our e-commerce base, LAWSON acquired HMV Japan
K.K., a music/video software marketing company, as its wholly-owned subsidiary on December 1, 2010. On January 28,
2011, LAWSON also acquired a 35.4% share of Venture Republic Inc., which operates a price comparison website thatdrives viewers to e-commerce websites and e-commerce shopping malls.
During fiscal 2009, LAWSON ENTERMEDIA, INC. was described as a company mainly engaged in the ticket sales
business. When LAWSON acquired HMV Japan K.K. as its consolidated subsidiary, however, LAWSON changed the nameof business operations undertaken by LAWSON ENTERMEDIA, INC. and HMV Japan K.K.from “ticket sales business” to“entertainment/e-commerce business” from fiscal 2010, aiming to expand the Company’s entertainment business.
LAWSON ATM Networks, Inc., which operates a financial services-related business, performed strongly as a result of anincrease in the number of ATM machines installed nationwide in LAWSON stores and a rise in the number of transactions.
The number of ATM machines installed has grown to 8,526 as of February 28, 2011.
[Total Operating Revenues in Other Businesses]
Total Operating Revenues (¥ millions)
39,673Year-over-Year (%)
134.1

4

(2) Capital Expenditures and Financing
Capital expenditures of the LAWSON Group during the year totaled ¥31,091 million, of which ¥22,697 million was
primarily for store facility investment in land and buildings, and ¥7,479 million was for the upgrading of information
systems.
The LAWSON Group’s own funds were used for all capital expenditures during the year ended February 28, 2011.
(3) Changes in Operating Results and Financial Position
1) Changes in Operating Results and Financial Position of the Corporate Group
Category/Fiscal Term
Total operating

Fiscal 2007

Fiscal 2008

Fiscal 2009

Fiscal 2010

33rd Term

34th Term

35th Term

36th Term

301,176

349,476

467,192

441,277

revenues (¥ millions)
Ordinary profit

46,244

48,78749,44054,594(¥ millions)
Net income (¥ millions)22,11923,807

12,562

25,386

Net income per share

214.69240.10126.67254.61

Total assets (¥ millions)

397,107436,096

448,131476,036

Net assets (¥ millions)

188,573

201,166

198,135

208,466(¥)

Net assets per share (¥)
1,867
1,968
1,935
2,037
Note:
1. Net income and net income per share declined in the 35th term due to an extraordinary loss of ¥12,616 million recorded as a result of
misappropriation of funds by former directors of consolidated subsidiary LAWSON ENTERMEDIA, INC.
2. A ¥1,936 million loss on a prior period adjustment posted in the 35th term is reflected retrospectively in the operating results andfinancial position of the 34th and 35th terms.

2) Changes in Operating Results and Financial Position of the Company
Category/Fiscal Term
Total net sales of

Fiscal 2007
33rd Term

Fiscal 2008
34th Term

Fiscal 200935th Term

Fiscal 201036th Term

1,402,786

1,506,312

1,472,415

1,502,754

269,582279,739

271,513

263,20945,29847,321

44,57749,312

Net income (¥ millions)

18,89922,066

20,66524,643

Net income per share

183.43222.54208.38247.15

Total assets (¥ millions)

385,335

402,117420,444444,821

Net assets (¥ millions)187,146

195,634

200,506

211,448

Net assets per share (¥)

1,886

1,969

2,018

2,113

LAWSON storesincluding franchised
stores (¥ millions)
Total operating
revenues (¥ millions)
Ordinary profit(¥ millions)(¥)

5(4) Pressing Issues
Although early signs of recovery were seen in the consumer market, there are concerns that the Japanese economy will
suffer adverse effects from the Great East Japan Earthquake in fiscal 2011.
In this environment, LAWSON is promoting the following management measures with the aim of realizing its corporate
philosophy of "Happiness and Harmony in Our Community."
1) Create merchandise assortments that meet customer needs
In an effort to create stores that meet the needs of customers in the neighborhood, the Company will continue to use thePonta multi-partner shopping points program data to develop customer-centric merchandise assortment. By harnessing ourcore IT system, PRiSM, to a higher degree, we will strive to improve ordering precision to reduce sales opportunity losses
and product disposal losses. We will also step up our efforts to enhance product development capabilities, which areessential in achieving customer-centric merchandise assortments and improving ordering precision.
2) Provide appealing services by leveraging the Ponta multi-partner shopping points program
The number of companies participating in the Ponta program is expected to increase in the days ahead, which will lead tomore convenient services for customers. LAWSON will pursue broader marketing analysis and sales promotion measures incollaboration with the other participating companies to provide customers with more appealing services.
3) Promote the fresh foods convenience store businessWe will further expand our fresh foods convenience store business, which is a growth area, by opening new LAWSONSTORE100 and fresh foods convenience stores mainly in residential areas. In particular, we will strive to respond to theincreasing needs of customers desiring to prepare their meals at home, while further expanding our customer base by
attracting elderly and female customers in addition to male customers in their 20s and 30s, who have constituted the main
demographic of convenience store shoppers.
4) Respond to demand for OTC drugs and healthcare
LAWSON will expand OTC drug sales and help customers achieve the healthy and comfortable lifestyles they seek bystepping up the development and marketing of health-oriented foods harnessing the know-how acquired through operationof NATURAL LAWSON stores. Based on the idea that “you are what you eat,” we will continue to help customers leadhealthy and fulfilling lives.
5) Full-scale operation of entertainment/e-commerce businessIn our entertainment/e-commerce business, we aim to offer an entertainment-related merchandise assortment that meetsdiverse customer needs both online and offline. We also plan to provide new services in e-commerce based on partnershipwith other companies.
6) Strengthen internal control within the Company
In response to the misconduct that was uncovered in fiscal 2009 within our subsidiary LAWSON ENTERMEDIA, INC., wewill continue to promote the initiatives we implemented in fiscal 2010. We will also embark on the establishment of astructure that facilitates communication between LAWSON and its affiliates with a view to propagating the Company’s
management policy and increasing the degree of its implementation.
We take this opportunity to offer our deepest condolences to the families of those who lost their lives in the Great East Japan
Earthquake and extend our heartfelt sympathy to all who have been affected by the disaster.
We will strive to fulfill our mission as “The Hot Station in the Neighborhood,” a place where customers can feel at home, by
providing emergency supplies to disaster-hit regions, offering merchandise in disaster-hit stores, and collecting donations
for relief support.
We look forward to the continued support and encouragement of our shareholders.

62. Current Status at the End of February 2010
(1) Major Business Operations and Principal Offices
Convenience Store Business
1) LAWSON, INC.
Major Business:
LAWSON, INC. operates the LAWSON-brand franchise system andCompany-operated stores as the headquarters of LAWSON and NATURALLAWSON convenience store chains
Head Office:Shinagawa-ku, Tokyo
Principal Offices:
Hokkaido LAWSON Branch (Chuo-ku, Sapporo), Tohoku LAWSON Branch(Aoba-ku, Sendai), 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 102 offices throughout Japan including
District Offices. As of March 1, 2011, the Company adopted a branch structure for its
organization, whereby District Offices were restructured into Branches.

2) Ninety-nine Plus Inc.
Major Business:

Head Office:Ninety-nine Plus Inc. operates Company-operated and franchise system stores as theheadquarters of the LAWSON STORE100 and SHOP99 convenience store chains.
The 1,077 LAWSON STORE100 and SHOP99 stores operated by Ninety-nine Plus areincluded in the table below.
Shinjuku-ku, Tokyo

3) CHONGQING LAWSON CO., LTD.
Major Business:
CHONGQING LAWSON CO., LTD. Operates Company-operated stores.

Head Office:The 4 LAWSON stores operated by CHONGQING LAWSON CO.,LTD are includedin the table below above.
Chongqing, China
Note: CHONGQING LAWSON CO., LTD., became LAWSON’s consolidated subsidiaryas a result of establishing this company as a wholly-owned subsidiary on April 29, 2010,

Stores:Prefecture
Hokkaido
Aomori
Akita
Iwate
Miyagi
Yamagata
Fukushima
Niigata
Tochigi
Gunma
Saitama
Chiba

Number ofStores
532
169
153
160
193
61
99
102
107
68
389
355

Prefecture
IbarakiTokyo
Kanagawa
Shizuoka
Yamanashi
Nagano
Aichi
Gifu
Mie
Ishikawa
ToyamaFukui

Number ofStores
109
1,288
697
180
73
132
473
122
94
87
112
99

Prefecture
Kyoto
Shiga
Nara
Wakayama
Osaka
Hyogo
Okayama
Hiroshima
Yamaguchi
Tottori
ShimaneKagawa7

Number ofStores
251
127
99
110
969
554
122
143
112
89
90
98

Prefecture
Ehime
Tokushima
Kochi
Fukuoka
Saga
Nagasaki
Oita
Kumamoto
MiyazakiKagoshima
Total
ChongqingNumber ofStores
155
103
57
357
61
87
139
92
79
105
9,853
4

Other BusinessCompany NameLAWSON ENTERMEDIA,INC.
HMV Japan K.K.
LAWSON ATM Networks,
Inc.
BestPractice Inc.

Cross Ocean Media, Inc.

Head Office
Shinagawa-ku,
Tokyo
Minato-ku,
TokyoShinagawa-ku,
Tokyo
Shinagawa-ku,
TokyoShibuya-ku,
Tokyo

Major BusinessEntertainment/e-commerce Sells tickets for various events
business
inside LAWSON stores, etc.
Entertainment/e-commerce Sells music/video software
business
Financial services–related
Installs jointly-operated ATMs
business
in LAWSON stores, etc.
Consulting businessConducts surveys of
convenience stores to give
advice and make specificproposals for the improvementof LAWSON stores
Advertising business
Develops and operates digital
signage inside LAWSON
stores.

Note:
1. During fiscal 2009, LAWSON ENTERMEDIA, INC. was described as a company mainly engaged in the ticket sales
business. When LAWSON acquired HMV Japan K.K. as its consolidated subsidiary, however, LAWSON changed the name ofbusiness operations undertaken by LAWSON ENTERMEDIA, INC. and HMV Japan K.K. from “ticket sales business” to“entertainment/e-commerce business” from fiscal 2010, aiming to expand the Company’s entertainment business.
2. HMV Japan K.K. became LAWSON’s consolidated subsidiary as a result of the acquisition of all of HMV Japan K.K.’s commonshares issued and outstanding held by HMV Japan Holdings Co., Ltd. (5,001 shares) on December 1, 2010.
3. Cross Ocean Media, Inc., which was established as a joint venture between LAWSON, ASATSU- DK INC. and NTT DOCOMO, INC.
became LAWSON’s consolidated subsidiary on March 1, 2010.

(2) Employees
1) Employees of the Corporate Group
Designation of Business Segment
Convenience store businessEntertainment/e-commerce business
Financial services-related business
Consulting business
Advertising business
Total2) Employees of the Company
Number of Employees
3,305

Number of Employees (YoY Change)
4,792
727
22
157
5
5,703

(YoY Change)

Average Age(-119)

38.3

8

(-13)
(445)
(-)
(30)
(5)
(467)

Average Years of Service
11.6

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

Shareholding
(%)
100.0
100.0

Ninety-nine Plus Inc.
CHONGQING LAWSON CO.,LTD.,
LAWSON ENTERMEDIA,INC.
HMV Japan K.K.

¥99 million
CNY37,881
Thousand¥2,892 million¥2,953 million

100.0

LAWSON ATM Networks, Inc.

