7 ELEVEN INC, S-3, 2000-05-08

7 ELEVEN INC
S-3, 2000-05-08
CONVENIENCE STORES

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 2000
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------

FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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7-ELEVEN, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
TEXAS 75-1085131
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
</TABLE>

2711 NORTH HASKELL AVENUE
DALLAS, TEXAS 75204-2906
(214) 828-7011

(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

BRYAN F. SMITH, JR.
GENERAL COUNSEL
7-ELEVEN, INC.
2711 NORTH HASKELL AVENUE
DALLAS, TEXAS 75204-2906
(214) 828-7011

(Name, address and telephone number, including area code, of agent for service)
------------------------------

COPIES TO:

<TABLE>
<S> <C>
A. WINSTON OXLEY STEPHEN T. GIOVE
VINSON & ELKINS L.L.P. ANDREW B. JANSZKY
3700 TRAMMELL CROW TOWER SHEARMAN & STERLING
2001 ROSS AVENUE 599 LEXINGTON AVENUE
DALLAS, TEXAS 75201 NEW YORK, NEW YORK 10022-6069
(214) 220-7700 (212) 848-1000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------------

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
------------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock.......................... 11,500,000 shares $20.3125 $233,593,750 $61,669
</TABLE>

(1) Includes 1,500,000 shares that the underwriters have the option to purchase
to cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the registration fee on the
basis of the average of the high and low price paid per share of Common
Stock, as reported on the Nasdaq Stock Market, Inc. on May 4, 2000, in
accordance with Rule 457(c) promulgated under the Securities Act of 1933, as
amended.
------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED , 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
P R O S P E C T U S

[LOGO]

10,000,000 SHARES

7-ELEVEN, INC.
COMMON STOCK
$ PER SHARE
---------

We are selling 10,000,000 shares of our common stock in this offering. The
underwriters named in this prospectus may purchase up to 1,500,000 additional
shares of common stock from us under certain circumstances.

Our common stock is quoted on the Nasdaq National Market under the symbol
"SVEV." The last reported sale price of the common stock on the Nasdaq National
Market on May 5, 2000 was $20.50 per share. We have applied to list our common
stock on the New York Stock Exchange.

--------------

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 7.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these shares of stock or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

--------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------- -------------------
<S> <C> <C>
Public Offering Price..................................... $ $
Underwriting Discount..................................... $ $
Proceeds to 7-Eleven, Inc. (before expenses).............. $ $
</TABLE>

The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about ,
2000.

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SALOMON SMITH BARNEY MERRILL LYNCH & CO.

DEUTSCHE BANC ALEX. BROWN

DONALDSON, LUFKIN & JENRETTE

GOLDMAN, SACHS & CO.

, 2000
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
Prospectus Summary.......................................... 2

Risk Factors................................................ 7

Forward-Looking Statements.................................. 10

Use of Proceeds............................................. 11

Price Range of Common Stock and Dividend Policy............. 11

Capitalization.............................................. 12

Selected Financial Data..................................... 13

Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 15

Business.................................................... 30

Management.................................................. 40

Principal Shareholders...................................... 44

Certain Relationships and Related Transactions.............. 46

Description of Capital Stock................................ 47

Description of Indebtedness................................. 50

Shares Eligible for Future Sale............................. 53

Certain U.S. Federal Tax Considerations for Non-United
States Holders of Common Stock............................ 54

Underwriting................................................ 57

Legal Matters............................................... 58

Experts..................................................... 58

Where You Can Find More Information......................... 59

Information We Can Incorporate by Reference................. 59

Index to Financial Statements............................... F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY

TO UNDERSTAND THIS OFFERING FULLY, YOU SHOULD READ THE ENTIRE PROSPECTUS
CAREFULLY, INCLUDING THE "RISK FACTORS" AND FINANCIAL STATEMENTS CONTAINED IN
THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS
PROSPECTUS TO "7-ELEVEN," "US," "WE," OR "OUR" REFER TO 7-ELEVEN, INC., AND ITS
SUBSIDIARIES. UNLESS OTHERWISE INDICATED, REFERENCES IN THIS PROSPECTUS TO "OUR
STORES" REFER TO STORES THAT WE OWN AND OPERATE OR FRANCHISE IN THE UNITED
STATES AND CANADA. ALL INFORMATION IN THIS PROSPECTUS REFLECTS A ONE-FOR-FIVE
REVERSE SPLIT OF OUR COMMON STOCK EFFECTED MAY 1, 2000. ALL INFORMATION
CONCERNING THE NUMBER OF OWNED AND OPERATED, FRANCHISED AND LICENSED STORES, AND
STORES THAT WE OTHERWISE HAVE AN EQUITY INTEREST IN, IS AS OF MARCH 31, 2000.
UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THE
UNDERWRITERS' OPTION TO PURCHASE ADDITIONAL SHARES TO COVER OVER-ALLOTMENTS IS
NOT EXERCISED. INDUSTRY INFORMATION INCLUDED IN THIS PROSPECTUS IS DERIVED
PRIMARILY FROM THE NATIONAL ASSOCIATION OF CONVENIENCE STORES 1999 STATE OF THE
INDUSTRY REPORT. WE HAVE NOT INDEPENDENTLY VERIFIED THIS INDUSTRY INFORMATION.

7-ELEVEN, INC.

OUR BUSINESS

7-Eleven is the world's largest operator, franchisor and licensor of
convenience stores, as well as the largest convenience store chain in North
America. With approximately 19,700 stores operating under the
7-Eleven-Registered Trademark- name worldwide, system-wide sales reached
approximately $27.0 billion in 1999. We have approximately 5,700 stores in the
United States and Canada, of which over 3,000 are franchised. These stores
generated total sales of $8.3 billion in 1999, and attract over 6.5 million
customers each day. Area licensees operate over 14,000 additional
7-Eleven-Registered Trademark- stores in 16 countries and two U.S. territories.
Our licensees in Japan, Taiwan and Thailand are the largest operators of
convenience stores in their countries.

We introduced the convenience store concept in 1927. Over the last several
years we have transformed our business model to take advantage of our extensive
store base, our widely recognized brand identity and the best practices
developed by our affiliate and largest area licensee, Seven-Eleven Japan Co.,
Ltd. In the fragmented $164 billion convenience store industry, these
competitive advantages are allowing us to implement strategies to increase our
average retail transaction size and to broaden our customer base. Excluding the
impact of cigarette cost increases passed through to customers and of the extra
day from the leap year, our U.S. same-store merchandise sales growth was
approximately 6% and 5% for the three months ended March 31, 2000 and the year
ended December 31, 1999, respectively.

BUSINESS MODEL

The core of our business model is to offer a broad range of products and
services, including many not traditionally offered by convenience stores, to
increase our average retail transaction size and to broaden our customer base.
Our business model has a number of elements that we believe differentiates us
from our competitors.

DIFFERENTIATED MERCHANDISING STRATEGY. The key components of our
merchandising strategy are:

- item-by-item inventory management that allows store operators to keep our
stores stocked with key, basic items and to eliminate slow-selling items;

- proactively working with our vendors and distributors to select products
for our stores based on customer preferences;

- continual development and introduction of new products, including many
that are first offered in our stores, to help reduce our reliance on
gasoline and tobacco;

- daily delivery to our stores of high quality, ready-to-eat fresh foods
that are made to our specifications by third-party bakeries and
commissaries; and

- everyday fair pricing that ensures consistent, competitive prices on all
items.

2
<PAGE>
APPLICATION OF TECHNOLOGY. Adapting the best practices of our affiliate and
our largest area licensee, Seven-Eleven Japan, we were the first major
convenience store chain in the United States to use an integrated set of retail
information technology tools which currently allow our store operators to
analyze sales results, identify trends and customer preferences and better
maintain appropriate inventory levels and merchandise assortment. This
integrated retail information system, or RIS, is also capable of supporting
merchandise ordering and coordinating product delivery. We expect all of our
U.S. stores to be able to fully utilize these additional functions by the end of
2000.

MANAGED DISTRIBUTION. Our distribution strategy is to work with our vendors
and distributors to provide for daily deliveries to our stores of fresh food and
other items, to increase the efficiency of deliveries and to shift some
deliveries to off-peak hours. We have over the past six years contracted with
third parties who own and operate combined distribution centers in the United
States for the distribution of perishables and other time sensitive products to
our stores. These CDCs consolidate orders from multiple suppliers for daily
distribution to individual stores.

IMPROVED SHOPPING EXPERIENCE. We have implemented an aggressive store
remodeling program designed to provide our customers with a more attractive
shopping environment, broaden our customer base and increase our average retail
transaction size. In addition, we have expanded our employee training programs
to improve customer service.

UNIQUE FRANCHISE MODEL. More than half of our U.S. stores are operated by
franchisees. We believe that our franchise model is unique in two significant
respects:

- we own or lease the stores and equipment operated by our franchisees,
which allows us to better control the manner in which our franchised
stores are designed and operated; and

- we base our ongoing franchise fees on store gross profit, rather than on
revenue as is customary among franchisors, in order to align our interests
more effectively with those of our franchisees.

GROWTH STRATEGY

The key elements of our growth strategy are to:

- increase our average retail transaction size and same-store merchandise
sales through better category management and new product introductions;

- pursue a market concentration strategy by opening at least 200 stores per
year over the next five years in existing markets;

- provide our customers with additional convenience through innovative
merchandising and by offering financial services and products such as
self-serve check cashing, wire transfers and electronic bill payments
using our V.com-TM- computerized kiosks;

- become an e-commerce destination by offering our customers the advantages
of our extensive presence and infrastructure in order to use
7-Eleven-Registered Trademark- stores as a convenient point to purchase,
pick up and return products ordered over the Internet; and

- continue to develop our systems and technology in order to provide a more
attractive opportunity to international area licensees and, over time,
allow us to broaden the presence of the 7-Eleven-Registered Trademark-
brand worldwide.

OUR MAJORITY SHAREHOLDER

Our majority shareholder, IYG Holding Company, is jointly owned by
Ito-Yokado Co., Ltd. and Seven-Eleven Japan. Ito-Yokado is one of the largest
retailers in Japan. Seven-Eleven Japan, a majority-owned subsidiary of
Ito-Yokado, is our largest area licensee, with over 8,000 stores, and operates
the largest convenience store chain in Japan. IYG Holding's 1991 acquisition of
a majority interest in us created the opportunity for us to benefit from the
strategies and initiatives that have established Seven-Eleven Japan as the
premier convenience store retailer in Japan. We believe that the

3
<PAGE>
adaptation of these best practices, such as daily deliveries of fresh food,
managed distribution and application of technology, will translate into
continued improvement in store operations and provide a platform for our future
growth.

On March 16, 2000, IYG Holding purchased 22,736,842 newly issued shares of
our common stock for $540 million, or $23.75 per share, representing a premium
of $10.75, or 83%, over the stock's closing price on February 29, 2000, the
trading day prior to the public announcement of the sale. As a result, IYG
Holding currently holds 76,124,428 shares, or 72.7%, of our common stock.

THIS OFFERING

<TABLE>
<S> <C>
Common stock offered by us........... 10,000,000 shares
Common stock to be outstanding after
this offering...................... 114,761,730 shares(1)
Use of proceeds...................... We intend to use the net proceeds to
fund new store development, expenses
related to remodeling our stores,
continued enhancement to the RIS, and
implementation of our merchandising
and stategic initiatives, including
V.com-TM-. In the interim, the net
proceeds will be used to pay down
outstanding amounts on our commercial
paper facility. See "Use of Proceeds"
for more information.
Dividend policy...................... We do not intend to pay cash
dividends on our common stock in the
foreseeable future. See "Price Range
of Common Stock and Dividend Policy"
for more information.
Nasdaq National Market symbol........ SVEV
</TABLE>

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(1) This share information includes 2,413 shares that we issued to directors on
April 3, 2000 and excludes up to 20,924,069 shares of our common stock
issuable upon the exercise, conversion or exchange of convertible securities
outstanding as of March 31, 2000 and an additional 8,421,892 shares of our
common stock reserved for issuance in connection with awards that may be
granted under our 1995 Stock Incentive Plan and the Stock Compensation Plan
for Non-Employee Directors.

OUR COMPANY INFORMATION

Our principal executive offices are located at 2711 North Haskell Avenue,
Dallas, Texas 75204, and our telephone number is (214) 828-7011.

4
<PAGE>
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING DATA

The summary consolidated historical financial and operating data presented
below should be read in conjunction with our consolidated financial statements
and our interim condensed consolidated financial statements and notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this prospectus. We report all sales and
gross profit from franchised stores in our consolidated results. We record as an
expense a percentage of the gross profit generated by franchised stores. Sales
by stores operated under domestic and foreign area license agreements are not
included in our consolidated revenues. All fees and royalties from such
agreements are included in other income. See Note 1 to the consolidated
financial statements.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------- ----------------------
1997 1998 1999 1999 2000
--------- --------- --------- --------- ----------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales:
Merchandise.................................. $ 5,181.8 $ 5,573.6 $ 6,216.1 $ 1,361.8 $ 1,509.3
Gasoline..................................... 1,789.4 1,684.2 2,035.6 408.3 603.3
--------- --------- --------- --------- ---------
Total net sales............................ 6,971.2 7,257.8 8,251.7 1,770.1 2,112.6
Other income................................... 89.4 92.0 97.8 22.1 24.8
--------- --------- --------- --------- ---------
Total revenues............................. 7,060.6 7,349.8 8,349.5 1,792.2 2,137.4
Gross profit:
Merchandise.................................. 1,828.4 1,927.6 2,142.4 451.8 514.8
Gasoline..................................... 183.8 208.1 223.4 53.8 51.6
--------- --------- --------- --------- ---------
Total gross profit......................... 2,012.2 2,135.7 2,365.8 505.6 566.4
Franchisee gross profit expense................ 524.9 551.0 612.2 128.7 146.8
Operating, selling, general and administrative
expense...................................... 1,371.3 1,502.8 1,621.9 371.8 413.7
Earnings before income taxes and extraordinary
gain......................................... 115.3 82.6 127.3 3.1 3.9
Income tax expense (benefit)(1)................ 45.3 31.9 48.5 1.2 (11.0)
Earnings before extraordinary gain............. 70.0 50.7 78.8 1.9 14.8
Net earnings(2)................................ $ 70.0 $ 74.0 $ 83.1 $ 6.2 $ 14.8
========= ========= ========= ========= =========
Earnings before extraordinary gain per common
share:
Basic........................................ $ 0.85 $ 0.62 $ 0.96 $ 0.03 $ 0.17
Diluted(3)................................... $ 0.81 $ 0.60 $ 0.87 $ 0.03 $ 0.16
Weighted-average shares outstanding:
Basic........................................ 82.0 82.0 82.0 82.0 85.8
Diluted(3)................................... 96.4 101.9 103.0 82.0 107.3
OTHER FINANCIAL DATA:
EBIT(4)........................................ $ 205.4 $ 173.9 $ 229.6 $ 27.2 $ 30.8
EBITDA(5)...................................... 401.6 368.6 435.0 77.4 87.2
Depreciation and amortization.................. 196.2 194.7 205.5 50.2 56.5
Interest expense, net(6)....................... 90.1 91.3 102.2 24.1 26.9
Capital expenditures........................... 232.5 380.9 428.8 110.7 72.0
OPERATING DATA:
Store data (end of period)
Company owned and franchised:
United States.............................. 4,956 5,151 5,223 5,146 5,209
Canada..................................... 467 475 480 476 477
--------- --------- --------- --------- ---------
Total.................................... 5,423 5,626 5,703 5,622 5,686
Licensees and affiliates..................... 11,681 12,612 13,775 12,894 14,059
--------- --------- --------- --------- ---------
Total worldwide stores................... 17,104 18,238 19,478 18,516 19,745
U.S. same-store merchandise sales growth(7).... 1.5% 5.7% 9.1% 9.9% 9.0%
Merchandise gross profit margin................ 35.3% 34.6% 34.5% 33.2% 34.1%
Gasoline gallons (in millions)................. 1,405.7 1,543.0 1,686.6 402.2 419.0
Gasoline gross profit--cents per gallon........ 13.07 13.48 13.25 13.37 12.33
BALANCE SHEET DATA (END OF PERIOD):
Total assets(8)................................ $ 2,138.6 $ 2,476.1 $ 2,685.7 $ 2,552.0 $ 2,664.7
Total debt..................................... 1,852.1 1,958.9 2,044.7 2,070.1 1,509.4
Convertible Quarterly Income Debt
Securities(9)................................ 300.0 380.0 380.0 380.0 380.0
Total shareholders' equity (deficit)........... (721.5) (642.2) (559.6) (634.4) (8.6)
</TABLE>

5
<PAGE>
(1) Income tax benefit for the three months ended March 31, 2000, includes a
$12.5 million benefit from the company's settlement of certain outstanding
tax issues with the IRS.

(2) Net earnings in 1998 and 1999 (including the three months ended March 31)
include extraordinary gains of $23.3 million and $4.3 million, respectively,
in connection with debt redemption.

(3) The Convertible Quarterly Income Debt Securities are not assumed converted
for the three months ended March 31, 1999 as they have an antidilutive
effect on the period's earnings per share. In addition, stock options are
not assumed exercised for the three months ended March 31, 1999 as the
average market price of shares was below the exercise price of the options.

(4) EBIT represents net earnings before interest, income taxes and extraordinary
gains. EBIT is not a measure of performance under generally accepted
accounting principles, and should not be considered as a substitute for net
earnings, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with generally accepted accounting
principles, or as a measure of profitability or liquidity. We have included
information concerning EBIT as one measure of our historical performance and
because we believe investors find this information useful. EBIT as defined
may not be comparable to similarly titled measures reported by other
companies.

(5) EBITDA represents net earnings before interest, income taxes, extraordinary
gains and depreciation and amortization. EBITDA is not a measure of
performance under generally accepted accounting principles, and should not
be considered as a substitute for net earnings, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with generally accepted accounting principles, or as a measure of
profitability or liquidity. We have included information concerning EBITDA
as one measure of our cash flow and historical ability to service debt and
because we believe investors find this information useful. EBITDA as defined
may not be comparable to similarly titled measures reported by other
companies. In addition, EBITDA as defined is not comparable to the similarly
titled measure utilized in our debt covenants.

(6) Includes $8.8 million, $12.0 million and $11.2 million of interest income
and $572,000, $2.3 million and $5.0 million of capitalized interest in 1997,
1998 and 1999, respectively. The three months ended March 31, 1999 and 2000
include $2.9 million and $3.0 million of interest income and $648,000 and
$565,000 of capitalized interest, respectively.

(7) Excluding the impact of cigarette cost increases passed through to our
customers and the extra day from the leap year in the three months ended
March 31, 2000, U.S. same-store merchandise sales growth was approximately
4%, 5%, 5% and 6% for 1998, 1999, and the three months ended March 31, 1999
and March 31, 2000, respectively.

(8) Total assets for 1997, 1998 and March 31, 1999 have been reclassified to
conform to the December 31, 1999 presentation.

(9) The Convertible Quarterly Income Debt Securities are potentially convertible
into a maximum of 20,924,069 shares of common stock. See "Description of
Indebtedness" for more information.

6
<PAGE>
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING OUR COMMON
STOCK.

INDUSTRY RISKS

CHANGES IN TOBACCO LEGISLATION, CAMPAIGNS TO DISCOURAGE SMOKING, INCREASED
TAXES ON TOBACCO PRODUCTS AND AN INCREASE IN WHOLESALE PRICES OF TOBACCO
PRODUCTS, MAY HAVE A MATERIAL IMPACT ON OUR REVENUES AND GROSS PROFIT.

Sales of tobacco products have averaged approximately 24% of our merchandise
sales over the past three fiscal years. During 1999, based on purchase data, our
per store unit volume of cigarettes declined by 3.6%. Future tobacco
legislation, national and local campaigns to discourage smoking and increases in
taxes on cigarettes and other tobacco products could cause further volume
declines and could have a material adverse effect on sales of and margins for
the tobacco products we sell.

In addition, major cigarette manufacturers have increased the wholesale
prices of their products. If we are unable to pass future price increases on to
our customers, our margins on tobacco products would suffer.

BECAUSE GASOLINE SALES COMPRISE A SUBSTANTIAL PORTION OF OUR REVENUES,
INCREASES IN THE COST OF GASOLINE COULD ADVERSELY AFFECT OUR REVENUE AND GROSS
PROFIT.

Over the past three years, gasoline sales have averaged approximately 25% of
our net sales and 9% of our gross profit. Increases in the cost of gasoline
would adversely affect our revenues if sales decline and adversely affect our
gross profit if we are not able to fully pass on these increases to our
customers.

CHANGES IN TRAFFIC PATTERNS AND INCREASED COMPETITION COULD AFFECT OUR
REVENUES.

We compete with numerous other convenience stores, supermarket chains, drug
stores, fast food operations and other retail outlets. In addition, our stores
which offer self-service gasoline compete with gasoline service stations and,
more recently, supermarkets which offer gasoline. Our stores compete in large
part based on their ability to offer convenience to customers. As a result,
changes in traffic patterns and the type, number and location of competing
stores could result in the loss of customers and a corresponding decrease in
revenues for affected stores.

UNFAVORABLE WEATHER CONDITIONS IN THE SPRING AND SUMMER MONTHS COULD
ADVERSELY AFFECT OUR BUSINESS.

Weather conditions may have a significant effect on our sales, as customers
tend to purchase higher profit margin items such as snacks, fountain drinks and
other beverages when weather conditions are favorable. Adverse weather during
the second and third quarters may result in lower sales and increased expenses
due to overstaffing which would result in lower than expected profits for our
stores.

AS A RESULT OF OUR GASOLINE BUSINESS WE ARE SUBJECT TO EXTENSIVE AND
CHANGING ENVIRONMENTAL REGULATION, AND THE COSTS OF COMPLIANCE COULD REQUIRE
SUBSTANTIAL ADDITIONAL CAPITAL EXPENDITURES.

We are subject to extensive environmental laws and regulations, particularly
those regulating underground storage tanks and vapor recovery systems.
Compliance with these regulations requires significant capital expenditures. It
is expected that through 2003 we will incur in the aggregate between
$12 million and $15 million in capital improvement costs to comply with
applicable federal, state and local environmental laws and regulations. These
laws and regulations are subject to change and any increased regulation could
require substantial additional capital expenditures. See "Management's

7
<PAGE>
Discussion and Analysis of Financial Condition and Results of Operations--Other
Issues--Environmental" for more information.

WE MAY INCUR SUBSTANTIAL LIABILITIES FOR REMEDIATION OF ENVIRONMENTAL
CONTAMINATION AT OUR STORES.

Under various federal, state and local laws, ordinances and regulations, we
may, as the owner or lessee of the real property underlying our stores, be
liable for the costs of removing or remediating contamination at these or our
former locations, whether or not we knew of, or were responsible for, the
presence of contamination. The presence of contamination may subject us to
liability to third parties and may adversely affect our ability to sell or rent
such property. Additionally, persons who arrange for the disposal or treatment
of hazardous or toxic substances may also be liable for removing or remediating
contamination at sites where these substances are located, whether or not the
sites are owned or operated by those persons. We may be deemed to have arranged
for the disposal or treatment of hazardous or toxic substances and, therefore,
may be liable for removal or remediation costs, as well as other related costs,
including governmental fines, and injuries to persons, property and natural
resources. See "Management's Discussion and Analysis of Results of
Operations--Other Issues--Environmental" for more information.

OUR BUSINESS IS SUBJECT TO NUMEROUS OTHER FEDERAL, STATE AND LOCAL
REGULATIONS THAT MAY AFFECT OUR REVENUES AND RESULTS OF OPERATIONS.

In certain areas where our stores are located, state or local laws limit the
stores' hours of operation or their sale of alcoholic beverages, tobacco
products, possible inhalants and lottery tickets. Failure to comply with these
laws could adversely affect our revenues because these state and local
regulatory agencies have the power to revoke, suspend or deny applications for
and renewals of permits and licenses relating to the sale of these products or
to seek other remedies. Regulations related to wages also affect our business,
and any appreciable increase in the statutory minimum wage would result in an
increase in our labor costs. All of these regulations are subject to legislative
and administrative change from time to time.

RISKS PARTICULAR TO OUR OPERATIONS

WE PURCHASE SUBSTANTIALLY ALL OF OUR GASOLINE FROM ONE SUPPLIER, AND ANY
SUDDEN DISRUPTION IN SUPPLY COULD ADVERSELY AFFECT OUR REVENUES.

Gasoline sales comprise a substantial portion of our sales. We purchase
substantially all of our gasoline from CITGO Petroleum Corporation ("CITGO")
pursuant to a long-term product purchase and supply agreement expiring in 2006.
We may not be able to obtain alternative sources of gasoline quickly in the
event our supplies from CITGO are suddenly disrupted. Any disruption in the
supply of gasoline from CITGO may leave us, at least for a period of time,
unable to meet the demand of our customers and would adversely affect our sales.

RISKS PARTICULAR TO OUR CAPITAL STRUCTURE

OUR DEBT LEVELS MAY LIMIT OUR FUTURE FLEXIBILITY IN OBTAINING ADDITIONAL
FINANCING AND IN PURSUING BUSINESS OPPORTUNITIES.

As of March 31, 2000, we had outstanding indebtedness of $1.5 billion. Our
high degree of leverage could have important consequences to the holders of our
common stock, including the following:

- our ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes
may be impaired in the future;

8
<PAGE>
- our substantial degree of leverage may limit our flexibility to implement
our business strategy and adjust to changing market conditions, reduce our
ability to withstand competitive pressures and make us more vulnerable to
a downturn in general economic conditions; and

- some of our borrowings are at variable interest rates, including
borrowings under our commercial paper facility, which expose us to the
risk of increased interest rates.

If our cash flow and capital resources are insufficient to fund our debt
service obligations, we may be forced to reduce or delay planned expansion and
capital expenditures, sell assets, obtain additional equity capital or
restructure our debt.

OUR DEBT FACILITIES CONTAIN RESTRICTIVE COVENANTS, WHICH MAY LIMIT OUR
ABILITY TO ENGAGE IN VARIOUS ACTIVITIES.

Our bank credit facilities and the indentures related to our indebtedness
contain a number of significant covenants that, among other things, restrict our
ability and that of our subsidiaries to dispose of assets, incur additional
indebtedness and pay dividends. In addition, we are required to satisfy
financial tests. Failure to comply with these covenants or meet these financial
tests could cause a default under our debt obligations and result in our debt
becoming immediately due and payable which would materially adversely affect our
business, financial condition and results of operations. See "Description of
Indebtedness" for more information.

AS A RESULT OF ITS POSITION AS OUR MAJORITY SHAREHOLDER, IYG HOLDING CAN
CONTROL THE OUTCOME OF ANY EVENT REQUIRING A VOTE OF OUR SHAREHOLDERS.

After the completion of this offering, IYG Holding will own approximately
66.3% of our outstanding common stock. In addition, IYG Holding's shareholders
own Convertible Quarterly Income Debt Securities ("QUIDS") that are convertible
into a maximum of 20,924,069 shares, representing 15.4% of our common stock
outstanding after the exchange and after this offering. As a result of its
ownership, IYG Holding is able to determine the outcome of all corporate actions
requiring shareholder approval. For example, IYG Holding can control decisions
with respect to:

- our direction and policies, including the election and removal of
directors;

- mergers or other business combinations involving us;

- our acquisition or disposition of assets;

- future issuances of our common stock or other securities;

- our incurrence of debt;

- the payment of any dividends on our common stock; and

- amendments to our certificate of incorporation and bylaws.

SHARES ELIGIBLE FOR FUTURE SALE AND REGISTRATION RIGHTS MAY AFFECT THE
MARKET PRICE OF OUR COMMON STOCK.

As of March 31, 2000, we had 104,759,317 shares of common stock outstanding.
Of those shares, 27,902,362 shares are freely transferable without restriction.
A total of 76,124,428 shares of common stock are held by IYG Holding, and
20,924,069 shares are potentially issuable upon the exchange of the QUIDS held
by Ito-Yokado and Seven-Eleven Japan. In addition, another 732,527 shares are
held by "affiliates" other than IYG Holding, Ito-Yokado and Seven-Eleven Japan.
The shares held by "affiliates" are currently eligible for sale subject to
compliance with the requirements of Rule 144 of the Securities Act.

Future sales of substantial amounts of common stock, or the perception that
these sales could occur, may affect the market price of our common stock.

9
<PAGE>
FORWARD-LOOKING STATEMENTS

This prospectus includes and incorporates by reference certain statements
that are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Any statement in this prospectus that
is not a statement of historical fact may be deemed to be a forward-looking
statement. We often use these types of statements when discussing our plans and
strategies, our anticipation of revenues from designated markets and statements
regarding the development of our businesses, the markets for our services and
products, our anticipated capital expenditures, operations, support systems,
changes in regulatory requirements and other statements contained in this
prospectus regarding matters that are not historical facts. Forward-looking
statements may also be included in certain portions of our reports, proxy
statements, information statements and other information incorporated herein by
reference. When used in this prospectus, the words "expect," "anticipate,"
"intend," "plan," "believe," "seek," "estimate," and similar expressions are
generally intended to identify forward-looking statements. Because these
forward-looking statements involve risks and uncertainties, actual results may
differ materially from those expressed or implied by these forward-looking
statements. There can be no assurance that: (i) we have correctly measured or
identified all of the factors affecting these markets or the extent of their
likely impact; (ii) the publicly available information with respect to these
factors on which our analysis is based is complete or accurate; (iii) our
analysis is correct or (iv) our strategy, which is based in part on this
analysis, will be successful. We do not intend to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

10
<PAGE>
USE OF PROCEEDS

Assuming a public offering price of $ , the net proceeds that we will
receive from the sale of 10,000,000 shares of common stock in this offering are
estimated to be $ million after deducting underwriting discounts and estimated
offering expenses. If the underwriters exercise their over-allotment option in
full, we estimate the net proceeds to us to be $ .

We intend to use the net proceeds to fund new store development, expenses
related to remodeling our stores, continued enhancements to the RIS and
implementation of our merchandising and strategic initiatives, including
V.com-TM-. Pending these uses, the net proceeds will be used to pay down the
indebtedness under our commercial paper facility which had $466.1 million
outstanding as of March 31, 2000.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The following table sets forth on a per share basis the high and low sale
prices for our common stock for the fiscal quarters indicated as reported by the
Nasdaq National Market:

1997

First Quarter............................................. 17 13/16 13 9/32

Second Quarter............................................ 18 7/16 15 5/8

Third Quarter............................................. 17 1/32 12 1/2

Fourth Quarter............................................ 14 3/8 8 19/32

1998

First Quarter............................................. 15 5/32 7 13/16

Second Quarter............................................ 15 5/32 10 5/16

Third Quarter............................................. 15 5/32 10 5/16

Fourth Quarter............................................ 11 7/8 8 3/4

1999

First Quarter............................................. 12 13/16 7 31/32

Second Quarter............................................ 13 3/4 9 1/16

Third Quarter............................................. 11 3/32 9 3/8

Fourth Quarter............................................ 10 5/8 7 31/32

2000

First Quarter............................................. 20 8 19/32

Second Quarter (through May 5, 2000)...................... 21 1/4 15
</TABLE>

We do not expect to pay cash dividends on our common stock for the
foreseeable future. We currently intend to retain our future earnings, if any,
to support operations and to finance expansion. Future dividends, if any, will
be determined by our board of directors and will depend upon our earnings,
operations, capital requirements, financial condition and other factors that our
board of directors considers relevant. The payment of any cash dividends is
prohibited, except in limited circumstances, by the indentures relating to the
debentures and our credit agreement.

11
<PAGE>
CAPITALIZATION

The following table shows our unaudited cash and cash equivalents and
capitalization as of March 31, 2000 on an actual basis and on an as adjusted
basis to reflect our receipt of the net proceeds of $ million from the sale
of 10,000,000 shares of our common stock at an assumed offering price of
$ per share. The data as adjusted also reflects the application of the net
proceeds to reduce our indebtedness. See "Use of Proceeds" for more information.
The following should be read together with our consolidated financial statements
and related notes and "Management's Discussion and Analysis and Results of
Operations," included elsewhere in this prospectus.

