Aeon Co. FR201204

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This is an abridged translation of the original Japanese document and is provided for informational purposes only.

If there are any discrepancies between this and the original, the original Japanese document prevails.

Financial Results for the Fiscal Year ended February 29, 2012

April 12, 2012

Company name Aeon Co., Ltd. Listings The First Section of Tokyo Stock Exchange Security code 8267 URL http://www.aeon.info/ Representative Motoya Okada, President Contact Hidehiro Hirabayashi

Vice President, Office of the President Telephone +81 43-212-6042 Scheduled dates: Ordinary general meeting of shareholders May 17, 2012 Commencement of dividend payments April 26, 2012 Submission of statutory financial report May 18, 2012 Supplementary materials to the financial results Available Fiscal year-end earnings results briefing Yes (targeted at institutional investors and analysts)

(Amounts rounded down to the nearest million) 1. Consolidated Financial Results for the Fiscal Year ended February 29, 2012

(March 1, 2011 to February 29, 2012)

(1) Operating Results (Percentage figures represent year-on-year changes)

Operating revenue Operating income Ordinary income Net income

million yen % million yen % million yen % million yen % Year ended February 29, 2012 5,206,132 2.1 195,690 13.5 212,260 16.6 66,750 11.8

Year ended February 28, 2011 5,096,569 0.8 172,360 32.4 182,080 39.8 59,688 91.8

Note: Comprehensive income: Year ended February 29, 2012: 79,994 million yen (-11.3%) Year ended February 28, 2011: 90,185 million yen (-%)

Net income per share

Net income per share- fully diluted

Return on equity Ordinary income to

total assets yen yen %

Year ended February 29, 2012 87.23 76.33 7.3 5.4

Year ended February 28, 2011 78.01 68.31 6.9 4.8

Note: Equity in gains (losses) of equity-method affiliates: Year ended February 29, 2012: 5,190 million yen

Year ended February 28, 2011: (1,985) million yen

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(2) Financial Position

Total assets Net assets Shareholders’ equity ratio

Net assets per share

million yen million yen % yen February 29, 2012 4,048,937 1,282,066 23.1 1,216.22

February 28, 2011 3,774,628 1,219,236 23.5 1,159.73

Note: Shareholders’ equity: February 29, 2012:935,737 million yen February 28, 2011:887,371 million yen

(3) Cash Flow Position

Cash flow from operating activities

Cash flow from investing activities

Cash flow from financing activities

Cash and cash equivalents at end of

period million yen million yen million yen million yen

Year ended February 29, 2012 203,382 (327,865) (13,061) 166,277

Year ended February 28, 2011 261,132 (105,517) (121,847) 306,820

2. Dividends

Dividend per share

Record date or period

End-first quarter

End- second quarter

End-third quarter

Fiscal year-end

Annual total

Total dividends

paid (full year)

Payout ratio (consolidated)

Dividends to net assets

(consolidated) yen yen yen yen yen million yen % %

Year ended Feb. 29, 2012 - - - 21.00 21.00 16,069 26.9 1.9

Year ended Feb. 28, 2011 - - - 23.00 23.00 17,697 26.4 1.9

Year ending Feb. 28, 2013 (forecast)

- 12.00 - 12.00 24.00 25.3 to 27.2

Note: *Year-end dividend for the fiscal year ended February 28, 2011: Ordinary dividend of 18.00 yen Special dividend of 3.00 yen

3. Forecast of Consolidated Earnings for the Fiscal Year ending February 28, 2013


(Percentage figures represent year-on-year changes)

Operating revenue Operating income Ordinary income

million yen % million yen % million yen % Six months ending August 31, 2012 - - - - - -

Full year 5,650,000 8.5 210,000 to

220,000 7.3 to 12.4

220,000 to 230,000

3.6 to 8.4

Net income Net income per share

million yen % yen Six months ending August 31, 2012 - - -

Full year 68,000 to 73,0001.9 to

9.4 88.38 to 94.88

Note: Aeon does not disclose earnings forecasts for the first six months for the fiscal year.

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4. Other Information (1) Changes affecting the consolidation status of significant subsidiaries during the period: Yes

Excluded: one (Mycal Corporation)

(2) Changes in accounting principles, procedures, and method of presentation, etc. 1) Changes in accordance with amendments to accounting standards: Yes 2) Changes other than the above: None

* For details, see “Material Changes to the Basis of Preparation of Consolidated Financial Statements” on page 21 in the Accompanying Materials.

(3) Number of shares issued (common stock) 1) Number of shares issued at end of period (treasury stock included):

February 29, 2012: 800,446,214 shares February 28, 2011: 800,446,214 shares

2) Number of shares held in treasury at end of period: February 29, 2012: 31,065,617 shares February 28, 2011: 35,290,230 shares

3) Average number of shares outstanding during the period: Year ended February 29, 2012: 765,223,095 shares Year ended February 28, 2011: 765,144,983 shares

For Reference 1. Non-consolidated Financial Results for the Fiscal Year ended February 29, 2012


(Percentage figures represent year-on-year changes)

Operating revenue Operating income Ordinary income Net income

million yen % million yen % million yen % million yen % Year ended February 29, 2012 51,128 7.6 36,438 0.9 37,489 0.2 17,769 291.0

Year ended February 28, 2011 47,495 32.2 36,101 51.8 37,409 48.0 4,544 (83.0)

Net income per share

Net income per share - fully diluted

yen yen Year ended February 29, 2012 23.22 20.42

Year ended February 28, 2011 5.94 5.30

(2) Financial Position

Total assets Net assets

Shareholders’ equity ratio

Net assets per share

million yen million yen % yen

February 29, 2012 1,045,669 553,047 52.8 717.89

February 28, 2011 1,005,178 547,441 54.4 714.59

Note: Shareholders’ equity: February 29, 2012: 552,387 million yen February 28, 2010: 546,829 million yen

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*Audit status This report is exempt from the audit requirements of Japan’s Financial Instruments and Exchange Act. As of this report’s publication, the audit of the fiscal year-end financial results had not been completed. Appropriate Use of Earnings Forecasts and Other Important Information The above forecasts, which constitute forward-looking statements, are based on information available to the Company as of the date of the release of this document. Actual results may differ materially from the above forecasts due to a range of factors. For the forecasts herein, refer to “(5) Outlook for the Fiscal Year ending February 28, 2013” on page 7 in “1. Analysis of Operating Results” in section “Review of Operating Results and Financial Statements” in the Accompanying Materials.

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1. Review of Operating Results and Financial Statements (1) Analysis of Operating Results 1. Summary of Consolidated Operating Results

In the fiscal year ended February 29, 2012 (March 1, 2011 – February 29, 2012), though the Japanese economy was severely impacted by the Great East Japan Earthquake, corporate capital spending and personal consumption showed signs of mild improvement following progress in the recovery of the disaster area. Overall, however, the economic climate remained severe, as the outlook for Japan’s economy was clouded by volatile foreign exchange markets and slumping stock markets stemming from the European debt crisis, along with the impact of flooding in Thailand and other factors.

In response to community needs following the earthquake, Aeon immediately made its stores in the disaster area available as temporary evacuation shelters for the refugees, and the company fulfilled its social mission within the community infrastructure by harnessing the capabilities of its proprietary supply chain and global sourcing capabilities to deliver daily necessities to disaster areas and rapidly reopen stores. The company collaborated closely with customers, local governments, and business partners and suppliers to provide the fullest support possible to disaster-struck areas. At the same time, Aeon supported efforts to rekindle consumer spending by utilizing its shopping center, e-money services, and other Group infrastructure to develop special products and sales floors meeting customer needs, along with fresh promotional campaigns.

Fiscal 2011 marked the first year of the Group Medium-term Management Plan designed to support a new growth stage through the promotion of Group structural reforms and the optimal allocation of management resources towards growth areas. In regard to Group structural reforms, with the aim of improving corporate value and generating stronger Group synergies, each company in the Group continued to promote its own specialization through the reduction of unnecessary intra-Group business duplication and business function dispersion. Aeon also improved brand recognition through the promotion of one brand, one format policy. Additionally, the Group deepened locally rooted management practices which connect companies to their communities to support the livelihood of local residents. With regard to the optimal allocation of management resources, Aeon recognizes three emerging megatrends in the management environment –shift to Asian markets, shift to urban markets, and shift to senior-oriented markets – and is channeling management resources into these growth areas. In regard to shift to Asian markets, Aeon will practice “glocal” management which combines overarching global management practices with local, community-based management. To support this approach, progress was made on the establishment of headquarters for China and ASEAN. With regard to shift to urban markets, Aeon is aiming to increase its market share in major metropolitan areas by accelerating the development of the Group’s diverse array of urban-focused stores and creating new types of stores meeting the needs of urban consumers. In regard to shift to senior-oriented markets, Aeon appointed an executive in charge of business related to seniors and has established a lateral structure to create product lineups, sales floors, and new services tailored to the needs of seniors.

As a result of these activities, for the fiscal year ended February 29, 2012, Aeon earned consolidated operating income of 195,690 million yen (up 13.5% year on year), consolidated ordinary income of 212,260 million yen (up 16.6% year on year) including the results of 24 equity-method affiliates, and consolidated net income of 66,750 million yen (up 11.8% year on year) on consolidated operating revenue of 5,206,132 million yen (up 2.1% year on year), with consolidated operating, ordinary and net incomes each achieving record highs.