¥3,000 million

44.0¥10 million¥393 million

100.0
42.0

BestPractice Inc.
Cross Ocean Media, Inc.

100.0

Major BusinessConvenience store businessConvenience store businessEntertainment/e-commercebusiness
Entertainment/e-commercebusiness
Financial services-related
business
Consulting business
Advertising business

Note:
1. Ninety-nine Plus Inc. became a LAWSON wholly-owned subsidiary as a result of a share exchange agreement with LAWSON
effective July 1, 2010. In addition, Ninety-nine Plus Inc, reduced capital on August 31, 2010.
2. CHONGQING LAWSON CO., LTD., became LAWSON’s consolidated subsidiary as a result of establishing this company as awholly-owned subsidiary on April 29, 2010.
3. LAWSON ENTERMEDIA, INC. became a LAWSON wholly-owned subsidiary as a result of a share exchange agreement with
LAWSON effective July 1, 2010.
4. HMV Japan K.K. became LAWSON’s consolidated subsidiary as a result of the acquisition of all of HMV Japan K.K.’scommon shares issued and outstanding held by HMV Japan Holdings Co., Ltd. (5,001 shares) on December 1, 2010.
5. Cross Ocean Media, Inc. became LAWSON’s consolidated subsidiary as a result of LAWSON, ASATSU-DK INC. andNTT DOCOMO, INC. establishing a joint venture on March 1, 2010.

2) Other Important Business Combinationsi) Important Affiliated Companies
Company Name

Common Stock

SHANGHAI HUALIANLAWSON CO., LTD.
LAWSON Okinawa, Inc.
Venture Republic Inc.

CNY165,898
thousand¥10 million¥307 million

Shareholding
(%)
49.0
49.0
35.4

Major BusinessConvenience store businessConvenience store businessEntertainment/e-commercebusiness

Note: Although LAWSON concluded a capital and operational alliance agreement with Venture Republic Inc. on January 28, 2011, theCompany determined that its acquisition date would be March 31, 2011 because the balance sheet date for Venture Republic Inc. isdifferent from the balance sheet date for the Company. For this reason, Venture Republic Inc. has been excluded from the scope of
application of the equity method for this period.

ii) Important Business Alliances
Mitsubishi Corporation holds 32.5% of the total voting rights (32,399 thousand shares) of the Company (including
indirect holdings). Recognizing Mitsubishi Corporation as the most important strategic partner, the Company hasentered into an extensive business tie-up agreement with Mitsubishi Corporation for the enhancement of existing
businesses and the development of new businesses.

9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 433,040 shares of treasury stock)
Note: Ninety-nine Plus Inc. and LAWSON ENTERMEDIA, INC. have been consolidated as wholly owned subsidiaries of LAWSON
through share exchanges effective July 1, 2010. As a result, the total number of shares issued and outstanding increased by 1,602,189
shares. Pursuant to Article 178 of the Companies Act, the Company cancelled 902,189 shares of its treasury stock as of August 11,
2010.

(3) Number of Unit (tangen) Shares:(4) Number of Shareholders:(5) Major Shareholders:

100 shares
40,921

Shareholder’s Name
Mitsubishi Corporation
Marubeni Foods Investment Co., Ltd.
Japan Trustee Services Bank, Ltd. (Trust account)
The Master Trust Bank of Japan, Ltd. (Trust account)
STATE STREET BANK AND TRUST COMPANY 505223
NTT DOCOMO, INC.
The Chase Manhattan Bank NA, London SL, Omnibus Account
Deutsche Securities Inc.
Rabobank Nederland, Tokyo Branch
STATE STREET BANK AND TRUST COMPANY 505225
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 stock.

10

Investment in the Company
Number of shares held
Shareholding (%)(Thousands)
32,089
32.1
4,786
4.8
4,262
4.3
3,870
3.9
3,162
3.2
2,092
2.1
1,440
1.4
1,330
1.3
1,080
1.1
883
0.9

2. Status of stock acquisition rights
Stock Acquisition Rights Held by Corporate Officers of the Company as of February 28, 2010
6th (b) Stock
5th Stock
6th (a) Stock
Acquisition
Acquisition
Acquisition Rights
RightsRightsNumber of option holders and the number of stock acquisition rights (units)
Directors (Excluding
1 person
3 persons
3 personsoutside directors)(112 units)(137 units)(180 units)
Outside directors
3 persons
3 persons
3 persons(21 units)(18 units)(90 units)
Class and number ofCommonCommon stock ofCommon stock ofshares subject to stock
stock ofLAWSON, INC.
LAWSON, INC.
acquisition rights
LAWSON,
15,50027,000INC.
13,300
Value of property
invested in exercising¥1¥1¥4,053stock acquisition rights(per share)
Exercise period
October 13,
October 27, 2006
October 28, 20082005 throughthrough May 26,
through October
May 31, 2025
2026
26, 2011
Main exercise
Note 1
Note 2
Note 3
conditions

7th (a) Stock
Acquisition
Rights4 persons(162 units)
3 persons(18 units)
Common stock of
LAWSON, INC.
18,000¥1
September 6,
2007 throughAugust 20, 2027
Note 28th (a) Stock
9th Stock Acquisition
10th Stock
Acquisition Rights
RightsAcquisition Rights
Number of option holders and the number of stock acquisition rights (units)
Directors (Excluding
4 persons (239 units) 4 persons (194 units)
4 persons (166 units)
outside directors)
Outside directors
3 persons (25 units)
3 persons (21 units)
3 persons (23 units)
Class and number ofCommon stock ofCommon stock ofCommon stock ofshares subject to stock
LAWSON, INC.
LAWSON, INC.
LAWSON, INC.
acquisition rights
26,40021,50018,900
Value of property
invested in exercising¥1¥1¥1
stock acquisition rights(per share)
Exercise period
January 17, 2009
February 18, 2010
February 26, 2011
through December
through February 1,
through February 10,
15, 2028
2030
2031
Main exercise
Note 2
Note 2
Note 2conditions
Notes:
1. A stock acquisition rights holder may exercise his or her rights only for a period of five (5) years from the day after losing 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 five (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 stock options when the closing price for ordinary transactions of theCompany’s common stock on the Tokyo Stock Exchange on the day immediately preceding the exercise date (the closing price of thenearest preceding trading day if such closing price was not established on the preceding day) exceeds the amount of the above “Value of
property invested in exercising stock acquisition rights (per share)” by 1.1 times or more (with a fraction below one (1) yen to be roundedup).
The total number of shares subject to stock acquisition rights that remain unexercised as of February 28, 2011 is 279,100 shares,
accounting for 0.3% of the total number of shares issued and outstanding.

11

3. Directors and Corporate Auditors(1) Positions, Names and Assignments
Name

Position

Assignments and Important Concurrent Positions
Note: Important concurrent positions of outside directors given later in (4) Outside Directors andOutside Corporate Auditors

Takeshi Niinami
Yoshiyuki Yahagi
Manabu Asano
Toru Moriyama

Representative Director
Director
Director
Director

Hiroshi Tasaka
Reiko Yonezawa
Takehiko Kakiuchi
Munehiko Nakano

Director
Director
DirectorStanding Corporate
AuditorStanding Corporate
AuditorCorporate Auditor
Corporate Auditor

Atsuhiko Seki
Tetsuo Ozawa
Kazuyuki Masu

President and CEO
Senior Executive Vice President and CFO
Executive Vice President and CCO
Executive Vice President, Group COO, Living Essentials Group,
Mitsubishi Corporation

Notes:
1. Directors Hiroshi Tasaka, Reiko Yonezawa and Takehiko Kakiuchi are outside directors as stipulated in Article 2, Item 15, of theCompanies Act of Japan.
2. Standing Corporate Auditor Munehiko Nakano and Corporate Auditors Tetsuo Ozawa and Kazuyuki Masu are outside corporate
auditors as stipulated in Article 2, Item 16, of the Companies Act.
3. Standing Corporate Auditor Munehiko Nakano has assumed responsible posts for many years in the accounting and administration
departments of Mitsubishi Corporation and therefore has considerable expertise in finance and accounting.
Standing Corporate Auditor Atsuhiko Seki has assumed responsible posts for many years in the administration and other departmentsof LAWSON and therefore has considerable expertise in corporate legal affairs.
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 and accounting.
Corporate Auditor Kazuyuki Masu has assumed responsible posts for many years in the accounting and administration departments of
Mitsubishi Corporation and therefore has considerable expertise in finance and accounting.
4. Changes in positions as approved with resolutions by the 35th Ordinary General Meeting of Shareholders held on May 25, 2010, are as
follows:
Appointment
Standing Corporate Auditor
Atsuhiko Seki
Corporate Auditor
Kazuyuki Masu
Retirement from officeStanding Corporate Auditor
Kenji Yamakawa
Corporate Auditor
Hiroshi Kuwata
5. LAWSON appointed, at its Board of Directors meeting, Director Hiroshi Tasaka and Corporate Auditor Tetsuo Ozawa as independent
directors as specified in the rules set by the Tokyo Stock Exchange, Inc. and the Osaka Stock Exchange Co., Ltd., and filed
notifications to that effect with both stock exchanges.
6. Executive officers who are not directors are as follows:
Senior Executive Vice President
Takatoshi Kawamura
Senior Vice President
Masahiro Oyama
Executive Vice President
Shuichi Imagawa
Senior Vice President
Tatsushi Sato
Executive Vice President
Masaharu Kamo
Senior Vice President
Kei Murayama
Senior Vice President
Norikazu Nishiguchi
Senior Vice President
Ichiro Kijima
Senior Vice President
Shigeaki Kawahara
Senior Vice President
Hisashi Yasuhira
Senior Vice President
Takaki Mizuno
Senior Vice President
Atsushi Maeda
Senior Vice President
Hajime Nakai
Senior Vice President
Kazuo Togasa
Senior Vice President
Jun Miyazaki12(2) Amounts of Remuneration, etc., Paid to Directors and Corporate Auditors

Category

Directors(Including outside directors)(Outside directors)
Corporate Auditors(Including outside corporate
auditors)(Outside corporate auditors)
Total

Total
Compensation
Paid

Total Compensation Paid by Type(Millions of Yen)

Number of
Directors andCorporate
Auditors
Applicable(Millions of Yen)

Basic
Compensation

Stock Options

Retirement
Benefit

214

163

50

－

7

(44)

(38)

(6)

(－)

(3)

69

54

－

14

6

(42)
283

(36)
218

(－)
50

(6)
14

(4)
13

Notes:
1. As of February 28, 2010, the number of directors in office was 7 and that of corporate auditors was 4.
2. The above figures include remuneration paid to 2 corporate auditors who retired at the conclusion of the 35th Ordinary General
Meeting of Shareholders held on May 25, 2010.
3. In addition to the above, total remuneration received from LAWSON subsidiaries, etc. by outside corporate officers was ¥1 million,
which was received by 1 person.
(3) Policy on Decisions Concerning the Amounts of Remuneration, etc. Paid to Directors and Corporate Auditors
The amounts of remuneration paid to directors of LAWSON are set in close correlation with financial performance and insuch a way that value can be shared with the shareholders.