<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
-----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents................................... $ 99.8 $ --
========= =========
Current debt:
Commercial paper.......................................... $ 116.1 $ --
Long-term debt due within one year........................ 96.4 --
--------- ---------
Total current debt...................................... 212.5 --
--------- ---------
Long-term debt:
Bank debt term loans...................................... -- --
Bank debt revolving credit facility....................... -- --
Commercial paper.......................................... 350.0 --
5% First priority senior subordinated debentures due
2003.................................................... 275.2 --
4 1/2% Second priority senior subordinated debentures
(series A) due 2004..................................... 128.9 --
4% Second priority senior subordinated debentures (series
B) due 2004............................................. 21.1 --
Yen loans................................................. 113.8 --
7 1/2% Cityplace term loan due 2005....................... 260.1 --
Capital lease obligations................................. 145.1 --
Other..................................................... 2.7 --
--------- ---------
Total long-term debt.................................... 1,296.9 --
--------- ---------
Total debt............................................ 1,509.4 --
--------- ---------
Convertible quarterly income debt securities................ 380.0 --
--------- ---------
Shareholders' equity (deficit):
Preferred stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding.............. -- --
Common stock, $.0001 par value; 1 billion shares authorized;
104,759,317 shares issued and outstanding, actual;
114,759,317 shares issued and outstanding, as adjusted.... 0.1 --
Additional capital........................................ 1,165.4 --
Accumulated deficit....................................... (1,180.0) --
Accumulated other comprehensive earnings.................. 5.9 --
--------- ---------
Total shareholders' equity (deficit).................... (8.6) --
--------- ---------
Total capitalization.................................. $ 1,880.8 $ --
========= =========
</TABLE>

12
<PAGE>
SELECTED FINANCIAL DATA

The following table presents selected historical consolidated financial and
operating data as of the dates and for the periods indicated. The selected
statement of earnings data, other financial data and balance sheet data as of
and for the years ended December 31, 1995 through 1999 are derived from our
audited consolidated financial statements. The selected statement of earnings
data, other financial data, and balance sheet data as of and for the three month
periods ended March 31, 1999 and 2000 are derived from our unaudited condensed
consolidated financial statements and in our opinion, all adjustments necessary
for a fair presentation have been made. The interim results of operations are
not necessarily indicative of the operating results that may occur for the full
year. We report all sales and gross profit from franchised stores in our
consolidated results. We record as an expense a percentage of the gross profit
generated by the franchised stores. Sales by stores operated under domestic and
foreign area license agreements are not included in consolidated revenues. All
fees and royalties from such agreements are included in other income. Since the
information in this table is only a summary, you should read our audited
consolidated financial statements and interim unaudited condensed consolidated
financial statements and notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations," included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales:
Merchandise........................................ $5,063.7 $5,084.0 $5,181.8 $5,573.6 $6,216.1 $1,361.8 $1,509.3
Gasoline........................................... 1,682.1 1,784.9 1,789.4 1,684.2 2,035.6 408.3 603.3
-------- -------- -------- -------- -------- -------- --------
Total net sales.................................. 6,745.8 6,868.9 6,971.2 7,257.8 8,251.7 1,770.1 2,112.6
Other income......................................... 78.5 86.4 89.4 92.0 97.8 22.1 24.8
-------- -------- -------- -------- -------- -------- --------
Total revenues................................... 6,824.3 6,955.3 7,060.6 7,349.8 8,349.5 1,792.2 2,137.4
Cost of goods sold................................... 4,762.7 4,893.1 4,958.9 5,122.1 5,885.8 1,264.5 1,546.1
Gross profit:
Merchandise........................................ 1,790.2 1,787.7 1,828.4 1,927.6 2,142.4 451.8 514.8
Gasoline........................................... 192.9 188.1 183.8 208.1 223.4 53.8 51.6
-------- -------- -------- -------- -------- -------- --------
Total gross profit............................... 1,983.1 1,975.8 2,012.2 2,135.7 2,365.8 505.6 566.4
Franchisee gross profit expense...................... 518.8 520.2 524.9 551.0 612.2 128.7 146.8
Operating, selling, general and administrative
expense............................................ 1,355.7 1,321.0 1,371.3 1,502.8 1,621.9 371.8 413.7
Earnings before income taxes and extraordinary
gain............................................... 101.5 130.8 115.3 82.6 127.3 3.1 3.9
Income tax expense (benefit)(1)...................... (66.1) 41.3 45.3 31.9 48.5 1.2 (11.0)
Earnings before extraordinary gain................... 167.6 89.5 70.0 50.7 78.8 1.9 14.8
Net earnings(2)...................................... $ 270.8 $ 89.5 $ 70.0 $ 74.0 $ 83.1 $ 6.2 $ 14.8
======== ======== ======== ======== ======== ======== ========
Earnings before extraordinary gain per common share:
Basic.............................................. $ 2.04 $ 1.09 $ 0.85 $ 0.62 $ 0.96 $ 0.03 $ 0.17
Diluted(3)......................................... $ 2.02 $ 1.01 $ 0.81 $ 0.60 $ 0.87 $ 0.03 $ 0.16
Weighted-average shares outstanding:
Basic.............................................. 82.0 82.0 82.0 82.0 82.0 82.0 85.8
Diluted............................................ 83.3 96.4 96.4 101.9 103.0 82.0 107.3
OTHER FINANCIAL DATA:
EBIT(4).............................................. $ 187.1 $ 221.0 $ 205.4 $ 173.9 $ 229.6 $ 27.2 $ 30.8
EBITDA(5)............................................ 353.5 406.4 401.6 368.6 435.0 77.4 87.2
Depreciation and amortization........................ 166.4 185.4 196.2 194.7 205.5 50.2 56.5
Interest expense, net(6)............................. 85.6 90.2 90.1 91.3 102.2 24.1 26.9
Capital expenditures................................. 192.2 194.4 232.5 380.9 428.8 110.7 72.0
OPERATING DATA:
Store data (end of period)
Company owned and franchised:
United States.................................... 4,973 4,967 4,956 5,151 5,223 5,146 5,209
Canada........................................... 451 455 467 475 480 476 477
-------- -------- -------- -------- -------- -------- --------
Total.......................................... 5,424 5,422 5,423 5,626 5,703 5,622 5,686
Licensees and affiliates......................... 9,961 10,892 11,681 12,612 13,775 12,894 14,059
-------- -------- -------- -------- -------- -------- --------
Total worldwide stores......................... 15,385 16,314 17,104 18,238 19,478 18,516 19,745
U.S. same-store merchandise sales growth(7).......... 2.0% 1.4% 1.5% 5.7% 9.1% 9.9% 9.0%
Merchandise gross profit margin...................... 35.4% 35.2% 35.3% 34.6% 34.5% 33.2% 34.1%
Gasoline gallons (in millions)....................... 1,416.0 1,398.9 1,405.7 1,543.0 1,686.6 402.2 419.0
Gasoline gross profit--cents per gallon.............. 13.62 13.45 13.07 13.48 13.25 13.37 12.33
BALANCE SHEET DATA (END OF PERIOD):
Total assets(8)...................................... $2,135.2 $2,083.0 $2,138.6 $2,476.1 $2,685.7 $2,552.0 $2,664.7
Total debt........................................... 1,900.8 1,805.5 1,852.1 1,958.9 2,044.7 2,070.1 1,509.4
Convertible Quarterly Income Debt Securities(9)...... 300.0 300.0 300.0 380.0 380.0 380.0 380.0
Total shareholders' equity (deficit)................. (880.8) (789.0) (721.5) (642.2) (559.6) (634.4) (8.6)
</TABLE>

13
<PAGE>
- ----------------------------------
(1) Income tax benefit in 1995 includes an $84.3 million benefit from
recognition of the remaining portion of the company's net deferred tax
assets. Income tax benefit for the three months ended March 31, 2000
includes $12.5 million benefit in connection with our settlement of certain
outstanding tax issues with the IRS.

(2) Net earnings in 1995, 1998 and 1999 (including the three months ended
March 31) include extraordinary gains of $103.2 million, $23.3 million and
$4.3 million, respectively, in connection with debt redemption.

(4) EBIT represents net earnings before interest, income taxes, and
extraordinary gains. EBIT is not a measure of performance under generally
accepted accounting principles, and should not be considered as a substitute
for net earnings, cash flows from operating activities and other income or
cash flow statement data prepared in accordance with generally accepted
accounting principles, or as a measure of profitability or liquidity. We
have included information concerning EBIT as one measure of our historical
performance and because we believe investors find this information useful.
EBIT as defined may not be comparable to similarly titled measures reported
by other companies.

(6) Includes $17.0 million, $10.6 million, $8.8 million, $12.0 million and
$11.2 million of interest income and $165,000, $126,000, $572,000,
$2.3 million and $5.0 million of capitalized interest in 1995, 1996, 1997,
1998 and 1999, respectively. The three months ended March 31, 1999 and 2000
include $2.9 million and $3.0 million of interest income and $648,000 and
$565,000 of capitalized interest, respectively.

(8) Total assets for 1995, 1996, 1997 and 1998 and March 31, 1999 have been
reclassified to conform to the December 31, 1999 presentation.

(9) The Convertible Quarterly Income Debt Securities are potentially convertible
into a maximum of 20,924,069 shares of common stock. See "Description of
Indebtedness" for more information.

14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS WHEN YOU READ THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED IN THIS
PROSPECTUS. THE DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE
RESULTS ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF FACTORS
INCLUDING, BUT NOT LIMITED TO, THOSE UNDER "RISK FACTORS" AND "THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS."

GENERAL

7-Eleven is the world's largest operator, franchisor and licensor of
convenience stores. 7-Eleven is also the largest convenience store chain in
North America. Over the last several years we have transformed our business
model to take advantage of our extensive store base, our widely recognized brand
identity and the best practices developed by our affiliate and largest area
licensee, Seven-Eleven Japan.

The key elements of our business model are:

- a differentiated merchandising strategy;

- utilization of sophisticated retail information technology;

- managing distribution to our stores;

- improving the customer shopping experience; and

- a unique franchise model.

In an effort to implement this new business model, we have invested a
significant amount of capital into our business. From 1991 through 1996, the
amount of capital invested totaled approximately $900 million. The majority of
this money was spent remodeling our stores. During this period we sold or closed
over 1,400 stores most of which were unprofitable, did not fit into our market
development strategy or were too costly to upgrade. The costs associated with
these programs had a negative impact on our earnings but improved our store
base. Additionally, since the beginning of 1997 we have spent over $1 billion of
capital to develop and acquire 541 new stores, design and install a proprietary,
state-of-the-art retail information system and to provide new equipment to
support our merchandising initiatives. We believe these expenditures have
positioned us for sustainable profitable growth.

15
<PAGE>
The following table sets forth our results of operations and other financial
data for the periods indicated. We report all sales and gross profit from
franchised stores in our consolidated results and record as an expense a
percentage of the gross profit generated by the franchised stores. In accordance
with Statement of Financial Accounting Standards No. 15 ("SFAS No. 15"), we do
not recognize interest expense on our debentures in our statement of earnings.
These debentures are recorded at an amount equal to the future undiscounted cash
payments, both principal and interest. Accordingly, the cash interest payments
are charged against the recorded amount of the debentures and are not treated as
interest expense. Except where noted, all per store numbers refer to an average
of all stores rather than only stores open more than one year.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT OTHER DATA)
<S> <C> <C> <C> <C> <C>
Net sales:
Merchandise................................ $5,181.8 $5,573.6 $6,216.1 $1,361.8 $1,509.3
Gasoline................................... 1,789.4 1,684.2 2,035.6 408.3 603.3
-------- -------- -------- -------- --------
Total net sales.......................... 6,971.2 7,257.8 8,251.7 1,770.1 2,112.6
Gross profit:
Merchandise................................ 1,828.4 1,927.6 2,142.4 451.8 514.8
Gasoline................................... 183.8 208.1 223.4 53.8 51.6
-------- -------- -------- -------- --------
Total gross profit....................... 2,012.2 2,135.7 2,365.8 505.6 566.4
Other income................................. 89.4 92.0 97.8 22.1 24.8
Franchisee gross profit expense.............. 524.9 551.0 612.2 128.7 146.8
Operating, selling, general and
administrative expense ("OSG&A")........... 1,371.3 1,502.8 1,621.9 371.8 413.7
Interest expense, net........................ 90.1 91.3 102.2 24.1 26.9
Income tax expense (benefit)................. 45.3 31.9 48.5 1.2 (11.0)
Earnings before extraordinary gain........... 70.0 50.7 78.8 1.9 14.8
Extraordinary gain........................... -- 23.3 4.3 4.3 --
Net earnings................................. $ 70.0 $ 74.0 $ 83.1 $ 6.2 $ 14.8
======== ======== ======== ======== ========
Earnings before extraordinary gain per common
share
Basic...................................... $ 0.85 $ 0.62 $ 0.96 $ 0.03 $ 0.17
Diluted.................................... $ 0.81 $ 0.60 $ 0.87 $ 0.03 $ 0.16
OTHER DATA:
Stores at end of period...................... 5,423 5,626 5,703 5,622 5,686
Merchandise sales growth--U.S. same store.... 1.5% 5.7% 9.1% 9.9% 9.0%
Merchandise gross profit margin.............. 35.3% 34.6% 34.5% 33.2% 34.1%
Merchandise gross profit growth--per store... 2.3% 3.2% 8.8% 6.0% 12.6%
Gasoline gallon sales growth--per store...... (0.6%) 4.2% 3.5% 6.8% (0.6%)
Gasoline gross profit margin--cents per
gallon..................................... 13.07 13.48 13.25 13.37 12.33
Gasoline gross profit growth--per store...... (3.5%) 7.5% 1.7% 14.7% (8.3%)
Average retail price of gasoline per
gallon..................................... $ 1.27 $ 1.09 $ 1.21 $ 1.02 $ 1.44
OSG&A % of net sales......................... 19.7% 20.7% 19.7% 21.0% 19.6%
</TABLE>

Excluding the impact of the proceeds from this offering, we expect net
interest expense in 2000 to decrease by approximately $21 million as compared to
1999 based on anticipated levels of debt and interest rate projections. The
reduced interest expense is primarily attributable to a $540 million investment
by IYG Holding we received on March 16, 2000, the net proceeds of which we used
to reduce our debt. See "--Liquidity and Capital Resources" for more
information.

In 1999, approximately $56 million of other income consisted of royalties
from area license agreements with Seven-Eleven Japan. One year following the
final repayment of our 1988 Yen-denominated loan, currently projected for 2001,
royalty payments from Seven-Eleven Japan will be reduced by approximately
two-thirds in accordance with the terms of the amended license agreement.

16
<PAGE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 TO THREE MONTHS ENDED MARCH 31,
1999

NET SALES

Net sales for the three months ended March 31, 2000 were $2,112.6 million,
an increase of $342.5 million, or 19.3%, from $1,770.1 million for the three
months ended March 31, 1999. This increase was attributable to growth in both
merchandise and gasoline sales.

Merchandise sales for the three months ended March 31, 2000 were $1,509.3
million, an increase of $147.5 million, or 10.8%, from $1,361.8 million for the
three months ended March 31, 1999. This increase was primarily attributable to
U.S. same-store merchandise sales growth of 9.0% and our operating an average of
68 additional stores in the three months ended March 31, 2000 as compared to the
same period in 1999. Excluding the impact of cigarette cost increases passed
through to customers and the extra day from the leap year, our U.S. same-store
merchandise sales were approximately 6% higher for the three months ended
March 31, 2000 as compared to the same period in 1999. Categories contributing
to U.S. same-store merchandise sales growth were trading cards, prepaid phone
cards, non-carbonated beverages, coffee, services and beer/wine. This growth
was, in part, offset by slight decreases in the sales of dairy products and
newspapers.

Gasoline sales for the three months ended March 31, 2000 were $603.3
million, an increase of $194.9 million, or 47.7%, from $408.3 million for the
three months ended March 31, 1999. This increase was primarily attributable to a
higher average retail price of gasoline and our operating an average of 104
additional stores that sell gasoline during the three months ended March 31,
2000 as compared to the same period in 1999. During the three months ended
March 31, 2000, the average retail price of gasoline was $1.44 per gallon, a
$0.42 increase from $1.02 per gallon for the same period in 1999. Average
gallons sold per store declined 0.6% during the three months ended March 31,
2000 as compared to the same period in 1999. This decline was the result of our
pricing strategy of maximizing our gross profit dollars instead of volume. We
sold 419.0 million gallons in the three months ended March 31, 2000, an increase
of 16.8 million gallons, or 4.2%, from 402.2 million gallons for the same period
in 1999.

GROSS PROFIT

Gross profit for the three months ended March 31, 2000 was $566.4 million,
an increase of $60.9 million, or 12.0%, from $505.6 million for the three months
ended March 31, 1999. This increase was attributable to increased merchandise
gross profit, which was offset, in part, by a decline in gasoline gross profit.

Merchandise gross profit for the three months ended March 31, 2000 was
$514.8 million, an increase of $63.0 million, or 13.9%, from $451.8 million for
the three months ended March 31, 1999. This increase was primarily attributable
to higher U.S. same-store merchandise sales, a higher merchandise gross profit
margin and our operating a larger number of stores. Gross profit margin
increased to 34.1% for the three months ended March 31, 2000 from 33.2% for the
same period in 1999. This margin increase was primarily attributable to
increased sales in several higher margin categories, including trading cards,
coffee, services and non-carbonated beverages. As a result, merchandise gross
profits per store increased 12.6% for the three months ended March 31, 2000 as
compared to the same period in 1999.

Gasoline gross profit for the three months ended March 31, 2000 was $51.6
million, a decrease of $2.1 million, or 4.0%, from $53.8 million for the three
months ended March 31, 1999. This decline in gasoline gross profit was the
result of a decrease in gasoline gross profit margin to 12.33 cents per gallon
for the three months ended March 31, 2000 from 13.37 cents per gallon for the
same period in 1999, which was primarily due to wholesale costs rising at a
faster rate than retail prices. As a result,

17
<PAGE>
gasoline gross profits per store declined 8.3% for the three months ended
March 31, 2000 as compared to the same period in 1999.

OTHER INCOME

Other income for the three months ended March 31, 2000 was $24.8 million, an
increase of $2.6 million, or 12.0%, from $22.1 million for the three months
ended March 31, 1999. This increase was attributable to increased franchise fees
associated with more stores being franchised. In addition, royalty income from
our area licensees increased as a result of higher sales at stores operated by
licensees and an increase in the number of such stores.

FRANCHISEE GROSS PROFIT EXPENSE

Franchisee gross profit expense for the three months ended March 31, 2000
was $146.8 million, an increase of $18.1 million, or 14.0%, from $128.7 million
for the three months ended March 31, 1999. The increase was due to higher gross
profit at franchised stores.

OSG&A

OSG&A for the three months ended March 31, 2000 was $413.7 million, an
increase of $41.9 million, or 11.3%, from $371.8 million for the three months
ended March 31, 1999. This increase was primarily attributable to the cost of
operating a larger number of stores, approximately $10 million of incremental
costs related to the implementation of our proprietary retail information system
and additional costs related to implementing other strategic initiatives.

The ratio of OSG&A to net sales decreased to 19.6% for the three months
ended March 31, 2000 from 21.0% for the three months ended March 31, 1999.
Excluding the impact of the higher average retail price of gasoline in the three
months ended March 31, 2000, the ratio of OSG&A to net sales increased to 21.4%
from 21.0% for the same period in 1999.

INTEREST EXPENSE, NET

Net interest expense for the three months ended March 31, 2000 was $26.9
million, an increase of $2.8 million, or 11.7%, from $24.1 million for the three
months ended March 31, 1999. This increase was primarily attributable to higher
borrowing levels that we incurred to finance new store development and other
initiatives, combined with slightly higher interest rates on our floating rate
debt. The increase was partially offset by a reduction in interest expense for
the three months ended March 31, 2000 resulting from the repayment of borrowings
with proceeds from our sale of common stock to IYG Holding on March 16, 2000.

INCOME TAX EXPENSE/BENEFIT

Income tax benefit for the three months ended March 31, 2000 was $11.0
million, compared to a $1.2 million expense for the three months ended March 31,
1999. This decrease was primarily attributable to a non-recurring benefit of
$12.5 million recorded in the three months ended March 31, 2000, which resulted
from a settlement with the Internal Revenue Service related to audits of our
federal income taxes for the 1992 through 1995 tax years. Excluding the income
tax credit, our effective tax rate was 39.5% for the three months ended
March 31, 2000 compared to 39.6% in the same period 1999.

EXTRAORDINARY GAIN

In the first quarter of 1999, we redeemed $19.4 million of our debentures
resulting in a $4.3 million after-tax gain. This gain resulted from the
retirement of future undiscounted interest

18
<PAGE>
payments as recorded under SFAS No. 15, combined with repurchasing a portion of
the debentures below their face amount.

NET EARNINGS

Net earnings for the three months ended March 31, 2000 were $14.8 million,
an increase of $8.7 million, or 140.3%, from $6.2 million for the three months
ended March 31, 1999. Net earnings for the three months ended March 31, 2000
included the $12.5 million tax benefit discussed above. Net earnings for the
three months ended March 31, 1999 included the $4.3 million extraordinary gain
discussed above. Excluding these non-recurring items, net earnings were $2.3
million for the three months ended March 31, 2000, an increase of $0.5 million,
or 24.1%, from $1.9 million for the same period in 1999.

COMPARISON OF 1999 TO 1998

NET SALES

Net sales for 1999 were $8,251.7 million, an increase of $993.9 million, or
13.7%, from $7,257.8 million in 1998. This increase was attributable to growth
in both merchandise and gasoline sales.

Merchandise sales for 1999 were $6,216.1 million, an increase of $642.5
million, or 11.5%, from $5,573.6 million in 1998. This increase was primarily
attributable to U.S. same-store merchandise sales growth of 9.1% and our
operating an average of 121 additional stores in 1999 as compared to 1998.
Excluding the impact of cigarette cost increases passed through to customers,
our U.S. same-store merchandise sales were approximately 5% higher in 1999 as
compared to 1998. Categories contributing to U.S. same-store merchandise sales
growth were prepaid phone cards, trading cards and non-carbonated beverages.
These increases were primarily the result of new product introductions. This
growth was offset, in part, by decreases in the sales of newspapers, carbonated
beverages and prepackaged bakery goods.

Gasoline sales for 1999 were $2,035.6 million, an increase of $351.4
million, or 20.9%, from $1,684.2 million in 1998. This increase was primarily
attributable to a higher average retail price of gasoline, higher average
gallons sold per store and our operating an average of 118 additional stores
that sold gasoline during 1999 as compared to 1998. During 1999, the average
retail price of gasoline was $1.21 per gallon, a $0.12 increase from $1.09 per
gallon in 1998. Average gallons sold per store increased 3.5% in 1999 as
compared to 1998. We sold 1,686.6 million gallons in 1999, an increase of
143.6 million gallons, or 9.3%, from 1,543.0 million gallons in 1998.

GROSS PROFIT

Gross profit for 1999 was $2,365.8 million, an increase of $230.2 million,
or 10.8%, from $2,135.7 million in 1998. This increase was attributable to
increases in both merchandise and gasoline gross profit.

Merchandise gross profit for 1999 was $2,142.4 million, an increase of
$214.8 million, or 11.1%, from $1,927.6 million in 1998. This increase was
primarily attributable to higher U.S. same-store merchandise sales and our
operating a larger number of stores. Our gross profit margin was 34.5% in 1999
as compared to 34.6% in 1998. This margin decline was principally the result of
lower gross margin on cigarettes due to wholesale and retail price increases.
While our margin on cigarettes decreased in 1999, per store gross profits
generated from cigarette sales increased primarily due to more effective
merchandising. Somewhat offsetting the margin decline was the successful
introduction of new higher margin products including Pokemon trading cards,
7-Eleven Frut Cooler-TM- and 7-Eleven

19
<PAGE>
Bakery Stix-TM-, combined with increased sales of some traditional higher margin
products, such as coffee and non-carbonated beverages.

Gasoline gross profit for 1999 was $223.4 million, an increase of $15.4
million, or 7.4%, from $208.1 million in 1998, which represents an increase of
1.7% per store. This increase in gasoline gross profit was primarily
attributable to higher gallons sold per store and our operating a larger number
of gasoline stores in 1999 as compared to 1998, which was partially offset by a
decline in gasoline gross profit margin to 13.25 cents per gallon in 1999 from
13.48 cents per gallon in 1998. This margin decrease was primarily attributable
to higher wholesale gasoline costs.

OTHER INCOME

Other income for 1999 was $97.8 million, an increase of $5.8 million, or
6.3%, from $92.0 million in 1998. This increase was attributable to increased
franchise fees associated with more stores being franchised. In addition,
royalty income from our area licensees increased as a result of higher sales at
stores operated by licensees and an increase in the number of such stores.

FRANCHISEE GROSS PROFIT EXPENSE

Franchisee gross profit expense for 1999 was $612.2 million, an increase of
$61.2 million, or 11.1%, from $551.0 million in 1998. This increase was due to
higher gross profit at franchised stores.

OSG&A

OSG&A for 1999 was $1,621.9 million, an increase of $119.1 million, or 7.9%,
from $1,502.8 million in 1998. This increase was primarily attributable to
higher store labor costs, the costs of operating a larger number of stores,
approximately $40 million of incremental costs related to the implementation of
our proprietary retail information system and additional costs associated with
other strategic initiatives.

The ratio of OSG&A to net sales decreased to 19.7% for 1999 from 20.7% for
1998. In 1999, OSG&A included a credit of $14.0 million related to environmental
legislation changes in California, which was partially offset by $4.7 million of
severance expenses. In 1998, OSG&A included $14.1 million associated with the
write-offs of computer equipment and development costs and $7.6 million in
severance and related costs. After adjusting for these items and excluding the
impact of the higher average retail price of gasoline in 1999, the ratio of
OSG&A to net sales declined to 20.3% in 1999 from 20.4% in 1998.

INTEREST EXPENSE, NET

Net interest expense for 1999 was $102.2 million, an increase of $10.9
million, or 12.0%, from $91.3 million in 1998. This increase was primarily
attributable to higher borrowing levels that we incurred to finance new store
development, other initiatives and the redemption of a total of $65 million of
our debentures in the fourth quarter of 1998 and first quarter of 1999. See
"--Extraordinary Gain" for more information. We accounted for the redeemed
debentures in accordance with SFAS No. 15; accordingly, we did not recognize
interest expense on these debentures in our statement of earnings. As a result,
interest expense on debt used to redeem our debentures increased our reported
interest expense.

INCOME TAX EXPENSE/BENEFIT

Income tax expense on earnings before extraordinary gains for 1999 was $48.5
million compared to $31.9 million in 1998. Our effective tax rate was 38.1% in
1999 compared to 38.6% in 1998.

20
<PAGE>
EXTRAORDINARY GAIN

In 1999, we redeemed $19.4 million of our debentures resulting in a $4.3
million after-tax gain. During 1998, we redeemed $45.6 million of our debentures
resulting in a $23.3 million after-tax gain. These gains resulted from the
retirement of future undiscounted interest payments as recorded under SFAS No.
15, combined with repurchasing a portion of the debentures below their face
amount.

NET EARNINGS

Net earnings for 1999 were $83.1 million, an increase of $9.1 million, or
12.2%, from $74.0 million in 1998. Net earnings for 1999 included the
$4.3 million extraordinary gain discussed above. Net earnings for 1998 included
the $23.3 million extraordinary gain discussed above. Excluding these
extraordinary gains, net earnings for 1999 were $78.8 million, an increase of
$28.1 million, or 55.4%, from $50.7 million in 1998. The credit and charges
discussed in OSG&A affected net earnings for both 1999 and 1998.

COMPARISON OF 1998 TO 1997

NET SALES

Net sales for 1998 were $7,257.8 million, an increase of $286.6 million, or
4.1%, from $6,971.2 million in 1997. This increase was attributable to growth in
merchandise sales, which was offset, in part, by a decrease in gasoline sales.

Merchandise sales for 1998 were $5,573.6 million, an increase of $391.8
million, or 7.6%, from $5,181.8 million in 1997. This increase was primarily
attributable to U.S. same-store merchandise sales growth of 5.7% and our
operating an average of 119 additional stores in 1998 as compared to 1997.
Excluding cigarette cost increases passed through to customers, our U.S.
same-store merchandise sales were approximately 4% higher in 1998 as compared to
1997. Categories contributing to U.S. same-store merchandise sales growth were
frozen beverages, fresh foods, non-carbonated drinks, prepaid phone cards and
coffee. This growth was offset, in part, by decreases in the sales of
newspapers, carbonated beverages and prepackaged bakery goods.

Gasoline sales for 1998 were $1,684.2 million, a decrease of $105.2 million,
or 5.9%, from $1,789.4 million in 1997. This decrease was primarily attributable
to a lower average retail price of gasoline, which was offset, in part, by
increased average gallons sold per store and our operating an average of 106
additional gasoline stores in 1998 as compared to 1997. In 1998, the average
retail price of gasoline was $1.09 per gallon, an $0.18 decrease, or 14.2%, from
$1.27 per gallon in 1997. Average gallons of gasoline sold per store increased
4.2% in 1998 as compared to 1997. We sold a total of 1,543.0 million gallons in
1998, an increase of 137.3 million gallons, or 9.8%, from 1,405.7 million
gallons in 1997.

GROSS PROFIT

Gross profit for 1998 was $2,135.7 million, an increase of $123.5 million,
or 6.1%, from $2,012.2 million in 1997. This increase was attributable to
increases in both merchandise gross profit and gasoline gross profit.

Merchandise gross profit for 1998 was $1,927.6 million, an increase of $99.2
million, or 5.4%, from $1,828.4 million in 1997. This increase was due to a
combination of higher U.S. same-store merchandise sales and our operating a
larger number of stores, partially offset by a decline in gross profit margin to
34.6% in 1998 from 35.3% in 1997. This margin decline was principally the result
of product cost increases, continuing refinement of our everyday fair price
strategy and introductory costs associated with new product offerings, combined
with the further rollout of our fresh food program.

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<PAGE>
Gasoline gross profit for 1998 was $208.1 million, an increase of $24.3
million, or 13.2%, from $183.8 million in 1997, which represents an increase of
7.5% per store. This increase in gasoline gross profit was primarily
attributable to our operating a larger number of gasoline stores, higher gallons
sold per store and an increase in gasoline gross profit margin. Gasoline gross
profit margin increased to 13.48 cents per gallon in 1998 from 13.07 cents per
gallon in 1997. This increase was attributable to lower wholesale gasoline
costs.

OTHER INCOME

Other income for 1998 was $92.0 million, an increase of $2.6 million, or
2.9%, from $89.4 million in 1997. This increase was attributable to increases in
royalty income from our area licensees, which increased as a result of higher
sales at stores operated by area licensees and an increase in the number of such
stores.

FRANCHISEE GROSS PROFIT EXPENSE

Franchisee gross profit expense for 1998 was $551.0 million, an increase of
$26.1 million, or 5.0%, from $524.9 million in 1997. This increase was primarily
attributable to higher gross profit among franchised stores.

OSG&A

OSG&A for 1998 was $1,502.8 million, an increase of $131.5 million, or 9.6%,
from $1,371.3 million in 1997. This increase was primarily attributable to
higher store labor costs, the costs of operating a larger number of stores,
approximately $9 million of incremental costs related to the implementation of
our proprietary retail information system and additional costs associated with
other strategic initiatives.

The ratio of OSG&A to net sales increased to 20.7% in 1998 from 19.7% in
1997. In 1998, OSG&A included $14.1 million associated with the write-offs of
computer equipment and development costs and $7.6 million in severance expenses.
After adjusting for these items and excluding the impact of the higher average
retail price of gasoline in 1997, the ratio of OSG&A to net sales was
approximately 19.7% for both periods.

INTEREST EXPENSE, NET

Net interest expense for 1998 was $91.3 million, an increase of $1.2
million, or 1.3%, from $90.1 million in 1997. This increase was primarily
attributable to our slightly higher average debt balance in 1998, combined with
the redemption of a portion of our debentures. See
"--Extraordinary Gain" for more information. We accounted for the redeemed
debentures in accordance with SFAS No. 15; accordingly, we did not recognize
interest expense on these debentures in our statements of earnings. As a result,
interest expense on debt used to redeem our debentures increased our reported
interest expense.

INCOME TAX EXPENSE/BENEFIT

Income tax expense on earnings before extraordinary gains for 1998 was $31.9
million compared to $45.3 million in 1997. Our effective tax rate was 38.6% in
1998 compared to 39.2% in 1997.

EXTRAORDINARY GAIN

During 1998, we redeemed $45.6 million of our debentures, resulting in a
$23.3 million after-tax gain. These gains resulted from the retirement of future
undiscounted interest payments as recorded under SFAS No. 15, combined with
repurchasing a portion of the debentures below their face amount.

22
<PAGE>
NET EARNINGS

Net earnings for 1998 were $74.0 million, an increase of $4.0 million, or
5.7%, from $70.0 million in 1997. Net earnings for 1998 included the
$23.3 million extraordinary gain discussed above. Excluding this non-recurring
item, net earnings for 1998 were $50.7 million, a decrease of $19.3 million, or
27.6%, from $70.0 million in 1997. Net earnings for 1998 were affected by the
charges discussed in OSG&A.