Business Segment Information General Merchandise Store (GMS) Business

Aeon’s GMS Business opened five new stores and closed three existing stores during the fiscal year under review (equity-method affiliates did not open or close any GMS stores).

Effective March 1, 2011, the Aeon Group ascribed the Aeon brand name to all of its general merchandise stores throughout Japan, from Hokkaido to Okinawa, enabling the GMS Business to

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pursue greater economies of scale with respect to merchandising and sales promotions. It also endeavored to expand the scale of its nationwide network while tailoring its operations to individual local communities by reorganizing along geographic lines into 11 areas served by Aeon Retail Co., Ltd.’s eight in-house companies, previously four in-house companies, together with Aeon Hokkaido Corporation, Aeon Kyushu Co., Ltd., and Aeon Ryukyu Co., Ltd. Amid the dramatically changed post-earthquake retail environment, GMS stores leveraged the strength of their broad lineups of apparel, food, and household items and the full infrastructure of the Aeon Group to support customers through such sales events as the “Ganbaro Nippon! Fukko-Oen Tokubetsu Sale” (Go Japan! Special sales event aimed at raising funds to Support Restoration Efforts) and other sales promotions linked with the Aeon Card and WAON, Aeon’s e-money service.

In terms of merchandising and sales floor development, the GMS business further promoted the specialization of the categories through new specialty stores, such as AEON BIKE and AEON LIQUOR, which bolstered specialty product lineups and services meeting the needs of customers.

At the start of the fiscal year, Aeon Retail was reborn through a merger with Mycal Corporation and Aeon Marche Co., Ltd., in a move designed to improve profitability and maximize economies of scale of a company with combined revenues of more than 2 trillion yen. Additionally, Aeon Retail divested its discount store (DS) business, neighborhood shopping center (NSC) business, and the My Basket division of its supermarket (SM) business to Aeon Group companies leading these respective business areas. Aeon Retail’s comparable-store sales in the fiscal year grew 0.3% compared with the previous year, with food sales up 0.5%, apparel sales up 0.5%, and housing and recreational product sales down 0.3% year on year (Aeon Retail’s year-on-year comparable-store sales and SG&A expense comparisons are provided for reference only and are based on actual year-earlier results for the pre-merger Aeon Retail’s GMS operations). Directly operated stores’ gross margin improved 0.1 points compared to the previous year, bolstered by continued expansion of the TOPVALU brand merchandise range, improved cost of sales and inventory controls, the prompt switchover of seasonal apparel, and the effects of changes in the fresh food markets. SG&A expenses decreased by 2.3% compared with the previous year through efforts to reduce power consumption, including the gradual switch to LED lighting at stores, and the reduction of headquarters’ costs through the integration of the three companies.

Aeon Hokkaido Corporation improved its operations by proactively creating and enlarging sales floors tailored to the consumer needs, while refreshing its lineup of priority merchandise and refining its display methods. It also improved its profitability by improving inventory control and stepping up efforts to sell TOPVALU merchandise.

Aeon Kyushu Co., Ltd. improved its earnings by strengthening store development and price competitiveness in response to diversifying customer needs and competitive environment, as well as using Group infrastructure to enhance store operation efficiency, mainly though lower procurement costs and capital investments.

As a result of the above, the GMS Business earned operating income of 55,693 million yen (up 21.1% year on year) on operating revenue of 2,614,488 million yen (down 2.6% year on year) for the fiscal year ended February 29, 2012.

Supermarket Business

Aeon’s Supermarket Business opened 55 new stores and closed 20 existing stores during the fiscal year ended February 29, 2012 (excluding equity-method affiliates, the Supermarket Business opened 33 and closed 11 stores).

The Supermarket Business continued to bolster its store network in each geographic area by actively adding new stores while building a management foundation deeply rooted in local communities. The business bolstered its competitiveness by enhancing its marketing capabilities for key products, with a focus on daily necessities, while responding to changes in the characteristics of the business regions and neighborhood customer needs through such initiatives as converting selected stores to the discount store (DS) format. The Supermarket Business also improved its profitability by expanding the lineup of TOPVALU merchandise and lowering costs through overhauls of store

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operations and power-saving initiatives. On November 25, 2011, Marunaka Co., Ltd. and Sanyo Marunaka Co., Ltd., which operate Supermarket Business in the Chugoku and Shikoku regions of Japan, became consolidated subsidiaries in order to strengthen competiveness in the regions and promote locally rooted management.

As a result, the Supermarket Business earned operating income of 21,846 million yen (up 17.4% year on year) on operating revenues of 1,222,449 million yen (up 11.4% year on year) for the fiscal year ended February 29, 2012. Strategic Small-size Store Business

Ministop Co., Ltd., had a total of 4,138 stores in Japan and overseas at the end of February 2012. Domestically, key initiatives included increasing sales of coffee in the in-store-prepared fast-food area as well as increasing the number of stores that carry handmade onigiri (rice balls) and ready-to-eat food items, also in-store-prepared. The stores also benefitted from TV commercials and mobile advertising to bolster sales of desserts, along with efforts to expand the lineup of dairy products, mainly TOPVALU brand merchandise, along with frozen foods. Overseas, Ministop continued to steadily expand in Asia, with Ministop Korea Co., Ltd., and Qingdao Ministop Co., Ltd. steadily expanding their chains in Korea and China. In Vietnam, G7-MINISTOP Service & Trading Joint Stock Company opened its first outlet on December 8, 2011, and expanded to two outlets as of the end of February 2012. Including Robinson’s Convenience Stores Inc.'s stores in the Philippines, Ministop had a total of 2,033 overseas stores at the end of the fiscal year. Additionally, the business opened 14 RECODS combined drug and convenience stores in the year, for a total of 17 outlets.

The My Basket chain of small-scale urban supermarkets ended February with a total of 246 stores as a result of intensive expansion in priority areas, mainly Greater Tokyo. My Basket expanded its product lineup to meet the needs of urban consumers, with product series like “TOPVALU Ready Meal” offering small packaging of ready-to-eat meals at affordable prices, while improving profitability by utilizing a proprietary IT system and enhancing logistics efficiency. On January 21, 2012, Aeon Retail Co., Ltd. split off the My Basket business into an independent company, My Basket Co., Ltd., to create a structure for rapid decision-making and support the future growth of the Strategic Small-size Store Business.

As a result, the Strategic Small-size Store Business earned operating income of 6,576 million yen (up 12.2% year on year) on operating revenues of 213,345 million yen (up 13.2% year on year) for the fiscal year ended February 29, 2012. Financial Service Business

In the credit card business, Aeon Credit Service Co., Ltd. had 21.01 million active cardholders by the end of the fiscal year under review, a net increase of 1.01 million from the previous year, as a result of its card-issuing activities with Group companies. It also commemorated its 30th anniversary with sales promotions involving the Aeon Card, leading to a 10.4% year-on-year increase in its credit card shopping transaction volume. In the fee-based services business, Aeon Credit Service expanded its network of establishments unaffiliated with the Aeon Group that accept WAON as a means of payment, stepped up efforts to promote WAON as a local currency, and increased the issuance of “Yu Yu WAON” cards for customers aged 65 and over. As of February 29, WAON was accepted at some 139,000 establishments with cumulative card issuance of approximately 24.10 million cards. WAON e-money transaction volume in the fiscal year ended February 29, 2012 totaled 1,002.6 billion yen, a 16.8% year-on-year increase. In its banking agency business, Aeon Credit Service opened nine new in-store branches that provide a one-stop array of financial products and services, including banking, credit, and insurance products, for a total of 66 branches as of the end of the fiscal year under review. It also strengthened its account opening services and housing loan brokerage operations. In order to bolster the menu of residential mortgage products and strengthen home renovation loan products, Aeon Credit Service acquired Toshiba Housing Loan Service Corporation on January 27, 2012 and converted the company into a consolidated subsidiary (company name was changed to Aeon Housing Loan Service Co., Ltd. on April 1, 2012). Overseas, the Asian Business Division established in Hong Kong in April 2011 endeavored to cultivate globally minded personnel and build a common operational foundation for Asian countries. Aeon Credit Service subsidiaries in China and ASEAN

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countries focused on partnering with local retailers to issue new co-branded cards and recruit new cardholders, and succeeded in increasing their overseas credit card shopping transaction volume through collaboration over sales promotions.

As a result, the Financial Service Business earned operating income of 22,056 million yen (up 6.5% year on year) on operating revenue of 167,629 million yen (down 0.9% year on year) for the fiscal year ended February 29, 2012.

Equity-method affiliate Aeon Bank, Ltd. was profitable (Aeon’s consolidated financial statements for the fiscal year reflect Aeon Bank’s results for January through December) as a result of initiatives to bolster the sales foundation through increased in-store branches, increase interest income through a growing balance of loans, mainly housing loans, and increase income from brokerage fees on financial products. On December 26, 2011, Aeon Bank acquired from the Deposit Insurance Corporation of Japan all shares of The Second Bridge Bank of Japan, Ltd. (renamed Aeon Community Bank the same day) and made the company a consolidated subsidiary. On March 31, 2012, it was merged with Aeon Bank, Ltd., with the latter as the surviving company. The bank will lead the Group’s efforts to expand into financing for Aeon shopping center tenants and local companies to support their vitalization.