Remuneration of directors, which is composed of basic compensation and stock options as compensation, is paid within thelimit of the amount of annual remuneration resolved at the General Meeting of Shareholders. The basic compensation iscomposed of fixed compensation commensurate with the position and variable compensation, which fluctuates in response
to corporate financial performance. The baseline pay is decided in accordance with the directors’ remuneration system.
The variable compensation is decided mainly based on quantitative elements such as corporate financial performance.
Decisions concerning remuneration are made at the Board of Directors meeting in accordance with the recommendations of
the Compensation Committee, which consists of outside directors and outside corporate auditors.
As for remuneration of corporate auditors, fixed compensation amounts are decided for each corporate auditor based on
discussions by the corporate auditors, within the limit of the amount of annual remuneration resolved at the General
Meeting of Shareholders. As for the corporate auditors’ retirement benefits, reasonable amounts are to be paid based on
discussions by the corporate auditors and pursuant to a resolution made at the General Meeting of Shareholders and thestandards stipulated by internal rules.

13(4) Outside Directors and Outside Corporate Auditors
1) Relationship Between Major Positions Concurrently Held and the Company
Position in the
Name
Position
Details
Company
Concurrently Held
Director

Hiroshi Tasaka

Graduate Schoolof Tama
University
SophiaBank
LimitedSBI Holdings, Inc.

Director

Reiko Yonezawa

The Japan
Research Institute,
LimitedThe R Co., Ltd.

Director

Takehiko
KakiuchiMitsubishi
Corporation
Kentucky Fried
Chicken Japan,
Ltd.
The Nisshin
OilliO Group, Ltd.

Relationship Between the
Company and Company Where
Position Concurrently Held

Professor

President
Director
FellowPresident

The Company and The R Co.,
Ltd., in which Reiko Yonezawa
is President, have a business
relationship with regard to theentrustment of reception
services.

Division COO,
Foods
(Commodity) Div.
Outside director

The Company and Mitsubishi
Corporation, of which Mr.
Kakiuchi is an employee andwhich is a large shareholder of
the Company, have a business
relationship under an extensive
business alliance agreement.

Outside director

Corporate auditor

Munehiko Nakano

Ninety-nine Plus
Inc.

Outside corporate
auditorCorporate auditor

Tetsuo Ozawa

Corporate auditor

Kazuyuki Masu

Tokyo Fuji Law
OfficeMonex Group,Inc.
CEMEDINE CO.,LTD.
Mitsubishi
Corporation

Lawyer(Partner)
Outside corporate
auditorOutside corporate
auditor
General Manager,
Administration
Dept. of Corporate
Section

The Company and Ninety-nine
Plus Inc. have a businessalliance mainly regarding joint
procurement and joint productdevelopment.

The Company and Mitsubishi
Corporation, of which Mr.
Masu is an employee andwhich is a large shareholder of
the Company, have a business
relationship under an extensive
business alliance agreement.

Note: Where nothing is written in the column Relationship Between the Company and Company Where Position Concurrently Held, itmeans that the Company has no important business or other relationship with that company.

142) Major Activities During the Year
Position in the Company
Name
Director
Hiroshi Tasaka

Director

Reiko Yonezawa

Director

Takehiko Kakiuchi

Corporate auditor

Munehiko Nakano

Major Activities
Mr. Tasaka attended 11 of 13 Board meetings held
during the year and appropriately questioned and/or
remarked based on his abundant experience andknowledge as a learned person and a management
executive.
Ms. Yonezawa attended 11 of 13 Board meetings held
during the year and appropriately questioned and/or
remarked based on her abundant experience andknowledge as a management executive.
Mr. Kakiuchi attended 12 of 13 Board meetings held
during the year and appropriately questioned and/or
remarked based on his deep knowledge about theconsumer lifestyles industry and was also responsible
for smooth operations of the Board of Directors as its
Chairman.
As a standing corporate auditor, Mr. Nakano examinedfinancial documents, and visited relevant
establishments and business partners to examine
business operations and financial positions thereof. He
monitored and verified the execution of duties of
directors and other personnel including those relating to
the improvement of internal control systems, and was
also responsible for smooth operations of the Board of
Corporate Auditors as its Chairman.
Mr. Nakano attended 13 of 13 Board of Directors’
meetings and 15 of 15 Board of Corporate Auditors’
meetings held during the year and appropriately
questioned and/or remarked based on his abundantoccupational experience in accounting andinvestment management.
Corporate auditor

Tetsuo Ozawa

Corporate auditor

Kazuyuki Masu

Mr. Ozawa attended 10 of 13 Board of Directors’
meetings and 14 of 15 Board of Corporate Auditors’
meetings held during the year and appropriately
questioned and/or remarked based on his abundant
experience and knowledge as a lawyer.
Mr. Masu attended 10 of 10 Board of Directors’
meetings and 11 of 11 Board of Corporate Auditors’
meetings held during his term in office in the year andappropriately questioned and/or remarked based on his
abundant experience in financial accounting and risk
management.

LAWSON appointed, at its Board of Directors meeting, Director Hiroshi Tasaka and Corporate Auditor Tetsuo Ozawa as independent
directors as specified in the rules set by the Tokyo Stock Exchange, Inc. and the Osaka Stock Exchange Co., Ltd., and filed notifications
to that effect with both stock exchanges.

(5) 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 Corporate Law, 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
Corporate Law.

15

4. Independent Auditor(1) Independent Auditor
Deloitte Touche Tohmatsu LLC(2) Amounts of Remunerations, etc., to Be Paid to the Independent Auditor
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 its
subsidiaries to the Independent Auditor¥78 million¥128 million

Note:
1.The audit agreement entered into by the Independent Auditor and the Company does not clearly distinguish the amount for the audit
under the Corporate Law and that for the audit under the Financial Instruments and Exchange Act, and the two amounts cannot be
substantially distinguished from each other. Therefore, the amount in 1) above indicates the total for the two audits. In addition to theabove, LAWSON and its subsidiaries paid ¥28 million as additional remuneration for the previous term.
2. One of the important subsidiaries of LAWSON overseas is subject to audit by an independent auditor other than LAWSON’s
independent auditor.

(3) Non-Audit 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 Law (non-audit services), to the Independent Auditor:
Advice on and guidance on the preparation of documents translated into English for earnings reports and other various
financial documents; and(4) Policy on Decisions Concerning Dismissal or Non-Reappointment of the Independent Auditor
If the Independent Auditor violates or infringes the Corporate Law, the Certified Public Accountant Law, or other laws
or regulations, or the Company considers it necessary to do so, the Board of Directors shall, after obtaining theagreement of the Board of Corporate Auditors, submit a proposal for dismissal or non-reappointment of the Independent
Auditor to a general meeting of shareholders. In addition, the Board of Corporate 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 Corporate Law.

16

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 21, 2011, based on improvements and the operation of thepreceding “2010 Basic Policy for Improvement of Internal Control Systems,” which was approved at the Board of
Directors’ meeting held on February 22, 2010, the Company passed a resolution called the “2011 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 (hereinafter, 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 the statusconcerning 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 bythoroughly disseminating the LAWSON Group Code of Conduct and the LAWSON Ethical Mission Statement bysuch measures as, including, but not limited to, appointing a Chief Compliance Officer (CCO), establishing adepartment to oversee compliance, assigning personnel in charge of compliance at each department, streamlining
the rules in relation to compliance, and providing periodic training on ethics and awareness surveys oncompliance.
6) The Legal Affairs Department shall be reinforced to fortify foundations for complying with legal requirements byidentifying the laws and regulations applicable to the Company’s businesses and communicating the content
thereof to the relevant departments and sections.
7) The Company shall establish and upgrade normal reporting routes for reporting any violations of laws,
regulations or internal rules, and upgrade reporting and consulting systems (internal and outside contact points
and a group-wide consulting contact point) that fully protect those who report more positive. By establishing a
consulting contact point for employees and business counterparties for LAWSON’s franchised stores, theCompany shall strive for early detection of violations or possible violations of laws, regulations, etc. across theentire LAWSON chain.
8) The Company shall never become involved with antisocial forces or bodies that threaten the order and security ofsociety, and shall take a firm stance on, and deal with, improper demands by consulting with lawyers, 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 to maintaining
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.
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 and important
trade secrets.
5) The Company shall establish and maintain rules regarding the disclosure of important Company information, andupgrade the system for disclosing information that must be disclosed according to the requirements of laws,
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, the Company shall17

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 probabilityof such risk factors materializing and their impact, and evaluating whether intensive countermeasures should betaken.
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 the committee
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, which might
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, the Company shallformulate a Business Continuity Plan (BCP) and a Business Continuity Management (BCM) 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) 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 communicated by employees tocorporate officers in a timely manner.
(5) Systems to Ensure the Propriety of Business Operations Conducted by the Corporate Group Consisting of theCompany and Its Subsidiaries
1) The Company shall endeavor to maintain and enhance the LAWSON brand through close collaboration withsubsidiaries and affiliated companies (hereinafter, “Associated Companies”). However, with regards to affiliatedcompanies, 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 in laws,
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 forthe management of Associated Companies and management policies thereof, and keep the Associated Companies
fully informed of the LAWSON Group Code of Conduct.
3)
The Company shall appoint designated persons at major Associated Companies to be responsible for promoting
compliance and risk management with a view to ensuring the appropriateness of business operations across theentire LAWSON 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 and 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 a properand 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- and third-party evaluation andimprovement through the identification and recording of business processes at important business bases and thestatus of Company-wide internal controls. The results of these evaluations of, and improvements 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 as employees exclusively to assist
Corporate Auditors in the execution of their duties (hereinafter, “Corporate Auditors’ Staff”).
2) Corporate Auditors’ Staff may serve concurrently as Corporate Auditors of Associated Companies.

18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 sothat the Corporate Auditors can carry out their duties effectively. Such important matters include compliance- andrisk-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 orloss, 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.
(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 and the ratios arerounded to the nearest whole number.

19

Consolidated Balance Sheet (As of February 28, 2011)(Millions of yen)
Assets
Account item
Current assets
Cash and bank deposits
Accounts receivable—due from
franchised stores
Marketable securities
Merchandise inventories
Prepaid expenses
Accounts receivable—other
Deferred tax assets
Other
Allowance for doubtful accounts
Fixed assets
Property and store equipment
Buildings and structures

Amount145,00974,816
16,159
2,999
7,011
7,424
29,285
4,943
2,466
(97)
331,026
158,833
96,401

Furniture, fixtures and equipment

13,241

Land

6,609

Lease assets

41,934

Construction in progress
Intangible assets
Software
Software development inprogress
Goodwill
Other
Investments and other
Investments in securities
Long-term loans receivable
Long-term prepaid expenses

646
36,09623,182
4,719
7,717
477
136,096
3,116
31,825
5,736

Lease deposits
Deferred tax assets

81,654
13,253Claims provable in bankruptcy,
claims provable in rehabilitationand other
Other
Allowance for doubtful accounts
Total Assets

Liabilities
Account item
Current liabilities
Accounts payable —trade
Accounts payable— due tofranchised stores
Lease obligations
Accounts payable—other
Income taxes payable
Deposits received
Accrued employees’ bonuses
Provision for use of points granted
Other
Long-term liabilities
Long-term debt
Long-term lease obligations
Allowance for employees’
retirement benefits
Allowance for retirement benefits
to executive officers and corporate
auditors
Deposits received from
franchisees and lessees
Allowance for impairment loss on
leased property
Other
Total liabilities
Net assets
Owners’ equity

Amount192,595
81,398
1,179
7,953
18,23910,67362,340
3,768
1,287
5,753
74,974500
28,253
7,529
234

37,139667
650
267,570
208,466
204,11758,506
47,696
99,608(1,693)(638)(4)