SEASONALITY

Weather conditions tend to have a significant impact on our sales because
our customers tend to purchase more and higher profit margin products when
weather conditions are favorable. Consequently, our results are seasonal, and
the typically warmer second and third quarters are our better-performing
quarters.

The following table is derived from our unaudited consolidated condensed
financial statements and presents the unaudited quarterly net sales, gross
profit, EBIT, EBITDA and cash flows provided by operating activities for each of
our fiscal quarters in 1998, 1999 and the first quarter in 2000. In our opinion,
all adjustments necessary for a fair presentation have been made. The first
quarter of 1998 includes an expense of $11.8 million resulting from a computer
equipment lease termination and an accrual of $7.1 million for severance
expenses. The third and fourth quarters of 1999 include credits of approximately
$10 million and $4 million resulting from environmental legislative changes in
California. The fourth quarter of 1999 also includes a termination benefit
accrual of $4.7 million.

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
1998 1999 2000
----------------------------------------- ----------------------------------------- --------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
-------- -------- -------- -------- -------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Merchandise................ $1,204 $ 1,421 $1,556 $1,393 $1,362 $1,585 $1,695 $1,574 $1,510
Gasoline................... 391 424 444 425 408 504 548 576 603
------ ------- ------ ------ ------ ------ ------ ------ ------
Total net sales.......... 1,595 1,845 2,000 1,818 1,770 2,089 2,243 2,150 2,113
Gross profit:
Merchandise................ 411 502 546 469 452 553 596 541 515
Gasoline................... 43 44 59 62 54 60 53 57 51
------ ------- ------ ------ ------ ------ ------ ------ ------
Total gross profit....... 454 546 605 531 506 613 649 598 566
EBIT(1)...................... 3 64 80 27 27 73 88 41 31
EBITDA(2).................... 51 111 130 77 77 125 140 93 87
Cash flows provided by (used
in) operating activities... 29 97 104 3 (8) 128 126 35 23

<CAPTION>
1998 1999
----------------------------------------- -----------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-------- -------- -------- -------- -------- -------- -------- --------
(PERCENT OF ANNUAL TOTAL)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Merchandise................ 21.6% 25.5% 27.9% 25.0% 21.9% 25.5% 27.3% 25.3%
Gasoline................... 23.2 25.2 26.4 25.2 20.1 24.7 26.9 28.3
Total net sales.......... 22.0 25.4 27.6 25.0 21.5 25.3 27.2 26.1
Gross profit:
Merchandise................ 21.3 26.0 28.3 24.3 21.1 25.8 27.8 25.2
Gasoline................... 20.9 21.0 28.3 29.8 24.1 26.9 23.6 25.4
Total gross profit....... 21.3 25.6 28.3 24.8 21.4 25.9 27.4 25.3
EBIT(1)...................... 1.8 36.6 46.0 15.6 11.8 31.9 38.4 17.9
EBITDA(2).................... 13.7 30.2 35.2 20.9 17.8 28.7 32.1 21.4
</TABLE>

- ------------------------------

(1) EBIT represents net earnings before interest, income taxes and extraordinary
gains. EBIT is not a measure of performance under generally accepted
accounting principles, and should not be considered as a substitute for net
earnings, cash flows

23
<PAGE>
from operating activities and other income or cash flow statement data
prepared in accordance with generally accepted accounting principles, or as
a measure of profitability or liquidity. We have included information
concerning EBIT as one measure of our historical performance and because we
believe investors find this information useful. EBIT as defined may not be
comparable to similarly titled measures reported by other companies.

(2) EBITDA represents net earnings before interest, income taxes, extraordinary
gains and depreciation and amortization. EBITDA is not a measure of
performance under generally accepted accounting principles, and should not
be considered as a substitute for net earnings, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with generally accepted accounting principles, or as a measure of
profitability or liquidity. We have included information concerning EBITDA
as one measure of our cash flow and historical ability to service debt and
because we believe investors find this information useful. EBITDA as defined
may not be comparable to similarly titled measures reported by other
companies. In addition, EBITDA as defined is not comparable to the similarly
titled measure utilized in our debt covenants.

LIQUIDITY AND CAPITAL RESOURCES

The majority of our working capital is provided from three sources:

- cash flows generated from our operating activities;

- a $650 million commercial paper facility, guaranteed by Ito-Yokado; and

- short-term seasonal borrowings of up to $400 million under our revolving
credit facility.

We believe that operating activities, coupled with available short-term
working capital facilities, will provide sufficient liquidity to fund operating
and capital expenditure programs, as well as to service debt requirements. We
expect capital expenditures for 2000, excluding lease commitments, to be in
excess of $325 million.

Our $400 million revolving credit facility was made available to us under an
unsecured credit agreement with a group of lenders. A sublimit of $150 million
for letters of credit is included in the revolving credit facility. To the
extent outstanding letters of credit are less than the $150 million maximum, the
excess availability can be used for additional borrowings under the revolving
credit facility. The credit agreement also included a $225 million term loan,
the balance of which was paid in full on March 16, 2000. The covenant levels
established by the credit agreement generally require continuing improvement in
our financial condition. In March 1999, our creditors amended the financial
covenant levels required by these instruments in order to provide us with the
flexibility to continue our strategic initiatives, including store growth. In
connection with these amendments, we agreed to change the interest rate on
borrowings to a reserve-adjusted Eurodollar rate plus .475% instead of the
previous increment of .225%.

On March 16, 2000, IYG Holding purchased 22,736,842 newly issued shares of
our common stock for $540 million, or $23.75 per share, in a private placement
transaction. We used the net proceeds from this transaction to repay the
outstanding balance on our bank term loan, to repay the outstanding balance of
our bank revolver and to reduce indebtedness under our commercial paper
facility.

In December 1999 and January 2000, we entered into sale-leaseback agreements
for 63 of our store properties whereby we sold land, buildings and related
improvements which were then leased back to us. We received net proceeds of
$57.3 million and $71.9 million on the sale of 30 and 33 stores in
December 1999 and the first quarter of 2000, respectively. The sales resulted in
an aggregate of approximately $22 million of deferred gains, which we will
recognize on a straight-line basis over the initial term of the leases. We used
all of the proceeds from these transactions to pay down our revolving credit
facility.

In August 1999, we entered into a leasing facility that will provide up to
$100 million of off-balance-sheet financing to be used for the construction of
new stores. Funding under this facility is available through August of 2001 with
a final maturity of the leases of February 2005. As of March 31, 2000, $38.1
million was funded under this facility.

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<PAGE>
CASH FROM OPERATING ACTIVITIES.

Net cash provided by operating activities was $22.8 million for the three
months ended March 31, 2000 compared to a use of $7.6 million for the three
months ended March 31, 1999, an increase of $30.4 million. Net cash provided by
operating activities was $281.9 million for 1999 compared to $232.8 million for
1998, an increase of $49.1 million. These increases are primarily attributable
to increased levels of net earnings as adjusted for non-cash items and, in the
quarterly comparison, changes in certain balance sheet amounts. Changes in
working capital for the quarterly comparison include the payment of a previously
accrued claim, an increase in advances for RIS equipment awaiting quarterly
funding under a master lease facility and a payment associated with transferring
our obligation for long-term disability coverage to a third party insurer, all
of which are non-recurring items that occurred in the three months ended
March 31, 1999.

CASH FROM INVESTING ACTIVITIES

Net cash provided by investing activities was $1.3 million for the three
months ended March 31, 2000 compared to a use of $104.2 million for the three
months ended March 31, 1999. Capital expenditures were $72.0 million for the
three months ended March 31, 2000 compared to $110.7 million for the same period
in 1999. In addition, we received $71.9 million of net proceeds from a
sale-leaseback transaction during the three months ended March 31, 2000.

Net cash used in investing activities was $350.2 million in 1999, compared
to $396.8 million in 1998. Capital expenditures were $428.8 million in 1999
compared to $380.9 million in 1998. In addition, net cash used in investing
activities in 1998 included $32.9 million that we spent to acquire two
businesses. We received net proceeds of $57.3 million from a sale leaseback
transaction in 1999.

Capital expenditures for each of the periods were used for new store
development, continued implementation of our retail information system, new
equipment to support merchandising initiatives, maintaining, remodeling and
upgrading store and gasoline facilities' image and equipment and compliance with
environmental regulations.

CASH FROM FINANCING ACTIVITIES

Net cash used in financing activities was $1.1 million for the three months
ended March 31, 2000, compared to cash provided by financing activities of
$108.6 million for the three months ended March 31, 1999. Net cash provided by
financing activities was $58.1 million for 1999, compared to $164.0 million in
1998.

Net repayments under commercial paper and revolving credit facilities
totaled $416.2 million for the three months ended March 31, 2000, compared to
net borrowings of $150.6 million for the same period in 1999. Net long-term debt
repayments for the three months ended March 31, 2000 were $131.2 million
compared to $31.8 million for the same period in 1999. Cash from financing
activities for the three months ended March 31, 2000 also included
$539.7 million in net proceeds from issuance of common stock that we used to pay
down debt.

During 1999 and 1998, net borrowings under commercial paper and revolving
credit facilities were $210.8 million and $199.7 million, respectively. Net
long-term debt repayments for 1999 were $147.4 million compared to
$57.9 million for 1998. Additionally, in 1998 we received $80 million from the
issuance of QUIDS, $65 million of which was restricted to and used for the
repurchase of debentures in the fourth quarter of 1998 and the first quarter of
1999. Such amounts are not reflected in our statements of cash flow.

25
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The following discussion summarizes the financial and derivative instruments
we held as of March 31, 2000 which are sensitive to changes in interest rates,
foreign exchange rates and equity prices. We use interest-rate swaps to manage
the primary market exposures associated with underlying liabilities and
anticipated transactions. We use these instruments to reduce risk by essentially
creating offsetting market exposures. In addition, our two yen-denominated loans
serve effectively to hedge our exposure to yen-dollar currency fluctuations. The
instruments we hold are not leveraged and are held for purposes other than
trading. On March 16, 2000 we received $540 million in proceeds from a private
placement transaction. We used these proceeds to reduce floating rate debt which
has lowered our exposure to interest rate risk. See "--Liquidity and Capital
Resources" for more information.

In the normal course of business, we also face risks that are either
non-financial or non-quantifiable. Such risks principally include country risk,
credit risk and legal risk and are not represented in this discussion.

INTEREST-RATE RISK MANAGEMENT.

The table below presents descriptions of the floating-rate financial
instruments and interest-rate-derivative instruments we held at March 31, 2000.
We entered into an interest-rate swap to achieve the appropriate level of
variable and fixed-rate debt as approved by senior management. Under the
interest-rate swap, we agreed with other parties to exchange the difference
between fixed-rate and floating-rate interest amounts on a quarterly basis.

For the debt, the table below presents principal cash flows that exist by
maturity date and the related average interest rate. For the swap, the table
presents the notional amounts outstanding and expected interest rates that exist
by contractual dates. We used the notional amount to calculate the contractual
payments to be exchanged under the contract and estimated the variable rates
based on implied forward rates in the yield curve at the reporting date.
Additionally, the interest rate on the bank debt reflects a LIBOR margin of 47.5
basis points as prescribed in the credit agreement.

<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 THEREAFTER TOTAL FAIR VALUE
-------- -------- -------- -------- -------- ---------- -------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Floating-rate financial
instruments:
Commercial paper................ $116 $ 0 $ 0 $ 0 $ 0 $350 $466 $466
Average interest rate......... 7.3% 7.4% 7.3% 7.3% 7.3% 7.3% 7.3%

Interest-rate derivatives:
Notional amount................. $250 $250 $250 $250 $250 $ 0 $250 $ 8
Average pay rate................ 6.1% 6.1% 6.1% 6.1% 6.1% 0% 6.1%
Average receive rate............ 7.3% 7.4% 7.3% 7.3% 7.3% 7.3% 7.3%
</TABLE>

The $8 million fair value of the interest-rate swap represents an estimate
of the amount we would receive from the counterparty if we chose to terminate
the swap as of March 31, 2000. See Note 11 to the Consolidated Financial
Statements for detailed information on floating-rate and fixed-rate liabilities
as well as fair value and derivative discussions.

As of March 31, 2000, approximately 31% of our debt contained floating rates
that will be unfavorably impacted by rising interest rates. We have effectively
eliminated 54% of our exposure to rising interest rates through an interest rate
swap agreement. The weighted-average interest rate for such debt, including the
impact of the interest rate swap agreement, was 6.2% for three months ended
March 31, 2000 as compared to 5.4% for the same period in 1999.

26
<PAGE>
INTEREST RATE SWAP AGREEMENT

In February 1999, we amended the terms of an interest rate swap agreement.
The terms of the amended agreement fixes the interest rate on $250 million
notional principal of existing floating rate debt at 6.1% through
February 2004.

FOREIGN-EXCHANGE RISK MANAGEMENT.

We recorded nearly $73 million in royalty income in 1999 that could have
been impacted by fluctuating exchange rates. Approximately 77% of such royalties
were from area license agreements with Seven-Eleven Japan. Seven-Eleven Japan
royalty income will not fluctuate with exchange rate movements since we have
effectively hedged this exposure by using the royalty income to make principal
and interest payments on our yen-denominated loans. See "Description of
Indebtedness." We are exposed to fluctuating exchange rates on the
non-Seven-Eleven Japan portion of our royalties earned in foreign currency, but
based on current estimates, future risk is not material.

We have several wholly- or partially-owned foreign subsidiaries and are
susceptible to exchange-rate risk on earnings from these subsidiaries. Based on
current estimates, we do not consider future foreign-exchange risk associated
with these subsidiaries to be material.

EQUITY-PRICE RISK MANAGEMENT

We hold equity securities of other companies, which are classified as
available for sale and are carried on our consolidated balance sheet at fair
value. Changes in fair value are recognized as other comprehensive earnings, net
of tax, as a separate component of shareholders' equity. At March 31, 2000, we
held the following available-for-sale marketable equity securities:

<TABLE>
<CAPTION>
COST FAIR VALUE
-------- ---------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
326,700 shares of Affiliated Computer Services, Inc.
common stock........................................ $0 $12.4
151,452 shares of common stock of Precept's Business
Computer Services, Inc.............................. $0 $ 0.3
</TABLE>

The Affiliated Computer stock was obtained in 1988 as partial consideration
for our entering into a mainframe data processing contract with Affiliated
Computer. At the time, Affiliated Computer was a privately held start-up
company, and, accordingly, the stock was valued with no cost. Subsequently,
Affiliated Computer became a public company and Precept Business Services, Inc.
was spun off from Affiliated Computer and also became a public company.

OTHER ISSUES

ENVIRONMENTAL

In December 1988, we closed our chemical manufacturing facility in New
Jersey. We are required to conduct environmental remediation at the facility,
including groundwater monitoring and treatment for a projected 15-year period,
which commenced in 1998. We have recorded undiscounted liabilities, representing
our best estimates of the clean-up costs, of $6.5 million at March 31, 2000. In
1991, we entered into a settlement agreement with the former owner of the
facility pursuant to which the former owner agreed to pay a substantial portion
of the clean-up costs. Based on the terms of the settlement agreement and the
financial resources of the former owner, we have a receivable recorded of $4.1
million at March 31, 2000.

Additionally, we accrue for the anticipated future costs and the related
probable state reimbursement amounts for remediation activities at our existing
and previously operated gasoline sites

27
<PAGE>
where releases of regulated substances have been detected. At March 31, 2000,
our estimated undiscounted liability for these sites was $27.9 million. This
estimate is based on our prior experience with gasoline sites and contractors
who perform environmental assessment and remediation work as well as other
factors such as the age of the tanks and the location of tank sites. We
anticipate that substantially all of the future remediation costs for detected
releases of regulated substances at these sites as of March 31, 2000 will be
incurred within the next four to five years.

Under state reimbursement programs, we are eligible to receive reimbursement
for a portion of future remediation costs, as well as a portion of remediation
costs previously paid. Accordingly, at March 31, 2000, we had recorded a net
receivable of $49.7 million based on the estimated state reimbursements. In
assessing the probability of state reimbursements, we take into consideration
each state's fund balance, revenue sources, existing claim backlog, status of
clean-up activity and claim ranking systems. As a result of these assessments,
the recorded receivable amount is net of an allowance of $7.9 million.

While there is no assurance of the timing of the receipt of state
reimbursement funds, based on our experience we expect to receive the majority
of state reimbursement funds, except from California, within one to three years
after our payment of eligible remediation expenses. This time period assumes
that the state administrative procedures for processing such reimbursements have
been fully developed. Because of recent legislative changes in California, we
estimate that we will receive reimbursement of our identified remediation within
one to ten years after our payment of eligible remediation expenses. As a result
of the timing for reimbursements, we have present-valued the portion of the
recorded receivable amount that relates to remediated activities that has
already been completed at a discount rate of approximately 6.5%. Thus, the
recorded receivable amount is also net of a discount of $14.0 million.

The estimated future assessment and remediation expenditures and related
state reimbursement amounts could change within the near future as governmental
requirements and state reimbursement programs continue to be implemented or
revised.

LITIGATION

We are a defendant in two legal actions, which are referred to as the
7-Eleven Owners for Fair Franchising and Valente cases, filed by franchisees in
1993 and 1996, respectively. A nationwide settlement was negotiated in 1997,
and, in connection with the settlement, these two cases were combined on behalf
of a class of all persons who franchised 7-Eleven-Registered Trademark-
convenience stores from us in the United States at any time between January 1,
1987 and July 31, 1997. A total of 98.5% of the class members have approved the
settlement, and the court presiding over the settlement process gave its final
approval of the settlement on April 24, 1998. The settlement provides that class
members who are former franchisees will share in a settlement fund, that we will
make certain changes to the franchise agreements of class members who are
current franchisees and that we will pay certain attorney fees.

Notices of appeal of the order approving the settlement were filed on behalf
of three of the attorneys who represented the class and six former and two
current franchisees who were members of the class. One of these current
franchisees has dismissed his appeal. The settlement agreement will not become
effective until the appeals are resolved. However, the settlement agreement
provides that while the appeals are pending we will pay certain maintenance and
supply expenses relating to the cash registers and retail information system
equipment of current franchisees that are members of the settlement class. If
the settlement is overturned on appeal, we have the right to require franchisees
to repay the amounts that we paid for these expenses. Our accruals are
sufficient to cover the total settlement costs, including payments due to former
franchisees when the settlement becomes effective.

28
<PAGE>
RECENTLY ISSUED ACCOUNTING STANDARD

We are currently reviewing SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS No.
133 becomes effective for all fiscal quarters of fiscal years beginning after
June 15, 2000, and earlier application is permitted as of the beginning of any
fiscal quarter subsequent to June 15, 2000. We intend to adopt the provisions of
this statement as of January 1, 2001. The impact of the adoption of SFAS No. 133
has not been determined at this time due to our continuing investigation of our
financial instruments and the applicability of SFAS No. 133 to them.

29
<PAGE>
BUSINESS

OVERVIEW

Founded in 1927 in Dallas, Texas, we are the world's largest operator,
franchisor and licensor of convenience stores. We introduced the convenience
store concept during our first years of operation as an ice company when our
retail outlets began selling milk, bread and eggs as a convenience to customers.
The name "7-Eleven" originated in 1946 when our stores were open from 7 a.m.
until 11 p.m. Today, the vast majority of our stores provide approximately
6.5 million daily customers with 24-hour convenience, seven days a week. Our
convenience stores generally range in size from 2,400 to 3,000 square feet and
carry approximately 2,300 to 2,800 items.

The United States convenience store industry is large and growing. In 1998
over 96,700 convenience stores throughout the United States generated sales of
$164 billion, which was greater than many other retail sectors, including the
home improvement, drug store and department store sectors. Over the last ten
years, industry sales have grown at a 6.2% compound annual growth rate. The
convenience store industry is highly fragmented. The five largest operators
represent approximately 23% of the total store base and the 50 largest operators
represent approximately 53% of the total store base.

We believe that we have the most recognized brand in the convenience store
industry. With approximately 19,700 stores worldwide, 7-Eleven has more stores
operating under its name than any other convenience store chain in the world.
7-Eleven is the largest convenience store chain in North America, with
approximately 5,700 stores in the United States and Canada, and one of the
nation's largest independent gasoline retailers. We operate approximately 2,700
stores, while our franchisees operate approximately 3,000. These stores
generated sales of $8.3 billion in 1999. Internationally, area licensees and
affiliates operate over 14,000 7-Eleven stores, primarily in the Pacific Rim.

Over the last several years we have transformed our business model to take
advantage of our extensive store base, our widely recognized brand identity and
the best practices developed by our affiliate and largest area licensee,
Seven-Eleven Japan. In the fragmented convenience store industry, these
competitive advantages allow us to implement strategies to increase our average
retail transaction size and broaden our customer base.

BUSINESS MODEL

Because of our market position, brand recognition and ability to share best
practices with Seven-Eleven Japan, we have been able to develop a business model
that we believe is difficult to replicate. The key elements of this model are:

- a differentiated merchandising strategy;

- utilization of sophisticated retail information technology;

- managing distribution to our stores;

- improving the customer shopping experience; and

- a unique franchise model.

DIFFERENTIATED MERCHANDISING STRATEGY. We offer a broad range of products,
including many not traditionally available in convenience stores, in an effort
to broaden our customer base and reduce our dependence on gasoline and tobacco.
These products include high-quality fresh foods that are delivered daily to our
stores. In addition, we sell a number of products that are developed
specifically for us. Partnering with key vendors to develop and introduce
proprietary items is an integral part of this strategy. These items tend to
provide relatively higher profit margins than other products we sell. Key new
products introduced in 1999, such as trading cards, 7-Eleven Bakery Stix-TM-,
7-Eleven Frut Cooler-TM- and prepaid cellular and international long distance
cards contributed in excess of $150 million to our merchandise sales in 1999,
based on purchase data.

30
<PAGE>
We implement our merchandising strategy through a variety of different
means. We employ item-by-item inventory management to remain in-stock in certain
basic items that our customers expect to find in convenience stores. We also use
this inventory management approach to supplement our basic inventory with an
assortment of new products that we believe our customers will purchase in a
convenience store setting. We encourage our store operators to monitor customer
purchasing trends closely in order to stay in stock on popular items and to
merchandise products effectively so as to maximize inventory turns while
limiting slow-moving items.

Our goal is to maintain consistent, competitive prices on all items. Using
our significant purchasing power, we work closely with our vendors and
distributors to ensure that we receive the lowest possible cost on the items we
sell. This allows us to offer everyday fair prices while maintaining margins.

Because we believe that gasoline sales contribute to increased store
traffic, we intend to sell gasoline wherever practical. We expect that most of
the 200 stores per year we intend to open over the next five years will sell
gasoline.

APPLICATION OF TECHNOLOGY. Adapting the best practices of our largest area
licensee, Seven-Eleven Japan, we were the first major convenience store chain in
the United States to use an integrated set of retail information technology. In
1999, we completed the installation in all of our U.S. stores of the hardware
and software for our proprietary retail information system, or RIS. Through the
use of this system, our store operators are now able to:

- analyze sales results, trends, customer preferences and the factors that
affect each of these; and

- more effectively maintain optimal inventory levels and eliminate
slow-moving items from inventory.

The system automates various tasks that previously would have required
significant personnel resources and time, thus allowing store operators to focus
more attention on inventory management and customer service.

Approximately 60% of our stores are currently able to use the RIS to place
orders. We aggregate these orders at our corporate headquarters and re-transmit
them to our vendors and distributors. We intend to expand both the number of
stores that can place orders using this system and to increase the number of
items that can be ordered.

MANAGED DISTRIBUTION. We are working with our vendors and distributors to
provide for daily deliveries to our stores of fresh food and other items, to
increase the efficiency of deliveries and to shift some deliveries to off-peak
hours. The CDCs, which consolidate orders from multiple suppliers for daily
distribution to individual stores, offer a number of advantages over other
distribution systems including:

- more frequent deliveries of time-sensitive and perishable products such as
milk, bread and fresh foods;

- off-peak merchandise deliveries that utilize store labor more efficiently
and reduce store parking lot congestion;

- more customized deliveries and improved in-stock levels; and

- access to products that traditionally have not been available to
individual convenience stores.

We are currently working to increase both the number of stores that use the
CDCs and the number of items available for delivery.

IMPROVED SHOPPING EXPERIENCE. We strive to provide our customers with a
convenient, safe and clean store environment. Over the last several years we
have improved lighting inside and outside our stores, modernized store signage
and installed canopies over our gasoline pumps. Additionally, we have
implemented a program to remodel stores or upgrade equipment at each of our
locations once every three years.

31
<PAGE>
We also emphasize training programs that are designed to improve customer
service. Examples include the "University of 7-Eleven" seminars that provide an
opportunity for us to present merchandising case studies and potential new food
offerings and to demonstrate product display techniques to our employees and
franchisees. In the future, we intend to provide online training to store
operators and employees via RIS.

UNIQUE FRANCHISE MODEL. More than half of our stores in the United States
are operated by franchisees. We believe our franchise model is unique in that we
own or lease the stores and equipment used by our franchisees. This allows us to
better control the manner in which our stores operate and provides a more
consistent store environment for our customers. We also provide more support to
our franchisees than most franchisors of convenience stores, including service
support, training and access to our infrastructure. The ongoing fees we receive
from our franchisees are based on a percentage of store gross profit, which we
believe better aligns our interests with those of our franchisees.

GROWTH STRATEGY

The key elements of our growth strategy are:

INCREASING SAME-STORE MERCHANDISE SALES. Our product development managers
focus on developing and introducing new products in order to drive a higher
average retail transaction size and increase same-store sales. In addition, by
using the RIS, our category managers and store operators are better able to
increase sales by enhancing the merchandise mix in each store.

EXPANDING IN EXISTING MARKETS. We focus our store development efforts in
our core urban and suburban markets in order to take advantage of greater
population and traffic in these areas. These new stores will be concentrated
around our CDCs, commissaries and bakeries and will allow us to advertise and
operate more efficiently. We believe that the potential exists for significant
expansion in our core urban and suburban markets and plan to open at least 200
new stores per year in these areas over the next five years.

PROVIDING GREATER CONVENIENCE TO CUSTOMERS. We intend to continue to
improve customer convenience through innovative merchandising programs, such as
our V.com-TM- computerized kiosks for self-service financial and e-commerce
transactions. The V.com-TM- kiosk allows our customers to conduct a variety of
financial transactions, such as check cashing, wire transfers, electronic bill
payments and purchasing money orders, as well as traditional ATM transactions.
Eventually the V.com-TM- will allow customers to perform transactions such as
purchasing event tickets and other products on-line. We intend to pursue this
strategy by working with third parties in a manner that minimizes our capital
outlays. By the end of 2000 we expect to have completed our pilot roll-out of
about 450 V.com-TM- kiosks in our Texas stores.

BECOMING A DELIVERY AND PICK-UP DESTINATION FOR E-COMMERCE. By using our
daily distribution infrastructure and our extensive store base, we will offer
our customers a convenient location for purchase, pick-up and return of products
ordered over the Internet. We are well-positioned to solve the "last-mile"
problem that arises when consumers order products over the Internet but are
unable to take home delivery of their orders.

INCREASING THE VALUE OF OUR LICENSES AND EXPANDING INTERNATIONALLY. By
continuing to develop our systems and technology, we will increase the strength
of our brand and provide a more attractive opportunity to international
licensees. Over time, this will allow us to expand into a number of countries in
the developed world where we currently do not have a presence.

32
<PAGE>
PRODUCTS AND SERVICES

Our stores carry a broad array of recommended products, which our category
managers select based on customer demands, sales potential and profitability. At
the same time, store operators supplement their stores' product selection with
items intended to appeal to local preferences.

Based upon total store purchases, we estimate that the percentages of our
merchandise sales in the United States and Canada by principal product
categories for the last three years were as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
PRODUCT CATEGORIES 1997 1998 1999
- ------------------ -------- -------- --------
<S> <C> <C> <C>
Tobacco Products..................................... 22.5% 23.7% 25.8%
Beverages............................................ 23.2 23.7 22.9
Beer/Wine............................................ 11.8 11.3 10.8
Candy/Snacks......................................... 9.8 9.5 9.4
Non-Foods............................................ 9.2 8.8 9.2
Prepared Foods....................................... 5.9 6.0 5.9
Dairy Products....................................... 5.6 5.3 5.0
Other................................................ 4.9 4.6 4.2
Baked Goods.......................................... 4.4 4.2 3.9
----- ----- -----
TOTAL PRODUCT SALES.................................. 97.3 97.1 97.1

Services............................................. 2.7 2.9 2.9
----- ----- -----
TOTAL MERCHANDISE SALES.............................. 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>

In addition, gasoline sales accounted for 25.7%, 23.2% and 24.7% in 1997,
1998 and 1999, respectively, of our total net sales in the U.S. and Canada.

Our merchandise selection includes a number of items widely identified with
7-Eleven-Registered Trademark-, including Slurpee-Registered Trademark- frozen
carbonated beverages, Cafe Select-Registered Trademark- coffee, Big
Gulp-Registered Trademark- fountain beverages and Big Bite-Registered Trademark-
grilled sandwiches. We have capitalized on the popularity of these proprietary
names to introduce other products, such as Slurpee-Registered Trademark- brand
bubble gum and frozen novelties. We continually develop new merchandise to add
to our proprietary merchandise lines, including recent additions such as
7-Eleven Cafe Cooler-Registered Trademark-, 7-Eleven Frut Cooler-TM- and
7-Eleven Bakery Stix-TM-. Many of these products have been developed with
well-known companies such as Kraft, Oscar Mayer and PepsiCo, which helps to
increase the customer acceptance of these items.

In addition to a broad product selection, our stores offer a number of
services to our customers. We have the largest ATM network of any retailer, with
approximately 5,000 ATMs in our U.S. stores and an additional 450 in Canada. We
also continue to be one of the leading retailers of money orders. In 1998, we
began the test marketing of our V.com-TM- kiosks. Our stores also provide
ancillary services that draw additional store traffic such as public pay
telephones, video games and, where permitted, the sale of lottery tickets.

We sell gasoline at approximately 2,300 stores and anticipate that most of
our new stores will sell gasoline. New stores tend to have higher gasoline sales
because they have more pumps with convenient configurations and offer the
"Pay-at-the-Pump" option. Currently, over 1,400 of our stores are equipped to
accept credit cards at the pump.

We monitor gasoline sales to maintain a steady supply of gasoline to our
stores, to determine competitive retail pricing, to provide the appropriate
product mix at each location and to manage inventory levels based on market
conditions. Almost all of our stores that sell gasoline offer CITGO-branded
gasoline.

33
<PAGE>
MANAGEMENT INFORMATION SYSTEMS

The RIS is a proprietary system that provides store operators and management
with timely access to item-by-item sales information captured by a point-of-sale
scanning system at the register. As a part of RIS, stores can be linked to
vendors, our primary third-party distributor and our CDCs for ordering and
item-level information sharing. The development and use of the RIS is a core
component of our business model, allowing individual store operators to manage
both their products and time more effectively while streamlining our corporate
operations.

The RIS features:

- a point-of-sale touch-screen system with scanning and integrated credit
card authorization, supported by a centralized price book;

- daily ordering for all items, supported by regular weather forecasts,
merchandise messages and historical sales information;

- category management and item level sales analysis;

- integrated gasoline and "pay at the pump" functionality;

- automated back office functions, such as sales and cash reporting,
payroll, gasoline pricing and inventory control, which are connected
directly to our accounting system; and

- the ability to make delivery adjustments, write-offs and price changes on
a hand-held unit.

We have installed hardware and software for the RIS in the United States. We
worked with a number of vendors to design and develop the RIS, including ACS
Retail Solutions, EDS and NEC. Having adapted Seven-Eleven Japan's best
practices to the U.S. market, we developed the RIS to support our business model
in substantially the same manner that Seven-Eleven Japan's retail technology
supports its business model.

We own all of the necessary licenses in order to exclusively use the RIS,
and have a contract with ACS Retail Solutions to provide maintenance and
updating of the RIS software. Currently, all of our U.S. stores use the scanning
capability of the RIS. We plan to fully install the RIS in Canada by the end of
2001.

COMMISSARIES AND BAKERIES

We have contracted with third-parties who own and operate 11 bakeries and 13
commissaries that provide our U.S. stores with daily deliveries of fresh foods
such as sandwiches, salads and baked goods. These commissaries and bakeries
average approximately 20,000 square feet in size. Each commissary ships
approximately 13,000 units daily to our stores. Each bakery ships approximately
28,000 units. All store deliveries from our commissaries and bakeries are made
via one of our CDCs so that fresh products are in the stores by 5 a.m. for our
morning shoppers. All commissaries are F.D.A.-approved. We work with all of our
third-party commissaries and bakeries to ensure that our products are produced
in a safe and sanitary environment.

