FAST RETAILING CO., LTD.
迅銷有限公司

Year-end Report 2017/18
2017.9.1–2018.8.31
Stock Code: 6288

Contents
1.

Corporate Information

2

2.

Financial Highlights

33.

Corporate Profile

6

4.

Management Discussion and Analysis

14

5.

Capital Expenditures

25

6.

Stock Information and Dividend Policy

28

7.

Board of Directors

44

8.

Corporate Governance Report50

9.

Financial Information

60

1.

2.

Consolidated Financial Statements(1)

Consolidated statement of financial position

62

(2)

Consolidated statement of profit or loss andConsolidated statement of comprehensive income

63

(3)

Consolidated statement of changes in equity

65

(4)

Consolidated statement of cash flows

67

(5)

Notes to the consolidated financial statements

69

(6)

Others120

Non-consolidated Financial Statements(1)

Balance sheet

121

(2)

Statement of income

123

(3)

Statement of changes in net assets

124

(4)

Notes

126

(5)

Supplementary information

130

(6)

Main details of assets and liabilities

131

(7)

Others131

Independent Auditor’s Report (the Group)132

Independent Auditor’s Report (the Company)

138

Internal Control Report

140

Confirmation Note141

1. Corporate Information
Board of Directors
Executive Director

Akasaka, Minato-ku,
Tokyo 107-6231
Japan

Tadashi Yanai (Chairman of the Board of Directors,
President, and Chief Executive Officer)

Principal Place of Business in Hong Kong
Directors

702–706, 7th Floor, Mira Place Tower A
No. 132 Nathan Road
Tsim Sha Tsui
KowloonHong Kong

Toru Hambayashi (External)
Nobumichi Hattori (External)
Masaaki Shintaku (External)
Takashi Nawa (External)
Naotake Ohno (External)
Takeshi Okazaki
Kazumi Yanai
Koji Yanai

HDR Registrar and HDR Transfer OfficeComputershare Hong Kong Investor Services Limited
Shops 1712–1716, 17th Floor
Hopewell Centre
183 Queen’s Road East
WanchaiHong Kong

Board of Statutory Auditors
Akira Tanaka
Masaaki Shinjo
Takaharu Yasumoto (External)
Keiko Kaneko (External)
Takao Kashitani (External)

Stock CodeHong Kong: 6288
Japan: 9983

Joint Company Secretaries

Website Address

Japan: Mitsuru Ohki
Hong Kong: Choy Yee Man

http://www.fastretailing.com

Independent Auditor
Deloitte Touche Tohmatsu LLC

Principal Banks
Sumitomo Mitsui Banking Corporation;
The Bank of Tokyo-Mitsubishi UFJ, Ltd.;
Mizuho Bank, Ltd., and;The Hong Kong and Shanghai Banking Corporation Limited

Registered Office and Headquarters
717-1 Sayama, Yamaguchi City, Yamaguchi 754-0894
Japan

Principal Place of Business in Japan
Midtown Tower 9-7-1,—2—

2. Financial Highlights(1) Consolidated Financial Summary
Term
Accounting Period
Revenue (Millions of yen)International Financial Reporting Standards (“IFRS”)
53rd Year54th Year

55th Year

56th Year

57th Year

Year ended
Year ended
Year ended
Year ended
Year ended
31 August 2014 31 August 2015 31 August 2016 31 August 2017 31 August 2018
1,382,935

1,681,781

1,786,473

1,861,917

2,130,060

Operating profit (Millions of yen)

130,402

164,463

127,292

176,414236,212

Profit before income taxes (Millions of yen)

135,470

180,676

90,237

193,398

242,678

Profit attributable to owners of the parent(Millions of yen)

74,546

110,027

48,052

119,280

154,811Comprehensive income attributable toowners of the parent (Millions of yen)

75,517

163,871(141,345)

190,566

165,378

Equity attributable to ownersof the parent (Millions of yen)

618,381750,937

574,501

731,770

862,936

Total assets (Millions of yen)992,307

1,163,706

1,238,119

1,388,486

1,953,466

Equity per share attributable to ownersof the parent (Yen)6,067.40

7,366.07

5,634.35

7,175.35

8,458.52

Basic earnings per share for the year (Yen)

731.51

1,079.42

471.31

1,169.70

1,517.71

Diluted earnings per share for the year
(Yen)

730.81

1,078.08

470.691,168.00

1,515.23

Ratio of equity attributable to owners of
the parent to total assets (%)

62.3

64.5

46.4

52.7

44.2

Ratio of profit to equity attributable toowners of the parent (%)

12.5

16.1

7.3

18.3

19.4

Price earnings ratio (times)

44.5

45.6

77.1

26.9

34.1

Net cash generated by operating activities(Millions of yen)

110,595

134,93198,755

212,168

176,403

Net cash generated by/(used in)investing activities (Millions of yen)

(56,323)(73,145)(245,939)

122,790(57,180)

Net cash generated by/(used in) financing
activities (Millions of yen)

(44,060)(41,784)

201,428(50,836)

198,217

Cash and cash equivalents at endof year (Millions of yen)

314,049355,212385,431

683,802

999,697

Number of employees:(Separate, average number of
temporary employees) (Persons)

30,448(25,705)

41,646(27,219)

43,639(26,282)

44,424(31,719)

52,839(71,840)(Notes)

1. Revenue does not include consumption taxes, etc.
2. The Group started to prepare the consolidated financial statements in accordance with IFRS for the year ended 31
August 2014.
3. The number of junior employees and part-time workers is stated as a separate number in parentheses as theaverage number of people per year was calculated based on an eight-hour workday per person until the 56th year.
The number for the 57th year is the registered number at the end of the reporting period.