15,372

Common stock
Capital surplus
Retained earnings
Treasury stock
Valuation and translation adjustments
Net unrealized loss onavailable-for-sale securities
Land revaluation difference
Foreign currency translation
adjustments
Stock acquisition rights

1,184(16,047)
476,036

Minority interests
Total net assets
Total Liabilities, and Total Net Assets

4,581
208,466
476,036

20

(634)
1
405

Consolidated Statement of Income(From March 1, 2010 to February 28, 2011)(Millions of yen)Account item
Operating revenues
Franchise commissions from franchised stores
Other
Net sales
Net sales
Total operating revenues
Cost of goods sold
Gross profit on sales
Operating gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest received
Compensation received for removal
Equity in earnings of affiliates
Other
Non-operating expenses
Interest expense
Loss on cancellation of store lease contract
Other
Ordinary profit
Extraordinary gains
Gain on sale of investment in securities
Extraordinary losses
Loss on sale of fixed assets
Loss on disposal of fixed assets
Loss on impairment of long-lived assets
Other
Income before income taxes and minority interests
Income taxes－current
Income taxes – deferred
Minority interests in net income
Net income

Amount197,673
51,274(192,329)(143,101)(49,228)

248,947
192,329441,277
143,101
298,176
242,635
55,540

661
207
311
537
983
1,224
457

1
1,303
3,017
4,989
873
16,551
1,668

21

1,718

2,665
54,594
1

10,184
44,411
18,220803
25,386

Consolidated Statement of Changes in Net Assets(From March 1, 2010 to February 28, 2011)(Millions of yen)
Owners’ equity

Balance at the end of
previous period

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
owners’equity58,506

41,52094,171(1,713)

192,485

Valuation and translation adjustments
Total
Net unrealized
Foreignvaluation
loss onLand
currencytranslation
andavailablerevaluationdifferencetranslation
for-saleadjustments
adjustments
securities

14

(634)

65

(554)

Stock
acquisitionrightsMinority
interests

Total net
assets346

5,858

198,135

Changes of items during theperiod6,176

Increase by share exchanges

6,176(16,422)
25,386

6,176(16,422)
25,386(3,510)(3,510)(3,510)

(0)

1

1

1

(3,528)

3,528

－

－

(16,422)
25,386

Dividends from surplus
Net income
Purchase of treasury stock –at cost
Disposal of treasury stock
Retirement of treasurystock
Net changes of items otherthan owners’ equity – net
Total changes of items during
the period
Balance at the end of thecurrent period

(19)

(64)

(83)

59

(1,276)(1,301)

－

6,176

5,436

19

11,632

(19)

－

(64)

(83)

59

(1,276)

10,33158,506

47,696

99,608(1,693)204,117

(4)

(634)

1

(638)

405

4,581

208,466

22

(Notes to the Consolidated Financial Statements)
1. Scope of consolidation(1) Consolidated subsidiaries: 7(Domestic) LAWSON ENTERMEDIA, INC.
LAWSON ATM Networks, Inc.
BestPractice Inc.
Ninety-nine Plus Inc.
Cross Ocean Media, Inc.
HMV Japan K.K.
(Foreign) CHONGQING LAWSON, Inc
On March 1, 2010, Cross Ocean Media, Inc. which was established as a joint venture between LAWSON,ASATSU-DK INC. and NTT DOCOMO, INC. became LAWSON’s consolidated subsidiary.
HMV Japan K.K. became LAWSON’s consolidated subsidiary as a result of the acquisition of all of HMV
Japan K.K.’s common shares issued and outstanding held by HMV Japan Holdings Co., Ltd. (5,001 shares)
through a transfer of shares on December 1, 2010.
CHONGQING LAWSON Co., Ltd. was established on April 29, 2010 as a 100% subsidiary of LAWSON.
(2) Names of major non-consolidated subsidiaries, etc.
LAWSON Toyama, Inc.,LAWSON Toyama, Inc., categorized as a non-consolidated subsidiary, has been excluded from theapplication of the equity method because it has a negligible impact on total assets, net sales, net income,retained earnings, etc., and does not interfere with reasonable judgment of the corporate group’s financial
condition and business results.
2. Application of the equity method(1)Unconsolidated subsidiaries and affiliated companies to which the equity method is applied: 2(Domestic) LAWSON Okinawa, Inc.
(Foreign) SHANGHAI HUALIAN LAWSON CO., LTD.
(2) Affiliated companies to which the equity method is not applied
The Company does not apply the equity method to two affiliated companies (KOBE HOT DELI Co., LTD.
and LAWSON Farm Chiba, Inc.) and LAWSON Toyama, Inc., categorized as a non-consolidated
subsidiary, because the financial figures such as net income, retained earnings, and others are negligibly
insignificant in comparison with the Company’s consolidated financial statements.
Among affiliates not accounted for by the equity method, Venture Republic Inc. has been excluded fromthe application of the equity method because the deemed acquisition date is not arrived.
(3) Special notes concerning procedures for application of the equity method:Among companies accounted by the equity method, the closing date is December 31 for SHANGHAIHUALIAN LAWSON CO., LTD. . When preparing the consolidated financial statements, the Company
used this company’s financial information prepared based on the financial data at the end of the most recent
fiscal quarter and, as required, made certain adjustments for significant transactions that subsequently
occurred in the intervening period until the end of the consolidation fiscal year.
3. Fiscal year-end of the consolidated subsidiaries
The balance sheet date of HMV Japan K.K. is April 30 and the balance sheet date of CHONGQINGLAWSON Co., Ltd. is December 31. In order to prepare for the consolidated financial statements, temporary
financial statements based on the latest quarterly financial statements are used and significant transactions
which occur between the latest quarterly balance sheet date and the consolidated balance sheet date areadjusted as required for consolidation. The fiscal year-end date for the other consolidated subsidiaries
correspond with the consolidated balance sheet date.

23

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 isdetermined based on the moving-average method.
Other: Stated at cost determined by the moving-average method.
Inventories:
Inventories at cost being determined by the retail method (the book value on the balance sheet is written
down based on a decline in profitability) in accordance with this standard.
Merchandise of some consolidated subsidiaries is stated at cost determined by the specific identification
method (the book value on the balance sheet is written down based on a decline in profitability).
(2) 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 andstructures 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 theinternal useful life.
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 term as theuseful life and a residual value of zero.
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 an amount of possible losses from uncollectible
receivables based on the actual rate of losses from bad debt for ordinary receivables, and on estimatedrecoverability for specific doubtful receivables.
Accrued Employees’ Bonuses:
Accrued employees’ bonuses are provided for payments of employees’ bonuses based on the estimatedamounts.
Provision for use of points granted:
The Company provides, mainly to MY LAWSON POINT holders and LAWSON PASS holders whenpurchasing goods, an entitlement to certain points that the holder can redeem for a discount on
subsequent purchases from LAWSON stores.
Allowance for Employees’ Retirement Benefits:
Allowance for employees’ retirement benefits are provided at the amount calculated based on the
projected benefit obligations and plan assets at the balance sheet date. 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. Prior service cost is
mainly amortized, starting with the fiscal year incurred, on a straight-line basis over a certain period(10 years) within an average remaining service period of employees.
24Allowance for Retirement Benefits to Executive Officers and Corporate Auditors:
Allowance for retirement benefits to corporate auditors and executive officers of the Company, and todirectors and corporate auditors of a certain consolidated subsidiary, are calculated to state the liability
at 100% of the amount that would be required if all corporate auditors, executive officers and directors
terminated their services with the Company at the balance sheet date.
(4) Foreign Currency Translation and Foreign Currency Financial Statements
All short-term and long-term monetary receivables and payables denominated in foreign currencies aretranslated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains
and losses from translation are recognized in the consolidated statement of income. The balance sheet
accounts as well as revenue and expense accounts of foreign affiliated companies are translated into
Japanese yen at the current exchange rate as of the balance sheet date except for shareholders’ equity,which is translated at the historical rate. Differences arising from such translation are shown as “foreign
currency translation adjustments” in a separate component of net assets.
(5) Leases
Finance leases without ownership transfer of the leased property to the lessee whose lease inception was
before February 28, 2009 are accounted for as operating lease transactions.
(6) Accounting for Consumption Tax
Consumption tax is excluded from income and expense.
(7) Change of Significant Accounting Policies
1) Adoption of Accounting Standard for Business Combinations
Effective from the year ended February 28, 2011, the Company adopted the “Accounting Standard forBusiness Combinations” (ASBJ Statement No. 21 issued on December 26, 2008), the “AccountingStandard for Consolidated Financial Statements” (ASBJ Statement No. 22 issued on December 26, 2008),
and the “Guidance on Accounting Standard for Business Combinations and Accounting Standard forBusiness Divestitures, etc.” (ASBJ Guidance No. 10 issued on December 26, 2008).
2) Adoption of Partial Amendments to Accounting Standard for Retirement Benefits (Part 3)
Effective from the year ended February 28, 2011, the Company adopted the “Partial Amendments to
Accounting Standard for Retirement Benefits” (ASBJ Statement No. 19 issued on July 31, 2008). Thischange had no effect on operating income, ordinary income and income before income taxes and minority
interests.
5. Valuation of assets and liabilities of consolidated subsidiaries
The assets and liabilities of consolidated subsidiaries, including the portion attributable to minority interests, arecarried in the consolidated balance sheet at their fair values at the respective dates when the subsidiaries were
initially consolidated.
6. Amortization of Goodwill
Goodwill is amortized on a straight-line basis over relevant years, depending on the reason for the occurrence of
goodwill with maximum of 20 years.

25

(Notes to the Consolidated Balance Sheet)
1. Accumulated depreciation of property and store equipment:¥ 153,499 million

2. 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 road-based 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 assessedvalue 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¥ 269 million.
(Notes to the Consolidated Statement of Income)Long-lived assets
The Group recognized an impairment loss mainly for each store with the smallest cash generating unit.
The Group recognized an impairment loss on the following assets that declined in value due mainly to continuous
operating losses. The carrying amount of those assets were written down to the recoverable amount and wererecorded in special losses.
Category by use
Location
AssetsMillions of yen
Tokyo
1,223
Buildings and structures・Furniture, fixtures andequipment and others
StoresOsaka
192〃
Others2,128〃―
Software
1,438
Other
―
Other
6
Total
―
―
4,989
Category by fixed assets（Millions of yen）
Buildings and structures
2,043
Furniture, fixtures and equipment
380
Leased property
1,094
Software
1,438
Other
31
Recoverable value of the impaired assets is calculated based on the net selling price or value in use. The net
selling price of land was calculated based on the appraised value by the real estate appraiser or expected
contract price, and the value in use was calculated by discounting estimated future cash flows to which mainly
the 3.3% discount rate was applied.

26

(Notes to the Consolidated Statement of Changes in Net assets)
1. Number of shares of outstanding stock and treasury stock.
Number of shares at
Increase during the Decrease during the Number of shares atthe end of previous
periodperiodthe end of the period
period(thousand shares)(thousand shares)(thousand shares)(thousand shares)
Outstanding stock
Common stock (*1)
99,6001,602
902
100,300
Treasury stock
Common stock (*2)

432

903

902

433

(*1) The 1,602,000 increase in shares outstanding resulted from the 1,314,000 increase in shares outstanding due to theshare exchange between the Company and Ninety-nine Plus Inc., effective as of July 1, 2010, and the 287,000
increase in shares outstanding due to the share exchange between the Company and LAWSON ENTERMEDIA,
INC., effective as of July 1, 2010. The 902,000 decrease in shares outstanding resulted from the retirement oftreasury stock.
(*2) The 903,000 share increase in treasury stock resulted from the 902,000 share increase due to acquisition of treasury
stock in accordance with a Board of Directors' resolution and the 1,000 share increase due to purchase of stock lessthan one share unit.
The 902,000 share decrease in treasury stock resulted from the 902,000 share decrease due to retirement of treasury
stock.

