Seven-Eleven JapanSeven-Eleven Japan aims for "Coexistence and Co-prosperity" with franchisees,

and "Coexistence and Co-prosperity" with society.Seven-Eleven Japan will continue to develop our convenience store franchise business based on our fundamental

philosophies of "Modernizing and revitalizing small and medium-sized retail stores" and "Coexistence and Co-prosperity".

Our special business characteristics are the foundation of our efforts to build better relationships with our stores

while focusing on management support for our partner franchisees, as well as with local communities surrounding them.

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Commitment by the President & COO

President and COOSeven-Eleven Japan Co.,Ltd.

Toshiro Yamaguchi

We are striving for retail industry that responds sincerely to the demands of society.

The establishment of Seven & I Holdings in September of this year has put us in a position to meet compliance and CSR requirement as an operating company. As one of the Seven & I Holdings operating companies, we will continue to develop our convenience store franchise business based on our fundamental philosophies of "Modernizing and revitalizing existing small and medium-sized retail stores" and "Coexistence and Co-prosperity". Seven-Eleven Japan, in our role as a "nearby, convenient store", has come to be seen by our patrons as a vital part of the social infrastructure, and we now have over 10,000 stores in Japan.

In restructuring our convenience store business, it has become necessary to implement consolidated management of both our domestic and international convenience store businesses, such as that of our US subsidiary, 7-Eleven, Inc. The franchise business model in itself serves to strengthen the internal control function and self-innovation, and we at Seven-Eleven Japan intend to fulfill our "corporate responsibilities" and "corporate social responsibilities", in particular through environmental measures. This is especially important given that our convenience stores, whose existence is predicated on a relationship of trust with our franchisees, are businesses offering goods

and services to local communities and maintaining a close relationship with end-users.

We have constructed our business infrastructure with business partners that share our franchise system philosophy for the development of original products and services for delivery to customers by our franchisees. Therefore, Seven-Eleven Japan's "corporate responsibility" and "corporate social responsibility" require awareness of production, distribution, information systems, retail store management, consumption, and disposal in every aspect of business. As the franchiser (Seven-Eleven Japan), we are aware of our responsibility for ensuring that all of the various businesses sharing our philosophy, including franchisees, manufacturers, and combined distribution centers, form a common strategy and work together to implement business measures, in addition to fulfilling our duty of accountability.

As a member of Seven & I Holdings, we strive to be a retailer industry that responds sincerely to the demands of society, maintaining a high degree of transparency while approaching corporate social responsibility from a broad perspective, taking the special characteristics of the franchise business into consideration. We look forward to your continued supports.

C o n t e n t s

Commitment by the President & COO 15Special Report Modernizing and revitalizing small and medium-sized retail stores

through pursuit of "Coexistence and Co-prosperity" with our franchisees 16With Our Customers 20With Our Business partners 22With Our Communities 24With Our Employees 28Environmental Conservation 30Independent Assurance and Responding to Independent Assurance 38

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Total number of stores in Japan

(FY)200520042003

4,000

8,000

12,000

Total store sales and ordinary income

(Millions of yen) (Millions of yen)

Total store sales (Nonconsolidated) Total store sales (Nonconsolidated)

(FY)200520042003

500,000

1,500,000

2,500,000

1,000,000

2,000,000

50,000

150,000

250,000

100,000

200,000

9,690

2,213,298

159,639 168,892 176,070

10,303 10,826

2,343,177 2,440,853

Modernizing and revitalizing small andmedium-sized retail stores through pursuit of "Coexistence and Co-prosperity" with our franchiseesThe Seven-Eleven Japan franchise chain has grown and developed to 10,826 stores nationwide (as of February 28, 2005). This franchise chain is founded on "Coexistence and Co-prosperity" with our franchisees. Seven-Eleven Japan views its franchisees as "equal business partners" with whom we work together to promote our common convenience store business. We seek to grow and develop together by both profiting and fulfilling our social responsibilities together. We focus on supporting the stable management and improved business results of our franchisees, as well as creating the structures and awareness necessary to their fulfillment as businesses of their social responsibilities.

Special Report

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Seven-Eleven Japan franchising

Three mechanisms for the basic of mutual trust

Franchisee Seven-Eleven Japan

Store management and sales

Supporting franchisee store operation

Roleassignment

Management consultationMerchandise development and informationInformation serviceDistribution serviceLeasing of sales equipmentPublicityAccounting and bookkeeping, etc.

Personal management(Hiring, training, and personnel management)Merchandise management(Order placement and sales promotion)Statistical management(Sales and business management)

Gross profit sharing

A system of fixed-rate sharing of franchisee gross profits (the gross profit after sales merchandise costs are deducted from sales) between franchisees and Seven-Eleven Japan

A system for payment and financing enabling businesses to be started up with little funding and managed stably

A system guaranteeing franchisees a certain annual gross profit

Open accounting Minimum guarantees

Seven-Eleven Japan has opened a first convenience store based on an unprecedented franchise model founded on the principles of "Modernizing and revitalizing existing small and medium-sized retail stores" and "Coexistence and Co-prosperity", which was our first Seven-Eleven store in Japan in May 1974. That was a time of rapid changes in the retail environment, a period of transition from the "lining up items on the shelves and selling" mindset to "surviving as retailer by providing the value demanded by customers when they want it." Small and medium-sized retailers, which had no market data collection or analysis functions, no know-how corresponding to the needs of customers in a new era, and no product procurement network, were all facing fierce competition from large-scale retailers and a deep business slump.

It was in this environment that Seven-Eleven Japan proceeded to construct a unique franchise system, based on the concept of "joint business with franchisees", rooted in local communities and capable of a detailed response to local customer needs. The franchisees are dedicated to store management and sales. Seven-Eleven

Japan (the franchiser) provides the various support functions: product information and know-how, the distribution and sales infrastructure, etc. This clear delineation of roles contributed to furthering the modernizing and revitalizing of local small and medium-sized retail stores.

These "convenience stores" came to fulfill an important role in their success and development as a new type of business previously unknown in Japan through the "gross profit sharing", "open accounting", and "minimum guarantee" system. This system is the foundation of the Seven-Eleven Japan "joint business" by which stable management and growth are realized by Seven-Eleven Japan backing up of store management by Seven-Eleven Japan franchise owners. (Please refer to the diagram below.)

Joint business

The unique structure of our convenience store business, founded on the principle of "Coexistence and Co-prosperity", led to the success in Japan of new type of business.

The first Seven-Eleven store in Japan, pictured as it was in May 1974 (Toyosu store)

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Franchisees' Mutual Aid System

Condolencemoney

Consolationmoney

Installmentsaving

Consolation moneyfor work-related

employee accidents

●

●

●

―

●

●

―

―

●

―

●

―

―

―

●

●

Franchisees

Spouses

Employees

Other services and systems

Management consultation●OFC management consultation

Merchandise development and information●Developing quality worthwhile

products meeting customer needs

●Providing merchandise information on sales trends, display innovations, etc.

Information service●Providing computer systems to

ensure accurate order placement

Distribution service●Providing distribution that delivers

merchandise in a timely manner Leasing of sales equipment ●Leasing sales counter, shelf open

case, computers, etc.

Publicity●Advertising expenses for sales

promotion borne by Seven-Eleven Japan Accounting and bookkeeping, etc.●Providing payment service and

management materials System for working person●Providing help on behalf of owners in

case of their absence due to the emergency

Others●Quarterly actual inventory for

inventory control

●80% of utilities costs borne by Seven-Eleven Japan

●Various indemnity insurances by Seven-Eleven Japan

Part-timeemployees

Modernizing and revitalizing small and medium-sized retail stores through pursuit of "Coexistence and Co-prosperity" with our franchisees

Special Report

The key to successful retailing is continuous provision of the goods and services demanded by customers. Realizing this requires various management strategies, such as a thorough store open planning, an assortment of merchandise that suits the particular needs of the community, and the proper education and treatment of employees. Seven-Eleven Japan has put in a place a system for continuous, multi-faceted support of franchisee management.

Prior to soliciting new franchisees, Seven-Eleven Japan conducts detailed market surveys containing a total of 135 categories, such as the number of households and population density of the area under proposal, existing branches of competing chain stores, and other factors, so that prospective franchisees can feel secure about taking out a new franchise. We advertise for and solicit franchising among existing small and medium-sized retailers and local landowners only in areas that meet the requirements.

Our Recruit Field Counselors (RFCs) are in charge of new store development. In addition to advising prospective franchisees, the RFCs conduct courteous branch planning counseling.