Bakeries and commissaries currently serve approximately 3,500 stores in the
United States. We expect to provide daily fresh food deliveries to approximately
800 additional stores by the end of 2000. We estimate that an additional nine
bakeries and seven commissaries will be needed to serve all of our stores in our
primary markets over the next three years.

DISTRIBUTION

We rely primarily on traditional distribution services for the delivery of
non-perishable goods to all of our stores. McLane Company, Inc., our primary
third-party distributor, delivers products to all of our company-operated stores
and a majority of our franchised stores pursuant to a ten-year contract which we
entered into in 1992. Purchases from McLane accounted for 43% of our 1999
purchases attributable to U.S. stores. Our stores also purchase a variety of
merchandise, including certain

34
<PAGE>
beverages and snack foods, directly from a number of vendors and their
wholesalers. Recently we have been working with these vendors and distributors
to improve the accuracy and scheduling of deliveries.

CDCs typically serve stores within a 50 mile radius. All CDCs in the United
States are owned and operated by third parties. The average CDC is approximately
20,000 square feet in size and ships approximately 60,000 units to our stores
daily. Each CDC has cross docking facilities so that every incoming shipment is
matched to an outgoing order. Each CDC serves an average of 200 stores using
dedicated trucks on route systems that are exclusive to 7-Eleven. The CDCs
receive products such as milk, bread, fruit, baked goods, fresh sandwiches and
other perishables from a variety of suppliers, including the commissaries and
bakeries. The merchandise is then sorted to fill orders placed by area stores.
All store deliveries are made by 5 a.m. the following day so that fresh products
are ready for morning customers. Because vendors deliver to the CDCs only those
quantities ordered by the stores, the CDCs do not maintain an inventory of
merchandise.

Currently, CDCs service approximately 3,700 of our stores, with
approximately 800 additional stores expected to be added to the system in 2000.
We estimate that an additional 14 CDCs will be needed to service substantially
all the stores in our primary markets over the next three years.

OUR STORES

As of March 31, 2000, we operated or franchised 5,648
7-Eleven-Registered Trademark- convenience stores in the United States and
Canada, and 38 other retail locations, including Christy's Markets, Quik Marts
and one High's Dairy Store. These stores are located in 31 states, the District
of Columbia, and five provinces of Canada.

35
<PAGE>
Our company-operated stores are primarily located in Colorado, Florida,
Texas, Utah, Virginia and Canada. The following table shows the location and
number of our company operated and franchised stores in operation on March 31,
2000.

<TABLE>
<CAPTION>
STORES
------------------------------
STATE/PROVINCE OWNED LEASED TOTAL
- -------------- -------- -------- --------
<S> <C> <C> <C>
UNITED STATES
Arizona............................................. 37 63 100
California.......................................... 241 931 1,172
Colorado............................................ 59 176 235
Connecticut......................................... 7 43 50
Delaware............................................ 10 16 26
District of Columbia................................ 5 13 18
Florida............................................. 225 271 496
Idaho............................................... 6 8 14
Illinois............................................ 58 93 151
Indiana............................................. 10 31 41
Kansas.............................................. 7 8 15
Maine............................................... 0 24 24
Maryland............................................ 87 214 301
Massachusetts....................................... 12 91 103
Michigan............................................ 49 69 118
Missouri............................................ 32 50 82
Nevada.............................................. 89 107 196
New Hampshire....................................... 3 17 20
New Jersey.......................................... 76 133 209
New York............................................ 43 204 247
North Carolina...................................... 2 5 7
Ohio................................................ 11 4 15
Oregon.............................................. 37 94 131
Pennsylvania........................................ 74 93 167
Rhode Island........................................ 0 11 11
Texas............................................... 114 172 286
Utah................................................ 42 69 111
Vermont............................................. 0 4 4
Virginia............................................ 207 399 606
Washington.......................................... 53 162 215
West Virginia....................................... 10 13 23
Wisconsin........................................... 15 0 15

CANADA
Alberta............................................. 30 103 133
British Columbia.................................... 25 120 145
Manitoba............................................ 14 35 49
Ontario............................................. 31 76 107
Saskatchewan........................................ 21 22 43
----- ----- -----
Total................................................. 1,742 3,944 5,686
===== ===== =====
</TABLE>

From the beginning of 1997 to March 31, 2000, we acquired or opened
541 convenience stores. In addition, we closed or sold 277 convenience stores
during the same period, mostly due to changing

36
<PAGE>
market patterns, lease expirations and the closing of selected stores that were
not profitable. The following table summarizes these activities:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31, 1999
------------------------------------ ----------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Number of stores at beginning of period................ 5,422 5,423 5,626 5,626 5,703
Acquired............................................... 0 155 0 0 0
Opened................................................. 61 144 165 30 16
Closed or sold......................................... (60) (96) (88) (34) (33)
----- ----- ----- ----- -----
Number of stores at end of period...................... 5,423 5,626 5,703 5,622 5,686
===== ===== ===== ===== =====
</TABLE>

We believe that our existing markets can support at least an additional 300
stores for each of the next five years.

SITE SELECTION

We evaluate sites for new stores by focusing on population density,
demographics, traffic volume, visibility, ease of access and economic activity
in the area. We also review the location and traffic at competitive stores in
the area. Our strategy is to have each new store located within a one-hour drive
of a CDC.

FRANCHISEES AND LICENSEES

FRANCHISEES. At March 31, 2000, franchisees operated
3,021 7-Eleven-Registered Trademark- stores in the United States. Sales by
franchisee-operated stores are included in our net sales and totaled
approximately $3.4 billion for the year ended December 31, 1999.

In our franchise program for individual 7-Eleven-Registered Trademark-
stores, we select qualified applicants and train the operators who will
participate in store management. The franchisee pays us an initial fee that
varies by store and is generally calculated based upon the gross profit of the
store if it has been operating for more than 12 months, or average gross profit
of the 7-Eleven-Registered Trademark- stores in the market area if the store has
been operating for less than 12 months. Under the standard franchise agreement,
which has an initial term of 10 years, we lease to the franchisee a
ready-to-operate 7-Eleven-Registered Trademark- store and bear the costs of
acquiring the land, building and equipment as well as most utility costs and
property taxes. The franchisee pays for all business licenses, permits and all
in-store selling expenses. We finance a portion of these costs, as well as the
ongoing operating expenses and inventory purchases.

Under the standard agreements, we receive between 50% and 58% of the gross
profits of the stores. The franchisee may terminate the franchise at any time.
We may terminate the franchise only for cause, and upon the notice specified in
the franchise agreement.

AREA LICENSEES AND INTERNATIONAL AFFILIATES. As of March 31, 2000 we had
granted domestic area licenses to six companies that were operating 444
convenience stores using the 7-Eleven-Registered Trademark- system and name in
certain areas of Hawaii, Indiana, Maryland, Michigan, New Mexico, Ohio,
Oklahoma, Pennsylvania, Texas, Utah and West Virginia. Although parts of
Kentucky, Nevada and Virginia are also covered by area licenses, there are no
stores currently operating under area licenses in those states.

37
<PAGE>
As of March 31, 2000, area license agreements covered the operation of
14,067 7-Eleven-Registered Trademark- stores in the following countries and U.S.
territories:

<TABLE>
<CAPTION>
COUNTRY TOTAL STORES
- ------- ------------
<S> <C>
Japan....................................................... 8,154
Taiwan...................................................... 2,348
Thailand.................................................... 1,352
United States............................................... 444
China....................................................... 434
South Korea................................................. 283
Mexico...................................................... 272
Australia................................................... 195
Philippines................................................. 155
Malaysia.................................................... 144
Singapore................................................... 113
Norway...................................................... 49
Sweden...................................................... 47
Denmark..................................................... 26
Spain....................................................... 20
Puerto Rico................................................. 13
Turkey...................................................... 9
Guam........................................................ 9
------
Total....................................................... 14,067
======
</TABLE>

We receive royalty payments from our area licensees based on a percentage of
their sales. We have an equity interest in the Puerto Rico and Mexico area
licensees.

COMPETITION

Our stores compete with a number of national, regional, local and
independent retailers, including grocery and supermarket chains, grocery
wholesalers and buying clubs, other convenience store chains, oil company
gasoline/mini-convenience stores, food stores, and fast food chains as well as
variety, drug and candy stores. In sales of gasoline, our stores compete with
other food stores and service stations and generate only a very small percentage
of the gasoline sales in the United States. Each store's ability to compete is
dependent on its location, accessibility and individual service. Growing
competitive pressures from new participants in the convenience retailing
industry and the rapid growth in numbers of convenience-type stores opened by
oil companies over the past several years have intensified competitive
pressures. Finally, we may encounter competitive pressure from new sources, such
as Internet retailers. In densely populated urban areas, certain e-commerce
retailers offer delivery of products traditionally available at convenience
stores.

TRADEMARKS

Our 7-Eleven-Registered Trademark- trademark, registered in 1961, is
well-known throughout the United States and in many other parts of the world.
Our other trademarks and service marks include Super-7-Registered Trademark-,
Slurpee-Registered Trademark-, Big Gulp-Registered Trademark-, Big
Bite-Registered Trademark-, Deli Central-Registered Trademark-, Cafe
Select-Registered Trademark-, World Ovens-Registered Trademark- and Quality
Classic Selection-Registered Trademark-, as well as many other trade names,
marks and slogans relating to other foods, beverages and items such as 7-Eleven
Cafe Cooler-Registered Trademark-, 7-Eleven Frut Cooler-TM-, 7-Eleven Bakery
Stix-TM- and V.com-TM-.

38
<PAGE>
EMPLOYEES

At March 31, 2000, we had 33,623 employees, of whom approximately 27% were
considered to be either temporary or part-time employees. None of our U.S.
employees was subject to collective bargaining agreements at year-end.
Approximately 70 nonsupervisory employees in Canada in six separate stores in
British Columbia have had the United Food and Commercial Workers Union certified
as their agent for collective bargaining. We have entered into an agreement with
the UFCW regarding these six stores.

MAJORITY OWNER

IYG Holding is a Delaware corporation that was formed in 1991 specifically
for the purpose of acquiring and holding our common stock. On March 16, 2000,
IYG Holding purchased in a private transaction approximately 22,736,842 shares
of common stock for $540 million. As a result of that purchase, IYG Holding now
owns approximately 76,124,428 shares, or 72.7%, of our common stock. See
"Principal Shareholders" for more information.

ITO-YOKADO. Ito-Yokado is among the largest retailers in Japan. Its
principal business consists of operating approximately 150 superstores that sell
a broad range of food, clothing and household goods. In addition, its activities
include operating a chain of supermarkets and two restaurant chains doing
business under the names "Denny's" and "Famil." All of Ito-Yokado's operations
are located in Japan except for some limited overseas purchasing activities and
two stores in China. Ito-Yokado guarantees our $650 million commercial paper
facility. In addition, Ito-Yokado holds $153 million of our 1995 QUIDS that are
convertible into 7,355,416 shares of our common stock, and $40.8 million of our
1998 QUIDS that are potentially convertible into 3,315,860 shares of our common
stock.

SEVEN-ELEVEN JAPAN. Seven-Eleven Japan is a 50.3%-owned subsidiary of
Ito-Yokado and is our largest area licensee, operating over 8,000 stores in
Japan. It owns Seven-Eleven (Hawaii), Inc., which, as of March 31, 2000 operated
an additional 51 7-Eleven-Registered Trademark- stores in Hawaii under a
separate area license agreement covering that state. In addition, Seven-Eleven
Japan holds $147 million of our 1995 QUIDS that are convertible into 7,066,967
shares of our common stock, and $39.2 million of our 1998 QUIDS that are
potentially convertible into 3,185,826 shares of our common stock.

ENVIRONMENTAL MATTERS

Our operations are subject to various federal, state and local laws and
regulations relating to the environment including the Resource Conservation and
Recovery Act of 1976, The Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986
and the Clean Air Act. The implementation of these laws by the United States
Environmental Protection Agency and the states will continue to affect our
operations by imposing increased operating and maintenance costs and capital
expenditures required for compliance. Additionally, the procedural provisions of
these laws can result in increased lead times and costs for new facilities.

Violation of any federal environmental statutes or regulations or orders
issued thereunder, as well as relevant state and local laws and regulations,
could result in civil or criminal enforcement actions.

For a description of current environmental projects and proceedings, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Other Issues--Environmental" for more information.

39
<PAGE>
MANAGEMENT

Set forth below is information concerning our executive officers and
directors, including their ages, as of May 1, 2000.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------------------- --------------------------------------------------------
<S> <C> <C>
Masatoshi Ito............... 76 Chairman of the Board of Directors
Toshifumi Suzuki............ 67 Vice Chairman of the Board of Directors
Clark J. Matthews, II....... 63 Co-Vice Chairman of the Board of Directors
James W. Keyes.............. 45 President, Chief Executive Officer and Director
Masaaki Asakura............. 57 Senior Vice President and Director
Yoshitami Arai.............. 57 Director
Timothy N. Ashida........... 60 Director
Jay W. Chai................. 66 Director
Gary J. Fernandes........... 56 Director
Masaaki Kamata.............. 60 Director
Kazuo Otsuka................ 53 Director
Asher O. Pacholder.......... 63 Director
Nobutake Sato............... 61 Director
Rodney A. Brehm............. 52 Senior Vice President, Store Operations
Gary Rose................... 54 Senior Vice President, Merchandising
Ezra Shashoua............... 45 Vice President, Chief Financial Officer and Treasurer
Bryan F. Smith, Jr.......... 47 Senior Vice President, General Counsel and Secretary
Donald E. Thomas............ 41 Vice President, Chief Accounting Officer and Controller
</TABLE>

MASATOSHI ITO has served as our Chairman of the Board and as a Director
since March 1991. He also serves as a Director and as Honorary Chairman of
Ito-Yokado Group, which includes Ito-Yokado Co., Ltd., Seven-Eleven Japan and
Denny's Japan Co., Ltd., as well as other companies. From 1958 until 1992,
Mr. Ito served as President of Ito-Yokado Co., Ltd. He served as the Chairman of
the Board of Seven-Eleven Japan Co., Ltd. from 1978 until 1992, and as its
President from 1973 until 1978. From 1981 until 1992, Mr. Ito served as the
Chairman of the Board of Denny's Japan Co., Ltd, and from 1973 until 1981 as its
President. He has been Chairman of the Board of Famil Co., Ltd. since 1986,
Chairman of the Board of York Mart Co., Ltd. since 1979, Chairman of the Board
of Robinson's Japan Co., Ltd. since 1995, Chairman of the Board of Maryann Co.,
Ltd. since 1977, and President of Oshman's Japan Co., Ltd. since 1984. In
addition, Mr. Ito has served as Statutory Auditor of Steps Co., Ltd. since 1992,
Chairman of the Board of York-Keibi Co., Ltd. since 1989, President of Union
Lease Co., Ltd. since 1985, Statutory Auditor of Daikuma Co., Ltd. since 1982
and as Chairman of the Board of Marudai Co., Ltd. since 1989. He has been a
Director of Seven-Eleven (Hawaii), Inc. since 1989 and Chairman of the Board of
Umeya Co., Ltd. since 1981. He also has served as Director and Chairman of the
Board of IYG Holding since 1990.

TOSHIFUMI SUZUKI has served as our Vice Chairman of the Board and as a
Director since March 1991. He has served as President and Chief Executive
Officer of Ito-Yokado Co., Ltd. since October 1992, as a Director since 1971, as
Executive Vice President from 1985 to 1992, as Senior Managing Director from
1983 to 1985, as Managing Director from 1977 to 1983 and as an employee since
1963. Mr. Suzuki has served as a Director of Seven-Eleven Japan Co., Ltd since
1973, its Chairman of the Board and Chief Executive Officer since October 1992,
its President from 1975 until 1992 and its Senior Managing Director from 1973 to
1965. Since 1984 Mr. Suzuki has served as Statutory Auditor of Robinson's Japan
Co., Ltd. He has served as Chairman of the Board of Daikuma Co., Ltd. since
1985, President of Seven-Eleven (Hawaii), Inc. since 1989 and President and
Director of IYG Holding since 1990.

CLARK J. MATTHEWS, II was elected Director in March 1991 and previously
served in that capacity from 1981 until 1987. He was appointed Co-Vice Chairman
of the Board in May 2000. He served as

40
<PAGE>
our President and Chief Executive Officer from March 1991 until April 2000, and
as Secretary from April 1995 until April 2000. From 1979 until 1991
Mr. Matthews served as our Executive Vice President or Senior Executive Vice
President and Chief Financial Officer, and from 1973 until 1979 as General
Counsel. Prior to his retirement in April 2000 Mr. Matthews had been employed by
us since 1965.

JAMES W. KEYES was elected Director in April 1997 and has served as our
President and Chief Executive Officer since May 2000. From May 1998 until April
2000 he served as our Executive Vice President and Chief Operating Officer.
Mr. Keyes also served as our Chief Financial Officer from May 1996 until
April 1998, as Senior Vice President of Finance from June 1993 until
April 1996, as Vice President of Planning & Finance from August 1992 until
June 1, 1993, as Vice President and/or Vice President, National Gasoline, from
August 1991 until August 1992 and as General Manager, National Gasoline, from
1986 until 1991. He has been an employee since 1985.

MASAAKI ASAKURA was elected Director in April 1997 and has served as our
Senior Vice President since May 1998. He previously served as Vice President
from May 1997 until April 1998. Mr. Asakura served as the General Manager and
Overseas Liaison, Planning Department, for Seven-Eleven Japan Co., Ltd., from
1995 until 1997 and as Executive Vice President and General Manager of
Seven-Eleven (Hawaii), Inc., from 1991 until 1994. He has been an employee of
Seven-Eleven Japan Co., since 1976.

YOSHITAMI ARAI was elected Director in March 1991. Mr. Arai has been the
Chairman of the Board of Systems International Incorporated, a consulting firm
for international joint ventures, licensing and investment managements, since
1977, and served as its President from 1970 until 1977. From 1977 until 1989 he
served as the President of Tokyo Hotels International. He is the Chairman of
Catalina Pacific Media L.L.C. and a Director of Catalina Marketing Japan K.K.,
Entry Strategies Inc., Industrial Suppliers S.A., Pacific Media K.K. and
Parallel Inc. Mr. Arai is a member of the Pacific Basin Economic Council, APEC
Business Advisory Council and other international non-profit organizations.
Since 1996, he has served as Senior Advisor to the Welsh Development Agency, a
British government organization.

TIMOTHY N. ASHIDA was elected Director in March 1991. Since 1972 he has
served as the President of A.K.K. Associates, Inc., a consulting firm based in
Glendale, California for Japanese/American investments. Mr. Ashida has also
served as a Director of Seven-Eleven Japan since 1991. From 1969 until 1972 he
was General Manager of the Far East Division of Travel Systems International and
from 1966 until 1969 he was an interpreter and technical coordinator for
Kawaguchi Tour Services. Mr. Ashida has entered into an "Independent
Consultant's Agreement" with us pursuant to which he is paid $11,500 per month
to serve as liaison with the board of directors. This fee is inclusive of any
director's fees to which he would otherwise be entitled.

JAY W. CHAI was elected Director in March 1991. He is Chairman of the Board
and Chief Executive Officer of ITOCHU International Inc., serving in that
capacity since April 1991. He has held several other positions with ITOCHU
International, including Chief Operating Officer from 1989 until 1991, Executive
Vice President from 1986 until 1991 and Senior Vice President from 1982 until
1985. He also has served as a Director of ITOCHU International since 1983. Since
July 1993 Mr. Chai has served as Executive Vice President of ITOCHU Corporation,
a Japanese trading company. Other positions held at ITOCHU include Senior
Managing Director from 1991 until 1993, Managing Director from 1989 until 1991
and Director from 1986 until 1989. Since 1989 Mr. Chai has served as Managing
Director with Representation Rights. He also has served as a Director of Isuzu
Motors Limited since 1984 and as a strategic planning advisor with General
Motors Corporation throughout 1982.

GARY J. FERNANDES was elected Director in April 1991. Since January 2000 he
has served as Chief Executive Officer of GroceryWorks.com, a privately owned
home fulfillment internet service with warehouse and distribution facilities,
currently enabling people to purchase groceries over the Internet.
Mr. Fernandes was a partner in Convergent Partners, Ltd., a venture capital
partnership, from January to December 1999. He has served as a Director of John
Wiley & Sons, Inc. since April 1988 and of

41
<PAGE>
Paging Network, Inc. since March 1999. Mr. Fernandes has held the position of
Vice Chairman, Senior Vice President and Director of Electronic Data Systems
Corporation, an information technology service company, from 1996 until 1996,
1984 until 1996 and 1981 until 1998, respectively. From 1995 until 1998 he
served as Director and Chairman of A.T. Kearney, Inc. He is Governor of the Boys
and Girls Clubs of America and Director of the Boys and Girls Clubs of Greater
Dallas, Inc.

MASAAKI KAMATA was elected Director in March 1991. He has held several
positions with Seven-Eleven Japan, including Director since 1978, Vice Chairman
since 1997, Executive Vice President from 1992 until 1997, Senior Managing
Director from 1989 until 1992, Managing Director from 1985 until 1989 and
employee since 1973. Since 1989 he has served as Director, and since 1992 as
President, of Seven-Eleven (Hawaii), Inc. He has served as Director and
Treasurer of IYG Holding since 1990.

KAZUO OTSUKA was elected Director in March 1991. Since 1986 he has served as
General Manager, Corporate Development, for Ito-Yokado, and from 1982 until 1986
as Manager, Corporate Development. He has also served as assistant to
Mr. Masatoki Ito, from 1978 until 1982, and has been employed by Ito-Yokado
since 1975. He has served as Assistant Secretary of IYG Holding since 1990.

ASHER O. PACHOLDER was elected Director in March 1991. Since February 1995
he has served as Chairman of the Board and Chief Financial Officer of ICO, Inc.,
an oil field service company, and since 1984 has served as Chairman of the Board
and Managing Director of Pacholder Associates, Inc., an investment advisory
firm.

NOBUTAKE SATO was elected Director in March 1991. He has held several
positions with Ito-Yokado, including Director since 1977, Executive Vice
President since 1993, Chief Financial Officer from 1996 until 1998, Senior
Managing Director from 1985 until 1993 and Managing Director from 1983 until
1985. Mr. Sato has been an employee of Ito-Yokado since 1964. He serves on the
board of directors of several companies, including Denny's Japan Co., Ltd. since
1973, Managing Co., Ltd. since 1982, Oshman's Japan Co., Ltd since 1984 and
Marudai Co., Ltd. since 1989. Mr Sato was appointed President of Urawa Building
Co., Ltd. in 1985, of Nitsa Systems Kaihatsu Co., Ltd. in 1986 and of Waiaru
Kiahatsu Co., Ltd. in 1988 and still serves in those positions. He has served as
Director and Vice President of IYG Holding since 1990.

RODNEY A. BREHM has served as a Senior Vice President since January 1999.
Previously he served as the Senior Vice President, Chesapeake Division from
May 1998 until December 1998 and as the Senior Vice President, Southwest
Division from May 1997 until April 1998. From May 1996 until April 1997, Mr.
Brehm served as our Senior Vice President, Distribution, from June 1993 until
April 1996 as our Senior Vice President, Distribution and Foodservice, from
February 1992 until June 1993 as Vice President, Merchandising and from 1990
until 1992 as Vice President, Marketing. For 7-Eleven-Registered Trademark-
Stores he served as Vice President, Northwest Region from 1989 unil 1990 and as
Division Manager, Central Pacific Division from 1979 until 1986. Mr. Brehm also
served as our National Marketing Manager from 1986, until 1989. He has been an
employee since 1972.

GARY ROSE has served as Senior Vice President, Merchandising since May 1998.
Mr. Rose previously has served as Vice President, Non-Foods Merchandising from
May 1997 until April 1998, and as Vice President, Gasoline and Environmental
Services from May 1995 until April 1997. From January 1991 until April 1995 he
served as our National Gasoline Manager, and from November 1987 until
January 1991 as Manager, East/West Gasoline. Mr. Rose has been an employee since
1968.

EZRA SHASHOUA has served as Chief Financial Officer since May 2000, as Vice
President since May 1, 1999 and as Treasurer since April 1998. He previously
served as Assistant General Counsel from December 1989 until April 1998, and has
been an employee since 1982.

BRYAN F. SMITH, JR. has been our Senior Vice President and General Counsel
since May 1995. From August 1992 until April 1995 Mr. Smith served as Vice
President and General Counsel, from January 1990 until July 1992 as Assistant
General Counsel, and from January 1987 until December 1989 as Associate General
Counsel. Mr. Smith has been an employee since 1980.

42
<PAGE>
DONALD E. THOMAS has served as Chief Accounting Officer since May 2000 and
as Vice President and Controller since May 1997. Mr. Thomas served as Controller
from August 1995 until April 30, 1997, and as Assistant Controller from
January 1993 to July 1995. He has been an employee since 1993. Prior to his
employment with us, Mr. Thomas served as Financial Manager for The Trane Company
from April 1992 until December 1992, as Senior Manager, Audit Department,
Deloitte & Touche from January 1990 until March 1992, and as an employee of
Deloitte & Touche, from 1989 to 1992.

43
<PAGE>
PRINCIPAL SHAREHOLDERS

The following table sets forth information regarding the beneficial
ownership of the outstanding common stock of 7-Eleven, Inc. as of May 1, 2000
by:

- each director and executive officer of 7-Eleven,

- all directors and executive officers as a group, and

- each owner of more than 5% of the equity securities of 7-Eleven.

The percentages specified below are based on 104,761,730 shares of common
stock outstanding as of May 1, 2000 and 114,761,730 shares of common stock
outstanding after the offering. Unless otherwise noted, the address for each
director and executive officer of 7-Eleven is c/o 7-Eleven, Inc., 2711 North
Haskell Avenue, Dallas, Texas 75204-2506.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING
--------------------- -------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------ ---------- -------- -------------- --------
<S> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Masatoshi Ito(1).................................. 402,523 * 402,523 *
Toshifumi Suzuki(2)............................... 201,262 * 201,262 *
James W. Keyes(3)................................. 128,000 * 128,000 *
Clark J. Matthews, II(4).......................... 264,608 * 264,608 *
Masaaki Asakura(5)................................ 2,000 * 2,000 *
Yoshitami Arai.................................... 7,402 * 7,402 *
Timothy N. Ashida................................. 6,000 * 6,000 *
Jay W. Chai(6).................................... 0 * 0 *
Gary J. Fernandes................................. 13,553 * 13,553 *
Masaaki Kamata(7)................................. 22,443 * 22,443 *
Kazuo Otsuka(8)................................... 7,682 * 7,682 *
Asher O. Pacholder(9)............................. 9,717 * 9,717 *
Nobutake Sato(10)................................. 21,682 * 21,682 *
Rodney A. Brehm(11)............................... 46,770 * 46,770 *
Gary Rose(12)..................................... 24,476 * 24,476 *
Ezra Shashoua(13)................................. 22,459 * 22,459 *
Bryan F. Smith, Jr.(14)........................... 54,794 * 54,794 *
Donald E. Thomas(15).............................. 23,396 * 23,396 *
All executive officers and directors as a group
(18 persons)(16)................................ 1,258,767 1.2 1,258,767 1.1
5% OWNERS:
IYG Holding Company............................... 76,124,428 72.7 76,124,428 66.3
4-1-4, Shibakoen
Minato-ku, Tokyo Japan 105
Ito-Yokado Co., Ltd............................... 7,355,415(17) 7.0 7,355,415(17) 6.4
4-1-4, Shibakoen
Minato-ku, Tokyo Japan 105
Seven-Eleven Japan Co., Ltd....................... 7,066,967(17) 6.7 7,066,967(17) 6.2
4-1-4, Shibakoen
Minato-ku, Tokyo Japan 105
</TABLE>

- ------------------------

* Holdings are less than one percent.

(1) Excludes the shares held by IYG Holding, of which Mr. Ito serves as Chairman
of the Board and Director. Mr. Ito disclaims ownership of the shares held by
IYG Holding.

44
<PAGE>
(2) Excludes the shares held by IYG Holding, of which Mr. Suzuki serves as
President and Director. Mr. Suzuki disclaims beneficial ownership of the
shares held by IYG Holding.

(3) Includes 4,000 shares held directly and options to acquire 124,000 shares
pursuant to the 1995 Stock Incentive Plan which are currently exercisable.

(4) Includes 30,208 shares held directly and options to acquire 234,400 shares
pursuant to the 1995 Stock Incentive Plan which are currently exercisable.

(5) Held in a brokerage account for Mr. Asakura's daughter. Mr. Asakura
disclaims beneficial ownership of these shares.

(6) Mr. Chai owns no shares directly. Excludes 2,439,783 shares held by ITC
Asset Management, a wholly-owned subsidiary of ITOCHU International, Inc.,
of which Mr. Chai is Chairman of the Board and Chief Executive Officer. Also
excludes 1,639,783 shares held by ITOCHU Corporation, of which Mr. Chai is
Executive Vice President. Mr. Chai disclaims beneficial ownership of all
shares owned by ITC Management and ITOCHU Corporation. Mr. Chai disclaims
beneficial ownership of these shares.

(7) Excludes the shares held by IYG Holding, of which Mr. Kamata serves as a
Director and as Treasurer. Also excludes 7,066,967 shares acquirable by
Seven-Eleven Japan upon conversion of the 1995 QUIDS. Mr. Kamata is the Vice
Chairman and a Director of Seven-Eleven Japan. Mr. Kamata disclaims
beneficial ownership of the shares held or attributable to IYG Holding and
Seven-Eleven Japan.

(8) Excludes the shares held by IYG Holding, of which Mr. Otsuka serves as
Assistant Secretary. Also excludes 7,355,415 shares acquirable by Ito-Yokado
upon conversion of the 1995 QUIDS. Mr. Otsuka is a General Manager of
Ito-Yokado. He disclaims beneficial ownership of the shares held by, or
which are attributable to, IYG Holding and Ito-Yokado.

(9) Dr. Pacholder is a member of the general partner of a limited partnership
which holds 40,740 shares. Of these, Dr. Pacholder disclaims beneficial
ownership of all but 4,074 shares representing his beneficial interest by
the shares held by the limited partnership.

(10) Excludes the shares held by IYG Holding, of which Mr. Sato serves as Vice
President and a Director. Also excludes 7,355,415 shares acquirable by
Ito-Yokado upon conversion of the 1995 QUIDS. Mr. Sato serves as Executive
Vice President and as a Director of Ito-Yokado. Mr. Sato disclaims
beneficial ownership of the shares held by, or which are attributable to,
IYG Holding and Ito-Yokado.

(11) Includes 1,666 shares held directly and options to acquire 45,104 shares
pursuant to the 1995 Stock Incentive Plan which are currently exercisable.

(12) Includes 200 shares held directly and options to acquire 24,276 shares
pursuant to the 1995 Stock Incentive Plan which are currently exercisable.

(13) Includes 139 shares held directly, 2,000 shares held in a trust for the
benefit of Mr. Shashoua's children, and options to acquire 20,320 shares
pursuant to the 1995 Stock Incentive Plan which are currently exercisable.

(14) Includes 50 shares held directly and options to acquire 54,744 shares
pursuant to the 1995 Stock Incentive Plan which are currently exercisable.

(15) Consists of options to acquire 23,396 shares pursuant to the 1995 Stock
Incentive Plan which are currently exercisable.

(16) Excludes the shares owned by IYG Holding and acquirable by Ito-Yokado and
Seven-Eleven Japan which may be attributable to one or more of Messrs. Ito,
Suzuki, Sato, Kamata and Otsuka and the shares owned by ITC Asset Management
and ITOCHU Corporation that may be attributable to Mr. Chai.

(17) Reflects shares to be acquired upon conversion of the 1995 QUIDS.

45
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We currently have a commercial paper facility under which we can issue up to
$650 million. The commercial paper facility is unconditionally guaranteed by
Ito-Yokado.

On March 16, 2000, IYG Holding purchased 22,736,842 newly issued shares of
our common stock for $540 million, or $23.75 per share, representing a premium
of $10.75, or 83%, over the stock's closing price on February 29, 2000, the
trading day prior to the public announcement of the sale. IYG Holding now owns
72.7% of our outstanding common stock.