2. Dividend(1) Dividend payment
Date ofresolution
The General
meeting ofshareholders(May 25, 2010)
Directors’
meeting(October 12,
2010)

Class ofsharesAmount ofdividend
payment(Millions ofyen)

Dividend
per share(yen)

Date attributable todividend

Effective dateCommon
stock

7,933

80

As of February, 28,2010

As of May, 26,
2010

Common
stock

8,488

85

As of August 31,
2010

As of November,
10, 2010(2) Dividends for which the effective date is after the year - end balance sheet date, while dividends
attributed in this period.
Date ofresolution

Class ofsharesReserveof
Dividend

The General
meeting ofshareholders(May 24,2011)

Commonstock

Retained
Earnings

Amount ofdividend
Dividend per Date attributable topayment
share (yen)dividend(Millionsof yen)Effective date

As of February, 28,
2011

As of May, 25,
2011

8,488

85

3. Kind and number of stock which can be exercised by outstanding stock acquisition rights (excluding those
before exercisable period).
Common stock
279,100 shares

27

(Notes regarding financial instruments)
1. Matters relating to the status of financial instruments(1) Policy for financial instruments
The LAWSON Group primarily uses short-term deposits, etc. to manage its funds and raises funds as necessary
through borrowings from financial institutions and leasing according to the financial plan. The Company does notengage in derivative transactions.
(2) Nature, extent of risk and risk management system for financial instruments
Trade receivables such as other accounts receivable are exposed to credit risk from business counterparties.
Long-term loans receivable (primarily referring to construction cooperation funds which are loaned to the owners
when a store opens and loans to franchised stores) and lease deposits are exposed to credit risk from the owners,
etc. The department responsible manages liabilities regarding these risks on a daily basis with the aim of early
detection and reduction of concerns associated with the collectability of debt due to deterioration in the financial
conditions of the owners.
Marketable securities are government bonds which are financial instruments with low risk and high liquidity.
Investment securities are primarily shares of companies with business relationships and listed shares of which areexposed to the risk of market price fluctuations. With regard to this risk, the Company monitors the financial
conditions of bond issuers and business counterparties on a regular basis.
Among trade payables, most of the accounts payable-trade and deposits held as a result of bill settlement services
have payment due dates within one month, while most deposits held as a result of ticket sales transactions havepayment due dates within six months.
The primary purpose of long-term debt and lease obligations related to finance lease transactions is securing theoperating capital and funds required for capital investments, and their maximum redemption dates are two years
and seven years after the balance sheet date, respectively.
Deposits received from franchisees and lessees are primarily operational deposits received from franchised storesbased on franchise contracts are returned to franchised stores after the expiry of the franchise contract term
(contract term is 10 years in principle.).
With regard to the liquidity risk associated with fund raising (risk for which payment cannot be executed on thepayment due date), the Company prepares and updates financial plans on a timely basis and manages liquidity
risk by measures including maintaining liquidity on hand.
(3) Fair values of financial instruments
Fair values of financial instruments are based on the quoted price in active markets. If quoted price is notavailable, other rational valuation techniques are used instead. The result of estimation might differ if othervaluation techniques were used.
2. Matters relating to the fair values of financial instruments
The carrying amount, fair values and the unrealized gain/loss as of February 28, 2011, are as follows. (Financial
instruments whose fair value cannot be reliably determined are not included as described in “(Note 2) Financial
instruments whose fair value cannot be reliably determined.”)28

(Millions of yen)
(1) Cash and bank deposits(2) Accounts receivable—other
Allowance for doubtful
accounts (*1)(3) Marketable securities andinvestment securities(i) Held-to-maturity debt
securities(ii) Available-for-salesecurities(iii) Investment in subsidiaries
and affiliated companies(4) Long-term loans receivable
Allowance for doubtful
accounts (*1)(5) Lease deposits
Allowance for doubtful
accounts (*1)(6) Claims provable inbankruptcy, claims provable inrehabilitation and other
Allowance for doubtful
accounts (*1)
Total assets(1) Accounts payable—trade(2) Deposits received(3) Long-term debt
(4) Lease obligations (*2)(5) Deposits received from
franchisees and lessees
Total liabilities

Carrying amount
74,81629,285(47)
29,23874,816

Unrealized gain/loss－

29,238

－

2,999

2,999

(0)

144

144

－

599

449

(149)

31,78377

71,795－(9,334)(15,353)18
220,653
81,39862,340500
36,207
37,13918
211,246
81,39862,340500
36,831
32,761－(9,407)－－0
173(4,378)217,585

213,381(4,204)

31,825(119)
31,70681,654(523)
81,13015,372

Fair value(*1) Allowance for doubtful accounts posted against other accounts receivable—other, long-term loans receivable,lease and claims provable in bankruptcy, claims provable in rehabilitation and other, have been deducted.
(*2) Lease obligations are indicated including liabilities maturing within one year.
(Note 1) Method of calculating the fair values of financial instruments(1) Cash and bank deposits (2) Accounts receivable—other
The carrying fair values of cash and bank deposits and accounts receivable—other approximate fair value becauseof their short maturities.
(3) Marketable securities and investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for theequity instruments, and at the quoted price obtained from the financial institution for certain debt instruments.
(4) Long-term loans receivable
The fair values of long-term loans receivable are determined by discounting the cash flows related to the loans at
the interest rate deemed to be applied for similar loans.
(5) Lease deposits
The fair values of lease deposits are determined by discounting future cash flows which reflect the collectibility
with the yield rate of government bonds during the remaining period.
(6) Claims provable in bankruptcy, claims provable in rehabilitation and other29The fair values of claims in bankruptcy, claims provable in rehabilitation and other are stated at book value
because the estimated amount of bad debt is calculated based on the collectibility, and fair values are close to theamount which can be calculated by deducting the estimated amount of current bad debt from the carrying valueon the consolidated balance sheets on the consolidated balance sheet date.
Liabilities(1) Accounts payable—trade (2) Deposits received
The carrying values of accounts payable—trade and deposits received approximate fair value because of theirshort maturities.
(3) Long-term debt
The fair values of long-term debt are determined by discounting the cash flows related to the debt at the Group’s
assumed corporate discount rate.
(4) Lease obligations
The fair values of lease obligations are determined by discounting the cash flows related to the obligations at theGroup’s assumed corporate discount rate.
(5) Deposits received from franchisees and lessees
The fair values of deposits received from franchisees and lessees are determined by discounting future cash flows
based on the estimated repayment amount with the yield rate of government bonds during the remaining period.
(Note 2) Financial instruments for whose fair values cannot be reliably determined
Category
Carrying amount (Million Yen)
Unlisted equity securities
391
Investments in subsidiaries and affiliated1,875
companies
Others106
Because financial instruments listed above do not have market prices and their fair values cannot be reliably
determined they are not included in “(3) Marketable securities and investment securities.”30

(Additional information)
Effective from the year ended February 28, 2011 the Company adopted the “Accounting Standard for Financial
Instruments” (the Accounting Standards Board of Japan (hereinafter, “ASBJ”) Statement No. 10 announced on
March 10, 2008) and the “Guidance on Accounting Standard for Financial Instruments and Related Disclosures”(ASBJ Guidance No. 19 issued on March 10, 2008).
(Accounting for income taxes)
Components of deferred tax assets and liabilities were described as follows:(Millions of yen)Enterprise taxes payable
Accrued employees' bonuses
Excess of depreciation
Excess of amortization of software
Allowance for employees’ retirement benefits
Allowance for doubtful accounts
Impairment loss
Tax loss carryforwards
Other
Subtotal of deferred tax assets
Less valuation allowances
Total deferred tax assets

935
1,562
6,832
788
5,333
3,377
3,288
5,421
3,302
30,842(10,304)
20,537

Investments in subsidiaries and affiliated companies(paid-in capital decrease)
Total deferred tax liabilities(2,340)

Deferred tax assets-net

18,19731(2,340)(Accounting for retirement benefits)
Summary of the retirement benefit plans:
The Company and a certain domestic subsidiary have defined benefit lump-sum severance indemnity plans which
cover substantially all of their employees. The Company established a trust fund for its lump - sum severance
indemnity plan.
In addition, the Company has a defined contribution plan for severance payments.
Projected benefit obligations
a. Projected benefit obligations
b. Plan assets
c. Projected benefit obligations in excess of plan assets (= a + b)
d. Unrecognized prior service coste. Unrecognized actuarial differences
f. Allowance for employees’ retirement benefits (=c + d + e)

(Millions of yen)
(13,676)
5,577(8,099)527
42(7,529)Net periodic benefit cost
(Millions of yen)
1,028
a. Service costb. Interest cost249
c. Amortization of prior service cost
174
d. Amortization of actuarial differences
85
e. Net periodic benefit cost (= a + b +c + d)
1,537
f. Contribution to defined contribution plan271
g. Total (= e + f)
1,809
Note: Net periodic benefit cost in the consolidated subsidiary, which adopted the simplified method, isincluded in “a. Service cost.”
Basis of calculation of projected benefit obligations
a. Discount rate
2.0% (mainly)
b. Expected rate of return on plan assets
0%c. Allocation method of estimated total
Straight-line basis (a method to allocate
retirement benefits
estimated total retirement benefits equally torespective periods in employee’s whole service
period)(Per Share data)
1. Net assets per share
2. Net income per share

2,037.50
254.61yen
yen(Notes regarding significant subsequent events)
As a result of the earthquake off the pacific coast of Tohoku, which occurred on March 11, 2011, some of the
LAWSON Group stores in the Tohoku region and the Kanto region, including Ibaraki Prefecture, have been
affected. Some merchandise and fittings fell, tipped over or broke, and buildings have been damaged or sufferedfrom power outages. Some of the stores, mainly in Iwate and Miyagi Prefectures, remained closed or opening hours
were shortened. In addition, due to the influence of the planned power outages mainly in the Kanto region, opening
hours have been shortened for some stores and there has been a delay in the delivery of goods.
The extent of the damage to the Group caused by this earthquake is currently being studied. The influence on theGroup’s operational activities, etc., the outlook for recovery and the amount of damage including the cost of repairs
are not yet determinable.