After the franchise has been started, our management specialists, the Operation Field Counselors (OFCs), provide store management support. OFCs visit stores at least twice a week to provide advice on all aspects of store management, such as ordering and displays, providing store management back-up and support that reflects the needs of the local community. OFCs also relay policies and guidelines from Seven-Eleven Japan, relay to information to Seven-Eleven Japan about the concerns and issues confronting franchisees, and help to hammer out solutions. The OFCs provide the link for maintaining close communications between Seven-Eleven Japan and the franchisees.

In addition to OFC counseling services, the Owner Consultation Office at Seven-Eleven Japan provides advice covering a broad range of owner concerns. The personnel in charge of the Owner Consultation Office visit 10-15 franchisees during the last three days of each week to meet with owners. Issues brought up during these meetings are reported directly to top management. Orders for improvement of pressing issues are then issued by top management to the departments in charge.

A single franchisee is operated by 20 to 30 people (regular, part-time employees). To ensure long-term operation, Seven-Eleven Japan established a Franchisees' Mutual Aid System in 1980 and encourages franchisees to participate.

This covers compensation and insurance for franchisees and their spouses in emergencies and condolence money to employees. We have also prepared consolation money for work-related accidents affecting employees during commuting or work. Taking advantage of the merit of scale that franchise chain of nationwide scale possess, we have succeeded in winning group coverage at a low premium.

Supporting the management of our franchisees Putting the system in place

Providing the latest information and management support to franchise owners

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Specialist counselors from store open planning to store management support

The Owner Consultation Office: Responding to owner concerns

"Franchisees' Mutual Aid System", support to facilitate franchisee

Our franchisees fulfillment of their social responsibilities

Poster of the safety station activities

Seven-Eleven Japan believes that our franchisees must be aware of and fulfill their social responsibilities as businesses in the same way as does Seven-Eleven Japan; both our franchisees and Seven-Eleven Japan must "Coexist and Co-prosperity" along with society. It is therefore a given that our entire chain of franchisees must comply with laws and social norms, and work to implement awareness activities and structures that will allow them to share our company's CSR policies, guidelines, and systems for environmental conservation and contribution to local communities.

Seven-Eleven Japan launched its Corporate Ethics Committee in March 2004. This Committee provides guidance to both Seven-Eleven Japan employees and our franchisees concerning compliance with rules and regulations. In addition, it engages in compliance awareness activities at franchisees through "Seven-Eleven Japan Guidance" and our in-house magazine, "Seven-Eleven Family".

In FY2006, we called for special attention at each store concerning the handling of customers' public utility charge payment receipts and gift merchandise applications in anticipation of the full enforcement on April 1 of the Act on the Protection of Personal Information. Furthermore, all stores in the Seven-Eleven chain must treat any documents containing personal data as confidential documents; these are to be collected by Seven-Eleven Japan, shredded, and recycled.

Seven-Eleven Japan works to ensure that our franchisees fulfill their responsibilities as members of their communities through the cooperation of Seven-Eleven Japan and the franchisees in various activities. Currently, we engage in community cleanup efforts, such as the "Seven-Eleven Day: Nationwide Cleanup" inaugurated

in July 1999. Another activity our stores engage in as a way of fulfilling their responsibilities as members of their local communities is the Safety Station Activities (P24), whereby our convenience stores serve as community bases for safety and security for local residents.

We also make an effort to prevent the purchase of alcohol

and tobacco products by our underage patrons by showing indication to place these items clearly separated from other products, and by implementing thorough age-checking at checkout. We also use methods such as separate display and special packaging to ensure that juveniles are not able to view adult magazines.

We have created the "Part-Timer Training Guidebook" listing all laws and regulations that must be complied and points of concern with regard to the hiring and training of employees at franchisees. This is distributed during owner training, and we recommend its use. In addition, we have instituted various employee safety measures, making items such as the two-employee system for night work, dye-balls, and protective shields mandatory (P24). Staff from Seven-Eleven Japan makes the rounds of stores as necessary during nighttime hours to confirm that these safety measures are in place.

Seven-Eleven Japan is focusing its efforts on reducing the environmental impact of store operation. In addition to continual efforts to conserve power, such as the development of facility equipment that uses less power (P34) and thorough checking and maintenance (P35), we have made efforts to create systems for proper disposal and recycling of waste, and we provide backup for the environmental activities of our franchisees.

Among these efforts, as a result of discussions with the proper government authorities we have consolidated the waste disposal and recycling methods of the entire Seven-Eleven chain, so that the disposal and recycling methods for the waste covered by the Waste Disposal and Public Cleansing Law of each franchisee is compliant with regulations. We have created and implemented our own Eco-Distribution System (P36).

Store front waste separation containers

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Strengthening compliance

Considerations made for part-time employees

Reducing the environmental impact of store operation

Fulfilling responsibilities toward local communities

The Seven-Eleven Cold Chain (representation of truck container temperature)

30℃

Chilled vehicleLow temperature vehicle

Storage at low temperature

after harvesting

Sorting by plant Process for sandwiches and salads

Chilled vehicle Chilled vehicle

General shipment

0℃

Cold Chain

*Depending on certain delivery conditions, actual temperatures will vary. The above is only a representation.

Production area

Low temperature process center Plant Store

Chilledtemperature

We strive for "Safety and Confidence" in both product development and quality control.In response to customer demand for safe products that can be purchased with confidence, Seven-Eleven Japan implements thorough quality control throughout the entire production process, from ingredient procurement through product manufacturing, distribution, and sale. Our approach to providing safe products that our customers can purchase with confidence covers every product aspect, from the development of completely preservative and artificial color-free food products through safety-conscious packaging and proper product labeling.

Box lunches and side-dishes are important convenience store products, and have an effect on our customers' health. For this reason, Seven-Eleven Japan has since its founding made food safety a priority, and we strive for quality control and the development of products in which our customers can feel confident.

We had in mind our original fast food items, such as rice balls and lunch boxes, when we set up the Nihon Delica Foods Association (NDF) for the participation of our suppliers of food products. The Association provides for consolidated quality and sanitation control, based on our own standards. We went further in 1984 by requesting that the member companies construct specialized plants dedicated to the manufacture of products for Seven-Eleven Japan. All of the specialized plants are connected by an online system, making consolidated quality control methods a reality. As of February 28, 2005, NDF membership comprised 91 companies with 192 plants. In addition to the sharing of quality control information, they also engage in joint purchasing of materials and equipment.

The NDF adopted the HACCP (Hazard Analysis and Critical Control Points), which is a sanitation control system developed for astronaut food, in FY2003, and employs its own "NDF-HACCP Qualification System" for the inspection and qualification of the sanitation controls of member companies. As of June 2005, 36 of the 192 plants

had acquired accreditation. Plants that have yet to acquire accreditation receive regular check-ups and guidance from the Seven-Eleven Japan Product Department and Quality Control Department, and are supported in their efforts to improve sanitation control.

The NDF has constructed the "Recipe Master System" for unified control through WEB-based traceability of each stage in the manufacturing, distribution, and processing of all of the ingredients and packaging used in our original fast food items. In this system, NDF-member companies record and store supplier, order amount, and distribution channel information by placing orders for ingredients and packaging using WEB-based order forms. In this way they are able to use this information to answer in real-time questions such as "Which manufacturer?", "Where from?", "When?", and "What kind of ingredients were purchased?" providing for confirmation of the safety of the ingredients and packaging. This system also provides for supply and demand control of the ingredients and packaging purchased jointly by all of the member companies, reducing inventory losses.

Some vegetables lose their freshness if they are shipped and stored at room temperature. Therefore, Seven-Eleven Japan has introduced the "Cold Chain" system for keeping the vegetables used in salads and unheated breads constantly chilled during the shipping and sales process. This was inaugurated at all stores in March 2005, so that we can offer our customers fresh food with a high nutrition value.

Establishment of NDF-HACCP Qualificationsystem

The Recipe Master System for traceability of ingredients and packaging and supply and demand control

Cold Chain for maintaining freshness of vegetables

We set up a manufacturers association among our suppliers for thorough quality control in our fast food items and processed foods

With Our CustomersS

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Items subject to allergen indication

Items subject to mandatory indication wheat, buckwheat, eggs, milk, peanuts

Items subject to voluntary indication

abalone, cuttlefish, salmon caviar, shrimp, oranges, crab, kiwi fruit, beef, walnuts, salmon, chub mackerel, soybeans, chickens, banana, pork, matsutake mushrooms, peaches, yams, apples, gelatin

Toilet with handrails installed Wheelchair-friendly mark on toilet door

Original fast food items

Creating safe and comfortable storesSeven-Eleven Japan has worked to develop store facilities that provide our customers with a safe and pleasant shopping experience, emphasizing themes of "improved accessibility", "improved merchandise visibility", and "making shopping more pleasant." Our facility improvement measures include eliminating steps from the entrance, making merchandise easier to find by adjusting display case height, and making it easier to pick out merchandise. Since FY2005 we have adopted "Universal Design" considerations in building our stores, so that the elderly and the physically challenged can also have a pleasant shopping experience.