—3—Generally accepted
accounting principles
in Japan (“JGAAP”)

Term

53rd Year
Accounting period
Net sales (Millions of yen)

Year ended
31 August 2014
1,382,907

Ordinary income (Millions of yen)

156,828

Net income (Millions of yen)

78,118Comprehensive income (Millions of yen)

82,066

Total net assets (Millions of yen)

626,581

Total assets (Millions of yen)

977,609

Equity per share (Yen)

5,958.54

Basic net income per share (Yen)

766.55

Diluted net income per share (Yen)765.82Equity ratio (%)

62.1

Earnings on equity (%)

13.4

Price earnings ratio (times)

42.5

Net cash generated by operating activities (Millions of yen)

111,399

Net cash used in investing activities (Millions of yen)

(63,574)

Net cash used in financing activities (Millions of yen)

(38,014)

Cash and cash equivalents at the end of year (Millions of yen)

313,746

Number of employees:(Separate, average number of temporary employees) (Persons)

30,448(25,705)(Notes)1. Net sales do not include consumption taxes, etc.
2. The financial figures for the 53rd year prepared in accordance with JGAAP were not audited pursuant to Article
193-2-1 of the Financial Instruments and Exchange Act.

—4—

(2) Non-Consolidated Financial Summary
Term
Accounting period
Operating revenue (Millions of yen)

53rd Year54th Year

55th Year

56th Year

57th Year

Year ended
Year ended
Year ended
Year ended
Year ended
31 August 2014 31 August 2015 31 August 2016 31 August 2017 31 August 2018
77,438

119,071

99,289139,871

193,044

Ordinary profit (Millions of yen)

46,921

89,245

9,270

115,488

139,660

Profit (Millions of yen)

23,33670,227

6,084

64,264

122,158

Capital stock (Millions of yen)

10,273

10,273

10,273

10,273

10,273106,073,656

106,073,656

106,073,656

106,073,656

106,073,656

Total net assets (Millions of yen)332,255

376,007345,773

377,103463,229

Total assets (Millions of yen)

385,113410,009

631,086

670,111

993,413Equity per share (Yen)3,243.97

3,662.28

3,355.83

3,654.97

4,489.50

Dividends per share(Figures in parentheses
indicate interim dividends) (Yen)

300.00(150.00)

350.00(175.00)

350.00(185.00)

350.00(175.00)

440.00(200.00)

Total number of shares issued (shares)

Basic net profit per share (Yen)

228.99688.9659.68

630.201,197.59

Diluted net profit per share (Yen)

228.77688.11

59.60

629.28

1,195.63

Equity ratio (%)

85.9

91.1

54.2

55.6

46.1

Earnings on equity (%)

7.0

20.0

1.7

18.0

29.4

Price earnings ratio (Times)

142.1

71.5

608.9

49.9

43.3

Dividend ratio (%)

131.0

50.8

586.5

55.5

36.7

Number of employees:(Separate, average number of
temporary employees) (Persons)

1,088
(114)

1,234
(119)

1,131
(126)

1,166
(140)

1,345
(267)

(Notes)

1. Operating revenue does not include consumption taxes, etc.
2. The number of junior employees and part-time workers is stated as a separate number in parentheses as theaverage number of people per year was calculated based on an eight-hour workday per person until the 56th year.
The number for the 57th year is the registered number at the end of the reporting period.

—5—

3. Corporate Profile
1.

History
In March 1949, Hitoshi Yanai, the father of our current Chairman, President, and CEO Tadashi Yanai, founded Men’s
Shop Ogori Shoji in Ube City, Yamaguchi Prefecture. To solidify the management foundation, the business later became
incorporated in May 1963 under the name Ogori Shoji Co., Ltd.
In June 1984, the Fukuromachi Store, a store specializing in casual clothing, opened its doors in Hiroshima City, Hiroshima
Prefecture as the first UNIQLO.
The Company’s history:
Date

Summary

May 1963

Tadashi Yanai takes over the family business and transforms it into Ogori Shoji Co., Ltd., capitalized at
6 million yen, with headquarters at 63-147 Ogushi Village, Ube City, Yamaguchi Prefecture (now 2-1212 Chuo-cho, Ube City, Yamaguchi Prefecture).

June 1984

UNIQLO’s first location, the Fukuromachi Store, opens in Hiroshima (closed in 1991), marking themove into casual wear retailing with stores named UNIQLO.

September 1991

Ogori Shoji Co., Ltd. changes its name to FAST RETAILING CO., LTD., to embody the its approach tobusiness.

April 1992

The main Ogori Shoji store, selling menswear, is converted to the UNIQLO Onda store (closed in 2001).
All the stores are completely renovated as casual clothing stores matching the UNIQLO brand.

April 1994

The number of UNIQLO stores in Japan rises above 100 (109 directly operated stores, 7 franchises).

July 1994

FAST RETAILING CO., LTD. lists its shares on the Hiroshima Stock Exchange.

April 1997

FAST RETAILING CO., LTD. lists its shares on the second section of the Tokyo Stock Exchange.

February 1998

Construction of the head office is finished (717-1 Sayama, Yamaguchi City, Yamaguchi Prefecture) to
expand the company’s headquarters capacity.

November 1998

The first urban UNIQLO store opens in Shibuya-ku, Tokyo (UNIQLO Harajuku store, closed in 2007).

February 1999

FAST RETAILING CO., LTD. lists its shares on the first section of the Tokyo Stock Exchange.

April 1999

UNIQLO Shanghai office opens to further enhance production management.

April 2000

Tokyo headquarters opens in Shibuya-ku, Tokyo.

October 2000

Online store launches to open a new sales channel and make shopping easier for customers.

September 2001

FAST RETAILING (U.K) LTD. opens first four UNIQLO stores in London.

September 2002

Fast Retailing (Jiangsu) Apparel Co., Ltd. opens first two UNIQLO China stores in Shanghai.

January 2004

FAST RETAILING CO., LTD. invests in LINK HOLDINGS CO., LTD. (now LINK THEORY JAPAN CO., LTD.),the developer of Theory brand business apparel.

August 2004

Capital reserves of ¥7 billion integrated into capital, increasing total capital to ¥10.273 billion.

November 2004

Establishment of UNIQLO USA, Inc.

December 2004

Establishment of FRL Korea Co., Ltd., a business venture with South Korea’s Lotte Shopping Co., Ltd.

March 2005

Establishment of UNIQLO HONG KONG, LIMITED.

April 2005

Establishment of FR FRANCE S.A.S. (now FAST RETAILING FRANCE S.A.S.) and GLOBAL RETAILINGFRANCE S.A.S. (now UNIQLO EUROPE LIMITED).

May 2005

Acquires management control of Nelson Finance S.A.S. (now CRÉATIONS NELSON S.A.S.), thedeveloper of the Comptoir des Cotonniers brand, and makes it a subsidiary.