32

(Business Combinations-Related)
Transactions under common control
1. Ninety-nine Plus Inc. has been consolidated as a wholly-owned subsidiary of the Company through a shareexchange.
(1) Name and business of combined companies, date of the business combination, legal form of the businesscombination, name of the companies after combination, and overview of the transaction including theobjectives.
(i) Name and business of combined companies
Names of companies under business combination: Ninety-nine Plus Inc.
Business description: Single-price Store LAWSON STORE 100, direct management of SHOP99 and roll out of
the franchise chain(ii) Date of the business combination
July 1, 2010(iii) Legal form of the business combination
Share exchange between the Company as the sole parent company and Ninety-nine Plus Inc. as a wholly-owned
subsidiary (hereinafter, “this share exchange”)(iv) Name of the company after combination
There has been no change in the name of the combined companies.
(v) Overview of the transactions including objectives
Amid increasingly fierce competition in the store opening and product development areas in the convenience
store industry, it has become inevitable for medium- to long-term growth to open more stores in the optimal
format based on the area strategy and provide products to protect life which exceed customers’ expectation more
promptly than ever in order to sustain and expand the franchise commission from franchised stores. To achievethis, the Company conducted this share exchange with the belief that it is the best policy to reinforce thecompetitiveness of the Company Group as a whole by establishing a system that will enable functional
decision-making, the further unification of both companies, sharing know-how, and further enhancing thecollaborative structure to improve productivity with effective utilization of the Group’s operational capital.
(2) Overview of accounting treatment of transaction
This share exchange has been treated as a transaction under common control pursuant to the “AccountingStandard for Business Combinations” (ASBJ Statement No. 21 issued on December 26, 2008) and the “Guidanceon Accounting Standard for Business Combinations and Accounting Standards for Business Divestitures,etc.”(ASBJ Guidance No. 10 issued on December 26, 2008).
(3) Matters relating to the acquisition of additional shares in the subsidiary(i) Details of acquisition costs
Equivalent value of the acquisition:
5,069 million yen
Costs directly incurred for the acquisition: 108 million yen-------------------------------------------------------------------------Acquisition costs:
5,177 million yen(ii) Exchange ratio by type of stockThirty three shares in the Company’s common stock have been allocated per one share of Ninety-nine Plus Inc.’scommon stock.
(iii) Method of calculating the share exchange ratio
In order to ensure fairness and validity of the share exchange ratio in this share exchange, the Company and
Ninety-nine Plus Inc. requested Mitsubishi UFJ Securities Co., Ltd. and Ernst & Young Transaction Advisory
Services Co., Ltd. separately to calculate the exchange ratio. The above ratio was determined based on the resultsof the calculation and discussions between both parties.
(iv) Number of allocated shares and valuation amount
Number of allocated shares: 1,314,951 shares
Valuation amount:
5,069 million yen(4) Amount of carryforward goodwill, causes of carryforward goodwill, and amortization method andamortization period(i) Amount of carryforward goodwill
2,324 million yen(ii) Causes of carryforward goodwill
Difference between the increase in equity of the combined company held by the Company LAWSON and theacquisition cost(iii) Amortization method and amortization period
Amortized equally over 20 years
33

2. LAWSON ENTERMEDIA, INC. has been consolidated as a wholly-owned subsidiary of the Company
through a share exchange.
(1)Name and business of the combined companies date of the business combination, legal form of thebusiness combination, name of the companies after combination, and overview of the transaction including
the objectives.
(i) Name and businesses of combined companies
Names of Companies under business combination: LAWSON ENTERMEDIA, INC.
Content of business: Ticket sales, E-Commerce, advertising, Web marketing, and other information distribution
and management business, etc.
(ii) Date of the business combination
July 1, 2010(iii) Legal form of the business combination
Share exchange between the Company as the sole parent company and LAWSON ENTERMEDIA, INC. as awholly-owned subsidiary (hereinafter, “this share exchange”)(iv) Name of the companies after combination
There has been no change in the name of the combined companies.
(v) Overview of the transactions objectives
As entertainment is seen as more attractive as content and recognition of the influence of entertainment in
attracting customers to the stores increases in the convenience store industry, movement in competitors including
business alliances and capital alliances with ticket sales agencies has become marked since last year. This shareexchange was conducted as a result of the Company’s belief that the acquisition of LAWSON ENTERMEDIA,
INC. as a wholly-owned subsidiary of the Company will lead to improved operational efficiency through unified
organizational management, prompt decision-making and redeployment of management resources whileleveraging the strengths of LAWSON ENTERMEDIA, INC. and that this will ultimately contribute to reinforcing
the Company Group’s competitiveness and enhancing the corporate value.
(2) Overview of accounting treatment of transaction
This share exchange has been treated as a transaction under common control pursuant to the “AccountingStandard for Business Combinations” (ASBJ Statement No. 21 issued on December 26, 2008) and the “Guidanceon Accounting Standard for Business Combinations and Accounting Standards for Business Divestitures, etc.”(ASBJ Guidance No. 10 issued on December 26, 2008).
(3) Matters relating to the additional acquisition of shares in the subsidiary(i) Details of acquisition costs
Equivalent value of the acquisition: 1,107 million yen
Costs directly incurred for the acquisition: 142 million yen-------------------------------------------Acquisition costs: 1,250 million yen(ii) Exchange ratio by type of stock
Twenty one shares in the Company’s common stock have been allocated per one share of LAWSONENTERMEDIA, INC.’s common stock.
(iii) Method of calculating the share exchange ratio
In order to ensure fairness and validity of the share exchange ratio in this share exchange the Company and
LAWSON ENTERMEDIA, Inc. requested Mitsubishi UFJ Securities Co., Ltd. and PricewaterhouseCoopers Co.,
Ltd. separately to calculate the exchange ratio. The above ratio was decided based on the results of the calculationand discussions between both parties.
(iv) Number of allocated shares and valuation amount
Number of allocated shares: 287,238 shares
Valuation amount:
1,107 million yen(4) Amount of carryforward goodwill, causes of carryforward goodwill, and amortization method andamortization period(i) Amount of carryforward goodwill
1,250 million yen(ii) Causes of carryforward goodwill
Revenue surplus to be expected as a result of business expansion and enhanced efficiency of operations(iii) Amortization method and amortization period
Amortized equally over 5 years

34Non-consolidated Balance Sheet (As of February 28, 2011)(Millions of yen)
Assets
Account item
Current assets
Cash and bank deposits
Accounts receivable—due from
franchised stores
Marketable securities

Amount123,234
68,743
15,661
2,999

Merchandise inventories
Prepaid expenses
Accounts receivable—other
Deferred tax assets
Other
Allowance for doubtful accounts

862
6,599
23,641
3,344
1,459
(77)

Fixed assets
Property and store equipment
Buildings
Structures
Furniture, fixtures and equipment

321,586
141,614
78,104
11,216
10,962

Land

6,609

Lease assets

34,076

Construction in progress

643

Intangible assets
Software
Software development in progress
Goodwill
Other27,925
21,627
4,674
1,163
459

Investments and other
Investments in securities
Investments in subsidiaries andaffiliated companies
Investments in affiliated limited
private company
Long-term loans receivable

152,046438
16,656Long-term loans receivable fromsubsidiaries and affiliates
Long-term prepaid expenses
Lease deposits

8,100
5,252
77,164

Deferred tax assets
Other
Allowance for doubtful accounts
Total Assets

11,693
1,662(1,601)444,821

Liabilities
Account item
Current liabilities
Accounts payable —trade
Accounts payable— due tofranchised stores
Short-term loans payable tosubsidiaries and affiliates
Lease obligations
Accounts payable—other
Income taxes payable
Consumption taxes payable
Accrued expenses
Deposits received
Accrued employees’ bonuses
Provision for use of points granted
Other
Long-term liabilities
Long-term lease obligations
Allowance for employees’
retirement benefits
Allowance for retirement benefits
to executive officers and corporate
auditors
Deposits received from
franchisees and lessees
Allowance for impairment loss on
leased property
Other
Total liabilities
Net assets
Owners’ equity
Common stock
Capital surplus
Additional paid-in capital
Retained earnings
Legal reserve
Other retained earnings

Amount165,398
67,633
1,171
5,870
5,893
13,534
9,738
2,635
1,821
52,5483,610925
1467,974
22,612
7,036
212

37,240562
310
233,372
211,692
58,506
47,696
47,696
107,182
727

924

General reserve

50,00031,756

Earned surplus brought
forwardTreasury stock

56,455

Valuation and translation adjustments
Net unrealized loss onavailable-for-sale securities
Land revaluation difference
Stock acquisition rights
Total net assets
Total Liabilities, and Total Net Assets

35(1,693)
(648)
(14)
(634)
405
211,448444,821

Non-consolidated Statement of Income(From March 1, 2010 to February 28, 2011)(Millions of yen)Account item
Operating revenues
Franchise commissions from franchised stores
Other
Net sales
Net sales
Total operating revenues
Cost of goods sold
Gross profit on sales
Operating gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest and dividend income
Compensation received for removal
Other
Non-operating expenses
Interest expense
Loss on cancellation of store lease contract
Other
Ordinary profit
Extraordinary gains
Gain on sale of investment in subsidiary
Gain on sale of investment in securities
Extraordinary losses
Loss on disposal of fixed assets
Loss on impairment of long-lived assets
Loss on sale of fixed assets
Other
Income before income taxes
Income taxes - current
Income taxes - deferred
Net income

Amount
193,746
22,821(46,641)(33,053)(13,587)

216,568
46,641
263,209
33,053
230,156
179,945
50,210

702
177
417
768
1,075
351

73
1
2,926
2,410
1,303
540
14,984
2,579

36

1,297

2,195
49,31275

7,180
42,206
17,56324,643

Non-consolidated Statement of Changes in Net Assets(From March 1, 2010 to February 28, 2011)(Millions of yen)
Owners’ equity
Capital surplus

Balance at the end of
previous period
Changes of items during
the period
Increase by shareexchanges
Dividends from surplus
Net income
Purchase of treasury stock– at cost
Disposal of treasury stock
Retirement of treasurystock
Net changes of items
other than owners’ equity– net
Total changes of items
during the period
Balance at the end of thecurrent period

Commonstock

Additional
paid-in
capital58,506

41,52041,520

6,176

6,176

Total
capitalsurplusRetained earnings
Other retained earnings
Legal
reserve
727

Generalreserve

Earned surplus
brought forward

50,00051,762

Total retained
earnings
102,490

Treasury
stock

Total
owners’equity(1,713)200,803

6,176(16,422)
24,643(16,422)
24,643(16,422)
24,643(3,510)(3,510)

(0)

(0)

1

1

(3,528)(3,528)

3,528

－

－

6,176

6,176

－

－

4,692

4,692

19

10,88858,506

47,696

47,696727

50,00056,455

107,182(1,693)211,69237

Valuation and translation adjustments

Balance at the end of previous
periodNet
unrealized
loss onavailablefor-salesecurities

Land
revaluationdifference

(8)

(634)

Total
Stock
valuation andacquisitiontranslationrightsadjustments

(643)

346

Total
net assets

200,506

Changes of items during the period
Increase by share exchanges

6,176

Dividends from surplus
Net income
Purchase of treasury stock – atcost
Disposal of treasury stock(16,422)
24,643Retirement of treasury stock
Net changes of items other thanowners’ equity – net
Total changes of items during theperiod－Balance at the end of the current
period(3,510)
1

(5)

(5)

59

53

(5)

－

(5)

59

10,942

(14)

(634)

(648)