We have begun adopting "Universal Design"

We at Seven-Eleven Japan emphasize the food safety and confidence demanded by our customers, and work along with food manufacturers to develop and supply safe original products and packaging.

Since October 2001, Seven-Eleven Japan has been offering original products, such as lunch boxes, side-dishes, and noodles, that are completely free of preservatives and artificial coloring. We began offering our 100% preservative and artificial coloring-free health-friendly molded confections in FY2005.

We check containers and packaging to be sure that they are compliant with the Food Sanitation Law and Health, Labor and Welfare Ministry announcements to ascertain that no chemicals suspected of health effects or chlorine-based plastics are used in the packaging of our original fast food items. Since 1998, the wrapping for rice-based items uses only non-polyvinyl chloride (polyethylene) materials. We use the Recipe Master System for unified control of the packaging used for original fast food items in the same way as we do for ingredients.

To offer the customer correct merchandise information, labels conform to JAS (Japan Agriculture Standard) Law and Food Sanitation Law. Indications on allergens include items subject to voluntary indication.

Our stores are visited by an average of 1,000 customers per day. Recent studies have shown that the trends in Japan toward an aging population combined with the diminishing number of children as well as the growing urbanization of lifestyles have led to an increase in the number of our elderly customers. Beginning in FY2005, Seven-Eleven Japan has been adopting Universal Design considerations in designing our stores, so as to make it easy for everyone to enjoy shopping at Seven-Eleven Japan, regardless of age, disability, sex, or body type.

For example, we have been working to install automated doors, especially at new stores, so that physically challenged customers as well as mothers holding babies will find it easier to enter and exit. We have also expanded aisle width from 1 meter to 1.2 meters, so that in addition to making it easier for wheelchair users to pass, we can improve visibility and make it easier for all of our customers to pick out merchandise. We are also enlarging restrooms and installing handrails to make use easier for older or physically challenged customers.

Developing and selling safe original products that customers can buy with confidence

Striving for "100% preservative and artificial coloring-free"

Dispelling concerns about endocrine disruptors

Allergen information on the commodity label include items subject to voluntary indication.

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CSR Report 2005 21

Chapter 5Activities for the sound development of FC business

Relationships with business partners(extracted from the Employee Code of Conduct)

Maintaining fair tradingSEJ shall comply with all relevant laws and regulations, such as the Anti-Monopoly Act, and shall refrain from any "unfair trading" practices, such using its trading position to force counterparts unfairly to engage in unprofitable business. All merchandise orders shall necessarily be made in writing, as shall the details of all conventions pertaining to rebates, holdbacks, cash incentives, and specifications for equipment and furnishings.

Prohibition of private profitingNo employee or member of employee's family shall receive gifts, entertainment, or enjoy any other form of preferential treatment or profit from a business partner of Seven-Eleven Japan. This is because the receipt of favors from specific business partners is psychologically damaging to the concept of equitable business relations.

Employees shall exercise a high degree of sincere and independent judgment in executing company business, and shall refrain from any conduct causing or having the potential to cause the company to lose profit.

（The above is taken directly from the Code of Conduct. "SEJ" is an abbreviation of Seven Eleven Japan.）

Employee Code of Conduct

We seek mutual business development while maintaining a fair trading relationshipWe at Seven-Eleven Japan view our business partners as valuable business partners, and we strive to maintain fair, just, and beneficial business relationships. Our goal is for mutual development through information sharing and joint product development.

Seven-Eleven Japan has established the Fair Trade (FT) subcommittee for maintaining fair trading. The subcommittee oversees thorough compliance with laws, regulations, and corporate ethics in all business.

The Seven-Eleven Japan Employee Code of Conduct contains a provision outlining our policy for "Relationships with Business Partners". The Code of Conduct clearly states our policies calling for Seven-Eleven Japan employees to engage in fair trading while complying with all relevant laws and statutes, refraining from private profiting in relationships with business partners, and maintaining business on an equal footing.

The Employee Code of Conduct also lists Code of Conduct Guidelines for the compliance of each employee in the course of daily business activities.

The Code of Conduct Guidelines clearly spell out items of concern in the maintenance of fair and just relationships in our business partnerships with franchise owners and business partners. Employees are required to refrain from private relations, particularly monetary loans, with specific parties. Similarly, Seven-Eleven Japan employees shall receive no monetary or material gifts, including "travel money" or "commemorative items" when visiting business partners. In addition, the Guidelines stipulate that employees shall politely decline any dining or other entertainment in conjunction with business negotiations, and shall not impose any economic burden upon a business partner that is not directly related to business.

We hold regular fair trading study meetings for the personnel responsible in each department for direct business contact with business partners. For example, the Merchandising Department, which is responsible for all purchasing, holds monthly study meetings in conjunction with the MD Committee for the personnel responsible at the Distribution Management Department for coordinating the delivery companies. These meetings are held to ensure compliance with laws and regulations, such as those related to the fair trading clauses in the Anti-Monopoly Act and the Subcontracting Act.

We will continue to promote increased awareness of these issues among our personnel and our business partners. We will also hold study meetings concerning matters such as the "Large-Scale Retailers Proclamation", which goes into effect as of November 2005.

The Seven-Eleven Japan Employee Code ofConduct: Maintaining fair trading and prohibiting private profiting

Code of Conduct Guidelines: Promoting caution in daily activities

Regular study meetings for ensuring fair trading

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Flow of original product development through TeamMerchandising

Feedback

Feedback

Product concept research basedon POS data and market information

Product development meeting withbusiness partners

Research and decisions on productspecifications and manufacturing process

Establishment of production structure

Production, distribution, sale

Taste-testing within the Team;monitoring evaluation

Evaluation and advice fromspecialists and chefs

Market research

Test marketing, taste-testing by directors

Sekkisui Series

Wa no takumi Series

Promoting "Team Merchandising" for joint development with our business partnersSeven-Eleven Japan is working to develop original products through "Team Merchandising" (Team MD) so as to meet promptly and accurately the various needs of our customers, which change every day. This requires that we work together with domestic and international manufacturers, business partners, and distributors to develop and offer high-quality original products that take store information, market trends, and local needs into consideration. It makes it possible to develop and offer the products demanded by our customers in a timely fashion. In addition to making progress in product lines that satisfy the needs of our customers, this also enables us to strengthen partnerships with business partners and develop joint business.

The soup stock that is broadly used in such popular standbys as oden and noodles is critical to flavor. Seven-Eleven Japan engaged in a joint thorough examination with a business partner of the entire soup stock

production process, from the raw ingredients through processing methods. As a result, we use honkarebushi dried bonito shavings for stock. These dried bonito shavings, from bonito taken from equatorial waters, were selected for freshness and low fat content by three specialists from Makurazaki in Kagoshima, the home of dried bonito shavings, after three months of testing.

We strive to create product series based on original products that are highly rated by our customers. We keep the basic product concept the same, and by creating variations in taste and function we broaden the selection available to customers and increase the likelihood that they will return to our stores. In addition to our processed food series, such as Wa no takumi series of individual servings of gourmet ice cream, Shokunin katagi series of rice confection, and Attaka shitate series of cup miso soup, we have also developed a series of cosmetic products, the Sekkisui Series.

* HonkarebushiThese are bonito shavings with beneficial mold grown on the surface of the raw shavings. The mold results in a distinctive, delicious flavor.

Joint development of the soup stock that makes the difference in oden (Japanese hodgepodge)

Development of original product series

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CSR Report 2005 23

The Safety Station Activities

Government agencies

Local communitiesLocal police

1,428

3,424

7,430

321

865

981

Of total Seven-Eleven storesContent Total

Safety Station Activities: 3rd trial* results

Refuge taken by women or children

Cooperation in making police report

Cooperation in providing care to the elderly or physically challenged

*3rd Trial Period: July - September 2004

Building a sound educational environment for young people1) Preventing purchases of alcoholic

beverages and tobacco2) Preventing the viewing and

purchase of unsuitable publications

3) Preventing juvenile delinquency*Tie-ins with the police, PTA, and

other organizations

Ensuring safety in local communities1) Offering local safety information to

customers 2) Gathering data about local

customer safety needs

Creating safe and secure towns【Crime Prevention】

1) Strengthening voluntary crime prevention organizations

【Safety Measures】1) Functioning as a conduit for care

for the elderly and physically challenged

2) Providing refuge for women and children

*Tie-ins with local police, police sub-stations, and fire departments

【Crime Prevention Measures】1) Reporting the incidence of

emergencies, disasters, and crimes

Convenience store functions●Mainly 24-hour operation ●Employees present even late at night ●Available at key locations in the community

Security coller balls

All of our stores participate in the Safety Station Activities as community bases for safety and security

We are working to create local communities in which people can live safely and confidently.As good citizens of their local communities, each of our Seven-Eleven stores participates in community efforts, such as the various activities of local shopping malls and clean-ups. Beginning in 2000, our stores began participating in the Safety Station Activities sponsored by the Japan Franchise Association (JFA). The Activity makes use of our special characteristics as a convenience store that is open 24 hours a day, seven days a week. Our stores in every region continue to function as emergency contact points for local crime prevention, accident and disaster response, and nursing care needs.

