Flash Report on the Consolidated result for the year ended February 28, 2011
Listed Company Name : LAWSON, INC.
Code No.: 2651
(URL http://www.lawson.co.jp/company/ir/index.html )Listing: Tokyo Stock Exchange and Osaka Securities Exchange
Location of Head Office: Metropolis of Tokyo
Company Representative: Takeshi Niinami, Representative Director, President & CEO
Contact: Tomoki Takanishi, Financial & Accounting Office General Manager
Tel.: (03) 5435-2773
Scheduled date for the ordinary general meeting of shareholders: May 24, 2011
Scheduled date for payment of dividend: May 25, 2011
Scheduled date for submission of annual report: May 25, 2011
Supplementary Documents fiscal year results: Yes
Presentation of annual results: Yes (for institutional investors and analysts)
1. Consolidated Performance for the 2010 fiscal year (from March 1, 2010, to February 28, 2011)(1) Consolidated operating results
Notes: ①Amounts below one million yen are truncated.
Notes: ②Percentages for total operating revenues, operating income, ordinary profit and net profit show increase(decrease) from previous year.
Total operating revenues
Operating profit
Recurring profit¥ Million%¥ Million%¥ Million%
2010 fiscal year
441,277(5.5)
55,540
10.5
54,594
10.4
2009 fiscal yea r
467,192
33.7
50,2752.2
49,4401.3

Net profit¥ Million
25,386
12,562

2010 fiscal year
2009 fiscal year%
102.1
（47.2）

Notes: Equity in net income (loss) of affiliates:2010 fiscal year:¥311million

Net profit per
share

Fully
dilutedprofit per
share¥
254.61
126.67¥254.31
126.542009 fiscal year:

Ratio of
Return on recurring
equityprofit tototal assets
%
12.8
6.5

%
11.8
11.2

Ratio ofoperatingprofit tototal
operatingrevenues
%
12.6
10.8

¥61million(2) Consolidated financial position
Total assets¥ Million
476,036
448,131

Net assets¥ Million
208,466
198,135

2010 fiscal year
2009 fiscal year
Note: Capital adequacy:
2010 fiscal year: ¥203,479million

Capital adequacy
ratio
%
42.7
42.8

Net assets per share¥
2,037.50
1,935.41

2009 fiscal year: ¥191,930million(3) Consolidated cash flows2010 fiscal year
2009 fiscal year

Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities¥ Million
72,21040,695¥ Million(30,522)(42,595)¥ Million(28,798)(27,238)

Cash and cash
equivalents at theend of the year
¥ Million
67,712
54,843

2. Dividends status
Annual dividends per share¥―

Interimdividend
¥
80

―
―

1Q
2009 fiscal year
2010 fiscal year
2011 fiscal year
(Forecast)¥―Year-end
dividend
¥
80

85

―

85

170

87

―

88

175

3Q

1

Total
¥
160

Total
dividends
for theyear¥ Million
15,866
16,977―%
126.3

Ratio ofdividends toshareholders’ equity
%
8.2

66.8
88.3

8.6
―

Payoutratio

3. Forecast Consolidated Performance for 2011 fiscal year（from March 1, 2011 to February 29, 2012）
Total operating revenues
Operating profit
Recurring profit
Net profit¥ Million%¥ Million%¥ Million%¥ Million¥
230,000
4.0
28,500(5.5)
27,600(7.0)
5,300(56.9)
2011 interim period
461,000
4.5
57,5003.5
55,4001.5
19,800(22.0).
2011 fiscal year
Reference: Forecast net profit per share for the 2011 half year: 53.07yen
Forecast net profit per share for the 2011 fiscal year: 198.26yen
4.Other(1) Change in important subsidiaries during the period: None
(Note) This indicates any changes in specified subsidiaries during the fiscal year resulting from a revision of the scope of
consolidation.
(2) Changes in accounting principles, procedures, presentation methods, etc., pertaining to preparation of consolidated
financial statementsi) Changes associated with revision in accounting standards: Yesii) Other changes: None
(3) Number of issued sharesi) The number of shares issued at the end of term
February, 2011: 100,300,000
February, 2010: 99,600,000ii) The number of treasury shares in the end of term
February, 2011: 433,040
February, 2010: 432,190
iii) Average number of shares during the term
February, 2011: 99,705,265
February, 2010: 99,167,889[Reference]
1.Non-consolidated Performance for the 2010 Fiscal Year (from March 1, 2010, to February 28,2011)(1)Operating results
Notes: ①Amounts below one million yen are truncatedNotes: ②Percentages for total operating revenues (Total net sales of Lawson stores), operating income, ordinary profit
and net profit show increase (decrease) from previous year.
Total operating revenues

Operating profit

Recurring profit

2010 fiscal year

¥ Million
263,209%(3.1)¥ Million
50,210%
11.6¥ Million
49,312%
10.6

2009 fiscal year

271,513(2.9)

44,997(4.1)

44,577(5.8)

2010 fiscal year

¥ Million
24,643%19.2

Net profit
per share¥
247.152009 fiscal year

20,665(6.4)

208.38Net profit

Fully diluted
profit per
share¥
246.85208.17(2) Financial position

2010 fiscal year
2009 fiscal year
Note: Capital adequacy:
2010 fiscal year:

Total assets

Net assets

Capital adequacy ratio

Net assets per share¥ Million
444,821420,444¥ Million
211,448
200,506

%
47.4
47.6

¥
2,113.24
2,018.39¥211,043 million

2009 fiscal year:¥200,160 million

2.Forecast Non-consolidated Performance for 2011 fiscal Year（from March 1, 2011, to February 29, 2012)
Total operating
revenues

Operating profit

Recurring profit

Net profit per
share

Net profit¥ Million%¥ Million%¥ Million%¥ Million%¥ Million

2011 interim period

132,000(1.0)

26,200(3.6)

25,500

(4.8)

6,500

(48.7)

65.08

2011 fiscal year

262,000(0.5)

52,1003.8

50,3002.0

19,600(20.5)

196.262

Note: Disclosure of progress of review procedures
At the time of disclosure of this fiscal flash report, review procedures for fiscal earnings reports based on the Financial
Instruments and Exchange Act had been completed.
Note: The above-mentioned forecast is based on the information, which is able to get hand at present, and including a
potential risk and uncertainty. Therefore, actual achievements may differ from these forecasts due to many factors. In
addition, please refer to 5th page of appending data about matters, such as precondition of the above-mentioned forecast.

3

1. Operating Results
1. Review of Operation(1) Analysis of Consolidated Operating Results
During fiscal 2010, 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 anadverse effect to some extent. 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 theaim of improving customer satisfaction in CVS operations and other businesses to realize its corporate
philosophy of "Happiness and Harmony in Our Community."[Convenience Store Operations]
The status of merchandise strategy and services, store operations, store development and other aspects ofConvenience Store Operations in the fiscal year under review is outlined as follows:
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 theingredients procurement process, including procuring high-quality food materials in bulk.
In the rice dishes category (rice balls/boxed lunches/sushi), we reduced the prices for some popular itemsin the series of rice balls made with a branded rice, Niigata-grown Koshihikari, to promote sales, andlaunched 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 many customers. Our
Gohoubi-no-hitotoki (Enjoy a luxurious time) series of deluxe boxed lunches, which was launched under
the concept of satisfying both the stomach and the soul, was also tremendously popular among customers.
We also launched a series 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 popular characters.
Breakdown of sales at chain stores by merchandise categories
Fiscal period
Current fiscal year
Current fiscal year
March 1, 2009,
March 1, 2010
to February 28,2010
to February 28,2011
YOY PercentagechangeSales
Ratio to total
Sales
Ratio to total
Product group(Millions of(%)(Millions of
(%)
yen)
yen)
Processed foods
902,306
54.2
897,426
53.3
99.5
Fast foods
324,197
19.5
321,865
19.1
99.3
Daily
239,08814.3
264,169
15.7
110.5
delivered foods
Nonfood products
200,54412.5
199,350
11.9
99.4
Total
1,666,136
100.0
1,682,812
100.0
101.0
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.

On the services front, we 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

4Ponta cards is ever on the rise, notably those with Ponta cards issued by other companies.

Store Operations
In store operations, we promoted sales spaces and merchandise assortments tailored to the needs of eachneighborhood through analysis of purchase data collected from the Ponta card program by utilizing
PRiSM, our core IT system that was developed to place orders from the perspective of customers. PRiSM
has enhanced franchise owners’ awareness of the importance of optimal merchandise assortment by
quantifying the sales opportunities we lose as a result of being out of stock of items customers need andvisualizing 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 precise merchandise customers
need on a timely basis, aiming to further boost customer satisfaction.
Store Development
In opening new stores, the Company focused on maximizing return on investment (ROI), strictly adhered
to its proprietary group 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 storesthat focus on fresh foods, especially in residential areas with a high demand for fresh food. The number ofthese stores now exceeds 1,000.
In an effort to reinforce its capacity to cater to healthcare needs, the Company opened new stores thatcombine MatsumotoKiyoshi and LAWSON STORE 100. In addition, we now operate 35 stores thatmarket 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](Stores)

LAWSON
Total stores as ofFebruary 28 2010
Change during fiscal
year
Total stores as ofFebruary 28, 2011

LAWSONSTORE100 and
SHOP99NATURALLAWSON

Total

8,540

89

996

9,625

146

1

81

228

8,686

90

1,077

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, in July 2010 the Company opened its first store in Chongqing in China,
expanding its area of operations from Shanghai. CHONGQING LAWSON CO., LTD., in which
LAWSON has a 100% equity interest, operates four stores as of February 28, 2011. SHANGHAIHUALIAN LAWSON CO., LTD., a Chinese equity-method affiliate, was operating 315 stores inShanghai, China, as of February 28, 20115

Number of LAWSON stores by prefecture (As of February 28, 2010; consolidated subsidiaries only)
Prefecture

Number ofstoresPrefecture

Number ofstoresPrefecture

Number ofstoresPrefecture

Number ofstoresPrefecture

Number ofstoresHokkaido

532

Saitama

389

Mie

94

Okayama

122

Saga

61

Aomori

169

Chiba

355

Ishikawa

87

Hiroshima

143

Nagasaki

87

Akita

153

Ibaraki109

Toyama112

Yamaguchi

112

Oita

139

Iwate

160

Tokyo

1,288

Fukui

99

Tottori

89

Kumamoto

92

Miyagi

193

Kanagawa

697

Kyoto

251

Shimane90

Miyazaki

79

Yamagata

61

Shizuoka

180

Shiga

127

Kagawa98

Kagoshima

105

Fukushima

99

Yamanashi

73

Nara

99

Ehime

155

Niigata102

Nagano132

Wakayama

110

Tokushima

103

Total

Tochigi

107

Aichi

473

Osaka

969

Kochi

57

Chongqing

Gunma

68

Gifu

122

Hyogo

554

Fukuoka357

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 the environment 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, not only at new stores but also at existing stores.
In a collaborative effort with customers to fight global warming, in April 2008 the Company launched acarbon offset program, 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 tons of CO2 had been offset through this program.
In addition, the LAWSON Green Fund, active since 1992, in combination with donation drives forregions 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
In response to the misconduct that took place in fiscal 2009 within our subsidiary LAWSONENTERMEDIA, 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 their funds. 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 andassistance given to its affiliates and promoted area-specific initiatives in areas such as the centralized
management of funds. We intend to continue to promote the measures 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.