Shopping Center Development Business

The Shopping Center Development Business made progress improving its operating efficiency by consolidating duplicative and dispersed functions within the Group in the aim of strengthening its competitiveness. With the aim of boosting brand recognition, on November 21, 2011 the name “Aeon Mall” was ascribed to all domestic mall-type shopping centers, while neighborhood shopping centers (NSC) operated by Aeon Town Co., Ltd., which recently took over operation of the centers from Aeon Retail, and neighborhood shopping centers operated by Aeon Big Co., Ltd., were uniformly given the name "Aeon Town."

Aeon Mall Co., Ltd., opened three shopping centers and was awarded property management contracts for two others during the fiscal year. It also renovated nine existing shopping centers in the aim of enhancing their customer drawing power by recruiting new tenants, relocating existing tenants and accommodating their store format changes. Specialty store sales at existing shopping centers grew 2.0% year on year, buoyed by nationwide bargain sales events that harnessed the Group’s combined strength as well as special marketing promotion with WAON e-money services. In China, Aeon Mall proceeded with renovation of the Aeon Beijing International Mall Shopping Center, including the introduction of new tenants and relocation of existing tenants, and made preparations to open a second property in Tianjin. In the ASEAN regions, Aeon Mall started preparations to open its first shopping centers in Cambodia and Vietnam in 2014, while progress was also made on development projects in Indonesia.

On August 31, 2011, Aeon acquired all shares in equity-method affiliate Loc Development Co., Ltd. owned by Daiwa House Industry Co., Ltd. to make Loc Development a wholly owned subsidiary (renamed Aeon Town Co., Ltd. on September 1, 2011). Aeon Town will become the Group’s core company for the NSC business, striving to bolster the business development structure and establish a new NSC format model, while generating synergies by. participating in group joint promotion.

As a result, the Shopping Center Development Business earned operating income of 40,883 million yen (up 6.5% year on year) on operating revenue of 171,567 million yen (up 12.5% year on year) in the fiscal year ended February 29, 2012. Service Business

Aeon Delight Co., Ltd. harnessed its abilities to provide a diverse array of services to support the early recovery of clients in disaster areas of the March 11 earthquake. The company also responded to the growing need among clients to reduce their environmental burden by expanding order backlog for renovation projects for energy-conserving facilities and sales of equipment such as LED lighting. To strengthen its comprehensive facilities management services (FMS) business, Aeon Delight expanded its business services to small commercial facilities through Kajitaku Inc., which became a consolidated subsidiary in the fiscal year, and subsidiary A to Z Service Co., Ltd. On December 1,

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2011, Aeon Delight established FMS Solutions Co., Ltd. as a joint venture with Vinculum Japan Corporation to launch IT-related solutions as a new business offering. The company also appointed executives in charge of business for China and ASEAN, devolving responsibility and authority to build a structure which can ensure fast decision-making and deploy experience and capabilities from Japan laterally throughout the region.

Aeon Fantasy Co., Ltd. revamped its domestic facilities’ amusement machine lineups to better match customer needs and demographics, which vary on a store-to-store basis. In support of rebuilding efforts in disaster areas in Japan, the company also offered free of charge some of its time-charge facilities for children, while striving to raise customer recognition of the convenience and safety of its indoor amusement facilities. In Asia, Aeon Fantasy’s local subsidiary opened indoor amusement facilities, mainly in Aeon Group shopping center in China, with a total of five facilities at the end of February. In Malaysia, Aeon Fantasy’s local subsidiary took over all existing franchised stores under its own direct management and opened three new locations, bringing its total number of Malaysian stores to 20 by the end of the fiscal year under review.

Zwei Co., Ltd. intensified sales promotion activities and increased the number of members in the year amid a heightened awareness in Japan of the importance of family and friendship following the March 11 earthquake. The company also established a local subsidiary in Thailand in December 2012 as a foundation for business expansion in Asia.

As a result, the Service Business earned operating income of 19,228 million yen (up 4.1% year on year) on operating revenue of 312,671 million yen (up 3.7% year on year) for the year ended February 29, 2012. Specialty Store Business

G Foot Co., Ltd. expanded the provision of sales operations at Aeon GMS directly managed footwear departments, while promoting in-house developed products and revamping product lineups to serve current trends. Mega Sports Co., Ltd. bolstered its product lineup to meet reconstruction demand and the needs of local community events, while improving inventory controls and lowering cost of sales. Miraiya Shoten Co., Ltd. and Pet City Co., Ltd. took over some sales areas at GMS stores, opened new stores, revitalized exiting stores, and improved profitability by lowering cost of sales, and improving overall store operations. In executing its medium-term management plan by repositioning its existing brands to establish its top brand position in each demographic market, Cox Co., Ltd. closed unprofitable stores, started a full-fledged e-commerce business, and actively expanded into China.

As a result, the Specialty Store Business earned operating income of 5,981 million yen (up 21.3% year on year) on operating revenue of 318,359 million yen (up 1.0% year on year) in the fiscal year ended February 29, 2012. ASEAN Business

The ASEAN Business opened one GMS (in Malaysia) and 16 supermarkets (in Thailand) in the year (Aeon’s consolidated results reflect the ASEAN Business’s result for January-December).

Amid robust regional growth, the ASEAN Business posted a solid sales increase by serving local needs through meticulously developed product lineups and sales activities. A personnel structure was put in place and organizational reforms implemented in order to establish an ASEAN Headquarters tasked with accelerating business growth. In Vietnam, it obtained an investment license from the Ho Chi Minh City People’s Council on October 7, 2011 and established Aeon Vietnam Co., Ltd. with the aim of opening its first store in 2014.

Aeon Malaysia (Aeon Co. (M) Bhd.) posted higher sales after reopening its renovated flagship store by introducing new tenants, along with the rollout of special promotions for cardholders and sales events around social holidays. The transfer of management for amusement facilities for children to another Group company also helped to improve asset efficiency.

Aeon Thailand (Aeon (Thailand) Co., Ltd.) accelerated its program of opening small, new-format supermarkets aimed at small geographic areas within densely populated cities. It ended February with a total of 16 such stores. Three stores suspended operations temporarily due to the Thai floods, but

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were able to quickly reestablish a product delivery structure for daily necessities and other goods by leveraging the Group’s supply chain. Profits were also boosted through efforts to improve product development capabilities and bolster sales of key merchandise.

As a result, the ASEAN Business earned operating income of 6,971 million yen (up 5.0% year on year) on operating revenue of 87,070 million yen (up 0.7% year on year) in the fiscal year ended February 29, 2012. China Business

The China Business opened one GMS and three supermarkets in the fiscal year under review (Aeon’s consolidated financial statements for the fiscal year reflect China Business’s results for January through December).

Amid vigorous consumer markets in mainland China, the China Business actively opened new stores and tailored merchandising and sales floors around National Day, Christmas, and social holidays and events. AEON Stores (Hong Kong) Co., Ltd. increased sales with the launch of new stores in convenient locations as well as drawing customer interest in reasonably priced merchandise at existing stores. Aeon (China) Co., Ltd., the Aeon Group’s China Headquarters, was established on December 26, 2011 to raise the competitiveness of the China Business, accelerate integrated Group business development, and execute a growth strategy for the country. The company has developed a human resources and organizational structure to begin business operations on March 1, 2012.

As a result, the China Business earned operating income of 2,864 million yen (up 11.5% year on year) on operating revenue of 102,729 million yen (up 3.3% year on year). Other Operations

As one measure to strengthen the DS business, Aeon Big Co., Ltd., a wholly owned subsidiary, took over operation of Aeon Retail’s 21-store DS operations on August 21, 2011. In order to strengthen the DS business model, Aeon Big established a general-merchandise DS model that encompasses apparel and other consumer staples as well as food. The new model focused on the strategic pricing, merchandising, and sales floor development to meet the demands of the competitive environment and enhance overall operations.

In the drugstore and pharmacy business, Group linchpin CFS Corporation took steps to bolster its merchandising with a stronger lineup of health and beauty care products, while introducing prescription drug corner to existing stores. To enhance its marketing capabilities, the business actively opened new stores in Aeon shopping centers and expanded the number of stores accepting WAON e-money.

Aeon endeavored to further broaden its lineup of TOPVALU fresh foods and prepared meals in response to customers’ demand for safe and secure products, launching new vegetable products from Aeon-managed farms, yellowtail fish products from contracted fish farms, and beef croquettes, among others. Aeon also intensified its voluntary food inspection program in the aim of ensuring that its food products are completely free of radioactivity. In addition to all TOPVALU domestically raised Japanese Black beef, Aeon increased the frequency and scope of its testing to rice, agricultural produce, and seafood. Information on the testing results was also proactively released to customers. Aeon strengthened its efforts to develop megahit TOPVALU products with annual sales of more than 1 billion yen as a way to enhance brand recognition and utilize economies of scale. As of the end of February, the number of such products had increased to about 200, including TOPVALU Barreal beer, with cumulative sales of more than 300 million cans since its launch in June 2010, TOPVALU HeatFact and TOPVALU CoolishFact lines of functional innerwear, as well as the TOPVALU children’s school backpacks. Though impacted by the Great East Japan Earthquake, the product supply structure for TOPVALU brand merchandise recovered quickly. As a result, sales of TOPVALU merchandise grew 10.2% year on year in the first half of the fiscal year and 24.1% year on year in the second half of the year. For the full year under review, sales of TOPVALU merchandise grew 17.5% to 527,300 million yen.