Seven-Eleven stores offer "time convenience" by staying open 24 hours a day, 7 days a week. Our lights are on even in the middle of the night, and our staff is always there. Our efforts to serve as community bases for safety and security are seen in the Safety Station Activities.

In 2000, the National Police Agency issued a request to the JFA, whose membership is comprised of all the convenience store companies, for assistance in "nurturing a sound educational environment for young people" and "creating safe and secure towns". This request spurred the inauguration of the Safety Station Activities using convenience stores, which are open 24 hours a day, 365 days a year, as emergency contact points for local crime prevention, accident and disaster response, and nursing care needs.

Up to now, the JFA has implemented three trial runs of this program. Seven-Eleven Japan has used our biannual Product Exhibitions and our in-house magazine, "Seven-Eleven Family", to provide Seven-Eleven Japan' explanation of our crime prevention measures, and we provide advice to each of our stores depending upon their particular situation.

The first trial run was held in March 2003 in Saga Prefecture and Kawasaki City; the second was held in November 2003 in six wards of Tokyo, Yokohama, Kawasaki, Saga Prefecture, and Fukuoka Prefecture. The third trial run was held in July 2004 in Sapporo, Tokyo, Yokohama, Kawasaki, Shizuoka, Aichi Prefecture, Gifu Prefecture, Nara Prefecture, Kyoto, Osaka, Hyogo Prefecture, Fukuoka Prefecture, and Saga Prefecture.

Having implemented these trials, the nationwide Safety Station Activities was begun in October 2005.

The participation of Seven-Eleven Japan in the Safety Station Activities was the impetus for taking even more thorough crime prevention measures at our stores. We instituted crime prevention rules, such as always having at least two employees working during late night hours, only using one cash register at a time, and equipping our staff with color dye balls filled with fluorescent paint for use in the event that a robbery is attempted. These rules are relayed and explained at each store by our Operation Field Counselors (OFCs) (P18).

Stores that have participated in this trial program have worked to further ensure safety and security in their local communities by providing refuge to women and children and cooperating in making police reports.

Strengthening crime prevention measures at our stores

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Satellite mobile phone at a district office

Crisis Action Standards

Digital wireless

We work for prompt resumption of operations and support for stricken areas when disasters occur.

Disaster response is another of our missionsIn their roles as "community bases for safety and security", when disasters such as earthquakes occur convenience stores must fulfill a vital role. To this end, Seven-Eleven Japan has issued its "Crisis Action Standards", composed in 1986. These standards cover damage confirmation, situation assessment, and recovery assistance for stores and local communities in the event of the occurrence of a large-scale disaster, and are distributed to OFCs, who provide management consulting services to franchisees. Seven-Eleven Japan has also put in a place a system for prompt distribution of aid supplies to stricken areas.

Seven-Eleven Japan has installed satellite mobile phones at each of its district offices so as to be able to execute prompt confirmation of customer and employee safety, assess store damage, and provide recovery assistance in the event a disaster occurs. This system allows for accurate communications between the stricken area and Seven-Eleven Japan during a disaster. In addition, each OFC is provided with and studies the Crisis Action Standards, and is equipped with a helmet, flashlight with radio, and similar gear for use in patrol after a disaster.

Other measures include the equipping of vehicles that deliver products from distribution centers with digital wireless equipment, and the conclusion of agreements providing for the dispatch when necessary of helicopters in the event that roads become impassable.

Seven-Eleven Japan uses its delivery trucks to send food, drinks and other relief supplies to stricken areas after disasters such as earthquakes. At such times, the wireless equipment may not function throughout the entire disaster area, and it can become difficult for Seven-Eleven Japan to monitor the location of each vehicle and control distribution, especially when roads may be out in some areas. Therefore, beginning in March 2005, we began switching to digital communications in our vehicles, and by September 2005 the changeover was complete for all vehicles. This system provides for the smooth delivery of relief supplies by allowing instructions and directions to be relayed to our drivers.

When the Niigata-Chuetsu Earthquake struck on October 23, 2004, some of our stores and production plants in that area were damaged. Nevertheless, with the exception of a few stores that had trouble resuming operations, the majority of stores were able to continue operating and providing local residents with needed supplies even during the difficulties posed by ongoing aftershocks. Similarly, when Southern Kyushu took a direct hit from Typhoon 14, 9 of our stores were flooded, 108 suffered rain leaks, and 34 underwent power outages. Store employees and Seven-Eleven Japan worked together to recover, and operations were resumed promptly.

Seven-Eleven Japan works to resume normal operations during the difficult period after a disaster. We consider it our mission to continue providing goods and services as normal to our customers.

Digital wireless equipment installed in delivery vehicles

Emphasizing routine preparedness

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CSR Report 2005 25

Results of citizen volunteer environmental grants

Grant total

Activity grants

Fostering grants

Business grants

Partnership grants

¥63,521,573

¥48,089,499

¥2,282,074

¥3,200,000

¥9,950,000

106

5

2

6

(total number of grants issued: 119)

The Mt. Fuji Cleanup Project has entered its 7th year.

Sapporo Odori Koen flowerbeds

The SEVEN-ELEVENn MidorinoKikin has been operated jointly by our franchisees and Seven-Eleven Japan since November 1993.

The SEVEN-ELEVEn MidorinoKikin (Green Fund) supports environmental NPOs and environmental conservation activities.The SEVEN-ELEVEn MidorinoKikin (Green Fund) supports various organizations and activities, through donations at store counters from customers and contributions/donations from Seven-Eleven Japan. FY2005 Total amount of donations collected at stores ………………………… ¥270,605,635

The SEVEN-ELEVEn MidorinoKikin was founded for the joint social contribution efforts with environmental emphasis of our franchisees and Seven-Eleven Japan in November 1993.

The SEVEN-ELEVEn MidorinoKikin supports environmental activities, local environment beautification efforts, and public relations activities through donations from customers and Seven-Eleven Japan.

The SEVEN-ELEVEn MidorinoKikin covers four types of grants for citizen volunteer environmental activities: "Activity Grants", "Education Grants", "Business Grants", and "Partnership Grants". It has also set up local intermediary organizations for the support of environmental NPO activities in individual regions, and has implemented overseas training programs for the improvement of the knowledge and technical skills of environmental volunteer leaders.

The SEVEN-ELEVEn MidorinoKikin concluded an environmental partnership agreement with the Fujisan(Mt. Fuji) Club NPO, which is engaged in environmental conservation efforts on Japan's national symbol, Mt. Fuji, and has been engaged in the protection of the precious environment of Mt. Fuji area.

An environmental partnership agreement was also concluded with the Kiritappu Wetland National Trust authorized NPO to create a national trust by purchasing private lands in Kiritappu Wetland for conservation.

This is support for activities, such as cleanups and the greening of streets, which improve the environment practice in peoples' everyday lives. Cleanup activities include the "Love Erath Cleanup" for regional cleanups in Hokkaido and Kyushu, and biannual "Seven-Eleven Day: Nationwide Cleanup" conducted jointly by Seven-Eleven Japan and our franchisees.

We also have taken part in the planting of Sapporo Odori Koen flowerbeds, and the sponsorship of four "partner flowerbeds" in Hiroshima.

We have co-sponsored projects such as the "Earth Friendly Essay and Activity Report Contest" held by the Yomiuri Shinbun, as well as forest marathons in Hokkaido and Kyushu. These projects are designed to give everyone in local communities the opportunity to show concern for the natural environment and pay attention to environmental issues in their local areas.

When serious damage has been caused by large-scale earthquakes, fires, typhoons, and other disasters, we solicit public donations for stickers on them showing where the money will be spent.