6

9,853
4

[Other Businesses]
In addition to convenience store operations, the Company is involved in entertainment/e-commercebusiness, financial services, and other businesses.
LAWSON ENTERMEDIA, INC., which undertakes ticket sales as part of its entertainment/e-commercebusiness, recorded a strong performance in sales of event and leisure-related tickets. On July 1, 2010,
LAWSON concluded a share exchange agreement with LAWSON ENTERMEDIA, making it awholly-owned subsidiary.
In addition, with the aim of expanding and reinforcing our ticket sales business and building a frameworkthat allows us to offer 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 concluded an agreement on abusiness alliance and stock purchase with Venture Republic Inc., which operates a price comparison
website that drives viewers to e-commerce websites and e-commerce shopping malls.
During fiscal 2009, LAWSON ENTERMEDIA 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 of business operations undertaken by LAWSON ENTERMEDIA and HMV
Japan 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 an increase in the number of ATM machines installed nationwide in LAWSON stores and arise in the number of transactions. The number of ATM machines installed has grown to 8,526 as ofFebruary 28, 2011.
Advertising business operator Cross Ocean Media, Inc. worked to develop and operate new highvalue-added media such as digital signage, a form of electronic display that shows advertising.
(2) Profit and Loss
In terms of our operating results, total operating revenues decreased by ¥25,914 million, or 5.5%, fromthe previous fiscal year to ¥441,277 million. This was due to a ¥41,363 million decline in net sales
resulting from a fall in the number of Company-operated stores.
Operating income grew by ¥5,264 million, or 10.5%, from the previous fiscal year to ¥55,540 million,
mainly due to an increase of ¥4,706 million in gross operating income.
Ordinary income increased by ¥5,153 million, or 10.4%, from the previous fiscal year to ¥54,594 million.
Income before income taxes and minority interests increased by ¥14,536 million, or 48.7%, year on yearto ¥44,411 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 a result, net income increased by ¥12,824 million, or 102.1%, to ¥25,386 million, and net income pershare stood at ¥254.61.
(3) Outlook for Fiscal 2011
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 ofrealizing 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 willcontinue to use the Ponta multi-partner shopping points program data to develop customer-centricmerchandise assortment. By harnessing our core IT system, PRiSM, to a higher degree, we will strive toimprove ordering precision to reduce sales opportunity losses and product disposal losses. We will also
step up our efforts to enhance product development capabilities, which are essential 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,7

which will lead to more convenient services for customers. LAWSON will pursue broader marketing
analysis and sales promotion measures in collaboration 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 LAWSON STORE 100 and fresh foods convenience stores mainly in residential areas. In particular,
we will strive to respond to the increasing 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 malecustomers in their 20s and 30s, who have constituted the main body 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 by stepping up the development and marketing of health-oriented foods harnessing theknowhow acquired through operation of NATURAL LAWSON stores. Based on the idea that “you arewhat you eat,” we will continue to help customers lead healthy 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 meets diverse customer needs both online and offline. We also plan to provide newservices in e-commerce based on partnership with other companies.
6) Strengthen internal control within the Company
In response to the misconduct that was uncovered in fiscal 2009 within our subsidiary LAWSONENTERMEDIA, INC., we will continue to promote the initiatives we implemented in fiscal 2010. We
will also embark on the establishment of a structure that facilitates communication between LAWSON
and its affiliates with a view to propagating the Company’s management policy and increasing the degreeof its implementation. By consistently implementing the aforementioned management measures toenhance customer satisfaction and expand our customer base, we are aiming to improve corporate
earnings by maintaining or expanding the number of customers, increase the earnings of franchised stores,
and eventually to enhance our corporate value.
For fiscal 2011, we project an ordinary income of ¥55.4 billion, up 1.5% year on year, on a consolidated
basis, and an ordinary income of ¥50.3 billion up 2.0% year on year, on an unconsolidated basis.

(4) Analysis of Financial Position[Total assets, Total liabilities, Total net assets analysis]
Total assets increased by ¥27,905 million year on year to ¥476,036 million, mainly due to a ¥10,799
million increase in cash and bank deposits and a ¥13,067 million growth in leased assets.
Total liabilities stood at ¥267,570 million, a year-on-year increase of ¥17,573 million. This mainlyreflected a ¥8,209 million increase in accounts payable resulting from a growth in the number of stores,
and a ¥12,155 million increase in current and long-term lease obligations combined.
Net assets increased by ¥10,331 million year on year to ¥208,466 million. This was mainly attributable
to a ¥6,176 million increase in capital surplus as a result of LAWSON executing share exchanges withboth Ninety-nine Plus Inc. and LAWSON ENTERMEDIA, INC. on July 1, 2010.
[Cash flow analysis]
Net cash provided by operating activities amounted to ¥72,210 million, ¥31,514million higher year on
year, due to a ¥14,536 million increase in income before income taxes and minority interests.
Investing activities used net cash of ¥30,522 million, ¥12,073 million less than the previous fiscal year,
mainly due to a ¥13,720 million increase in payments into time deposits and a ¥21,960 million increase inproceeds from withdrawing time deposits.
Financing activities used net cash of ¥28,798 million, ¥1,559 million more year on year, mainlyreflecting a ¥3,509 million increase in payments for purchase of treasury stock.

(5) Basic Policy on Profit Distribution, and the Reporting Term’s & Next Term’s Dividend Payment
The Company places a high priority on profit distribution to shareholders, and follows a policy of paying
appropriate dividends with due regard for sufficient earnings retention required for future business8

development, in accordance with the Company’s financial position, profitability level and payout ratio.
In compliance with this policy, the Company paid an interim dividend of ¥85 per share for the first-halfperiod, and plans to pay a year-end dividend of ¥85 for a total dividend of ¥170 per share annually.
Retained earnings not distributed to shareholders will be allocated to improving the value of theCompany by the reinvestment of such funds in new store openings and the renovation of existing stores,
as well as the encouragement of new business development.
Furthermore, based on the high priority it gives to returning profits to shareholders, LAWSON plans to
pay an annual dividend per share of ¥175 applicable to the fiscal year ending February 28, 2012 despite
expectations of a difficult operating environment.
In addition to paying dividends, the Company reserves the right to respond flexibly to market
circumstances by acquiring or retiring treasury stock as a strategy to improve shareholder profit.

(6) Operating Risks
The principal categories of risk that may have a material effect on the business performance or financial
position of the LAWSON Group are listed below. The Group is fully aware of the potential for such risks
to materialize, and intends to implement risk management accordingly, while taking optimal
countermeasures as necessary. These risks faced by the Group include, but are not limited to, thefollowing:(i) Risks involving change in the Group’s operating environment
In view of the fact that LAWSON Group is principally involved in the convenience store business,changes in the economic, market and societal structure of Japan or other countries in which the Group
operates, or any usual weather conditions, insofar as they may affect consumer behavior, may exert asignificant effect on the Group’s business. Other factors that are likely to affect the Group’s businessperformance and financial position include competition with other convenience store operators or withcompanies operating other business formats within the retail sector.
(ii)Risks involving food safety and hygiene
The Group sells food products to customers in its core convenience store business. In cooperation with its
business partners, the Group rigorously enforces a system of quality control from the initial foodprocessing stage to food item sales at its stores, ensuring appropriate labeling of "best by" and expiration
dates, product origins, and ingredients. The Group also ensures strict hygiene control and sales data
management within its stores. However, in the unlikely event of a serious incident such as food poisoning,the discovery of foreign matter within a food product, or mislabeling of food products, this could damage
the Group’s reputation for trustworthiness in the eyes of its customers, resulting in an adverse impact on
the Group’s business performance and financial position.
In such an event, the Group’s policy is to do its utmost to promptly provide full disclosure of information
about the situation through the news media, with the aim of minimizing the effect on the reputation of its
stores among consumers.
(iii)Risks involving the handling of personal information
In the course of conducting its business operations, the Group comes into the possession of, and handles,
various items of personal information relating to customers, shareholders, business partners, andfranchised store owners (the franchisees). Management recognizes as serious risks the leak of personal
information to third parties, and unauthorized access to such information. In addition to information
security measures, the Company has created a Personal Information Protection Policy, and all employees
have been acquainted with it in detail. However, in the unlikely event of a leak of confidential personal
information, the Group’s business performance and financial position could be adversely affected.
(iv) Legal risk
The Group operates stores in all 47 prefectures of Japan, as well as a number of stores in Shanghai andChongqing, and most are open 24 hours a day. For this reason, the Company is forced to carefully
observe a number of national and local laws and regulations, both in Japan and China, pertaining to store
opening locations, store operations, hygiene standards, merchandise procurement transactions, andenvironmental protection, and is required to obtain various permits and licenses from the competentauthorities.
For these reasons, in the event of unforeseeable changes in such laws or regulations, or in law
enforcement methods going forward, the Company may incur additional expenses needed to conform to9the new laws, and so forth, and this may have a material effect on its business performance and financial
position.
(v) Risks involving franchise operations
In its principal business line of convenience store operations, the LAWSON Group employs a franchisesystem under which the owner of the store signs a franchise contract with the Group, enabling him or her
to use the Group's proprietary brand name and logo. Consequently, an illegal or improper action or
actions taken by one franchise store, as a contractual counterparty, could damage the image of the
LAWSON chain as a whole, possibly adversely affecting the Group’s business performance and financial
position.
Furthermore, as its franchise system is designed to encourage the improvement of business performancefor both the franchise store and the Company, on the basis of a relationship of mutual trust between thetwo contracted parties, in the event that the said relationship of trust between the Group and its
franchisee is weakened, and as a consequence, that a large number of franchise contracts are dissolved,
this would adversely affect the Group’s business performance and financial position.
(vi) Risks involving unusual weather or damage due to natural causes
The Group operates a truly national chain of stores with outlets located in all of Japan’s 47 prefectures,
and additionally operates stores in Shanghai and Chongqing, China. Therefore, in the event that natural
phenomena such as a major earthquake or typhoon cause physical damage to the Group’s stores or other
LAWSON facilities, the Group’s business performance and financial position could be adversely affected.
The Group's principal convenience store business plays an important social role. Therefore, even in theevent of a major epidemic of a new influenza or other illness, we will continue to operate stores under abusiness continuity plan. However, in the unlikely event that stores are temporarily closed, the Group’sbusiness performance and financial position could be adversely affected.
(vii) Risks involving damage to IT systems
Operation of the Company’s IT system may be impeded by a computer virus, or obstructed by naturalcauses such as an earthquake, which could disrupt the information network system, creating delays in thedelivery of products to stores and causing the suspension of store services. Such developments could
adversely affect the Group’s business performance and financial position.
(viii) Risks involving a surge in raw material prices
When raw material prices rise due to a surge in crude oil prices, abnormal weather, or other unpredictableproblems, the Company’s business performance and financial position may be affected.

102. Corporate GroupThe business segments in which the Company operates are as follows:
Convenience store business The Company serves as the headquarters for its own and franchised stores in the LAWSON and NATURALLAWSON chains.
 A subsidiary, Ninety-nine Plus Inc., operates the price-point store “LAWSON STORE 100” and otherstores either by direct management or under the franchise system.
 A subsidiary, CHONGQING LAWSON CO., LTD., operates LAWSON stores in Chongqing, China.
 An affiliate, LAWSON Okinawa, Inc. engages in the Company’s chain-store development operations in
Okinawa Prefecture. This affiliate is a joint venture with SAN-A CO., LTD.
 An affiliate, SHANGHAI HUALIAN LAWSON CO., LTD., engages in the Company’s chain-store
development operations in Shanghai, China. This affiliate is a joint venture with Brilliance Group Co., Ltd.,
which has its headquarters in Shanghai.
Entertainment/e-commerce business A subsidiary, LAWSON ENTERMEDIA, INC. sells tickets for concerts, sporting events, movies, etc.
mainly through the Loppi multimedia terminals in LAWSON stores.
 A subsidiary, HMV Japan K.K., imports and markets music/video products such as CDs and DVDs.
Financial service business A subsidiary, LAWSON ATM Networks, Inc installs, maintains and operates bank ATMs located mainly in
LAWSON stores and conducts clerical procedures for depositing and withdrawing money as well as moneytransfers via the ATM network in question for alliance partners on a consignment basis.
Consulting business A subsidiary, BestPractice Inc., mainly conducts surveys of convenience store operation performance.
Based on the survey results, it then gives advice and specific proposals to LAWSON stores on improvementof store operations.
Advertising business・ A subsidiary, Cross Ocean Media, Inc., engages in electronic advertising business.

11

The following chart shows the relationship among LAWSON Group companies and affiliates.

[entertainment/e-commerc
e business business]

Commissioned
sales of various
tickets<Domestic><Overseas>
Management
Affiliate accounted forservicesby the equity method
SHANGHAI HUALIANLAWSON CO., LTD.

Consolidated subsidiary
LAWSONENTERMEDIA, INC.

Affiliate
Venture Republic Inc.,.
Cooperation inestablishing shared
ATMs

Consolidated subsidiary
CHONGQINGLAWSON CO., LTD.,.

Management
servicesManagement
servicesManagement <Domestic>
services
Consolidated subsidiary
Ninety-nine Plus Inc.

[Financial service business]

Consolidated subsidiary
LAWSON ATM Networks,
Inc

General Trading Company

Management
servicesArea
franchiseAffiliate accounted forby the equity method
LAWSON Okinawa, Inc.

Management services
based on store surveys

Business tie-up

Other affiliate
Mitsubishi Corporation

Management
services[Consulting business]
Consolidated subsidiary
BestPractice Inc.

[Advertising business]
Consolidated subsidiary
Cross Ocean Media, Inc.

Transaction
Capitalrelationship12Franchised chain storesmusic/video
softwaremarketing

LAWSON, INC.

Consolidated subsidiary
HMV Japan K.K .

