Year ended August 31, 2001

PROFILE
FAST RETAILING CO., LTD., is the company behind the UNIQLO brand of
casual clothing. The Company manages all facets of its business,from product planning and design, to production, distribution and sales.
Its shares are listed on the First Section of the Tokyo Stock Exchange.
During fiscal 2001, ended August 31, 2001, the Company recorded
net sales of ¥418.6 billion, generated by 519 stores and 1,598 employees.
Today, FAST RETAILING is Japan’s No. 1 casual clothing company.

CONTENTS
01

FINANCIAL HIGHLIGHTS

03

DEAR SHAREHOLDERS

06

ACHIEVING A STABLE REVENUE STRUCTURE

10SUCCESSFUL LAUNCH OF STORES IN LONDON

12OTHER INITIATIVES

13

FINANCIAL SECTION

34

STORE NETWORK35

CORPORATE HISTORY36

INVESTOR INFORMATION37

CORPORATE DATA

Forward-Looking Statements
Statements in this annual report, other than those of historical fact, are forward-looking
statements about the future performance of FAST RETAILING that are based on
management’s assumptions and beliefs in light of information currently available, and involve
known and unknown risks and uncertainties. Actual events and results may differ materiallyfrom those anticipated in these statements.

FINANCIAL HIGHLIGHTS

Thousands of
U.S. Dollars

Millions of Yen

Years ended August 31

2001

2000

1999

1998

1997

2001

Net sales¥ 418,561¥ 228,986¥111,082¥83,121¥75,021$3,509,945

Operating income

102,081

60,62814,344

6,840

5,866

856,025

Net income

59,192

34,514

6,817

2,924

2,704

496,369¥1,116.06¥1,301.98¥ 259.51¥111.49¥113.38

120.0

150.0

27.0

10.0

10.0

1.01

Total assets¥ 253,413¥ 153,261¥ 73,552¥47,848¥41,655$2,125,057

Total shareholders’ equity

120,123

66,40933,61826,00923,335

1,007,321

Basic net income per share (yen)Dividends per share (yen)

$

9.36

53,036,828 26,518,414 26,461,005 26,229,924 23,845,386

Number of issued and outstanding shares

Notes: 1. U.S. dollar amounts have been translated for convenience only at the rate of ¥119.25=US$1, the approximate exchange rate prevailing on
August 31, 2001.
2. FAST RETAILING has three subsidiaries, but owing to their limited contribution to overall performance, has chosen not to prepare
consolidated financial statements.

75.0

83.1

111.1

229.0

418.6

(FY) 97

98

99

00

01

5.9

6.8

14.3

60.6

102.1

(FY) 97

98

99

00

01

2.7

2.9

6.8

34.5

59.2

(FY) 97

98

99

00

01

Net Sales

Operating Income

Net Income(Billions of Yen)

(Billions of Yen)

(Billions of Yen)

2001 ANNUAL REPORT 01

FAST RETAILING believes

that when the clothes speak louder thanthe person, the person cannot be heard.

we won’t tell you
what to wear

02 2001 ANNUAL REPORTDEAR SHAREHOLDERS

Operating Income Exceeds ¥100 Billion in Fiscal 2001
In fiscal 2001, ended August 31, 2001, FAST RETAILING CO., LTD., saw
increases in revenue and net income for the thirteenth consecutive year.
Worldwide, there are only around thirty companies in the retail industry with
operating income over ·100 billion, and in Japan only Seven-Eleven Japan,
Co., Ltd., and our company have achieved this.
In fiscal 2001, net sales increased 82.8%, to ·418.6 billion, operating income
rose 68.4%, to ·102.1 billion, and net income increased 71.5%, to ·59.2 billion.
With net sales of ·111.1 billion in fiscal 1999 and ·229.0 billion in fiscal 2000,
we have nearly quadrupled net sales figures in just two years.

Becoming a global company means achieving consistently
high standards in all areas of business.

Launch of UNIQLO’s Global Expansion
The opening of four UNIQLO stores in London and surrounding areas in late
September 2001 received an enthusiastic response from both the press andconsumers. Major British media reported on the event and praised UNIQLO
highly. A well-known consultant quoted in a British magazine said UNIQLO scustomer-driven, design-led, vertically integrated business model from the East
will be as significant in the next 10 years as the innovations of Marks & Spencer
in the 1950s, Benetton in the 1980s and Zara in the 1990s. Although there aremany challenges to be faced in the future, the launch of stores in London
confirmed that FAST RETAILING s business concept and model affirms
UNIQLO is capable of becoming the world s top casual wear company.
The launch of stores in the United Kingdom is FAST RETAILING s first step
onto the international stage. We will continue evolving as a global company,
entering new and developing markets and gradually diversifying our market
portfolio. In the future, in an increasingly global market, companies that only
operate domestically will become uncompetitive. Becoming a global company
means achieving consistently high standards in all areas of business, including
sales, product, marketing and supply chain management.

2001 ANNUAL REPORT 03

To consistently achieve high growth, a company must create an environment
for people with initiative and talent to exercise their abilities.

Corporate Philosophy
I have always believed a company can grow, no matter what adverse conditions
exist, as long as there is a will, a sense of direction, planning, ingenuity andaction. I want to prove there is no reason why companies in Japan cannot mirror
the success of venture companies in the United States, growing from nothing to
gaining billions of dollars in sales in a short time. If a company wishes to continue achieving high growth with impressive revenues, it should create an environment for people with initiative and talent to exercise their abilities. It must be
an excellent company by any measure.
We are confident our casual wear will be appreciated by people all over theworld, regardless of age or gender. The same can be said for our management
style, which follows 23 basic principles that are relevant throughout the world
and represent the essence of any good company. There are only good companies
and bad companies, and the basic management principles of a good company do
not vary. Rather than simply be guided by a manager’s impulses or individual
management philosophy, a company must adopt basic principles that are
effective in any business.

04 2001 ANNUAL REPORTWe are dedicated to becoming the world’s leading
casual wear company.

Our Mission and Vision
Our mission is to produce clothes that anyone can wear anytime, anyplace. We
want to continuously offer fashionable, high-quality basic casual clothing at thelowest market price. The Company will therefore focus on creating and sustaining a low-cost structure to produce and sell clothes with the shortest possible
lead time. We will determine the needs of our customers and offer them thesuperior service they demand. We will also provide a pleasant working environment that meets global standards and encourages innovation and a team spirit,rather than a top-down, bureaucratic culture. We will strive for high sales andgrowth in earnings as a result of these efforts and become a global casual wear
company.
To once again triple the size of its operations in Japan, FAST RETAILING
will need to make another quantum leap in terms of planning and execution.
Currently, we have exceeded ¥400 billion in net sales. Our long-term goal is toachieve a total of ¥1.0 trillion in net sales in Japan and a further ¥1.0 trillion
overseas. We are dedicated to achieving this goal and our vision of becoming theworld’s leading casual wear company.

In closing, I would like to express my gratitude to all shareholders and ask fortheir continuing support of FAST RETAILING.

Tadashi Yanai, President & Chief Executive Officer
November 2001

2001 ANNUAL REPORT 05

achievinga stablerevenuestructure

product lineup

marketingpersonnel development

supply chain management
06 2001 ANNUAL REPORT

achieving a stable revenue structure
FAST RETAILING’s business model is based on an integrated system in which theCompany controls all facets of operations, including product planning, material development, design, procurement of raw materials, production, distribution and sales. Thismodel allows us to offer customers high-quality basic casual clothing at low prices andhas resulted in two years of dramatic growth. The launch of stores in London in September 2001—our first step into the global market—was marked with an enthusiastic
reception.
In fiscal 2002, ending August 31, 2002, our domestic business will make the transition from a period of rapid growth to one of stable growth. We are making concerted
efforts to stabilize the revenue structure, one of our most important concerns, bystrengthening our product lineup, marketing, personnel development and supply chain
management, thus improving our operating strengths.

