Consolidated Financial Statements
For the year ended February 20, 2016

Nitori Holdings Co., Ltd.

Consolidated Balance Sheet
Nitori Holdings Co., Ltd. and consolidated subsidiaries
As at February 20, 2016

ASSETS
Current Assets:
Cash and deposits (Notes 9 and 11)
Notes and accounts receivable-trade (Note 11)
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets (Note 16)
Forward exchange contracts
Other
Allowance for doubtful accounts (Note 11)
Total current assets
Non-Current Assets:
Property, plant and equipment:
Buildings and structures, net (Notes 5 and 17)
Machinery, equipment and vehicles, net (Note 5)
Tools, furniture and fixtures, net (Note 5)
Land (Note 17)
Leased assets, net (Notes 5 and 10)
Construction in progress
Total property, plant and equipment
Intangible assets
Investments and other assets:
Investment securities (Notes 5, 11 and 12)Long-term loans receivable
GuaranteeGt depositsdit (Notes(N t 5 andd 11)
Lease deposits (Note 11)
Deferred tax assets (Note 16)
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

Millions of Yen

Thousands of
U.S. Dollars(Note 2)

2015

2016

2016

¥26,409
13,063
41,563
184
2,740
831
25,873
13,333(5)
123,994¥42,327
15,25843,079
90
2,247
2,602
8,160
16,231(8)
129,989$374,681
135,069
381,334
798
19,89023,03972,238143,677(76)
1,150,653

85,224
3,462
3,985
111,106
2,907
4,255
210,942
10,46088,225
3,515
4,424
115,504
2,715
10,477
224,863
11,209780,961
31,12339,167
1,022,434
24,03892,749
1,990,474
99,223

1,569
642
17,04217 042
17,0501,030
22,070(9)59,396
280,799¥404,793

2,763
540
15,36215 362
18,079
2,821
8,921
(9)
48,478284,551¥414,541

24,461
4,785
135,987
135 987
160,037
24,97678,968(88)429,128
2,518,826$3,669,480

1

Consolidated Balance Sheet
Nitori Holdings Co., Ltd. and consolidated subsidiaries
As at February 20, 2016

Millions of Yen

Thousands of
U.S. Dollars(Note 2)

2015

2016

2016

LIABILITIES AND NET ASSETS
Current Liabilities:
Notes and accounts payable-trade (Notes 5 and 11)
Short-term loans payable (Notes 11 and 21)
Lease obligations (Notes 10 and 21)
Accounts payable-other (Note 11)
Income taxes payable (Note 11)
Deferred tax liabilities (Note 16)
Provision for bonuses
Provision for point card certificates
Provision for special benefits to shareholders
Asset retirement obligations (Note 22)
Other
Total current liabilities¥16,473
4,392
188
18,031
13,961
5,167
2,374
1,029
121
26
14,241
76,007¥15,356
1,504
188
16,195
14,929$135,938
13,3201,666
143,364
132,151

3,024
1,031
191

26,769
9,128
1,690

15,176
67,597

134,340
598,370

Non-Current Liabilities:
Long-term loans payable (Notes 11 and 21)
Lease obligations (Notes10 and 21)
Deferred tax liabilities (Note 16)
Provision for directors' retirement benefits
Net defined benefit liability (Note 14)
Asset retirement obligations (Note 22)
Other (Note 5)
Total non-current liabilities
Total liabilities

2,129
2,706
3,020
228
2,345
2,266
5,557
18,254
94,262

625
2,518
1
228
2,279
3,902
6,418
15,974
83,572

5,532
22,2909
2,026
20,181
34,54656,818141,404
739,775

NET ASSETS (N
(Note
t 8)
Shareholders’ Equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity

13,37013,725
267,963(14,639)
280,419

13,37014,411
308,854(13,392)
323,244

118,357
127,572
2,733,947(118,548)
2,861,328

Accumulated Other Comprehensive Income:Unrealized holding gain (loss) on securities (Note 12)
Unrealized gain (loss) from hedging instruments (Note 13)
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income

586
25,0953,345(33)
28,993

289
4,165
2,301
(305)
6,450

2,565
36,86920,368(2,700)57,103

1,050
66
310,531¥404,793

1,174
98
330,968¥414,541

10,398873
2,929,704$3,669,480

Subscription Rights to Shares
Minority Interests
Total net assets
Total liabilities and net assets
See Notes to Consolidated Financial Statements.

2

Consolidated Statement of Income
Nitori Holdings Co., Ltd. and consolidated subsidiaries
For the year ended February 20, 2016

Net Sales:
Cost of Sales:
Gross profit:
Selling, General and Administrative Expenses (Notes 6 and 15)
Operating income
Non-Operating Income:Interest income
Dividends income
Foreign exchange gains
Vending machine income
Gain on sales of goods
Other
Non-Operating Expenses:
Interest expenses
Other
Ordinary income
Special Gains:
Gain on sales of non-current assets (Note 6)
Subsidy income
Gain on reversal of subscription rights to shares
Other

Millions of Yen

Thousands of
U.S. Dollars(Note 2)

2015
¥417,285
198,947
218,337
152,029
66,307

2016¥458,140
214,597
243,543
170,503
73,0392016$4,055,417
1,899,595
2,155,821
1,509,281
646,540

431
23
466
226
258
333
1,740

450
31
681
227
282
372
2,046

3,988
279
6,030
2,014
2,501
3,296
18,11298
19
118
67,92976
278
75,007672
24
697
663,955

27

9
643
10
10
673

83
5,691
93
90
5,959

119
122
86
6
456
67,565

57
431
35
488

511
3,821
318
4,322

46
1,060
74,619412
9,387
660,527

26,864(775)
26,08827,514
103
27,618

243,557918
244,475

41,477
26¥41,450

47,001
32¥46,969

416,051285$415,766

64
91

Special Losses:
Loss on sales and disposal of non-current assets (Note 6)
Loss on reduction of non-current assets
Penalty for the scrap and build of outlets
Impairment loss (Note 6)
Special retirement expenses
Other
Income before income taxes and minority interests
Income Taxes (Note 16):
Current
Deferred

Net Income Before Minority Interests
Minority Interests in Income
Net Income

120

See Notes to Consolidated Financial Statements.

3Consolidated Statement of Comprehensive Income
Nitori Holdings Co., Ltd. and consolidated subsidiaries
For the year ended February 20, 2016

Net Income Before Minority Interests
Other Comprehensive Income (Loss)
Unrealized holding gain (loss) on securities
Unrealized gain (loss) from hedging instruments
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total Other Comprehensive Income (Loss) (Note 7)
Comprehensive Income
Total comprehensive income attributable to:Shareholders of Nitori Holdings Co., Ltd.
Minority interests

Millions of Yen

Thousands of
U.S. Dollars(Note 2)

2015
¥41,477

2016¥47,0012016$416,051

277
22,4702,682
25,430¥66,907(296)(20,930)(1,044)(271)(22,542)¥24,458(2,628)(185,276)(9,242)(2,400)(199,547)$216,504¥66,88126¥24,426
32$216,219
285

See Notes to Consolidated Financial Statements.

4Consolidated Statement of Cash Flows
Nitori Holdings Co., Ltd. and consolidated subsidiaries
For the year ended February 20, 2016

Cash Flows from Operating Activities:
Income before income taxes and minority interests
Depreciation and amortization
Impairment loss
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for point card certificatesInterest and dividends income
Interest expenses
Loss (gain) on sales and disposal of non-current assets
Loss on reduction of non-current assets
Penalty for the scrap and build of outlets
Subsidy income
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Payment of penalty for the scrap and build of outlets
Income taxes paid
Income taxes refund
Net cash provided by operating activities
Cash Flows from Investing Activities:
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Proceeds from government subsidy
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Payments for lease deposits
Proceeds from collection of lease deposits
Proceeds from guarantee deposits received
Proceeds from lease deposits received
Purchase of long-term prepaid expenses
Purchase of short-term and long-term investment securities
Payments of loans receivable
Proceeds from collection of loans receivable
Other payments
Net cash used in investing activities

Millions of Yen

Thousands of
U.S. Dollars(Note 2)