[Convenience store business]

3. Management Policy(1) Basic Management Policy(i) Corporate Philosophy and Code of Conduct
The Company’s corporate philosophy "Happiness and Harmony in Our Communities" reflects its
belief that its social significance derives from relationships with all its stakeholders.
Under this concept, the Company has established a Code of Conduct based on three principles
governing its day-to-day corporate activities:
1) Act with utmost consideration for others,2) Tackle challenges with innovative ideas and actions, and
3) See objectives through to the very end.
(ii) Vision
The Company is taking various steps to realize "Happiness and Harmony in Our Communities."
Central to this effort is “Neighborhood Hot Station (Machi No Hotto Station in Japanese)," anickname for the Company’s stores, which communicates the idea of "hot" new merchandise,information and services that take into account local preferences and aims to be a place where
customers can relax (“hotto” suru in Japanese).
(2) Performance Indicators (Target)
From the perspective of medium-and-long-term management strategy, the Company believes thatinvesting in businesses with high return on investment (ROI) will maximize the efficiency in the useof shareholders’ equity, which will in turn enhance shareholder value. The Company regards returnon equity (ROE) as the best measure of optimal utilization of shareholders’ equity. Accordingly,
the Company is targeting a ROE of 15 to 20% on a consolidated basis over the medium term.
(3) Medium-and-Long-Term Management Strategies
The business environment facing convenience stores is defined by several factors, including:population decline arising from Japan’s declining birthrate and aging society; deflation; and stronger
environmental awareness. Never before has the convenience store industry experienced such anenvironment. Against this backdrop, the Company recognizes the following as priority issues ahead.
The Company believes that its core business strategies must address these priority issues.
(4) Priority Issues of the Company(i) Growing Need to Broaden Customer Segments
Faced with a declining birthrate and aging society, the Company must expand its customer base andincrease customer numbers by targeting not only men in their 20s and 30s, its traditional corecustomers, but also women, the middle-aged and seniors. It must therefore continue to develop
merchandise and services suited to the needs of each customer segment.
(ii) Responding to diversification of consumption patterns and deregulation
Amid growing regional disparity, the Company faces changes in its operating environment definedby deregulation following the amendment of the Pharmaceutical Affairs Act and other legislation,and intensifying competition from other industries and retail segments. In response, the Company
must revamp nationwide and standardized store management practices, take a fresh look at its
merchandise assortments and continue to improve the level of convenience in an effort to reinvent its
stores to better suit the customer.
(iii) Increasing public interest in CSR
The Company recognizes the societal duties the convenience store sector bears and, as a publicly
listed corporation, it must not only seek profit, but also remain fully aware of CSR priorities in thecourse of business operations.
Key to the measures necessary to address the above issues is the Company’s mid- to long-term basic
strategy of “creating stores to suit the needs of each and every customer in the area.” While focusedon this strategy, the Company is working to raise the customer satisfaction of each individual in
every location. The Company continues to provide total support to franchised store owners

13

(franchisees) so that they can focus on building stores with more emphasis on customers, to improveearnings. To ensure the effectiveness of this support, the Company is focusing on the following
concrete initiatives.

Initiatives to Address Priority Issues(i) Improving New Merchandise Development Capabilities
While strengthening its ability to develop safe and reliable original merchandise, the Company willproactively develop merchandise suited to regional preferences by focusing on such aspects as taste
and price. In this process, the Company aims to raise its original added value and develop
merchandise that garners a strong customer response.
(ii) Improving Store Operation Capabilities
The Company will continue its efforts to improve customer satisfaction through promoting the Three
Challenge Practices. They are (1) ensuring merchandise assortments are matched to individual
locations, (2) keeping stores and surrounding areas clean, and (3) serving customers courteously.
When selecting store merchandise, the Company will focus on ensuring the merchandise assortment
suits local customers, by creating individually tailored stores. At the same time, the Company will
strive to create attractive stores where the customer feels comfortable shopping and makes return
visits by ensuring that stores and their surrounding neighborhoods are kept clean and that customers
are truly made to feel welcome.
(iii) Reinforcing Store-Development Capabilities
The Company’s store-development policy prioritizes customer convenience and profitability for bothfranchise store owners and headquarters. The Company seeks to establish high-ROI (return on
income) stores by avoiding a standardized, nationwide approach to decision-making and choosing
new store locations based on detailed regional and location characteristics.
(iv) Tailoring Store Formats to Suit Local Characteristics
Conscious that market needs are becoming increasingly complex and diversified, the Company
provides store formats that offer retail spaces and merchandise assortments to suit the location. As
for the Company’s store development strategy, regular LAWSON stores will be opened to target
customers seeking new merchandise, famous brand goods and convenient services; NATURALLAWSON stores will be opened to target customers seeking beauty, health and amenity. The
LAWSON STORE100 will be opened to target customers seeking perishables packaged in small
quantities and low standardized prices.
(v) Enhancing Convenience by Opening Stores in Special Locations and Expanding Financial
Services
To enhance customer convenience, the Company develops initiatives based on new ideas rather thanon established practices. In tie-ups with other corporations, the Company opens stores in special
locations (captive commercial spaces providing high profitability due to the absence of competingstores). In its financial services, the Company aims to increase convenience for customers by
expanding the Ponta card programs and offering various services via the “Loppi” multimedia
terminals, and in-store ATMs.
(vi) Accelerating Business Reform Through Capital and Business Alliances
The Company continues to effectively respond to the rapidly changing social environment and theneeds of customers through capital and business alliances that enable it to improve profitability on
an individual store basis

144. Consolidated Financial Statements etc.
(1) Consolidated Balance Sheets (Unaudited)
As of February 28, 2010 and February 28, 2011
February 28, 2010
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
Total current assets
Fixed assets:
Property and store equipment;
Buildings and structures
Accumulated depreciation
Buildings and structures－net
Vehicles, tools, furniture and fixtures
Accumulated depreciation
Vehicles, tools, furniture and fixtures－net
Land
Lease assets
Accumulated depreciation
Lease assets－net
Construction in progress
Subtotal
Intangible fixed assets;
Software
Software in progress
Goodwill
Other（Millions of yen）
February 28, 2011

64,017
20,790
2,500
4,446
6,980
26,445
4,587
2,587
(155)
132,198

74,816
16,159
2,999
7,011
7,424
29,285
4,943
2,466
(97)
145,009

183,841(87,388)
96,452
57,241(44,383)
12,8586,526
31,435(2,567)28,867603
145,308

192,865(96,463)
96,401
61,156(47,914)
13,241
6,609
51,055(9,120)41,934646
158,833

26,259
3,415
4,248
484

23,182
4,719
7,717
477

Subtotal
Investments and Other;
Investments in Securities
Long-term loans receivable
Long-term prepaid expenses
Lease deposits
Deferred tax assets
Claims provable in bankruptcy, claims provable in rehabilitation and other
Other
Allowance for doubtful accounts

34,40736,096

2,053
29,724
5,753
83,205
15,274
13,631
1,211(14,636)

3,116
31,825
5,736
81,654
13,253
15,372
1,184(16,047)

Subtotal
Total fixed assets

136,216
315,933

136,096
331,026

Total assets

448,131476,03615

Consolidated Balance Sheets (Unaudited) - Continued
February 28, 2010

（Millions of yen）
February 28, 2011

Current liabilities:
Accounts payable —trade
Accounts payable —trade for franchised stores
Accounts payable — due to franchised stores
Lease obligations
Accounts payable — otherAccounts payable — other for franchised stores
Income taxes payable
Consumption taxes payable
Accrued expenses
Deposits received
Accrued employees’ bonuses
Provision for use of points granted
Other

11,423
61,765
1,024
4,641
21,838
295
9,852
288
2,426
65,858
2,789
2,097
194

13,014
68,384
1,179
7,953
18,101138
10,6732,894
2,610
62,340
3,768
1,287
248

Total Current liabilities

184,496

192,595－
19,410
6,206
217

500
28,253
7,529
234

38,710471
484

37,139667
650

Total Long-term Liabilities

65,49974,974

Total Liabilities

249,996

267,570

Owners’ equity;
Common stock
Capital surplus
Retained earnings
Treasury stock
Total Owners’ equity

58,506
41,52094,171(1,713)
192,485

58,506
47,696
99,608(1,693)204,117

Valuation and translation adjustments;
Net unrealized gain on available-for-sale securities
Land revaluation difference
Foreign currency translation adjustments
Valuation and translation adjustments

14
(634)
65
(554)

(4)
(634)
1
(638)

Stock acquisition rights
Minority interests

346
5,858

405
4,581

Total net assets

198,135

208,466

Total Liabilities and net assets

448,131476,036

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
Accumulated impairment loss on long-term leased assets
Other

16

(2) Consolidated Statements of Income (Unaudited)
For the fiscal year ended February 28, 2010 and 2011
February 28, 2010

（Millions of yen）
February 28, 2011

Total operating revenues
Net sales
Cost of goods sold467,192
233,693
173,722441,277
192,329
143,101

Gross profit on sales

59,97049,228Operating revenues:
Franchise commission from franchised stores
Other
Operating gross profit
Selling, general and administrative expenses

185,656
47,842
293,469
243,193

197,673
51,274
298,176
242,635

Operating profit

50,27555,540Non – operating income and expenses:
Non – operating income;Interest received
Compensation income for damage
Compensation income for removal
Equity in earnings of affiliates
Other
Non – operating expenses;
Interest expense
Loss on cancellation of store lease
Other
Recurring profit

1,676
696
81
342
61
493
2,511
394
1,578
539

1,718
661
64
207
311
473
2,665
983
1,224
457

49,44054,594Extraordinary gains and losses:
Extraordinary gains;
Gain on sales of fixed assets
Gain on change in equity
Gain on sales of subsidiaries and affiliates’ stock
Gain on sales of investment securities
Other
Extraordinary losses;
Loss on disposal of fixed assets
Loss on sales of fixed assets
Loss on impairment of long-lived assets
Impropriety-related loss
Other

2,397
33
625
1,628
－
110
21,963
3,898
29
3,903
12,616
1,514

1
－
－
－
1
－
10,184
3,017
1,303
4,989
－
873

Income before income taxes and minority interests

29,874

44,411

Income taxes:
Income taxes - current
Deferred income taxes
Minority interests in income

18,392(1,151)
71

16,551
1,668
803

Net profit

12,562

25,38617

(3) Consolidated Statements of Changes in Net Assets (Unaudited)
For the fiscal year ended February 28, 2010 and 2011
（Millions of yen）
February 28, 2010

February 28, 2011

58,50658,506－－58,50658,506

41,52041,520

Increase by share exchanges

－

6,176

Total changes during the current period

－

6,176

41,52047,696

97,811

94,171

Cash dividends paid

(15,866)(16,422)

Net income

12,562

25,386

Owners’ equity:
Common stock and preferred stock
Balance at the end of the previous period
Changes during the current period
Total changes during the current period
Balance at the end of the current period
Capital surplus
Balance at the end of the previous period
Changes during the current period

Balance at the end of the current period
Retained earnings
Balance at the end of the previous period
Changes during the current period

Disposal of treasury stock－(0)

Retirement of treasury stock－(3,528)(334)－(3,639)5,436

94,171

99,608(1,712)(1,713)Purchase of treasury stock(0)(3,510)

Disposal of treasury stock－

1

Retirement of treasury stock

－

3,528

Total changes during the current period

(0)

19

(1,713)(1,693)

196,124

192,485－

6,176

Cash dividends paid

(15,866)(16,422)

Net profit

Reversal of land revaluation differences, net of tax
Total changes during the current period
Balance at the end of the current period
Treasury stock
Balance at the end of the previous period
Changes during the current period

Balance at the end of the current period
Total Owners’ equity
Balance at the end of the previous period
Changes during the current period
Increase by share exchanges

12,562

25,386

Purchase of treasury stock(0)(3,510)

Disposal of treasury stock

－

1

(334)

－

Total changes during the current period(3,639)

11,632

Balance at the end of the current period

192,485

204,117

Reversal of land revaluation differences, net of tax

18

Consolidated Statements of Changes in Net Assets (Unaudited) - Continued（Millions of yen）
February 28, 2010
Valuation and translation adjustments:
Unrealized holding gains on securities, net of tax
Balance at the end of the previous period
Changes during the current period
Net changes of items other than owner’s equity
Total changes during the current period
Balance at the end of the current period
Land revaluation difference, net of tax
Balance at the end of the previous period
Changes during the current period
Net changes of items other than owner’s equity
Total changes during the current period
Balance at the end of the current period
Foreign currency translation adjustments
Balance at the end of the previous period
Changes during the current period
Net changes of items other than owner’s equity
Total changes during the current period
Balance at the end of the current period
Total valuation and translation adjustments
Balance at the end of the previous period
Changes during the current period
Net changes of items other than owner’s equity
Total changes during the current period
Balance at the end of the current period
Stock acquisition rights
Balance at the end of the previous period
Changes during the current period
Net changes of items other than owner’s equity
Total changes during the current period
Balance at the end of the current period
Minority interests
Balance at the end of the previous period
Changes during the current period
Net changes of items other than owner’s equity
Total changes during the current period
Balance at the end of the current period

February 28, 2011

(40)

14

55
55
14

(19)
(19)
(4)

(969)

(634)

334
334
(634)

－
－
(634)

59

65

6
6
65

(64)
(64)
1

(950)

(554)

395
395
(554)

(83)
(83)
(638)

274

346

71
71
346

59
59
405

5,717

5,858

141
141
5,858

(1,276)(1,276)
4,581

Total net assets
Balance at the end of the previous period
Changes during the current period
Increase by share exchanges
Cash dividends paid
Net profit
Purchase of treasury stock
Disposal of treasury stockReversal of land revaluation difference, net of tax
Net changes of items other than owner’s equity
Total changes during the current period