1

achievinga more complete
product lineup

FAST RETAILING’s basic philosophy is that the way we dress is the way we first
demonstrate our individuality, but that a clothing item is merely one part of a person’s
overall look. We aim to create items of clothing people can select to form their own
sense of style—rather than clothes with overbearing or dominating designs. Based on
this conviction, we have improved material development and design and implemented
meticulous quality control. As a result, our customers have praised UNIQLO products
for their high quality and reasonable prices, and we have gained a competitive advantage in the field of basic casual wear. In fiscal 2002, we will continue to develop andimprove products that will win customer support.
Although 90% of its products are consigned to partners in China and the remaining
10% for production in Southeast Asia, FAST RETAILING monitors quality in all these

Applying many years of apparel manufacturing experience in Japan, one of our
product directors conducts technicaltraining at a partner factory in China.

factories. In China, we have established two production management offices and aclothing production experts project in which product directors familiar with every
aspect of clothing production bring to our factories technology and knowledge accumulated over many years.
Within our integrated system, covering every
aspect from production to sales, we are reviewing
the early stages of the production process and developing new materials in cooperation with global
material manufacturers. One recent success was theABpopularity of our polo shirts and T-shirts sold in spring andsummer 2001, which were made of a material
The diagram shows surface temperature
variations for a person wearing a heattech sweater made from materials withspecial warmth-retention properties.
After the item of clothing is put on (A),it soon warms up and retains heat (B).
These materials have been developed incollaboration with some of the world’s
leading fiber manufacturers.

with moisture-absorbent and fast-drying
qualities. We also developed the“heat-tech” sweater, made of a newmaterial possessing warmth-retention
qualities, for sale in fall and winter 2001.
We will continue to offer new materials to
stimulate potential consumer demand.

2001 ANNUAL REPORT 07

Because basic casual wear is simple, its designs and colors must be appealing. The
launch of stores in the United Kingdom was anopportunity for us to form a design team with some of the world’s top casual clothing
designers, and this team is currently planning innovative products.

1 2 conveying

our brand message
through marketing

To communicate our message of clothes
for everyone, in our catalogs we featureordinary people wearing our products,
rather than models.

Our message, that we are a modern Japanese company that inspires the world to dresscasual, is strong because of its simplicity and clarity. Through aggressive and effective
marketing we have accurately conveyed this message to customers, using such promotional media as newspapers, magazines, television, catalogs and fliers, as well as instore sales promotions and visual merchandising. The promotion of our core products—fleeces, “air-tech” jackets and fast-drying polo shirts—has demonstrated thetremendous marketing power of this influential media mix.
However, we are careful to spend our marketing budgets effectively. In fiscal 2001,
marketing expenses accounted for only 4.6% of net sales. Using this figure as ourbenchmark, we plan to conduct even more efficient marketing activities in fiscal 2002.

3

supporting retailingthrough personnel
development

Our original personnel system of “superstar” store managers and long-term contract
employees supports our sales strengths. FAST RETAILING’s belief in the idea of independent sales people inspires its staff. Because of the recent increase in the number of
UNIQLO customers, we have doubled store staff, making it difficult to improve
efficiency by previous methods. We are thus creating a structure, as shown below, of
superstar store managers and long-term contract employees to ensure stores are run
more efficiently.

STORE OPERATIONS THUS FAR

store manager
staff

STORE OPERATIONS GOING FORWARD

superstar store manager
long-term contract employees
staffSuperstar store managers make independent decisions without waiting for instructions from the head office, bearing responsibility for sales, inventory and profit in theirown stores. A high proportion of their remuneration comprises performance-based
incentives. We currently employ approximately 30 superstar store managers, but plan toplace them in every UNIQLO store within a few years. A special curriculum for theirtraining has been developed.
The long-term contract employee system is another important feature of personnel
development. This system aims to retain talented part-time employees for long periods
in roles of supporting the manager and acting as the core of store operations. There are
currently approximately 320 such employees, and a further 500 are participating in
training for these positions. We aim to have 1,000 long-term contract employees in thenear future. As only one to two managers and assistant managers in a store are full-time
employees and the remaining 50 employees are part-timers, long-term contract
employees are essential to our store operations.

Our stores are staffed with teams offriendly, knowledgeable customer
advisers who are always on hand.

improving
supply chain
4 management

The period of transition from rapid to stable growth demands a more precise supply
chain management system. In the past few years, dramatic sales growth intensified thechallenge for merchandisers to produce replacement stock. As growth stabilizes, however, we need a system that enables timely decisions regarding supplemental productionof popular products and cancellation of slower moving products. We have improved
merchandisers’ awareness of these changes, and are implementing a supply chain management system that places greater attention on current product sales and changes infuture demand predictions. FAST RETAILING’s “flat” organization allows for accurate
and quick transmission of information within the company and clear delegation of
responsibilities between employees to improve the precision of inventory management.
UNIQLO stores extend throughout Japan, a country that experiences large differencesin climate between northern and southern regions. This has allowed FAST RETAILING
to improve its demand predictions. For example, the sales trends of fall and winterproducts in Hokkaido, Japan’s northernmost island, provide leading indicators for the
rest of the country. Based on such information, we are able to tactically coordinate
demand predictions with production.

2001 ANNUAL REPORT 09

successful
launch ofstores in london“welcome”

knightsbridge
romforduxbridge

wimbledon
10 2001 ANNUAL REPORTsuccessful launch of stores in london
FAST RETAILING opened four UNIQLO stores in London and surrounding areas on
September 28, 2001. Sales exceeded our expectations, and lines of more than 200 customers formed before doors opened, forcing us to manage the number of customers
entering the stores. A feature published in the October 10, 2001, edition of the Daily
Mail awarded UNIQLO stores the highest ranking for basic casual wear, demonstratingthat the British market has given our products high marks for quality and affordability.
The products sold in the United Kingdom are made from identical materials to thosesold in Japan, but feature Western styles and fit. Our prices are 30-40% lower thanthose of our competitors, confirming our perception that our stores are highly
competitive, even in London.
The four stores are situated in Knightsbridge, in central London; a suburban highstreet in Wimbledon; a retail park in Romford; and a suburban mall in Uxbridge. We
will analyze results from these diverse locations to develop an optimum real estate
strategy. As in Japan, the interior and exterior of UNIQLO stores in the United Kingdom
are simple and functional. The sophisticated design by Conran & Partners has received
high acclaim. Promotion in the early period following our launch is crucial to secure
brand recognition in the U.K. market. As in Japan, we will use an effective mix of television commercials, fliers and advertisements on public transportation and innewspapers.
We plan to open approximately 50 stores over three years in London and other major
cities in the United Kingdom. Our business targets are to break even after two years andachieve an operating margin of 10% after three years.

The opening of our first U.K. stores was
widely covered by the British press andbroadcast media.

2001 ANNUAL REPORT 11other initiatives
Seto Inland Sea Olive FundTen years of illegal dumping of
toxic industrial waste contaminated the environment ofTeshima, an island situated in the
Seto Inland Sea. Many years of efforts byresidents have resulted in the removal of
toxic waste and contaminated soil, but
the island’s greenery has still not been restored.
The Seto Inland Sea Olive Fund aims to restore the olive
forests of the coast and islands in the Inland Sea, including
Teshima, to revive nature in the region. This movement
was initiated by Kohei Nakabo, an attorney, and Tadao
Ando, an architect. As the fund was started by theserespected people and has a significant purpose, FASTRETAILING was pleased to participate. UNIQLO storesthroughout Japan have donation boxes and posters to collect contributions from customers. We match the total
amount contributed by our customers, effectively doubling
the sum collected.

“action and comfort” and provide protection from the windand cold. The opening ceremony uniform is made from airtech and fleece materials with superior comfort andwarmth. We will provide our accumulated knowledge ofclothing to assist in this new endeavor to create“Everyone’s Olympics.”

FAST RETAILING will supply
the official uniforms forJapan’s representatives at the
19th Winter Olympic Games.
Shown above are the formal
uniform (left) and opening
ceremony uniform (right).

The first commemorative tree planting event for the Seto
Inland Sea Olive Fund was held on November 15, 2000. Local
elementary and middle school students helped plant the trees.

Equal Opportunity

Olympic Support
On April 19, 2001, FAST RETAILING and the JapaneseOlympic Committee (JOC) agreed to form a JOC official
sponsorship. As a company making clothes for everyone,
we feel an affinity with JOC, an organization advocating“Everyone’s Olympics.” Furthermore, FAST RETAILING
decided to produce and supply the official uniforms of theJapanese representatives participating in the 19th WinterOlympic Games, to be held in Salt Lake City in 2002. An
official uniform selection committee, comprising experts inclothing design and other fields and former Olympic participants, debated and chose the uniforms, which express
12 2001 ANNUAL REPORTFAST RETAILING aims to be a company where anyone
can work in conditions of equality. We are creating a working environment that does not discriminate in terms ofnationality, ethnicity, gender, age, marital status, disabilityor religious belief.
FAST RETAILING currently employs 441 disabled
staff, accounting for 5.9% of all its employees. The minimum amount of disabled staff to work required by Japanese law is 1.8%. We would like to recruit more disabled
staff members to work in our stores and we recognize thehuge contribution people from diverse backgrounds canmake to our business.