405

211,448

38

(Notes to the Non-consolidated Financial Statements)
1. Valuation of 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 themoving-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 Inventories
Merchandise inventories:
Inventories at cost being determined by the retail method (the book value on the balance sheet is written down
based on a decline in profitability) in accordance with this standard.
3. Depreciation
Property and store equipment (except for lease assets):
Depreciation is computed using the declining-balance method at rates based on estimated useful lives of theassets. The ranges of useful lives are from 10 to 34 years for buildings 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 internal
useful life.
Lease assets:
In terms of the depreciation method for leased assets related to finance leases that do not transfer ownership ofleased property, the Company applies the straight-line method using the lease term as the useful life and aresidual value of zero.
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 an amount of possible losses from uncollectible receivables
based on the actual rate of losses from bad debt for ordinary receivables, and on estimated recoverability forspecific doubtful receivables.
Accrued Employees’ Bonuses:
Accrued employees’ bonuses are provided for payments of employees’ bonuses based on the estimatedamounts.
Provision for use of points granted:
The Company provides, mainly to MY LAWSON POINT holders and LAWSON PASS holders whenpurchasing goods, an entitlement to certain points that the holder can redeem for a discount on subsequentpurchases from LAWSON stores.
Allowance for Employees’ Retirement Benefits:
Allowance for employees’ retirement benefits are provided at the amount calculated based on the projected
benefit obligations and plan assets at the balance sheet date. Actuarial differences are amortized from thefollowing 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. Prior service cost is amortized, starting with thefiscal year incurred, on a straight-line basis over a certain period (10 years) within an average remaining
service period of employees.
39Allowance for Retirement Benefits to Executive Officers and Corporate Auditors:
Allowance for retirement benefits to corporate auditors and executive officers of the Company is calculated tostate the liability at 100% of the amount that would be required if all corporate auditors and executive officers
terminated their services with the Company at the balance sheet date.
5. Leases
Finance leases without ownership transfer of the leased property to the lessee whose lease inception was before
February 28, 2009 are accounted for as operating lease transactions
6. Accounting for consumption tax
Consumption tax is excluded from income and expense.
7. Adoption of Partial Amendments to Accounting Standard for Retirement Benefits (Part 3)
Effective from the year ended February 28 2011, the Company adopted the “Partial Amendments to AccountingStandard for Retirement Benefits” (ASBJ Statement No. 19, issued on July 31, 2008). This change had no effect on
operating income, ordinary income and income before income taxes.
(Notes to the Non-consolidated Balance Sheet)
1. Accumulated depreciation of property and store equipment:¥ 140,922 million

2. Due from / to subsidiaries and affiliated companies
Short-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¥¥¥

1,027 million
7,698 million
106 million

3. 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 revaluationdifference.
Revaluation method: The value of land is determined based on the road-based 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 assessedvalue 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¥269 million.

40

(Notes to the Non-consolidated Statement of Income)1. Transactions with subsidiaries and affiliated companies
Operating transactions
Operating revenues
Selling, general and administrative expenses
Transactions other than operating transactions:

¥
¥
¥

2,004
4,464
98

millionmillionmillion

2. Long-lived assets
The Company recognized an impairment loss mainly for each store with the smallest cash generating unit.
The Company recognized an impairment loss on the following assets that declined in value due mainly tocontinuous operating losses. The carrying amount, of those assets were written down to the recoverable amountand were recorded in special losses.
Category by use
Location
AssetsMillions of yen
Tokyo
468
Buildings・Furniture, fixtures and equipment andothersStoresOsaka
85〃
Others1,790〃
Others―Software
66
Total
―
―
2,410
Category by fixed assets(Millions of yen)
Buildings
1,435
Structures
179
Furniture, fixtures and equipment
211
Leased property
492
Software
66
Other
25
Recoverable value of the impaired assets is calculated based on the net selling price or value in use. The net selling
price of land was calculated based on the appraised value by the real estate appraiser or expected contract price,and the value in use was calculated by discounting estimated future cash flows to which the 3.3% discount rate wasapplied.
(Notes to the Non-consolidated Statement of Changes in Net assets)
Number of shares and kind of treasury stock
Common stock
433,040 shares

41

(Accounting for income taxes)
Components of deferred tax assets and liabilities were described as follows:(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
Allowance for employees’ retirement benefits
Allowance for doubtful accounts
Impairment loss
Other
Subtotal of deferred tax assets
Less valuation allowances
Total deferred tax assets

832
1,498
1,946
5,456
747
5,132
437
2,470
1,661
20,183(2,805)
17,378Investments in subsidiaries and affiliated companies(paid-in capital decrease)
Total deferred tax liabilities(2,340)(2,340)

Deferred tax assets-net

15,037

With regard to the deferred tax liability related to the 1,002 million yen of investments in subsidiaries and affiliatedcompanies which was assumed through the share exchange method specified in the Companies Act under Article
796 (3), the amount has not been recognized based on the “Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10 issued on December
26, 2008).
(Accounting for retirement benefits)
Summary of the retirement benefit plans:
The Company has defined benefit lump - sum severance indemnity plans which cover substantially all of theiremployees. The Company established a trust fund for its lump - sum severance indemnity plan.
In addition, the Company has a defined contribution plan for severance payments.
Projected benefit obligations
a. Projected benefit obligations
b. Plan assets
c. Projected benefit obligations in excess of plan assets (= a + b)
d. Unrecognized prior service coste. Unrecognized actuarial differences
f. Allowance for employees’ retirement benefits (= c + d + e)

42

(Millions of yen)
(13,160)
5,577(7,583)527
19(7,036)

Net periodic benefit cost
(Millions of yen)
960
248
175
82
1,467
271
1,738

a. Service costb. Interest costc. Amortization of prior service costd. Amortization of actuarial differences
e. Net periodic benefit cost (= a + b + c + d)
f. Contribution to defined contribution plang. Total (= e + f)

Basis of calculation of projected benefit obligations
a. Discount rate
2.0%
b. Expected rate of return on plan assets
0%c. Allocation method of estimated total retirement Straight-line basis (a method to allocate estimatedbenefits
total retirement benefits equally to respective
periods in employee’s whole service period)(Leases)
Finance leases without ownership transfer of the leased property to the lessee whose lease inception was before
February 28, 2009:(1) The assumed data as to acquisition cost, accumulated depreciation and net leased property(Millions of yen)
Acquisition cost
Furniture, fixturesand equipment

Accumulated
depreciation

27,313

16,659

Accumulated
impairment loss
964

Leased property
9,689(2) Obligations under finance leases
Due within one year
Due after one year
Total
Allowance for impairment loss on leased property(Millions of yen)
3,906
7,108
11,014562(3) Lease payments, transfer from allowance for impairment loss on leased property, depreciation expense,
interest expense and impairment loss:(Millions of yen)
Lease payments
5,463
Transfer from allowance for impairment loss on leased property
382
Depreciation expense
5,430Interest expense
351
Impairment loss
492(4) Computation method of depreciation expense
Depreciation expense is computed by the straight-line method, assuming the lease period as the useful life andno residual value.
(5) Computation method of interest expense
The difference between the total lease contract amount and the acquisition cost is assumed to be interest, andinterest expense is computed by the interest method.
43

(Related Party Transactions)
Subsidiaries and affiliates
Attribute

Subsidiary

Name ofCompany

Business or
Occupation

Holding
Ratio of
VotingRights(%)

Ninety-nine
Plus Inc.

Convenience
store
business

Directholding100.0%LAWSONATM
Networks,
Inc.

Financialservicesrelated
business

Directholding
44.0%

Relationship
Business
Relationship

Officer’s
Post
Concurrently
Held

Joint
purchasing,
joint productdevelopment

Yes

Placementof ATMs inthe
LAWSON
storesNo

DescriptionofTransactions

Transaction
Amount(Million
Yen)

Receipt ofdividend,
Loaning offunds,
Receipt ofinterest rates

10,800Borrowingof funds

－

9,000
45

Account
Item

Balance at
End of Year
(Million
Yen)－
Long-term
loans
receivable
－

－
8,100

Short-termloanspayable4,500－

Transaction conditions and the policies for determining those conditions:
1. LAWSON manages the funds of some subsidiaries centrally and there are loans and borrowing transactions between
LAWSON and its subsidiaries. Because it is difficult to obtain the details of transaction amounts, the balance at end ofyear is disclosed in the notes.
2. The interest rates for loans and borrowings are determined rationally, taking into account market interest rates.

44Subsidiaries of an affiliated company of the Company
Transaction

Relationship
Attribute

Company

Business line or Equity ownership

namepercentage

profession

BusinessrelationshipDirector’s

Description ofamountposts heldtransactions(Millions of

RYOSHOKU Sales of
LIMITED(Ownership)processed foods the

Vendor―0.3 %Purchases for

3,285

Accounts

the Company-(74,708)

payable-tradeof ancompany

operated stores

affiliatedis directly(Purchases for thecompany of

ownedfranchised stores)(Millions of
yen)

yen)

concurrently

Subsidiaries

Ending balance
Account item

5,559

the Company
Purchases for

10,229

Network Co., foods and daily

the Company-(227,351) payable-tradeLtd.

operated stores

Food Service Sales of fast―

Vendor―delivered foods

Accounts

20,119(Purchases forthe franchised
stores)Purchases for

1,376

Accounts

wholesale

the Company-(31,209)

payable-tradebusiness

operated stores

SAN-ESU

Confectionary

INC.

―

Vendor

―3,166(Purchases forthe franchised
stores)RYOSHOKU General―

Vendor―Purchases for356

the Company-(22,206)

LIQUOR

wholesale of

LIMITEDalcohol andoperated stores

food(Purchases for

Accounts

1,662

payable-trade

the franchised
stores)Transaction conditions and the principles on the decision thereof:
The terms and conditions for purchase transactions are determined as the same as those for other general business
transactions, except that regarding the purchases made for the franchised stores, the Company acts as an alternative payer,
not as direct party of purchase.

(Per Share data)
1. Net assets per share
2. Net income per share

2,113.24
247.15yen
yen(Notes regarding significant subsequent events)
As a result of the earthquake off the pacific coast of Tohoku, which occurred on March 11, 2011, some of the
LAWSON stores in the Tohoku region and the Kanto region, including Ibaraki Prefecture, have been affected. Somemerchandise and fittings fell, tipped over or broke and buildings have been damaged or suffered from power outages.
Some of the stores, mainly in Iwate and Miyagi Prefectures, remained closed or opening hours were shortened. In
addition, due to the influence of the planned power outages mainly in the Kanto region, opening hours have beenshortened for some stores and there has been a delay in the delivery of goods.
The extent of the damage to the Company caused by this earthquake is currently being studied. The influence on
the Company’s operational activities, etc., the outlook for recovery and the amount of damage including the costof repairs are not yet determinable.
The above amounts and the number of shares in these consolidated and non-consolidated statements are truncatedbelow the unit, and the ratios are rounded to the nearest whole number.
45

（TRANSLATION ONLY）
INDEPENDENT AUDITORS' REPORT

April 6, 2011

To the Board of Directors of
LAWSON, INC.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant: Kinya Suzuki
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant: Hiroyuki Morita

Pursuant to the first item, second paragraph of Article 436 of the Companies Act, we haveaudited the financial statements, namely, the balance sheet as of February 28, 2011 of LAWSON,
INC. (the “Company”), and the related statements of income and changes in net assets, and therelated notes for the 36th fiscal year from March 1, 2010 to February 28, 2011 and theaccompanying supplemental schedules. These financial statements and the accompanying
supplemental schedules are the responsibility of the Company's management.
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 in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and the accompanying supplemental schedules are freeof material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements and the accompanying supplemental
schedules. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement and theaccompanying supplemental schedules presentation. We believe that our audit provides areasonable basis for our 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 the Company as of February 28, 2011, and the results of
its operations for the year then ended in conformity with accounting principles generally accepted in Japan.
Our firm and the engagement partners do not have any financial interest in the Company forwhich disclosure is required under the provisions of the Certified Public Accountants Law.
The above represents a translation, for convenience only, of the original report issued in theJapanese language.
46

（TRANSLATION ONLY）
INDEPENDENT AUDITORS' REPORT

April 6, 2011

To the Board of Directors of
LAWSON, INC.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant: Kinya Suzuki
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant: Hiroyuki Morita

Pursuant to the fourth paragraph of Article 444 of the Companies Act, we have audited theconsolidated financial statements, namely, the consolidated balance sheet as of February 28, 2011of LAWSON, INC. (the “Company”), and the related consolidated statements of income andchanges in net assets, and the related notes for the 36th fiscal year from March 1, 2010 to
February 28, 2011.
These consolidated financial statements are the responsibility of theCompany's management. 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 require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audit provides a reasonablebasis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of the Company and consolidated subsidiaries as of February 28, 2011, and the results of theiroperations for the year then ended in conformity with accounting principles generally accepted in Japan.
Our firm and the engagement partners do not have any financial interest in the Company forwhich disclosure is required under the provisions of the Certified Public Accountants Law .
The above represents a translation, for convenience only, of the original report issued in theJapanese language.