November 2005

Adopts a holding company structure to reinforce the UNIQLO brand and develop new business
opportunities.

February 2006

Makes equity investment in, and makes a subsidiary of, PETIT VEHICULE S.A.S. (now PRINCESSE TAM.
TAM S.A.S.), developer of PRINCESSE TAM.TAM, a well-known brand of lingerie in France.

March 2006

Establishes G.U. CO., LTD. to manage a new brand of less expensive casual clothing to follow UNIQLO.

—6—

Date

Summary

November 2006UNIQLO Soho New York Store opens as the brand’s first global flagship store, with over 3,300 square
meters of floor space.

March 2007

UNIQLO opens the Kobe Harborland Store (closed in 2012), the first large-format store in Japan, withover 3,300 square meters of floor space.

November 2007

UNIQLO 311 Oxford Street Store opens in London as the brand’s first global flagship store in Europe.

December 2007

First UNIQLO France store opens in the Paris suburbs La Defense.

August 2008

UNIQLO establishes a business venture with Wing Tai Retail Pte. Ltd. to expand in Singapore.

March 2009LINK THEORY HOLDINGS CO., LTD. (now LINK THEORY JAPAN CO., LTD.) becomes a subsidiary througha takeover bid.

March 2009UNIQLO signs a design consulting contract for its products with world-renowned fashion designer Jil
Sander.

April 2009First UNIQLO Singapore store opens in the Tampines 1 Mall.

October 2009UNIQLO Paris Opera Store opens in France as a global flagship store.

March 2010

UNIQLO establishes a wholly owned subsidiary in Taiwan.

April 2010

First UNIQLO Russia store, UNIQLO Atrium, opens in Moscow.

May 2010

UNIQLO Shanghai West Nanjing Road Store opens in China as a global flagship store.

October 2010

UNIQLO Shinsaibashi Store in Osaka opens as the first UNIQLO global flagship store in Japan.

October 2010

First GU flagship store opens in Shinsaibashi, Osaka.

October 2010

First UNIQLO Taiwan store opens in Taipei.

November 2010

First UNIQLO Malaysia store opens in Kuala Lumpur.

February 2011

FAST RETAILING CO., LTD. launches a global partnership agreement with the United Nations HighCommissioner for Refugees (UNHCR) to further reinforce ongoing company initiatives such as the AllProduct Recycling Initiative.

September 2011

First UNIQLO Thailand store opens in Bangkok.

September 2011UNIQLO Mingyao Department Store opens in Taipei, Taiwan as a global flagship store.

October 2011UNIQLO Fifth Avenue Store opens in New York as a global flagship store.

November 2011UNIQLO Myeongdong Central Store opens in Seoul, Korea as a global flagship store.

March 2012UNIQLO Ginza Store opens in Tokyo as a global flagship store.

June 2012

First UNIQLO Philippines store opens in Manila.

September 2012

BICQLO Shinjuku East Exit Store opens in Tokyo as a global hotspot store.

October 2012

First UNIQLO store on the West Coast of the United States opens in San Francisco, Union Square.

December 2012

FAST RETAILING acquires a majority interest in U.S. J Brand Holdings, LLC based in Los Angeles,
California.

April 2013

UNIQLO Lee Theatre opens in Hong Kong as a global flagship store.

June 2013

UNIQLO Lotte Shopping Avenue Store opens as the first UNIQLO Store in the Republic of Indonesia.

September 2013

UNIQLO global flagship store opens in Shanghai.

September 2013

First GU overseas store opens in Shanghai.

March 2014

HDRs (Hong Kong Depository Receipts) listed on the Main Board of The Stock Exchange of Hong Kong
Limited.

March 2014

UNIQLO global hotspot store opens in Ikebukuro, Sunshine 60.

April 2014

First UNIQLO Australia store opens in Melbourne.

April 2014

First UNIQLO Germany store opens in Berlin, Tauenzienstrasse as a global flagship store.

April 2014

UNIQLO global hotspot store opens in Tokyo, Okachimachi district.

October 2014

UNIQLO global hotspot store opens in Tokyo, Kichijoji.

October 2014

UNIQLO global flagship store, UNIQLO OSAKA, opens.

—7—

Date

Summary

October 2015

First UNIQLO Belgium store opens in Antwerp.

October 2015

UNIQLO USA opens its first Midwest store, the UNIQLO Michigan Avenue Store in Chicago.

December 2015

Fast Retailing issues ¥250 billion in unsecured straight bonds.

March 2016

The newly refurbished 311 Oxford Street global flagship store opens in London.

April 2016

Construction completed on state-of-the-art distribution center in Ariake, Tokyo.

September 2016

UNIQLO Orchard Road Store opens as the first UNIQLO global flagship store in Southeast Asia.

September 2016

First UNIQLO Canada store opens in Toronto.

February 2017

UNIQLO CITY TOKYO Ariake Office opens. UNIQLO product and commercial functions moved from
Roppongi Office to Ariake Office.

March 2017

Bigger and better UNIQLO Online Store opens in Japan.

September 2017
August 2018
September 2018

First UNIQLO Spain store opens in Barcelona
Sweden’s first UNIQLO store opens in Stockholm
The Netherlands’ first UNIQLO store opens in Amsterdam

—8—

2.

Our Business
The Group consists of FAST RETAILING CO., LTD. (the “Company” or “Parent”), 130 consolidated subsidiaries, and 4
associates accounted for using the equity method.
Details of the Group’s businesses as well as the positioning of the Company and its main associates relative to thebusinesses are as follows.
The segment categories in this section of the report are the same as the segment categories in the section headed“9. FINANCIAL INFORMATION (6) Notes to the consolidated financial statements.”

Category

Company name

Reportable Segment

Holding company

FAST RETAILING CO., LTD.

OthersUNIQLO CO., LTD.

UNIQLO Japan

FAST RETAILING (CHINA) TRADING CO., LTD.*UNIQLO International

UNIQLO TRADING CO., LTD.*UNIQLO International

FAST RETAILING (SHANGHAI) TRADING CO., LTD.*UNIQLO International

FRL Korea Co., Ltd.

UNIQLO International/
GU

FAST RETAILING (SINGAPORE) PTE. LTD.