F INANCIAL SECTION
SIX-YEAR FINANCIAL SUMMARY

14MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

15

BALANCE SHEETS

20

STATEMENTS OF INCOME

22

STATEMENTS OF SHAREHOLDERS’ EQUITY

23

STATEMENTS OF CASH FLOWS

24

NOTES TO FINANCIAL STATEMENTS

25

INDEPENDENT AUDITORS’ REPORT

33

2001 ANNUAL REPORT 13

SIX-YEAR FINANCIAL SUMMARY
Millions of Yen

Years ended August 31

2001

2000

1999

1998

1997

1996

Net sales¥418,561¥228,986¥111,082¥83,121¥75,021¥59,959

Net income

59,192

34,514

6,817

2,924

2,704

2,327

Total shareholders’ equity

120,123

66,40933,61826,00923,33520,859Total assets

253,413

153,261

73,552

47,84841,65537,223Yen¥2,264.91¥2,504.25¥1,270.47¥991.58¥978.59¥962.23

Dividends per share

120.00150.00

27.00

10.00

10.00

10.00

Interim dividends

60.00

50.00

7.00

5.00

5.00

5.00

Basic net income per share

1,116.06

1,301.98

259.51111.49113.38115.04

Dividend payout ratio (%)

10.7

11.50

10.46

8.97

8.82

9.32

Return on equity (%)

63.5

69.0

22.9

11.9

12.2

11.8

Equity ratio (%)

47.4

43.3

45.7

54.4

56.0

56.0

53,036,828

26,518,414

26,461,005

26,229,924

23,845,386

21,677,624

Number of stores

519

433

368

336

276

229

Number of franchise stores

12

12

11

11

11

10

Number of regular employees

1,598

1,265

1,055

950

798

622

Shareholders’ equity per share

Number of issued and outstanding shares

14 2001 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The financial information in this section is based on the nonconsolidated financial statements presented
in this annual report. The financial statements have been prepared in accordance with accounting
principles generally accepted in Japan. FAST RETAILING has three subsidiaries, but owing to theirlimited contribution to overall performance, has chosen not to prepare consolidated financial statements.

RESULTSOF OPERATIONSNet Sales
In fiscal 2001, ended August 31, 2001, net sales continued to experience tremendous growth, jumping
82.8%, to ¥418.6 billion. This was attributable to a 41.7% increase in the revenues of existing stores, theopening of 86 new stores, net (opened 111, closed 25), and rising catalog and online sales. Furthermore,
our effective media mix has improved recognition of the UNIQLO brand, increasing the number ofcustomers to our stores 87.1%.
Millions of Yen

Net sales

2001¥418,561

2000¥228,986

1999¥111,082

All categories experienced high growth, in particular Cut & Sewn, Women’s Clothing and Accessories. The
Company’s expanded lineup of fleece and sweat products boosted sales in the Cut & Sewn category 102.0%,
to ¥109.5 billion. In fall and winter 2000, approximately 26 million fleece items were sold, including fleece
accessories. Polo shirts and T-shirts made of fast-drying materials sold during spring and summer 2001 also
contributed to higher sales. In the Women’s Clothing category, sales increased 93.9%, to ¥99.4 billion, owing
to higher net sales of jeans and pants made of stretch materials. Sales of socks, underwear, bags and belts
were also impressive, leading to ¥72.5 billion in sales in the Accessories category, a 91.0% rise. Catalog andonline sales, which commenced in fiscal 2000, ended August 31, 2000, expanded widely, to ¥15.5 billion,
from ¥1.5 billion. Catalog and online sales are included in each category’s sales, as shown below.
Sales by Category
Children’s Clothing
Women’s Clothing
National Brands
Outerwear
Sweaters
Cut & Sewn
ShirtsSlacks (Pants)
Accessories
Subtotal
Products supplied to franchise stores
Administrative charges
Fees from in-store alterations
Net sales

Millions of Yen

2001¥ 23,701
99,411–
24,79918,498109,495
28,162
36,94372,539413,548
4,279
584
149
¥418,561

2000¥ 14,929
51,272
83
15,302
10,911
54,203
18,54822,65637,981
225,885
2,689
352
60
¥228,986

1999¥ 6,110
18,745
10,2058,448
6,225
21,734
8,684
12,252
16,534
108,937
1,821
272
52
¥111,082

Notes:
1. Net sales for the year ended August 31, 2001, include catalog and online sales amounting to ¥15,533 million.
2. Figures for products supplied to franchise stores represent sales of merchandise to franchises.
3. Administrative charges are royalty income received from franchises.
4. Fees from in-store alterations comprise income from fitting and mending, such as hemming.
5. The above figures do not include consumption tax.

2001 ANNUAL REPORT 15

Before Japan’s new Site Location Law replaced the Large-Scale Retail Stores Law, restricting thelocation of stores, we received many offers to become tenants in shopping centers. Because of thisfactor, and to improve service by easing overcrowding, we opened 111 new stores in fiscal 2001, 44
more than in fiscal 2000. The large-scale opening of stores in urban areas to reduce overcrowding
resulted in a division of trading areas, which slowed the growth rates of existing stores. Overall sales,
however, continued to see high growth and market share continued to expand.
We also continued our strategy of closing stores to build larger stores nearby, closing 25 in fiscal 2001.
As a result, our network of UNIQLO stores grew to 519 outlets nationwide, including 12 franchises, by
the end of fiscal 2001. Total retail space grew 41.2%, to 263,713.45 square meters. Store expansion
continued to be particularly noticeable in the Kanto region, with 58 new stores and four closures.

Store Openings and Closures
Store openings
Store closures
Increase in store numbers
Capital spending (millions of yen)

2001
111
25
86
¥13,474

2000
67
3
64
¥6,218

1999
38
6
32
¥3,363Note:
Total capital spending for fiscal 2001 includes forward investments for stores to be opened during fiscal 2002, ending
August 31, 2002.

Number of Stores by Region
Hokkaido
Tohoku
Kanto
Chubu
Kansai
Chugoku
Shikoku
KyushuOkinawa
Direct-run storesFranchises
Total
Total floor space (m2)

16 2001 ANNUAL REPORT

2001

2000

1999

12
26
197
77
95
24
16
55
5
507
12
519
263,713.45

9
22
143
68
84
21
15
55
4
421
12
433
186,801.10

7
19
102
63
74
20
15
53
4
357
11
368
157,424.03

Income
Earnings continued to expand in fiscal 2001. Gross profit increased 77.6%, to ¥199.8 billion. Operating
income grew 68.4%, to ¥102.1 billion. Operating margin dropped 2.1%, to 24.4%, owing to gross profit
margin in the second half falling below the planned amount, compared with unexpectedly wide sales
expansion in the first half. Despite the drop in operating margin, it remained the highest among
Japanese retailers.
There were two reasons for the decrease in operating margin. First, our promotional strategy, whichemphasized low prices, led to strong demand from customers and an increase in the sales growth of
products exceeding predictions. Second, unseasonably low temperatures after July 2001 led to moreprice markdowns than expected. Although gross profit margin decreased, the figure did not differ
greatly from our expectations.
In selling, general and administrative (SG&A) expenses, “others” saw the highest increases, owing tooutsourcing fees for the catalog and online sales business.
Breakdown of SG&A Expenses
2001
Millions Percentage Percentage
of Yen to Sales Change

Personnel
Advertising andpromotion costs
Rents
Depreciation andamortization
Others
Total

2000

1999

Millions Percentage Percentage
of Yen to Sales Change

Millions Percentage Percentage
of Yen to Sales Change¥37,891

9.0

+79.3

¥21,128

9.2

+86.8

¥11,310

10.2

+28.0

19,083
17,872

4.6
4.3

+90.2
+72.7

10,036
10,347

4.4
4.5

+51.3
+29.4

6,632
7,998

6.0
7.2

+11.3
+14.5

1,571
21,324¥97,741

0.4
5.0
23.3

+95.0
+123.3
+88.4

806
9,550
¥51,867

0.4
4.2
22.7

+8.7
+84.4
+62.8

741
5,180
¥31,861

0.7
4.7
28.8

+13.4
-8.9
+13.3

As a result, income before income taxes rose 70.9%, to ¥102.5 billion. Net income jumped 71.5%, to¥59.2 billion, from ¥34.5 billion. Return on sales was 14.1% and return on equity (ROE) was 63.5%.
Our policy is to secure a stable management foundation over the long-term and continue providing
value to our shareholders based on our performance. Thanks to favorable earnings, we were able toissue a ¥120 cash dividend in fiscal 2001. As a result, total dividends paid amounted to ¥6.3 billion,
with a dividend payout ratio of 10.7%. The dividend-to-equity ratio was 5.3%.