2015

2016

2016

¥67,565
10,190
122
4
19
239
(755)
(454)
98
93

¥74,619
10,799
488
3
662
356
1
(482)
76
48
431
35
(643)
(2,138)(1,157)(1,020)(2,363)(1,307)78,411
492
(79)
(17)
(26,692)
5,228
57,343$660,527
95,599
4,322
27
5,863
3,153
13
(4,267)
672
428
3,821
318
(5,691)(18,927)(10,242)(9,029)(20,922)(11,572)
694,093
4,363
(702)
(154)
(236,281)
46,282507,600(10,848)
5,870(28,021)8(1,656)
431
(30)
108
(1,101)
356
549
595
(464)
(1,677)
(40)
43
(23)
(35,899)(96,028)
51,961(248,040)75(14,662)
3,821
(267)
956
(9,746)
3,159
4,865
5,275
(4,110)(14,853)
(362)
383
(205)
(317,777)

119(2,033)(6,941)
1,250
3,146
792
73,457
447
(100)
(31)
(25,584)
4,734
52,923(601)
769(38,691)
82(1,540)(767)
170(1,278)6832
240(1,190)
(91)
(213)
6
(20)
(43,023)6

Consolidated Statement of Cash Flows
Nitori Holdings Co., Ltd. and consolidated subsidiaries
For the year ended February 20, 2016

Cash Flows from Financing Activities:
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Repayments of lease obligations
Purchase of treasury stock
Cash dividends paid
Proceeds from exercise of stock options
Net cash used in financing activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of the Year
Cash and Cash Equivalents at End of the Year (Note 9)

Millions of Yen

Thousands of
U.S. Dollars(Note 2)

2015

2016

2016

(967)
4,000
(4,166)(196)(12)(5,884)573(6,654)
1,288
4,534
21,179¥25,713(4,392)(188)(1)(6,509)1,148(9,943)(419)
11,08025,713¥36,794(38,877)(1,666)(13)(57,623)
10,162(88,018)(3,717)98,087
227,614$325,701

See Notes to Consolidated Financial Statements.

7

Notes to Consolidated Financial Statements
Nitori Holdings Co., Ltd. and consolidated subsidiaries
For the year ended February 20, 2016

1. Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared based on the accounts maintained by
Nitori Holdings Co., Ltd. (the “Company”) and consolidated subsidiaries (collectively the “Group”) in accordancewith accounting principles generally accepted in Japan, which are different in certain respects as to the applicationand disclosure requirements of International Financial Reporting Standards, and are compiled from theconsolidated financial statements prepared by the Company as required by the Financial Instruments andExchange Act of Japan.

2. Basis of Translation
The accompanying consolidated financial statements are expressed in Japanese yen, and solely for theconvenience of the reader, have been translated into United States dollars at the rate of ¥112.97 = U.S.$1, theexchange rate prevailing on February 20, 2016. This translation should not be construed as a representation thatthe amounts shown could be converted into U.S. dollars at such rate.
Japanese yen amount less than a million yen are rounded down to the nearest million yen, except for per sharedata. U.S. dollar amount less than a thousand dollars are rounded down to the nearest thousand dollars, except
for per share data.

3. Principles of Consolidation
1) Scope of Consolidation
The consolidated financial statements include the accounts of the Company and its 21 significant subsidiaries.
2) Financial Statements of Consolidated Subsidiaries
The financial closing dates of consolidated subsidiaries below are different from the balance sheet date of theCompany.
NITORI FURNITURE CO., LTD.························ December 20, 2015
P.T. NITORI FURNITURE INDONESIANITORI FURNITURE VIETNAM EPE
NITORI (CHINA) CO., LTD.
NITORI PUBLIC CO., LTD.
SHANGHAI LIQIAO INDUSTRIAL CO., LTD.
NITORI TAIWAN CO., LTD.
DECO HOME CHINA CO., LTD.
NITORI USA, INC.
and other 7 subsidiaries ·································· December 31, 2015
HOME DECO CO., LTD. ································· January 31, 2016
The above subsidiaries are consolidated using their financial statements as of their respective fiscal year ends,
and necessary adjustments are made to their financial statements to reflect any significant transactions from theirrespective fiscal year ends to that of the Company.
Effective from the previous fiscal year, P.T. NITORI FURNITURE INDONESIA changed its fiscal year end from
November 20 to December 31. Since the fiscal year end changed, the consolidated results also included theresults of that subsidiary from November 21, 2013 to December 31, 2014.

4. Summary of Significant Accounting Policies
1) Investment Securities
The Group has available-for-sale securities. Available-for-sale securities with market quotations are valued at theprevailing market price as at the balance sheet date. Available-for-sale securities without market quotations arestated at cost, cost being determined by the gross average method. Available-for-sale securities with market
quotations are carried at fair value with changes in unrealized holding gain or loss, net of the applicable income
taxes, included directly in “Net Assets”, and the cost of sales is determined by the gross average method.

8
FY2015 Nitori Holdings Co., Ltd.

2) Inventories
Inventories are stated at the lower of cost or market, cost being determined by the moving-average method.
3) Derivatives
Derivative financial instruments are stated at fair value.
4) Property, Plant and Equipment (except leased assets)
Depreciation of property, plant and equipment (except leased assets) is computed by the declining balance method, at
rates based on the estimated useful lives of the assets, except for buildings (excluding building facilities) acquired on
or after April 1, 1998, which are depreciated based on the straight-line method. Overseas subsidiaries apply thestraight-line method. The ranges of principal estimated useful lives are as follows:
Buildings and structures
5 to 47 years
Machinery, equipment and vehicles
2 to 12 years
Tools, furniture and fixtures
5 to 10 years
For buildings on fixed term leaseholds, the Company computes depreciation using the straight-line method, over its
lease term assuming no residual value. These lease terms are principally 20 years.
5) Intangible Assets (except leased assets)
Intangible assets are amortized using the straight-line method. Software for internal use is amortized using thestraight-line method over an estimated useful life of 5 years.
6) Leased Assets
Leased assets under finance lease transactions are depreciated to a residual value of zero by the straight-line
method using the contract term as the useful life.
Regarding finance lease transactions that do not transfer ownership to the lessee, commencing on or before
February 20, 2009, are accounted for as operating leases and related payments are charged to profit as incurred.
7) Allowance for Doubtful Accounts
For receivables classified as “normal,” the allowance for doubtful accounts is provided based on historicalexperience. For receivables classified as “doubtful,” the allowance for doubtful accounts is provided based on an
individual assessment of the collectability of the account.
8) Provision for Bonuses
Provision for bonuses is provided at the estimated amounts, based on actual results during the fiscal year, toprovide for the payments to employees in the following fiscal year.
9) Provision for Point Card Certificates
The Group provides customers with credit points (Nitori Members Card Points) when they make purchases byusing the card. The Group provides a reserve for the estimated future costs of Nitori Members Card Points basedon the historical rate of point usage.
10) Provision for Special Benefit to Shareholders
Provision for special benefit to shareholders is provided for future utilization of granted shareholder benefits. The
amount of the provision is estimated based on the historical rate of use of shareholder benefits.
11) Provision for Directors’ Retirement Benefits
Provision for directors’ and corporate auditors’ retirement benefits of the Company and its certain domestic
consolidated subsidiaries had been recorded until 2004 April for the company and in 2005 December for thesubsidiaries based on their internal rules at the estimated amount which would be payable if all officers were to
retire at the balance sheet date. The retirement benefits were terminated at that time and its carrying amounts forthe provision are unpaid portions.
12) Accounting Method for Retirement Benefits
Projected benefit obligations are attributed to each period by the benefit formula method over the estimated yearsof service of the eligible employees.