In November 1995, we issued $300 million principal amount of QUIDS, with
Ito-Yokado purchasing $153 million and Seven-Eleven Japan purchasing
$147 million. An additional $80 million principal amount of QUIDS were issued in
February 1998 to Ito-Yokado and Seven-Eleven Japan, which purchased
$40.8 milion and $39.2 million, respectively. Interest on both series of QUIDS
is payable quarterly at a rate of 4.5% per annum, and in 1999 we paid aggregate
interest to Ito-Yokado of $8.9 million and to Seven-Eleven Japan of
$8.5 million on both series of QUIDS. We may defer the interest payments for up
to 20 consecutive quarters. The 1995 QUIDS are convertible in whole or in part
into a total of 14,422,383 shares of our common stock at a conversion price of
$20.80 per share. Beginning in 2001, the 1998 QUIDS are potentially convertible
in whole or in part into a total of 6,501,686 shares of our common stock, at a
conversion price of $12.3045 per share, if certain conditions with regard to the
closing price of our common stock are met.

Seven-Eleven Japan operates over 8,000 7-Eleven-Registered Trademark- stores
in Japan under an area license agreement. In 1988, we entered into a financing
arrangement pursuant to which we pledged the royalty stream from the area
license agreement as collateral for the financing. In anticipation of our
obligations being satisfied earlier than the stated term of that agreement, we
entered into an additional financing related to subsequent royalties which,
pursuant to the terms of the original financing, will be at a reduced
percentage. In 1999, Seven-Eleven Japan paid royalties under this arrangement
totaling $55.7 million.

In addition, Seven-Eleven (Hawaii), Inc., our area licensee in Hawaii, is a
subsidiary of Seven-Eleven Japan and operates 51 stores in Hawaii. During 1999,
Seven-Eleven (Hawaii), Inc. paid us $73,603 in connection with the area license
arrangement.

As of March 31, 2000, the Savings and Profit Sharing Plan, our 401(k)
defined contribution plan, leased a total of 560 operating convenience stores in
addition to 16 other properties. We paid rent of $16.4 million to the Savings
and Profit Sharing Plan for the three months ended March 31, 2000. During the
the three months ended March 31, 2000, the Savings and Profit Sharing Plan sold
9 locations to third parties, 7 of which were leased to us at the time of the
sale which leases were assigned to the buyer and one of which was terminated
upon payment of $54,396 in termination fees. In addition, we purchased nine
properties from the Savings and Profit Sharing Plan in 1999 for $4.3 million.

Mr. Chai is Chairman and Chief Executive Officer of ITOCHU
International Inc. and Executive Vice President of ITOCHU Corporation. Both
ITOCHU International and ITOCHU Corporation are general trading companies and
each has a 10% direct equity interest in Prime Deli, Inc., a company that
operates a fresh food commissary for us, serving approximately 283
7-Eleven-Registered Trademark- stores in Texas. During 1999, we purchased fresh
food products from this commissary for approximately $6.5 million. In addition,
SIG Logistics, which is partially owned by ITOCHU Corporation and ITOCHU
International, operated six combined distribution centers in Florida and
Virginia that served a total of 847 7-Eleven-Registered Trademark- stores.
During 1999 the fees paid to SIG Logistics totaled approximately $9.3 million.
In addition, Mr. Chai has no personal material interest in any transactions
between ITOCHU Corporation, ITOCHU International Inc. and us other than as a
director and/or officer of such companies.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

Our authorized capital stock consists of 1,000,000,000 shares of common
stock, $.0001 par value per share, and 5,000,000 shares of preferred stock, $.01
par value per share. As of March 31, 2000, we had 104,759,317 shares of common
stock and no shares of preferred stock outstanding. We also have outstanding
debt securities that are potentially convertible into a maximum of 20,924,069
shares of common stock. See "Description of Indebtedness--Convertible Quarterly
Income Debt Securities" for more information.

COMMON STOCK

The holders of common stock are entitled to one vote for each share held on
all matters submitted to a vote of shareholders. Cumulative voting in the
election of directors is not permitted, and the holders of a majority of the
number of outstanding shares of common stock entitled to vote in any election of
directors may elect all of the directors standing for election.

Holders of common stock are entitled to receive ratably such dividends, if
any, as may be declared by the Board of Directors, subject to any preferential
dividend rights of outstanding preferred stock. Upon a liquidation, dissolution
or winding up of 7-Eleven, holders of common stock are entitled to receive
ratably the net assets available after the payment of all our debts and other
liabilities and subject to the prior rights of any outstanding preferred stock.
The holders of our common stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of common stock are, and the shares
being offered in this offering, will be, when issued and paid for, duly
authorized, fully paid, validly issued and nonassessable.

PREFERRED STOCK

Our Board of Directors is authorized, without any further action by our
shareholders, to issue preferred stock in one or more series and to fix the
voting rights and designations, preferences, limitations and relative rights and
qualifications, limitations or restrictions and certain other rights and
preferences of the preferred stock. Satisfaction of any dividend preferences of
outstanding preferred stock would reduce the amount of funds available for the
payment of dividends on common stock. Also, holders of preferred stock would
normally be entitled to receive a preference payment in the event of any
liquidation, dissolution or winding-up by us before any payment is made to the
holders of our common stock. Our Board of Directors can therefore issue
preferred stock with voting and conversion rights which could adversely affect
the holders of common stock. On the date of this prospectus, none of the
5,000,000 authorized shares of preferred stock are outstanding and we have no
present intention to issue any shares of preferred stock.

EXCULPATORY CHARTER PROVISIONS; LIABILITY AND INDEMNIFICATION OF OFFICERS AND
DIRECTORS

Our articles of incorporation provide that a director will not be liable to
a corporation or its shareholders for monetary damages arising from acts or
omissions in the director's capacity as a director, except for:

- a breach of the director's duty of loyalty to 7-Eleven or its
shareholders;

- an act or omission not in good faith that constitutes a breach of duty of
the director to 7-Eleven or an act or omission that involves intentional
misconduct or a knowing violation of law;

- a transaction from the which the director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope
of the director's office; or

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- an act or omission for which the liability of a director is expressly
provided by an applicable statute.

In addition, our articles of incorporation and bylaws require us to
indemnify our directors and officers, as well as individuals serving as
directors, officers or in similar positions of other entities at our request
against any and all liability and reasonable expense that may be incurred by
them in connection with or resulting from:

- any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative, arbitrative or investigative;

- an appeal on such an action, suit or proceeding; or

- an inquiry or investigation that could lead to such an action, suit or
proceeding, all of the fullest extent permitted by Texas law.

Our bylaws allow us to purchase and maintain liability, indemnification or
similar insurance. Such insurance is currently in place.

While indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, we have been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.

TEXAS BUSINESS COMBINATION LAW

We are subject to Part Thirteen of the Texas Business Corporation Act (the
"Business Combination Law"). In general, the Business Combination Law prevents
an "affiliated shareholder" (defined generally as a person that is or was within
the preceding three-year period the beneficial owner of 20% or more of the
corporation's outstanding voting shares) or its affiliates or associates from
entering into or engaging in a "business combination" with an issuing
corporation (which would include us) during the three-year period immediately
following the affiliated shareholder's acquisition of shares unless:

- before the date such person become an affiliated shareholder, the board of
directors of the issuing public corporation approves the business
combination or the acquisition of shares made by the affiliated
shareholder on such date; or

- not less than six months after the date such person became an affiliated
shareholder, the business combination is approved by the affirmative vote
of holders of at least two-thirds of the issuing public corporation's
outstanding voting shares not beneficially owned by the affiliated
shareholder or its affiliates or associates.

For purposes of the Business Combination Law, the term "business
combination" is defined generally to include:

- mergers or share exchanges;

- dispositions of assets having an aggregate value equal to 10% or more of
the market value of the assets or of the outstanding common stock or
representing 10% or more of the earning power or net income of the
corporation;

- certain issuances or transactions by the corporation that would increase
the affiliated shareholder's proportionate ownership of shares of the
corporation;

- certain liquidations or dissolutions; and

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- the receipt of tax, guarantee, loan or other financial benefits by an
affiliated shareholder other than proportionately as a shareholder of the
corporation.

The Business Combination Law does not apply to a business combination with
an affiliated shareholder that was the beneficial owner of 20% or more of the
outstanding voting shares of the issuing public corporation on December 31,
1996, and continuously until the announcement date of the business combination;
as a result, the restrictions of the Business Combination Act would not apply to
IYG Holding, which has been the beneficial owner of more than 20% of the
outstanding Common Stock continuously since prior to December 31, 1996.

The transfer agent and registrar for our common stock is Harris Trust and
Savings Bank, and its address is Attn: Shareholder Services, 311 West Monroe
Street, Chicago, Illinois 60606.

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DESCRIPTION OF INDEBTEDNESS

BANK DEBT

We are obligated to a group of lenders under an unsecured credit agreement
that includes a $400 million revolving credit facility. A sublimit of
$150 million for letters of credit is included in the revolving credit facility.
The credit agreement also included a $225 million term loan, the balance of
which was paid in full on March 16, 2000. In addition, to the extent outstanding
letters of credit are less than the $150 million maximum, the excess
availability can be used for additional borrowings under the revolving credit
facility.

Upon expiration of the revolving credit facility in February 2002, all the
then-outstanding letters of credit must expire and may need to be replaced, and
all other amounts then outstanding will be due and payable in full. At
March 31, 2000, outstanding letters of credit under the facility totaled
$70.7 million.

Interest on the borrowings under the revolving credit facility is generally
payable quarterly and is based on a variable rate equal to the administrative
agent bank's base rate or, at our option, at a rate equal to a reserve-adjusted
Eurodollar rate plus .475% per year. A fee of .325% per year on the outstanding
amount of letters of credit is required to be paid quarterly. In addition, a
facility fee of .15% per year is charged on the aggregate amount of the credit
agreement facility and is payable quarterly.

The credit agreement contains various financial and operating covenants
which require, among other things, the maintenance of certain financial ratios
including interest and rent coverage, fixed-charge coverage and senior
indebtedness to earnings before interest, income taxes, depreciation and
amortization. The credit agreement also contains various covenants which, among
other things:

- limit our ability to incur or guarantee indebtedness or other liabilities
other than under the credit agreement;

- restrict our ability to engage in asset sales and sale/leaseback
transactions;

- restrict the types of investments we can make; and

- restrict our ability to pay cash dividends, redeem or prepay principal and
interest on any subordinated debt and certain senior debt.

COMMERCIAL PAPER

At March 31, 2000, $350 million of the $466.1 million outstanding principal
amount, net of discount, was classified as long-term debt since we intend to
maintain at least this amount outstanding during the next year. Such debt is
unsecured and is fully and unconditionally guaranteed by Ito-Yokado. Ito-Yokado
has agreed to continue its guarantee of all our commercial paper issued through
2001. While it is not anticipated that Ito-Yokado would be required to perform
under its commercial paper guarantee, in the event Ito-Yokado makes any payments
under the guarantee, we and Ito-Yokado have entered into an agreement by which
we are required to reimburse Ito-Yokado subject to restrictions in the Credit
Agreement. The weighted-average interest rate on commercial paper borrowings
outstanding at March 31, 2000 was 6.0%.

DEBENTURES

Our outstanding debentures are accounted for in accordance with SFAS
No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructuring,"
and were recorded at an amount equal to the future undiscounted cash payments,
both principal and interest. Accordingly, no interest expense will be recognized
over the life of these securities, and cash interest payments will be charged
against the recorded amount of such securities. Interest on all of the
debentures is payable in cash semiannually on June 15 and December 15 of each
year.

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The 5% First Priority Senior Subordinated Debentures, due December 15, 2003,
had an outstanding principal balance of $239.3 million at March 31, 2000, and
are redeemable at any time at our option at 100% of the principal amount.

The Second Priority Senior Subordinated Debentures were issued in three
series, and each series is redeemable at any time at the Company's option at
100% of the principal amount and are described as follows:

- 4 1/2% Series A Debentures, due June 15, 2004, had an outstanding
principal balance of $111.4 million at March 31, 2000;

- 4% Series B Debentures, due June 15, 2004, had an outstanding principal
balance of $18.5 million at March 31, 2000; and

- 12% Series C Debentures, due June 15, 2009, were redeemed by us in
March 1998 with a portion of the proceeds from the issuance to Ito-Yokado
and Seven-Eleven Japan of $80 million principal amount of QUIDS due 2013.
The 12% Debentures had an outstanding principal balance of $21.8 million
when they were redeemed.

The debentures contain certain covenants that, among other things:

- limit the payment of dividends and certain other restricted payments by us
and our subsidiaries;

- require the purchase by us of the debentures at the option of the holder
upon a change of control;

- limit additional indebtedness;

- limit future exchange offers;

- limit the repayment of subordinated indebtedness;

- require board approval of certain asset sales;

- limit transactions with certain stockholders and affiliates; and

- limit consolidations, mergers and the conveyance of all or substantially
all of our assets.

The debentures are subordinate to the borrowings outstanding under the
credit agreement and to previously outstanding mortgages and notes that are
either backed by specific collateral or are general unsecured, unsubordinated
obligations. The Second Priority Debentures are subordinate to the First
Priority Debentures.

YEN LOANS

In March 1988, we monetized our future royalty payments from Seven-Eleven
Japan through a loan that is nonrecourse to us as to principal and interest. The
original amount of the yen-denominated debt was 41 billion yen, which equals
approximately $327 million at the exchange rate in March 1988 and is
collateralized by our Japanese trademarks and a pledge of the future royalty
payments. By designating its future royalty receipts during the term of the loan
to service the monthly interest and principal payments, we have hedged the
impact of future exchange rate fluctuations. As a result of the hedge with the
Seven-Eleven Japan royalty, the 1988 Yen Loan and related interest are converted
at 125.35 yen to one U.S. dollar. Payment of the debt is required no later than
March 2006 through future royalties from Seven-Eleven Japan. We believe it is a
remote possibility that there will be any principal balance remaining at that
date because current royalty projections suggest the 1988 Yen Loan could be
repaid as early as 2001. One year following the final repayment of the 1988 Yen
Loan, royalty payments from Seven-Eleven Japan will be reduced by approximately
two-thirds in accordance with the terms of the license agreement. The interest
rate was 3.10% as of March 31, 2000.

In April 1998, funding occurred on an additional yen-denominated loan for
12.5 billion yen or $96.5 million of proceeds. The 1998 Yen Loan has an interest
rate of 2.325% and will be repaid from the Seven-Eleven Japan area license
royalty income after the 1988 Yen Loan has been retired, which is currently
expected in 2001. Both principal and interest of the loan are nonrecourse to us.
We utilized a

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short-term put option to lock-in the exchange rate and avoid the risk of foreign
currency exchange loss. The put option was financed by selling a call option
with the same yen amount and maturity as the put option. Due to market
conditions, the call option was not exercised and, as a result, income of
$1.6 million was recognized during 1998. Proceeds of the loan were designated
for general corporate purposes. As a result of the hedge with the Seven-Eleven
Japan royalty, the 1998 Yen Loan and related interest are converted at 129.53
yen to one U.S. dollar.

CITYPLACE DEBT

Cityplace Center East Corporation, our subsidiary, constructed the
headquarters tower, parking garages and related facilities of the Cityplace
Center development and is currently obligated to The Sanwa Bank, Limited, New
York Branch, which has a lien on the financed property. The debt with Sanwa
requires monthly payments of principal and interest based on a 25-year
amortization at 7.5%, with the remaining principal due on March 1, 2005.

We are occupying part of the building as our corporate headquarters and the
balance is leased to third parties. As additional consideration through the
extended term of the debt, CCEC will pay to Sanwa an amount that it receives
from us which is equal to the net sublease income that we receive on the
property and 60% of the proceeds, less $275 million and permitted costs, upon a
sale or refinancing of the building.

MATURITIES

Long-term debt maturities assume the continuance of the commercial paper
program and the Ito-Yokado guarantee. As of March 31, 2000, long-term debt
maturities, for the twelve month periods ending March 31, which include capital
lease obligations as well as SFAS No. 15 Interest accounted for in the recorded
amount of the debentures, are as follows (dollars in millions):

<TABLE>
<S> <C>
2001........................................................ $ 96.4
2002........................................................ 63.5
2003........................................................ 77.6
2004........................................................ 286.7
2005........................................................ 164.3
Thereafter.................................................. 704.8
--------
$1,393.3
========
</TABLE>

QUIDS

In November 1995, we issued $300 million principal amount 1995 QUIDS to
Ito-Yokado and Seven-Eleven Japan. The 1995 QUIDS have an interest rate of 4.5%
and give us the right to defer interest payments thereon for up to 20
consecutive quarters. The holder of the 1995 QUIDS can convert the debt anytime
into a maximum of 14,422,383 shares of our common stock. The conversion rate
represents a premium to the market value of our common stock at the time of
issuance of the 1995 QUIDS. As of December 31, 1999, no shares had been issued
as a result of debt conversion.

In February 1998, we issued $80 million principal amount of 1998 QUIDS,
which have a 15-year life, no amortization and an interest rate of 4.5%. The
instrument gives us the right to defer interest payments thereon for up to 20
consecutive quarters. The debt mandatorily converts into 6,501,686 shares of our
common stock if our stock trades above $12.30 for 20 of 30 consecutive trading
days after the fifth anniversary of issuance, or our stock trades above $14.75
for 20 of 30 consecutive trading days after the third anniversary of issuance
and before the fifth anniversary. A portion of the proceeds from the 1998 QUIDS
was used to redeem all our 12% Debentures at par and to fund partial purchases
of its other debentures. The 1998 QUIDS, together with the 1995 QUIDS, are
subordinate to all existing debt.

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SHARES ELIGIBLE FOR FUTURE SALE

SALES OF RESTRICTED SHARES; OPTIONS

All of the shares of common stock held by our affiliates may generally only
be sold in compliance with the limitations of Rule 144. In general, under
Rule 144 as currently in effect, a person or persons whose shares are
aggregated, including an affiliate, who has beneficially owned restricted stock
for at least one year is entitled to sell, within any three-month period, a
number of shares of stock that does not exceed the greater of:

- one percent of the then outstanding shares of common stock, or

- the average weekly trading volume in the common stock during the four
calendar weeks preceding the date on which notice of that sale is filed.

In addition, under Rule 144(k), a person who is not an affiliate and has not
been an affiliate for at least three months prior to the sale and who has
beneficially owned shares of restricted stock for at least two years may resell
those shares without compliance with the foregoing requirements. In meeting the
one and two year holding periods described above, a holder of restricted stock
can include the holding periods of prior owners who were not an affiliate.

Additional shares of our common stock are available for future grants under
our 1995 Stock Incentive Plan and our Stock Compensation Plan for Non-Employee
Directors. We have filed one or more registration statements on Form S-8 under
the Securities Act to register all shares of common stock subject to outstanding
stock options and common stock issuable pursuant to our benefit plans that do
not qualify for an exemption under Rule 701 from the registration requirements
of the Securities Act. Shares covered by these registration statements will be
eligible for sale in the public markets subject to the lock-up agreements, to
the extent applicable.

LOCK-UP AGREEMENTS

We, our executive officers, directors, IYG Holding, Ito-Yokado and
Seven-Eleven Japan have agreed, pursuant to lock-up agreements, for a period of
90 days from the date of this prospectus not to dispose of or hedge any shares
of our common stock or any securities convertible into or exchangeable into our
common stock, without the prior consent of Salomon Smith Barney Inc. Salomon
Smith Barney Inc., in its sole discretion, may release any of the securities
subject to these lock-up agreements at any time without notice.

Following the lock-up period, approximately 91,805,578 shares of common
stock, including 526,240 shares issuable pursuant to stock options immediately
exercisable or exercisable prior to the termination of the lock-up period and
shares issuable upon exercise of the QUIDS, will be eligible for sale, subject
to compliance with Rule 144 of the Securities Act as described above.

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CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS OF COMMON STOCK

The following is a summary of the material United States federal income and
estate tax consequences of the ownership and disposition of common stock
generally application to non-United States holders. Subject to the discussion
below under "Estate Tax," a non-United States holder is any beneficial owner of
common stock that, for United States federal income tax purposes, is a
non-resident alien individual, a foreign corporation, a foreign partnership or a
foreign estate or trust as such terms are defined in the Internal Revenue Code
of 1986, as amended. This discussion is based on the Internal Revenue Code,
existing, proposed and temporary regulations promulgated thereunder, and
administrative and judicial interpretations, all as of the date of this
prospectus, and all of which are subject to change either retroactively or
prospectively. This discussion does not address all aspects of United States
federal and estate taxation that may be relevant to non-United States holders in
light of their particular circumstances and does not address any taxation
consequences arising under the laws of any state, local or foreign taxing
jurisdiction or the application of any particular tax treaty. Further, it does
not consider non-United States holders subject to special tax treatment under
the United States federal income tax laws, including banks, insurance companies,
dealers in securities and holders of securities held as part of a "straddle,"
"hedge" or "conversion transaction." Prospective investors are urged to consult
their tax advisors regarding the United States federal, state and local income
and other tax consequences, and the non-United States tax consequences, of
owning and disposing of common stock.

DIVIDENDS

Subject to the discussion below, including the discussion of backup
withholding, any dividend paid to a non-United States holder generally will be
subject to United States withholding tax at a rate of 30% of the gross amount of
the dividend or such lower rate as may be specified by any applicable tax
treaty. For purposes of determining whether tax is required to be withheld under
United State Treasury Regulations currently in effect we ordinarily will presume
that dividends paid to a holder with an address in a foreign country are paid to
a resident of such country absent knowledge that such presumption is not
warranted. Under such regulations, dividends paid to a holder with an address
within the United States generally will be presumed to be paid to a holder who
is not a non-United States holder and will not be subject to the 30% (or lower
treaty rate) withholding tax, unless we have actual knowledge that the holder is
a non-United States holder. Under final United States Treasury Regulations,
scheduled to become effective January 1, 2001, however, a non-United States
holder who wishes to claim the benefit of an applicable treaty rate would be
required to satisfy applicable certification and other requirements, which would
include the requirement that the non-United States holder file with us the
United State Internal Revenue Service Form W-8 which provides the holder's name
and address. In the case of a non-United States holder that is a foreign
partnership, the certification requirements would generally be applied to the
partners of the partnership.

Dividends received by a non-United States holder that are effectively
connected with a United States trade or business conducted by such a non-United
States holder or, if a tax treaty applies, that are attributable to a permanent
establishment in the Unites States maintained by such non-United States holder
are exempt from withholding tax if the non-United States holder files an IRS
Form W-8ECI (or, prior to January 1, 2001, an IRS Form 4224) with the payor.
However, such effectively connected dividends are subject to regular United
States federal income tax. Effectively connected dividends are subject to
regular United States federal income tax. Effectively connected dividends
received by a corporate non-United States holder may be subject to an additional
"branch profits tax" at a rate of 30%, or such lower rates as may be specified
by an applicable tax treaty, of such corporate non-United States holder's
effectively connected earnings and profits for the taxable year, subject to
certain adjustments.

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A non-United States holder eligible for a reduced rate of United States
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the IRS.

GAIN ON DISPOSITION OF COMMON STOCK

A non-United States holder generally will not be subject to United States
federal income tax with respect to gain realized upon the sale or other
disposition of common stock unless: (1) such gain is effectively connected with
a United States trade or business of the non-United States holder (or, if a tax
treaty applies, attributable to a permanent establishment in the United States
maintained by such non-United States holder); (2) the non-United States holder
is an individual who holds the common stock as a capital asset, is present in
the United States for a period or periods aggregating 183 days or more during
the taxable year in which such sale or disposition occurs, and certain other
conditions are met; (3) the non-United States holder is an individual subject to
tax pursuant to the provisions of United States tax law applicable to certain
United States expatriates; or (4) we are or have been a "United States real
property holding corporation" for United States federal income tax purposes at
any time within the shorter of the five-year period preceding such disposition
of such holder's common stock and such holder's holding period and certain other
conditions are met. If we are or have been a United States real property holding
corporation, a non-United States holder will generally not be subject to U.S.
federal income tax on gain recognized on a sale or other disposition of our
common stock provided that (1) the non-United States holder does not hold, and
has not held during certain periods, directly or indirectly, more than 5% of our
outstanding common stock and (2) our common stock is, and continues to be,
traded on an established securities market for U.S. federal income tax purposes.
We believe that our common stock will be traded on an established securities
market for this purpose in any quarter during which it is included for quotation
on the Nasdaq National Market. If we are, or have been during certain periods, a
U.S. real property holding corporation, and the foregoing exception does not
apply, a non-United States holder will be required for U.S. federal income tax
purposes to treat gain realized on any sale or other disposition of our common
stock as gain that is effectively connected with the conduct of a United States
trade or business and will be subject to a withholding tax, generally at a rate
of 10% of the proceeds. Any amount so withheld would be creditable against a
non-United States holder's federal income tax liability.

BACKUP WITHHOLDING AND INFORMATION REPORTING

Generally, we must report to the IRS the amount of dividends paid, the name
and address of the recipient, and the amount, if any, of tax withheld. A similar
report is sent to the recipient. Pursuant to tax treaties or other agreements,
the IRS may make its reports available to tax authorities in the recipient's
country of residence.

For payments made before January 1, 2001, backup withholding generally will
not apply to dividends paid to holders at an address outside the United States
unless we have knowledge that the holder is a United States person. Unless we
have actual knowledge that a holder is a non-United States holder, dividends
paid during such period to a holder at an address within the United States may
be subject to backup withholding at a rate of 31% if the holder (1) is not a
corporation or other "exempt recipient" as defined in Treasury Regulations and
(2) fails to provide a correct taxpayer identification number and other
information to us. For payments made after December 31, 2000, non-United States
holder that is not an "exempt recipient" generally will be subject to backup
withhlding at a rate of 31%, rather than withholding at a 30% rate or lower
treaty rate discussed above, unless such non-United States holder certifies as
to its foreign status, which certification may be made on IRS Form W-8.

Proceeds from the disposition of common stock by a non-United States holder
effected by or through a United States office of a broker will be subject to
information reporting and to backup

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withholding at a rate of 31% of the gross proceeds unless such non-United States
holder certifies under penalties of perjury as to, among other things, its
address and status as a non-United States holder or otherwise establishes an
exemption. Generally, United States information reporting and backup withholding
will not apply to a payment of disposition proceeds if the transaction is
effected outside the United States by or through a non-United States office of a
broker. However, if such broker is, for United States federal income tax
purposes, a United States person, a "controlled foreign corporation," a foreign
person who derives 50% or more of its gross income for certain periods from the
conduct of a United States trade or business, or, for payments after
December 31, 2000, a partnership with certain connections to the United States,
information reporting but not backup withholding will apply unless (1) such
broker has documentary evidence in its files that the holder is a non-United
States holder and certain other conditions are met or (2) the holder otherwise
establishes an exemption. Under Final United States Treasury Regulations,
effective January 1, 2001, a non-United States holder generally would not be
subject to backup withholding if the beneficial owner certifies to such owner's
foreign status on a valid Form W-8 filed with us.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of United States
income taxes, a refund may be obtained, provided the required documents are
filed with the IRS.

ESTATE TAX

An individual non-United States holder who is treated as the owner of common
stock at the time of such individual's death or has made certain lifetime
transfers of an interest in common stock will be required to include the value
of such common stock in such individual's gross estate for United States federal
estate tax purposes and may be subject to United States federal estate tax,
unless an applicable tax treaty provides otherwise. For United States federal
estate tax purposes, a "non-United States holder" is an individual who is
neither a citizen nor a domiciliary of the United States. Whether an individual
is considered a "domiciliary" of the United States for estate tax purposes is
generally determined on the basis of all of the facts and circumstances.

56
<PAGE>
UNDERWRITING

Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and 7-Eleven has agreed to sell to such underwriter, the number of
shares set forth opposite the name of such underwriter.

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ----------
<S> <C>
Salomon Smith Barney Inc....................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Deutsche Bank Securities Inc................................
Donaldson, Lufkin & Jenrette................................
Goldman, Sachs & Co.........................................
----------
Total.....................................................
----------
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.

The underwriters, for whom Salomon Smith Barney Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated are acting as representatives, propose to
offer some of the shares directly to the public at the public offering price set
forth on the cover page of this prospectus and some of the shares to certain
dealers at the public offering price less a concession not in excess of
$[ ] per share. The underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share on sales to certain other dealers.
If all of the shares are not sold at the initial offering price, the
representatives may change the public offering price and the other selling
terms.

7-Eleven has granted to the underwriters an option, exercisable for 30 days
from the date of this prospectus, to purchase up to 1,500,000 additional shares
of common stock at the public offering price less the underwriting discount. The
underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent such
option is exercised, each underwriter will be obligated, subject to certain
conditions, to purchase a number of additional shares approximately
proportionate to such underwriter's initial purchase commitment.

7-Eleven, its executive officers and directors, IYG Holding, Ito-Yokado and
Seven-Eleven Japan have agreed that, for a period of 90 days from the date of
this prospectus, they will not, without the prior written consent of Salomon
Smith Barney Inc., dispose of or hedge any shares of common stock of 7-Eleven or
any securities convertible into or exchangeable for common stock. Salomon Smith
Barney Inc. in its sole discretion may release any of the securities subject to
these lock-up agreements at any time without notice.

The common stock is quoted on the Nasdaq National Market System under the
symbol "SVEV".

The following table shows the underwriting discounts and commissions to be
paid to the underwriters by 7-Eleven in connection with this offering. These
amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares of common stock.

<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share............................................ $ $
Total................................................ $ $
</TABLE>

57
<PAGE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell shares of common stock in the open market.
These transactions may include over-allotment, syndicate covering transactions
and stabilizing transactions. Over-allotment involves syndicate sales of common
stock in excess of the number of shares to be purchased by the underwriters in
the offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of common stock
made for the purpose of preventing or retarding a decline in the market price of
the common stock while the offering is in progress.

The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.

Any of these activities may cause the price of the common stock to be higher
than the price that otherwise would exist in the open market in the absence of
such transactions. These transactions may be effected on the Nasdaq National
Market or in the over-the-counter market, or otherwise and, if commenced, may be
discontinued at any time.

In addition, in connection with this offering, some of the underwriters may
engage in passive market making transactions in the common stock on the Nasdaq
National Market, prior to the pricing and completion of the offering. Passive
market making consists of displaying bids on the Nasdaq National Market no
higher than the bid prices of independent market makers and making purchases at
prices no higher than those independent bids and effected in response to order
flow. Net purchases by a passive market maker on each day are limited to a
specified percentage of the passive market maker's average daily trading volume
in the common stock during a specified period and must be discontinued when such
limit is reached. Passive market making may cause the price of the common stock
to be higher than the price that otherwise would exist in the open market in the
absence of such transactions. If passive market making is commenced, it may be
discontinued at any time.

7-Eleven estimates that its portion of the total expenses of this offering
will be $ .

The representatives have performed certain investment banking and advisory
services for 7-Eleven from time to time for which they have received customary
fees and expenses. The representatives may, from time to time, engage in
transactions with and perform services for 7-Eleven in the ordinary course of
their business. Citibank, N.A. and Deutsche Bank AG, affiliates of Salomon Smith
Barney Inc. and Deutsche Bank Securities Inc., respectively, provide commercial
banking services to 7-Eleven.

7-Eleven has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the underwriters may be required to make in respect of
any of those liabilities.

LEGAL MATTERS

The validity of the shares offered hereby and certain matters of Texas law
has been passed upon for us by Vinson & Elkins L.L.P., Dallas, Texas. Certain
legal matters will be passed upon for the underwriters by Shearman & Sterling,
New York, New York. Shearman & Sterling has in the past provided and may
continue to provide legal services to us and to IYG Holding's shareholders.

EXPERTS

The financial statements as of December 31, 1998 and 1999 and for each of
the three years in the period ended December 31, 1999, included in this
prospectus and incorporated in this prospectus by reference to the Annual Report
on Form 10-K for the year ended December 31, 1999, have been so

58
<PAGE>
included and incorporated in reliance on the reports of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.

INDEPENDENT ACCOUNTANTS

With respect to the unaudited condensed consolidated financial information
for the three month periods ended March 31, 1999 and 2000, included in this
Prospectus and incorporated in this Prospectus by reference to the Quarterly
Report on Form 10-Q for the three months ended March 31, 2000,
PricewaterhouseCoopers LLP reported that they have applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate report dated May 1, 2000 appearing herein, states that
they did not audit and they do not express an opinion on that unaudited
condensed consolidated financial information. Accordingly, the degree of
reliance on their report on such information should be restricted in light of
the limited nature of the review procedures applied. PricewaterhouseCoopers LLP
is not subject to the liability provisions of Section 11 of the Securities Act
of 1933 for their report on the unaudited condensed consolidated financial
information because that report is not a "report" or a "part" of the
registration statement prepared or certified by PricewaterhouseCoopers LLP
within the meaning of Sections 7 and 11 of the Act.