¥84,441,455Environmental NPO support projects

¥25,609,922Natural environmental conservation project

¥17,504,238Local environment beautification project

¥37,744,172Public relations project

Public donation projects for large-scale disasters

With Our Communities

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Seven & I Holdings Co.,Ltd.26

Group relief efforts during large-scale disasters

●July 2004 Niigata Floods　Provided to Niigata Prefecture

●October 2004 Niigata-Chuetsu EarthquakeProvided to Niigata Prefecture

●October 2004 Typhoon No. 23Provided to Gifu, Kyoto, Gunma, Kagawa,Tokushima, and Miyazaki Prefectures

●December 2004 Sumatra TsunamiProvided to the Japan Red Cross

●March 2005 Fukuoka EarthquakeProvided to Fukuoka Prefecture

●September 2005 Hurricane KatrinaProvided to the US Red Cross

¥8,839,915(¥8,413,844)

¥243,851,799(¥185,789,149)

¥55,588,017(¥43,012,849)

¥134,555,491(¥112,871,749)

¥9,342,204(¥9,299,591)

¥33,082,968(¥27,807,943)

Recent Donation Campaigns*The amount in ( ) is the amount collected at Seven-Eleven franchisees of the total for Seven & I Holdings.

Mock-up Student City store

Our contribution to sports activities includes being the main sponsor of the Nagano Marathon.

We participate in the Student City, and hold learning through work experience to our stores.

In addition to cooperating in arts, culture, and sports projects, Seven-Eleven Japan contributes to the development of richer local communities by sponsoring learning through work experience for local children.

When the foundations of daily life are shaken in communities stricken by earthquakes, fires, or floods, all of the Seven & I Holdings companies, led by Seven-Eleven Japan, Ito-Yokado, and Denny's, initiate donation campaigns at their outlets. They also seek to provide speedy relief by maintaining close communications with stricken areas, assessing recovery needs, and providing necessities to the people in those areas. They aim to repair and restore normal life in all of its aspects as quickly as possible.

Immediately after the Niigata-Chuetsu Earthquake struck on October 23, 2004, we sought to transport relief items using all possible means, including helicopters and trucks. Beginning with a shipment of 26,000 rice balls, we were able to provide bread, cup noodles, blankets, and other supplies to the stricken area. In addition, during the period of October 24-November 7, the 11,514 stores of Seven & I Holdings nationwide began a donation campaign. A total of ¥243,851,799 was provided to Niigata Prefecture (of this, ¥185,789,149 was collected at Seven-Eleven franchisees).

The Broadway musical "Peter Pan" has enjoyed a more than 20-year run beginning in 1981, delighting audiences of all ages, both children and adults. Seven-Eleven Japan has joined in sponsoring this musical since 1998, and has invited children with serious illnesses and those in the care of welfare facilities to enjoy the production.

The first Nagano Marathon was held in 1999, in commemoration of the 1998 Nagano Winter Olympics. Seven-Eleven Japan supports this event as its main sponsor. Participants in this event include the top runners from Japan and the rest of the world, as well as amateurs. The number of runners has increased every year, and the event has contributed to the growth of the popularity of marathons. In 2004, 5,115 runners entered the race.

We participate in the hands-on learning Student City experience sponsored by Junior Achievement, the world's largest business education NPO. We create a mock-up Seven-Eleven Japan inside the school, and give the students the opportunity to experience store management and direct customer contact. This program was held for 5th graders in elementary schools in Tokyo's Shinagawa-ku in FY2005, with 1,791 students participating.

Contributing to the development of local communities through culture, sports, and education

We joined in sponsoring a production of the musical "Peter Pan" and invited children in the care of welfare facilities.

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CSR Report 2005 27

Human rights training

We are working to eliminate all sex discrimination from our personnel decisions, and seek to provide opportunities for our female employees to show their abilities and gain promotion.

We seek to create a personnel system that values employee initiative and independence.

We strive for equal and fair evaluations, and we honor diversity.Seven-Eleven Japan seeks to eliminate all forms of discrimination, to respect human rights, and to strive for equal opportunity and fairness in all personnel issues, so as to create a pleasant environment in which each of our employees feels the will to work.

"The source of a company's competitiveness is its people." Based upon this concept, Seven-Eleven Japan seeks to increase an employee's will to work and initiative. We do so by respecting the desires and aptitude of each employee, and we have created a personnel system by which an employee's work results are fairly evaluated.

Seven-Eleven Japan established its Candidacy System for assignment of desired work and promotion to management in 2002, with the goal of supporting employees who "desire to produce great results through work that is suitable to their individual personality and abilities" and "want to challenge a higher level of work." Through this system, an employee that has worked for two years or more may, irrespective of experience or age, become a candidate for their desired work or management position. They may then be selected for their desired position if a Head Office (Personnel Department) audit finds them suitable.

Out of 78 applicants via this system in FY2005, 18 were selected for their desired work or management position.

Seven-Eleven Japan has implemented the Self-Checking System so as to realize fair and highly transparent personnel evaluations. In this system, the employee evaluates his or her own work three times annually, the details of which are matched up with evaluations made by superiors. After that, the final personnel evaluation is determined. By eliminating the gaps between the employee's own evaluation and his or her superiors', the personnel evaluation is more convincing to both the employee and management, as well as more objective. It

is then used in setting employee goals, training, and skill refinement.

As of February 28, 2005, there were 64 physically challenged employees at Seven-Eleven Japan, mainly in the staff and accounting positions. Seven-Eleven Japan will continue henceforth to create a workplace where all employees can use their abilities to the fullest, irrespective of disability. We will continue to seek to employ the physically challenged and maintain a work environment with a strong awareness of the concept of normalization.

Seven-Eleven Japan respects the human rights and personal dignity of all persons associated with our company, and we do not discriminate on any unreasonable grounds unrelated to work execution, such as social status, lineage, race, faith, or sex. We also do not tolerate discriminatory language or harassment by our employees.

In order to be sure that all of our employees understand and operate according to this basic philosophy, we have implemented human rights training for employees, beginning with education about this issue for our new employees (including mid-career hires). We held a cumulative total of 25 days of human rights training over the course of FY2005, in which 703 employees took part (in comparison with 420 participants in FY2004).

Seven-Eleven Japan has created a performance- and merit-based personnel evaluation system, and we do not discriminate on the basis of age or sex in our hiring, wage, advancement, promotion, or retirement decisions. 24 women were employed in OFC positions, which are vital to our franchise business, as of February 28, 2005. In addition, we have one female director, and 24 managers.

Candidacy System for assignment of desired work and promotion to management

The Self-Checking System supporting fair evaluations

Continuous efforts to hire the physically challenged

Human rights training for all employees

With Our EmployeesS

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Rechallenge Plan overview

Possible to take both programs Possible to take both programs

Employees can return to full-time employment after a maximum of 2 years of leave for childcare or after a maximum of 1 year of leave for nursing care

Number of employees taking advantage of the Rechallenge Plan

Childcare

Nursing care

FY2003 FY2005FY2004

Leaves of absence Short-timeemployment Reemployment

Working hours can be shortened until children start attending elementary school

Priority in hiring

12

1

19

1

22

2

Ratio of men and women of employees

Board members and managers (as of Feb. 28, 2005)

TotalMale Female

Board members

Managers

Total

21

358

379

1

24

25

22

382

404

Employees (as of Feb. 28, 2005)

Total or averageMale Female

3,718

+168

1,116

-12

27 years

4,834

+156Change over preceding fiscal year

Average years of service

Employees

Average age 33 years and 2month

31 years and 11month

8 years and 1month

5 years and 4month

7 years and 6month

Vehicle for OFC

"Rechallenge Plan": Supporting employee child and nursing care

We focus on measures to prevent transport labor accidents.

Promoting a safe and pleasant work environmentSeven-Eleven Japan established the Health and Safety Committee for the creation of a safe and pleasant work environment for our employees. This committee meets monthly to discuss measures for the improvement of the work environment, and promotes the continuous implementation of health and safety improvement measures.

Seven-Eleven Japan established the "Rechallenge Plan" system of childbearing leave in 1991 as a way of supporting female employees raising children. This system provides a maximum two-year (three years when unavoidable) leave of absence plan for childbirth. It also provides for a working hours reduction plan for the reduction of daily working hours by a maximum of four, and re-employment plan that gives precedence in hiring to employees who quit temporarily to raise children.

While the system was originally established only for childcare, beginning in FY2004 it was expanded to include use for nursing care. Eligibility requirements were reduced from three years of continuous employment to just one and allowed for male staff as well in 1992. In FY2005, 24 employees were making use of the system (22 for childcare, 2 for nursing).

We always seek to increase the number of employees receiving regular health examinations, and we encourage employees requiring further examination to receive hospital testing. If an employee reports the results to the company, we work with industrial physicians to ensure that the employee's work is suitable to their health condition, in some cases, for example, transferring the employee to a less stressful workplace.