9
FY2015 Nitori Holdings Co., Ltd.

Actuarial gains and losses are amortized using the straight-line method over a specific period (ten years), which iswithin the average estimated remaining service period of employees at the time of recognition, from the following
fiscal year when the gain or loss was recognized.
Unrecognized prior service costs are amortized using the straight-line method over a specific period (ten years),
which is within the average estimated remaining service period of employees at the time of recognition.
13) Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at theexchange rate in effect at the balance sheet date and the resulting exchange gains or losses are credited or
charged to income as incurred.
The balance sheets of overseas subsidiaries are translated into Japanese yen at the exchange rates prevailing at
the balance sheet date except for the components of net assets excluding minority interests which are translated
at historical rates. Revenue and expense accounts of overseas subsidiaries are translated into Japanese yen at
the average exchange rate.
Differences arising from such translations are shown as “Foreign currency translation adjustment” in the net
assets section.
14) Hedge Accounting
Hedging instruments are recorded at fair value and accounted for using the deferral hedge accounting, underwhich unrealized gain or loss is deferred as a separate component of net assets. With regard to some interest rate
swaps that meet certain criteria, the Group uses the special treatment.
Hedging instruments: Derivative transactions (interest rate swaps and foreign exchange contracts).
Hedged items: Liabilities exposed to interest and foreign exchange market fluctuation risks.
Hedging policy: Derivative transactions are used solely for hedging the risks arising from adverse fluctuation inforeign currency exchange rates and interest rates.
The Company assesses the hedge effectiveness every half year based on internal rules covering derivativetransactions. Derivative transactions are never entered into for the purpose of trading or speculation.
15) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statement of cash flows consist of cash on hand, bank deposits
payable on demand, and short-term investments with a maturity of three months or less, which are readily
convertible into cash and subject to minor risks of fluctuations in value.
16) Consumption Tax
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
17) Income Taxes
Deferred tax assets and liabilities have been recognized in the consolidated financial statements with respect tothe differences between the financial reporting and tax bases of the assets and liabilities, and were measured
using the enacted tax rates and laws which will be in effect when the differences are expected to reverse.
18) Changes in Accounting Policy
Adoption of Accounting Standard for Retirement Benefits
Effective from the current fiscal year, the Company adopted “Accounting Standard for Retirement Benefits”(Accounting Standards Board of Japan (ASBJ) Statement No. 26, issued on May 17, 2012) and “Guidance on
Accounting Standard for Retirement
Benefits” (ASBJ Guidance No. 25, revised on March 26, 2015) with respect to the provisions stated in the text ofParagraph 35 of the Accounting Standard for Retirement Benefits and in the text of Paragraph 67 of the Guidanceon Accounting Standard for Retirement Benefits, whereby the calculation method for retirement benefit obligationand service cost has been revised. Based on this revision, the method of attributing expected retirement benefits
to periods has been changed from the straight-line basis to the benefit formula method, while the method ofdetermining of discount rate has been changed from the method using a discount rate based on the number ofyears approximately equal to the average remaining years of service of employees to the method using multiple
discount rates corresponding to each period up to the expected time of retirement benefit payment.
With regard to the adoption of the Standard and the Guidance, the transitional treatment as prescribed inparagraph 37 of the Standard was adopted. As of February 21, 2015, the cumulative effect of the change in themethod of calculating retirement benefit obligation and current service costs was recognized by adjusting retained
earnings.

10
FY2015 Nitori Holdings Co., Ltd.

As a result, as of February 21, 2015, net defined benefit liability decreased by ¥675 million ($5,979 thousand)and retained earnings increased by ¥434 million ($3,848 thousand). The effect of this change on operating
income, ordinary income, income before income taxes and minority interests, net assets per share, basic net
income per share and diluted net income per share as of end for the year ended February 20, 2016 wasimmaterial.

5. Notes to Consolidated Balance Sheet
1) Accumulated depreciation of property, plant and equipment

As at February 20

Accumulated depreciation

Millions of Yen

Thousands of
U.S. Dollars

2015

2016

2016

¥73,998¥83,103$735,622

2) Assets Pledged as Collateral
The following assets are pledged as collateral for certain debts and other liabilities:

As at February 20

Millions of Yen

Thousands of
U.S. Dollars

2015

2016

2016

¥292

¥2,169$19,203

69

30

273

¥362

2,200

19,477

Pledged assets:
Buildings and structures
Guarantee deposits
Total
Corresponding liabilities:
Notes and accounts payable-trade¥75

Current liabilities (other)

30

273

124

1,102

Non-current liabilities (other)

244

2,196

19,445

Total

¥320

2,352

$20,821

Millions of Yen

Thousands of
U.S. Dollars

3) Investment securities of non-consolidated subsidiaries
Investments in non-consolidated subsidiaries and affiliates are as follows:

As at February 20

2015

2016

2016

Investment securities

¥15

¥15

$138

4) Amount of reduction entry
The accumulated reduction entry of non-current assets deducted from the acquisition cost of the tangible fixed
assets as a result of based on the funds from government subsidies, etc. is as follows:
Millions of Yen
As at February 20

Tools, furniture and fixtures

Thousands of
U.S. Dollars

2015

2016

2016

¥-

¥431

$3,82111
FY2015 Nitori Holdings Co., Ltd.

6. Notes to Consolidated Statement of Income
1) The major components of “Selling, General and Administrative Expenses” are as follows:
Millions of Yen

Thousands of
U.S. Dollars

2015

2016

2016

Customer delivery expenses¥18,850¥21,890$193,775

Advertising

12,676

13,329117,990

Salaries, allowances and bonuses

42,58749,200435,521

Provision for bonuses

1,997

2,704

23,937

912

983

8,702

Rents

22,70425,497

225,702

Depreciation and amortization

8,921

9,398

83,194

Outsourcing

7,287

8,370

74,096

Millions of Yen

Thousands of
U.S. Dollars

2016

2016

For the years ended February 20

Retirement benefit expenses

2) Gains on sales of non-current assets are as follows:

For the years ended February 20

2015

Buildings and structures¥4

Machinery, equipment and vehicles

18

4

42

Tools, furniture and fixtures

0

0

2

Land

9

-

-

Total

¥27

¥9

$83

Millions of Yen

Thousands of
U.S. Dollars

2015

2016

2016

3) Losses on sales and disposal of non-current assets are as follows:

For the years ended February 20

Loss on disposal:
Buildings and structures

¥69

¥37

$327

Machinery, equipment and vehicles

0

0

2

Tools, furniture and fixtures

44

9

85

Intangible assets and others

4

6

56

Machinery, equipment and vehicles

1

1

10

Tools, furniture and fixtures

0

3

28

Land

0

-

-

Intangible assets and others

-

0

0

¥120

¥57

$511

Loss on sales:

Total4) Impairment loss
For the year ended February 20, 2015
AssetsMillions of Yen

Numazu City, Shizuoka
and other
Idle assets

Land

¥97

Kobe City, Hyogo and
otherStore assets

Buildings andstructures and other

24

LocationGroup

12
FY2015 Nitori Holdings Co., Ltd.

The Company identifies groups of assets on a nature of business basis. Impairment loss was recognized for idle
assets for which there is no specific plan for future business usage and for store assets with a significant decline
in future profitability.
The recoverable value of store assets was measured at the net realizable value based on the publicly assessedvalue of fixed assets. Idle assets were measured at the value in use and assumed to have no recoverable value.
For the year ended February 20, 2016
AssetsLocationGroup

Kita-ku, Tokyo and
other

System development
cost
Software

California, USA

Store assets

Millions of Yen

Thousands of
U.S. Dollars¥121$1,075366

3,247

Buildings andstructures andother

The Company identifies groups of assets on a nature of business basis. Impairment loss was recognized for apart of system development cost because of the cancellation of the development project and for store assets witha significant decline in future collectibility.
The recoverable amount of store assets was measured at the net realizable value based on the publicly assessedvalue of fixed assets. System development cost was measured at the value in use and estimated to have norecoverable amount.

7. Notes to Consolidated Statement of Comprehensive Income

For the years ended February 20

Millions of yen

Thousands of
U.S. Dollars

2015

2016

2016

¥430

(¥483)($4,282)

Unrealized holding gain (loss) on securities
Amounts arising during the year
Reclassification adjustments

-

-

-

Total before income tax effect

430

(483)

(4,282)

Income tax effect

(153)

186

1,654

Sub-total

277

(296)

(2,628)34,758(32,770)(290,082)---

Unrealized gain (loss) from hedging instruments
Amounts arising during the year
Reclassification adjustments
Total before income tax effect34,758(32,770)(290,082)

Income tax effect(12,287)

11,839104,806

Sub-total

22,470(20,930)(185,276)

2,682(1,044)(9,242)

2,682(1,044)(9,242)-(396)(3,508)

-

4

35

-

(392)

(3,472)

-

121

1,072

Foreign currency translation adjustment
Amounts arising during the year
Sub-total
Remeasurements of defined benefit plans
Amounts arising during the year
Reclassification adjustments
Total before income tax effect
Income tax effectSub-total
Total other comprehensive income

-

(271)

(2,400)¥25,430(¥22,542)($199,547)

13
FY2015 Nitori Holdings Co., Ltd.

8. Notes to Consolidated Statement of Changes in Net Assets
1) Type and number of outstanding shares
For the year ended February 20, 2015