2001 ANNUAL REPORT 17

LIQUIDITY AND
FINANCING

Assets, Liabilities and Shareholders’ Equity
The increase in net sales boosted total assets 65.3%, to ¥253.4 billion, from ¥153.3 billion in fiscal 2000.
Total current assets rose 68.7%, to ¥212.4 billion, while fixed assets, comprising property andequipment, intangible assets, and investments and other assets, increased 49.8%, to ¥41.0 billion.
The increase in total current assets is attributable to the growth in cash and marketable securities,
which totaled ¥157.4 billion at the end of the fiscal year. Marketable securities increased 140.8%, to¥111.3 billion. The Company concentrates on safe and liquid investments, and its marketable securities
mainly comprise money management funds and medium-term government securities funds. Reflecting
increased net sales, inventories advanced 47.3%, to ¥30.4 billion, and trade notes and accounts
receivable rose 102.1%, to ¥3.7 billion. Forward exchange contracts and net deferred unrealized gain on
forward exchange contracts are noted as unrealized profit on forward exchange profits for future
payment for goods in U.S. dollars.
As a result of opening new stores, lease deposits rose 42.9%, to ¥9.6 billion, and construction
assistance fund receivables increased 32.4%, to ¥12.9 billion. Following the introduction of stock
options, we recorded ¥3.6 billion in new treasury stock, up ¥2.0 billion from the previous year.
Higher transaction amounts led to a 48.3% increase in accounts payable, to ¥63.5 billion. Accrued
income taxes rose 32.6%, to ¥30.5 billion. Business expansion resulted in total current liabilities of¥125.6 billion, an increase of 64.9%.
Total long-term liabilities fell 27.7%, to ¥7.7 billion. As a result, total liabilities rose 53.5%, to ¥133.3
billion. The Company’s current ratio increased from 165.3%, to 169.2%.
Total shareholders’ equity jumped 80.9%, to ¥120.1 billion, owing to an increase in retained earningsof 102.5%, to ¥103.8 billion. The Company’s equity ratio increased from 43.3%, to 47.4%.
At the June 19, 2000, Board of Directors’ meeting, it was decided that a two-for-one stock split would
be initiated for shareholders registered as of August 31, 2000, with the split taking place on October 20,
2000. Following the stock split, the number of issued and outstanding shares amounted to 53,036,828,
up from 26,518,414 shares.

Cash Flows
Reflecting a 70.9% increase in income before income taxes, to ¥102.5 billion, cash and cash equivalents
at end of year rose 57.9%, to ¥157.4 billion, despite store openings in Japan and the development of the
U.K. subsidiary following its establishment the previous year.
Net cash provided by operating activities amounted to ¥80.6 billion, mainly owing to net sales growthleading to the increase in income before income taxes. Net cash used in investing activities totaled ¥13.2
billion, primarily owing to ¥6.5 billion in purchase of property and equipment, as well as ¥4.0 billion in
payments for construction assistance fund receivables and ¥3.0 billion in payments for lease deposits
required to open 86 new direct-run outlets (net) and renovate existing stores.
Net cash used in financing activities totaled ¥11.0 billion. This included ¥5.8 billion for dividends
paid, ¥2.3 billion for purchase of treasury stock and ¥3.0 billion for repayments of long-term debt.

18 2001 ANNUAL REPORTOUTLOOK

Global Expansion and Domestic Stability
Fiscal 2002 will be a period of transition from rapid to stable growth. The launch of stores in London
and surrounding areas on September 28, 2001, represented our first step into global markets, and wewill promote our business model for further global expansion and growth.
The stabilization of our earnings structure is the most important issue for our domestic business. We
are therefore (i) improving our product lineup, (ii) securing a healthy gross profit margin throughdemand predictions and supply chain management, and (iii) improving our management control,
focusing on personnel expenditure.
While maintaining a balance between sales, profits and customer service, we are continuing ourstrategy of closing stores to build larger ones. In fiscal 2002, we plan to open approximately 90 storesand close about 30.

2001 ANNUAL REPORT 19

BALANCE SHEETSFAST RETAILING CO., LTD.
August 31, 2001 and 2000

Thousands of
U.S. Dollars

Millions of Yen(Note 2)

2001

2000

2001

Cash (Note 3)¥ 46,035¥ 53,432$ 386,038

Marketable securities (Notes 1(d) and 3)

111,344

46,238

933,702

Trade notes and accounts receivable

3,685

1,823

30,901

Less–Allowance for doubtful accounts

(12)

(7)

(101)

ASSETS
Current assets:

3,673

1,816

30,800Inventories (Note 4)30,416

20,646

255,061

Prepaid expenses

1,549

1,070

12,990

Deferred tax assets (Note 9)

2,637

2,394

22,113Forward exchange contracts

16,419–137,686

355

309

2,977

212,428

125,905

1,781,367

Land

2,052

2,052

17,208

Buildings and structures

15,228

9,297

127,698

Furniture and equipment

188

131

1,576

Net trade receivables

Other (Note 5)
Total current assets
Property and equipment:

502

218

4,210

17,97011,698150,692

Less–Accumulated depreciation(4,674)(3,212)(39,195)

Net property and equipment

13,296

8,486

111,497

56

44

470

Construction in progress

Intangible assets
Investments and other assets:

72

62

604

Treasury stock (Note 6)

3,647

1,654

30,583

Investments in subsidiaries and affiliates

1,147

282

9,618

Lease deposits

9,554

6,688

80,117

Construction assistance fund receivables (Note 12)

Investments in securities (Note 1(d))

12,876

9,723

107,975

Deferred tax assets (Note 9)

140

76

1,174

Other

197

341

1,652

27,633

18,826

231,723¥253,413¥153,261$2,125,057

Total investments and other assets
Total assets

See accompanying notes to financial statements.

20 2001 ANNUAL REPORTThousands of
U.S. Dollars

Millions of Yen(Note 2)

2001

2000

2001

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:¥ 63,533¥ 42,834$ 532,772

Accrued income taxes (Note 9)30,50023,000255,765

Accrued expenses

14,977

10,248125,593

16,419–137,686

133

87

1,115

125,562

76,1691,052,931

Long-term debt (Note 7)

7,000

10,00058,700Accrued pension liability (Note 8)

106

–

889

Other (Note 5)

622

683

5,216

7,728

10,68364,805133,290

86,852

1,117,736

Accounts payable

Net deferred unrealized gain on forward
exchange contracts
Other (Note 5)
Total current liabilities

Long-term liabilities:

Total long-term liabilities
Total liabilities

Shareholders’ equity:
Capital (Note 10)

3,274

3,274

27,455Additional paid-in capital

11,579

11,57997,098Legal reserve (Note 11)

818

324

6,860

103,752

51,232870,038

gain on securities (Note 1(d))

700

–

5,870

Total shareholders’ equity

120,123

66,4091,007,321¥253,413¥153,261$2,125,057

Retained earnings (Note 11)
Net unrealized holding

Commitments and contingencies (Note 12)
Total liabilities and shareholders’ equity

2001 ANNUAL REPORT 21

STATEMENTS OF INCOME
FAST RETAILING CO., LTD.
Years ended August 31, 2001, 2000 and 1999

Thousands of
U.S. Dollars

Millions of Yen(Note 2)

2001

2000

1999

2001

Net sales¥418,561¥228,986¥111,082$3,509,945

Cost of sales (Note 5)

218,739

116,491

64,887

1,834,289

199,822

112,495

46,205

1,675,656

97,741

51,86731,861

819,631102,081

60,62814,344

856,025

Interest and dividend income

1,062

618

169

8,906

Interest expenses

(137)

(159)

(155)

(1,149)Store closure cost

(52)

(8)

(133)

(436)

Loss on disposal of fixed assets

(75)

(42)

–

(629)

Loss on termination of lease

(439)

–

–

(3,681)

Loss on sale of marketable securities

–

(509)

–

–

Liquidation loss of a subsidiary

–

(295)

–

–

Retirement benefits for directors

–

(122)

(49)

–

Other, net (Note 5)

93

(109)

(195)

780

452

(626)

(363)

3,791

102,533

60,002

13,981

859,816

44,151

27,346

7,549

370,239

Gross profit
Selling, general and administrative expenses
Operating income
Other income (expenses):

Income before income taxes
Income taxes (Note 9):
Current(810)(1,858)(385)(6,792)

43,341

25,4887,164

363,447¥ 59,192¥ 34,514¥ 6,817$ 496,369

Deferred
Net income

Yen

U.S. Dollars

2001

2000

1999

2001

Basic

¥1,116.06¥1,301.98¥259.51$9.36

Diluted¥¥¥259.29$

Per share data:
Net income

See accompanying notes to financial statements.