As required by the Personal Data Act, we entrust the control of all forms containing employee health data to the corporate health insurance union for proper handling.

The work of our OFCs, who are in charge of providing management support to our franchisees, requires a great deal of vehicular travel. As such, we have implemented annual Traffic Safety Program for OFCs in conjunction with local police departments as one measure for preventing transport labor accidents*. In FY2005 this training focused on the stricter application, in conjunction with enactment of the Revised Road Traffic Law, of the Law Prohibiting Use of Mobile Phones While Driving. Nearly all OFCs participated in this program.

We seek to apply the results of health examinations in work assignments, while respecting employee privacy.

*Transport labor accidents include accidents during work travel and commuting.

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CSR Report 2005 29

FY2005

TargetsArea Details

Merchandising

Distribution

Store Construction and Facilities

Waste and recycling

Environmentalactivities at

offices

Communication and environmental

education

Reducing environmental impact associated with manufacturingmerchandise

Environmental considerations in containers and packaging

Promotion of combined distribution

Reducing environmental loads associated with delivery

Proper control of CFCs

Energy-saving

Promotion of recycling

Proper disposal of waste

Promotion of recycling

Green purchasing

Promotion of recycling

Improvement of communications tool

Environmental education

Promotion of combined distribution for construction materials

Recycling of construction materials and facilities

Reducing the environmental load in sales promotion

●Expanding the use of rice requiring no washing at rice-based product plants

●Discussing the use of environmentally friendly containers

●Reducing the environmental load in sales promotion

●Continuing reduction in fuel cost based on operation control by in-car terminals

●Continuing the introduction of inverter freezers (1,950 units)

●Minimizing waste by promoting heat insulation panel use

●Continuing the reuse of leased equipment

●Increasing the number of stores participating in fluorescent lamp recycling.

●Reducing the environmental load in construction-related distribution

●Expanding eco distribution areas to include Hokkaido and new areas

●Promoting recycling of unused food residue at stores

●Launching recycling by the Kyushu Food Plant Recycle Business Corporate 　Association

●Attaining a green procurement ratio exceeding 50% both value and volume

●Attaining introduction of low-emission vehicles (LEV) with 3 stars to all vehicles 　exceeding 95%

●Expanding recycling to legally retained documentation to outside the Tokyo 　metropolitan area

●Promoting information dissemination by preparing supplementary materials　of environmental report

●Disseminating information through the Seven-Eleven Family bulletin and 　merchandise exhibitions

●Continuing Seven-Eleven Day: Nationwide Cleanup

●Improving accuracy in collecting environmental impact data

●Continuing abolition and destruction of CFCs●Continuing tests of natural refrigerants

●Conducting research on and discussing trial introduction of next-generation 　environmentally friendly vehicles

●Completing nationwide introduction of bulk delivery of room temperature items 　such as processed food, sweets, general merchandise, and liquor

Seven-Eleven Japan has implemented the Environmental Management Project for the sharing of information amongst departments about the progress, goals for the following year, and other details of the environmental conservation measures in the various departments. We are also engaged in concrete environmental initiatives with the cooperation of our franchisees and business partners so that the departments in charge can reduce environmental impact.

FY2005 Environmental Targets, Results and Self-evaluation

FY2005 targets and results

Environmental ConservationS

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C

B

B

B

B

C

C

A

A

B

B

C

C

C

A

B

A

A

B

D

B

B

Results Self-evaluation Targets

FY2006

●Introduced rice requiring no washing at 36 plants.　Ratio to all plants: 55%

●Expanding the use of rice requiring no washing●Loss in weights of food leftovers of fast foods manufacturers　Decrease of utility consumption by dual making electric power

●Continuing reduction in packaging materials use●Discussing the use of environmentally friendly containers

●Discussing paper POP

●Completing nationwide introduction of bulk delivery of room 　temperature items, such as processed food, sweets, general 　merchandise, and liquor

●Continuing reduction in fuel consumption based on operation　control system by in-car terminals

●Continuing research on next-generation environmentally friendly vehicles

●Improving accuracy in environmental impact data

●Collecting 22.5 tons CFCs from 6,000 units

●Introducing inverter freezers at 1,200 stores.●Introducing inverter microwave ovens

●Reducing 682 ton CO2/year by efficient combined distribution of 　construction materials and facilities

●Constructing 500 stores (new and rebuilding) using heat insulation 　panels

●Reusing 12,000 units of leased equipment.

●Recycling 1 million lamps (for store lighting and equipment)

●Expanding eco distribution areas and improving service in areas 　currently in operation

●Promoting recycling of unused food residue at stores

●Promoting recycling by the Kyushu Food Plant Recycle Business 　Corporate Association

●Attaining a green procurement ratio exceeding 75% both on value and 　volume

●Attaining LEV (75% or more) to all vehicles, except special cars

●Promoting projector use

●Preparing materials other than social and environmental report and 　promoting disclosure

●Continuing environmental publicity in Seven-Eleven Family

●Seven-Eleven Day: Nationwide Cleanup will be held in July and 　November

●Reduced plastic consumption in 20 kinds of packaging 　materials of 150 tons●Containers for the special New Year's foods were 　changed from resins to papers●Continued effort to use materials derived from plant, 　such as the polylactic acids

●Catalogs and handbills changed from 100% used paper　to eco-pulp

●Fuel consumption of diesel cars improved to 6.07 km/liter

●2,019 inverter freezers introduced

●417 stores used heat insulation panels

●10,634 units of leased equipment reused

●Recycled 560,000 fluorescent lamps at 5,612 stores

●Reduced 566 tons CO2 by combined distribution of　construction materials and facilities

●Conducted in 49 municipalities of newly open area

●Nagoya: Started food recycling in November 2004●Higashi Murayama and other 7 cities: Started food　recycling in June 2005.●Kumamoto: Under preparation toward the start in FY2006

●Completed association facilities in July 2004. 　Under promotion of production of feed products

●Value ratio 57.0%, volume ratio 68.1%

●LEV (50% or more) ratio: 96.6% (of 1,969 vehicles)

●Developing recycling system (Hokkaido and Kyushu)

●Not prepared

●Social and environmental corners at spring and autumn 　exhibitions●Started publicity in Seven-Eleven Family bulletin since 　May 2005

●Collection garbage about 110 tons and number of 　participants: 54,828

●Continuing the investigation and the examination of the　collection method

●Collected and destroyed 21.9 tons CFCs from 5,573 units●Introduced natural refrigerants (CO2 and ammonia) at 　2 stores

●Continuous enforcement

●Improved number of delivery vehicle to 8.9 car/store in　areas that combined distribution is preceded

Criteria for self-evaluation:

C=50% of target or better D=Less than 50% of target

A=Attainment of 100% of target or better B=75% of target or better

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Changes in numbers of delivery vehicles per store per day

1975 1981 1991 20042001 2005(FY)

12 10 9 8.9

80

60

40

20

* The number of delivery vehicles varies with regional and seasonal conditions. The above figures show averages for regions in which concentration has progressed

34

70

Seven-Eleven Japan combined distribution

Milk plant

Products are sorted

and delivered by temperature

Rice-based itemsand bread

Combined distribution centerMaintained at 20˚C

Frozen productsCombined distribution center

Maintained at -20˚C

Non temperature-controlled itemsCombined distribution center

Maintained at room temperature

Cooked noodles and pickles plant

Side-dish plant

Sandwich plant

Side-dish plant

Dessert plant

Chilled combineddistribution center:Maintained at 5˚c

Products are delivered to each distribution center from plants and manufacturers based on specified product control temperature

Consolidated and deliveredcollectively

Products loaded without waste of space on the truck bed

Seven-Eleven Japan has constructed a distribution system that can deliver the necessary goods in the right amounts so that we can respond promptly and accurately to ever-changing customer needs. In addition, we have begun constructing Combined Distribution System, so as to consider the environmental impact on distribution and traffic around our stores. The system works by reducing the number of delivery vehicles while expanding the range of products delivered. We will continue to work to reduce environmental impact by improving distribution efficiency and increasing the number of environmentally friendly vehicles in our fleet.

The "area-dominance strategy" (high number and density of stores) makes for more efficient and environmentally friendly distribution.

We reduce environmental impact by improving distribution efficiency.

The combined distribution system has greatly reduced the number of delivery vehicles.

Seven-Eleven Japan has been opening stores based on an area-dominance strategy (high number and density of stores) followed since its founding. Under this strategy, stores are opened in specific regions to raise regional name recognition, increase customers, and improve distribution efficiency. Store concentration based on our area-dominance strategy ensures efficient distribution routes, and thus makes just in time delivery possible. Also, Seven-Eleven Japan has constructed a combined distribution system, in which items from different manufacturers are combined at a distribution center and collectively distributed to stores based upon their individual orders.