Number of shares (Thousands)
Balance at
beginning of year

Increase

Decrease

Balance at end ofyear

Issued stock:
Common stock

57,221

57,221-

114,443

Treasury stock:
Common stock

2,281

2,283

351

4,213

Type of shares

Notes:1. The Company conducted a stock split of common shares at a ratio of two for one effective February 21, 2014.
2. The increase in 57,221 thousand shares of issued stock is due to the stock split.
3. The increase in 2,283 thousand shares of treasury stock consists of an increase in 2 thousand shares due to the purchases ofshares in quantities less than the minimum trading unit of shares, and an increase in 2,281 thousand shares due to the stock
split.
4. The decrease in 351 thousand shares of treasury stock consists of a decrease in 157 thousand shares due to the exercise of“Stock Benefit Trust (J-ESOP)”, which was resolved on December 20, 2011, and a decrease in 194 thousand shares by theexercise of stock options.
5. The treasury stock balance at end of the fiscal year included 487 thousand shares of common stock held by Trust & Custody
Services Bank, Ltd.
For the year ended February 20, 2016

Number of shares (Thousands)
Balance at
beginning of year

Increase

Decrease

Balance at end ofyear

Issued stock:
Common stock

114,443--

114,443

Treasury stock:
Common stock

4,213

0

359

3,854

Type of shares

Notes:1. The increase in 0 thousand shares of treasury stock consists of an increase due to the purchases of shares in quantities less thanthe minimum trading unit of shares.
2. The decrease in 359 thousand shares of treasury stock consists of a decrease in 69 thousand shares due to the exercise of“Stock Benefit Trust (J-ESOP)”, which was resolved on December 20, 2011, and a decrease in 290 thousand shares by theexercise of stock options.
3. The treasury stock balance at end of the fiscal year included 418 thousand shares of common stock held by Trust & Custody
Services Bank, Ltd.(The Trust Account E) which is the trustee under the Stock Benefit Trust(J-ESOP).

2) Subscription rights to shares
Millions of Yen
As at February 20

Subscription rights to shares as stock options

Thousands of
U.S. Dollars

2015

2016

2016

¥1,050¥1,174$10,398

3) Dividends(1) Dividends paid to shareholders
For the year ended February 20, 2015
Amount(Millions ofYen)Amount per
share (Yen)

Resolution approved byType ofsharesBoard of directors(March 28, 2014)(Notes 1 and 3)

Commonstock¥3,038

Board of directors(September 25, 2014)(Notes 2 and 3)

Common
stock

2,878

Shareholders’
cut-off date

Effective date¥55

February 20,
2014

April 21,2014

26

August 20,
2014

November
5, 2014

Note:1.The amount includes the dividend of ¥17 million on shares, held by Trust & Custody Services Bank, Ltd.
(The Trust Account E) which is the trustee under the Stock Benefit Trust(J-ESOP).
2.The amount includes the dividend of ¥12 million on shares, held by Trust & Custody Services Bank, Ltd.
(The Trust Account E) which is the trustee under the Stock Benefit Trust(J-ESOP).
3. The Company conducted a stock split of common shares at a ratio of two for one effective February 21, 2014.

14
FY2015 Nitori Holdings Co., Ltd.

For the year ended February 20, 2016
Amount(Millions of
Yen)

Resolution approved byType ofsharesBoard of directors(March 30, 2015) (Note 1)

Commonstock¥3,210Board of directors(September 28, 2015)(Note 2)

Commonstock

Amount per
share (Yen)

Shareholders’
cut-off date

Effective date¥29

February 20,
2015

April 20,
2015

3,329

30

August 20,
2015

October 27,
2015

Amount(Thousandsof U.S.
Dollars)

Amount per
share (U.S.
Dollars)

Shareholders’
cut-off date

Effective date

For the year ended February 20, 2016

Resolution approved byType ofsharesBoard of directors(March 30, 2015) (Note 1)

Commonstock$28,421$0.25

February 20,
2015

April 20,
2015

Board of directors(September 28, 2015)(Note 2)

Commonstock

29,4680.26

August 20,
2015

October 27,
2015

Note : 1.The amount includes the dividend of ¥14 million (U.S.$125 thousand) on shares, held by Trust & Custody Services Bank, Ltd.
(The Trust Account E) which is the trustee under the Stock Benefit Trust(J-ESOP).
2.The amount includes the dividend of ¥12 million (U.S.$111 thousand) on shares, held by Trust & Custody Services Bank, Ltd.
(The Trust Account E) which is the trustee under the Stock Benefit Trust(J-ESOP).

(2) Dividends with a shareholders’ cut-off date during the current fiscal year but an effective date in the following
fiscal year
For the year ended February 20, 2015
Type of
Resolution approved by shares

Board of directors(March 30, 2015)

Commonstock

Paid fromAmount(Millions ofYen)Amount per
share (Yen)

Shareholders’
cut-off date

Effective
date

Retainedearnings¥3,210¥29

February
20, 2015

April 20,
2015

Note : 1.The amount includes the dividend of ¥14 million on shares, held by Trust & Custody Services Bank, Ltd.
(The Trust Account E) which is the trustee under the Stock Benefit Trust(J-ESOP).
For the year ended February 20, 2016
Type of
Resolution approved by shares

Board of directors(March 28, 2016)

Commonstock

Paid fromAmount(Millions ofYen)Amount(Thousands of
U.S. Dollars)

Amount per
share (Yen)Amount per
share (U.S.
Dollars)

Shareholders’
cut-off date

Effective
date

Retainedearnings¥3,885$34,391

¥35

$0.30

February
20, 2016

April 22,2016

Note : 1.The amount includes the dividend of ¥14 million (U.S.$129 thousand) on shares, held by Trust & Custody Services Bank, Ltd.
(The Trust Account E) which is the trustee under the Stock Benefit Trust(J-ESOP).

4) Shareholder’s Equity
The Corporation Act of Japan (the “Act”) provides that an amount equal to 10% of the amount to be disbursed as
distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve)
be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve andthe legal reserve equals 25% of the common stock account. Such distributions can be made at any time byresolution of the shareholders, or by the board of directors if certain conditions are met, but neither the capitalreserve nor the legal reserve is available for distributions.

15
FY2015 Nitori Holdings Co., Ltd.

9. Note to Consolidated Statement of Cash FlowsThe reconciliation between cash and cash equivalents reported in the consolidated statement of cash flows andcash and deposits reported in the consolidated balance sheet is as follows:
Millions of Yen
As at February 20

Cash and deposits
Time deposits with maturities exceeding 3 months
Cash and cash equivalents

Thousands of
U.S. Dollars

2015

2016

2016

¥26,409¥42,327$374,681(695)(5,533)(48,979)¥25,713¥36,794$325,701

10. Leases
As Lessee:
The Group leases certain buildings for retail stores. With finance leases for which ownership is not transferred to
the lessee commencing on or before February 20, 2009, the Company employs accounting methods normallyapplicable to operating lease transactions. The information on these lease transactions is omitted because it isinsignificant.
Future minimum lease payments relating to non-cancelable operating leases are as follows:

As at February 20

Due within one year

Millions of Yen

Thousands of
U.S. Dollars

2015

2016

2016

¥2,122¥2,511$22,235

Due after one year

27,51029,296259,331

Total¥29,632¥31,808$281,567

As Lessor:
Future minimum lease receivables relating to non-cancelable operating leases are as follows:

As at February 20

2015Millions of Yen

Thousands of
U.S. Dollars

2016

2016

Due within one year

¥109

¥219

$1,941

Due after one year

1,428

1,490

13,192

Total¥1,537¥1,709$15,134

11. Financial Instruments
1. Overview
1) Policy for financial instruments
The Group raises necessary funds based on capital investment plans and fund management plans, mainly throughloans from banks. The Group utilizes derivative financial instruments only to manage risks described below anddoes not enter into such transactions for speculative trading purposes.
2) Types of financial instruments, risk and risk management
Trade notes and accounts receivable-trade are exposed to credit risk of customers, but term for cash collection
is relatively short and actual bad debt ratio is extremely low. The Group manages its credit risk by monitoringbalances for each customer to identify default risk of those customers at an early stage, which results indecrease of credit risk to the Group.
Investment securities with market values are exposed to market risk, and which without market values are
exposed to impairment risk. The Group periodically reviews the fair values of such financial instruments.
Guarantee deposits and lease deposits, which are mostly related to rental of stores, are exposed to credit risk oflessors. The Group manages its credit risk by monitoring balances of these deposits to identify the default risk oflessors at an early stage.