201,166

198,135－(15,866)
12,562
(0)
－
(334)
608
(3,031)

6,176(16,422)
25,386(3,510)1－(1,301)
10,331

Balance at the end of the current period

198,135

208,466

19

(4) Consolidated Statements of Cash Flows (Unaudited) - Continued
For the fiscal year ended February 28, 2010 and 2011

Operating activities:
Income before income taxes
Depreciation of property and store equipment
Loss from disposal of fixed assets
Loss from disposal of intangible fixed assets
Loss on impairment of long-lived assets
Loss (gain) on sales of fixed assets
Increase in provision for allowance for retirement benefits to employees
Increase in allowance for doubtful accounts
Gain on sales of stocks of subsidiaries and affiliates
Equity in earnings (losses) of an affiliates
Interest received
Interest expense
Other-net
Decrease (increase) in accounts receivable due from franchised stores
Decrease (increase) in merchandise inventories
Decrease (increase) in accounts receivable－other
Decrease (increase) in claims provable in bankruptcy, claims
provable in rehabilitation
Increase (decrease) in accounts payable—trade and due to franchised
storesIncrease (decrease) in accounts payable—other
Increase (decrease) in deposits received
Increase (decrease) in lease deposits from franchisee and lessees
Other-net
SubtotalInterest received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities

20

February 28, 2010

(Millions of yen)February 28, 2011

29,874
27,468
1,981
278
3,903
(3)
1,155
10,309(1,628)
(61)
(696)
394
1,462
390
839
260
(12,636)

44,411
33,083
1,468
267
4,989
1,303
941
1,352
－
(311)
(661)
983
1,115
4,631
57
(1,237)(1,788)(3,922)

5,248(4,230)5,196(3,315)
1,103
58,124
689(395)(17,722)(5,126)(3,560)(1,571)
2,612
88,208661(982)(15,676)

40,69572,210Consolidated Statements of Cash Flows (Unaudited) - Continued

February 28, 2010

(Millions of yen)February 28, 2011(12,584)
3,414(2,799)4,100(2,040)
(110)
3,223
－

(26,304)
25,374－2,500(2,069)
(650)
225
(809)

Investing activities:
Payments into time deposits
Proceeds from withdrawal of time deposits
Payment for purchase of marketable securities
Proceeds from redemption of marketable securities
Increase (decrease) in long-term loans receivable – net
Purchase of stocks of subsidiaries and affiliates
Proceeds from sales of stocks of subsidiaries and affiliates
Purchase of investments in subsidiaries resulting in change in scopeof consolidation
Proceeds from purchase of investments in subsidiaries resulting fromchange of scope of consolidation
Payment for acquisition of property and store equipment
Payment for acquisition of intangible fixed assets
Increase (decrease) in lease deposit –net
Increase (decrease) in long-term prepaid expenses
Other – net
Net cash used in investing activities－

455(26,144)(9,041)289(1,386)483(42,595)(22,883)(7,511)
2,299(1,045)(102)(30,522)

Financing activities:
Repayment of long-term loans payable
Repayments of lease obligations
Cash dividends paid
Cash dividends paid to minority interests
Purchase of treasury stock
Other -net
Net cash used in financing activities(1,968)(9,149)(15,866)
(61)
－
(192)
(27,238)－(8,785)(16,422)－(3,510)(80)(28,798)－(20)

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year

(29,138)
83,981

12,86854,843

Cash and cash equivalents at end of period

54,84367,712

Effect of exchange rate change on cash and cash equivalents

21

《Notes Concerning Going Concern Assumption》
None《Basis of Presenting the Consolidated Financial Statements》
1. Scope of consolidation
Consolidated subsidiaries: 7
LAWSON ENTERMEDIA, INC.
LAWSON ATM Networks, Inc
BestPractice Inc.
Ninety-nine Plus Inc.
Cross Ocean Media, Inc
HMV Japan K.K.
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.
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
Affiliated companies to which the equity method is applied: 2
LAWSON Okinawa, Inc.
SHANGHAI HUALIAN LAWSON CO., LTD.

The Company does not apply the equity method to one affiliated company (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 acquisition is still pending.
Among share method application companies, it is December 31 on the settling day of SHANGHAIHUALIAN LAWSON CO.,LTD..When creating the consolidated balance sheets, the Company usedbalance sheets created by provisional settlement based on the financial data at the end of the most recently
settled fiscal quarter and, as required, made adjustments on a consolidated basis to take into accountsignificant transactions that subsequently occurred in the interval until the end of the consolidated term.
3. Closing day for settlement of accounts of 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 balance22sheet date are adjusted as required for consolidation. The fiscal year end date for the other consolidated
subsidiaries correspond with the consolidated balance sheet date.
4. Summary of Significant Accounting Policies(1) Valuation basis and method for important assets
Marketable securities and investments in securities:
Held-to-maturity debt securities: Carried at amortized cost.
Available-for-sale securities:
Securities whose market value is readily determinable: Reported at market value, with unrealized
gains and losses, net of applicable taxes, reported in a separate component of net assets.
The cost of securities sold is determined based on the moving-average method.
Other: Stated at cost determined by the moving-average method.
Inventories:
Effective from the first quarter of the fiscal year ending February 28, 2010, the Company has adopted“Accounting Standard for Measurement of Inventories” (ASBJ Statement No. 9 (July 5, 2006) and has
calculated inventories at cost, cost mainly 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.
In the past, the Company has principally accounted for inventories at cost determined by the retailmethod. Therefore, this change had no effect on earnings.
(2) Depreciation method of depreciable assets
Property and store equipment (except for lease assets):
Depreciation is mainly computed by the declining-balance method at rates based on the estimateduseful lives of the assets. The range of useful lives is from 10 to 34 years for buildings and from 5 to 8
years for furniture, fixtures and equipment.
Intangible fixed assets (except for lease assets):
Amortization of intangible assets is computed by the straight-line method.
Software costs of software for internal use are amortized by the straight-line method over 5 years,
which is the internal useful life.
Lease assets:
Previously, these leases were accounted for as rental transactions. Furthermore, in terms of thedepreciation 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 the useful life and aresidual value of zero.
However, the Company has continued to treat as rental transactions finance leases that do not transfer
ownership of leased property and that commenced before the first fiscal year in which the new
accounting standard was applied.
Long - term prepaid expense
Amortization of long-term prepaid expense is computed by the straight - line method.
(3) Accounting standard for important reserves
Allowance for Doubtful Accounts:
Allowance for doubtful accounts is provided at an amount of possible losses from uncollectable
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 MY LAWSON POINT holders and LAWSON PASS holders whenpurchasing goods, an entitlement to certain points that the holder can redeem for a discount on
23

subsequent purchases from LAWSON stores.
Allowance for Employees’ Retirement Benefits:
Allowance for employees’ retirement benefits is provided at the amount accrued based on the projected
benefit obligations and plan assets at the balance sheet date. Actuarial differences will be 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 the fiscal year incurred, on a straight-line basis over a certain period (10years) within an average remaining service period of employees.
(Changes in accounting treatment)
Effective from the fiscal year ended March 31, 2011, the Company adopted the Partial Amendments to
Accounting Standard for Retirement Benefits (Part 3) (ASBJ Statement No. 19, issued on July 31,2008).
This change had no effect on operating income, ordinary income and income before income taxes andminority interests.
Allowance for Retirement Benefits to Directors and Corporate Auditors:
Allowance for retirement benefits to corporate auditors and executive officers of The Company, and todirectors and corporate auditors of the certain consolidated subsidiary are calculated to state theliability at 100% of the amount that would be required if all corporate auditors, executive officers anddirectors resigned their services with the Company at the balance sheet date.
(4) Foreign Currency Transactions 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 statements 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) Accounting for Consumption Tax
Consumption tax is accounted for using the tax exclusion method.
5. Valuation of assets and liabilities of consolidated subsidiaries
The assets and liabilities of consolidated subsidiaries, including the portion attributable to minority interests,
are valued at their fair values at the respective dates when the subsidiaries were initially consolidated.
6. Amortization of Goodwill
Concerning goodwill, the amount is amortized on a straight-line basis over a maximum of 20 years, dependingon the reason for the occurrence of goodwill.
7. Cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents in the consolidated statements of cash flows include cash on hand, demand deposits
and short-term investments due within 3 months from the acquired date, which are easily convertible into cashwith little risk of value fluctuation.

（Accounting Standard for Business Combination）
The Company is applying the Accounting Standard for Business Combinations (ASBJ Statement
No.21, December 26, 2008), the Accounting Standard for Consolidated Financial Statements(ASBJ Statement No.22, December 26, 2008), and the Implementation Guidance on Accounting Standard forBusiness Combinations and Business Divestitures (ASBJ Guidance No.10, December 26, 2008) from thisfiscal year.

24

《Notes to Consolidated Financial Statements》
Notes to the Consolidated Balance Sheets
As of February 28, 2010

As of February 28, 2011

1.Investment in affiliated companies
1.Investment in affiliated companies
Investments in¥1,541 million
Investments in securities¥2,474 million
securities (stock)(stock)Investment amount for¥100 million
Investment amount for¥100 million
jointly-controlled
jointly-controlled
companies
companies
Other (other equity¥500 million
Other (other equity¥ 468 million
investments)
investments)
2.Accounts receivable due from franchised stores, 2.Same as in the left
accounts payable due to franchised stores-theamounts of credits and debts incurred for the deal
with franchised stores.
3.Accounts payable-trade for franchised stores－the 3.Same as in the left
amounts payable to vendors for merchandisepurchased by franchised stores.
4.Accounts payable-other due for franchised stores 4.Same as in the left－the amounts payable for supplies purchased by
franchised stores.
5.Deposits received from franchise and lessees-the 5.Same as in the left
amounts received from mainly franchised stores.
6. Revaluation of land used for business
6. Revaluation of land used for businessLand used for business was revalued on the basis
Land used for business was revalued on the basisprescribed by the Law Concerning Revaluation ofprescribed by the Law Concerning Revaluation ofLand (Law No. 34, March 31, 1998). The resulting Land (Law No. 34, March 31, 1998). The resulting
revaluation difference for land used for businessrevaluation difference has been included in net
that is scheduled to be sold has been included in
assets as land revaluation difference.
net assets as land revaluation difference, net of therelated tax, which is included in deferred tax assets
for land revaluation.
Revaluation method:
The value of land is determined based on the roadbased prices adjusted reasonably as stipulated in
Article 2, Item 4 of the Ordinance Implementing
the Law Concerning Revaluation of Land
(Government Ordinance No. 119, March 31, 1998)
and the assessed value as stipulated in Article 2,
Item 5 of the same Ordinance.
Date of revaluation:
February 28, 2002
The difference between book value andmarket value of the revalued land as of balance
sheet date.
¥232 million

25

Revaluation method:
The value of land is determined based on theroad-based prices adjusted reasonably as
stipulated in Article 2, Item 4 of the Ordinance
Implementing the Law Concerning Revaluation ofLand (Government Ordinance No. 119, March 31,
1998) and the assessed value as stipulated in
Article 2, Item 5 of the same Ordinance.
Date of revaluation:
February 28, 2002
The difference between book value andmarket value of the revalued land as of balance
sheet date.
¥269 million

Notes to Consolidated Statements of Income
From March 1, 2008 to February 28, 2010
1.Net sales, cost of goods sold, operating
gross profit-the amounts from mainlycompany operated stores.
2.Main account of selling, general andadministrative expenses
Sales promotion and advertising
Doubtful debt accountSalaryProvision for accrued employees’
bonuses
Retirement benefit costs
Provision for allowance for retirement
benefits to directors and corporate
auditors
Rent accountDepreciation of fixed assets
3.Gain on sales of fixed assets
Buildings and Structures
Furniture, fixtures and equipment
Land
Telephone subscription right(Millions of yen)
From March 1, 2009 to February 28, 2011
1.Same as in the left

2.Main account of selling, general andadministrative expenses
10,070
Sales promotion and advertising13
Doubtful debt account47,019
Salary2,789
Provision for accrued employees’
bonuses
1,800
Retirement benefit costs
65
Provision for allowance for retirement
benefits to directors and corporate
auditors
70,570Rent account
21,053
Depreciation of fixed assets
3.Gain on sales of fixed assets
9―――――――――
122
0

10,905
182
43,403
3,770
1,810
83

73,231
24,5294.Distribution of loss on disposal of fixed assets
4.Distribution of loss on disposal of fixed assets
Buildings and structures
3,067 Buildings and structures
2,012
Furniture, fixtures and equipment
638 Furniture, fixtures and equipment
743
Software145 Software
153
Software development in progress
27 Software development in progress
84
Other
20 Other24
5.Distribution of loss on sales of fixed assets
5.Distribution of loss on sales of fixed assets
Buildings and Structures
26 Buildings and Structures
1,228
Furniture, fixtures and equipment
0 Furniture, fixtures and equipment
11
Other
2
Land
61
Other
1

26

6. Loss on impairment of long-lived assets
6. Loss on impairment of long-lived assets
The Group recognized an impairment loss mainly for The Group recognized an impairment loss mainly foreach stores as the smallest category bear cash flows.
each stores as the smallest category bear cash flows.
The carrying amount of those assets was written down The carrying amount of those assets was written down
to the recoverable amount. The Group recognized to the recoverable amount. The Group recognizedimpairment loss as special losses on following assets impairment loss as special losses on following assets
due to a decline in value of the related asset categories due to a decline in value of the related asset categories
due mainly to a continuous operating losses
due mainly to a continuous operating losses.
Category
by uselocation

Tokyo
StoresOthersTotal

Osaka
Others－―AssetsBuildings andstructure furniture,
fixtures andequipment and others〃〃
Goodwill―

millionof yen
427
191
2,784
500
3,903

Category by fixed assets
Buildings and Structure
2,125
Furniture, fixtures and equipment
273
Land
395
Goodwill
500
Leased property
442
Other
166
Recoverable value of the assets of the Group is thehigher amount of net selling price or value in use. Not
selling price of land was calculated based on appraisedvalue by real estate appraiser or contract price, and thevalue in use was calculated by discounting estimatedfuture cash flows to which the 4.9% discount rate wasapplied.