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Outlook for the Fiscal Year ending February 28, 2013 Consolidated Operating Results Forecast (millions of yen, except per-share data and percentages)

Fiscal year to end-February, 2013 (forecast) 2012 (actual) Operating revenue 5,650,000 5,206,132 Operating income 210,000~220,000 195,690 Ordinary income 220,000~230,000 212,260 Net income 68,000~73,000 66,750 Net income per share (yen) 88.38~94.88 87.23 ROE (%) 7.3~7.8 7.3

The next fiscal year (ending February 28, 2013) marks the second year of the Aeon Group Medium-term Management Plan (fiscal 2011 through fiscal 2013). Aeon is taking a number of initiatives to ensure the Group’s future development is geared towards high growth and profitability. Organizational reforms were introduced on March 1, 2012, clarifying responsibility through the appointment of a Group CEO for management responsibility and a Group COO for execution responsibility, in addition to the appointment of an Aeon Tohoku representative. The new structure also responds to the emergence of a digital society and the need to develop next-generation management personnel. During the next fiscal year (ending February 28, 2013), Aeon will continue to accelerate its management emphasis on Asian markets, urban markets, and senior-oriented markets, while making new strides to respond to the fast-emerging digital society. Each business will ensure it meets the goals of the Group Medium-term Management Plan by allocating management resources to high-growth areas and improving profitability. In the GMS business, which accounts for a large percentage of Group sales, reforms are being made to shift towards a high-profit, high-growth model. Specific initiatives include enhancing the specialization of stores to better meet the needs of customers, with such examples as AEON BIKE and AEON LIQUOR. The GMS business will also bolster its locally rooted management approach and develop tailored sales floors and product lineups to meet the needs of local customers. The supermarket business is establishing a business model to ensure the proactive development of new store formats, not only in Japan but other parts of Asia. Additionally, the business is accelerating the launch of strategic small-size stores and specialty stores in large urban markets in order to expand Group market share. The financial service business is striving to strengthen the fee-based services business by increasing the number of credit card holders and shopping transaction volume, while expanding the number of stores accepting WAON e-money and building up the bank agent business. The shopping center development business is aiming to improve efficiency through integrated Group functions and accelerate shopping center development in China and ASEAN, while expanding the business foundation as part of an overall goal of generating Group synergies. The China and ASEAN businesses are aiming to accelerate unified Group growth by using respective headquarters to build strategies and develop stores and merchandise across all business areas, establish a human resources hiring and training function, and strengthen the management foundation. Aeon is seeking to establish TOPVALU as the number one private brand in Japan and the rest of Asia by bolstering the product lineup and establishing a value chain in which Aeon takes responsibility for all aspects of quality management, from procurement of raw materials to product sales. From March 1, 2012, Aeon launched “TOPVALU Week” in Japan from the first to seventh day of every month. The promotion will raise product knowledge among employees and enable the focused launch of new products while increasing brand recognition among customers. New initiatives will contribute to higher sales and profitability, including a renewed emphasis on the development and sales of megahit products delivering more than 1 billion yen in annual sales, the increase in the sales share of TOPVALU

brand products in GMS and supermarkets etc., and enhanced supply chain efficiency using IT and logistics infrastructure. On March 9, 2012, Aeon launched 115 TOPVALU products in China developed specifically for the local market in response to customer tastes. The number of such products is planned to increase to 500 this fiscal year and to 1,000 by the end of the fiscal year ending February 28, 2014.

8

Earnings forecasts incorporate the potential impact of weather conditions, seasonal trends, and other variables to the extent that we can currently determine. Because the Group manages earnings on an annual basis, it does not disclose forecasts for the first six months of the fiscal year. To keep stakeholders informed, the Group provides progress updates through monthly results reports. Since Aeon Co., Ltd. is a pure holding company, non-consolidated forecasts are not disclosed. In order to raise business efficiency and raise transparency of information disclosure, Aeon plans to make the last day of February the unified fiscal year-end date for consolidated subsidiaries in Japan (including all listed subsidiaries) starting with the fiscal year ending February 28, 2013. (2) Consolidated Financial Condition Consolidated Assets, Liabilities, Net Assets, and Cash Flows (millions of yen)

Fiscal year to end-February, 2012 2011 2010 2009 Total assets 4,048,937 3,774,628 3,785,288 3,741,447Interest-bearing debt 1,335,186 1,161,854 1,250,735 1,194,612

Breakdown: Interest-bearing debt of financial

subsidiaries 523,050 518,739 518,910 535,531

Interest-bearing debt excluding that of financial subsidiaries

812,136 643,115 731,825 659,081

Net assets 1,282,066 1,219,236 1,144,434 1,105,712Cash and cash equivalents, ending

balance 166,277 306,820 280,521 224,625

Cash flow from operating activities 203,382 261,132 361,096 234,082Cash flow from investing activities (327,865) (105,517) (324,573) (325,758)Cash flow from financing activities (13,061) (121,847) 11,179 165,000

Consolidated Assets, Liabilities, and Net Assets at the End of the Fiscal Year

Assets

Consolidated assets at the end of the fiscal year under review totaled 4,048,937 million yen, an increase of 274,309 million yen (7.3%) from the previous fiscal year-end (February 28, 2011). The increase was chiefly attributable to a 186,361 million yen increase in assets stemming from the third-quarter inclusion of newly consolidated subsidiaries Marunaka Co., Ltd. and Sanyo Marunaka Co., Ltd. and their subsidiaries in Aeon’s consolidated accounts, and a 206,596 million yen increase in property, buildings and equipment due to the opening of new shopping centers and adoption of a new accounting standard for asset retirement obligations. Cash and deposits declined by 147,400 million yen.

Liabilities

Consolidated liabilities at the end of the fiscal year under review totaled 2,766,871 million yen, an increase of 211,479 million yen (8.3%) from the previous fiscal year-end (February 28, 2011). The increase was chiefly attributable to inclusion of Marunaka, Sanyo Marunaka, and their subsidiaries’ combined liabilities of 159,443 million yen in Aeon’s consolidated accounts, a 40,684 million yen increase in asset retirement obligations, a 33,754 million yen increase in short-term borrowings, a 28,592 million yen increase in bonds payable, including those due for redemption in less than a year. Deposits payable and other current liabilities declined by 40,328 million yen.

Net assets Consolidated net assets at February 29, 2012 totaled 1,282,066 million yen, an increase of 62,829

million yen (5.2%) from February 28, 2011. Retained earnings increased by 47,122 million yen and minority interests increased by 14,269 million yen. Consolidated Cash flows

9

Cash and cash equivalents The balance of cash and cash equivalents at February 29 was 166,277 million yen, a decrease of 140,542 million yen, or 45.8%, from February 28, 2011. Cash flow from operating activities Net cash provided by operating activities in the fiscal year ended February 29, 2012 was 203,382 million yen (down 22.1% year on year). The decline of 57,749 million yen compared to the previous year reflects a 95,118 million yen decline in notes and accounts receivable trade, increases of 42,144 in inventories and 13,291 million in income tax payments, as well as increases of 32,840 million yen in other assets and liabilities and 17,142 million yen in notes and accounts payable trade due to some subsidiaries’ fiscal year settlement date for the previous fiscal year overlapping with a bank holiday, which impacted the return of specialty stores’ sales deposits and the settlement of notes and accounts payable. Cash flow from investing activities

Net cash used in investing activities during the fiscal year ended February 29, 2012, was 327,865 million yen (up 210.7% year on year). This 222,348 million yen increase reflects a 134,897 million yen increase in the purchase of fixed assets and 36,129 million yen in cash paid in conjunction with the purchases of the equities of consolidated subsidiaries Marunaka and Sanyo Marunaka. Cash flow from financing activities Net cash used in financing activities during the fiscal year ended February 29, 2012, was 13,061 million yen (down 89.3% year on year). This 108,785 million yen decrease reflected a 81,413 million yen increase in long-term debt repayments, a 126,671 million yen increase in proceeds from long-term debt, and a 35,540 million yen increase in proceeds from the issuance of bonds. (3) Dividend Policy and Dividends for the Fiscal Year ended February 29, 2012, and the Fiscal Year ending February 28, 2013 1) Basic Medium- to Long-Term Policy Aeon Co., Ltd. strives to maintain an optimal balance between paying dividends and improving corporate value through medium- to long-term growth as a key management priority. It believes in returning profits to shareholders, whom it considers partners in business management. Dividends Aeon Co., Ltd. sets dividends in consideration of its consolidated earnings results and strives to reward shareholders appropriately for capital invested. On the basis of this policy, during the Group Medium-term Management Plan, Aeon has set a target of maintaining its annual dividend payment at or above the previous year’s payment (the previous target was 20 yen). For the final year of the plan ending February 2014, the company has set a target of a dividend payout ratio of 30% (previously 20% or more). These targets reflect the Aeon Group’s endeavor to increase earnings and return even more to shareholders in coming years. Use of internal reserves Internal reserves are essential for funding investments in future growth. Aeon Co., Ltd. strives to meet shareholder expectations by improving corporate value through medium- to long-term growth. 2) Dividends for the Fiscal Year ended February 29, 2012, and Starting Date for Dividend Payments The Aeon Group achieved record consolidated profits for the year ended February 29, 2012, and therefore Aeon Co., Ltd. has decided to increase annual dividend payments by 2 yen a share. The payment from retained earnings for the fiscal year ended February 29, 2012 will therefore be 23 yen a share, in accordance with the dividend policy. The starting date for dividend payments (effective date) is Thursday, April 26, 2012. 3) Dividend Forecast for the Fiscal Year ending February 28, 2013