OthersUNIQLO (THAILAND) COMPANY LIMITEDUNIQLO International

PT. FAST RETAILING INDONESIAUNIQLO International

UNIQLO AUSTRALIA PTY LTD

UNIQLO International

Fast Retailing USA, Inc.

OthersUNIQLO EUROPE LIMITEDUNIQLO International

G.U. CO., LTD.

GU

FAST RETAILING FRANCE S.A.S.

Others

Theory LLC

Global Brands

COMPTOIR DES COTONNIERS S.A.S.

Global Brands

PRINCESSE TAM.TAM S.A.S.

Global Brands

J Brand, Inc.

Global Brands

Other consolidated subsidiaries (113 companies)

UNIQLO International/
GU/Global Brands/
Others

Associates accounted for using the equity-method(4 companies)

OthersMain consolidated subsidiaries

Associates accounted for using theequity method*

The English names of all subsidiaries established in the People’s Republic of China (“PRC”) are translated for identification
only.

(Notes)

1.
2.
3.
4.
5.

“UNIQLO” business means the retail business of UNIQLO brand casual apparel in Japan and overseas.
“GU” business means the retail business of GU brand casual apparel in Japan and overseas.
“Global Brands” business means the planning, retail, and manufacturing of apparel in Japan and overseas.
“Others” includes real estate leasing businesses.
The Company corresponds to a specified listed company, etc. as stipulated in Article 49-2 of the Cabinet Office
Ordinance on Restrictions on Securities Transactions. As a result, assessment of the minimal standard for material
facts under the insider trading regulations is based on the consolidated numerical data.

—9—

The organizational structure is as follows:Business Structure

UNIQLOJapan

UNIQLO
BusinessFAST
RETAILING
CO., LTD.
(holding
company)Group
Management
Operation

UNIQLOInternational

UNIQLO CO., LTD.

FAST RETAILING (CHINA) TRADING CO., LTD.*UNIQLO TRADING CO., LTD.*
FAST RETAILING (SHANGHAI) TRADING CO., LTD.*FRL Korea Co., Ltd.
UNIQLO (THAILAND) COMPANY LIMITED
PT. FAST RETAILING INDONESIAUNIQLO AUSTRALIA PTY LTD
UNIQLO EUROPE LIMITED
OthersGroup
Management
Operation
Customers

GU
Business

G.U. CO., LTD
OthersGlobal Brands
Business

Theory LLCCOMPTOIR DES COTONNIERS S.A.S.
PRINCESSE TAM.TAM S.A.S.
J Brand, Inc.
OthersOther
Businesses

FAST RETAILING (SINGAPORE) PTE. LTD.
FAST RETAILING FRANCE S.A.S.
Fast Retailing USA, Inc.
Others* The English names of all subsidiaries established in PRC are translated for identification only.

— 10 —

3.

Subsidiaries and Associates

Name

Location(Consolidated subsidiaries) UNIQLO CO., LTD.

Yamaguchi City,
Yamaguchi Prefecture

FAST RETAILING (CHINA) TRADING CO., LTD.*

Shanghai, PRC

UNIQLO TRADING CO., LTD.*
FAST RETAILING (SHANGHAI) TRADING CO., LTD.*FRL Korea Co., Ltd.

Nominal value of
issued ordinary/registered share capital(Thousands)

Ownership ratio ofvoting rights

Relationship

UNIQLO Japan

100.0%—USD20,000

UNIQLO International

100.0%—

Shanghai, PRC

USD30,000

UNIQLO International

100.0%—

Shanghai, PRC

USD35,000

UNIQLO International

100.0%—KRW24,000,000

UNIQLO International/
GU

51.0%

—

SGD86,000

UNIQLO International

100.0%——

Seoul, South Korea

JPY1,000,000

Details of main
businesses

FAST RETAILING (SINGAPORE) PTE. LTD.

Republic of Singapore

UNIQLO (THAILAND) COMPANY LIMITED

Bangkok,
Kingdom of Thailand

THB1,000,000

UNIQLO International

75.0%(75.0%)

PT. FAST RETAILING INDONESIA

Jakarta,Republic of Indonesia

IDR115,236,000

UNIQLO International

75.0%(75.0%)—UNIQLO AUSTRALIA PTY LTD

Melbourne, Australia

AUD21,000

UNIQLO International

100.0%(100.0%)Loans

Fast Retailing USA, Inc.

New York,
United States of America

USD981,621

UNIQLO International/
Global Brands

100.0%

Loan guarantees
Loans

UNIQLO EUROPE LIMITED

London,United Kingdom

GBP40,000

UNIQLO International

100.0%

Rent guarantees

G.U. CO., LTD.

Yamaguchi City,
Yamaguchi Prefecture

JPY10,000

GU

100.0%—FAST RETAILING FRANCE S.A.S.

Paris, France

EUR84,762

Global Brands

100.0%

Loans

Theory LLC

New York,
United States of America

USD116,275

Global Brands

100.0%(100.0%)—COMPTOIR DES COTONNIERS S.A.S.

Paris, France

EUR2,600

Global Brands

100.0%(100.0%)—PRINCESSE TAM.TAM S.A.S.

Paris, France

EUR2,000

Global Brands

100.0%(100.0%)—J Brand, Inc.

California,
United States of America

USD396,340

Global Brands

100.0%(100.0%)—

Other consolidated subsidiaries (113 companies)

—

—

—

—

—

Associates accounted for using the equity method(4 companies)

—

—

—

—

—

*

The English names of all subsidiaries established in the PRC are translated for identification only.

(Notes)1. The information given in the “Details of main businesses” column is the name of the business segment.
2. UNIQLO CO., LTD., FAST RETAILING (CHINA) TRADING CO., UNIQLO TRADING CO., LTD., FAST RETAILING(SHANGHAI) TRADING CO., LTD., FRL Korea Co., Ltd., FAST RETAILING (SINGAPORE) PTE. LTD., UNIQLO (THAILAND)COMPANY LIMITED, PT. FAST RETAILING INDONESIA, UNIQLO AUSTRALIA PTY LTD, Fast Retailing USA, Inc., UNIQLOEUROPE LIMITED, FAST RETAILING FRANCE S.A.S. and J Brand, Inc. are specified subsidiaries.
3. Figures in parentheses in the “Ownership ratio of voting rights” column indicate the ratio of voting rights held by aGroup subsidiary.