Category
by useAssetsmillionof yenBuildings andstructure furniture,
Tokyo
1,223
fixtures andStoresequipment and others
Osaka
192
〃
Others2,128〃
Software
1,438―
OthersOthers
6
―
Total
4,989
―
―
Category by fixed assets
Buildings and Structure
2,043
Furniture, fixtures and equipment
380
Leased property
1,094
Software
1,438
Other
31
Recoverable value of the assets of the Group is thehigher amount of net selling price or value in use. Not
selling price of land was calculated based on appraisedvalue by real estate appraiser or contract price, and thevalue in use was calculated by discounting estimatedfuture cash flows to which the 3.3% discount rate wasmainly applied.

7. Impropriety-related Loss
7.
Impropriety-related Loss was provided for estimatedunrecoverable money connected with an alleged
misappropriation at consolidated subsidiary LAWSONENTERMEDIA, INC.

27

location―――――――――

(Notes to the Consolidated Statements of Changes in Net assets)
Previous period (From March 1, 2009 to February 28, 2010)
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
99,60099,600－－Treasury stock
Common stock(*1)
432
0
432
－
(*1) The 0 thousand shares increase in treasury stock was resulted from purchase of stock less than unit share.
2. Stock acquisition rights and treasury stock acquisition rights
Class and number of shares subject to stock acquisitionrightsTerms ofstock
Number(shares)Classificationacquisition
End
of
the
Increase
Decrease End of theClassrightsprevious during the during theperiodperiodperiodperiodStock
Submitting
acquisition
company
rights—————(Parent(ordinarycompany)stock
options)
Total
—
—
—
—
—

Balance at
end of thecurrent
period(Millionsof yen)346

346

3. Dividend(1) Dividend payment
Date ofresolution
The General
meeting ofshareholders(May 26, 2009)
Directors’
meeting(October 8,
2009)Class ofsharesAmounts ofdividend
payment(Millions ofyen)

Dividend
per shares(yen)

Date recorded for
dividend

Effective dateCommon
stock

7,933

80

As of February, 28,2009

As of May, 27,
2009Common
stock

7,933

80

As of August 31,
2009

As of November,
10, 2009(2) Dividends for which effective date is after Balance sheet date of year-ended, among dividends attributed in the
Current period.
AmountsofReserve
Date ofClass ofdividend Dividend per Date recorded forof
Effective datepayment shares (yen)dividend
resolution
sharesDividend(Millionsof yen)The General
meeting of
As of February, 28,
Common Retained
7,933
80
As of May, 26, 2010
shareholders
2010
stock
Earnings(May 25,
2010)
28

Current period (From March 1, 2010 to February 28, 2011)
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 tothe share 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 LAWSONENTERMEDIA, INC., effective as of July 1, 2010.The 902,000 decrease in shares outstanding resulted fromthe retirement of treasury stock.
(*2) The 903,000 share increase in treasury stock resulted from the 902,000 share increase due to acquisition oftreasury stock in accordance with a Board of Directors' resolution and the 1,000 share increase due to purchaseof stock less than one share unit.
The 902,000 share decrease in treasury stock resulted from the 902,000 share decrease due to retirement oftreasury stock and the 0 thousand shares decrease due to requests for additional purchase of stock less than one
share unit.

2. Stock acquisition rights and treasury stock acquisition rights
Class and number of shares subject to stock acquisitionrightsTerms ofstock
Number(shares)Classificationacquisition
End
of
the
Increase
Decrease End of theClassrightsprevious during the during theperiodperiodperiodperiodStock
Submitting
acquisitionrightscompany—————(Parent(ordinarycompany)stock
options)
Total
—
—
—
—
—

Balance at
end of thecurrent
period(Millionsof yen)405

405

3. Dividend(1) Dividend payment
Date of resolution
The General
meeting ofshareholders(May 25, 2010)
Directors’ meeting(October 12, 2010)

Class ofsharesAmounts ofdividend payment(Millions of yen)

Dividend
per shares(yen)

Date recorded for
dividend

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 effective date is after Balance sheet date of year-ended, among dividends attributed in the
Current period.
Amounts ofdividend
Date ofClass of Reserve of
Dividend per Date recorded for
payment
Effective date
resolution
sharesDividend
shares (yen)dividend(Millions ofyen)
The General
meeting ofCommon Retained
As of February, 28,
shareholders
8,488
85
As of May, 25, 2011stock
Earnings
2011(May 24,2011)
29

Notes to the Consolidated Statements of Cash Flows
1. Relations between the year-end balance of cash and cash equivalents and the accounts listed in the consolidatedbalance sheets(Millions of yen)
As of February 28, 2011
Cash and bank deposits
74,816
Marketable securities
2,999
Time deposits, etc., for which the deposit period exceeds(10,104)
three months
Cash and cash equivalents
67,712
2. Description of significant non-fund transactions(1) Assets and liabilities related to finance lease transactions newly recognized for the year ended February
28, 2011 were 19,518 million yen respectively.
(2)Consolidated subsidiaries, Ninety-nine Plus Inc. and LAWSON ENTERMEDIA, INC., became whollyowned subsidiaries of the Company through a share exchange during the year ended February 28, 2011.
Capital surplus increased by 6,176 million yen as a result of this share exchange.
3. Details of assets and liabilities of companies that have been newly consolidated through the acquisition ofsharesAssets and liabilities of HMV Japan K.K. at the time when it was newly consolidated through the acquisitionof shares by the Company, as well as the acquisition price of shares in HMV Japan K.K. and payment for
acquisition were as follows:(Millions of yen)
Current assets
5,417
Fixed assets
2,716
Goodwill
608
Current liabilities(5,475)
Fixed liabilities(1,369)Acquisition price of shares in newly consolidated company
1,897
Cash and cash equivalents held by newly consolidated company
1,088
Actual cost of acquisition of shares in newly consolidated company(809)
Notes to Lease Contracts
1. Finance lease transactions (lessees)
Non-ownership-transferred finance lease transactions(i) Details of leased assets
Mainly store furniture (including fixtures and fittings) used in the convenience store business(ii) Depreciation method for leased assets
As stated in the Basis of Presentation of the Consolidated Financial Statements under “4.Accounting
standards (2) Depreciation methods for important depreciable assets.”
With regard to non-ownership-transferred finance lease transactions whose effective date of lease transaction
precedes February 28, 2009, the Company applies the accounting method that it uses to account for ordinary
lease transactions. Details of the transaction are summarized below.
(1) The assumed data as to acquisition cost, accumulated depreciation and net leased property(Millions of yen)
As of February 28, 2010 As of February 28, 2011
Furniture, fixtures and equipment
Acquisition cost
53,95544,128
Accumulated depreciation
29,05627,880
Accumulated impairment loss
1,148
1,128
Leased property
23,74915,11930

(2) Obligations under finance leases
Furniture, fixtures and equipment
Due within one year
Due after one year
Total
Allowance for impairment loss on leased property

8,944
16,90925,853452(3) Lease payments, depreciation expense, interest expense and impairment loss
Lease payments
11,697
Transfer from allowance for impairment loss on leased property
512
Depreciation expense
11,161
Interest expense
912
Impairment loss
439

6,970
10,076
17,047
760

9,290
553
8,973
631
861

(4) Computation method of depreciation expense
Depreciation expense is computed by the straight-line method, assuming the lease period as the useful lifeand no residual value.
(5) Computation method of interest expense
The difference between the total lease contract amount and the acquisition cost is assumed to be interest,and interest expense is computed by the interest method.

2. Operating lease contracts
Obligations under operation leases(Millions of yen)
As of February 28, 2010 As of February 28, 2011
782
436
1,606
332
2,388
768

Due within one year
Due after one year
Total

31

Notes to Market Value Information of Securities(As of February 28, 2010)
1.
Information regarding marketable held-to-maturity debt securities as of February 28, 2010, was as follows:(Millions of yen)Book value per
Unrealized gain
Market valueTypeconsolidated
Description(loss)
balance sheets
Securities with market Government and－－－value exceeding book municipal bonds, etc.
value per consolidated Corporate Bonds
2,500
2,501
1
balance sheets
Other
2,500
2,501
1
Subtotal－－－
Securities with book
Government and－－－value per consolidated municipal bonds, etc.
balance sheets
Corporate Bonds－－－
exceeding market value Other－－－－
Subtotal
－
－
Total
2,500
2,501
1
2.

Information regarding marketable available-for-sale securities as of February 28, 2010, was as follows:(Millions of yen)Book value per
Unrealized gain
Description
Type
Cost
consolidated(loss)
balance sheets5
5
Equity0
Securities with costexceeding book value Bond certificate－－－
per consolidated
Other
－
－
－
balance sheets
Stock
5
Subtotal
50
Securities with book51
37
Equity(13)
value per consolidated
Bond certificate－－－
balance sheets
－
－
Other
－
exceeding cost
Stock
Subtotal
51
37
(13)
56

Total

43

3. Information regarding available-for-sale securities sold during the year was as follows:(Millions of yen)
Proceeds from the sale Total gain from the sale Total loss from the
sale
0
2
－

32

(12)

4. Available-for-sale securities whose fair value is not readily determinable as of February 28, 2010, were as
follows:
Available-for-sale securities

Unlisted shares (excluding OTC securities)
Other
Total

(Millions of yen)Book value perconsolidated balance
sheets355
112
468

5. Available-for-sale securities with maturities and held-to-maturity debt securities as of February 28, 2010 bycontractual maturity were as follows:(Millions of yen)Type
1 year or lessOver 1 year to 5years
Government and municipal bonds, etc.
－－
Corporate Bonds－－
Other bonds
2,500
－
Total
2,500
－

(As of February 28, 2011)
1.
Information regarding marketable held-to-maturity debt securities as of February 28, 2011, was as follows:(Millions of yen)Book value per
Unrealized gainTypeconsolidated
Market value
Description(loss)
balance sheets
Securities with market Government and－－－value exceeding book municipal bonds, etc.
value per consolidated Corporate Bonds－－－
balance sheets
Other
－
－
－
Subtotal－－－
Securities with book
Government and
2,999
2,999
(0)
value per consolidated municipal bonds, etc.
balance sheets
Corporate Bonds－－－
exceeding market value Other
－
－
－
(0)
Subtotal
2,999
2,999
Total
2,999
2,999
(0)
2.

Information regarding marketable available-for-sale securities as of February 28, 2011, was as follows:(Millions of yen)Book value per
Unrealized gain
Description
Type
Cost
consolidated(loss)
balance sheets
Equity－－－Securities with costexceeding book value Bond certificate－－－
per consolidated
Other
－
－
－
balance sheets
Stock
Subtotal－－－
Securities with book
166
144
Equity(21)
value per consolidated
Bond certificate－－－
balance sheets
Other
－
－
－
exceeding cost
Stock
Subtotal
166
144
(21)
166

Total
33

144

(21)

3. Information regarding available-for-sale securities sold during the year was as follows:(Millions of yen)
Proceeds from the sale Total gain from the sale Total loss from the
sale
54
1
13

4. Available-for-sale securities whose fair value is not readily determinable as of February 28, 2011, were as
follows:
Available-for-sale securities

Unlisted shares (excluding OTC securities)
Other
Total

(Millions of yen)Book value perconsolidated balance
sheets391
106
498

5. Available-for-sale securities with maturities and held-to-maturity debt securities as of February 28, 2011 bycontractual maturity were as follows:(Millions of yen)Type
1 year or lessOver 1 year to 5years
Government and municipal bonds, etc.
2,999－
Corporate Bonds－－
Other bonds
－
－
Total
2,999
－

Note to Derivative Transactions(As of February 28, 2010) (As of February 28, 2011)
None of disclosure is required because The Lawson group made no derivative transactions.