10

The forecast for dividend payments for the fiscal year ending February 28, 2013 is based on the basic policy outlined above. Specifically, the company plans to increase dividends by 1 yen per share, for an annual payment of 24 yen per share. From the fiscal year ending February 28, 2013, the company will pay an interim dividend, and therefore the annual dividend will be divided between an interim payment of 12 yen per share and a year-end payment of 12 yen per share, making an annual payment of 24 yen per share. 2. Management Strategies and Policies (1) Basic Policy on Management Aeon’s fundamental management principles are the pursuit of peace, respect for humanity, and contributions to local communities—with the customer’s point of view as the core. On the basis of this unchanging philosophy, the Aeon Group focuses first and foremost on its customers and ensuring customer satisfaction, constantly innovating to promptly and precisely respond to changes in the external environment and customer needs. Aeon aims to be a “glocal” company, meaning that management must both meet global quality standards and at the same time remain rooted in local communities. From the viewpoint of corporate social responsibility (CSR), the company has instituted the Aeon Code of Conduct, a set of behavior guidelines and standards for decision-making for all Group employees to follow in their daily work activities. Aeon is instilling this code throughout the Group. On the basis of this code, Aeon is striving to achieve long-term prosperity and growth by building excellent relationships with its customers, shareholders, business partners, local communities, and employees, while continuing to offer products and services that satisfy customers. (2) Medium-term Management Strategy Aeon has positioned the three years from March 2011 to February 2014 as the first step of a new growth stage geared towards fiscal 2020. The Group has formed a common strategy to respond to major changes it faces in the operating environment, based on the recognition of three emerging megatrends: shift to Asian markets, shift to urban markets, and shift to senior-oriented markets. From the fiscal year ending February 2013, the company has added “digital channels” to these three and is responding by focusing the allocation of management resources into these four growth areas. Shift to Asian Markets The company recognizes that in addition to the Japanese market, business expansion throughout the Asian region, with its population increases and strong economic growth, will be essential to maintaining the growth of the Aeon Group. In the year ended February 2012, the Group laid a new foundation for Asian growth by starting plans for opening stores in Vietnam, Cambodia, and other new geographic areas, while also pushing forward to set up headquarters functions for China and ASEAN. Going forward, the group will explore growth in new geographic and business areas using its China and ASEAN headquarters to accelerate an integrated Group approach to Asian business development. In the year ending February 28, 2013, the Group plans to establish local subsidiaries in China to lead the supermarket business and establish a new business model reflecting the needs of the market. The Group will also promote private-label products to bolster its merchandise directed at the needs of Chinese customers. In ASEAN, the Group will begin business operations to prepare for the opening of its first stores in Vietnam and Cambodia in 2014. Preparations will also be made for developing business in Indonesia. Shift to urban markets Historically, the Aeon Group has depended on large-scale shopping centers and GMS in suburban areas for its growth. Moving forward, in addition to large-sized shopping centers, the Group will strengthen the development of small-size stores for urban markets to meet the urbanization megatrend in Japan and capture new growth opportunities. In the Tokyo metropolitan area, the Group has succeeded in expanding the My Basket and Acolle small-sized store formats for urban markets, and will accelerate their launch, while pursuing the expansion of specialty stores like AEON BIKE and AEON LIQUOR in the GMS business, along

11

with Internet supermarkets and supermarket chains like Maxvalu Express for urban markets as it aims for a higher urban market share. Shift to senior-oriented markets Aeon is changing its business model to meet the needs of a growing population of senior customers in light of the population ageing trend in Japan. Senior customer in Japan have distinct lifestyles and needs, affected by such trends as the decline in the number of household family members, an increase in free time, a decline in physical strength, and a desire for community relations. The Aeon Group is developing products and services to meet their needs amid this change. Specifically, the Group is attracting tenants which support senior lifestyles and redesigning stores for their needs, including comprehensive medical clinics and financial services stores offering such as asset management consultation. The Group is also developing TOPVALU private brand products to meet their needs. Digital shift The e-commerce market is rapidly expanding thanks to advances in information communications technology. The trend has changed consumer behavior greatly, as even when buying products at stores, consumers often search the Internet for word-of-mouth advice and price checks. With its retail-based business, these changes offer tremendous opportunities for Aeon. The company is incorporating digital technology into its business from a novel perspective not based on traditional criteria such as store location and product lineup. Aeon is accelerating the digitalization of its business by utilizing the e-commerce and Internet marketing initiatives developed by Group companies, while also taking measures to promote a unified digital business for the Group. The Group has a credit card business with 24.39 million cardholders in Japan and overseas and an e-money business, WAON, with 24.1 million cards issued. In addition, the Group will leverage its network of Internet supermarket customers and other customer platforms in Japan and combine them with the store and other Group infrastructure to rapidly create a unique “click & mortar” business model, combining the internet with Aeon's actual store and distribution system, which only Aeon can realize.

12

3. Consolidated Financial Statements

(1) Consolidated Balance Sheets

(Millions of yen) As of

February 28, 2011 As of

February 29, 2012 Amount

Assets Current assets

Cash and time deposits 320,212 184,324Notes and accounts receivable - trade 416,548 421,929Marketable securities 4,509 2,198Merchandise inventories 308,951 340,971Deferred tax assets 40,728 47,784Financial loan 293,427 255,704Other 178,329 163,299Allowance for doubtful accounts (53,245) (43,681)Total current assets 1,509,462 1,372,530

Fixed assets Property, buildings and equipment

Buildings and structures, net 910,075 1,058,073 Tools, furniture and fixtures, net 108,186 118,515 Land 354,029 531,954 Leased property, net 6,336 16,007 Construction in progress 24,796 21,544 Other, net 3,643 3,808 Total property, buildings and equipment 1,407,068 1,749,903

Intangible fixed assets Goodwill 74,753 101,720 Software 27,514 30,141 Leased property 2,033 1,457 Other 13,064 11,668 Total intangible fixed assets 117,365 144,987

Investments and other assets Investment securities 274,507 296,724 Deferred tax assets 63,981 73,774 Fixed leasehold deposits to lessors 324,916 322,395 Deposits for stores in progress 2,942 3,331 Other 89,387 100,716 Allowance for doubtful accounts (15,004) (15,427) Total investments and other assets 740,731 781,515 Total fixed assets 2,265,166 2,676,406Total assets 3,774,628 4,048,937

13

(Millions of yen) As of

February 28, 2011 As of

February 29, 2012 Amount Amount

Liabilities Current liabilities

Notes and accounts payable - trade 640,114 644,059Short-term borrowings 52,065 97,003Current portion of long-term debt 217,028 223,159Bonds due within one year 15,311 54,793Convertible bonds with stock acquisition rights due within one year - 46,185

Commercial paper 5,410 9,921Lease obligations 1,468 2,460Income taxes payable 44,838 35,757Provision for bonuses 17,991 19,138Provision for store closing expenses 8,397 1,810Allowance for point program 12,070 16,052Notes payable, construction 30,861 46,045Other 373,354 342,945

Total current liabilities 1,418,913 1,539,334

Long-term liabilities Bonds 215,209 204,319Convertible bonds with stock acquisition rights 99,976 49,988Long-term debt 547,624 631,196Lease obligations 7,759 16,159Deferred tax liabilities 8,390 8,877Liability for employees’ retirement benefits 8,271 8,735Liability for directors’ retirement benefits 889 1,216Provision for store closing expenses 2,448 2,238Provision for contingent liabilities 675 479Allowance for loss on refund of interest received 16,017 9,250Allowance for loss on redemption of gift coupons 2,531 2,723Asset retirement obligations - 41,975Lease deposits from lessees 216,844 232,254Other 9,841 18,124

Total long-term liabilities 1,136,478 1,227,537Total liabilities 2,555,391 2,766,871

Net assets Shareholders’ equity

Common stock 199,054 199,054Capital surplus 264,963 264,963Retained earnings 496,648 543,771Treasury stock (61,458) (54,087)

Total shareholders’ equity 899,208 953,701

Accumulated other comprehensive income Unrealized gain on available-for-sale securities 3,401 1,853Deferred gain (loss) on derivatives under hedge accounting (1,225) (1,923)

Foreign currency translation adjustments (14,012) (17,893) Total accumulated other comprehensive income (11,836) (17,964)

Stock acquisition rights 1,118 1,313Minority interests 330,746 345,015

Total net assets 1,219,236 1,282,066Total net assets and liabilities 3,774,628 4,048,937

14

(2) Consolidated Statements of Income (Millions of yen)

Year ended February 28, 2011


Amount Amount Net sales 4,561,748 4,650,792Cost of sales 3,322,762 3,393,772

Gross profit on sales 1,238,985 1,257,020Other revenues 534,821 555,339

Gross profit from operations 1,773,807 1,812,359Selling, general and administrative expenses

Advertising expense 95,859 100,825Provision of allowance for doubtful accounts 31,614 23,736Employees’ salaries and bonuses 557,027 566,225Provision for bonuses 17,991 19,138Statutory welfare benefit expense 84,698 88,082Utilities expense 89,224 84,630Depreciation and amortization 124,635 127,459Repairs and maintenance expense 81,836 87,580Rent expense 269,918 268,138Amortization of goodwill 7,019 7,418Other 241,619 243,431