WHERE YOU CAN FIND MORE INFORMATION

This prospectus constitutes a part of the registration statement on
Form S-3, together with all amendments, supplements, schedules and exhibits to
the registration statement, referred to as the registration statement, which we
have filed with the Securities and Exchange Commission with respect to the
common stock offered in this prospectus. This prospectus does not contain all of
the information in the registration statement. For further information about us
and our securities, see the registration statement and its exhibits. This
prospectus contains a description of the material terms and features of some
material contracts, reports or exhibits to the registration statement required
to be disclosed. However, as the descriptions are summaries of the contracts,
reports or exhibits, we urge you to refer to the copy of each material contract,
report and exhibit attached to the registration statement. Copies of the
registration statement and the exhibits to the registration statement, as well
as the periodic reports, proxy statements and other information we will file
with the Securities and Exchange Commission, may be examined without charge in
the Public Reference Section of the Securities and Exchange Commission, 450
Fifth Street, N.W. Room 1024, Washington, DC 20549, and the Securities and
Exchange Commission's regional offices located at 500 West Madison Street, Suite
1400, Chicago, IL 60661, and 7 World Trade Center, 13(th) Floor, New York, NY
10048 or on the Internet at http://www.sec.gov. You can get information about
the operation of the Public Reference Room by calling the Securities and
Exchange Commission at 1-800-SEC-0330. Copies of all or a portion of the
registration statement can be obtained from the Public Reference Section of the
Securities and Exchange Commission upon payment of prescribed fees. In addition,
the Securities and Exchange Commission maintains a Web site which provides
online access to periodic reports, proxy and information statements and other
information regarding registrants that file electronically with the Securities
and Exchange Commission at the address HTTP://WWW.SEC.GOV.

INFORMATION WE CAN INCORPORATE BY REFERENCE

The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this prospectus, and the information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any further filings made with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 until all of the securities are sold or until we terminate this offering:

- Annual Report on Form 10-K for the year ended December 31, 1999.

59
<PAGE>
- Quarterly Report on Form 10-Q for the three months ended March 31, 2000,
filed on May 8, 2000.

You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:

7-Eleven, Inc.
2711 North Haskell Avenue
Dallas, Texas 75204-2906
Attention: Investor Relations
Telephone: (214) 828-7587

You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.

60
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:

Report of Independent Accountants........................... F-2

Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-3

Consolidated Statements of Earnings for the years ended
December 31, 1997, 1998 and 1999.......................... F-4

Consolidated Statements of Shareholders' Equity (Deficit)
for the years ended December 31, 1997, 1998 and 1999...... F-5

Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998
and 1999.................................................. F-6

Notes to Consolidated Financial Statements.................. F-7

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED):

Report of Independent Accountants........................... F-35

Condensed Consolidated Balance Sheets as of
December 31, 1999 and March 31, 2000...................... F-36

Condensed Consolidated Statements of Earnings for the
three months ended March 31, 1999 and 2000................ F-37

Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1999 and 2000................ F-38

Notes to Condensed Consolidated Financial Statements........ F-39
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To The Board of Directors and Shareholders

of 7-Eleven, Inc.

We have audited the accompanying consolidated balance sheets of 7-Eleven,
Inc. and Subsidiaries as of December 31, 1998 and 1999, and the related
consolidated statements of earnings, shareholders' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of 7-Eleven, Inc.
and Subsidiaries as of December 31, 1998 and 1999, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.

PRICEWATERHOUSECOOPERS LLP

Dallas, Texas
February 3, 2000, except as to the information
regarding sale-leaseback agreements included in
Note 13, for which the date is March 2, 2000, the
information regarding the private placement
transaction included in Note 2, for which the date is
March 16, 2000, and the information regarding the
reverse stock split included in Note 2, for which
the date is May 1, 2000.

F-2
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 87,115 $ 76,859
Accounts receivable..................................... 148,046 179,039
Inventories............................................. 101,045 134,050
Other current assets.................................... 162,631 115,328
----------- -----------
Total current assets.................................. 498,837 505,276
Property and equipment.................................... 1,652,932 1,880,520
Other assets.............................................. 324,310 299,870
----------- -----------
Total assets.......................................... $ 2,476,079 $ 2,685,666
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Trade accounts payable.................................. $ 136,059 $ 168,302
Accrued expenses and other liabilities.................. 422,633 401,216
Commercial paper........................................ 18,348 34,418
Long-term debt due within one year...................... 151,754 207,413
----------- -----------
Total current liabilities............................. 728,794 811,349
Deferred credits and other liabilities.................... 220,653 251,073
Long-term debt............................................ 1,788,843 1,802,819
Convertible quarterly income debt securities.............. 380,000 380,000
Commitments and contingencies
Shareholders' equity (deficit):
Preferred stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding
Common stock, $.0001 par value; 1,000,000,000 shares
authorized; 409,922,935 and 81,999,790 shares issued
and outstanding....................................... 41 8
Additional capital...................................... 625,574 625,761
Accumulated deficit..................................... (1,278,009) (1,194,896)
Accumulated other comprehensive earnings................ 10,183 9,552
----------- -----------
Total shareholders' equity (deficit).................. (642,211) (559,575)
----------- -----------
Total liabilities and shareholders' equity
(deficit)......................................... $ 2,476,079 $ 2,685,666
=========== ===========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Merchandise sales (including $438,489, $466,013 and
$527,422 in excise taxes)............................ $5,181,762 $5,573,606 $6,216,133
Gasoline sales (including $532,635, $577,457 and
$634,199 in excise taxes)............................ 1,789,383 1,684,184 2,035,557
---------- ---------- ----------
Net sales.......................................... 6,971,145 7,257,790 8,251,690

Other income........................................... 89,412 92,021 97,853
---------- ---------- ----------
Total revenues..................................... 7,060,557 7,349,811 8,349,543
---------- ---------- ----------

COSTS AND EXPENSES:
Merchandise cost of goods sold......................... 3,353,323 3,645,974 4,073,743
Gasoline cost of goods sold............................ 1,605,603 1,476,144 1,812,115
---------- ---------- ----------
Total cost of goods sold........................... 4,958,926 5,122,118 5,885,858
Franchisee gross profit................................ 524,941 551,003 612,233
Operating, selling, general and administrative
expenses............................................. 1,371,265 1,502,788 1,621,881
Interest expense, net.................................. 90,130 91,289 102,232
---------- ---------- ----------
Total costs and expenses........................... 6,945,262 7,267,198 8,222,204
---------- ---------- ----------

EARNINGS BEFORE INCOME TAX EXPENSE AND EXTRAORDINARY
GAIN................................................... 115,295 82,613 127,339

INCOME TAX EXPENSE....................................... 45,253 31,889 48,516
---------- ---------- ----------
EARNINGS BEFORE EXTRAORDINARY GAIN....................... 70,042 50,724 78,823

EXTRAORDINARY GAIN ON DEBT REDEMPTION (NET OF TAX EFFECT
OF $14,912 AND $2,743)................................. -- 23,324 4,290
---------- ---------- ----------
NET EARNINGS............................................. $ 70,042 $ 74,048 $ 83,113
========== ========== ==========

NET EARNINGS PER COMMON SHARE:
BASIC
Earnings before extraordinary gain................. $ 0.85 $ 0.62 $ 0.96
Extraordinary gain................................. -- 0.28 0.05
---------- ---------- ----------
Net earnings....................................... $ 0.85 $ 0.90 $ 1.01
========== ========== ==========
DILUTED
Earnings before extraordinary gain................. $ 0.81 $ 0.60 $ 0.87
Extraordinary gain................................. -- 0.23 0.04
---------- ---------- ----------
Net earnings....................................... $ 0.81 $ 0.83 $ 0.91
========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

(DOLLARS AND SHARES IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE
EARNINGS
------------------------
ACCUMULATED UNREALIZED FOREIGN SHAREHOLDERS'
PAR ADDITIONAL EARNINGS GAINS CURRENCY EQUITY
SHARES VALUE CAPITAL (DEFICIT) (LOSSES) TRANSLATION (DEFICIT)
-------- -------- ---------- ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996......... 409,923 $ 41 $625,574 $(1,422,099) $10,765 $(3,236) $(788,955)

Net earnings....................... 70,042 70,042
Other comprehensive earnings:
Unrealized gain on equity
securities (net of $958
deferred taxes)................ 1,498 1,498
Reclassification adjustments for
gains included in net earnings
(net of $1,964 tax expense).... (3,072) (3,072)
Foreign currency translation..... (1,040) (1,040)
---------
Total other comprehensive
earnings (loss)................ (2,614)
---------
Comprehensive earnings............. 67,428
-------- ---- -------- ----------- ------- ------- ---------
BALANCE AT DECEMBER 31, 1997......... 409,923 41 625,574 (1,352,057) 9,191 (4,276) (721,527)

Net earnings....................... 74,048 74,048
Other comprehensive earnings:
Unrealized gain on equity
securities (net of $7,293
deferred taxes)................ 11,408 11,408
Reclassification adjustments for
gains included in net earnings
(net of $2,649 tax expense).... (4,143) (4,143)
Foreign currency translation..... (1,997) (1,997)
---------
Total other comprehensive earnings
(loss)........................... 5,268
---------
Comprehensive earnings............. 79,316
-------- ---- -------- ----------- ------- ------- ---------
BALANCE AT DECEMBER 31, 1998......... 409,923 41 625,574 (1,278,009) 16,456 (6,273) (642,211)

Net earnings....................... 83,113 83,113
Other comprehensive earnings:
Unrealized loss on equity
securities (net of ($447)
deferred taxes)................ (698) (698)
Reclassification adjustments for
gains included in net earnings
(net of $2,946 tax expense).... (4,607) (4,607)
Foreign currency translation..... 4,674 4,674
---------
Total other comprehensive
earnings (loss)................ (631)
---------
Comprehensive earnings............. 82,482
Issuance of stock.................. 76 154 154
Reverse stock split................ (327,999) (33) 33 --
-------- ---- -------- ----------- ------- ------- ---------
BALANCE AT DECEMBER 31, 1999......... 82,000 $ 8 $625,761 $(1,194,896) $11,151 $(1,599) $(559,575)
======== ==== ======== =========== ======= ======= =========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.............................................. $ 70,042 $ 74,048 $ 83,113
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Extraordinary gain on debt redemption................... -- (23,324) (4,290)
Depreciation and amortization of property and
equipment............................................. 177,174 175,086 185,495
Other amortization...................................... 19,026 19,611 19,968
Deferred income taxes................................... 31,812 19,190 32,476
Noncash interest expense................................ 2,342 1,725 1,466
Other noncash expense (income).......................... 96 2,943 (4,099)
Net loss on property and equipment...................... 2,391 9,631 7,955
Increase in accounts receivable......................... (1,563) (22,674) (36,724)
(Increase) decrease in inventories...................... (16,010) 11,306 (33,005)
(Increase) decrease in other assets..................... (11,114) (35,330) 3,925
(Decrease) increase in trade accounts payable and other
liabilities........................................... (76,250) 600 25,595
---------- ---------- ----------
Net cash provided by operating activities........... 197,946 232,812 281,875
---------- ---------- ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and equipment........... (232,539) (380,871) (428,837)
Proceeds from sale of property and equipment.............. 39,648 8,607 63,861
Proceeds from sale of domestic securities................. 4,997 6,754 7,522
Acquisition of businesses, net of cash acquired........... -- (32,929) --
Other..................................................... 1,911 1,625 7,219
---------- ---------- ----------
Net cash used in investing activities............... (185,983) (396,814) (350,235)
---------- ---------- ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from commercial paper and revolving credit
facilities.............................................. 5,907,243 7,231,795 4,872,273
Payments under commercial paper and revolving credit
facilities.............................................. (5,842,539) (7,032,120) (4,661,427)
Proceeds from issuance of long-term debt.................. 225,000 96,503 --
Principal payments under long-term debt agreements........ (299,005) (154,376) (147,392)
Proceeds from issuance of convertible quarterly income
debt securities......................................... -- 15,000 --
Increase (decrease) in outstanding checks in excess of
cash in bank............................................ 4,665 11,765 (4,600)
Other..................................................... (551) (4,525) (750)
---------- ---------- ----------
Net cash (used in) provided by financing
activities........................................ (5,187) 164,042 58,104
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 6,776 40 (10,256)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 80,299 87,075 87,115
---------- ---------- ----------

CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 87,075 $ 87,115 $ 76,859
========== ========== ==========

RELATED DISCLOSURES FOR CASH FLOW REPORTING:
Interest paid, excluding SFAS No.15 Interest.............. $ (97,568) $ (99,240) $ (117,669)
========== ========== ==========
Net income taxes paid..................................... $ (10,482) $ (11,721) $ (16,181)
========== ========== ==========
Assets obtained by entering into capital leases........... $ 56,745 $ 33,643 $ 40,638
========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

1. ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION--7-Eleven, Inc. and its subsidiaries ("the
Company") is owned approximately 65% by IYG Holding Company, (see Note 2), which
is jointly owned by Ito-Yokado Co., Ltd. ("IY") and Seven-Eleven Japan
Co., Ltd. ("SEJ"). The Company operates more than 5,700 7-Eleven and other
convenience stores in the United States and Canada. Area licensees, or their
franchisees, and affiliates operate approximately 13,800 additional 7-Eleven
convenience stores in certain areas of the United States, in 15 foreign
countries and in the U. S. territories of Guam and Puerto Rico.

The consolidated financial statements include the accounts of
7-Eleven, Inc. and its subsidiaries. Intercompany transactions and account
balances are eliminated. Prior-year amounts have been reclassified to conform to
the current-year presentation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Merchandise sales and cost of goods sold of stores operated by franchisees
are consolidated with the results of Company-operated stores. Merchandise sales
of stores operated by franchisees are $2,880,148, $3,034,951 and $3,385,554 from
2,868, 2,960 and 3,008 stores for the years ended December 31, 1997, 1998 and
1999, respectively.

The gross profit of the franchise stores is split between the Company and
its franchisees. The Company's share of the gross profit of franchise stores is
its continuing franchise fee, generally ranging from 50% to 58% of the
merchandise gross profit of the store, which is charged to the franchisee for
the license to use the 7-Eleven operating system and trademarks, for the lease
and use of the store premises and equipment, and for continuing services
provided by the Company. These services include merchandising, advertising,
recordkeeping, store audits, contractual indemnification, business counseling
services and preparation of financial summaries. In addition, franchisees
receive the greater of one cent per gallon sold or 25% of gasoline gross profit
as compensation for measuring and reporting deliveries of gasoline, conducting
pricing surveys of competitors, changing the prices and cleaning the service
areas.

Sales by stores operated under domestic and foreign area license agreements
are not included in consolidated revenues. All fees or royalties arising from
such agreements are included in other income. Initial fees, which have been
immaterial, are recognized when the services required under the agreements are
performed.

OPERATING SEGMENT--The Company operates in a single operating segment--the
operating, franchising and licensing of convenience food stores, primarily under
the 7-Eleven name. Revenues from external customers are derived principally from
two major product categories--merchandise and gasoline. The Company's
merchandise sales are comprised of groceries, beverages, tobacco products,
beer/wine, candy/snacks, fresh foods, dairy products, non-food merchandise and
services. Services

F-7
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

1. ACCOUNTING POLICIES (CONTINUED)
include lottery, ATM and money order service fees/commissions for which there
are little, if any, costs included in merchandise cost of goods sold.

The Company does not record merchandise sales on the basis of product
categories. However, based on the total dollar volume of store purchases,
management estimates that the percentages of its convenience store merchandise
sales by principal product category for the last three years were as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
PRODUCT CATEGORIES 1997 1998 1999
- ------------------ -------- -------- --------
<S> <C> <C> <C>
Tobacco Products..................................... 22.5% 23.7% 25.8%
Beverages............................................ 23.2% 23.7% 22.9%
Beer/Wine............................................ 11.8% 11.3% 10.8%
Candy/Snacks......................................... 9.8% 9.5% 9.4%
Non-Foods............................................ 9.2% 8.8% 9.2%
Food Service......................................... 5.9% 6.0% 5.9%
Dairy Products....................................... 5.6% 5.3% 5.0%
Other................................................ 4.9% 4.6% 4.2%
Baked Goods.......................................... 4.4% 4.2% 3.9%
----- ----- -----
Total Product Sales................................ 97.3% 97.1% 97.1%
Services............................................. 2.7% 2.9% 2.9%
----- ----- -----
Total Merchandise Sales............................ 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>

The Company does not rely on any major customers as a source of revenue.
Excluding area license royalties, which are included in other income as stated
above, the Company's operations are concentrated in the United States and
Canada. Approximately 8% of the Company's net sales for the years ended
December 31, 1997, 1998 and 1999 are from Canadian operations, and approximately
5% of the Company's long-lived assets as of December 31, 1998 and 1999 are
located in Canada.

OTHER INCOME--Other income is primarily area license royalties and franchise
fee income. The area license royalties include amounts from area license
agreements with SEJ of approximately $50 million, $53 million and $56 million
for the years ended December 31, 1997, 1998 and 1999, respectively.

Under the present franchise agreements, initial franchise fees are generally
calculated based on gross profit experience for the store or market area. These
fees cover certain costs including training, an allowance for lodging for the
trainees and other costs relating to the franchising of the store. The Company
defers the recognition of these fees in income until its obligations under the
agreement are completed. Franchisee fee income was $8,309, $11,881 and $13,987
for the years ended December 31, 1997, 1998 and 1999, respectively.

OPERATING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (OSG&A)--Buying and
occupancy expenses are included in OSG&A. Advertising costs, also included in
OSG&A, generally are charged to

F-8
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

1. ACCOUNTING POLICIES (CONTINUED)
expense as incurred and were $35,111, $40,144 and $39,418 for the years ended
December 31, 1997, 1998 and 1999, respectively.

INTEREST EXPENSE--Interest expense is net of interest income and capitalized
interest. Interest income was $8,788, $12,021 and $11,159, and capitalized
interest was $572, $2,328 and $4,952 for the years ended December 31, 1997, 1998
and 1999, respectively.

INCOME TAX EXPENSE--Income taxes are determined using the liability method,
where deferred tax assets and liabilities are recognized for temporary
differences between the tax basis of assets and liabilities and their reported
amounts in the financial statements. Deferred tax assets include tax
carryforwards and are reduced by a valuation allowance if, based on available
evidence, it is more likely than not that some portion or all of the deferred
tax assets will not be realized.

CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
investment instruments purchased with maturities of three months or less to be
cash equivalents. Cash and cash equivalents include temporary cash investments
of $29,167 and $8,114 at December 31, 1998 and 1999, respectively, stated at
cost, which approximates market.

The Company utilizes a cash management system under which a book balance
cash overdraft exists for the Company's primary disbursement accounts. These
overdrafts represent uncleared checks in excess of cash balances in bank
accounts at the end of the reporting period. The Company transfers cash on an
as-needed basis to fund clearing checks (see Note 8).

INVENTORIES--Inventories are stated at the lower of cost or market. Cost is
generally determined by the LIFO method for stores in the United States and by
the FIFO method for stores in Canada.

DEPRECIATION AND AMORTIZATION--Depreciation of property and equipment is
based on the estimated useful lives of these assets using the straight-line
method. Acquisition and development costs for significant business systems and
related software for internal use are capitalized and are depreciated or
amortized on a straight-line basis. Amortization of capital lease assets,
improvements to leased properties and favorable leaseholds is based on the
remaining terms of the leases or the estimated useful lives, whichever is
shorter. The following table summarizes the years over which significant assets
are generally depreciated or amortized:

<TABLE>
<CAPTION>
YEARS
--------
<S> <C>
Buildings................................................... 25
Leasehold improvements...................................... 3 to 20
Equipment................................................... 3 to 10
Software and other intangibles.............................. 3 to 7
License royalties and goodwill.............................. 20 to 40
</TABLE>

Effective August 1999, the Company changed the depreciable lives of all
buildings from 20 to 25 years. The effect of the change in estimate decreased
depreciation expense by approximately $2,400 for the year ended December 31,
1999. The change had an immaterial effect on earnings per share for the same
period. Had the change in estimate been made at January 1, 1999, depreciation
expense would have decreased by approximately $5,900 for the year ended
December 31, 1999.

F-9
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

1. ACCOUNTING POLICIES (CONTINUED)
Foreign and domestic area license royalty intangibles were recorded in 1987
at the fair value of future royalty payments and are being amortized over
20 years using the straight-line method. The 20-year life is less than the
estimated lives of the various royalty agreements, the majority of which are
perpetual.

STORE CLOSINGS / ASSET IMPAIRMENT--Provision is made on a current basis for
the write-down of identified owned-store closings to their net realizable value.
For identified leased-store closings, leasehold improvements are written down to
their net realizable value and a provision is made on a current basis if
anticipated expenses are in excess of expected sublease rental income. The
Company's long-lived assets, including goodwill, are reviewed for impairment and
written down to fair value whenever events or changes in circumstances indicate
that the carrying value may not be recoverable.

INSURANCE--The Company has established insurance programs to cover certain
insurable risks consisting primarily of physical loss to property, business
interruptions resulting from such loss, workers' compensation, employee
healthcare, comprehensive general and auto liability. Third-party insurance
coverage is obtained for property and casualty exposures above predetermined
deductibles as well as those risks required to be insured by law or contract.
Provisions for losses expected under the insurance programs are recorded based
on independent actuarial estimates of the aggregate liabilities for claims
incurred.

ENVIRONMENTAL--Environmental expenditures related to existing conditions
resulting from past or current operations and from which no current or future
benefit is discernible are expensed by the Company. Expenditures that extend the
life of the related property or prevent future environmental contamination are
capitalized. The Company determines its liability on a site-by-site basis and
records a liability when it is probable and can be reasonably estimated. The
estimated liability of the Company is not discounted.

A portion of the environmental expenditures incurred for corrective action
at gasoline sites is eligible for reimbursement under state trust funds and
reimbursement programs. A related receivable is recorded for estimated probable
refunds. The receivable is discounted if the amount relates to remediation
activities which have already been completed. A receivable is also recorded to
reflect estimated probable reimbursement from other parties (see Note 14).

2. SUBSEQUENT EVENTS

On March 16, 2000, the Company issued 22,736,842 shares of common stock at
$23.75 per share to IYG Holding Company in a private placement transaction,
which increased their ownership in the Company to 72.7%. The net proceeds of
$539,425 was used on March 16, 2000, to repay the outstanding balance on the
Company's bank term loan of $112,500 and will be used to reduce the Company's
revolving credit facility by approximately $250 million and commercial paper
facility by approximately $177 million (see Note 9). The reduction of the
revolver and commercial paper facilities occurred as the various instruments
matured during the month of March 2000.

On April 26, 2000, the shareholders of the Company approved a reverse stock
split of one share of common for five shares of common, which was effective
May 1, 2000. As a result, share data as of

F-10
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

2. SUBSEQUENT EVENTS (CONTINUED)
December 31, 1999 and all earnings-per-share data included herein have been
restated to reflect the reverse stock split.

The impact of the issuance of the additional shares of common stock and the
reduction of debt on earnings before extraordinary gain and related earnings per
share, had the transaction occurred on January 1, 1999, is presented in the
following condensed consolidated pro forma information for the year ended
December 31, 1999 (unaudited, in thousands, except per-share data):

<TABLE>
<CAPTION>
AS PRO FORMA
PRESENTED ADJUSTMENTS PRO FORMA
--------- ----------- ---------
<S> <C> <C> <C>
Earnings before extraordinary gain:
Basic................................... $ 78,823 $ 18,296(1) $ 97,119
Diluted................................. $ 89,584 $ 18,296(1) $107,880

Weighted-average common shares
outstanding:
Basic................................... 81,994 22,737(2) 104,731
Diluted................................. 102,960 22,737(2) 125,697

Earnings per common share before
extraordinary gain:
Basic................................... $ .96 $ .93
Diluted................................. $ .87 $ .86
</TABLE>

- ------------------------

(1) Represents interest on retired bank term loan and reduced revolving credit
and commercial paper facilities net of tax.

(2) Represents additional common shares issued in private placement.

The pro forma results are not necessarily indicative of what would have
occurred if the private placement had occurred at the beginning of the period
presented. In addition, they are not intended to be a projection of future
results.

3. ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Trade accounts receivable............................... $ 59,985 $ 84,770
Franchisee accounts receivable.......................... 74,176 71,756
Environmental cost reimbursements--see Note 14.......... 9,798 11,981
SEJ royalty receivable.................................. 4,230 4,522
Other accounts receivable............................... 8,624 12,254
-------- --------
156,813 185,283
Allowance for doubtful accounts......................... (8,767) (6,244)
-------- --------
$148,046 $179,039
======== ========
</TABLE>

F-11
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

4. INVENTORIES

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Merchandise............................................. $ 74,835 $ 86,976
Gasoline................................................ 26,210 47,074
-------- --------
$101,045 $134,050
======== ========
</TABLE>

Inventories stated on the LIFO basis that are included in inventories in the
accompanying Consolidated Balance Sheets were $50,242 and $60,505 for
merchandise and $21,070 and $40,466 for gasoline at December 31, 1998 and 1999,
respectively. These amounts are less than replacement cost by $33,804 and
$37,203 for merchandise and $600 and $7,124 for gasoline at December 31, 1998
and 1999, respectively.

5. OTHER CURRENT ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Prepaid expenses........................................ $ 26,670 $ 29,134
Deferred tax assets--see Note 16........................ 61,260 50,287
Restricted cash......................................... 22,810 --
Advances for lottery and other tickets.................. 22,247 27,789
Reimbursable equipment purchases under the master lease
facility--see Note 13................................. 22,892 --
Other................................................... 6,752 8,118
-------- --------
$162,631 $115,328
======== ========
</TABLE>

6. PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1999
----------- -----------
<S> <C> <C>
Cost:
Land............................................. $ 493,369 $ 495,598
Buildings........................................ 389,751 419,288
Leaseholds....................................... 1,047,791 1,172,791
Equipment........................................ 953,001 1,113,561
Software......................................... 131,693 186,315
Construction in process.......................... 102,524 90,951
----------- -----------
3,118,129 3,478,504
Accumulated depreciation and amortization (includes
$29,886 and $47,415 related to software)......... (1,465,197) (1,597,984)
----------- -----------
$ 1,652,932 $ 1,880,520
=========== ===========
</TABLE>

F-12
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

7. OTHER ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
SEJ license royalty intangible (net of accumulated
amortization of $181,034 and $197,049)................ $137,466 $121,451
Other license royalty intangibles (net of accumulated
amortization of $32,259 and $35,095).................. 24,345 21,509
Environmental cost reimbursements--see Note 14.......... 42,012 45,046
Goodwill (net of accumulated amortization of $449 and
$1,159)............................................... 30,671 28,137
Investments in available-for-sale domestic securities
(no cost basis)....................................... 27,011 18,313
Other................................................... 62,805 65,414
-------- --------
$324,310 $299,870
======== ========
</TABLE>

8. ACCRUED EXPENSES AND OTHER LIABILITIES

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Insurance............................................... $ 54,059 $ 31,773
Compensation............................................ 47,216 63,188
Taxes................................................... 51,807 55,577
Lotto, lottery and other tickets........................ 37,446 40,756
Other accounts payable.................................. 33,320 26,132
Environmental costs--see Note 14........................ 22,364 20,019
Profit sharing--see Note 12............................. 16,490 16,491
Interest................................................ 20,432 6,243
Book overdrafts payable--see Note 1..................... 60,235 55,635
Other current liabilities............................... 79,264 85,402
-------- --------
$422,633 $401,216
======== ========
</TABLE>

The Company continues to review the functions necessary to enable its stores
to respond faster, more creatively and more cost efficiently to rapidly changing
customer needs and preferences. To accomplish this goal, the Company continues
to realign and reduce personnel. For the year ended December 31, 1998, the
Company accrued $7,643 for severance benefits for the reduction in force of
approximately 120 management and administrative employees. There have been no
significant changes to the initial accrual, and the unpaid balance of $2,936 is
included in accrued expenses and other liabilities as of December 31, 1999. In
addition, the Company accrued termination benefits of $4,654 in December 1999
for approximately 40 employees. The cost of the termination benefits in 1998 and
1999 was recorded in OSG&A expense.

F-13
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

9. DEBT

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1999
---------- ----------
<S> <C> <C>
Bank Debt Term Loans................................. $ 168,750 $ 112,500
Bank Debt revolving credit facility.................. 295,000 250,000
Commercial paper..................................... 350,000 600,000
5% First Priority Senior Subordinated Debentures due
2003............................................... 317,866 287,152
4 1/2% Second Priority Senior Subordinated Debentures
(Series A) due 2004................................ 144,472 133,948
4% Second Priority Senior Subordinated Debentures
(Series B) due 2004................................ 22,590 21,849
Yen Loans............................................ 223,751 177,223
7 1/2% Cityplace Term Loan due 2005.................. 272,883 267,448
Capital lease obligations............................ 137,152 156,933
Other................................................ 8,133 3,179
---------- ----------
1,940,597 2,010,232
Less long-term debt due within one year.............. 151,754 207,413
---------- ----------
$1,788,843 $1,802,819
========== ==========
</TABLE>

BANK DEBT--The Company is obligated to a group of lenders under an unsecured
credit agreement ("Credit Agreement") that includes a $225 million term loan and
a $400 million revolving credit facility. A sublimit of $150 million for letters
of credit is included in the revolving credit facility. In addition, to the
extent outstanding letters of credit are less than the $150 million maximum, the
excess availability can be used for additional borrowings under the revolving
credit facility.

Payments on the term loan, which matures on December 31, 2001, commenced in
March 1998, when the first installment of 16 quarterly installments of $14,063
was paid. Upon expiration of the revolving credit facility in February 2002, all
the then-outstanding letters of credit must expire and may need to be replaced,
and all other amounts then outstanding will be due and payable in full. At
December 31, 1999, outstanding letters of credit under the facility totaled
$70,152.

Interest on the term loan and borrowings under the revolving credit facility
is generally payable quarterly and is based on a variable rate equal to the
administrative agent bank's base rate or, at the Company's option, at a rate
equal to a reserve-adjusted Eurodollar rate plus .475% per year. A fee of .325%
per year on the outstanding amount of letters of credit is required to be paid
quarterly. In addition, a facility fee of .15% per year is charged on the
aggregate amount of the Credit Agreement facility and is payable quarterly. The
weighted-average interest rate on the term loan outstanding at December 31, 1998
and 1999, respectively, was 5.6% and 6.6%. The weighted-average interest rate on
the revolving credit facility borrowings outstanding at December 31, 1998 and
1999, respectively, was 5.6% and 6.8%.

F-14
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

9. DEBT (CONTINUED)
The Credit Agreement contains various financial and operating covenants
which require, among other things, the maintenance of certain financial ratios
including interest and rent coverage, fixed-charge coverage and senior
indebtedness to earnings before interest, income taxes, depreciation and
amortization. The Credit Agreement also contains various covenants which, among
other things, (a) limit the Company's ability to incur or guarantee indebtedness
or other liabilities other than under the Credit Agreement, (b) restrict the
Company's ability to engage in asset sales and sale/leaseback transactions,
(c) restrict the types of investments the Company can make and (d) restrict the
Company's ability to pay cash dividends, redeem or prepay principal and interest
on any subordinated debt and certain senior debt.

COMMERCIAL PAPER--Effective January 1999, the availability of borrowings
under the Company's commercial paper facility was increased from $400 million to
$650 million. At December 31, 1998 and 1999, $350 million and $600 million of
the respective $368,348 and $634,418 outstanding principal amounts, net of
discount, was classified as long-term debt since the Company intends to maintain
at least these amounts outstanding during the next year. Such debt is unsecured
and is fully and unconditionally guaranteed by IY. IY has agreed to continue its
guarantee of all commercial paper issued through 2001. While it is not
anticipated that IY would be required to perform under its commercial paper
guarantee, in the event IY makes any payments under the guarantee, the Company
and IY have entered into an agreement by which the Company is required to
reimburse IY subject to restrictions in the Credit Agreement. The
weighted-average interest rate on commercial paper borrowings outstanding at
December 31, 1998 and 1999, respectively, was 5.2% and 6.1%.

DEBENTURES--The Debentures are accounted for in accordance with SFAS
No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructuring,"
and were recorded at an amount equal to the future undiscounted cash payments,
both principal and interest ("SFAS No. 15 Interest"). Accordingly, no interest
expense will be recognized over the life of these securities, and cash interest
payments will be charged against the recorded amount of such securities.
Interest on all of the Debentures is payable in cash semiannually on June 15 and
December 15 of each year.

The 5% First Priority Senior Subordinated Debentures, due December 15, 2003
("5% Debentures"), had an outstanding principal balance of $239,293 at
December 31, 1999, and are redeemable at any time at the Company's option at
100% of the principal amount.

- 4 1/2% Series A Debentures, due June 15, 2004 ("4 1/2% Debentures"), had
an outstanding principal balance of $111,391 at December 31, 1999.