34

Note to Retirement Benefits
From March 1, 2009 to February 28, 2010
1. Summary of the retirement benefit plans adopted
The Company and 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, theCompany has a defined Contribution plan for severance payments.
2. Projected benefit obligations(Millions of yen)a
Projected benefit obligations(12,528)b
5,576Plan assets
c(6,952)
Projected benefit obligation in excess ofplan assets (a + b)d
Unrecognized prior service cost702e43
Unrecognized actuarial differencesfReported amount on the consolidated(6,206)balance sheets, net (c + d + e )Notes: Consolidated subsidiaries adopted the simplified method to calculate the projected benefit obligation.
(Millions of yen)972
a Service cost242
b Interest cost
175
c Amortization of prior service cost
136
d Amortization of actuarial differences
1,527
e Net periodic benefit cost(a+b+c+d)271
f Contribution to defined contribution plan
1,799
g Total (= e + f)
Notes: Net periodic benefit cost for consolidated subsidiaries, which adopted the simplified method, areincluded in “a. Service cost.”
3. Net periodic benefit cost

4. Basis of calculation of projected benefit
obligationsaDiscount rateb
Expected rate of return on plan assetsc
Allocation method of estimated total
retirement benefits

d

e

2.0 ％
0 ％
Straight-line basis (a method to allocate
estimated total retirement benefits equally torespective periods in employee's wholeservice period)
Amortization period of prior service cost
10 years
Prior service cost is amortized, starting the fiscal year incurred, on a straight-line basis over acertain period within an average remaining service period of employees.
Recognition of actuarial differences
10 years
Actuarial differences will be amortized from the following fiscal year on a straight-line basis
over a certain period within an average remaining service period of employees at the time of
their occurrence.

35

From March 1, 2010 to February 28, 2011
1. Summary of the retirement benefit plans adopted
The Company and 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, theCompany has a defined Contribution plan for severance payments.
2. Projected benefit obligations(Millions of yen)a
Projected benefit obligations(13,676)bPlan assets
5,577
cProjected benefit obligation in excess of(8,099)plan assets (a + b)d
Unrecognized prior service cost527eUnrecognized actuarial differences
42f
Reported amount on the consolidated(7,529)balance sheets, net (c + d + e )Notes: Consolidated subsidiaries adopted the simplified method to calculate the projected benefit obligation.
3. Net periodic benefit cost
(Millions of yen)
1,028
a Service cost249
b Interest cost
174
c Amortization of prior service cost85d Amortization of actuarial differences
1,537
e Net periodic benefit cost(a+b+c+d)271
f Contribution to defined contribution plan
1,809
g Total (= e + f)
Notes: Net periodic benefit cost for consolidated subsidiaries, which adopted the simplified method, areincluded in “a. Service cost.”
4. Basis of calculation of projected benefit
obligationsaDiscount rateb
Expected rate of return on plan assetsc
Allocation method of estimated total
retirement benefits

d

e

2.0 ％
0 ％
Straight-line basis (a method to allocate
estimated total retirement benefits equally torespective periods in employee's wholeservice period)
Amortization period of prior service cost
10 years
Prior service cost is amortized, starting the fiscal year incurred, on a straight-line basis over acertain period within an average remaining service period of employees.
Recognition of actuarial differences
10 years
Actuarial differences will be amortized from the following fiscal year on a straight-line basis
over a certain period within an average remaining service period of employees at the time of
their occurrence.

36

Notes to Accounting for income taxes
1. Deferred tax assets and liabilities were described as follows:
As of February 28, 2010
Deferred tax assets
Enterprise taxes payable
Accrued employees' bonuses
Excess of depreciation
Excess of amortization ofsoftware
Allowance for employees’
retirement benefits
Allowance for doubtful accounts
Impairment loss
Tax loss carryforward
Loss on replacement ofcomputer system
Other
Subtotal of deferred tax assets
Valuation allowances
Total deferred tax assets(Millions of yen)
As of February 28, 2011

906
1,135
5,371
919

935
1,562
6,832
788

4,797

5,333

5,807
2,396
1,523
412

3,377
3,288
5,421
－

3,668
26,937(7,076)
19,861

3,302
30,842(10,304)
20,537－(2,340)－(2,340)－18,197

Affiliates’ stock (paid-in capitaldecrease)
Total deferred tax liabilities
Deferred tax assets-net

2. The difference between the normal effective statutory tax rate and the actual effective tax rate for previous
fiscal year is reconciled as follows:(As of February 28, 2010)
The reconciliation between the statutory tax rate
(Adjustments)
Increase of Valuation allowances
Tax loss carryforward
Residents’ tax
Permanent difference in entertainment expenses
the effective tax rate for previous and current fiscal year

40.7%
20.5%
(5.8%)
1.3%
0.6%
0.4%
57.7%

(As of February 28, 2011)
The reconciliation between the statutory tax rate and the effective tax rate for previous and current fiscal year
has not been disclosed because the difference is less than 5% of the statutory tax rate.

37

(Business Combinations-Related)
Previous period (From March 1, 2009 to February 28, 2010)
Details have been omitted due to immateriality.
Current period (From March 1, 2010 to February 28, 2011)
Transactions under common control
1. Ninety-nine Plus Inc. has been consolidated as a wholly-owned subsidiary of LAWSON through a shareexchange.
(1) Name and content of the business of the combined company or combined business, date of the businesscombination, legal form of the business combination, name of the company after combination, and a summaryof transactions including the objective of transactions(i) Name and content of the business of the combined company
Name: Ninety-nine Plus Inc.
Content of business: 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 LAWSON 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 company.
(v) Summary of transactions including objective of transactions
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
achieve this, LAWSON conducted this share exchange with the belief that it is the best policy to reinforce thecompetitiveness of the LAWSON Group as a whole by establishing a system that will enable functional
decision-making, the further unification of both companies, sharing know-how, and further enhancing thecollaborative structure to improve productivity with effective utilization of the Group’s operational capital.
(2) Summary of accounting treatment
This share exchange has been treated as a transaction under common control pursuant to the “AccountingStandard for Business Combinations” (ASBJ Statement No. 21 announced on December 26, 2008) and the
Guidance on Accounting Standard for Business Combinations and Accounting Standards for Business
Divestitures (ASBJ Guidance No. 10 effective on December 26, 2008).
(3) Matters relating to the acquisition of additional shares in the subsidiary(i) Details of acquisition cost
Equivalent value of the acquisition: 5,069 million yen
Cost directly incurred for the acquisition: 108 million yen-------------------------------------------Acquisition cost: 5,177 million yen(ii) Exchange ratio by type of stockThirty three shares in LAWSON’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 transaction, LAWSON and Ninetynine 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 decided based on the results of thecalculation 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 goodwill carryforwards, causes of goodwill carryforwards, and amortization method andamortization period(i) Amount of goodwill carryforwards
2,324 million yen(ii) Causes of goodwill carryforwards
Difference between the increase in equity of the combined company held by LAWSON and the acquisition
38

cost
(iii) Amortization method and amortization period
Amortized equally over 20 years
2. LAWSON ENTERMEDIA, INC. has been consolidated as a wholly-owned subsidiary of LAWSON through ashare exchange.
(1) Name and content of the business of the combined company or combined business, date of the businesscombination, legal form of the business combination, name of the company after combination, and a summaryof transactions including the objective of transactions(i) Name and content of business of combined company
Name: 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 LAWSON as the sole parent company and LAWSON ENTERMEDIA, INC. as awholly-owned subsidiary (hereinafter, “this share exchange”)(iv) Name of the company after combination
There has been no change in the name of the combined company.
(v) Summary of transactions including objective of transactions
As entertainment is seen as more attractive as content and recognition of the influence of entertainment in
attracting customers to the stores increases in the convenience store industry, movement in competitors
including business alliances and capital alliances with ticket sales agencies has become marked since last year.
This share exchange was conducted as a result of LAWSON’s belief that the acquisition of LAWSONENTERMEDIA, INC. as a wholly-owned subsidiary of LAWSON will lead to improved operational efficiency
through unified organizational management, prompt decision-making and redeployment of management
resources while leveraging the strengths of LAWSON ENTERMEDIA, and that this will ultimately contributeto reinforcing the LAWSON Group’s competitiveness and enhancing the corporate value.
(2) Summary of accounting treatment
This share exchange has been treated as a transaction under common control pursuant to the “AccountingStandard for Business Combinations” (ASBJ Statement No. 21 announced on December 26, 2008) and the
Guidance on Accounting Standard for Business Combinations and Accounting Standards for Business
Divestitures (ASBJ Guidance No. 10 effective 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 LAWSON’s common stock have been allocated per one share of LAWSONENTERMEDIA’s common stock.
(iii) Method of calculating the share exchange ratio
In order to ensure fairness and validity in the share exchange ratio for this transaction, LAWSON and Ninetynine Plus 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 discussions between both parties andthe results of the calculation.
(iv) Number of allocated shares and valuation amount
Number of allocated shares: 287,238 shares
Valuation amount: 1,107 million yen(4)Amount of goodwill carryforwards, causes of goodwill carryforwards, and amortization method andamortization period(i) Amount of goodwill carryforwards
1,250 million yen(ii) Causes of goodwill carryforwards
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 five years
39

Segment Information
1. Business segment information(From March 1, 2009 to February 28, 2010) (From March 1, 2010 to February 28, 2011)
The Company operates mainly the franchised store business and total operating revenue, operating income
and total assets of the franchised store business account for more than 90% of the respective consolidated
totals at all segments for both current and previous fiscal years, therefore information by industry segment
is excluded.
2. Geographic segment information(From March 1, 2009 to February 28, 2010)
The Company has no foreign consolidated subsidiary and branch office for current fiscal year, therefore,
geographical segment information is excluded.
(From March 1, 2010 to February 28, 2011)
Net sales in Japan account for more than 90% of total net sales at all segments for current fiscal years,
therefore geographical segment information is excluded.

3. Overseas sales(From March 1, 2009 to February 28, 2010) (From March 1, 2010 to February 28, 2011)
Overseas sales account for less than 10% of consolidated sales at all segments for both current and previous
fiscal years, therefore, overseas sales information is excluded.

40

Related Party Transactions(As of February 28, 2010)
Companies with the Same Parent as the Company Submitting Consolidated Financial Statements and Other
Subsidiaries of Affiliates of the Company Submitting Consolidated Financial Statements

Attribute

Relationship with theCompany
CapitalTransaction
Business
Description
Company
stock
Equity ownershipamountLocationline orof
Director's'
name(Millionspercentage(Millions ofBusiness
profession
transactions
posts heldof yen)yen)
relationshipconcurrently

Affiliated RYOSHOK Ota-ku,
companies U
Tokyo
LIMITED

10,630 Sales ofprocessed
foods－(Ownership)
Direct 0.3%

VendorIndirect ―FoodService
Network
Co.,Ltd

Chuo
-ku,
Tokyo

SAN-ESU Adachiku
INC.
, Tokyo

2,000

2,600

－

Sales of fast (Ownership)
foods and Direct ―daily
deliveredIndirect ―
foods

－

Confectionar (Ownership)
y wholesale Direct ―business
Indirect ―VendorVendor

Account
item

Endingbalance(Millions ofyen)

Purchases
for theCompanyoperated
stores4,893

Accounts
payabletrade284(Purchases
for thefranchised
stores)(81,065) Accounts
payabletrade for
franchised
stores

5,525

Purchases
for theCompanyoperated
stores13,127

Accounts
payabletrade822(Purchases
for thefranchised
stores)(208,461) Accounts
payabletrade for
franchised
stores1,786
Accounts
payabletrade

15,632(29,430) Accounts
payabletrade for
franchised
stores

2,670

Purchases
for theCompanyoperated
stores(Purchases
for thefranchised
stores)132

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 generalbusiness transactions, except that regarding the purchases made for the franchised stores, the Company acts
as an alternative payer, not as direct party of purchase.
Companies with the Same Parent as the Company Submitting Consolidated Financial Statements and Other
Subsidiaries of Affiliates of the Company Submitting Consolidated Financial Statements

Attribute

Relationship with theCompany
CapitalTransaction
Business
Description
Company
stock
Equity ownershipamountLocationline orof
Director's'
name(Millionspercentage(Millions ofBusiness
profession
transactions
posts heldof yen)yen)
relationshipconcurrently

Affiliated RYOSHOK Ota-ku,
companies U
Tokyo
LIMITED

10,630 Sales ofprocessed
foods―(Ownership)
Direct 0.3%
Indirect ―Vendor

Account
item

Purchases
for theCompanyoperated
stores61,444

Accounts
payabletrade

4,056(Purchases
for thefranchised
stores)11,125

Accounts
payabletrade for
franchised
stores496

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 generalbusiness transactions, except that regarding the purchases made for the franchised stores, consolidated
subsidiary acts as an alternative payer, not as direct party of purchase.
41

Endingbalance(Millions ofyen)(As of February 28, 2011)
Companies with the Same Parent as the Company Submitting Consolidated Financial Statements and Other
Subsidiaries of Affiliates of the Company Submitting Consolidated Financial Statements