— 11 —

4. Net sales (excluding internal sales between other member companies of the consolidated Group) of UNIQLO
CO., LTD., and FAST RETAILING (CHINA) TRADING CO., LTD., are greater than 10% of consolidated revenue. Keyelements of profit/loss and financial position for the year ended 31 August 2018 are as below.
UNIQLO CO., LTD.
(1)
(2)
(3)
(4)
(5)

Revenue
Profit before income taxes
Profit for the year
Total equity
Total assets

864,789 million yen
119,690million yen
83,534million yen
193,596million yen
494,104million yen

FAST RETAILING (CHINA) TRADING CO., LTD
(1)
(2)
(3)
(4)
(5)

Revenue
Profit before income taxes
Profit for the year
Total equity
Total assets

308,715 million yen
51,589 million yen
38,653 million yen
112,840 million yen
204,175 million yen— 12 —

4.
(1)

Employees
The Group
As at 31 August 2018
Name of segment

Number of employees (Persons)

UNIQLO Japan

14,881(30,326)

UNIQLO International

27,005(28,129)

GU

4,620(11,715)

Global Brands

3,864(1,272)

Total for reportable segments

50,370(71,442)

Others

1,124(131)All companies (shared)

1,345(267)
Total(Notes)52,839(71,840)

1. The number of employees does not include operating officers, junior employees, part-time workers, or temporary
staff seconded from other companies.
2. The number of junior employees and part-time workers is stated as a separate number in parentheses as theregistered numbers at the end of reporting period.
3. The number of employees given as “All companies (shared)” represents administrative employees who could not be
categorized in a specific business segment.
4. Hiring of employees for new stores was the main reason for the increase in the number of employees during the year
ended 31 August 2018.

(2)

The Company
As at 31 August 2018

Number of employees (persons)
1,345(267)(Notes)(3)

Average age (years, months)
38 years and 1 month

Average number of years
with the Company
4 years and 7 months

Average annual wages(thousands of yen)
8,773

1. The number of employees does not include operating officers, junior employees, part-time workers or temporary
staff seconded from other companies.
2. The number of junior employees and part-time workers is stated as a separate number in parentheses as theregistered numbers at the end of reporting period.
3. Figures for average annual wages include bonuses and other non-standard payments.
4. All of the Company’s employees are categorized as “All companies (shared).”

Status of labor unions
There are no labor unions at the Company, but unions have been formed at some subsidiary companies. Managementlabor relations have been smooth, and there are no items of note to report.

— 13 —

4. Management Discussion and Analysis
1.

Business Plan
The statements with regard to the future are based on management decision and projections made by the Company
based on information available at the time of the publication of this report (30 November 2018).

i)

Promote Global One Management Principles
We have been actively promoting Global One and Zen-in Keiei management principles to unify UNIQLO, GU, Theory
and other Group brands worldwide, encouraging employees to use the best available global methods and pursue aselfmotivated, united global approach to any challenge. Our deep-rooted management principles focus on introducing
Groupwide, global business processes, while respecting local culture, values and history. Our FR Management Innovation
Center (FR-MIC) is also working hard to nurture future managers and corporate leaders.

ii)

Accelerate UNIQLO’s Global Development
As the driver of Group growth, we intend to expand UNIQLO International operations even further, accelerating store
openings and expanding operations in Greater China, Southeast Asia & Oceania, and also venturing into new markets
such as India and Vietnam. UNIQLO USA is aiming to turn a profit. UNIQLO Europe is working to improve profitability andexpand new store openings in Spain, Sweden, the Netherlands, Denmark and other areas. We will strive to open global
flagship stores around the world to improve UNIQLO brand visibility.

iii)

Strengthen Development of Superior World-class Products
We collect a vast array of clothes-related information in our R&D centers in Tokyo, New York, London and other areas,and channel that information into the development of world-class products. While we prize the UNIQLO LifeWear concept
and strive to achieve ever more finished products, we are always looking to invent fresh UNIQLO styles by collaboratingwith designers and creators worldwide. We will apply our ability to develop and instantly commercialize customer desires
to the GU brand an well, and seek to enhance our ability to develop more fashion-focused products going forward.

iv)

Major Supply Chain Reforms
We will speed up progress on creating a new supply chain under our transformative Ariake Project drive. By reforming all
our business processes from materials procurement through planning, design, production, distribution and retail, we seek
to transform ourselves into a new digital consumer retail company that is capable of instantly commercializing customer
desires and proactively conveying ideas and information. We are also aggressively pursuing our Ariake Project aims at
GU. In addition, the successful automation of our Ariake warehouse represents the logistics reform portion of the Ariake
Project. We intend to expand this project to all UNIQLO and GU operations worldwide as we seek to transform the entire
Fast Retailing Group.

v)

Promote Stable Growth at UNIQLO Japan
UNIQLO Japan intends expand the average size of its stores through its scrap-and-build policy, and maintain high levelsof efficiency. We will seek to achieve further stable growth by implementing community-rooted local store managementthat can tailor product mixes and services to best suit local needs. We are transforming UNIQLO Japan into a new, uniqueretail format through the fusing of real (stores) and virtual (e-commerce) operations. We will continue active digital, IT
and logistics investment to help expand the e-commerce operation.

vi)

Grow GU Brands
GU is great at offering fashion at amazingly low prices, but we want to actively introduce Ariake Project reforms,
and strengthen the operation’s product development prowess and product volume accuracy. By reforming materials
procurement and manufacturing processes, we hope to achieve more competitive, low-priced products. We intend tocontinue opening large numbers of new GU stores in Japan, and, at the same time, nurture nascent GU store networks
in international markets such as Greater China and South Korea as part of a broader future plan to develop a GU brandpresence in Asian countries.

vii)

Promoting Sustainability-focused Activities
Fast Retailing remains committed to helping realize a sustainable society through multiple clothing-manufacture related
initiatives, including monitoring factory working environments, upholding human rights, and protecting the environment.
We promote various activities to enrich people’s lives, including providing clothing aid to refugees and displaced
persons through our All-Product Recycling Initiative, operating a social business in Bangladesh, supporting employees bypromoting diversity, female participation in the workforce and a healthy work-life balance, and employing people withdisabilities.
— 14 —

2.