Total selling, general and administrative expenses 1,601,446 1,616,668Operating income 172,360 195,690

Other income Interest income 3,423 2,828Dividend income 1,114 1,526Equity in gains of equity-method affiliates - 5,190Amortization of negative goodwill 11,209 11,100Penalty income from leaving tenants 2,410 1,796Income from bad debt recovery 2,957 2,947Other 5,812 5,370

Total other income 26,927 30,761Other expenses

Interest expense 10,858 10,334Equity in losses of equity-method affiliates 1,985 -Other 4,363 3,857

Total other expenses 17,207 14,191Ordinary income 182,080 212,260

Extraordinary gains Gain on sale of fixed assets 4,014 379

Gain on negative goodwill - 2,665Gain on sale of investment securities 177 57

Gain on sale of subsidiaries’ shares 21,630 -

Gain on change in equity interest 959 352

Gain on reversal of allowance for doubtful accounts 937 542

Gain on collection of fixed leasehold deposits - 3,713

Insurance income - 7,000Other 9,838 6,733

Total extraordinary gains 37,557 21,445Extraordinary losses

Loss on disposal of fixed assets 4,615 2,925Impairment loss 33,284 28,177Disaster-related losses - 33,543Valuation loss on investment securities 11,094 417Provision of allowance for doubtful accounts 41 971Loss related to store closing 1,930 2,135

15

Provision for store closing expenses 1,100 532Effect of adoption of accounting standards for asset retirement obligations

- 17,773

GMS and other retail store business restructuring costs 5,227 -Other 7,176 9,000

Total extraordinary losses 64,471 95,475Income before income taxes and minority interests 155,166 138,230Income taxes

Current 67,401 59,503Deferred (4,040) (11,756)

Total income taxes 63,360 47,746Income before minority interests - 90,483Minority interests 32,117 23,733Net income 59,688 66,750

16

Statements of Comprehensive Income (Millions of yen)



Amount Amount Income before minority interests - 90,483 Other comprehensive income

Unrealized gain on available-for-sale securities - 194 Deferred gain (loss) on derivatives under hedge accounting - (1,822)

Foreign currency translation adjustments - (7,036) Share of other comprehensive income of equity-method affiliates

- (1,824)

Total other comprehensive income - (10,489) Comprehensive income - 79,994

(Breakdown)

Comprehensive income attributable to owners of the parent - 60,622

Comprehensive income attributable to minority interests - 19,372

17

(3) Consolidated Statements of Changes in Shareholders’ Equity

Millions of yen



Shareholders’ Equity Common stock

Balance at end of previous period 199,054 199,054Changes during period

Total changes during period - -Balance at end of period 199,054 199,054

Capital surplus Balance at end of previous period 264,963 264,963Changes during period

Total changes during period - -Balance at end of period 264,963 264,963

Retained earnings Balance at end of previous period 449,950 496,648Changes during period

Cash dividends (15,304) (16,069)Net income 59,688 66,750Disposal of treasury stock (23) (3,557)Increase (decrease) in retained earnings due to adoption of US accounting standards by subsidiaries in the US

2,336 -

Total changes during period 46,697 47,122Balance at end of period 496,648 543,771

Treasury stock Balance at end of previous period (61,512) (61,458)Changes during period

Repurchase of stock (3) (5)Disposal of treasury stock 56 7,375Total changes during period 53 7,370

Balance at end of period (61,458) (54,087)

Total shareholders’ equity Balance at end of previous period 852,456 899,208Changes during period

Cash dividends (15,304) (16,069)Net income 59,688 66,750Repurchase of stock (3) (5)Disposal of treasury stock 33 3,817Increase (decrease) in retained earnings due to adoption of US accounting standards by subsidiaries in the US

2,336 -


Accumulated other comprehensive income Unrealized gain on available-for-sale securities

Balance at end of previous period (718) 3,401Changes during period

Net change in items other than shareholders’ equity during period

4,120 (1,547)

Total changes during period 4,120 (1,547)

18

Balance at end of period 3,401 1,853

Deferred gain (loss) on derivatives under hedge accounting Balance at end of previous period (1,863) (1,225)Changes during period


638 (698)

Total changes during period 638 (698)Balance at end of period (1,225) (1,923)

Foreign currency translation adjustments Balance at end of previous period (9,340) (14,012)Changes during period


(4,671) (3,881)

Total changes during period (4,671) (3,881)Balance at end of period (14,012) (17,893)

Total accumulated other comprehensive income Balance at end of previous period (11,922) (11,836)Changes during period


86 (6,127)

Total changes during period 86 (6,127)Balance at end of period (11,836) (17,964)

Stock acquisition rights Balance at end of previous period 920 1,118Changes during period


198 194

Total changes during period 198 194Balance at end of period 1,118 1,313

Minority interests Balance at end of previous period 302,980 330,746Changes during period


27,765 14,269


Total net assets

Balance at end of previous period 1,144,434 1,219,236Changes during period

Cash dividends (15,304) (16,069)Net income 59,688 66,750Repurchase of stock (3) (5)Disposal of treasury stock 33 3,817Increase (decrease) in retained earnings due to adoption of US accounting standards by subsidiaries in the US

2,336 -


28,050 8,336

Total changes during period 74,801 62,829Balance at end of period 1,219,236 1,282,066

19

(4) Consolidated Statements of Cash Flows (Millions of yen)



Amount Amount Cash flows from operating activities Income before income taxes and minority interests 155,166 138,230 Depreciation and amortization 134,030 135,777 Amortization of goodwill 7,019 7,808 Amortization of negative goodwill (11,209) (11,100) Increase (decrease) in allowance for doubtful accounts 30,147 22,290

Increase (decrease) in allowance for loss on refund of interest received (6,823) (6,766)

Increase (decrease)in allowance for loss on redemption of gift coupons 290 (192)

Increase (decrease) in provision for bonuses 3,569 328 Increase (decrease) in liabilities for retirement benefits 2,224 (3,120) Increase (decrease) in provision for store closing expenses (1,126) (6,107) Interest and dividend income (4,537) (4,354) Interest expense 10,858 10,334 Foreign exchange (gains) losses - net 316 (651) Equity in (gains) losses of equity-method affiliates 1,985 (5,190) Gain on sales of fixed assets (4,014) (379) Loss on disposals and sales of fixed assets 5,019 3,156 Impairment losses 33,284 28,177 Disaster-related losses - 33,543

Effect of adoption of accounting standards for asset retirement obligations - 17,773

(Gain) loss on change in equity interest (613) (278) (Gain) loss on sale of subsidiaries’ shares (21,630) -

Net (gain) loss on sales of marketable securities and investment securities (174) (57)

Valuation (gain) loss on investment securities 11,094 417

(Increase) decrease in notes and accounts receivable - trade (118,892) (23,773)

(Increase) decrease in merchandise inventories 21,750 (20,393) (Increase) decrease in financial loan receivable 58,295 19,102 Increase (decrease) in notes and accounts payable - trade 924 (16,217) Other assets and liabilities 14,052 (18,787) Other - net 2,612 (7,167) Sub total 323,622 292,400 Interest and dividends received 4,158 3,934 Interest paid (10,773) (10,109) Income taxes paid (55,875) (69,166) Insurance income - 7,000 Payments for disaster-related losses - (20,676) Net cash provided by (used in) operating activities 261,132 203,382 Cash flows from investing activities Purchase of marketable securities (2,825) - Proceeds from sales of marketable securities 4,692 4,500 Purchase of fixed assets (177,006) (311,904) Proceeds from sales of fixed assets 29,803 2,974 Purchase of investment securities (12,804) (619) Proceeds from sales of investment securities 3,309 82

Cash paid in conjunction with the purchases of consolidated subsidiaries’ stock - (36,129)

Cash received in conjunction with the purchases of consolidated subsidiaries’ stock 1,671 365

20

Cash paid in conjunction with the sales of consolidated Subsidiaries’ stock (10,925) -

Cash received in conjunction with the sales of consolidated subsidiaries’ stock 8,451 -

Collection of loan receivables 45,058 544 Payments for fixed leasehold deposits to lessors (7,116) (14,476) Collection of fixed leasehold deposits to lessors 19,863 33,649 Proceeds from lease deposits from lessees 18,199 14,275 Repayments of lease deposits from lessees (22,520) (15,369) Other - net (3,367) (5,759) Net cash provided by (used in) investing activities (105,517) (327,865) Cash flows from financing activities

Net increase (decrease) in short-term borrowings and commercial paper

(38,387) (23,343)

Proceeds from long-term debt 152,972 279,644 Repayments of long-term debt (189,406) (270,819) Proceeds from issuance of bonds 7,343 42,883 Payments for redemption of bonds (27,585) (15,214)

Repayments of secured and unsecured obligations under reorganization proceedings of subsidiaries

(2,192) (166)

Proceeds from issuance of subsidiaries’ stock to minority shareholders

- 57

Repurchase of subsidiaries’ stock from minority shareholders

(162) (7)

Dividends paid to shareholders (15,304) (16,069) Dividends paid to minority shareholders (9,241) (9,985) Other - net 116 (39) Net cash provided by (used in) financing activities (121,847) (13,061)

Foreign currency translation adjustments on cash and cash equivalents

(7,468) (2,997)

Net increase (decrease) in cash and cash equivalents 26,299 (140,542) Cash and cash equivalents, beginning of period 280,521 306,820 Cash and cash equivalents, end of period 306,820 166,277

21

(5) Notes on the Going-concern Assumption

Not applicable

(6) Material Changes to the Basis of Preparation of Consolidated Financial Statements

Changes to accounting policy

Accounting Standard for Asset Retirement Obligations

Effective from the fiscal year ended February 29, 2012, Aeon adopted the Accounting Standard for

Asset Retirement Obligations (ASBJ Statement No.18, March 31, 2008) and its associated Guidance

on Accounting Standard for Asset Retirement Obligations (Guidance No.21, March 31, 2008). As a

result of this change, operating income and ordinary income for the fiscal year ended February 29,

2012, were each reduced by 2,050 million yen, income before income taxes for the same period was

reduced by 19,823 million yen, and asset retirement obligations changed by 38,050 million yen.