Attribute

Relationship with theCompany
CapitalTransaction
Business
Description
Company
stock
Equity ownershipamountLocationline orof
Director's'
name(Millionspercentage(Millions ofBusiness
profession
transactions
posts heldyen)of yen)relationshipconcurrently

Affiliated RYOSHOK Ota-ku,
companies U
Tokyo
LIMITED

10,630 Sales ofprocessed
foods－(Ownership)
Direct 0.3%

VendorIndirect ―FoodService
Network
Co.,Ltd

Chuo
-ku,
Tokyo

2,000

－

Sales of fast (Ownership)
foods and Direct ―daily
deliveredIndirect ―foods

Vendor

Account
item

Endingbalance(Millions ofyen)

Purchases
for theCompanyoperated
stores3,285

Accounts
payabletrade

210(Purchases
for thefranchised
stores)(74,708) Accounts
payabletrade for
franchised
stores

5,348

Purchases
for theCompanyoperated
stores

10,229Accounts
payabletrade732(Purchases
for thefranchised
stores)(227,351) Accounts
payabletrade for
franchised
stores19,387

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 generalbusiness transactions, except that regarding the purchases made for the franchised stores, the Company acts
as an alternative payer, not as direct party of purchase.
Companies with the Same Parent as the Company Submitting Consolidated Financial Statements and Other
Subsidiaries of Affiliates of the Company Submitting Consolidated Financial Statements

Attribute

Relationship with theCompany
CapitalTransaction
Business
Description
Company
Equity ownershipstock
amountLocationline orof
Director's'
name(Millionspercentage(Millions ofBusiness
profession
transactions
posts heldof yen)yen)
relationshipconcurrently

Affiliated RYOSHOK Ota-ku,
companies U
Tokyo
LIMITED

10,630 Sales ofprocessed
foods―(Ownership)
Direct 0.3%
Indirect ―Vendor

Account
item

Purchases
for theCompanyoperated
stores49,976

Accounts
payabletrade

3,760(Purchases
for thefranchised
stores)(9,347)

Accounts
payabletrade for
franchised
stores1,241

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 generalbusiness transactions, except that regarding the purchases made for the franchised stores, consolidated
subsidiary acts as an alternative payer, not as direct party of purchase.

42

Endingbalance(Millions ofyen)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 Ibaragi Prefecture have been
affected. Some of their merchandise and fittings fell, tipped over or broke and buildings have been damaged or
suffered from power outages. Some of the stores, mainly in Iwate and Miyagi Prefectures, remained closed or
opening hours 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 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 clear.

435. Non-Consolidated Financial Statements etc.
(1) Non-Consolidated Balance Sheets (Unaudited)
As of February 28, 2010 and February 28, 2011
February 28, 2010
Current assets:
Cash and bank deposits
53,862
Accounts receivable—due from franchised stores
20,767
Marketable securities
2,500
Merchandise inventories
1,063
Prepaid expenses
6,339
Accounts receivable—other
21,484
Deferred tax assets
3,188
Other
2,280
(74)
Allowance for doubtful accounts
Total current assets
111,412
Fixed assets:
Property and store equipment;
Buildings
140,995
Accumulated depreciation(63,151)
Buildings －net
77,843Structures
32,306
Accumulated depreciation(20,337)
11,968Structures－net
Vehicles, tools, furniture and fixtures
53,653
Accumulated depreciation(41,944)
11,708
Vehicles, tools, furniture and fixtures－net
Land
6,526
Lease assets
27,057(1,880)
Accumulated depreciation
25,177
Lease assets－net
603
Construction in progress
Subtotal
133,828
Intangible fixed assets;
Goodwill
786
83
Right of leasehold
Right of trademark
81
Right of telephone291
23,226
Software
Software in progress
3,336
Other
2
Subtotal
27,807
Investments and Other;294
Investments in Securities
Stocks of subsidiaries and affiliates
18,301
Investments in affiliated limited
438
29,670Long-term loans receivable
Long-term loans receivable from subsidiaries and affiliates－
Long-term prepaid expenses
5,201
79,338
Lease deposits
Deferred tax assets
14,424
Other
1,705(1,979)Allowance for doubtful accounts
Subtotal
147,395
Total fixed assets
309,031
Total assets
420,444

44（Millions of yen）
February 28, 2011
68,743
15,661
2,999
862
6,599
23,641
3,344
1,459
(77)
123,234

146,815(68,710)
78,10433,709(22,492)
11,216
53,619(42,656)
10,962
6,609
41,140(7,063)34,076643
141,614
1,163
84
85
288
21,6274,674
2
27,925438
16,656924
31,756
8,100
5,252
77,164
11,693
1,662(1,601)
152,046
321,586
444,821

Non-Consolidated Balance Sheets (Unaudited) - Continued

Current liabilities:
Accounts payable —trade
Accounts payable —trade for franchised stores
Accounts payable — due to franchised stores
Short-term loans payable to subsidiaries and affiliates
Lease obligations
Accounts payable — otherAccounts payable — other for franchised stores
Income taxes payable
Consumption taxes payable
Accrued expenses
Deposits received
Accrued employees’ bonuses
Provision for use of points granted
Other
Total Current liabilities

February 28, 2010

（Millions of yen）
February 28, 2011

2,505
61,765905－
3,751
17,207
295
8,812
－
1,778
55,999
2,629
2,095
17
157,764

1,907
65,725
1,171
5,870
5,893
13,396
138
9,738
2,635
1,821
52,5483,610925
14165,398

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
Accumulated impairment loss on long-term leased assets
Other
Total Long-term Liabilities

16,2986,095
201

22,612
7,036
212

38,735452
390
62,17337,240562
310
67,974

Total Liabilities

219,937

233,372

58,50658,506

41,52041,52047,696
47,696727

727

50,00051,762
102,490(1,713)200,803

50,00056,455
107,182(1,693)211,692

Valuation and translation adjustments;
Net unrealized gain on available-for-sale securities
Land revaluation difference
Valuation and translation adjustments

(8)
(634)
(643)

(14)
(634)
(648)

Stock acquisition rights

346

405

Total net assets

200,506

211,448

Total Liabilities and net assets

420,444444,821

Owners’ equity;
Common stock
Capital surplus
Additional paid-in capital
Total capital surplus
Retained earnings
Legal reserve
Other legal reserve
General reserve
Earned surplus brought forward
Total retained earnings
Treasury stock
Total Owners’ equity45(2) Non-Consolidated Statements of Income (Unaudited)
For the fiscal year ended February 28, 2010 and 2011
February 28, 2010
Total operating revenues
Net sales
Cost of goods soldInventory at beginning of year
Purchase amount
Total
Inventory at end of year
Cost of goods sold
Gross profit on sales（Millions of yen）
February 28, 2011

271,51365,834

263,20946,641

1,484
46,625
48,1091,063
47,046
18,7881,063
32,852
33,915862
33,053
13,587

Operating revenues:
Franchise commission from franchised stores
Other
Operating gross profit
Selling, general and administrative expenses

183,566
22,112
224,467
179,469

193,746
22,821
230,156
179,945

Operating profit

44,99750,210Non – operating income and expenses:
Non – operating income;Interest received
Dividends income
Compensation income for damage
Compensation income for removal
Other
Non – operating expenses;
Interest expense
Loss on cancellation of store lease
Other
Recurring profit

1,518
621
189
81
294
331
1,939
264
1,382
292
44,577

1,297
679
0
64
177
376
2,195
768
1,075
351
49,312Extraordinary gains and losses:
Extraordinary gains;
Gain on sales of fixed assets
Gain on sales of investment securities
Gain on sales of subsidiaries and affiliates’ stock
Other
Extraordinary losses;
Loss on disposal of fixed assets
Loss on sales of fixed assets
Loss on impairment of long-lived assets
Loss on valuation of stocks of subsidiaries and affiliates
Other
Income before income taxes and minority interests

1,769
33
－
1,671
64
7,874
3,863
29
2,867
174
939
38,471

75
－
1
73
－
7,180
2,926
1,303
2,410
－
540
42,206

Income taxes:
Income taxes - current
Deferred income taxes
Net profit

16,903902
20,665

14,984
2,579
24,64346

(3) Non-Consolidated Statements of Changes in Net Assets

Owners’ equity:
Common stock and preferred stock
Balance at the end of the previous period
Changes during the current period
Total changes during the current period
Balance at the end of the current period
Capital surplus common stock and preferred stock
Balance at the end of the previous period
Changes during the current period
Increase by share exchanges
Total changes during the current period
Balance at the end of the current period
Total capital surplus
Balance at the end of the previous period
Changes during the current period
Increase by share exchanges
Total changes during the current period
Balance at the end of the current period
Retained earnings
Legal earnings reserve
Balance at the end of the previous period
Changes during the current period
Total changes during the current period
Balance at the end of the current period
Other earned surplus
Special reserve fund
Balance at the end of the previous period
Changes during the current period
Total changes during the current period
Balance at the end of the current period
Earned surplus carried forward
Balance at the end of the previous period
Changes during the current period
Cash dividends paid
Net profit
Disposal of treasury stock
Retirement of treasury stockReversal of land revaluation differences, net of tax
Total changes during the current period
Balance at the end of the current period
Total retained earnings
Balance at the end of the previous period
Changes during the current period
Cash dividends paid
Net profit
Disposal of treasury stock
Retirement of treasury stockReversal of land revaluation differences, net of tax
Total changes during the current period
Balance at the end of the current period

47

February 28, 2010

（Millions of yen）
February 28, 2011

58,50658,506－58,506－58,506

41,52041,520－－41,5206,176
6,176
47,696

41,52041,520－－41,5206,176
6,176
47,696

727

727

－
727

－
727

50,00050,000－50,000－50,00047,29851,762(15,866)
20,665
－
－
(334)
4,464
51,762(16,422)
24,643(0)(3,528)－4,692
56,45598,025

102,490(15,866)
20,665
－
－
(334)
4,464
102,490(16,422)
24,643(0)(3,528)－
4,692
107,182

Non-Consolidated Statements of Changes in Net Assets - Continued（Millions of yen）
February 28, 2010

February 28, 2011

Balance at the end of the previous period
Changes during the current period
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Total changes during the current period(1,712)(1,713)

(0)
－
－
(0)

(3,510)1
3,528
19Balance at the end of the current period
Total owners’ equity(1,713)(1,693)

196,339

200,803－(15,866)
20,665
(0)
－
(334)
4,463

6,176
(16,422)
24,643(3,510)1－
10,888200,803

211,692

(10)

(8)

2
2
(8)

(5)
(5)
(14)

(969)

(634)

334
334
(634)

－
－
(634)

(979)

(643)

336
336
(643)

(5)
(5)
(648)

274

346

71
71
346

59
59
405

195,634

200,506－(15,866)
20,665
(0)
－
(334)
408
4,871
200,506

6,176(16,422)
24,643(3,510)1－
53
10,942
211,448

Treasury stock

Balance at the end of the previous period
Changes during the current period
Increase by share exchanges
Cash dividends paid
Net profit
Purchase of treasury stock
Disposal of treasury stockReversal of land revaluation differences, net of tax
Total changes during the current period
Balance at the end of the current period
Valuation and translation adjustments:
Unrealized holding gains on securities, net of tax
Balance at the end of the previous period
Changes during the current period
Net changes of items other than owners’ equity
Total changes during the current period
Balance at the end of the current period
Land revaluation difference, net of tax
Balance at the end of the previous period
Changes during the current period
Net changes of items other than owners’ equity
Total changes during the current period
Balance at the end of the current period
Total valuation and translation adjustments
Balance at the end of the previous period
Changes during the current period
Net changes of items other than owners’ equity
Total changes during the current period
Balance at the end of the current period
Stock acquisition rights
Balance at the end of the previous period
Changes during the current period
Net changes of items other than owners’ equity
Total changes during the current period
Balance at the end of the current period
Total net assets
Balance at the end of the previous period
Changes during the current period
Increase by share exchanges
Cash dividends paid
Net profit
Purchase of treasury stock
Disposal of treasury stockReversal of land revaluation difference, net of tax
Net changes of items other than owner’s equity
Total changes during the current period
Balance at the end of the current period

48

《Notes Concerning Going Concern Assumption》
None《Summary of Significant Accounting Policies》
1. Marketable Securities and investments in securities:
Held-to-maturity debt securities: Carried at amortized cost.
Investments in subsidiaries and affiliated companies: Stated at cost determined by the moving-averagemethod.
Available-for-sale securities:
Securities whose market value is readily determinable: Reported at market value, with unrealized
gains and losses, net of applicable taxes, reported in a separate component of net assets.
The cost of securities sold is determined based on the moving-average method.
Other: Stated at cost determined by the moving-average method.
2. Inventories:
Effective from the first quarter of the fiscal year ending February 28, 2010, the Company has adopted“Accounting Standard for Measurement of Inventories” (ASBJ Statement No. 9 (July 5, 2006) and has
calculated inventories at cost, cost being determined by the retail method (the book value on thebalance sheet is written down based on a decline in profitability) in accordance with this standard. In
the past, the Company has principally accounted for inventories at cost determined by the retailmethod. Therefore, this change had no effect on earnings.
Merchandise inventories Retail method applied on an annual average cost basis
3. Depreciation method of depreciable assets
Property and store equipment(except lease assets):
Depreciation is computed by the declining-balance method at rates based on the estimated useful livesof the assets. The range of useful lives is from 10 to 34 years for buildings and from 5 to 8 years forfurniture, fixtures and equipment.
Intangible fixed assets:(except lease assets):
Amortization of intangible assets is computed by the straight-line method.
Software costs of software for internal use are amortized by the straight-line method over 5 years,
which is the internal useful life.
Lease assets:
Previously, these leases were accounted for as rental transactions. Furthermore, in terms of thedepreciation 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 the useful life and aresidual value of zero.
However, the Company has continued to treat as rental transactions finance leases that do not transfer
ownership of leased property and that commenced before the first fiscal year in which the new
accounting standard was applied.
Long - term prepaid expense
Amortization of long-term prepaid expense is computed by the straight - line method.
4. Accounting standard for important reserves
Allowance for Doubtful Accounts:
Allowance for doubtful accounts is provided at an amount of possible losses from uncollectable
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 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 is provided at the amount accrued based on the projected49benefit obligations and plan assets at the balance sheet date. Actuarial differences will be amortizedfrom the following fiscal year on a straight-line basis over a certain period (10 years) within an averageremaining service period of employees at the time of their occurrence. Prior service cost is amortized,
starting the fiscal year incurred, on a straight-line basis over a certain period (10 years) within an
average remaining service period of employees.
Allowance for retirement benefits to directors and corporate auditors:
Allowance for retirement benefits to corporate auditors and executive officers of the Company iscalculated to state the liability at 100% of the amount that would be required if all corporate auditors,
executive officers resigned their services with the Company at the balance sheet date.
5. Accounting for consumption tax
Consumption tax is accounted for using the tax exclusion method.