16
FY2015 Nitori Holdings Co., Ltd.

Most of notes and accounts payable-trade and income taxes payable are due within three months.
Short-term loans payable are obtained mainly for short-term working capital, and long-term loans payable are forlong-term working capital. Certain long-term loans payable are exposed to interest rate fluctuation risk. However,
the interest rate fluctuation risk is hedged by interest rate swap transactions.
Regarding derivatives, the Group enters into forward foreign currency exchange transactions to hedge foreign
currency exchange rate fluctuation risk related to trade receivables and trade payables denominated in foreign
currencies. The Group also enters into interest rate swap transactions to hedge interest rate fluctuation risk
related to the loans. The Group believes that the credit risk under derivative transactions is fairly low because
counterparties of derivative transactions are limited to financial institutions with a high credit rating. The
execution and management of derivative transactions are performed by the finance department based on
in-house rules.
3) Supplementary explanation on fair value of financial instruments
The fair value of financial instruments is based on market value, or, when no market price is available, arationally estimated amount. Since various assumptions and factors are reflected in estimating the fair value,
different assumptions and factors could result in different fair value. The notional amounts of derivatives in thefollowing table are not necessarily indicative of the actual market risk involved in derivative transactions.
2. Estimated fair value of financial instruments
The carrying value of the financial statements on the consolidated balance sheet as at February 20, 2015 and2016, and estimated fair value are shown below. The following table does not include financial instruments forwhich it is extremely difficult to determine the fair value.
Millions of Yen
As at February 20, 2015

Carrying value

Estimated fair value

Difference(1) Cash and deposits¥26,409¥26,409¥-(2) Notes and accounts receivable-trade

13,057

13,057-(3) Investment securities

1,248

1,248

-

(4) Guarantee deposits

17,042

18,462

1,419(5) Lease deposits

17,05016,014(1,036)(1) Notes and accounts payable-trade¥16,473¥16,473¥-(2) Accounts payable-other

18,031

18,031-(3) Income taxes payable

13,961

13,961-(4) Long-term loans payable, including current
portion of long-term loans payable

6,521

6,512

(9)

¥38,992¥38,992¥-

AssetsLiabilities

Derivative transactions(*)

17
FY2015 Nitori Holdings Co., Ltd.

Millions of Yen
As at February 20, 2016

Carrying value

Estimated fair value

Difference(1) Cash and deposits¥42,327¥42,327¥-(2) Notes and accounts receivable-trade

15,25015,250-Assets(3) Investment securities

2,375

2,375

-

(4) Guarantee deposits

15,362

16,884

1,522(5) Lease deposits

18,07917,611(467)(1) Notes and accounts payable-trade¥15,356¥15,356¥-(2) Accounts payable-other

16,195

16,195-(3) Income taxes payable

14,92914,929-(4) Long-term loans payable, including
current portion of long-term loans payable

2,129

2,126

(3)

Derivative transactions(*)¥6,214¥6,214¥-

Carrying value

Estimated fair value

Difference(1) Cash and deposits$374,681$374,681$-(2) Notes and accounts receivable-trade134,992

134,992-(3) Investment securities

21,02421,024-(4) Guarantee deposits

135,987

149,462

13,474(5) Lease deposits

160,037

155,896(4,141)(1) Notes and accounts payable-trade$135,938$135,938$-(2) Accounts payable-other143,364

143,364-(3) Income taxes payable

132,151

132,151-(4) Long-term loans payable, including
current portion of long-term loans payable

18,852

18,825(27)

Derivative transactions(*)$55,012$55,012$-

Liabilities

Thousands of U.S. Dollars
As at February 20, 2016

AssetsLiabilities(*)The value of assets and liabilities arising from derivatives is shown at net value, and with the amount in parentheses representing net
liability position.
Notes: 1. Methods to determine the estimated fair value of financial instruments[Assets](1) Cash and deposits, (2) Notes and accounts receivable-trade
The Company uses the carrying value because these items will be settled in the short term, meaning that the carrying value
approximates fair value.
(3) Investment securities
Fair value of stocks is based on quoted market prices. Additional information on securities classified by holding purpose ispresented in “Securities” (Note 12).
.
(4) Guarantee deposits
Fair value of guarantee deposits is based on the present value of the future cash flows, which are discounted at the rate
determined by reference to an appropriate index such as a government bond yield adjusted for the credit risk related to thematurity schedule.
(5) Lease deposits
Fair value of lease deposits is based on the present value of the future cash flows, which are discounted at the rate determinedby reference to an appropriate index such as a government bond yield adjusted with the credit risk related to the term remaining.

18
FY2015 Nitori Holdings Co., Ltd.

[Liabilities](1) Notes and accounts payable-trade, (2) Accounts payable-other (3) Income taxes payable
The Company uses carrying value because they will be settled in the short term, meaning that carrying value approximate fair value.
(4) Long-term loans payable
Fair value of long-term loans payable is based on the present value of the total of principal and interest discounted by the rateapplicable to similar new borrowings.
(Derivative transactions)
Details of derivative transactions are described in “Derivatives” (Note 13).
2. Investment securities for which fair value is deemed extremely difficult to determine.
Thousands of
U.S. Dollars

Millions of Yen
As at February 20

2015

2016

2016

Unlisted stocks

¥320

¥388

$3,436

Unlisted stocks are excluded from “Assets (3) Investment securities” because they are not actively traded in a market and it isextremely difficult to determine the fair value.
3. Redemption schedule for monetary assets
Millions of Yen
As at February 20, 2015

Due in 1 year or
less

Due after 1 year
through 5 years

Due after 5 years

Cash and deposits¥26,409¥-¥-

Notes and accounts receivable-trade

13,063

-

-

Total

¥39,472¥-¥-

Guarantee deposits and lease deposits are not disclosed because it is difficult to determine the redemption schedule.
Millions of Yen
As at February 20, 2016

Due in 1 year or lessDue after 1 year
through 5 years

Cash and deposits¥42,327¥-¥-

Notes and accounts receivable-trade

15,258

-

-

Total

¥57,586¥-¥-

As at February 20, 2016

Due in 1 year or
less

Due after 1 year
through 5 years

Due after 5 years

Cash and deposits$374,681$-$-

Notes and accounts receivable-trade

135,069

-

-

Total

$509,750$-$-

Due after 5 years

Thousands of U.S. Dollars

Guarantee deposits and lease deposits are not disclosed because it is difficult to determine the redemption schedule.
4. Redemption schedule for short-term loans payable and long-term loans payable
Millions of Yen
Due in 1
year or lessAs at February 20, 2015

Due after 2
Due after 3
Due after 1
year through years through years through2 years
3 years
4 years

Due after 4
years through5 years

Due after 5
years

Long-term loans
payable¥4,395¥1,501

¥625

¥-

¥-

¥-

Total

¥4,395¥1,501

¥625

¥-

¥-

¥-

19
FY2015 Nitori Holdings Co., Ltd.

Millions of Yen

As at February 20, 2016

Due in1 yearor less

Due after
1 yearthrough
2 years

Due after
2 years
through
3 years

Due after
3 years
through
4 years

Due after
4 years
through
5 years

Due after
5 years

Long-term loans
payable¥1,501

¥625

¥-

¥-

¥-

¥-

Total

¥1,501

¥625

¥-

¥-

¥-

¥-

Thousands of U.S. Dollars

As at February 20, 2016

Due in1 yearor less

Due after
1 yearthrough
2 years

Due after
2 years
through
3 years

Due after
3 years
through
4 years

Due after
4 years
through
5 years

Due after
5 years

Long-term loans
payable$13,290$5,532

$-

$-

$-

$-

Total

$13,290$5,532

$-

$-

$-

$-

12. Securities
1) Available-for-sale securities (with market value)
Millions of Yen
As at February 20, 2015

Carrying value

Acquisition cost

Unrealized Gain
(Loss)¥1,248

¥337

¥911

-

-

-

¥1,248¥337¥911

Securities whose carrying value exceeds theiracquisition cost
StocksSecurities whose acquisition cost exceeds theircarrying value
StocksTotal

Note: Unlisted stocks (¥320 million in the consolidated balance sheet) are not included in the above table because determining their fairvalues is extremely difficult.
Millions of Yen
As at February 20, 2016

Carrying value

Acquisition cost

Unrealized Gain
(Loss)¥1,105¥180¥924¥1,269¥1,773(¥503)¥2,375¥1,953¥421

Securities whose carrying value exceeds theiracquisition cost
StocksSecurities whose acquisition cost exceeds theircarrying value
Stocks
Total

20
FY2015 Nitori Holdings Co., Ltd.

Thousands of U.S. Dollars
As at February 20, 2016

Carrying value

Acquisition cost

Unrealized Gain
(Loss)$9,787$1,600$8,187

11,237

15,694(4,457)$21,024$17,295$3,729Securities whose carrying value exceeds theiracquisition costs
StocksSecurities whose acquisition cost exceeds theircarrying value
StocksTotal

Note: Unlisted stocks (¥388 million ($3,436 thousand) in the consolidated balance sheet) are not included in the above table because
determining their fair values is extremely difficult.