Risk
Risk factors that investors may regard as potentially having a significant impact on the businesses of the Company and theGroup are stated below. The Company, aware of the possibility that these risks may occur, has planned preventive actions
and thoroughgoing administrative procedures and strives to take appropriate measures when they occur.
The statements with regard to the future are based on management decisions and projections made by the Company
based on information available at the time of the publication of this report (30 November 2018).

(1)

Risks specific to management strategy
Risks specific to the management strategy of the Group are as follows:i)Management personnel risk
Our Representative Director, Chairman and CEO Tadashi Yanai and the other members of the Group management
team all play vital roles in the operational areas for which they are responsible. If any of our executives should
become unable to perform his or her duties, or if they should become unable to play these vital roles, this could
have a negative impact on the Group’s earnings.

ii)

Competitive risks
In all the Group’s businesses, our customers are ordinary consumers, who are keenly selective when it comesto products, services and prices, and we are engaged in intense competition with rivals both domesticallyand internationally. If our customers should choose to do business with our competitors, and if our businesscompetitiveness wanes in relative terms, this may have a negative effect on earnings.

iii)

Risk of dependency on production in specified geographic locations
Most products sold through Group companies are manufactured in China and other Asian countries. For this reason,
if there is a dramatic political, economic, security, or legal change in countries where we produce, or a strike byfactory personnel or dock workers, or an earthquake, flood or other major natural disaster, this could have an
impact on supply of our products. Also, if there is a sharp rise in prices for cotton, cashmere, down or other raw
materials, this could have a negative impact on our earnings.

iv)

Risks of corporate acquisitions
One element of the Group’s management strategy is to expand the business through M&A. Our aim is to maximize
the enterprise value of the Group by pursuing synergies with target companies and businesses, and striving for
optimization of our business portfolio, but there is a possibility of negative impact on results if we are unable toachieve anticipated revenues and effects.

v)

Overseas business risks
As the Group expands its business through M&A, we are steadily enhancing the Group’s presence overseas. As
we open more stores in countries across the world, overseas sales are accounting for a higher proportion of theGroup’s sales. In this business environment, if there are changes in laws or changes in taxation systems that have an
adverse impact, unanticipated political developments, social turmoil due to terrorism, conflict or other disturbance,or significant fluctuations in exchange rates, or if the goods we sell do not match the market needs in thosecountries, or if the hiring and training of well-qualified management personnel and local staff who can smoothly
manage our business in each country do not go according to plan, this could have a negative impact on earnings.

vi)

Currency risks
Most products sold through the UNIQLO business, which is the Group’s core business, are denominated in US
dollars. For products to be imported to Japan, we stabilize our purchasing costs by entering into forward currency
agreements for about three years ahead to equalize exchange rates. If the dollar rises sharply against the key
currencies of each country going forward, this could have a medium- to long-term negative impact on earnings of
the UNIQLO business.

— 15 —

(2)General business risks
In management of the Group and operation of businesses, we are cognizant of risks in several categories:i)

Manufactured product liability risk
The Group’s business is subject to a variety of legal regulations in Japan and abroad such as product liability laws,
pharmaceutical laws, consumer protection laws and labeling laws. The Group endeavors to establish productmanagement systems for planning and production of products in accordance with the Groups own quality control
standards covering the legal regulations of various countries, but if gross quality defects are found in products soldby the Group, such as contamination by hazardous materials or dyes containing toxins, this may require global
product recalls, or compensation for harm to the health of customers, which may have a negative impact onearnings, as well as causing damage to customers’ trust.

ii)

Risk of leaks of business secrets or customer’s personal information
In the course of doing business such as mail order sales, the Group gathers information (including personal
information) about customers, and it also handles trade secrets and other confidential information. We are fully
aware of the impact of personal information leaks on the company’s management and trust, and have establishedan Information Security Office to ensure management of confidential information held by the Group by working
with the IT divisions and legal divisions in each country, while creating and strengthening appropriate management
systems for trade secrets and information (particularly personal information) about customers, and periodicallyconducting activities to raise awareness, but in the event confidential information is lost, it may be necessary totake steps to recover the information, apologize to customers, and pay of compensation for damages, which may
have a negative impact on earnings, as well as causing damage to customers’ trust. Furthermore, if the Groupis deemed by an administrative authority to have violated legal regulations restricting the transfer of personal
information between countries and regions such as the EU General Data Protection Regulation (GDPR), this could
lead to a decline in the trust of our customers, and the imposition of a hefty fine could have an adverse effect onearnings.

iii)

Risk due to weather
Global warming may cause a trend toward warmer winter weather, which may result in being unable to procurematerials such as cotton and cashmere in a timely and appropriate manner, and may also reduce sales of products
sold by the Group, which could have a negative impact on earnings.

iv)

Risk due to natural disaster
Earthquakes, volcanic eruptions, fires, floods, explosions, building collapse, or other disasters affecting factories
that produce or stores that sell the Group’s products, or in their immediate vicinity, may have a negative impact on
the Company’s ability to supply or to sell its products.

v)

Risks of disputes and litigation
In the event of disputes or litigation between the Group and tenants of its stores or others with whom it transacts,
or customers, resolution of such disputes may cost large sums of money, which could have a negative impact onearnings.

vi)

Risk of change in the business climate and consumer trends
Changes in the business climate or consumer trends in countries where the Group carries out business may havethe effect of reducing product sales or increasing inventories, which could have a negative impact on earnings.