50

《Notes to Non-consolidated Financial Statements》
Notes to the Non-consolidated Balance Sheets
As of February 28, 2010

As of February 28, 2011

1.Accounts receivable due from franchised stores,
1.Same as in the left
accounts payable due to franchised stores-theamounts of credits and debts incurred for the deal
with franchised stores.
2.Accounts payable-trade for franchised stores－the 2.Same as in the left
amounts payable to vendors for merchandisepurchased by franchised stores.
3.Accounts payable-other due for franchised stores 3.Same as in the left－the amounts payable for supplies purchased by
franchised stores.
4.Deposits received from franchise and lessees-the 4.Same as in the left
amounts received from mainly franchised stores.
5. Revaluation of land used for business
5.Revaluation of land used for businessLand used for business was revalued on theLand used for business was revalued on thebasis prescribed by the Law Concerningbasis prescribed by the Law Concerning
Revaluation of Land (Law No. 34, March 31,
Revaluation of Land (Law No. 34, March 31,
1998). The resulting revaluation difference has
1998). Revaluation difference resulted has been
been included in net assets as land revaluation
included in net assets as land revaluationdifference.
difference, net of the related tax which isincluded in deferred tax assets for land
revaluation.
Revaluation method:
The value of land is determined based on theroad-based prices adjusted reasonably as
stipulated in Article 2, Item 4 of the Ordinance
Implementing the Law Concerning Revaluationof Land (Government Ordinance No. 119,March 31, 1998) and the assessed value as
stipulated in Article 2, Item 5 of the same
Ordinance.
Date of revaluation:
February 28, 2002
The difference between book value and market
value of the revalued land as of balance sheet
date.
¥232 million

51

Revaluation method:
The value of land is determined based on theroad-based prices adjusted reasonably as
stipulated in Article 2, Item 4 of the Ordinance
Implementing the Law Concerning Revaluationof Land (Government Ordinance No. 119,March 31, 1998) and the assessed value as
stipulated in Article 2, Item 5 of the same
Ordinance.
Date of revaluation:
February 28, 2002
The difference between book value and market
value of the revalued land as of balance sheet
date.
¥269 million

Notes to Non-consolidated Statements of Income
From March 1, 2009 to February 28, 2010
1.Net sales, cost of goods sold, operating
gross profit-the amounts from mainlycompany operated stores.
2.Main account of selling, general andadministrative expenses
Sales promotion and advertising
SalaryProvision for accrued employees’
bonuses
Retirement benefit costs
Provision for allowance for retirement
benefits to directors and corporate
auditors
Rent accountDepreciation of fixed assets
3. Gain on sales of fixed assets
Buildings
Structures
Furniture, fixtures and equipment
Land
Telephone subscription right(Millions of yen)
From March 1, 2010 to February 28, 2011
1.Same as in the left

9,113
25,191
2,629
1,748
54

63,897
18,6532.Main account of selling, general andadministrative expenses
Sales promotion and advertising
SalaryProvision for accrued employees’
bonuses
Retirement benefit costs
Provision for allowance for retirement
benefits to directors and corporate
auditors
Rent accountDepreciation of fixed assets
3.

8,961
23,125
3,610
1,738
51

66,621
21,312――――――――――

8
1
1
22
0

4.Distribution of loss on disposal of fixed assets
Buildings
2,737
Structures
310
Furniture, fixtures and equipment
625
Software143
Software development in progress
27
Others20

4.Distribution of loss on disposal of fixed assets
Buildings
1,731
Structures
228
Furniture, fixtures and equipment
720
Software146
Software development in progress
84
Others15

5.Distribution of loss on sales of fixed assets
Buildings
structures
Furniture, fixtures and equipment
Telephone subscription rights

5.Distribution of loss on sales of fixed assets
Buildings
1,227
structures
0
Furniture, fixtures and equipment
11
Land
61
Telephone subscription rights
1

24
2
0
2

52

6. Loss on impairment of long-lived assets
The Group recognized an impairment loss mainlyfor each stores as the smallest category bear cash
flows.
The carrying amount of those assets was written
down to the recoverable amount. The Group
recognized impairment loss as special losses onfollowing assets due to a decline in value of therelated asset categories due mainly to a continuous
operating losses
Category
by useOsaka
OthersBuildings andstructure
furniture,
fixtures andequipment andothers
〃
〃

127
2,549

―

―

2,867

StoresTotalmillionof yenlocation Assets
Tokyo

6. Loss on impairment of long-lived assets
The Group recognized an impairment loss mainlyfor each stores as the smallest category bear cash
flows.
The carrying amount of those assets was written
down to the recoverable amount. The Group
recognized impairment loss as special losses onfollowing assets due to a decline in value of therelated asset categories due mainly to a continuous
operating losses
Category
by useTokyo
191
StoresOsaka
OthersOthers
Total

Category by fixed assets
Buildings
1,567
Structure
269
Furniture, fixtures and equipment
203
Land
395
Leased property
418
Other
14
Recoverable value of the assets of the Group is thehigher amount of net selling price or value in use.
Not selling price of land was calculated based on
appraised value by real estate appraiser or contract
price, and the value in use was calculated bydiscounting estimated future cash flows to which
the 4.9% discount rate was applied.

53

millionof yenlocation Assets――

Buildings andstructure
furniture,
fixtures andequipment andothers〃〃Software
―

468

85
1,790
66
2,410

Category by fixed assets
Buildings
1,435
Structure
179
Furniture, fixtures and equipment
211
Leased property
492
Software
66
Other
25
Recoverable value of the assets of the Group is thehigher amount of net selling price or value in use.
Not selling price of land was calculated based on
appraised value by real estate appraiser or contract
price, and the value in use was calculated bydiscounting estimated future cash flows to which the
3.3% discount rate was applied.

Notes to the Non - consolidated Statements of Changes in Net assets
Previous period (From March 1, 2009 to February 28, 2010)
Number of shares of treasury stock
Number of shares at Increase during the Decrease during the Number of shares atthe end of previous
current period
current period
the end of theperiod(thousand shares)(thousand shares)
current period(thousand shares)(thousand shares)
Common stock
432
0
432
―
Note: The 0 thousand shares increase in treasury stock was resulted from purchase of stock less than unit share.
Current period (From March 1, 2010 to February 28, 2011)
Number of shares of treasury stock
Number of shares at Increase during the Decrease during the Number of shares atthe end of previous
current period
current period
the end of theperiod(thousand shares)(thousand shares)
current period(thousand shares)(thousand shares)
Common stock
432
903
902
433
Note: The 903,000 share increase in treasury stock resulted from the 902,000 share increase due to acquisition oftreasury stock in accordance with a Board of Directors' resolution and the 1,000 share increase due topurchase of stock less than one share unit.
The 902,000 share decrease in treasury stock resulted from the 902,000 share decrease due to retirement oftreasury stock and the 0 thousand shares decrease due to requests for additional purchase of stock less than
one share unit.

Notes to Lease Contracts
1. Finance lease transactions (lessees)
Non-ownership-transferred finance lease transactions(i) Details of leased assets
Mainly store furniture (including fixtures and fittings) used in the convenience store business(ii) Depreciation method for leased assets
As stated in Summary of Significant Accounting Policies under “Accounting standard for important reserves
3.Depreciation method of depreciable assets.”
With regard to non-ownership-transferred finance lease transactions whose effective date of lease transaction
precedes February 28, 2009, the Company applies the accounting method that it uses to account for ordinary
lease transactions. Details of the transaction are summarized below.
(1) The assumed data as to acquisition cost, accumulated depreciation and net leased property(Millions of yen)
As of February 28, 2010 As of February 28, 2011
Furniture, fixtures and equipment
Acquisition cost
Accumulated depreciation
Accumulated impairment loss
Leased property

34,491
18,2871,047
15,15627,313
16,659964
9,689(2) Obligations under finance leases
As of February 28, 2010 As of February 28, 2011
Furniture, fixtures and equipment
Due within one year
Due after one year
Total
Allowance for impairment loss on leased property

5,422
11,177
16,599
452

54

3,906
7,108
11,014562

(3) Lease payments, depreciation expense, interest expense and impairment loss
As of February 28, 2010 As of February 28, 2011
Lease payments
7,290
5,463
Transfer from allowance for impairment loss on319
382
leased property
Depreciation expense
7,140
5,430
Interest expense
518
351
Impairment loss
418
492(4) Computation method of depreciation expense
Depreciation expense is computed by the straight-line method, assuming the lease period as the useful lifeand no residual value.
(5) Computation method of interest expense
The difference between the total lease contract amount and the acquisition cost is assumed to be interest,and interest expense is computed by the interest method.
2. Operating lease contracts
Obligations under operation leases(Millions of yen)
As of February 28, 2010 As of February 28, 2011
782
435
1,605
330
2,388
766

Due within one year
Due after one year
Total

Notes to Marketable Securities and Investments in Securities（February 28,2010）
Investment in subsidiaries and affiliated companies whose fair value is readily determinable as of February 28,
2010 were as follows:(Millions of yen)Book value per
Fair value
Difference
non-consolidated balance
sheetsInvestment in subsidiary
15,335
21,4096,073（February 28,2011）
Investment in subsidiaries and affiliated companies whose fair value is readily determinable as of February 28,
2011 were as follows:(Millions of yen)Book value per
non-consolidated balance
Fair value
Difference
sheetsInvestment in affiliated
599
449
(149)
company55

Notes to Accounting for income taxes
1. Deferred tax assets and liabilities were described as follows:
As of February 28, 2010
Deferred tax assets
Enterprise taxes payable
Accrued employees' bonuses
Reversal of write-off investments
in securities
Excess of depreciation
Excess of amortization of software
Allowance for employees’
retirement benefits
Allowance for doubtful accounts
Impairment loss
Loss on replacement of computer
systemOther
Total deferred tax assets(Millions of yen)
As of February 28, 2011

764
1,069
1,931

832
1,498
1,946

5,296
875
4,749

5,456
747
5,132

634
2,169
412

437
2,470
－

2,333
20,237

1,661
20,183

Valuation allowances(2624)(2,805)

Deferred tax assets-net

17,613

17,378－－(2,340)(2,340)Available-for-sale securities
Total deferred tax liabilities
Deferred tax assets-net

15,037

With regard to the deferred tax liability related to the 1,002 million yen of affiliates’ shares which was assumed
through the share exchange method specified in the Companies Act under Article 796 (3), the amount has not beenrecognized based on the “Guidance on Accounting Standard for Business Combinations and Accounting Standard
for Business Divestitures” (ASBJ Guidance No.10 announced on December 26, 2008).

2. The difference between the normal effective statutory tax rate and the actual effective tax rate is reconciled
as follows:(As of February 28, 2010)
The reconciliation between the statutory tax rate
(Adjustments)
Increase of Valuation allowances
Permanent difference in entertainment expenses
Permanent difference in dividends income
Residents’ tax
Othersthe effective tax rate for previous and current fiscal year

40.7%
4.6%
0.4%
(0.2%)
0.4%
0.3%
46.3%

(As of February 28, 2011)
The reconciliation between the statutory tax rate and the effective tax rate for previous and current fiscal year
has not been disclosed because the difference is less than 5% of the statutory tax rate.

56