22 2001 ANNUAL REPORT

–

–

–

STATEMENTS OF SHAREHOLDERS’ EQUITYFAST RETAILING CO., LTD.
Years ended August 31, 2001, 2000 and 1999

Thousands of
U.S. Dollars

Millions of Yen(Note 2)

2001

2000

1999

2001

¥ 3,274¥ 3,174¥ 2,774$ 27,455

Capital:Balance at beginning of year

–

100

400

–

¥ 3,274¥ 3,274¥ 3,174$ 27,455¥ 11,579¥11,460¥10,979$ 97,098

–

119

481

–

¥ 11,579¥11,579¥11,460$ 97,098

¥

¥

¥

96

$ 2,717

33

4,143

129

$ 6,860

Exercise of warrant
Balance at end of year
Additional paid-in capital:
Balance at beginning of year
Exercise of warrant
Balance at end of year
Legal reserve:
Balance at beginning of year

¥

818

129
195

494

Transfer from retained earnings
Balance at end of year

324

¥

324

¥

Retained earnings:¥ 51,232¥18,855¥12,159$429,619

Net income

59,192

34,514

6,817

496,369

Cash dividends(5,818)(1,852)(314)(48,788)

Bonuses to directors

(360)

(90)

–

(3,019)Transfer to legal reserve

(494)

(195)

(33)

(4,143)

Balance at beginning of year

Cumulative effect of change in
–

–

226

–

¥103,752¥51,232¥18,855$870,038

¥

¥

¥

$

accounting principle (Note 1(k))
Balance at end of year
Net unrealized holding gain on securities:
Balance at beginning of year
Balance at end of year

–

¥

700

–
–

700

Net change during the year

¥

–

¥

–

–

–

5,870

–

$ 5,870

See accompanying notes to financial statements.

2001 ANNUAL REPORT 23

STATEMENTS OF CASH FLOWSFAST RETAILING CO., LTD.
Years ended August 31, 2001 and 2000

Millions of Yen(Note 2)

2001

2000

2001

¥102,533¥60,002$ 859,816

1,571
(21)
106
(1,062)
137
(87)
85
–
75
(1,862)(9,770)(512)
20,6994,777(360)
116,309
1,062(139)(36,651)
80,581

805
69
–
(618)
159
37
11
85
42
(1,175)(10,620)(371)
23,6746,179(90)
78,189618(141)(9,876)
68,79013,174(176)
889(8,906)
1,149
(730)
713
–
629
(15,614)(81,929)(4,294)
173,577
40,059(3,019)975,338
8,906(1,166)(307,346)
675,732

Cash flows from investing activities:
Purchase of investment securities
Proceeds from sale of investment securities
Purchase of property and equipment
Collections of loan receivables
Payments for lease deposits
Collections of lease deposits
Payments for construction assistance fund receivables
Collections of construction assistance fund receivables
Purchase of intangible fixed assets
Other, net
Net cash used in investing activities(865)–(6,456)–(3,024)220(3,993)840(14)
93(13,199)(165)
201(2,559)161(2,045)219(1,614)677(9)49(5,085)(7,254)–(54,138)–(25,358)
1,845(33,484)
7,044
(117)
779
(110,683)

Cash flows from financing activities:
Proceeds from issuance of common stock
Repayments of long-term debt
Purchase of treasury stock
Proceeds from sale of treasury stock
Dividends paid
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year (Note 3)
Cash and cash equivalents at end of year (Note 3)–(3,000)(2,251)258(5,818)(144)(10,955)
1,282
57,70999,670¥157,379

199
–
(300)
(25,157)(1,734)(18,876)
74
2,163(1,852)(48,788)(153)(1,208)(3,766)(91,866)(37)
10,75059,902483,933
39,768835,807¥99,670 $1,319,740

Cash flows from operating activities:
Income before income taxes
Adjustments to reconcile income before income taxes
to net cash provided by operating activities:
Depreciation and amortization
Increase (decrease) in allowance for doubtful accounts
Increase in accrued pension liability
Interest and dividend income
Interest expenses
Exchange losses (gains)
Write-down of investment securities
Liquidation loss of a subsidiary
Loss on disposal of fixed assets
Increase in trade receivables
Increase in inventories
Increase in other assets
Increase in trade payables
Increase in accrued expenses and other liabilities
Bonuses to directors
Interest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

See accompanying notes to financial statements.

24 2001 ANNUAL REPORT

Thousands of
U.S. Dollars

NOTES TO FINANCIAL STATEMENTS
FAST RETAILING CO., LTD.
Years ended August 31, 2001, 2000 and 1999

Note 1BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Basis of Presentation
The accompanying financial statements have been prepared from the accounts maintained by FASTRETAILING CO., LTD. (“the Company”), in accordance with the provisions set forth in the JapaneseCommercial Code and in conformity with accounting principles and practices generally accepted inJapan, which may differ in some material respects from accounting principles and practices generally
accepted in countries and jurisdictions other than Japan. In preparing the accompanying financial
statements, certain reclassifications have been made for the convenience of the readers outside Japan.
In addition, the notes to the financial statements include additional information that is not required
under the accounting principles generally accepted in Japan.
The accompanying financial statements include only the accounts of the Company. The accounts of
its subsidiaries are not consolidated, due to their insignificance. Investments in subsidiaries andaffiliates are stated at cost.

(b) Certain Significant Differences Between Generally Accepted Accounting Principles (GAAP)in Japan and the United States
Certain significant differences between the accounting principles and practices adopted by theCompany and those of the United States as of and for the year ended August 31, 2001, are summarized
as follows:
Millions of Yen
Thousands of U.S. Dollars
Shareholders’ Equity
Net Income Shareholders’ Equity
Net Income
Increase (Decrease)

Treasury stock
Net deferred unrealized gain
on forward exchange contracts¥ (3,647)–$ (30,583)–¥ 9,556–$ 80,134–

Notes: 1. Under U.S. GAAP, treasury stock acquired for purposes other than retirement may be shown separately as a
reduction from shareholders’ equity.
2. Under U.S. GAAP, changes in fair value of the derivative instruments designated as cash flow hedges arereported as accumulated other comprehensive income, a component of shareholders’ equity.

(c) Cash and Cash Equivalents
Effective September 1, 2000, the Company adopted “Statement of Cash Flows” issued by the BusinessAccounting Deliberation Council. For the purpose of cash flows, the Company considers all highly
liquid investments with insignificant risk of changes in value, with maturities of generally threemonths or less when purchased, to be cash equivalent.

(d) Marketable Securities and Investment in Securities
Effective September 1, 2000, the Company adopted “Accounting Standard for Financial Instruments”
issued by the Business Accounting Deliberation Council. Under this standard, securities are to beclassified into one of the following three categories and accounted for as follows:• Securities that are generally used with the objective of generating profits on short-term differences inprice are classified as trading securities and measured at fair value, with unrealized holding gains andlosses included in earnings.
• Securities that the Company has positive intent and ability to hold to maturity are classified as heldto-maturity securities and measured at amortized cost.