Accounting standard for equity method

Effective from the fiscal year ended February 29, 2012, Aeon adopted the Accounting Standard for

Equity Method of Accounting for Investments (ASBJ Statement No.16, March 10, 2008) and the

associated Practical Solution on Unification of Accounting Policies Applied to Associates Accounted

for Using the Equity Method (PITF No.24, March 10, 2008). Changes in methods of presentation

1. For the fiscal year ended February 29, 2012, Aeon used the accounting title of “income before minority interests” pursuant to adoption of the Cabinet Office Ordinance Partially Revising Regulation on Terminology, Forms and Preparation of Financial Statements (Cabinet Office Ordinance No.5, March 24, 2009) based on the Accounting Standard for Consolidated Financial Statements (ASBJ Statement No.22, December 26, 2008).

2. For the fiscal year ended February 29, 2012, “gain on negative goodwill" and "gain on collection of fixed leasehold deposits” included in "other" under "extraordinary gains" in the fiscal year ended February 28, 2011, were presented individually. “Gain on negative goodwill" included in "other" under "extraordinary gains" and "gain on collection of fixed leasehold deposits" for the fiscal year ended February 28, 2011 were 1,137 million yen and 3,233 million yen respectively.

(7) Notes on Consolidated Financial Statements

Notes on consolidated balance sheets, consolidated statements of income, consolidated statements of changes in shareholders’ equity, and consolidated statements of cash flows are omitted from this report.

Statements of Comprehensive Income

(March 1, 2011 - February 29, 2012)

1. Comprehensive income for the previous fiscal year (March 1, 2010 – February 28, 2011)

(Millions of yen) Comprehensive income attributable to owners of the parent 59,774Comprehensive income attributable to minority interests 30,410

Total 90,185

2. Other comprehensive income for the previous fiscal year (March 1, 2010 – February 28, 2011) (Millions of yen)

Unrealized gain on available-for-sale securities 2,555Deferred gain (loss) on derivatives under hedge accounting 1,938Foreign currency translation adjustments (7,731)

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Share of other comprehensive income of equity-method affiliates 1,617

Total (1,620)

Additional information

Effective the fiscal year ended February 29, 2012, Aeon adopted the “Accounting Standard for Presentation of Comprehensive Income” (ASBJ Statement No.25, June 30, 2010). However, for the previous fiscal year, the amounts of “Valuation and translation adjustments” and “Total valuation and translation adjustments” were presented instead of “Accumulated other comprehensive income” and “Total accumulated other comprehensive income.”

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Segment Information

Business segment information

(March 1, 2010 - February 28, 2011)

(Millions of yen) GMS and

Other Retail Store

Specialty Store

Shopping Center

Development

Services and Other

Total Elimination/

corporate Consolidated

I. Operating revenue and income

(1) Revenue attributable to customers

4,090,768 521,654 119,526 364,620 5,096,569 - 5,096,569

(2) Intersegment revenue or transfers

45,117 11,230 51,481 746,591 854,420 (854,420) -

Total 4,135,886 532,884 171,008 1,111,211 5,950,990 (854,420) 5,096,569Operating expenses 4,055,418 527,138 132,556 1,069,024 5,784,137 (859,928) 4,924,208Operating income 80,467 5,746 38,451 42,187 166,853 5,507 172,360II. Assets,

depreciation, impairment loss, and capital expenditure

Assets 1,860,848 264,060 725,168 1,222,887 4,072,964 (298,336) 3,774,628Depreciation and amortization

83,314 7,620 25,589 23,962 140,487 562 141,049

Impairment loss 25,382 1,740 6,079 81 33,284 - 33,284Capital expenditure

87,999 6,499 60,364 22,142 177,006 - 177,006

Notes: 1. Classification of business segments

Businesses are classified based on the business activities that they carry out within the Aeon Group.

2. Businesses in each segment

(1) The GMS and Other Retail Store Business includes general merchandise stores (GMS), supermarkets, convenience stores, and department stores.

(2) The Specialty Store Business includes specialty stores that sell women’s apparel, family casual apparel, health & beauty care products, footwear, and others.

(3) The Shopping Center Development Business includes the development, leasing, and operation of shopping centers and malls.

(4) The Services and Other Businesses include financial services, amusement services, food services, store maintenance services, wholesale, and other activities.

Note: “Elimination/corporate” in the tables above includes figures attributable to Aeon’s holding company functions.

3. Depreciation and amortization includes amortization of long-term prepaid expenses and goodwill. Capital expenditure includes long-term prepaid expenses but does not include fixed leasehold deposits to lessors.

Geographic segment information

(March 1, 2010 - February 28, 2011)

(Millions of yen)

Japan Asia and other Total Elimination/

corporate Consolidated

I. Operating revenue and

income

(1) Revenue attributable 4,823,763 272,805 5,096,569 - 5,096,569

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to customers (2) Intersegment

revenue or transfers 2,715 3,721 6,437 (6,437) -

Total 4,826,479 276,527 5,103,007 (6,437) 5,096,569

Operating expenses 4,677,740 261,035 4,938,775 (14,566) 4,924,208

Operating income 148,739 15,492 164,231 8,129 172,360

II. Assets 3,428,169 368,107 3,796,276 (21,648) 3,774,628

Notes: Country and geographic segmentation and major countries or regions in each segment 1. Geographic segmentation is based on geographic proximity. 2. Major countries or regions in each segment Asia and other China, South Korea, Taiwan, Malaysia, Thailand, Singapore, Indonesia,

Vietnam, Australia, U.S.A. Note: “Elimination/corporate” in the table above includes figures attributable to Aeon’s holding

company functions.

Additional information

The Talbots Inc. was Aeon’s consolidated subsidiary at the end of the previous fiscal year (February 28, 2010) but ceased to be its consolidated subsidiary from the beginning of the fiscal year ended February 28, 2011, because all remaining Talbots shares held by Aeon (U.S.A.), Inc., also Aeon’s consolidated subsidiary, were sold back to Talbots on April 7, 2010. As a result, North American operations ceased to be a material component of Aeon’s business operations. Consequently, effective the fiscal year ended February 28, 2011, the North America segment was folded into the Asia and other segment. For reference, in the fiscal year ended February 28, 2011, North American operations produced no operating revenue, while they incurred operating expenses and an operating loss totaling 189 million yen. Assets attributable to North American operations were worth 5,604 million yen at February 28, 2011.

Overseas sales

(March 1, 2010 - February 28, 2011)

(Millions of yen) Asia and other Total

I. Overseas revenues 272,805 272,805

II. Consolidated revenues - 5,096,569

III. Ratio of overseas to total consolidated revenues (%)

5.4 5.4

Notes: 1. Country and geographic segmentation and major countries or regions in each segment

(1) Geographic segmentation is based on geographic proximity.

(2) Major countries in each segment

Asia and other China, South Korea, Taiwan, Malaysia, Thailand, Singapore, Indonesia, Vietnam, Australia, U.S.A.

2. “Overseas revenues” is the total of sales and other operating revenues by the Company and its consolidated subsidiaries to the countries and regions other than Japan.

Additional information The Talbots Inc. was Aeon’s consolidated subsidiary at the end of the previous fiscal year (February 28, 2010) but ceased to be its consolidated subsidiary from the beginning of the fiscal year ended February 28, 2011, because all remaining Talbots shares held by Aeon (U.S.A.), Inc., also Aeon’s consolidated subsidiary, were sold back to Talbots on April 7, 2010.

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As a result, operating revenues from North America in the fiscal year ended February 28, 2011, were nil.

Sales by business segment

Sales by business segment for the fiscal year ended February 28, 2011, were as follows.

Business segments Amount (millions of yen) Year-on-year change (%)

GMS and Other Retail Store operations GMS 2,693,229 99.0 Supermarkets 1,065,149 105.9 Convenience stores 104,874 104.9 Other 272,632 104.9 Total GMS and Other Retail Store operations 4,135,886 101.2 Specialty Store operations 532,884 98.0 Shopping Center Development operations 171,008 103.3 Services and Other operations Financial services 146,165 96.9 Other 965,046 104.9 Total Services and Other operations 1,111,211 103.8 Sub total 5,950,990 101.4 Elimination/corporate (854,420) 105.2 Total 5,096,569 100.8 Note: Operating revenue of convenience stores does not include net sales of franchised stores (362,447 million yen for the year ended February 28, 2011).