— 16 —

3.
(1)

Management’s discussion and analysis of consolidated financial condition, results of operations and cashflows
Summary of Business Results(i)Business Results
The Fast Retailing Group achieved record levels of revenue and profit in fiscal 2018, or the twelve months from
1 September 2017 to 31 August 2018. Consolidated revenue totaled ¥2.1300 trillion (+14.4% year-on-year) andoperating profit reached ¥236.2 billion (+33.9% year-on-year). This strong performance was due largely to asignificant revenue and profit increase at UNIQLO International, and stable revenue and profit growth at UNIQLO
Japan. The consolidated gross profit margin improved by 0.5 points year-on-year in fiscal 2018 and the selling,
general and administrative expense ratio improved by 1.5 points. Under other expenses, the Group recorded¥12.3 billion in impairment losses on France-based COMPTOIR DES COTONNIERS and other labels and on store
revaluations. A gain of ¥6.4 billion was recorded under finance income/costs resulting from a balance of ¥4.3 billion
in interest income net of interest expense. As a result, fiscal 2018 profit before income taxes expanded to ¥242.6
billion (+25.5% year-on-year) and profit attributable to owners of the Parent increased to ¥154.8 billion (+29.8%
year-on-year). Capital expenditures increased by ¥9.6 billion year-on-year in fiscal 2018 to ¥69.3 billion (including
finance leases). Breaking down that capital expenditure figure: ¥9.9 billion was invested at UNIQLO Japan, ¥26.3
billion at UNIQLO International, ¥4.5 billion at GU, ¥2.7 billion at Global Brands, and ¥25.8 billion in systems, etc. In
addition to investing in new UNIQLO and GU stores, more funding was channeled into IT investment and warehouseautomation, two key elements of the Groupwide Ariake Project.
The Group’s medium-term vision is to become the world’s number one apparel retailer. In pursuit of this aim,
we are focusing our efforts on expanding UNIQLO International and our GU casual fashion brand. We continue
to increase UNIQLO store numbers in each country where we operate, and open global flagship stores and largeformat stores in major cities around the world to help consolidate UNIQLO’s position as a key global brand. Within
the UNIQLO International segment, Greater China (Mainland China, Hong Kong and Taiwan) and Southeast Asia
are entering a new stage of growth as key drivers of operational growth for the Fast Retailing Group. In addition,
UNIQLO USA was able to significantly reduce operating losses, and is working solidly towards turning a profit in
fiscal 2019. In terms of the GU operation, we plan to open more GU stores in Japan, while expanding the brand’sinternational presence, primarily in Greater China and South Korea.
Due to its growing impact on overall consolidated performance, the GU casual fashion brand, formerly a partof the Global Brands business segment, was separated into an independent business segment from the current
consolidated fiscal year. Previous data have been adjusted to suit the new reporting segment structure andfacilitate accurate year-on-year comparisons.
UNIQLO Japan
UNIQLO Japan reported significant rises in profit in fiscal 2018, with revenue totaling ¥864.7 billion (+6.7 % year-onyear) and operating profit totaling ¥119.0 billion (+24.1% year-on-year). Full-year same-store sales, including online
sales, expanded by 6.2% year-on-year thanks to rising customer visits. In the first half of the from 1 September 2017
through 28 February 2018, same-store sales grew at an extremely fast rate of 8.4% year-on-year on the back of
unseasonably cold winter weather and timely increases in production of stronger selling items. In the second halffrom 1 March to 31 August 2018, same-store sales expanded by 3.3% year-on-year on the back of strong sales ofSummer items such as AIRism, UT and DRY T-shirts. Full-year online sales increased by 29.4% year-on-year to ¥63.0
billion, constituting 7.3% of total revenue. On the profit front, while the cost of sales continued to rise over theperiod due to a weakening in internal yen exchange rates, that negative impact was successfully offset by narrower
discounting rates. As a result, the gross profit margin improved by 0.4 point year-on-year. Meanwhile, the selling,
general and administrative expense ratio improved by 1.6 points year-on-year on the back of significant reductionsin advertising and promotion expenses, distribution costs and personnel expenses.

— 17 —UNIQLO International
UNIQLO International revenue and profit rose significantly in fiscal 2018, with revenue totaling ¥896.3 billion(+26.6% year-on-year) and operating profit increasing to ¥118.8 billion (+62.6% year-on-year). The gross profit
margin improved by 1.1 points year-on-year on the back of favorable new store openings and consistently strong
sales performances from all operations. The segment’s concerted shift towards a business format that relies lessheavily on discounting also contributed to the improved gross profit margin. The selling, general and administrative
expense ratio improved 1.5 points on consistent cost-cutting efforts. It is worth noting that UNIQLO International
revenue exceeded UNIQLO Japan revenue for the first time in fiscal 2018, and UNIQLO International’s operating
profit also expanded to a level approaching that of UNIQLO Japan.
Breaking down the strong UNIQLO International performance into individual markets: Same-store sales in the
Greater China region continued to expand in fiscal 2018 as more and more consumers embraced the LifeWear
concept, and regionally tailored product mixes proved a success. UNIQLO Greater China achieved buoyant doubledigit growth in online sales, which constituted 15% of total revenue. A close correlation between marketing andstores helped temper discounting rates in South Korea, leading to a significant improvement in that operation’s
gross profit margin. UNIQLO Southeast Asia & Oceania achieved double-digit growth in same-store sales on theback of strong sales of UT and shorts. UNIQLO USA managed to halve its operating loss after reviewing a tailoredproduct mix for consumers on the East and West Coasts, and achieving more accurate sales planning. UNIQLO
Europe operating profit doubled on the back of strong performances from Russia, France and the United Kingdom.
UNIQLO’s newest national operations in Europe have gotten off to a strong start, with the first store in Spain
opened in Barcelona in September 2017, the first store in Sweden opened in Stockholm in August 2018, and the first
store in the Netherlands opened in Amsterdam in September 2018.

GUThe GU business segment reported a rise in revenue but a fall in profit in fiscal 2018, with revenue climbing to¥211.8 billion (+6.4% year-on-year) and operating profit declining to ¥11.7 billion (-13.1% year-on-year). Full-yearsame-store sales declined due to issues with product mixes and volume planning. In the first half, GU was unable
to exploit actual demand due to an insufficient choice of coldweather ranges. In the second half, ranges featured
in GU campaigns underperformed, and the large increase in the number of product types resulted in shortages ofstronger-selling items. Against this backdrop of sluggish sales, the full-year gross profit margin declined 0.1 point
year-on-year and the business expenses to net sales ratio increased by 1.2 points year-on-year. As a result, GU
operating profit declined by 13.1% year-on-year.
Global Brands
Global Brands revenue rose but profit fell in fiscal 2018. Revenue rose to ¥154.4 billion (+9.5% year-on-year), but
the segment reported an operating loss of ¥4.1 billion (an operating profit of ¥0.5 billion in fiscal 2017), following
the recording of ¥9.9 billion in impairment losses on COMPTOIR DES COTONNIERS and other labels. The Theory
fashion operation reported a rise in both revenue and profit, thanks to stable growth for the Theory label in boththe United States and Japan, and a favorable expansion in Theory’s Japan-based PLST brand. COMPTOIR DES
COTONNIERS, PRINCESSE TAM.TAM and J Brand reported continued losses for the full business year.