2001 ANNUAL REPORT 25

• Securities classified as neither trading securities nor held-to-maturity securities are classified as othersecurities and measured at fair value. Unrealized holding gains and losses are excluded from earnings
and reported on a net basis as a separate component of shareholders’ equity until realized.
At the beginning of the year, the Company reviewed the classification of all securities and classified
all securities as other securities. Other securities with fair value are principally carried at fair value
with unrealized holding gains and losses excluded from earnings and reported on a net basis as aseparate component of shareholders’ equity until realized. Other securities without fair value arecarried at cost. In computing realized gains or losses, cost of other securities was principally
determined by the moving average method.
Previously, marketable securities were stated principally at the lower of cost or market, cost
determined by the moving average method. Investments in other than marketable securities were statedat cost.
The following is a summary of book value, market value and net unrealized holding gains of
securities as of August 31, 2000:
Millions of Yen

2000
Marketable securities
Investments in securities

Book Value

Market ValueNet Unrealized
Holding Gains¥46,23862¥46,300¥46,23882¥46,320

¥ –
20
¥20

(e) Inventories
Inventories are stated at cost. Cost is determined by the specific identification method.

(f) Property and Equipment
Property and equipment is stated at cost. Depreciation is computed by the declining-balance method
over the estimated useful lives of the respective assets.

(g) Leases
Under Japanese accounting standards “Accounting for Leases,” finance lease that transfers ownershipof the property to the lessee by the end of the lease term shall be classified as capital lease andrecorded as an asset and an obligation. Other finance lease may be classified as operating lease. The
Company classifies all other finance lease as operating lease, and lease expense is charged to expenses
over the lease term as it becomes payable.

(h) Pension Plan
Effective September 1, 2000, the Company adopted “Accounting Standard for Retirement Benefits”
issued by Business Accounting Deliberation Council. In accordance with this standard, pension
benefits for employees are provided based on the estimated benefit obligation and the pension assets.
Previously, under an unfunded defined benefit pension plan, accrued pension benefits were recorded
for the estimated accrued liability to which employees were entitled if they were to retire or sever
employment immediately at the balance sheet date. Annual contributions are charged to income under
the funded defined pension plan.
As a result of the application of this standard, operating income and income before income taxes
decreased by ¥48 million ($403 thousand) and ¥106 million ($889 thousand), respectively.
The transition difference of ¥58 million ($486 thousand) arising from the adoption of the new
accounting standard is charged to expenses in the year ended August 31, 2001, and the amortization
cost is included in “Other income (expenses)–Other, net.”(i) Foreign Currency Translation
Effective September 1, 2000, the company adopted the revised “Accounting Standard for Foreign
Currency Translation” issued by the Business Accounting Deliberation Council. Under this standard,
foreign currency transactions are translated into yen using the rates in effect at the transaction date. At
year-end, monetary assets and liabilities denominated in foreign currencies are translated into yen at

26 2001 ANNUAL REPORTthe rates of exchange in effect at the balance sheet date. Gains or losses resulting from the translation,
including gains and losses on settlement, are credited or charged to income as incurred.
Previously, foreign currency transactions were translated into yen on the basis of the rate in effect at
the transaction date. At year-end, current monetary assets and liabilities denominated in foreign
currencies were translated into yen at the rates of exchange in effect at the balance sheet date, andother monetary assets and liabilities denominated in foreign currencies were translated into yen at
historical rates with material unrealized translation losses on other monetary assets and liabilities
calculated using the rates of exchange in effect at the balance sheet date. As a result of the applicationof this standard, there was no effect on net income for the year ended August 31, 2001.

(j) Derivative Financial Instruments
Effective September 1, 2000, the Company adopted “Accounting Standards for Financial Instruments”
issued by the Business Accounting Deliberation Council. Under this standard, in principle, net assets
and liabilities arising from derivative financial transactions are measured at fair value, with unrealized
gain or loss included in earnings. Hedging transactions that meet the criteria of hedge accounting as
regulated under this standard are accounted for using deferral hedge accounting, which requires theunrealized gains or losses to be deferred as a liability or asset until such gains or losses relating to thehedge are recognized.
Previously, forward exchange contracts were accounted for as foreign currency transactions. Suchcontracts were translated at contract rates, and interest rate swap transactions were accounted for as ifinterest rates under the interest rate swap transactions were originally applied to underlying borrowings and debentures. As a result of the application of this standard, there was no effect on net income
for the year ended August 31, 2001.

(k) Income Taxes
Effective September 1, 1998, the Company adopted “Accounting Standards for Deferred Income Taxes”
issued by the Business Accounting Deliberation Council. This standard requires that deferred income
taxes be accounted for under the asset and liability method. Under this method, deferred tax assets andliabilities are recognized for the expected future tax consequences attributable to differences between
the financial statement carrying amount of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which temporary differences are expected to be recovered or settled. Previously,deferred tax assets and liabilities arising from temporary differences were not recognized.
The cumulative effect of the change in accounting principle for adopting deferred income taxes was¥226 million at September 1, 1998.

(l) Net Income per Share
Net income per share is based on the weighted average number of shares of common stock outstanding
during the respective years. On a diluted basis, both net income and shares outstanding are adjusted toassume the exercise of warrants.

(m)Reclassification
Certain reclassifications have been made to the prior year financial statements to conform with the2001 presentation.

Note 2BASIS OF FINANCIAL STATEMENT TRANSLATION
The accompanying financial statements are expressed in yen and, solely for the convenience of thereader, have been translated into United States dollars at the rate of ¥119.25 to U.S.$1, theapproximate exchange rate prevailing on the Tokyo Foreign Exchange Market as of August 31, 2001.
This translation should not be construed as a representation that any amounts could be converted into
U.S. dollars.

2001 ANNUAL REPORT 27

Note 3

CASH AND CASH EQUIVALENTS
Cash and cash equivalents as of August 31, 2001 and 2000, consist of the following:Thousands of
U.S. Dollars

Millions of Yen

CashMarketable securities

Note 4

2000¥53,432
46,238¥99,6702001¥ 46,035
111,344¥157,379

INVENTORIESInventories as of August 31, 2001 and 2000, are summarized as follows:

Thousands of
U.S. Dollars

Millions of Yen

Merchandise
Supplies

Note 52001$ 386,038
933,702$1,319,740

2000¥20,124522¥20,646

2001¥30,097319¥30,416

2001$252,386
2,675$255,061

BALANCES AND TRANSACTIONS WITH UNCONSOLIDATED SUBSIDIARIESDue from (to) unconsolidated subsidiaries as of August 31, 2001 and 2000, and transactions withunconsolidated subsidiaries for the years ended August 31, 2001, 2000 and 1999, are as follows:
Millions of Yen

2001
¥27
¥ 4

Due from unconsolidated subsidiaries
Due to unconsolidated subsidiaries

2000
¥1
¥4

Note 6

2001
¥ –
¥18

2000
¥93
¥19

2001
$226
$ 34
Thousands of
U.S. Dollars

Millions of Yen

Purchases
Rental fee income

Thousands of
U.S. Dollars

1999
¥96
¥19

2001
$ –
$151

STOCK OPTION PLAN
At the shareholders’ meeting held on November 26, 1999, it was approved that the Company may
purchase 50,600 shares of common stock within the period from November 26, 1999, to the closing of
the next ordinary shareholders’ meeting, with an aggregate purchase cost cap of ¥2,500 million for thestock option plan. Certain officers and certain other employees may be granted options to purchasecommon stock at an exercise price of lower of 102.5% of the average purchase cost or the market priceat the grant date. Those eligible can exercise 50% of the granted options from November 27, 2001, toNovember 26, 2002, and can exercise 100% from November 27, 2002, to August 31, 2004. In
accordance with the shareholders’ approval, the Company purchased 50,300 shares for ¥1,734 million
in 2000.
At the shareholders’ meeting held on November 28, 2000, it was approved that the Company may
purchase 88,500 shares of common stock within the period from November 28, 2000, to the closing of
the next ordinary shareholders’ meeting, with an aggregate purchase cost cap of ¥4,000 million($33,543 thousand) for the stock option plan. Certain officers and certain other employees may be
granted options to purchase the common stock at an exercise price of lower of 102.5% of the averagepurchase cost or the market price at the grant date. Those eligible can exercise 100% of the granted
option from November 29, 2002, to August 31, 2005. In accordance with the shareholders’ approval,
the Company purchased 88,200 shares for ¥2,169 million ($18,189 thousand) in 2001.