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Segment Information 1. Overview of Reportable Segments Aeon has adopted the “company with committees” as its governance model. Under the system, operational supervision and operational execution functions are explicitly divided and allocated to individual directors and executive officers. The system enables swift management decision-making by delegating significant authority to executive officers to enable them to achieve medium- and long-term targets.

Aeon’s reportable segments are components of its operations about which segment-specific financial statements are available. These segments are subject to periodic examinations to enable Aeon’s management to decide how to allocate resources and assess performance.

Led by Aeon, a pure holding company, the Group companies conduct various business operations, including the Group’s core retail store operations, which primarily revolve retail business centered around general merchandise stores, comprehensive financial services operations, shopping center development operations, and service operations.

The main operations in each reportable segment and other businesses are thus as follows.

The GMS Business includes general merchandise stores (GMS).

The Supermarket Business includes supermarkets (SM).

The Strategic Small-size Store Business includes convenience stores, small-scale supermarkets, and specialty stores that sell packaged lunches and household dishes.

The Financial Service Business includes credit card and fee-based services businesses.

The Shopping Center Development Business includes development and leasing of shopping centers and malls.

The Service Business includes facilities management services, amusement services, and food services.

The Specialty Store Business includes specialty stores that sell family casual apparel, women’s apparel, footwear, and others.

The ASEAN Business includes retail stores in the ASEAN region.

The China Business includes retail stores in China.

Other Businesses include discount stores, drugstores, e-commerce, etc.

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2. Operating Revenue and Income/Loss by Reportable Segment (March 1, 2010 - February 28, 2011)

(Millions of yen)

GMS SupermarketStrategic

Small-size Store

Financial Services

Shopping Center

Development Services

Operating revenue: Revenue attributable to customers

2,626,947 1,095,683 188,406 147,287 114,801 196,077

Intersegment revenue or transfers

56,188 1,807 46 21,904 37,704 105,431

Total 2,683,136 1,097,490 188,453 169,191 152,505 301,509Segment income (loss) 46,003 18,609 5,862 20,717 38,383 18,467Segment assets 1,417,490 354,488 150,601 940,405 595,836 130,105Segment interest-bearing debt

370,508 38,201 792 518,739 155,294 6,720

Other items: Depreciation and amortization

53,609 15,533 6,952 10,183 22,874 7,154

Equity in gains (losses) of equity-method affiliates

(2,162) 1,782 - (3,261) 296 387

Impairment loss 17,559 5,390 2,216 - 5,456 52Investment in equity-method affiliates

25,162 35,235 - 38,688 4,898 5,590

Increase/decrease in tangible/intangible assets 49,193 19,261 6,414 15,921 62,168 4,398

Specialty

Store ASEAN China Other Adjustments

*1,2 Total*3

Operating revenue Revenue attributable to customers

304,757 86,501 99,290 243,802 (6,986) 5,096,569


10,403 4 167 2,904 (236,562) -

Total 315,161 86,505 99,458 246,706 (243,548) 5,096,569Segment income (loss) 4,933 6,639 2,569 (869) 11,044 172,360Segment assets 127,671 59,858 68,561 95,081 (165,472) 3,774,628Segment interest-bearing debt 15,834 2,316 1,269 14,028 38,149 1,161,854

Other items: Depreciation and amortization 3,359 4,284 2,855 1,989 5,232 134,030


181 (1) - 792 - (1,985)

Impairment loss 933 138 140 1,395 - 33,284Investment in equity-method affiliates 4,497 39 - 12,972 - 127,084

Increase/decrease in tangible/intangible assets

2,515 4,814 5,249 2,540 4,819 177,297

Note: 1. Main components of the minus 6,986 million yen in adjustments for revenue attributable to

customers are (a) minus 108,155 million yen in adjustments to transactions reported in the

segment information inclusive of consumption tax but reported in the consolidated financial

statements exclusive of consumption tax and (b) 100,930 million yen in operating revenues of

Group companies attributable to Aeon Group merchandise supply that does not fall into any of the

business segments.

2. Main components of the 11,044 million yen in adjustments for segment income are (a) 8,161

million yen in income of the pure holding company (Aeon Co., Ltd.) not attributable to any of the business segments, (b) 5,511 million yen in income of the Group companies attributable to Aeon Group merchandise supply that does not fall into any of the business segments, and (c)

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minus 2,095 million yen in intersegment transaction eliminations. 3. Segment income adjustments are based on operating income reported in the consolidated

statements of income for the corresponding period.

(March 1, 2011 - February 29, 2012)

(Millions of yen)


Small-size Store

Financial Services

Shopping Center



2,556,999 1,220,741 212,640 143,960 129,801 199,468


57,489 1,708 704 23,668 41,766 113,202

Total 2,614,488 1,222,449 213,345 167,629 171,567 312,671Segment income (loss) 55,693 21,846 6,576 22,056 40,883 19,228Segment assets 1,358,666 551,535 160,031 943,249 715,225 143,921Segment interest-bearing debt

359,422 137,000 2,770 523,050 233,896 6,310


50,233 17,426 7,285 10,272 26,124 5,954


(2,059) 2,943 4 2,243 (42) (141)

Impairment loss 15,104 8,060 1,591 - 714 162Investment in equity-method affiliates

22,960 38,329 454 36,916 1,364 5,147


164,294 20,762 8,211 11,055 71,902 6,659

Specialty

Store ASEAN China Other

Adjustments *1,2

Total*3


311,499 86,962 102,592 252,860 (11,393) 5,206,132


6,859 108 137 4,638 (250,284) -

Total 318,359 87,070 102,729 257,498 (261,678) 5,206,132Segment income (loss) 5,981 6,971 2,864 375 13,212 195,690Segment assets 135,374 63,933 78,377 100,536 (201,913) 4,048,937Segment interest-bearing debt 17,367 406 246 17,884 36,830 1,335,186


3,501 3,998 2,839 2,649 5,490 135,777

Equity in gains (losses) of equity-method affiliates 336 (1) - 1,908 - 5,190

Impairment loss 1,042 368 - 1,132 - 28,177Investment in equity-method affiliates

4,777 35 - 14,652 - 124,638


5,068 8,631 6,209 5,069 12,244 320,106

Note: 1. Main components of the minus 11,393 million yen in adjustments for revenue attributable to

customers are (a) minus 116,818 million yen in adjustments to transactions reported in the

segment information inclusive of consumption tax but reported in the consolidated financial

statements exclusive of consumption tax and (b) 105,148 million yen in operating revenues of

Group companies attributable to Aeon Group merchandise supply that does not fall into any of the

business segments.

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2. Main components of the 13,212 million yen in adjustments for segment income are (a) 5,961

million yen in income of the pure holding company (Aeon Co., Ltd.) not attributable to any of the business segments, (b) 9,538 million yen in income of the Group companies attributable to Aeon Group merchandise supply that does not fall into any of the business segments, and (c) minus 1,743 million yen in intersegment transaction eliminations.

3. Segment income adjustments are based on operating income reported in the consolidated

statements of income for the corresponding period. Additional information

Effective the fiscal year ended February 29, 2012, Aeon adopted the Revised Accounting Standard for Disclosures about Segments of an Enterprise and Related Information (ASBJ Statement No. 17, revised March 27, 2009) and its associated Guidance on the Accounting Standard for Disclosures about Segments of an Enterprise and Related Information (ASBJ Guidance No. 20, March 21, 2008).

Related information (March 1, 2011 - February 29, 2012)

1. Information by merchandise and service

The information is omitted here because the same information is presented in the “Segment

Information” above.

2. Information by geographic area

(1) Operating revenue

(Millions of yen)

Japan ASEAN China Other Total 4,922,031 118,901 115,286 49,911 5,206,132

Note: Operating revenues are based on the location of customers and classified into countries

or regions.

(2) Property, buildings and equipment

(Millions of yen)

Japan ASEAN China Other Total 1,677,162 48,528 18,857 5,354 1,749,903

3. Information by major customer The information is omitted here because no customers account for more than 10% of the operating revenue on the consolidated financial statements.

Impairment loss on property, buildings and equipment by reportable segment

(March 1, 2011 - February 29, 2012)

The information is omitted here because the same information is presented in the “Segment

Information” above. Amortization for and unamortized balance of goodwill by reportable segment

(Millions of yen)


Small-size Store

Financial Services

Shopping Center


(goodwill) Amortization for the fiscal year ended

215 1,370 2,123 0 2,699 673

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Feb. 29, 2012 Balance at Feb. 29, 2012 2,058 32,224 29,671 1,539 42,032 2,127

(negative goodwill) Amortization for the fiscal year ended Feb. 29, 2012

10,659 3 0 83 0 12

Balance at Feb. 29, 2012 7,980 11 - 47 - 27

Specialty Store

ASEAN China Other Adjustments

*1,2 Total*3

(goodwill) Amortization for the fiscal year ended Feb. 29, 2012

22 14 261 428 - 7,808

Balance at Feb. 29, 2012 81 13 435 42 - 110,225(negative goodwill)

Amortization for the fiscal year ended Feb. 29, 2012

174 96 71 - - 11,100

Balance at Feb. 29, 2012 367 70 - - - 8,505

Gain on negative goodwill by reportable segment

(March 1, 2011 - February 29, 2012) Aeon consolidated Aeon Town Co., Ltd. as a subsidiary in the Shopping Center Development Business. In conjunction with the consolidation, negative goodwill of 2,665 million yen was recorded in the fiscal year ended February 29, 2012.

Aeon Co. FR201204

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