2) Impairment of available for sale securities
Not applicable.
If the market value of securities as of the fiscal year-end declines more than 50% compared with the acquisition
costs, the difference between fair market value and the acquisition cost is recognized as loss on valuation in the
period of the decline. In addition, if the market value of securities as of the fiscal year-end declines from 30% to
50% compared with the acquisition costs and if such decline is considered to be material and unrecoverable, thedifference between fair market value and the acquisition cost is recognized as loss on valuation in the period of
the decline.

13. Derivatives
1. Derivative transactions to which hedge accounting is not applied
Currency-related transactions
As at February 20, 2015

Not applicable.
As at February 20, 2016

Category

Over-thecountertransactions

Transaction typeMillions of Yen

Notional
amountNotional
amountmaturing
over 1 year

Fair value

Unrealized
Gain (Loss)¥3,035

¥-

(¥7)

(¥7)

Notional
amountNotional
amountmaturing
over 1 year

Fair value

Unrealized
Gain (Loss)$26,867

$-

($65)

($65)

Foreign exchange
forward contract
Selling U.S. dollars

As at February 20, 2016

Category

Over-thecountertransactions

Transaction type

Thousands of U.S. Dollars

Foreign exchange
forward contract
Selling U.S. dollars

Note: The fair value of derivative transactions is valued based on the prices quoted by counterparty financial institutions.

21
FY2015 Nitori Holdings Co., Ltd.

2. Derivative transactions to which hedge accounting is applied
1) Currency-related transactions
As at February 20, 2015

Millions of Yen

Hedging method

Transaction type

Main hedged item

Deferral method

Foreign exchange Accounts
payable-tradeforward contract
Buying U.S. dollars

Notional
amountNotional amountmaturing over
1 yearFair value¥307,422¥157,546¥38,992

Note: The fair value of derivative transactions is valued based on the prices quoted by counterparty financial institutions.
As at February 20, 2016

Millions of Yen

Hedging method

Transaction type

Main hedged item

Deferral method

Foreign exchange Accounts
payable-tradeforward contract
Buying U.S. dollars

Notional
amountNotional amountmaturing over
1 yearFair value¥157,546-¥6,222

Notional
amountNotional amountmaturing over
1 yearFair value$1,394,583$-$55,078

As at February 20, 2016

Thousands of U.S. Dollars

Hedging method

Transaction type

Main hedged item

Deferral method

Foreign exchange Accounts
payable-tradeforward contract
Buying U.S. dollars

Note: The fair value of derivative transactions is valued based on the prices quoted by counterparty financial institutions.

2) Interest-related transactions
As at February 20, 2015

Hedging method

Transaction typeMillions of Yen

Main hedged item

Special treatment Interest rate swap Long-term loansof interest ratetransaction
payableswaps
Pay fixed/
Receive floating

Notional
amountNotional amountmaturing over
1 yearFair value¥1,300¥-(Note)

Note: Since accounting for interest rate swaps subject to special treatment are combined with the hedged long-term loans payable, theirmarket values have been included in those of the corresponding long-term loans payable.

As at February 20, 2016

Not applicable.

22
FY2015 Nitori Holdings Co., Ltd.

14. Retirement Benefits
1) Summary of Employees’ Retirement Benefit Plans
The Company and certain consolidated subsidiaries have a defined benefit corporate pension plan, an
employees’ retirement lump-sum benefit plan and a defined contribution pension plan. The Company and certain
consolidated subsidiaries provide for lump-sum payments, which are not included in the calculation of projected
benefit obligations, to employees upon retirement determined by reference to their current rate of pay, length ofservice and the conditions under which termination occurs.
2) Defined benefit pension plans(a) Reconciliation of beginning and ending balances of the projected benefit obligations is as follows:
Millions of Yen

Thousands of
U.S. Dollars

2015

2016

2016

¥4,355¥4,787$42,382(675)(5,979)

4,355

4,112

36,402Service cost

647

691

6,123

Interest cost

55

33

299

Actuarial loss (gain)

38

294

2,610

(308)

(296)

(2,623)¥4,787¥4,836$42,812For the years ended February 20

Cumulative effect of changes in accounting policies

Benefits paid

Note: Includes those under the plan in which a simplified method is applied.

(b) Reconciliation of beginning and ending balances of plan assets at fair value is as follows:
Millions of Yen

Thousands of
U.S. Dollars

2015

2016

2016

¥2,128¥2,442$21,619

Expected return on plan assets

42

48

432

Actuarial gain (loss)

142

(101)

(898)

For the years ended February 20

Balance at beginning of year

Employer contributions

269

289

2,564

Benefits paid

(140)

(122)

(1,086)¥2,442¥2,556$22,630

Plan assets at fair value at end of year(c) Reconciliation of amounts recognized in the consolidated balance sheet is as follows:
Millions of Yen
As at February 20

Thousands of
U.S. Dollars

2015

2016

2016

Projected benefit obligations (funded plans)¥2,547¥2,559$22,658

Plan assets at fair value(2,442)(2,556)(22,630)

105

3

27

Projected benefit obligations (unfunded plans)

2,240

2,276

20,153Net defined benefit liability in the consolidatedbalance sheet¥2,345

2,279

20,181Gross defined benefit liability¥2,345

2,279

20,181

Net defined benefit liability in the consolidatedbalance sheet¥2,345¥2,279$20,181Note: Includes those under the plan in which a simplified method is applied.

23
FY2015 Nitori Holdings Co., Ltd.

(d) The composition of net pension and severance costs is as follows:
Millions of Yen

Thousands of
U.S. Dollars

For the years ended February 20

2015

2016

2016

Service cost

¥647

¥691

$6,123

Interest cost

55

33

299

Expected return on plan assets

(42)

(48)

(432)

Amortization and expenses:
Actuarial loss

52

39

347

Prior service cost

(35)

(35)

(311)

¥676

¥680

$6,026

Net pension and severance costs

Note: Includes those under the plan in which a simplified method is applied.

(e) The components of remeasurements of defined benefit plans recognized in other comprehensive income(loss) before income tax effect in are as follows:
Millions of Yen

Thousands of
U.S. Dollars

2015

2016

2016

Prior service cost

-

¥(35)

$(311)

Actuarial loss

-

(357)

(3,161)-¥(392)$(3,472)

For the years ended February 20

Total(f) The components of remeasurements of defined benefit plans recognized in accumulated other comprehensive
income (loss) before income tax effect are as follows:
Millions of Yen

Thousands of
U.S. Dollars

As at February 20

2015

2016

2016

Unrecognized prior service cost

¥215

¥179

$1,591

Unrecognized actuarial loss

(267)

(624)

(5,530)

Total

¥(52)

¥(444)$(3,938)(g) The significant components of plan assets, by asset category, are as follows:(% of total plan
assets)
As at February 20

2015

2016

Life insurance company general accounts

44 %

46 %

Debt securities

23

28

Equity securities

30

24

Others

2

2

Total

100 %

100 %

(h) The expected long-term rate of return on plan assets is determined based on the current and expected future
allocation of plan assets and the current and expected future long-term rate of return of various assets of whichplan assets are composed.

24
FY2015 Nitori Holdings Co., Ltd.

(i) Assumptions used for the actuarial computation of the retirement benefit obligations
are as follows:
As at February 20, 2016

2015

2016

Discount rate

1.5 %

0.8 %

Expected long-term rate of return on plan assets

2.0

2.0

Expected rate of salary increase

4.5

4.6

3) Defined contribution pension plans
The contribution to defined contribution pension plans of the Company was ¥302 ($2,675 thousand) for the year
ended February 20, 2016.