47

(TRANSLATION ONLY)<Copy of the Audit Report of the Board of Corporate Auditors>
AUDIT REPORTRegarding the execution of duties by the Directors for the 36th business term from March 1, 2010 to
February 28, 2011, 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 thereports from each Corporate Auditor regarding their execution of audits and results thereof, as well as reports
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 Board of
Corporate Auditors, has followed the audit policies and audit programs for the current term, communicated with
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 committee 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 the 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 the 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 on such
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 toensure 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, and asked for
explanations whenever necessary. With respect to subsidiaries, we have communicated and exchanged
information with the Directors, Corporate Auditors and other relevant personnel of subsidiaries, requested thesubsidiaries to report on their business where necessary, and investigated their status of operations and assets.
Based on the above methods, we have examined the business report and supplementary schedules thereof forthis business term.

48

Furthermore, we have monitored and verified whether Accounting Auditor maintained its independent
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 organized inaccordance 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 have examined the“consolidated financial statements (consolidated balance sheet, consolidated statement of income, 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 ofchanges in stockholder’s equity, and notes to non-consolidated financial statements) and supplementaryschedules thereof” for this term.
2. Result of Audit(1) Result of Audit of Business Report and Other Relevant Documents
1. We have found that the 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 matter that
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 therelevant 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 13, 2011
The Board of Corporate Auditors of Lawson, Inc.
Standing Corporate Auditor

Munehiko Nakano(Outside Corporate Auditor)
Standing Corporate Auditor

Atsuhiko Seki

Corporate Auditor

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

49

Kazuyuki Masu

REFERENCE DOCUMENT FOR THE GENERAL MEETING OF SHAREHOLDERS
Proposals and References
Proposal No. 1: Appropriation of Surplus
The Company intends to pay year-end dividends as specified below after considering its comprehensive financial position,
earnings, dividend payout ratio and other factors while ensuring sufficient funds are retained for future businessdevelopment.
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:¥85 per share of the Company’s common stock to a total of ¥8,488,691,600
Note: The annual dividend per share will be ¥170, an increase of ¥10 from the previous period, including an interim
dividend per share of ¥85.
(2) Effective date of the dividends from surplus:
Wednesday, May 25, 201150

Proposal No. 2: Partial Amendments to the Articles of Incorporation
The Company proposes that the Articles of Incorporation be partially amended as follows.
1. Reasons for amendment
Under the corporate philosophy, “Happiness and Harmony in our Community,” the Company operates businesses
centering on a franchise chain of convenience stores. We place emphasis on the entertainment business that provides ourcustomers with happiness as a critical growth area. In line with this policy, on July 1, 2010, LAWSON ENTERMEDIA,
INC., which sells tickets in LAWSON stores, was made a wholly owned subsidiary of the Company by way of a sharetransfer. Further, on December 1, 2010, we purchased all the outstanding shares in HMV Japan K.K., which distributes
music and video software.
On March 1, 2011, the Company adopted a group-based internal organization system toward further expansions of ourentertainment business, establishing the Entertainment & e-Commerce Group as one of the key groups with the CVS
Operating Group and International Group.
Under these circumstances, the Company proposes to add to Article 2 (Objectives) in the current Articles ofIncorporation an item “Business relating to entertainment including music, theaters and other events,” so that theCompany’s business purposes will be clearer to our stakeholders. In line with the amendment, the existing Articles must be
renumbered.
2. Particulars of amendments
Particulars of proposed amendments are described below.
Current Provision of the Articles of Incorporation
Chapter 1. GENERAL PROVISIONS(Purpose)
Article 2. The purpose of the Company shall be to operate
the following businesses:
1.-2. (Text omitted)(A new item to be inserted)
3.-21. (Text omitted)(Suggested amendments are underlined in the text.)
Proposed Amendments
Chapter 1. GENERAL PROVISIONS(Purpose)
Article 2. The purpose of the Company shall be to operate
the following businesses:
1.-2. (Unchanged from the existing text)
3. Business relating to entertainment including music,
theaters and other events.
4.-22. (Unchanged from the existing text)51

Proposal No. 3: Election of Two (2) Corporate Auditors
The term of office of two corporate auditors, Messrs. Tetsuo Ozawa and Kazuyuki Masu, is to expire at the conclusion ofthis general meeting of shareholders. We propose that two corporate auditors be elected.
The Board of Corporate Auditors has given prior consent to this proposal.
Brief history of the nominees is described below:
No.
Name
Brief Personal History, Position, Assignment and Important
Number of the(Date of Birth)
Concurrent Positions
Company’s
Shares Held1
Tetsuo Ozawa
April 1973
Registered as a practicing attorney. Joined
Nil(June 28, 1947)
Tokyo Fuji Law Office.
May 2003
Outside Corporate Auditor of LAWSON, INC.
(to date)
August 2004
Outside Corporate Auditor (to date) of Monex
Beans Holdings Inc. (currently, Monex Group,
Inc.)
June 2005
Outside Corporate Auditor of Monex Beans,
Inc. (currently, Monex, Inc.)
June 2007
Outside Corporate Auditor of CEMEDINE
CO., LTD. (to date)2* Eiko Tsujiyama(December 11,
1947)

April 1974
August 1980
April 1985
April 1991
April 2003

June 2008
June 2010

Registered as a Certified Public Accountant
Assistant Professor, College of Humanities,
Ibaraki University
Assistant Professor, Faculty of Economics,
Musashi University
Professor, Faculty of Economics, Musashi
University
Professor, School of Commerce and The
Graduate School of Commerce, Waseda
University (to date)Outside Corporate Auditor of Mitsubishi
Corporation (to date)Outside Director of ORIX Corporation (to
date)

Nil

Notes:
1. Both Mr. Tetsuo Ozawa and Ms. Eiko Tsujiyama are nominees for outside corporate auditors as set forth in Article 2,
Paragraph 3, Item 8 of the Ordinance for Enforcement of the Companies Act.
2. Reasons for selecting the above-listed nominees for outside corporate auditors, and the term of office as outside
corporate auditors of the Company:(1) Mr. Tetsuo Ozawa
He has been nominated as a candidate because he possesses abundant experience mainly in the area of corporate
legal affairs ranging from legislation to risk management from the legal point of view and because of his
knowledge as a lawyer, and he is also currently providing appropriate supervision to execution of business by theCompany's directors. Although he has not participated in corporate management in a position other than as an
outside director or outside corporate auditor, the Company expects him to continue to adequately fulfill his role as
an outside corporate auditor for the reasons referred to above.
He has been an outside corporate auditor of the Company since May 2003, and will have held this position foreight years at the conclusion of this general meeting of shareholders.
(2) Ms. Eiko Tsujiyama
She has been nominated as a candidate because she possesses abundant experience of serving on the52Government’s Tax Commission, the National Tax Agency’s National Tax Council, etc. as an academic expert aswell as a deep knowledge of finance and accounting as a certified public accountant. Although she has notparticipated in corporate management in a position other than as an outside director or outside corporate auditor,
the Company expects her to adequately fulfill her role as an outside corporate auditor for the reasons referred toabove.
3. Facts pertaining to the illicit execution of business, if any, that took place in another company while the above nominee

served as an executive at that other company, and a summary of his/her acts to prevent such actions from occurring, andto respond to such actions after they occurred:
When Mr. Tetsuo Ozawa was a part-time Outside Corporate Auditor of Monex, Inc. (“Monex”), Monex received abusiness improvement order from the Financial Services Agency (“FSA”) in June 2006 as a result of an inspection
conducted by the Securities and Exchange Surveillance Commission (“SESC”) in and after November 2005, in which
certain facts were recognized as violating applicable laws. These facts were that management was insufficient withrespect to transactions of securities on behalf of customers to prevent unfair trading, and that Monex was in a situationin which “the management of the electronic data processing organization related to the securities business is notsatisfactory.” As a corporate auditor, Mr. Ozawa had regularly expressed his opinions at meetings of the Board of
Directors from the viewpoint of compliance based on his expertise as a lawyer, and endeavored to prevent any violationof laws through proper auditing procedures. After the aforementioned violation of laws became known, he demandedthat actions be implemented to prevent any reoccurrence to the Representative Director through the Board of Corporate
Auditors, and also demanded that the person responsible for such action be present at the Board of Corporate Auditors
to explain the situation after the submission of an improvement report. Furthermore, in March 2009, Monex received athree-month business suspension order (the cessation of all new business services, aside from those approved by the
FSA, deploying system developments) and a business improvement order from the FSA following the recognition of theviolation of applicable laws due to the existence of a situation in which “the management of the electronic dataprocessing organization related to financial product transactions is not satisfactory,” as revealed in an inspection
conducted by the SESC in and after November 2008. As a corporate auditor, Mr. Ozawa had regularly expressed his
opinions at meetings of the Board of Directors from the viewpoint of compliance based on his expertise as a lawyer, andendeavored to prevent any violation of laws through proper auditing procedures. After the aforementioned violation oflaws occurred, he further reinforced his monitoring efforts to prevent any reoccurrence through the Board of Directors
and the Board of Corporate Auditors.
4. Agreement with the nominees to limit liability
Pursuant to Article 32 of the current Articles of Incorporation, the Company has entered into an agreement with Mr.
Tetsuo Ozawa to limit his liability with regard to the damages set out under Article 423, Paragraph 1 of the Companies
Act, to within the sum of the amounts set forth in the relevant laws and regulations as far as he has been in good faithand without gross negligence in executing the duties that were ascribed as the cause of the claim for damages.
The same agreement will be entered into with Ms. Eiko Tsujiyama.
5. The nominees do not have any special interests in the Company.
6. The Company designates Mr. Tetsuo Ozawa as an independent executive as stipulated in the regulations of the Tokyo
Stock Exchange and the Osaka Securities Exchange, and has notified those stock exchanges of the designation. In thesame manner, the Company will designate Ms. Eiko Tsujiyama as an independent executive, and notify those stock
exchanges.
7. The person marked with an asterisk (*) represents a new nominee for corporate auditor.
8. The nominees’ Brief Personal History, Position, Assignment and Important Concurrent Positions are as of April 14,
2011.

53

Proposal No. 4: Presentation of Retirement Benefits to a Retiring Corporate Auditor
The current corporate auditor, Mr. Kazuyuki Masu, will retire from office at the conclusion of this 36th Ordinary General
Meeting of Shareholders. As a reward for his services in office, we propose to present him with retirement benefits of up to¥1 million.
We would like to leave the details of the exact amount and the date and method of the presentation to the discretion of thecorporate auditors.
The following is a brief personal history of the retiring corporate auditor.
Name
Brief Personal History
Kazuyuki Masu

May 2010

Outside Corporate Auditor of LAWSON, INC. (to date)

Note: The corporate auditor’s Brief Personal History is current as of April 14, 2011.

54