- 4% Series B Debentures, due June 15, 2004 ("4% Debentures"), had an
outstanding principal balance of $18,516 at December 31, 1999.

- 12% Series C Debentures, due June 15, 2009 ("12% Debentures"), were
redeemed by the Company in March 1998 with a portion of the proceeds from
the issuance of $80 million principal amount of Convertible Quarterly
Income Debt Securities due 2013 ("1998 QUIDS") to

F-15
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

9. DEBT (CONTINUED)
IY and SEJ (see Note 10). The 12% Debentures had an outstanding principal
balance of $21,787 when they were redeemed.

The Company also utilized a portion of the proceeds from the 1998 QUIDS to
purchase $15,700 principal amount of its 5% Debentures, $7,845 principal amount
of its 4 1/2% Debentures and $250 principal amount of its 4% Debentures during
the fourth quarter of 1998. The partial purchases of these debentures, together
with the redemption of the 12% Debentures, resulted in an extraordinary gain of
$23,324 (net of current tax effect of $14,912) as a result of the discounted
purchase price and the inclusion of SFAS No. 15 Interest in the carrying amount
of the debt.

In addition, the Company purchased $15,000 principal amount of its 5%
Debentures in January 1999 and $4,418 principal amount of its 4 1/2% Debentures
in February 1999 with a portion of the proceeds of the 1998 QUIDS. These partial
purchases resulted in an extraordinary gain of $4,290 (net of current tax effect
of $2,743) in 1999 as a result of the discounted purchase price and the
inclusion of SFAS No. 15 Interest in the carrying amount of the debt.

Prior to the partial purchases, the 5% Debentures were subject to a sinking
fund payment of $8,696 due in December 2002. The Company used its purchase of
the 5% Debentures to satisfy all sinking fund requirements so that no sinking
fund payments remain.

The Debentures contain certain covenants that, among other things,
(a) limit the payment of dividends and certain other restricted payments by both
the Company and its subsidiaries, (b) require the purchase by the Company of the
Debentures at the option of the holder upon a change of control, (c) limit
additional indebtedness, (d) limit future exchange offers, (e) limit the
repayment of subordinated indebtedness, (f) require board approval of certain
asset sales, (g) limit transactions with certain stockholders and affiliates and
(h) limit consolidations, mergers and the conveyance of all or substantially all
of the Company's assets.

The First and Second Priority Senior Subordinated Debentures are subordinate
to the borrowings outstanding under the Credit Agreement and to previously
outstanding mortgages and notes that are either backed by specific collateral or
are general unsecured, unsubordinated obligations. The Second Priority
Debentures are subordinate to the First Priority Debentures.

YEN LOANS--In March 1988, the Company monetized its future royalty payments
from SEJ, its area licensee in Japan, through a loan that is nonrecourse to the
Company as to principal and interest ("1988 Yen Loan"). The original amount of
the yen-denominated debt was 41 billion yen (approximately $327 million at the
exchange rate in March 1988) and is collateralized by the Japanese trademarks
and a pledge of the future royalty payments. By designating its future royalty
receipts during the term of the loan to service the monthly interest and
principal payments, the Company has hedged the impact of future exchange rate
fluctuations. As a result of the hedge with the SEJ royalty, the 1988 Yen Loan
and related interest are converted at 125.35 yen to one U.S. dollar. Payment of
the debt is required no later than March 2006 through future royalties from SEJ.
The Company believes it is a remote possibility that there will be any principal
balance remaining at that date because current royalty projections suggest the
1988 Yen Loan could be repaid as early as 2001. One year following the final
repayment of the 1988 Yen Loan, royalty payments from SEJ will be reduced by
approximately

F-16
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

9. DEBT (CONTINUED)
two-thirds in accordance with the terms of the license agreement. The interest
rate was 3.10% as of December 31, 1999.

In April 1998, funding occurred on an additional yen-denominated loan ("1998
Yen Loan") for 12.5 billion yen or $96.5 million of proceeds. The 1998 Yen Loan
has an interest rate of 2.325% and will be repaid from the Seven-Eleven Japan
area license royalty income after the 1988 Yen Loan has been retired, which is
currently expected in 2001. Both principal and interest of the loan are
nonrecourse to the Company. The Company utilized a short-term put option to
lock-in the exchange rate and avoid the risk of foreign currency exchange loss.
The put option was financed by selling a call option with the same yen amount
and maturity as the put option. Due to market conditions, the call option was
not exercised and, as a result, income of $1.6 million was recognized during
1998. Proceeds of the loan were designated for general corporate purposes. As a
result of the hedge with the SEJ royalty, the 1998 Yen Loan and related interest
are converted at 129.53 yen to one U.S. dollar.

CITYPLACE DEBT--Cityplace Center East Corporation ("CCEC"), a subsidiary of
the Company, constructed the headquarters tower, parking garages and related
facilities of the Cityplace Center development and is currently obligated to The
Sanwa Bank, Limited, New York Branch ("Sanwa"), which has a lien on the property
financed. The debt with Sanwa has monthly payments of principal and interest
based on a 25-year amortization at 7.5%, with the remaining principal due on
March 1, 2005 (the "Cityplace Term Loan").

The Company is occupying part of the building as its corporate headquarters
and the balance is leased to third parties. As additional consideration through
the extended term of the debt, CCEC will pay to Sanwa an amount that it receives
from the Company which is equal to the net sublease income that the Company
receives on the property and 60% of the proceeds, less $275 million and
permitted costs, upon a sale or refinancing of the building.

MATURITIES--Long-term debt maturities assume the continuance of the
commercial paper program and the IY guarantee. The maturities, which include
capital lease obligations as well as SFAS No. 15 Interest accounted for in the
recorded amount of the Debentures, are as follows:

<TABLE>
<S> <C>
2000........................................................ $ 207,413
2001........................................................ 132,545
2002........................................................ 278,659
2003........................................................ 288,859
2004........................................................ 166,943
Thereafter.................................................. 935,813
----------
$2,010,232
==========
</TABLE>

10. CONVERTIBLE QUARTERLY INCOME DEBT SECURITIES

In November 1995, the Company issued $300 million principal amount of
Convertible Quarterly Income Debt Securities due 2010 ("1995 QUIDS") to IY and
SEJ. The 1995 QUIDS have an interest rate of 4.5% and give the Company the right
to defer interest payments thereon for up to 20

F-17
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

10. CONVERTIBLE QUARTERLY INCOME DEBT SECURITIES (CONTINUED)
consecutive quarters. The holder of the 1995 QUIDS can convert the debt anytime
into a maximum of 14,422,383 shares of the Company's common stock. The
conversion rate represents a premium to the market value of the Company's common
stock at the time of issuance of the 1995 QUIDS. As of December 31, 1999, no
shares had been issued as a result of debt conversion.

In February 1998, the Company issued $80 million principal amount of 1998
QUIDS, which have a 15-year life, no amortization and an interest rate of 4.5%.
The instrument gives the Company the right to defer interest payments thereon
for up to 20 consecutive quarters. The debt mandatorily converts into 6,501,686
shares of the Company's common stock if the Company's stock trades above $12.30
for 20 of 30 consecutive trading days after the fifth anniversary of issuance,
or the Company's stock trades above $14.75 for 20 of 30 consecutive trading days
after the third anniversary of issuance and before the fifth anniversary. A
portion of the proceeds from the 1998 QUIDS was used to redeem the Company's 12%
Debentures at par and to fund the partial purchases of its other Debentures (see
Note 9). The 1998 QUIDS, together with the 1995 QUIDS (collectively,
"Convertible Debt"), are subordinate to all existing debt.

The financial statements include interest payable of $723 as of
December 31, 1998 and 1999, and interest expense of $13,733, $16,801 and $17,384
for the years ended December 31, 1997, 1998 and 1999, respectively, related to
the Convertible Debt. The Company has not deferred any interest payments in
connection with the Convertible Debt.

11. FINANCIAL INSTRUMENTS

FAIR VALUE--The disclosure of the estimated fair value of financial
instruments has been determined by the Company using available market
information and appropriate valuation methodologies as indicated below.

The carrying amounts of cash and cash equivalents, trade accounts
receivable, trade accounts payable and accrued expenses and other liabilities
are reasonable estimates of their fair values. Letters of credit are included in
the estimated fair value of accrued expenses and other liabilities.

The carrying amounts and estimated fair values of other financial
instruments at December 31, 1999, are listed in the following table:

<TABLE>
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
Bank Debt............................................... $362,500 $362,500
Commercial Paper........................................ 634,418 634,418
Debentures.............................................. 442,949 308,810
Yen Loans............................................... 177,223 223,753
Cityplace Term Loan..................................... 267,448 254,908
Convertible Debt........................................ 380,000 305,561
Interest Rate Swap...................................... 2,399 (6,768)
</TABLE>

F-18
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

11. FINANCIAL INSTRUMENTS (CONTINUED)
The methods and assumptions used in estimating the fair value for each of
the classes of financial instruments presented in the table above are as
follows:

- The carrying amount of the Bank Debt approximates fair value because the
interest rates are variable.

- Commercial paper borrowings are sold at market interest rates and have an
average remaining maturity of less than 49 days. Therefore, the carrying
amount of commercial paper is a reasonable estimate of its fair value. The
guarantee of the commercial paper by IY is an integral part of the
estimated fair value of the commercial paper borrowings.

- The fair value of the Debentures is estimated based on December 31, 1999,
bid prices obtained from investment banking firms where traders regularly
make a market for these financial instruments. The carrying amount of the
Debentures includes $73,749 of SFAS No. 15 Interest.

- The fair value of the Yen Loans is estimated by calculating the present
value of the future yen cash flows at current interest and exchange rates.

- The fair value of the Cityplace Term Loan is estimated by calculating the
present value of the future cash flows at a current interest rate for a
similar financial instrument.

- The fair value of the Convertible Debt (see Note 10) at December 31, 1999,
is based on the sum of the fair values assigned to both an interest rate
and an equity component of the debt by a valuation firm. The interest rate
component is based on the ten-year treasury rate plus the Company's
subordinated borrowing spread. The equity component is based on the
Company's stock price as of December 31, 1999, using a 35% volatility
factor. Subsequent to December 31, 1999, the Company's stock price has
increased substantially. This increase would result in the fair value of
the Convertible Debt moving closer to its carrying value.

- The fair value of the Interest Rate Swap is estimated based on
December 31, 1999, quoted market prices of the same or similar instruments
and represents the estimated amount the Company would receive if the
Company chose to terminate the swap as of December 31, 1999.

DERIVATIVES--The Company uses derivative financial instruments to reduce its
exposure to market risk resulting from fluctuations in foreign exchange rates
(see Note 9), gasoline prices and interest rates. In June 1998, the Company
entered into an interest rate swap agreement that fixed the interest rate at
5.395% on $250 million notional principal amount of floating rate debt until
June 2003. This agreement was amended in February 1999, and the Company will pay
a fixed interest rate of 6.096% on the floating rate debt until February 2004. A
major financial institution, as counterparty to the agreement, will pay the
Company a floating interest rate based on three-month LIBOR during the term of
the agreement in exchange for the Company paying the fixed interest rate.
Interest payments related to the original agreement commenced in
September 1998, and interest payments related to the amended agreement commenced
in May 1999. Interest payments are made quarterly by both parties. Except for
the option component discussed below, the swap is accounted for as a hedge and,
accordingly, any difference between amounts paid and received under the swap are
recorded as interest expense. The impact on net interest expense as a result of
this agreement was nominally favorable for

F-19
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

11. FINANCIAL INSTRUMENTS (CONTINUED)
the years ended December 31, 1998 and 1999, and the Company does not anticipate
a material impact on its earnings as a result of the amended agreement. The
Company is at risk of loss from this swap agreement in the event of
nonperformance by the counterparty.

Upon expiration of the initial swap term, the original agreement was
extendible for an additional five years at the option of the counterparty. This
extendible option component of the original agreement was unwound by the amended
agreement. The option component was recognized at fair value and marked to
market as of December 31, 1998, and also at the time of unwinding. Due to
declining interest rates throughout the third and fourth quarters of 1998, the
Company recognized $3,677 of expense related to the option component in 1998.
However, with respect to its unhedged floating rate debt, the Company
experienced a positive economic benefit from the declining interest rates during
the same period. In the first quarter of 1999, the Company recognized income of
$1,505 as a result of the mark-to-market adjustment of the option component
through the date of the unwinding.

The Company is currently reviewing SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS
No. 133 becomes effective for all fiscal quarters of fiscal years beginning
after June 15, 2000, and earlier application is permitted as of the beginning of
any fiscal quarter subsequent to June 15, 2000. The Company intends to adopt the
provisions of this statement as of January 1, 2001. The impact of the adoption
of SFAS No. 133 has not been determined at this time due to the Company's
continuing investigation of its financial instruments and the applicability of
SFAS No. 133 to them.

12. BENEFIT PLANS

PROFIT SHARING PLANS--The Company maintains the 7-Eleven, Inc. Employees'
Savings and Profit Sharing Plan (the "Savings and Profit Sharing Plan") for its
U.S. employees and the 7-Eleven Canada, Inc. Pension Plan for its Canadian
employees. These plans provide retirement benefits to eligible employees.

Contributions to the Savings and Profit Sharing Plan, a 401(k) defined
contribution plan, are made by both the participants and 7-Eleven. 7-Eleven
contributes the greater of approximately 10% of its net earnings minus the
amount contributed to the 7-Eleven, Inc. Supplemental Executive Retirement Plan
for Eligible Employees (the "Supplemental Executive Retirement Plan") or an
amount determined by the Company. Net earnings are calculated without regard to
the contribution to the Savings and Profit Sharing Plan, federal income taxes,
gains from debt repurchases and refinancings and, at the discretion of the chief
executive officer of the Company, income from accounting changes. The
contribution by the Company is generally allocated to the participants on the
basis of their individual contribution and years of participation in the Savings
and Profit Sharing Plan. The provisions of the 7-Eleven Canada, Inc. Pension
Plan are similar to those of the Savings and Profit Sharing Plan. Total
contributions to these plans for the years ended December 31, 1997, 1998 and
1999 were $12,977, $13,403 and $13,616, respectively, and are included in OSG&A.

F-20
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

12. BENEFIT PLANS (CONTINUED)
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN--Effective January 1998, the Company
established the Supplemental Executive Retirement Plan, which is an unfunded
employee benefit plan maintained primarily to allow compensation to be deferred
by highly compensated employees as defined by the Internal Revenue Service.
Benefits under this plan constitute general obligations of the Company, subject
to the claims of general creditors of the Company, and participants have no
security or other interest in such funds.

Contributions to the Supplemental Executive Retirement Plan are made by the
participant and may be made by the Company. A participant may elect to defer a
maximum of 12 percent of eligible compensation. The Company may make a matching
contribution, if so authorized each plan year, up to a maximum of six percent of
the participant's eligible compensation minus the amount of the participant's
deferral to the Savings and Profit Sharing Plan. Matching contributions, if any,
will be credited to the participant's account at the same rate that 7-Eleven
matches under the Savings and Profit Sharing Plan, but using years of service
with the Company, minus one, rather than years of participation in the Savings
and Profit Sharing Plan to determine a participant's group. There were no
Company contributions to this plan for the years ended December 31, 1998 and
1999.

POSTRETIREMENT BENEFITS--The Company's group insurance plan (the "Insurance
Plan") provides postretirement medical and dental benefits for all retirees that
meet certain criteria. Such criteria include continuous participation in the
Insurance Plan ranging from 10 to 15 years depending on hire date, and the sum
of age plus years of continuous service equal to at least 70. The Company
contributes toward the cost of the Insurance Plan a fixed dollar amount per
retiree based on age and number of dependents covered, as adjusted for actual
claims experience. All other future costs and cost increases will be paid by the
retirees. The Company continues to fund its cost on a cash basis; therefore, no
plan assets have been accumulated.

F-21
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

12. BENEFIT PLANS (CONTINUED)

The following information on the Company's Insurance Plan is provided:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Net benefit obligation at beginning of year............... $ 21,238 $ 22,914
Service cost.............................................. 536 658
Interest cost............................................. 1,523 1,541
Plan participants' contributions.......................... 2,953 2,479
Actuarial (gain) loss..................................... 894 (3,020)
Gross benefits paid....................................... (4,230) (4,742)
-------- --------
Net benefit obligation at end of year..................... $ 22,914 $ 19,830
======== ========

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year............ $ -- $ --
Employer contributions.................................... 1,277 2,263
Plan participants' contributions.......................... 2,953 2,479
Gross benefits paid....................................... (4,230) (4,742)
-------- --------
Fair value of plan assets at end of year.................. $ -- $ --
======== ========

Funded status at end of year................................ $(22,914) $(19,830)
Unrecognized net actuarial gain............................. (6,270) (8,892)
-------- --------
Accrued benefit costs....................................... $(29,184) $(28,722)
======== ========
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost.............................................. $ 521 $ 536 $ 658
Interest cost............................................. 1,535 1,523 1,541
Amortization of actuarial gain............................ (603) (560) (398)
------ ------ ------
Net periodic benefit cost................................. $1,453 $1,499 $1,801
====== ====== ======

WEIGHTED-AVERAGE ASSUMPTIONS USED
Discount rate............................................. 7.25% 6.75% 7.75%
Health care cost trend on covered charges:
1998 trend.............................................. 9.00% N/A N/A
1999 trend.............................................. 8.00% 8.00% N/A
2000 trend.............................................. 7.00% 7.00% 7.00%
Ultimate trend.......................................... 6.00% 6.00% 6.00%
Ultimate trend reached in............................... 2001 2001 2001
</TABLE>

F-22
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

12. BENEFIT PLANS (CONTINUED)
There is no effect of a one-percentage-point increase or decrease in assumed
health care cost trend rates on either the total service and interest cost
components or the postretirement benefit obligation for the years ended
December 31, 1997, 1998 and 1999 as the Company contributes a fixed dollar
amount.

STOCK INCENTIVE PLAN--The 1995 Stock Incentive Plan (the "Stock Incentive
Plan") provides for the granting of stock options, stock appreciation rights,
performance shares, restricted stock, restricted stock units, bonus stock and
other forms of stock-based awards and authorizes the issuance of up to
8.2 million shares over a ten-year period to certain key employees and officers
of the Company. All options granted in 1997, 1998 and 1999 were granted at an
exercise price that was equal to the fair market value on the date of grant. The
options granted vest in five equal installments beginning one year after grant
date with possible acceleration thereafter based upon certain improvements in
the price of the Company's common stock. Vested options are exercisable within
ten years of the date granted.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for the options granted: for each year presented, expected life
of five years and no dividend yields, combined with risk-free interest rates of
5.81%, 4.50% and 6.19% in 1997, 1998 and 1999, respectively, and expected
volatility of 51.37%, 61.76% and 62.95% in 1997, 1998 and 1999, respectively.

A summary of the status of the Stock Incentive Plan as of December 31, 1997,
1998 and 1999, and changes during the years ending on those dates, is presented
below (summary has been restated to reflect the reverse stock split discussed in
Note 2):

<TABLE>
<CAPTION>
1997 1998 1999
------------------------- ------------------------- -------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
FIXED OPTIONS (000'S) EXERCISE PRICE (000'S) EXERCISE PRICE (000'S) EXERCISE PRICE
- ------------- -------- -------------- -------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year... 1,524 $15.4475 2,100 $14.4515 2,686 $13.2240
Granted............................ 678 12.3450 672 9.5315 773 9.3750
Exercised.......................... -- -- -- -- -- --
Forfeited.......................... (102) 15.3395 (86) 14.3465 (365) 14.3585
------- ------- -------
Outstanding at end of year......... 2,100 14.4515 2,686 13.2240 3,094 12.1295
======= ======= =======
Options exercisable at year-end.... 425 15.6155 809 15.0370 1,129 14.2110
Weighted-average fair value of
options granted during the
year............................. $6.3455 $5.3705 $5.5265
</TABLE>

F-23
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

12. BENEFIT PLANS (CONTINUED)

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------- ----------------------------
WEIGHTED-
OPTIONS AVERAGE OPTIONS
OUTSTANDING REMAINING WEIGHTED- EXERCISABLE WEIGHTED-
RANGE OF AT 12/31/99 CONTRACTUAL AVERAGE AT 12/31/99 AVERAGE
EXERCISE PRICES (000'S) LIFE EXERCISE PRICE (000'S) EXERCISE PRICE
- ----------------- ----------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$9.3750........... 773 9.77 $ 9.3750 -- $ --
9.5315........... 659 8.79 9.5315 132 9.5315
12.3450.......... 541 7.87 12.3450 216 12.3450
15.0000.......... 581 6.75 15.0000 349 15.0000
15.9375.......... 540 5.81 15.9375 432 15.9375
----- -----
9.3750 -
15.9375.......... 3,094 7.97 12.1295 1,129 14.2110
===== =====
</TABLE>

The Company is accounting for the Stock Incentive Plan under the provisions
of APB No. 25 and, accordingly, no compensation cost has been recognized. If
compensation cost had been determined based on the fair value at the grant date
for awards under this plan consistent with the method prescribed by SFAS
No. 123, the Company's net earnings and earnings per share for the years ended
December 31, 1997, 1998 and 1999, would have been reduced to the pro forma
amounts indicated in the table below:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net earnings:
As reported............................................... $70,042 $74,048 $83,113
Pro forma................................................. 68,542 72,017 80,819
Earnings per common share:
As reported:
Basic................................................... $ 0.85 $ 0.90 $ 1.01
Diluted................................................. 0.81 0.83 0.91
Pro forma:
Basic................................................... $ 0.84 $ 0.88 $ 0.99
Diluted................................................. 0.80 0.81 0.89
</TABLE>

13. LEASES

LEASES--Certain property and equipment used in the Company's business is
leased. Generally, real estate leases are for primary terms from 14 to 20 years
with options to renew for additional periods, and equipment leases are for terms
from one to ten years. The leases do not contain restrictions that have a
material effect on the Company's operations.

In August 1999, the Company entered into a leasing facility that will
provide up to $100 million of off-balance-sheet financing to be used for the
construction of new stores. A trust (the lessor), funded primarily by a group of
senior lenders, will acquire land and undertake construction projects with the
Company acting as the construction agent. During the construction period
following the lease commencement date, interim rent will be added to the amount
funded for land and construction.

F-24
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

13. LEASES (CONTINUED)
Rental payments begin immediately following the end of the construction period.
Rental payments are based on interest incurred by the trust on amounts funded
under the facility; such interest is based on LIBOR plus 2.075%. As of
December 31, 1999, the trust had funded $28,310 from this facility. The lease
has a maximum lease term of 66 months.

After the initial lease term has expired, the Company has the option of
(1) extending the lease for an additional period subject to the approval of the
trust, (2) purchasing the property for an amount approximating the trust's
interest in the property, or (3) to vacate the property, arranging for the sale
to a third party and pay the trust the net proceeds from the sale (such payment
not to exceed the trust's interest in the property with any excess being
returned to the Company). Payment of any deficiency of the sale proceeds from
approximately 84% of aggregate cost is guaranteed by the Company. The lease,
which is accounted for as an operating lease, contains financial and operating
covenants similar to those under the Company's Credit Agreement (see Note 9).

In December 1999 and January 2000, the Company entered into sale-leaseback
agreements whereby land, buildings and associated real and personal property
improvements were sold and leased back by the Company. The Company received net
proceeds of $57,332 and $71,915 on the sale of 30 and 33 stores, respectively.
The gains on the sale of the properties of approximately $10 million and
$12 million, respectively, were deferred and will be recognized on a
straight-line basis over the initial term of the leases.

Under the terms of the agreements, the Company will make rental payments
over a sixteen-year lease term. At the expiration of the initial lease term, the
Company will have the option of renewing the lease for up to six renewal terms
of up to five years per renewal term at predetermined increases. The leases do
not contain purchase options or guaranteed residual values; however, the Company
does have the right of first refusal after the first five years of the initial
lease term with respect to any offers to purchase the properties which the
lessor receives. The leases are being accounted for as operating leases.

In April 1997, the Company obtained commitments from the same group of
lenders that participated in the Credit Agreement (see Note 9) for up to
$115 million of lease financing under a master lease facility to be used
primarily for electronic point-of-sale equipment and software associated with
the Company's retail information system. As of December 31, 1999, the Company
had received all of the available funding under the lease facility. Lease
payments are variable based on changes in LIBOR.

Individual leases under this master lease facility have initial terms that
expire on June 30, 2000, at which time the Company has an option to cancel all
leases under this facility by purchasing the equipment or arranging its sale to
a third party. The Company also has the option to renew the leases semiannually
until five years after the beginning of the individual leases. At each
semiannual renewal date, the Company has the option to purchase the equipment
and end the lease. Individual leases may be extended beyond five years through
an extended rental agreement.

F-25
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

13. LEASES (CONTINUED)
The composition of capital leases reflected as property and equipment in the
Consolidated Balance Sheets is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Buildings............................................... $129,520 $164,487
Equipment............................................... 6,755 6,843
Software................................................ 40,813 40,813
-------- --------
177,088 212,143
Accumulated amortization................................ (69,989) (77,503)
-------- --------
$107,099 $134,640
======== ========
</TABLE>

The present value of future minimum lease payments for capital lease
obligations is reflected in the Consolidated Balance Sheets as long-term debt.
The amount representing imputed interest necessary to reduce net minimum lease
payments to present value has been calculated generally at the Company's
incremental borrowing rate at the inception of each lease.

Future minimum lease payments for years ending December 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES,
--------- ---------
<S> <C> <C>
2000........................................................ $ 36,370 $153,345
2001........................................................ 33,245 138,365
2002........................................................ 27,636 121,217
2003........................................................ 19,676 101,175
2004........................................................ 19,126 75,488
Thereafter.................................................. 127,124 357,350
--------- --------
Future minimum lease payments............................... 263,177 $946,940
========
Estimated executory costs................................... (23)
Amount representing imputed interest........................ (106,221)
---------
Present value of future minimum lease payments.............. $ 156,933
=========
</TABLE>

Minimum noncancelable sublease rental income to be received in the future,
which is not included above as an offset to future payments, totals $13,263 for
capital leases and $12,780 for operating leases.

Rent expense on operating leases for the years ended December 31, 1997, 1998
and 1999 totaled $136,516, $143,539 and $164,643, respectively, including
contingent rent expense of $9,360, $10,441 and $11,541, but reduced by sublease
rent income of $6,620, $5,909 and $4,936. Contingent rent expense on capital
leases for the years ended December 31, 1997, 1998 and 1999, was $1,987, $1,818
and $1,539, respectively. Contingent rent expense is generally based on sales
levels or changes in the Consumer Price Index.

F-26
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

13. LEASES (CONTINUED)

LEASES WITH THE SAVINGS AND PROFIT SHARING PLAN--At December 31, 1999, the
Savings and Profit Sharing Plan owned one store leased to the Company under a
capital lease and 591 stores leased to the Company under operating leases at
rentals which, in the opinion of management, approximated market rates at the
date of lease. In addition, in 1997, 1998 and 1999, there were 64, 99 and 28
leases, respectively, that either expired or, as a result of properties that
were sold by the Savings and Profit Sharing Plan to third parties, were canceled
or assigned to the new owner. Also, one property, five properties and four
properties, respectively, were sold to the Company by the Savings and Profit
Sharing Plan in 1997, 1998 and 1999.

Included in the consolidated financial statements are the following amounts
related to leases with the Savings and Profit Sharing Plan:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Buildings (net of accumulated amortization of $886 and
$39)...................................................... $281 $40
==== ===
Capital lease obligations (net of current portion of $56 and
$44)...................................................... $314 $34
==== ===
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Rent expense under operating leases and
amortization of capital lease assets........... $23,961 $19,987 $18,166
======= ======= =======
Imputed interest expense on capital lease
obligations.................................... $ 159 $ 59 $ 5
======= ======= =======
Capital lease principal payments included in
principal payments under long-term debt
agreements..................................... $ 1,183 $ 594 $ 3
======= ======= =======
</TABLE>

14. COMMITMENTS AND CONTINGENCIES

MCLANE COMPANY, INC.--The Company has a ten-year service agreement with
McLane Company, Inc. ("McLane") under which McLane is making its distribution
services available to 7-Eleven stores in the United States. The agreement
expires in November 2002. Upon signing the service agreement, the Company
received a $9,450 transitional payment that is being amortized to cost of goods
sold over the life of the agreement. If the Company does not fulfill its
obligation to McLane during this time period, the Company must reimburse McLane
on a pro-rata basis for a portion of the transitional payment. The Company has
exceeded the minimum annual purchases each year and expects to exceed the
minimum required purchase levels in future years.

CITGO PETROLEUM CORPORATION--The Company has a 20-year product purchase
agreement with Citgo Petroleum Corporation ("Citgo") to buy specified quantities
of gasoline at market prices. The agreement expires September 2006. The market
prices are determined pursuant to a formula based on the prices posted by
gasoline wholesalers in the various market areas where the Company purchases
gasoline from Citgo. Minimum required annual purchases under this agreement are
generally the lesser

F-27
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
of 750 million gallons or 35% of gasoline purchased by the Company for retail
sale. The Company has exceeded the minimum required annual purchases each year
and expects to exceed the minimum required annual purchase levels in future
years.

ENVIRONMENTAL--In December 1988, the Company closed its chemical
manufacturing facility in New Jersey. The Company is required to conduct
environmental remediation at the facility, including groundwater monitoring and
treatment for a projected 15-year period, which commenced in 1998. The Company
has recorded undiscounted liabilities representing its best estimates of the
remaining clean-up costs of $8,726 and $7,281 at December 31, 1998 and 1999,
respectively. Of this amount, $6,462 and $4,382, respectively, are included in
deferred credits and other liabilities and the remainder in accrued expenses and
other liabilities for the respective years.

In 1991, the Company and the former owner of the facility entered into a
settlement agreement pursuant to which the former owner agreed to pay a
substantial portion of the clean-up costs. Based on the terms of the settlement
agreement and the financial resources of the former owner, the Company has
recorded receivable amounts of $5,098 and $4,259 at December 31, 1998 and 1999,
respectively. Of this amount, $3,750 and $2,528, respectively, are included in
other assets and the remainder is included in accounts receivable.

Additionally, the Company accrues for the anticipated future costs and the
related probable state reimbursement amounts for remediation activities at its
existing and previously operated gasoline store sites where releases of
regulated substances have been detected. At December 31, 1998 and 1999,
respectively, the Company's estimated undiscounted liability for these sites was
$41,897 and $33,449, of which $21,797 and $16,329 are included in deferred
credits and other liabilities and the remainder is included in accrued expenses
and other liabilities. These estimates are based on the Company's prior
experience with gasoline sites and its consideration of such factors as the age
of the tanks, location of tank sites and experience with contractors who perform
environmental assessment and remediation work. The Company anticipates that
substantially all of the future remediation costs for detected releases at these
sites as of December 31, 1999, will be incurred within the next four or five
years.

Under state reimbursement programs, the Company is eligible to receive
reimbursement for a portion of future remediation costs, as well as a portion of
remediation costs previously paid. Accordingly, at December 31, 1998 and 1999,
the Company has recorded net receivable amounts of $46,712 and $52,768 for the
estimated probable state reimbursements, of which $38,262 and $42,518,
respectively, are included in other assets and the remainder in accounts
receivable. The net receivable amount was increased in 1999 by approximately
$14 million as a result of legislative changes in California, which have
expanded and extended that state's reimbursement program. In assessing the
probability of state reimbursements, the Company takes into consideration each
state's fund balance, revenue sources, existing claim backlog, status of
clean-up activity and claim ranking systems. As a result of these assessments,
the recorded receivable amounts in other assets are net of allowances of $9,992
and $8,115 for 1998 and 1999, respectively.

While there is no assurance of the timing of the receipt of state
reimbursement funds, based on the Company's experience, the Company expects to
receive the majority of state reimbursement funds, except from California,
within one to three years after payment of eligible remediation expenses,

F-28
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
assuming that the state administrative procedures for processing such
reimbursements have been fully developed. The Company estimates that it will
receive reimbursement of most of its identified remediation expenses in
California, although it may take one to ten years to receive those reimbursement
funds. As a result of the timing in receiving reimbursement funds from the
various states, the portion of the recorded receivable amounts related to
remedial activities which have already been completed has been discounted at
approximately 4.6% in 1998 and 6.4% in 1999 to reflect present values. Thus, the
1998 and 1999 recorded receivable amounts are net of present value discounts of
$4,051 and $14,996, respectively.

The estimated future remediation expenditures and related state
reimbursement amounts could change within the near future as governmental
requirements and state reimbursement programs continue to be implemented or
revised.

15. PREFERRED STOCK AND STOCK PLANS

PREFERRED STOCK--The Company has 5 million shares of preferred stock
authorized for issuance. Any preferred stock issued will have such rights,
powers and preferences as determined by the Company's Board of Directors.