Bringing increased efficiency to distribution leads to reductions in both the amount of energy used and environmental impact.

In Seven-Eleven Japan's early days, merchandise was delivered in line with commercial practices of that time, which can be described as "direct delivery to each store from manufacturers". This meant that up to 70 vehicles might visit a store in a single day, complicating the work of the stores and having a negative effect on the traffic and living environment around them. Since the units of order were also much larger, problems also arose, such as the maintenance of larger inventories than necessary to ensure a good assortment and the difficulty of handling products, for example everyday food items, that could not be easily stored.

We introduced combined distribution, in which items from different suppliers are combined at a center, sorted by product, and distributed to each store. This system got its start in 1980 with the launch of combined distribution of milk and rice based items, with a three times a day delivery system for rice based items established in 1987. Beginning in November 2000 we switched to a combined delivery system for room temperature items, such as sweets, alcoholic beverages, and processed foods. This led to a marked improvement in payload efficiency and significant decrease in the number of delivery vehicles.

In what is currently our most efficient area using combined distribution, the number of delivery vehicles visiting stores has been reduced to an average of 8.9 per day.

Environmental Conservation

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Number of environment-oriented vehicles introduced

Delivery vehicle complied with emission regulations

1994 regulations:0.1%

Natural gas vehicles:4.2%2003 regulations:36.7%

*Preliminary cars are included.

2003 2004 2005 (FY)

Nonidling freezer vehicles*

300

200

100

143

139

304

164153

227

CNG vehicles

(km/r)

2003 2004

8.00

6.00

4.00

2.00

5.82

2005 (FY)

6.07

5.90

Diesel trucks

1998 regulations:59.0%

Fuel consumption of in-car terminals introduction

Operation control through in-car terminals

Temperature sensor

GPS antenna

In-car terminal

Speed sensorDoor sensor

Satellite

Filling up CNG vehicle

We cooperate with our distribution contractors in maintaining vehicles and introducing low environmental impact vehicles.The environmental impact of distribution is affected not only by the number of vehicles per store, but also by the condition of the vehicles and route conditions. Seven-Eleven Japan has therefore cooperated with our distribution contractors to draw up voluntary management standards for vehicles: 1) Usage life of six years or less; 2) Total mileage of five million kilometers or less; 3) Monthly maintenance inspections. More than 3,000 delivery vehicles are maintained according to these standards.

We have also requested that our distribution contractors begin using compressed natural gas (CNG) vehicles so as to reduce the environmental impact of the vehicles themselves. CNG vehicles emit low levels of NOx, CO, and hydrocarbons (HC), and produce zero SOx emissions. CNG vehicles are currently being introduced in the capital region (Tokyo, Kanagawa, Saitama, Chiba, and Yamanashi), and the Kansai area (Kyoto, Osaka, and Hyogo). As of February 28, 2005, of 164 the 3,458 in use are powered by CNG.

Seven-Eleven Japan required its distribution contractors to install in-car terminals for controlling and monitoring operation of all vehicles in 2001. These terminals store data for delivery distances, maximum speeds, and idling. In addition to storing data about wasteful or dangerous driving, the terminals also help to improve driving by monitoring driving behavior of which the driver may be unaware, such as jackrabbit starts or driving to fast.

The data recorded by the in-car terminals is published in the Daily Safety Report. Based on this data, combined distribution centers advise drivers and optimize delivery distance and road traffic conditions. The fuel efficiency of delivery vehicles has improved every year since the in-car terminals were installed, with a steady improvement of 6.07 km/l posted in FY2005 (102.9% improvement over FY2004).

In-car terminals for safe and efficient driving

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Energy-efficient equipment used in stores

Soft-drink display cases

Open display cases for rice-based and chilled items

Lighting equipment

Air conditioners

Power saving devices for lamps and air conditioners

Outer wall and roofing materials

Windshield

Inverter-scroll freezers introduced

Inverter-stabilizer introduced for lighting equipmentInverter-scroll freezers introduced

Continuous dimmers and energy-saving fluorescent lamps installed

Inverter freezers introduced

Devices integrating energy-saving functions for lamps and power introduced

Insulated panels introduced

Vacuum glasses introduced in the cold district (Hokkaido and Tohoku).

Freezer case

Soft-drink display case inverter

We promote the use of energy-efficient equipment in stores.Seven-Eleven Japan works hard to install equipment in its stores that will guarantee our customers a pleasant shopping experience. At the same time, we install energy-efficient equipment when building or refurbishing stores in order to ensure that equipment improvements do not cause an increase in environmental impact. We conduct regular inspection and maintenance for maximum energy efficiency.

Seven-Eleven Japan convenience stores open 24 hours a day, 7 days a week. At the time we started up in Japan, however, there was no equipment available that could operate over such extended periods of time. Therefore, since the founding of Seven-Eleven Japan in 1973 we have been working with equipment manufacturers and other business partners in the joint development of energy-efficient display cases, lighting, and other equipment.

By developing this equipment, we have sought not only to increase convenience for our customers and employees, but also to cut energy consumption as much as possible. We will continue to work to improve the energy efficiency of the equipment we have developed.

Lighting equipment that maintains constant brightness in the operation of our stores is indispensable. In 1986, we began installing continuous dimmers so as to make this lighting equipment as energy-efficient as possible.

These continuous dimmers adjust the lighting automatically in accordance with changes in outdoor lighting due to seasonal, weather, and time differences. This allows us to ensure the right brightness with maximum energy efficiency, 24 hours a day, 365 days a year.

We will continue to expend all efforts toward continuously improving energy efficiency.

Seven-Eleven Japan has for some time used energy-efficient inverter-controlled air conditioners, refrigerators, and freezers. Nevertheless, because existing inverter-controlled units were able only to control individual display cases, we worked with manufacturers to develop inverter control boards. By realizing precise temperature control for each display case, we reduced the waste of electrical power, achieving 15-20% reductions in energy consumption for our display cases.

*InverterEquipment for voltage, current, and frequency control. Inverters are used to regulate motors in air conditions, refrigerators, and freezers.

Continuous dimmers for automatic lighting adjustment

Inverter control boards for display casesWe work in cooperation with manufacturers to develop energy-efficient equipment

Environmental Conservation

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●Facility Maintenance System (inspection and diagnosis 　four times a year):

All product display cases, microwave ovens, air conditioning equipment, outdoor equipment, etc.●Building Diagnostic System (inspection and diagnosis 　four times a year):

Electrical equipment, indoor and outdoor features, plumbing, external appearance

Inspection and maintenance items covered by the Building and Facility Maintenance System

We have constructed an inspection and maintenance system for the energy efficiency of our equipment.

Seven-Eleven Japan covers 80% of store utility expenses, and therefore seeks to reduce the environmental impact of entire chain.

Our future challenge is combining "improved convenience and service" with "energy efficiency".

Franchisee employees are trained in the proper use of equipment.

No matter how well the energy-efficient equipment functions, as age and wear and tear take their toll the energy savings effect decreases, and unnecessary energy consumption ensues. The insulation of our store buildings also has an effect on energy consumption. Seven-Eleven Japan has therefore created the Building and Facility Maintenance System for the regular inspection of buildings and maintenance of equipment through contracts made by Seven-Eleven Japan with construction companies and equipment manufacturers.

Our franchisees bear the costs involved in using this system, and while Seven-Eleven Japan recommends its use, the decision to enroll in the system is up to them. Irrespective of use of the Building and Facility Maintenance System, items to be serviced and maintenance requirements are relayed from Seven-Eleven Japan to each franchisee.

Stores enrolled in the Building and Facility Maintenance System undergo facility maintenance and inspection four times a year, but it is also necessary to train the franchisee employees who operate the facilities and equipment on a daily basis, so as to maintain energy efficiency. We provide information about the use of facilities and equipment in its in-house magazine, "Seven-Eleven Family", which is published bi-monthly. We also provide facilities and equipment usage explanations at our biannual Product Exhibitions.

Seven-Eleven Japan operates franchises throughout Japan, and it is the responsibility of Seven-Eleven Japan to reduce the environmental impact of the entire chain of franchisees. It is effective not only to support the efforts of individual stores, but also for Seven-Eleven Japan itself to promote reduced use of resources and energy by the chain overall. We have implemented an "80% Seven-Eleven Japan / 20% franchisee" system for payment of utility expenses (water and electricity) of the franchisees. In addition to providing support for franchise operation by covering part of the fixed costs, this system is aimed at promoting the reduction of the environmental impact of the overall chain through utility expense reduction efforts directed by Seven-Eleven Japan.