15. Stock Options
For the years ended February 20, 2015 and 2016, the Group recognized expenses regarding stock options of¥482 million and ¥339 million ($3,001 thousand), respectively, which are included in selling, general andadministrative expenses.
For the years ended February 20, 2015 and 2016, the Group recognized gains related to unexercised stock
options of ¥64 million and ¥10 million ($90 thousand), which are presented in special gains as “Gain on reversal ofsubscription rights to shares”.
1) The stock options outstanding as of February 20, 2016
The Fourth and Fifth Subscription Rights toSharesDate of annual general
meeting of shareholders

May 12, 2011

Date of meeting of directors

March 29, 2012

Grantees

Directors

4

Company auditors

2

Officers

16

Directors of subsidiaries

5

Employees of subsidiaries

2,664

Type and number of shares

Common stock

Grant date

April 2, 2012

Exercise conditions

None

Intended service period

From April 2, 2012 to March 29, 2015

Exercise period

From March 30, 2015 to March 29,
20171,389,10025
FY2015 Nitori Holdings Co., Ltd.

The Sixth Subscription Rights to Shares

The Seventh Subscription Rights to Shares

Date of annual general
May 9, 2014
meeting of shareholders

May 9, 2014

Date of meeting of directors

June 27, 2014

June 27, 2014

Grantees

Directors

8

Officers

Company auditors

3

Directors of subsidiaries

14
4

Employees of subsidiaries

3,239

Type and number of shares

Common stock

Grant dateJuly 14, 2014

June 30, 2014

Exercise conditions

None

None

Intended service period

From July 14, 2014 to July 14, 2017

From June 30, 2014 to June 30, 2017

Exercise period

From July 15, 2017 to July 14, 2020

From July 1, 2017 to June 30, 2020

121,000

Common stock

904,100

Note: The Company conducted a stock split of common shares at a ratio of two for one effective February 21, 2014. The type and numberof shares are retroactively adjusted for the stock split.

2) A summary of stock option activity during the fiscal year ended February 20, 2016
The Fourth and Fifth Subscription Rights toSharesNon-vested (Shares)
At the beginning of the year

1,251,600

GrantedForfeited and expired
Vested3,100
1,248,500

At the end of the year-

Vested (Shares)
At the beginning of the year-

Vested1,248,500

Exercised

290,000

Forfeited and expired

15,000At the end of the year

943,500
The Sixth Subscription Rights to Shares

The Seventh Subscription Rights to Shares

Non-vested (Shares)
At the beginning of the year

121,000

885,400

Granted--Forfeited and expired-

31,900

Vested--121,000

853,500

At the beginning of the year--

Vested--Exercised--

Forfeited and expired--

At the end of the year--

At the end of the year
Vested (Shares)

Note: The Company conducted a stock split of common shares at a ratio of two for one effective February 21, 2014. The number of The
Fourth and Fifth Subscription Rights to Shares issued are retrospectively adjusted for the stock split.

26
FY2015 Nitori Holdings Co., Ltd.

The unit price information is as follows:
The Fourth and Fifth Subscription Rights toSharesExercise price – yen¥3,959(U.S. dollars)($35.04)

Average stock price at exercise – yen(U.S. dollars)
Fair value price on grant date – yen(U.S. dollars)¥9,666($85.56)¥706($6.24)The Sixth Subscription Rights to Shares

The Seventh Subscription Rights to Shares

Exercise price – yen¥5,650¥5,540(U.S. dollars)($50.01)($49.03)

-

-

-

-

¥1,022¥996($9.04)($8.81)

Average stock price at exercise – yen(U.S. dollars)
Fair value price on grant date – yen(U.S. dollars)Note: The Company conducted a stock split of common shares at a ratio of two for one effective February 21, 2014. The Exercise price of
The Fourth and Fifth Subscription Rights to Shares is adjusted retrospectively for the stock split.

3) Method of estimating the number of options vested expirations
Estimated number of options vested is determined based on expirations ratio of the actual termination.

27
FY2015 Nitori Holdings Co., Ltd.

16. Income Taxes
1) As at February 20, 2015 and 2016, the significant components of deferred tax assets and liabilities are as
follows:
Millions of Yen

Thousands of
U.S. Dollars

2015

2016

2016

¥1,222¥1,288$11,403

Accrued real estate acquisition tax

65

54

484

Provision for bonuses

753

905

8,016

Provision for point card certificates

366

340

3,017

Unrealized gain on sales of inventories

As at February 20

Deferred tax assets
Accrued enterprise tax, business office tax

159

147

1,304

Deferred gains on hedges

-

639

5,662

Net defined benefit liability

813

718

6,356

2,854

2,994

26,508Provision for directors' retirement benefits

81

73

653

Allowance for doubtful accounts

45

31

278

Impairment loss and penalty for the scrap andbuild of outlets

352

417

3,695

Asset retirement obligations

882

1,373

12,161

Other

4,109

3,674

32,524

Sub total

11,707

12,660112,069

Less: valuation allowance(1,236)(1,587)(14,048)

10,471

11,073

98,02013,897

2,696

23,871

Unrealized holding gain on securities

324

138

1,221

Construction assistance fund receivables

789

760

6,728

Depreciation and amortization

Total deferred tax assets
Deferred tax liabilities
Deferred gains on hedges

Asset retirement cost related to asset retirement
obligation

427

899

7,961

1,326

1,125

9,959

31

30

271

Total deferred tax liabilities

16,796

5,649

50,013Net deferred tax assets (liabilities)(¥6,325)¥5,423$48,007

Retained earnings of subsidiaries
Other

2) Reconciliation between the effective statutory tax rate and the actual effective tax rates
The details for the years ended February 20, 2015 and 2016 are omitted as the differences between the statutory
tax rate and effective tax rates are 5% or less of the statutory tax rate.
3) Revision of amount of deferred tax assets and deferred tax liabilities due to change in corporate tax
rate.
The “Act for Partial Amendment of the Income Tax Act etc.” (Act No.9 of 2015) and “Act for Partial Amendment of
the Local Tax Act, etc.” (Act No. 2 of 2015) were promulgated on March 31, 2015. The effective statutory tax
rate used to measure deferred tax assets and liabilities was changed from 35.6% to 33.1% for temporary
differences expected to be utilized in the fiscal year beginning on February 21, 2016 and to 32.3% for temporary
differences expected to be utilized in and after the fiscal year beginning on February 21, 2017.
As a result, deferred tax assets decreased by ¥803 million ($7,113 thousand), income taxes-deferred increasedby ¥959 million ($8,491 thousand) and unrealized gain on hedging instruments increased by ¥160 million ($1,421
thousand).

28
FY2015 Nitori Holdings Co., Ltd.

4) Change in rate of corporate and other income taxes after financial closing date
The “Act for Partial Amendment of the Income Tax Act etc.” (Act No. 15 of 2016) and “Act for Partial Amendmentof the Local Tax Act, etc.” (Act No. 13 of 2016) were promulgated on March 31, 2016. The effective statutory tax
rate used to measure deferred tax assets and liabilities was changed from 32.3% to 30.9% for temporary
differences expected to be utilized in the fiscal year beginning on February 21, 2017 and the fiscal year beginning
on February 21, 2018 and to 30.6% for temporary differences expected to be utilized in and after the fiscal year
beginning on February 21, 2019.
As a result, deferred tax assets increased by ¥40 million ($356 thousand) and income taxes-deferred increasedby ¥41 million ($366 thousand).

17. Investment and Rental Properties
The Company and certain consolidated subsidiaries hold rental properties such as commercial facilities (includingland) in major cities throughout Japan. Certain rental properties are not recognized as rental properties but as realestate including spaces used as rental properties since the Company and certain consolidated subsidiaries use
some of the floor space of these properties.
For the years ended February 20, 2015 and 2016, the carrying values, changes during the year, and fair values of
those properties are as follows:
Millions of Yen

Thousands of
U.S. Dollars

2015

2016

2016

¥5,228¥5,946$52,642

Increase (Decrease)718

23,630209,178

Balance at end of year

5,946

29,577

261,820

Fair value at end of year

5,593

26,540234,935

For the years ended February 20

Rental property
Carrying value
Balance at beginning of year

Real estate including spaces used as rental properties
Carrying value¥35,143¥43,635$386,254

Increase (Decrease)

8,492(11,337)(100,359)

Balance at end of year

43,63532,297285,894

Fair value at end of year

38,276

26,536

234,898

Balance at beginning of year

Notes: 1. The carrying value is presented after deducting accumulated depreciation from acquisition cost.
2. Increase of rental property during the year ended February 20, 2015 was primarily attributable to the transfer from real estateincluding spaces used as rental properties of ¥784 million. Increase during the year ended February 20, 2016 was primarily
attributable to newly acquired properties of ¥14,406 million ($127,522 thousand) and the transfer from real estate including
spaces used as rental properties of ¥9,241 million ($81,804 thousand).
3. Increase of rental estate including spaces used as rental properties during the year ended February 20, 2015 was primarily
attributable to newly acquired properties of ¥10,278 million. Decrease during the year ended February 20, 2016 was primarily
attributable to the transfer to rental property of ¥9,241 million, and which was partially offset by depreciation expense of ¥847
million ($7,505 thousand).
4. Fair values of the properties as of year end are calculated by the Company based on certain appraisal values and otherindicators reflecting the market value.