28 2001 ANNUAL REPORTNote 7

LONG-TERM DEBT
Long-term debt is summarized as follows:
Thousands of
U.S. Dollars

Millions of Yen

Unsecured loans from Japanese banks at
1.88% to 1.95% interest, due 2003

2001

2000

2001

¥7,000¥10,000$58,700

The aggregate annual maturity of long-term debt after August 31, 2002, is as follows:

Note 8Year ending August 31

Millions of Yen

Thousands of
U.S. Dollars

2003¥7,000$58,700

PENSION PLAN
The Company has a noncontributory defined benefit pension plan (tax qualified pension plan) to
provide retirement and severance benefits to substantially all employees.
The funding status of the plan as of August 31, 2001, is summarized as follows:

Projected benefit obligation
Plan assets
Accrued pension liability

Millions of Yen

Thousands of
U.S. Dollars

2001
¥488
382
¥106

2001
$4,092
3,203$ 889

Net periodic pension cost for the year ended August 31, 2001, consists of the following:

Service cost
Interest cost
Expected return on plan assets
Amortization of transition obligation
Amortization of actuarial loss
Net periodic pension cost

Millions of Yen

Thousands of
U.S. Dollars

2001

2001

¥ 98
11
(6)
58
35
¥196

$ 822
92
(50)
486
294
$1,644The entire transition difference of ¥58 million arising from the adoption of the new accounting
standard is amortized in the year ended August 31, 2001, and amortized cost was included in “Other
income (expenses)–Other, net.”
Actuarial assumptions used to determine cost and benefit obligation for the pension plan are
as follows:
2001
Discount rate
3.0%
Expected rate of return on plan assets
2.0%

2001 ANNUAL REPORT 29

Note 9INCOME TAXESThe Company is subject to a number of taxes based on income, which in the aggregate resulted in anormal income tax rate of approximately 41.8% for the years ended August 31, 2001 and 2000.
Reconciliation between the normal income tax rate and effective income tax rate for the years ended
August 31, 2001 and 2000, are as follows:
2001
41.80%
0.20
0.27
42.27%

Normal income tax rate
Per capita tax
Other
Effective tax rate

2000
41.80%
0.33
0.36
42.49%Tax effects of temporary differences that give rise to a significant portion of the deferred tax assets asof August 31, 2001 and 2000, are as follows:
Thousands of
U.S. Dollars

Millions of Yen

Deferred tax assets:
Accrued business tax
Loss on sale of construction assistancefund receivables
Other
Total deferred tax assets

Note 10

2001

2000

2001

¥2,619¥2,035$21,96254
104¥2,77776359¥2,470453
872$23,287

SHARE CAPITALThe Company has authorized for issuance 200 million shares of common stock with a ¥50 ($0.42) parvalue as of August 31, 2001. Issued and outstanding shares, change in shares and share capital for theyears ended March 31, 2001, 2000 and 1999, are summarized as follows:

Balance as of September 1, 1998
Exercise of warrant
Balance as of August 31, 1999
Exercise of warrant
Balance as of August 31, 2000
Issued upon stock split
Balance as of August 31, 2001

Issued and Outstanding Shares

Share Capital (Millions of Yen)

26,229,924
231,081
26,461,005
57,40926,518,414
26,518,414
53,036,828¥2,774
400
3,174
100
3,274
–
¥3,274

Under the Japanese Commercial Code, the Company may issue, through stock split without
consideration, new shares to existing shareholders pursuant to resolution of the board of directors. The
Company allows such a stock split to the extent that the aggregate par value of the shares outstanding
after the stock split does not exceed the stated capital. However, the amount calculated by dividing thetotal amount of shareholders’ equity by the number of outstanding shares after the stock split cannot beless than ¥500.

30 2001 ANNUAL REPORTNote 11LEGAL RESERVEThe Japanese Commercial Code provides that an amount equal to at least 10% of appropriations paidin cash, such as cash dividends and directors’ bonuses, shall be appropriated as legal reserve until suchreserve equals 25% of stated common stock. This reserve is not available for dividends, but may be
used to reduce a deficit by approval at the annual shareholders’ meeting or may be transferred to statedcommon stock by resolution of the Board of Directors.
Cash dividends, directors’ bonuses and appropriations to the legal reserve charged to retained
earnings during the years ended August 31, 2001, 2000 and 1999, represent dividends and bonuses
paid out during those years and the related appropriations to the legal reserve. The accompanying
financial statements do not include any provision for the semiannual dividends of ¥60 ($0.50) per
share totaling ¥3,171 million ($26,591 thousand), or directors’ bonuses of ¥649 million ($5,442
thousand), approved by the Board of Directors in respect of the year ended August 31, 2001.

Note 12COMMITMENTS AND CONTINGENCIESThe Company had the following contingent liabilities as of August 31, 2001:

Loan guarantees for:Unconsolidated subsidiaries and affiliates
Employees’ benefit society

Millions of Yen

Thousands of
U.S. Dollars

2001

2001

¥2,399¥5$20,117$42

Construction assistance fund receivables represent an interest free loan granted to real estate owners
to construct stores that will be leased by the Company. The Company transferred the construction
assistance fund receivables to a trust bank during 1999. This transfer contains a recourse provision that
the Company has an obligation to repurchase the transferred construction assistance fund receivables if
the landowner fails to repay. The total outstanding transferred construction assistance fund receivables
to the trust bank amounted to ¥2,253 million ($18,893 thousand) as of August 31, 2001.

Note 13LEASES
Lease payments relating to finance lease accounted for as operating lease for the years ended August
31, 2001, 2000 and 1999, amounted to ¥2,717 million ($22,784 thousand), ¥1,626 million and ¥1,416
million, respectively.
Future minimum lease payments relating to finance lease accounted for as operating lease as ofAugust 31, 2001, are as follows:Year ending August 31

Millions of Yen

Thousands of
U.S. Dollars

2002
Thereafter¥2,722¥7,138$22,826$59,857

2001 ANNUAL REPORT 31

Note 14DERIVATIVESThe Company utilizes forward exchange contracts to hedge certain foreign currency transactions
related to foreign currency purchase commitments. The purpose of the Company’s hedging activities
in the form of forward exchange contracts is to protect the Company from the related market risks.
The Company also utilizes interest rate swap agreements to minimize the impact of interest rate
movements related to its outstanding debt on the Company’s operating results. The purpose of interest
rate swap agreements is to effectively modify the characteristics of interest applied to the outstanding
debt.
Effective September 1, 2000, the Company adopted “Accounting Standards for Financial Instruments”
as discussed in Note 1(j).
As of August 31, 2000, the following forward exchange contracts were outstanding:Millions of Yen

2000
Purchased forward exchange contracts
denominated in U.S. dollars

Notional AmountMarket Value

Unrealized Gain

¥131,955¥135,127¥3,172As of August 31, 2000, the following interest rate swap contracts were outstanding:Millions of Yen

2000
Interest rate swap contracts:
Floating rate to fixed rate
Fixed rate to floating rate

Note 15

Notional AmountMarket Value

Unrealized Gain (Loss)¥3,000¥3,000

¥59
¥(2)

¥59
¥(2)

SUBSEQUENT EVENTAt the shareholders’ meeting held on November 29, 2001, a stock option plan was approved. Under
this plan, certain directors and certain employees may be granted option to purchase common stock of
106,100 shares in total at an exercise price of higher of 102.5% of the market price at the date of grantor the average market price of the preceding month. Those eligible can exercise the option when themarket price exceeds 150% of the exercise price for at least 20 business days within the term of
exercise, which is from November 30, 2003, to August 31, 2006.

32 2001 ANNUAL REPORTINDEPENDENT AUDITORS’ REPORTThe Board of Directors and Shareholders
FAST RETAILING CO., LTD.
We have audited the balance sheets of FAST RETAILING CO., LTD., as of August 31, 2001 and 2000,
and the related statements of income and shareholders’ equity for each of the three years in the period
ended August 31, 2001, and the statements of cash flows for each of the two years in the period ended
August 31, 2001, all expressed in Japanese yen. Our audits were made in accordance with auditing
standards, procedures and practices generally accepted and applied in Japan and, accordingly, included
such tests of the accounting records and such other auditing procedures as we considered necessary inthe circumstances.
In our opinion, the accompanying financial statements, expressed in yen, present fairly the financial
position of FAST RETAILING CO., LTD., as of August 31, 2001 and 2000, and the results of its
operations for each of the three years in the period ended August 31, 2001, and the cash flows for eachof the two years in the period ended August 31, 2001, in accordance with accounting principles
generally accepted in Japan applied on a consistent basis.
As described in Note 1 to the accompanying financial statements, FAST RETAILING CO., LTD., has
adopted new accounting standards for retirement benefits, financial instruments and foreign currencytranslation in the preparation of its financial statements for the year ended August 31, 2001.
The U.S. dollar amounts in the accompanying financial statements with respect to the year ended
August 31, 2001, are presented solely for the convenience of the reader. Our audit also included thetranslation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been madeon the basis described in Note 2 to the financial statements.