Seven-Eleven Japan is making efforts to improve customer convenience and service, as well as energy efficiency, but these two goals have a tendency to conflict. For example, in FY2005 the number of stores installed ATMs increased to 9,652 (as of February 28, 2005), and we also made efforts to improve our counter fixtures. As a result, per store energy usage increased by 4.6% over FY2004.

We are continuing to do all we can to install energy-efficient equipment, and an important issue for us henceforth is the creation of energy strategies for more efficient energy usage so that energy consumption does not increase correspondent to improvements in facilities and services. To that end we are currently installing combined refrigeration/air conditioning systems* that make effective use of exhaust heat from refrigerators and freezer cases and air conditioning units. We also plan to install vacuum glass, which has excellent insulating properties, at our stores in cold regions such as Hokkaido and Tohoku region.

*Combined refrigeration/air conditioning systemsThese are energy efficient refrigeration/air conditioning systems developed jointly by Mitsubishi Electric Corporation, Denso Ace, and Seven-Eleven Japan. The systems provide for mutual use of refrigerator heat exhaust and air conditioner refrigeration circuits, which reduces energy consumption.

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Recycling from collection of waste by eco distribution

Waste discharged per day per store

Garbage: 14.7kgOthers: 24.9kg

Others: 5.2kgCans: 6.0kgBottles: 2.4kg

Corrugated cardboard Paper manufacturer

Bottle manufacturer

Construction material manufacturer

Glass manufacturer

Concrete secondary product manufacturer

Steel manufacturer

Aluminum manufacturer

Steel manufacturer (combustion improver)

Landfill

Farmers

Textile manufacturer

Glass bottles

Cans

Waste plastics

Combustibles

Food products whose sell-by date has passed

Brown and white bottles

Other coloredbottles

Steel

Aluminum

Collection and transport using refrigerator vehicles

Contract store

*Data includes mean values for 1,163 Tokyo stores in 2004 (844 stores in Tokyo 23 wards for garbage)

Valuables (cardboard and newspapers): 20.9kg

Non-combustibles (Bottles, cans and others): 13.6kg

Waste sorting at stores

Pressing

Processed into flakes

Pressing

Sorting and crushing

Incineration

Sorting and conversion to compost

Reducing volume and solidifying

Crushing

Total74.1kg

Collectionand

transport PET bottles

Combustibles:39.6kg

Collecting products that have exceeded their sell-by date

We seek to establish a recycling-oriented chain so as to realize a recycling-oriented society.Seven-Eleven Japan constructed the "Eco Distribution System" in 1994, beginning proper disposal and recycling of waste produced by stores under the consolidated control Seven-Eleven Japan. Through this system, leftovers in lunchboxes are recycled as compost or animal feed. The returning of ingredients to their place of production is one effort in the creation of a recycling-oriented chain, leading to the realization of a recycling-oriented society.

Every store generates waste, such as products that have exceeded their sell-by date, cardboard for shipping use, and trash in trash containers at our stores. Through the first half of the 1990's, this waste was disposed of regional contractors enlisted by the franchisees on an individual basis. This is because the Waste Disposal and Public Cleansing Law codified the responsibility of each business to make direct agreements with waste disposal contractors, so as to clarify the duties of the waste producer.

Nevertheless, when each individual franchise is working with different contractors it becomes difficult for Seven-Eleven Japan to check as to whether or not each store is consistently handling and recycling waste properly. Seven-Eleven Japan therefore lobbied the relevant government agencies concerning the merits of establishing a consolidated waste disposal and collection system for our entire chain of stores, and have gained their approval constructed the Eco Distribution System in 1994.

Under this system, waste disposal contractors designated by their municipalities are contracted by Seven-Eleven Japan to handle the collection and disposal of all stores within that region on a consolidated basis. This makes it easier to conduct proper waste disposal and recycling for the overall chain. Currently, there are regions in which the Eco Distribution System is not operating because some municipalities have no contract system of waste disposal to external waste operators. Still, FY2005 saw the addition of 49 municipalities, mainly in the Aichi region where new stores are springing up one after another. Operation of the Eco Distribution System has now expanded to 30 prefectures nationwide. While each franchisee is free to choose whether or not to implement this system, by February 28, 2005 we had gained the consent of the owners of 7,352 of 8,607 franchises in regions in which the system has been recommended.

Constructing and operating Eco Distribution System that uses the entire chain.

Environmental Conservation

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After composting

Disposal of food products past their sell-by dates

Feed recycling facility

The Food Recycling Law went into effect in May 2001, making all food businesses, including convenience stores, responsible for either reducing or recycling 20% of the food leftovers generated in the food distribution and processing cycle. Seven-Eleven Japan began looking into ways of effectively using food products past their sell-by dates and leftovers generated at food processing plants since before this law was enacted, and in March 2003 began the recycling (composting) of food that has exceeded its sell-by date by using the Eco Distribution System in place in the central Tokyo.

This is done through a single process, by which the containers of food that has exceeded the sell-by date are placed as they are in special boxes, and are then collected by a waste disposal contractor and separated at a disposal facility for composting. This process is entails more cost for the stores than does the collection of regular trash, because it is necessary put in place special boxes that are not used for regular waste, due to the contractor handling the separation of the leftovers from containers. Nevertheless, the majority of franchisees have accepted that "food products past their sell-by dates are not garbage, but rather are to be used as a resource", and as of February 28, 2005, 1,054 stores had begun implementing the recycling (composting, etc.) of food waste.

It is important to reduce food leftovers not only by recycling, but also by reducing the amount of leftovers generated. Seven-Eleven Japan revamped its fast food item freshness check system in July 2005 in order to do just that. By increasing the number of product sell-by date checks from three to nine times a day, sales losses of products that had been removed from the sales floor ahead of schedule. Also, they are useful as experimental items in taste testing since products removed from the sales floor actually have some time left before they reach the consumption deadline.

Beginning in July 2004, 14 Seven-Eleven food processing plants in the Kyushu area inaugurated test recycling of food leftovers from the fast food item manufacturing process into pig feed.

This program is promoted independently by the Kyushu Food Processing Plant Recycling Business Co-op, which was established by the Kyushu area Nihon Delica Foods Association (NDF: Seven-Eleven Japan's fast food item manufacturers' association) in April 2002. Feed is made from the good quality flour and bean curd refuse from each plant and offered to producers at prices lower than feed on the open market. It is of very high nutritional value, because the quality of the ingredients meets Seven-Eleven Japan's high standards.

Miyazaki Prefecture and Miyazaki University are currently also taking part, promoting this program as pig farming tests conducted jointly by government, industry, and academia.

Composting of food that has exceeded its sell-by date

Increasing the freshness checks of fast food items

Food leftover feed recycling tests conducted jointly by government, industry, and academia

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Independent Assurance and Responding to Independent Assurance

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December 2005

Noritomo BanzaiSenior Managing Director, General Affairs & Legal,

Senior Managing Director, Joint Venture Project In ChinaSeven-Eleven Japan Co., Ltd.

Since its founding in 1973, Seven-Eleven Japan has developed its business with "Constant Readiness for Change" and "Pursuing Absolutes" as its fundamental principles. This business itself causes changes in society and everyday living, and the corporation itself has become an entity under the scrutiny of society.

An examination of our business structure shows that convenience stores have the closest contact with end-users in supplying goods and services to local communities. Therefore, the strategic alliance of "manufacturing _ distribution _ sales" that makes up the infrastructure supporting this business depends on each business involved sharing the same principles. In consequence, we are viewed by society not only in terms of the services provided through our franchisees, but also from the perspective of how our franchisees and each related company operate.

There is currently much discussion about CSR (Corporate Social Responsibility). From the point of view of management, it is difficult to discriminate between corporate responsibility and a corporation's social responsibilities; indeed, these concepts must be seen as a single, organic whole.

As noted in the report, one actual example of the fulfillment of corporate responsibilities and social responsibilities is the Safety Station Program underway

since October at 40,000 convenience stores nationwide. Through this program, the industry is able to provide bases for safety and security to local communities. We plan to continue this important, proactive program.

The establishment of the holding company in September 2005 means that Seven-Eleven Japan has become an operating company. Nevertheless, there will be no change in regard to Seven-Eleven Japan' responsibilities toward our franchisees, nor in the efforts we will make to continue to succeed in meeting the needs and expectations of society.

Henceforth, in our constant readiness for change we will consider not only measures that take into consideration our special characteristics as a franchise business and our responsibilities as a corporation. We will also pursue the creation of a distribution business, in conjunction with all of our related companies, which fulfills all of its obligations from the perspective of CSR. We look forward to continuing to receive the support and cooperation of all of our stakeholders.

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