29
FY2015 Nitori Holdings Co., Ltd.

For the years ended February 20, 2015 and 2016, income from rental properties is as follows:
Millions of Yen

Thousands of
U.S. Dollars

2015

2016

2016

¥3,755¥3,854$34,119

Cost of rental properties

1,950

1,963

17,378Gross profit from rental properties

1,805

1,891

16,740---For the years ended February 20

Real estate including spaces used as rental properties
Income from rental properties

Other (gain or loss on sales of properties)
Note:

Since the Company and certain of its subsidiaries use certain real estate including spaces used as rental properties for the
purposes of providing services and management, the related rental income is not recognized. Expenses related to rental property(depreciation, insurance, taxes, etc.) are included in cost of rental properties.

18. Segment Information
1. Segment Information
The Company and its consolidated subsidiaries have been primarily engaged in a single segment of sales ofhome furnishings and interior goods. Therefore, the disclosure of reportable segment information is omitted.
2. Related Information
1) Information about products and services
Information about products and services is as follows:
Millions of Yen
For the year ended February 20, 2015

Sales to external customers

Home furnishingsand interior goods

Other

Total

¥409,947¥7,338¥417,285
Millions of Yen

For the year ended February 20, 2016

Sales to external customers

Home furnishingsand interior goods

Other

Total

¥449,251¥8,889¥458,140

Thousands of U.S. Dollars
For the year ended February 20, 2016

Sales to external customers

Home furnishingsand interior goods

Other

Total

$3,976,729$78,688$4,055,417

2) Information about geographic areasa) SalesInformation about geographic areas is not disclosed because sales to external customers in Japan constituted
more than 90% of net sales on the consolidated statement of income.
b) Property, plant and equipment
Information about property, plant and equipment is not disclosed because property, plant and equipment in Japan
constituted more than 90% of property, plant and equipment on the consolidated balance sheet.
3) Information about major customers
Information about major customers is not disclosed since no single customer accounts for more than 10% ofconsolidated net sales.
3. Information about Impairment Loss on Fixed Assets by Reportable Segment
The Group has been primarily engaged in a single segment of sales of home furnishings and interior goods.
Therefore, this information is omitted.

30
FY2015 Nitori Holdings Co., Ltd.

4. Information about Amortization and Unamortized Balances of Goodwill by Reportable Segment
Not applicable.
5. Information about Gain on Negative Goodwill by Reportable Segment
Not applicable.

19. Related Party Transactions
1. Related party transactions between the Company and related parties
Directors and major shareholders (individual shareholders only), etc., of the Company% of Voting
RightsFor the year ended February 20, 2015
Category

Name

Close
relative of Nitori
directors Mitsuko

Capital or
Address Investment Relationship--

Held (held by Business
Nature of
Others)Relationship Transaction(held byMother of
representative others)
Direct 0.02
director

Balanceat the end of theyear

Amounts of Transaction

Building
lease

Building
lease(Note 2)Millions of Yen

Account

Millions of Yen

¥16

Lease
deposits¥28

Notes: 1. Amount of transaction does not include consumption taxes.
2. The terms and prices of building lease transactions are determined based on a similar transaction in a nearby area.
% of Voting
RightsFor the year ended February 20, 2016
Name

Capital orHeld (held byAddress Investment Relationship Others)

Nitori
Directors Akio-

Represen (held byothers)tativedirectors Direct 3.08-

Represen (held byothers)tativedirectors Direct 0.04-

Directors(held byothers)Direct 0.02-

Mother of(held byrepresentat
others)ive director,
Nitori Akio Direct 0.01

Category

Shirai
Directors Toshiyuki

KomiyaDirectors Shoshin
Closerelative of Nitori
directors Mitsuko

-

-

-

-

Balanceat the end of the year

Amounts of Transaction
Business
Nature ofRelationship Transaction

Millions of Thousands of
Yen U.S. Dollars

Account

Millions of Thousands of
Yen U.S. Dollars-

Exercise ofstock options(Note 2)¥633

$5,607----

Exercise ofstock options(Note 2)

23

210

-

-

-

-

Exercise ofstock options(Note 2)

39

350

-

-

-

Building
lease

Building
lease(Note 3)16

Lease
143 deposits

¥28

$253

Notes: 1. Amount of transaction does not include consumption taxes.
2. Exercise of stock options during the fiscal year ended February 20, 2016 approved by annual general meeting of shareholders
on May 12, 2011.
3. The terms and prices of building lease transactions are determined based on a similar transaction in a nearby area.

2. Related party transactions between the consolidated subsidiaries and related parties
Not applicable.

31
FY2015 Nitori Holdings Co., Ltd.

20. Amounts per Share
As at and for the years ended February 20

Net assets per share of common stock

Yen

U.S. Dollars

2015

2016

2016

¥2,806.99¥2,981.27$26.39Basic net income per share of common stock376.14425.103.76

Diluted net income per share of common stock374.73421.403.73

Notes: Stocks held by Trust & Custody Services Bank, Ltd. on behalf of the J-ESOP are excluded in the number of shares for the
calculation of net assets per share of common stock information.

1. Basis of net income per share of common stock and diluted net income per share of common stock1) Basic net income per share
Millions of Yen

Thousands of
U.S. Dollars

2015

2016

2016

¥41,450¥46,969$415,766---

Net income attributable to ordinary shareholders

41,45046,969415,766

Average number of shares issued and outstanding
during the period (Thousand shares)

110,202110,488

For the years ended February 20

Net income
Net income not attributable to ordinary
shareholders

Note:

Stocks held by Trust & Custody Services Bank, Ltd. on behalf of the J-ESOP are excluded in the number of shares for the
calculation of average number of shares issued and outstanding during the period.

2) Diluted net income per share
Millions of Yen

Thousands of
U.S. Dollars

For the years ended February 20

2015

2016

2016

Adjustment to net income

¥-

¥-

$-

414

970

Increase in the number of common stock
corresponding to share warrants (Thousand
shares)32
FY2015 Nitori Holdings Co., Ltd.

21. Short-term and Long-term Loans Payable
Balance atFebruary 21,
2015

Item

Millionsof YenMillionsof YenThousands of
U.S. Dollars

Averageinterest
rate (%)

¥-

¥-

$-

-

-

4,392

1,504

13,320

0.48

-

188

188

1,666

-

-

2,129

625

5,532

0.65

Short-term loans payable
Current portion of long-termloans payable
Current portion of leaseobligations
Long-term loans payable(Excluding current portion)

Balance atFebruary 20,
2016
Repayment
term

2017

Lease obligations(Excluding current portion)

2,706

2,518

22,290-2017–2032

Total¥9,416¥4,836$42,810--Notes: 1. Average interest rates show weighted-average interest rate of loans payable balance at year end.
2. The weighted-average rate of interest for finance lease obligations is not disclosed since related interest charges are included in
the amount of lease obligations in the consolidated balance sheet.
3. Maturities of long-term loans payable and lease obligations, excluding the current portion, due within 5 years as of February 20,
2016 are as follows:
Millions of Yen

Thousands of
U.S. Dollars

Over 1 year less than 2 years¥625$5,532

Over 2 years less than 3 years--

Over 3 years less than 4 years--

Over 4 years less than 5 years--

Millions of Yen

Thousands of
U.S. Dollars

Over 1 year less than 2 years¥187$1,661

Over 2 years less than 3 years

187

1,655

Over 3 years less than 4 years

187

1,655

Over 4 years less than 5 years

187

1,655

Long-term loans payable (excluding current portion)

Lease obligations (excluding current portion)

22. Asset Retirement Obligations
Asset retirement obligations are not disclosed because asset retirement obligations constituted less than 1% of
total liabilities and net assets on the consolidated balance sheet.

23. Subsequent Event
Not applicable.

33
FY2015 Nitori Holdings Co., Ltd.