Shin Nihon & Co.
Tokyo, Japan
November 29, 2001

2001 ANNUAL REPORT 33

STORE NETWORK

Direct-run stores: 507
Franchise stores: 12
Total: 519

519 (12)(As of August 31, 2001)

433 (12)

Hokkaido

368 (11)336 (11)276 (11)

Tohoku
1997

1998

1999

2000

2001

( ) = Franchise stores

Kanto
Chubu
ChugokuKansai

Hokkaido

12

TohokuShikoku
Kyushu

26

Kanto

197

Chubu

79 (2)

Kansai98 (3)

Chugoku

Okinawa

Shikoku
Kyushu31 (7)
16
55

Okinawa 5( ) = Franchise stores

34 2001 ANNUAL REPORTCORPORATE HISTORY

March 1949
Men’s Shop Ogori Shoji founded as a private enterprise in Ube
City, Yamaguchi Prefecture.

February 1999
The Company’s stock listed on the First Section of the Tokyo
Stock Exchange.

May 1963
Ogori Shoji Co., Ltd., established, with capital of ¥6 million, as a
successor to the original business.

April 1999
Shanghai Office established to further enhance production
management operations.

June 1984
The first UNIQLO store, specializing in casual clothing, opened
in Hiroshima City (UNIQLO Fukuromachi store; closed inAugust 1991).

September 1999
Guangzhou Office established.

September 1991
The Company’s name changed from Ogori Shoji to FASTRETAILING, a name which succinctly expresses its business philosophy.
March 1994
To maximize efficiency, central management functions, previously dispersed, transferred to the Company’s newly constructed
Head Office in Ube City, Yamaguchi Prefecture.
April 1994
The Company’s sales network grew to 109 direct-run stores andseven franchise stores.
July 1994
The Company’s stock listed on the Hiroshima Stock Exchange(the Exchange was abolished in 2000).
February 1996
FAST RETAILING entered into a joint venture with Nichimen
Corp., and local capital in Shandong Province, China. FASTRETAILING took a 28.75% equity interest in the venture, withthe aim of securing a reliable supply of products.
March 1996
The Company’s sales network grew to 205 direct-run stores and
10 franchise stores.
November 1996
Tokyo Office opened in Shibuya, Tokyo, to reinforce the Company’s
in-house product planning and development capabilities.
April 1997
The Company’s stock listed on the Second Section of the Tokyo
Stock Exchange.
November 1997
The Company’s sales network grew to 309 direct-run stores and
11 franchise stores.
February 1998
Head Office newly constructed in Yamaguchi City, Yamaguchi
Prefecture, to further enhance central management functions andoperational efficiency.
To strengthen in-house merchandise development, Osaka
Office and Tokyo Office closed and integrated into a single office
set up in Shibuya.

September 1999
Trial-run of catalog sales conducted to explore the developmentof new sales avenues.
January 2000
Decision made to team up with Simree Co., Ltd., to shorten theimplementation period of full-fledged catalog sales.
(Collaboration took effect from June 2000.)
April 2000
The Company’s sales network increased to 417 direct-run storesand 12 franchise stores.
April 2000
To promote merchandising and marketing and to carry out operations more efficiently, new Tokyo Office established in the West
Wing of Mark City, a shopping and office complex in Shibuya,
integrating merchandising functions from the Yamaguchi
prefecture Head Office and the Tokyo Design Office.
June 2000
Established FAST RETAILING (U.K.) LTD.
June 2000
Prepared to set up shops in train stations, through a tie-up with
East Japan Railway Co. and its related KIOSK stores.
October 2000
Internet online sales business launched to foster new sales
channels and improve customer convenience.
November 2000
UNIQLO stores in Shibuya-Jinnan and Osaka-Umeda opened as
the flagship stores of east and west Japan, respectively.
April 2001
Joined with the Japanese Olympic Committee in an official
sponsorship.
The Company’s sales network increased to 507 direct-run storesand 12 franchise stores.
August 2001
Established FAST RETAILING (JIANGSU) APPAREL CO.,LTD., a 71.43% equity subsidiary, as the cornerstone of futurebusiness development in China.
September 2001
Opened four stores in the United Kingdom, in Knightsbridge,
Wimbledon, Uxbridge and Romford.

November 1998
The first downtown store opened in the fashionable Harajuku
district of Tokyo.

2001 ANNUAL REPORT 35

INVESTOR INFORMATION
August 31, 2001

Stock Information
Number of shares authorized:
Number of issued and outstanding shares:
Number of shareholders:

200,000,000
53,036,828
7,587*A stock split on a two-for-one basis was carried out on October 20, 2000, for shareholders as of August 31, 2000.

Principal Shareholders

Number of
SharesPercentage ofTotal Shares in Issue

Tadashi Yanai
Kazumi Yanai
Koji Yanai
Japan Trustee Services Bank, Ltd. (Trust Account)
The Mitsubishi Trust & Banking Corp. (Trust Account)
Teruyo Yanai
The Dai-ichi Mutual Life Insurance Co. (Special Account)
The Toyo Trust & Banking Co., Ltd. (Trust Account)
The Chase Manhattan Bank, N.A. London
Morgan Stanley and Co., Inc.

14,148,642
4,765,904
4,195,300
2,322,800
1,609,200
1,163,924
770,100
726,700
701,265
683,100

26.68
8.99
7.91
4.38
3.03
2.19
1.45
1.37
1.32
1.29

Shareholder Breakdown

Number of
Shareholders

Number of Shares(Thousands)

Percentage ofTotal Shares in Issue

Individuals and others
Foreign investors
Other financial institutions
Companies and corporations
Securities companies

6,806
473
136
120
52

26,412
13,687
12,383
289
264

49.79
25.81
23.35
0.55
0.50

Total

7,587

53,036100.00Stock Price (Yen)
32,20032,00029,70027,45027,30026,00025,84023,40022,09022,50017,61017,00017,1002001. 1

2

3

4

3,579

3,488

24,00023,78019,65020,010

5

6

7

3,159

3,275

3,143

5

6

7

19,00016,55022,95022,71021,65021,50020,00023,70027,95014,000014,0502000. 9

10

11

12

8

Trading Volume Shares (Thousands)
4,900

5,000

4,607
4,229

4,000

4,002

3,455

3,254

3,257

3,000
2,000
1,000
0
2000. 910

36 2001 ANNUAL REPORT

11

12

2001. 1

2

3

4

8

CORPORATE DATA
August 31, 2001

Corporate Information
Name: FAST RETAILING CO., LTD.
Head Office: 717-1 Oaza Sayama, Yamaguchi City, Yamaguchi 754-0894, Japan
Established: May 1, 1963
Paid-in capital: ·3,274 million
Line of business: Retail chain operator specializing in in-house designed casual clothing
for men and women of all ages. Operates stores under the name of UNIQLO.
Regular employees: 1,598
Settlement date: August 31
Annual shareholders meeting: End of November
Transfer agent: The Mitsubishi Trust & Banking Corp.,
2-11-1 Nagata-cho, Chiyoda-ku, Tokyo 100-8212, Japan
Number of shares per trading unit: 100

Board of Directors and Auditors
Tadashi Yanai, President & Chief Executive Officer
Takashi Sawada, Executive Vice President & Chief Operating Officer
Yuji Horibata, Senior Managing Director
Nobuo Domae, Managing Director & Chief Information Officer
Masatoshi Morita, Managing Director & Chief Financial Officer
Genichi Tamatsuka, Managing Director
Shuichi Nakajima, Director
Toshiharu Ura, Standing Corporate Auditor
Kiyomi Iwamura, Standing Corporate Auditor
Takaharu Yasumoto, Corporate Auditor
Soroku Matsumoto, Corporate Auditor

From left to right
Top: Nobuo Domae, Shuichi Nakajima, Genichi Tamatsuka, Masatoshi Morita
Bottom: Takashi Sawada, Tadashi Yanai, Yuji Horibata

2001 ANNUAL REPORT 37