STOCK PURCHASE PLANS--Effective October 1999, the Company adopted
noncompensatory stock purchase plans that allow qualified employees and
franchisees to acquire shares of the Company's common stock at market value on
the open market. The Company is responsible for the payment of all
administrative fees for establishing and maintaining the stock purchase plans as
well as the payment of all brokerage commissions for the purchase of shares by
the plans' independent administrator.

STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS--Effective October 1998,
the Company established the Stock Compensation Plan for Non-Employee Directors
under which up to an aggregate of 240,000 shares of the Company's common stock
is authorized to be issued to its non-employee directors. Eligible directors may
elect to receive all, none or a portion of their directors' fees in shares of
the Company's common stock. During 1999, 15,204 shares were issued under the
plan.

16. INCOME TAX EXPENSE

The components of earnings before income taxes and extraordinary gain are as
follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Domestic (including royalties of $67,259,
$68,329 and $72,947 from area license
agreements in foreign countries)............. $109,982 $78,719 $115,588
Foreign........................................ 5,313 3,894 11,751
-------- ------- --------
$115,295 $82,613 $127,339
======== ======= ========
</TABLE>

F-29
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

16. INCOME TAX EXPENSE (CONTINUED)
The provision for income taxes on earnings before extraordinary gain in the
accompanying Consolidated Statements of Earnings consists of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal........................................ $ 1,182 $ 1,146 $ 429
Foreign........................................ 11,559 10,753 13,361
State.......................................... 700 800 2,250
------- ------- -------
Subtotal..................................... 13,441 12,699 16,040
Deferred......................................... 31,812 19,190 32,476
------- ------- -------
Income taxes on earnings before extraordinary
gain........................................... $45,253 $31,889 $48,516
======= ======= =======
</TABLE>

Included in the accompanying Consolidated Statements of Shareholders' Equity
(Deficit) at December 31, 1997, 1998 and 1999, respectively, are $5,877, $10,521
and $7,128 of income taxes provided on unrealized gains on marketable
securities.

Reconciliations of income taxes on earnings before extraordinary gain at the
federal statutory rate to the Company's actual income taxes provided are as
follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Taxes at federal statutory rate.................. $40,353 $28,915 $44,569
State income taxes, net of federal income tax
benefit........................................ 455 520 1,463
Foreign tax rate difference...................... 2,095 263 728
Other............................................ 2,350 2,191 1,756
------- ------- -------
$45,253 $31,889 $48,516
======= ======= =======
</TABLE>

F-30
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

16. INCOME TAX EXPENSE (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1999
--------- ---------
<S> <C> <C>
Deferred tax assets:
Compensation and benefits........................... $ 38,823 $ 33,962
SFAS No. 15 Interest................................ 43,983 29,747
Accrued insurance................................... 25,483 29,237
Accrued liabilities................................. 25,842 25,863
Tax credit carryforwards............................ 11,515 5,722
Debt issuance costs................................. 6,518 4,718
Other............................................... 6,075 6,178
--------- ---------
Subtotal.......................................... 158,239 135,427
Deferred tax liabilities:
Property and equipment.............................. (70,943) (86,937)
Area license agreements............................. (63,106) (55,754)
Other............................................... (15,498) (11,695)
--------- ---------
Subtotal.......................................... (149,547) (154,386)
--------- ---------
Net deferred tax asset (liability).................... $ 8,692 $ (18,959)
========= =========
</TABLE>

At December 31, 1998 and 1999, respectively, $52,568 and $69,246 of the
Company's net deferred tax asset (liability) is recorded in deferred credits and
other liabilities. The remaining balance is included in other current assets
(see Note 5). At December 31, 1999, the Company had approximately $5,700 of
alternative minimum tax credit carryforwards, which have no expiration date.

F-31
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

17. EARNINGS PER COMMON SHARE

Computations for basic and diluted earnings per share are presented below:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
BASIC:
Earnings before extraordinary gain........................ $ 70,042 $ 50,724 $ 78,823
Earnings on extraordinary gain............................ -- 23,324 4,290
-------- -------- --------
Net earnings.............................................. $ 70,042 $ 74,048 $ 83,113
======== ======== ========
Weighted-average common shares outstanding................ 81,985 81,985 81,994
======== ======== ========
Earnings per common share before extraordinary gain....... $ 0.85 $ 0.62 $ 0.96
Earnings per common share on extraordinary gain........... -- 0.28 0.05
-------- -------- --------
Net earnings per common share............................. $ 0.85 $ 0.90 $ 1.01
======== ======== ========

DILUTED:
Earnings before extraordinary gain........................ $ 70,042 $ 50,724 $ 78,823
Add interest on convertible quarterly income debt
securities, net of tax--see Note 10..................... 8,343 10,316 10,761
-------- -------- --------
Earnings before extraordinary gain plus assumed
conversions............................................. 78,385 61,040 89,584
Earnings on extraordinary gain............................ -- 23,324 4,290
-------- -------- --------
Net earnings plus assumed conversions..................... $ 78,385 $ 84,364 $ 93,874
======== ======== ========
Weighted-average common shares outstanding (Basic)........ 81,985 81,985 81,994
Add effects of assumed conversions:
Stock options--see Note 12.............................. 34 24 42
Convertible quarterly income debt securities--see
Note 10............................................... 14,422 19,918 20,924
-------- -------- --------
Weighted-average common shares outstanding plus shares
from assumed conversions (Diluted)...................... 96,441 101,927 102,960
======== ======== ========
Earnings per common share before extraordinary gain....... $ 0.81 $ 0.60 $ 0.87
Earnings per common share on extraordinary gain........... -- 0.23 0.04
-------- -------- --------
Net earnings per common share............................. $ 0.81 $ 0.83 $ 0.91
======== ======== ========
</TABLE>

18. ACQUISITIONS

In May 1998, the Company purchased 100% of the common stock of Christy's
Market, Inc., a Massachusetts company that operated 135 convenience stores in
the New England area. The Company also purchased the assets of 20 'red D mart'
convenience stores in the South Bend, Indiana, area from MDK Corporation of
Goshen, Indiana, at approximately the same time.

These acquisitions were accounted for under the purchase method of
accounting and, accordingly, the results of operations of the acquired
businesses have been included in the accompanying

F-32
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

18. ACQUISITIONS (CONTINUED)
consolidated financial statements from their dates of acquisition. Pro forma
information is not provided as the impact of the acquisitions does not have a
material effect on the Company's results of operations, cash flows or financial
position.

The following information is provided as supplemental cash flow disclosure
for the acquisitions of businesses as reported in the Consolidated Statements of
Cash Flows for the year ended December 31, 1998:

<TABLE>
<S> <C>
Fair value of assets acquired............................... $75,479
Fair value of liabilities assumed........................... 42,478
-------
Cash paid................................................... 33,001
Less cash acquired.......................................... 72
-------
Net cash paid for acquisitions.............................. $32,929
=======
</TABLE>

19. QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data for 1998 and 1999 is as follows:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
YEAR ENDED DECEMBER 31, 1998: QUARTER QUARTER QUARTER QUARTER YEAR
- ----------------------------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE DATA)
<S> <C> <C> <C> <C> <C>
Merchandise sales................... $1,204 $1,421 $1,556 $1,393 $5,574
Gasoline sales...................... 391 424 444 425 1,684
------ ------ ------ ------ ------
Net sales........................... 1,595 1,845 2,000 1,818 7,258
------ ------ ------ ------ ------
Merchandise gross profit............ 411 502 546 469 1,928
Gasoline gross profit............... 43 44 59 62 208
------ ------ ------ ------ ------
Gross profit........................ 454 546 605 531 2,136
------ ------ ------ ------ ------
Income tax expense (benefit)........ (7) 16 22 1 32
Earnings (loss) before extraordinary
gain.............................. (12) 26 36 1 51
Net earnings........................ 6 26 36 6 74
Earnings (loss) per common share
before extraordinary gain:
Basic............................. (0.15) 0.32 0.43 0.01 0.62
Diluted........................... (0.15) 0.28 0.37 0.01 0.60
</TABLE>

The first and fourth quarters include extraordinary gains of $17,871 and
$5,453, respectively, resulting from the redemption of the 12% Debentures and
the partial purchases of the 5% Debentures, the 4 1/2% Debentures and the 4%
Debentures (see Note 9). The first quarter includes an expense of $11,839
resulting from a computer equipment lease termination and an accrual of $7,104
for severance benefits and related costs.

F-33
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

19. QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
YEAR ENDED DECEMBER 31, 1999: QUARTER QUARTER QUARTER QUARTER YEAR
- ----------------------------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE DATA)
<S> <C> <C> <C> <C> <C>
Merchandise sales................... $1,362 $1,585 $1,695 $1,574 $6,216
Gasoline sales...................... 408 504 548 576 2,036
------ ------ ------ ------ ------
Net sales........................... 1,770 2,089 2,243 2,150 8,252
------ ------ ------ ------ ------
Merchandise gross profit............ 452 553 596 541 2,142
Gasoline gross profit............... 54 60 53 57 224
------ ------ ------ ------ ------
Gross profit........................ 506 613 649 598 2,366
------ ------ ------ ------ ------
Income tax expense.................. 1 19 25 4 49
Earnings before extraordinary
gain.............................. 2 29 38 10 79
Net earnings........................ 6 29 38 10 83
Earnings per common share before
extraordinary gain:
Basic............................. 0.03 0.35 0.46 0.13 0.96
Diluted........................... 0.03 0.30 0.39 0.13 0.87
</TABLE>

The first quarter includes an extraordinary gain of $4,290 resulting from
the partial purchases of the 5% Debentures and the 4 1/2% Debentures (see
Note 9). The third and fourth quarters include income of approximately
$10 million and $4 million, respectively, which resulted from environmental
legislative changes in California (see Note 14). The fourth quarter includes a
termination benefit accrual of $4,654 (see Note 8).

F-34
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of

7-Eleven, Inc.

We have reviewed the accompanying condensed consolidated balance sheet of
7-Eleven, Inc. and Subsidiaries as of March 31, 2000, and the related condensed
consolidated statements of earnings and cash flows for the three-month periods
ended March 31, 1999 and 2000. These financial statements are the responsibility
of the Company's management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated interim financial
statements of 7-Eleven, Inc. and Subsidiaries for them to be in conformity with
accounting principles generally accepted in the United States.

We previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet as of
December 31, 1999, and the related consolidated statements of earnings,
shareholders' equity (deficit), and cash flows for the year then ended (not
presented herein), and in our report dated February 3, 2000, except as to the
information included in the fourth paragraph of Note 13, for which the date is
March 2, 2000, and the information included in Note 2, for which the date is
March 16, 2000, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet information as of December 31, 1999, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.

PRICEWATERHOUSECOOPERS LLP

Dallas, Texas
May 1, 2000

F-35
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:

Cash and cash equivalents................................. $ 76,859 $ 99,842

Accounts receivable....................................... 179,039 186,555

Inventories............................................... 134,050 111,914

Other current assets...................................... 115,328 124,369
----------- -----------

Total current assets.................................... 505,276 522,680

Property and equipment...................................... 1,880,520 1,855,053

Other assets................................................ 299,870 286,988
----------- -----------

Total assets............................................ $ 2,685,666 $ 2,664,721
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:

Trade accounts payable.................................... $ 168,302 $ 168,061

Accrued expenses and other liabilities.................... 401,216 383,187

Commercial paper.......................................... 34,418 116,128

Long-term debt due within one year........................ 207,413 96,411
----------- -----------

Total current liabilities............................... 811,349 763,787

Deferred credits and other liabilities...................... 251,073 232,668

Long-term debt.............................................. 1,802,819 1,296,899

Convertible quarterly income debt securities................ 380,000 380,000

Commitments and contingencies

Shareholders' equity (deficit):

Preferred stock, $.01 par value........................... -- --

Common stock, $.0001 par value............................ 8 10

Additional capital........................................ 625,761 1,165,473

Accumulated deficit....................................... (1,194,896) (1,180,060)

Accumulated other comprehensive earnings.................. 9,552 5,944
----------- -----------

Total shareholders' equity (deficit).................... (559,575) (8,633)
----------- -----------

Total liabilities and shareholders' equity (deficit).... $ 2,685,666 $ 2,664,721
=========== ===========
</TABLE>

See notes to condensed consolidated financial statements.

F-36
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------
1999 2000
---------- ----------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Merchandise sales (Including $118,806 and
$143,417 in excise taxes)............................... $1,361,750 $1,509,289
Gasoline sales (Including $149,032 and
$157,091 in excise taxes)............................... 408,345 603,282
---------- ----------

Net sales............................................... 1,770,095 2,112,571
Other income.............................................. 22,127 24,773
---------- ----------
Total revenues.......................................... 1,792,222 2,137,344
---------- ----------
COSTS AND EXPENSES:
Merchandise cost of goods sold............................ 909,980 994,498
Gasoline cost of goods sold............................... 354,565 551,634
---------- ----------
Total cost of goods sold................................ 1,264,545 1,546,132
Franchisee gross profit................................... 128,699 146,752
Operating, selling, general and administrative expenses... 371,779 413,691
Interest expense, net..................................... 24,083 26,892
---------- ----------
Total costs and expenses................................ 1,789,106 2,133,467
---------- ----------
EARNINGS BEFORE INCOME TAX EXPENSE (BENEFIT) AND
EXTRAORDINARY GAIN........................................ 3,116 3,877

INCOME TAX EXPENSE (BENEFIT)................................ 1,233 (10,959)
---------- ----------

EARNINGS BEFORE EXTRAORDINARY GAIN.......................... 1,883 14,836
EXTRAORDINARY GAIN ON DEBT REDEMPTION
(NET OF TAX EFFECT OF $2,743)............................. 4,290 --
---------- ----------
NET EARNINGS................................................ $ 6,173 $ 14,836
========== ==========
NET EARNINGS PER COMMON SHARE:
BASIC.....................................................
Earnings before extraordinary gain...................... $ 0.03 $ 0.17
Extraordinary gain...................................... 0.05 --
---------- ----------
Net earnings............................................ $ 0.08 $ 0.17
========== ==========
DILUTED
Earnings before extraordinary gain...................... $ 0.03 $ 0.16
Extraordinary gain...................................... 0.05 --
---------- ----------
Net earnings............................................ $ 0.08 $ 0.16
========== ==========
</TABLE>

See notes to condensed consolidated financial statements.

F-37
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------------
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.............................................. $ 6,173 $ 14,836
Adjustments to reconcile net earnings to net cash (used
in) provided by operating activities:
Extraordinary gain on debt redemption................... (4,290) --
Depreciation and amortization of property and
equipment............................................. 45,157 51,469
Other amortization...................................... 5,042 4,998
Deferred income taxes................................... 5,327 (15,335)
Noncash interest expense................................ 459 558
Other noncash income.................................... (2,051) (1,111)
Net loss (gain) on property and equipment............... 823 (52)
Increase in accounts receivable......................... (11,283) (5,022)
(Increase) decrease in inventories...................... (1,218) 22,136
Increase in other assets................................ (21,602) (7,255)
Decrease in trade accounts payable and other
liabilities........................................... (30,095) (42,420)
----------- -----------
Net cash (used in) provided by operating activities... (7,558) 22,802
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and equipment........... (110,697) (71,975)
Proceeds from sale of property and equipment.............. 1,056 72,908
Proceeds from sale of domestic securities................. -- 996
Other..................................................... 5,470 (660)
----------- -----------
Net cash (used in) provided by investing activities... (104,171) 1,269
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from commercial paper and revolving credit
facilities.............................................. 1,231,245 792,843
Payments under commercial paper and revolving credit
facilities.............................................. (1,080,599) (1,209,009)
Principal payments under long-term debt agreements........ (31,809) (131,210)
(Decrease) increase in outstanding checks in excess of
cash in bank............................................ (9,375) 6,568
Net proceeds from issuance of common stock................ -- 539,720
Other..................................................... (829) --
----------- -----------
Net cash provided by (used in) financing activities... 108,633 (1,088)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (3,096) 22,983
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 87,115 76,859
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 84,019 $ 99,842
=========== ===========
RELATED DISCLOSURES FOR CASH FLOW REPORTING:
Interest paid, excluding SFAS No.15 Interest.............. $ (36,760) $ (32,088)
=========== ===========
Net income taxes paid..................................... $ (2,970) $ (4,713)
=========== ===========
Assets obtained by entering into capital leases........... $ 14,259 $ 14,514
=========== ===========
</TABLE>

See notes to condensed consolidated financial statements.

F-38
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

(UNAUDITED)

1. BASIS OF PRESENTATION

The condensed consolidated balance sheet as of March 31, 2000, and the
condensed consolidated statements of earnings and cash flows for the three-month
periods ended March 31, 1999 and 2000, have been prepared by the Company without
audit. In the opinion of management, all adjustments necessary to present fairly
the financial position at March 31, 2000, and the results of operations and cash
flows for all periods presented have been made. Certain prior-period amounts
have been reclassified to conform to current-period presentation. The results of
operations for the interim periods are not necessarily indicative of the
operating results for the full year.

Sales and cost of goods sold of stores operated by franchisees are
consolidated with the results of Company-operated stores in the condensed
consolidated statements of earnings. Gross profit from franchise stores is split
between the Company and its franchisees pursuant to the terms of franchise
agreements.

The condensed consolidated balance sheet as of December 31, 1999, is derived
from the audited financial statements but does not include all disclosures
required by generally accepted accounting principles. The notes accompanying the
consolidated financial statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 1999, include accounting policies and additional
information pertinent to an understanding of both the December 31, 1999, balance
sheet and the interim financial statements. The information has not changed
except as a result of normal transactions in the three months ended March 31,
2000, and as discussed in the following notes.

2. EQUITY TRANSACTIONS

On March 16, 2000, the Company issued 22,736,842 shares of common stock at
$23.75 per share to IYG Holding Company in a private placement transaction,
which increased their ownership in the Company to 72.7%. The net proceeds of
$539,425 were used to repay the outstanding balance on the Company's bank term
loan of $112,500 and to reduce the Company's revolving credit facility by
approximately $250 million and commercial paper facility by approximately $177
million.

On April 26, 2000, the shareholders of the Company approved a reverse stock
split of one share of common for five shares of common, which was effective
May 1, 2000. Accordingly, all references to share or earnings-per-share data in
the accompanying condensed consolidated financial statements and related notes
reflect the reverse stock split.

3. SALE-LEASEBACK AGREEMENT

In the first quarter, the Company entered into a sale-leaseback agreement
whereby land, buildings and associated real and personal property improvements
were sold and leased back by the Company. The Company received net proceeds of
$71,915 on the sale of 33 stores. The gain on the sale of the properties of
approximately $12 million was deferred and will be recognized on a straight-line
basis over the initial term of the leases.

Under the terms of the agreements, the Company will make rental payments
over a 16-year lease term. At the expiration of the initial lease term, the
Company will have the option of renewing the

F-39
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

(UNAUDITED)

3. SALE-LEASEBACK AGREEMENT (CONTINUED)
lease for up to six renewal terms of up to five years per renewal term at
predetermined increases. The leases do not contain purchase options or
guaranteed residual values; however, the Company does have the right of first
refusal after the first five years of the initial lease term with respect to any
offers to purchase the properties which the lessor receives. The leases are
being accounted for as operating leases.

4. INCOME TAX EXPENSE/BENEFIT

On March 27, 2000, the Company received notice of approval from the Internal
Revenue Service regarding the settlement of certain outstanding tax issues
relating to audits of the Company's tax returns. As a result of the settlement,
the Company recorded an income tax benefit of $12.5 million in the first
quarter. This benefit reduced the Company's income tax expense in the first
quarter from an expense of $1.5 million to a benefit of $11 million.

5. COMPREHENSIVE EARNINGS

The components of comprehensive earnings of the Company for the periods
presented are as follows:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------
1999 2000
-------- --------
<S> <C> <C>
Net earnings............................................... $6,173 $14,836
Other comprehensive earnings:
Unrealized gains (losses) on equity securities, net of
tax.................................................... 549 (2,142)
Reclassification adjustments for gains included in net
earnings, net of $758 tax expense...................... -- (1,228)
Foreign currency translation adjustments................. 1,046 (238)
------ -------
Other comprehensive earnings........................... 1,595 (3,608)
------ -------
Total comprehensive earnings............................... $7,768 $11,228
====== =======
</TABLE>

F-40
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

(UNAUDITED)

6. EARNINGS PER SHARE

Computations for basic and diluted earnings per share are presented below
(in thousands, except per share data):

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------
1999 2000
-------- --------
<S> <C> <C>
BASIC:
Earnings before extraordinary gain........................ $ 1,883 $ 14,836
Earnings on extraordinary gain............................ 4,290 --
------- --------
Net earnings.............................................. $ 6,173 $ 14,836
======= ========
Weighted-average common shares outstanding................ 81,988 85,758
======= ========
Earnings per common share before extraordinary gain....... $ 0.03 $ 0.17
Earnings per common share on extraordinary gain........... 0.05 --
------- --------
Net earnings per common share............................. $ 0.08 $ 0.17
======= ========
DILUTED:
Earnings before extraordinary gain........................ $ 1,883 $ 14,836
Add interest on convertible quarterly income debt
securities, net of tax (A).............................. -- 2,629
------- --------
Earnings before extraordinary gain plus assumed
conversions............................................. $ 1,883 $ 17,465
Earnings on extraordinary gain............................ 4,290 --
------- --------
Net earnings plus assumed conversions..................... $ 6,173 $ 17,465
======= ========
Weighted-average common shares outstanding (Basic)........ 81,988 85,758
Add effects of assumed conversions:
Stock options (B)....................................... -- 582
Convertible quarterly income debt securities (A)........ -- 20,924
------- --------
Weighted-average common shares outstanding plus shares
from assumed conversions (Diluted)...................... 81,988 107,264
======= ========
Earnings per common share before extraordinary gain....... $ 0.03 $ 0.16
Earnings per common share on extraordinary gain........... 0.05 --
------- --------
Net earnings per common share............................. $ 0.08 $ 0.16
======= ========
</TABLE>

- ------------------------

(A) The convertible quarterly income debt securities, which are convertible into
20,924,069 common shares, are not assumed converted for the three months
ended March 31, 1999, as they have an antidilutive effect on earnings per
share.

(B) The weighted-average shares for the three months ended March 31, 1999, do
not assume exercise of the stock options since the average market price of
shares is below the options' exercise prices.

F-41
<PAGE>
7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

(UNAUDITED)

7. STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 133

The Company is currently reviewing SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). The statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
SFAS No. 133 becomes effective for all fiscal quarters of fiscal years beginning
after June 15, 2000, and earlier application is permitted as of the beginning of
any fiscal quarter subsequent to June 15, 2000. The Company intends to adopt the
provisions of this statement as of January 1, 2001. The impact of the adoption
of SFAS No. 133 has not been determined at this time due to the Company's
continuing investigation of its financial instruments and the applicability of
SFAS No. 133 to them.

F-42
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

10,000,000 SHARES

7-ELEVEN, INC.

COMMON STOCK

[LOGO]

---------------

PROSPECTUS

, 2000

---------------------

SALOMON SMITH BARNEY

MERRILL LYNCH & CO.

-------------

DEUTSCHE BANC ALEX. BROWN

DONALDSON, LUFKIN & JENRETTE

GOLDMAN, SACHS & CO.

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses payable by 7-Eleven, Inc. (the "Company") in
connection with the registration of the common stock offered hereby are as
follows:

<TABLE>
<S> <C>
SEC registration fee........................................ $
Printing and engraving expenses*............................
Legal fees and expenses*....................................
Accounting fees and expenses*...............................
Transfer agent and registrar fees*..........................
Miscellaneous expenses*.....................................
-------
Total.....................................................
=======
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article 2.02-1 of the Texas Business Corporation Act permits a corporation
to indemnify certain persons, including officers and directors and former
officers and directors, and to purchase insurance with respect to liability
arising out of their capacity or status as officers and directors. Such law
provides further that the indemnification permitted thereunder will not be
deemed exclusive of any other rights to which officers and directors may be
entitled under the corporation's articles of incorporation, bylaws, any
agreement or otherwise.

Article Twelve of the Company's Second Restated Articles of Incorporation
provides as follows:

The Corporation shall indemnify any person who (i) is or was a director
or officer of this Corporation or (ii) while a director or officer of this
Corporation is or was serving at the request of this Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent
or similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit
plan, or other enterprise, to the fullest extent that a corporation may or
is required to grant indemnification to a director under the Act. The
Corporation may indemnify any person to such further extent as permitted by
applicable law, such person to be so indemnified in accordance with the
provisions hereof in respect of such person's own negligence.

In addition, Article Nine of the Company's bylaws provides for such
indemnification of officers and directors within the limits set forth in the
Second Restated Articles of Incorporation and applicable provisions of Texas
law.

Article Thirteen of the Company's Second Restated Articles of Incorporation
further includes a provision eliminating the monetary liability of a director to
the Company or its shareholders for an act or omission in the director's
capacity as a director to the fullest extent permitted by Texas law. See
"Description of Capital Stock--Exculpatory Charter Provisions; Liability and
Indemnification of Officers and Directors."

The Company maintains liability insurance for the benefit of its directors
and officers as is customary for corporations in similar industries.

II-1
<PAGE>
ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------------------- -----------------------
<C> <S>
1.1** Underwriting Agreement.
4.1 Shareholders Agreement dated as of March 5, 1991, among The
Southland Corporation, Ito-Yokado Co., Ltd., IYG Holding
Company, Thompson Brothers, L.P., Thompson Capital
Partners, L.P., The Hayden Company, The Williamsburg
Corporation, Four J Investment, L.P., The Philp Co.,
participants in the Company's Grant Stock Plan who are
signatories thereto and certain limited partners of Thompson
Capital Partners, L.P. who are signatories thereto,
incorporated by reference to Exhibit A of Schedule 13D filed
by Ito-Yokado Co., Ltd., Seven-Eleven Japan Co., Ltd.and IYG
Holding Company.
4.2 First Amendment, dated December 30, 1992, to Shareholders
Agreement, dated as of March 5, 1991, incorporated by
reference to Exhibit 4.(i)(5) of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992.
4.3 Second Amendment, dated February 28, 1996, to Shareholders
Agreement, dated as of March 5, 1991, incorporated by
reference to Exhibit 4.(i)(6) of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995.
4.4 Subscription Agreement dated March 1, 2000, between IYG
Holding Company, 7-Eleven, Inc., Ito-Yokado Co., Ltd. and
Seven-Eleven Co., Ltd., incorporated by reference to
Exhibit 4.(i)(5) of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1999.
4.5 Agreement as to Shares dated March 16, 2000, between
7-Eleven, Inc., Ito-Yokado Co., Ltd. and Seven-Eleven
Co., Ltd., incorporated by reference to Exhibit 4.(i)(6) of
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1999.
4.6 Registration Rights Agreement dated March 16, 2000, between
IYG Holding Company, 7-Eleven, Inc., Ito-Yokado Co., Ltd.
and Seven-Eleven Co., Ltd., incorporated by reference to
Exhibit 4.(i)(7) of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1999.
4.7 Indenture, including Debenture, with Chase Manhattan Trust,
N.A., as successor trustee, providing for 5% First Priority
Senior Subordinated Debentures due December 15, 2003,
incorporated by reference to Exhibit 4.(ii)(2) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990.
4.8 Indenture, including Debentures, with Bank of New York as
successor trustee, providing for 4 1/2% Second Priority
Senior Subordinated Debentures (Series A) due June 15, 2004
and 4% Second Priority Senior Subordinated Debentures
(Series B) due June 15, 2004, incorporated by reference to
Exhibit 4.(ii)(3) of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990.
4.9 Form of 4.5% Convertible Quarterly Income Debt Securities
due 2010, incorporated by reference to Exhibit 4(v)-1 of the
Registrant's Form 8-K, dated November 21, 1995.
4.10 Form of 4.5% Convertible Quarterly Income Debt Securities
due 2013, incorporated by reference to Exhibit 4.(ii)(3) of
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997.
5.1** Opinion of Vinson & Elkins L.L.P.
8.1** Opinion of Vinson & Elkins L.L.P. relating to certain U.S.
Federal Tax Considerations for Non-U.S. Holders of Common
Stock.
15.1* Letter re Unaudited Interim Financial Information from
PricewaterhouseCoopers LLP, Independent Auditors.
23.1* Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2** Consent of Vinson & Elkins L.L.P. (included in
Exhibit 5.1).
24.1* Power of Attorney (included on signature page).
</TABLE>

- ------------------------

* Filed herewith.

** To be filed by amendment.

II-2
<PAGE>
ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Company pursuant to the provisions in Item 14 above,
or otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in such act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director or officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in such act and will
be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Act;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
and

(iii) To include any material information with respect to the Plan of
Distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;

(2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Dallas, State of Texas, on May 8, 2000.

<TABLE>
<S> <C> <C>
7-ELEVEN, INC.

By: /s/ JAMES W. KEYES
----------------------------------------
James W. Keyes
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James W. Keyes, Bryan F. Smith,
Jr., and Ezra Shashoua, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her in his or her name, place and stead, in any and
all capacities, to sign any or all amendments to this registration statement and
additional registration statements relating to the same offering, and to file
the same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed below by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
TITLE DATE
----- ----
<C> <S> <C>
/s/ MASATOSHI ITO Chairman of the Board of Directors May 8, 2000
------------------------------------
Masatoshi Ito

/s/ TOSHIFUMI SUZUKI Vice Chairman of the Board of Directors May 8, 2000
------------------------------------
Toshifumi Suzuki

/s/ JAMES W. KEYES President, Chief Executive Officer and May 8, 2000
------------------------------------ Director
James W. Keyes

/s/ EZRA SHASHOUA Vice President, Treasurer and Chief May 8, 2000
------------------------------------ Financial Officer
Ezra Shashoua
</TABLE>

S-1
<PAGE>

<TABLE>
<CAPTION>
TITLE DATE
----- ----
<C> <S> <C>
/s/ CLARK J. MATTHEWS, II Co-Vice Chairman of the Board of May 8, 2000
------------------------------------ Directors
Clark J. Matthews, II

Director
------------------------------------
Yoshitami Arai

/s/ MASAAKI ASAKURA Senior Vice President and Director May 8, 2000
------------------------------------
Masaaki Asakura

/s/ DONALD E. THOMAS Vice President, Chief Accounting May 8, 2000
------------------------------------ Officer, and Controller
Donald E. Thomas

/s/ TIMOTHY N. ASHIDA Director May 8, 2000
------------------------------------
Timothy N. Ashida

/s/ JAY W. CHAI Director May 8, 2000
------------------------------------
Jay W. Chai

/s/ GARY J. FERNANDES Director May 8, 2000
------------------------------------
Gary J. Fernandes

/s/ MASAAKI KAMATA Director May 8, 2000
------------------------------------
Masaaki Kamata

/s/ KAZUO OTSUKA Director May 8, 2000
------------------------------------
Kazuo Otsuka

/s/ ASHER O. PACHOLDER Director May 8, 2000
------------------------------------
Asher O. Pacholder

/s/ NOBUTAKE SATO Director May 8, 2000
------------------------------------
Nobutake Sato
</TABLE>

S-2
<PAGE>
INDEX TO EXHIBITS

- ------------------------

* Filed herewith.

** To be filed by amendment.

<PAGE>
Exhibit No. 15.1

May 8, 2000

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Commissioners:

We are aware that our report dated May 1, 2000 on our review of the condensed
consolidated interim financial information of 7-Eleven, Inc. and Subsidiaries
for the period ended March 31, 2000 and included in the Company's Quarterly
Report on Form 10-Q for the quarter then ended is included and incorporated by
reference in this Registration Statement.

PRICEWATERHOUSECOOPERS LLP

Dallas, Texas

<PAGE>
Exhibit No. 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-3 of our
report dated February 3, 2000, except as to the information regarding
sale-leaseback agreements included in Note 13, for which the date is March 2,
2000, the information regarding the private placement transaction included in
Note 2, for which the date is March 16, 2000, and the information regarding the
reverse stock split included in Note 2, for which the date is May 1, 2000,
relating to the consolidated financial statements of 7-Eleven, Inc. and
Subsidiaries, which appears in such Registration Statement. We also hereby
consent to the incorporation by reference in this Registration Statement on
Form S-3 of our report dated February 3, 2000, except as to the information
included in the fourth paragraph of Note 13, for which the date is March 2,
2000, and the information included in Note 2, for which the date is March 16,
2000, relating to the consolidated financial statements, and our report dated
February 3, 2000 relating to the financial statement schedule, both of which
appear in the Annual Report on Form 10-K for the year ended December 31, 1999.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.

PRICEWATERHOUSECOOPERS LLP

Dallas, Texas
May 8, 2000