Top Management Message May 22, 2003

On May 21, we were contacted by Sundelica Co., Ltd., one of our manufacturing vendors, who informed us that some Niigata Koshihikari Rice Balls and Tori Gomoku Rice Balls sold at Lawson stores in the Miyagi and Yamagata regions contained different ingredients to those labeled and were in breach of the JAS Law pertaining to standards and proper quality labeling of processed foods.

Sundelica's Sendai First Sales Office, which has been producing rice balls promoted by Lawson under the Onigiriya brand, discovered that the ingredients shown on packaging differed from ingredients actually used in the rice balls. Niigata Koshihikari Rice Balls contained Koshihikari rice from other prefectures in Japan that had been mixed in with Niigata Koshihikari rice. Meanwhile, Tori Gomoku Rice Balls, which are no longer on sale, had used chicken from other parts of Japan instead of Awaodori chicken from Tokushima. This was a clear breach of both law and the agreement under which the rice balls are produced for Lawson.

Immediately after receiving notice from Sundelica last evening, we withdrew the products concerned from stores and simultaneously launched an inspection of the factory involved. At this stage, we have confirmed that these rice balls are being produced in accordance with product specificationsh.

Furthermore, similar inspections have been carried out at all 41 factories of our 31 main dish manufacturing vendors across the country to confirm that they are operating in accordance with Lawson's quality management standards and producing the products concerned according to specifications.

I regret any undermining of the trust that customers place in Lawson caused by this incident.

The Onigiriya brand is the product of the hard work of the Lawson family (franchise owners, store crew, business partners and employees) and has been partly to thank for a renaissance at Lawson. We are committed to growing this brand and are determined to win back your trust. The lessons learned from this one incident will be used to strengthen and make the brand even better.

To prevent a reoccurrence of such an incident in the future, we will redouble our efforts to ensure that all our business partners are complying strictly with legal and quality management requirements.

Products concerned: Niigata Koshihikari Rice Balls Tori Gomoku Rice Balls - no longer on sale
Vendor: Sundelica Co., Ltd.
Address: 3-10-1, Iwamoto-cho, Chiyoda-ku, Tokyo
Representative: Kazuyoshi Aoyama
Tel: 03-3864-3248
Established: May 1980
Sales: 52,124 million (Year ended December 31, 2002)
Capital: 160 million
Business: Manufacture and sale of prepared bread, main dishes and delicatessen items
No. of employees: 6,088 (As of December 31, 2002)
Factory concerned: Sendai First Sales Office
Supply area: 218 stores throughout Yamagata and Miyagi (55 stores in Yamagata and 163 stores in Miyagi)
(As of May 21, 2003)
Related factories: Sendai Second Sales Office
Koriyama Office
Nagoya Office First Factory
Nagoya Office Second Factory

I sincerely apologize to shareholders and other investors for any trouble caused by this incident. I will report again if there is any new information to add.

May 22, 2003

Takeshi Niinami
President and CEO

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