— 18 —

Sustainability
As the business activities of the Fast Retailing Group expand worldwide, we will continue our efforts to achievesustainability of the global environment and society through the clothing business in accordance with our statement
to “Turn the power of clothing into the power of society.” The initiatives of our group focus on six priority areas:
new value creation through products and sales, respect for the human rights and work environment of our supply
chain, consideration of the environment, coexistence and co-prosperity with the community, the happiness of
employees, and ethical management. In all of these areas, we make efforts to protect human rights and theenvironment and to make social contributions. In June 2018, we established the Fast Retailing Group Human Rights
Policy (“Human Rights Policy”) in accordance with international standards including the United Nations Guiding
Principles on Business and Human Rights (UNGP). This policy applies to all employees of our group companies.
Furthermore, we also continually encourage our production and business partners to adopt similar policies, andwe promote respect for human rights in cooperation with them. In July 2018, we established the Human Rights
Committee based on our Human Rights Policy. This committee gives advice and oversees the company’s fulfillmentof its responsibilities in regard to respect for human rights and the appropriate execution of business under our
Human Rights Policy. We also established a hotline to enable employees at our partner garment factories to reportany issues directly to our company. If a report is received, the committee head will conduct an investigation,
examine relief measures, and request the relevant department to take corrective action. If the matter is serious, itwill be presented to the committee for deliberation. The committee will then make a decision on relief measures
and will give guidance and recommendations to the relevant department. We also actively promote social
contribution initiatives in Japan and countries around the world. In Japan, for example, after heavy rains caused
significant damage in Western Japan in July 2018, we commenced delivering clothing supplies to assist victims
in Hiroshima, Okayama, Ehime, and Shimane prefectures. By the end of August, we had donated approximately
46,600 clothing items including underwear and socks for which there was a pressing need for everyday life. In July
2018, UNIQLO US received the Sapolin Accessibility Award for Employment from New York City in recognition of
its commitment to supporting people with disabilities particularly in employment, an area where UNIQLO US has
been promoting initiatives for the past four years. In the same month, UNIQLO US also received the Corporate
Community Impact Award of the ESPN Sports Humanitarian Awards in recognition of its activities as an official
apparel sponsor for Street Soccer USA. Street Soccer USA provides opportunities for homeless young people tocome into contact with sports, and to date UNIQLO US has provided over 28,000 clothing items including Dry-EX
wear.
(ii)

Cash Flow Information
Cash and cash equivalents as at 31 August 2018 increased by ¥315.8 billion from the end of the preceding
consolidated fiscal year, to ¥999.6 billion.
(Operating Cash Flows)
Net cash generated by operating activities for the year ended 31 August 2018 was ¥176.4 billion, which was adecrease of ¥35.7 billion (-16.9 % year-on-year) from the year ended 31 August 2017. The principal factors were¥242.6 billion in profit before income taxes (an increase of ¥49.2 billion from the year ended 31 August 2017),
an increase of ¥179.4 billion in inventories (a decrease of ¥173.5 billion from the year ended 31 August 2017), an
increase of ¥142.2 billion in other liabilities (an increase of ¥135.7 billion from the year ended 31 August 2017), and¥86.7 billion in income taxes paid (a decrease of ¥39.0 billion from the year ended 31 August 2017).
(Investing Cash Flows)
Net cash used in investing activities for the year ended 31 August 2018 was ¥57.1 billion, which was an increaseof ¥179.9 billion from the year ended 31 August 2017. The principal factor was an increase of ¥4.3 billion in bankdeposits with original maturity over three months (an increase of ¥172.6 billion from the year ended 31 August2017).
(Financing Cash Flows)
Net cash generated from financing activities for the year ended 31 August 2018 was ¥198.2 billion, which was anincrease of ¥249.0 billion from the year ended 31 August 2017. The principal factor was an increase of ¥249.3 billion
in proceeds from issuance of corporate bonds (an increase of ¥249.3 billion from the year ended 31 August 2017).

— 19 —

(2)(i)

Summary of Revenue and Purchasing
Revenue by division
Year ended 31 August 2017
(From 1 September 2016 to
31 August 2017)

Division

Revenue(Millions of yen)

Year ended 31 August 2018
(From 1 September 2017 to
31 August 2018)

Percentage of total(%)

Revenue(Millions of yen)

Percentage of total(%)

Men’s clothing

316,601

17.0

341,392

16.0

Women’s clothing

386,075

20.7

403,40718.9

Children’s & babies’ clothing

60,497

3.2

67,202

3.2

Goods and other items

21,145

1.2

22,9381.1

784,32042.1

834,941

39.2

26,413

1.4

29,836

1.4

Total UNIQLO Japan operations

810,734

43.5

864,778

40.6

UNIQLO International operations

708,17138.0

896,32142.1

Total UNIQLO operations

1,518,905

81.5

1,761,099

82.7

GU operations

199,13910.7

211,831

9.9

Global Brands operations
Other operations

141,003
2,868

7.6
0.2

154,464
2,664

7.3
0.1

1,861,917

100.0

2,130,060

100.0

Total sales of UNIQLO Japan
Franchise-related income &alteration charges

Total(Notes)1. “Franchise-related income” refers to the proceeds from garment sales to franchise stores and royalty income.
“Alteration charges” refers to income generated from embroidery prints and alterations to the length of pants.
2. “UNIQLO operations” covers the selling of UNIQLO brand casual clothing.
3. “GU operations” covers the selling of GU brand casual clothing.
4. “Global Brands operations” consists of Theory operations (selling of Theory and PLST brand clothing), COMPTOIRDES COTONNIERS operations (selling of COMPTOIR DES COTONNIERS brand clothing), PRINCESSE TAM.TAM
operations (selling of PRINCESSE TAM.TAM brand clothing), and J Brand operations (selling of J Brand clothing).
5. “Other operations” includes the real estate leasing business, etc.
6. E-commerce revenue from UNIQLO Japan
		 Fiscal year ended 31 August 2017: 48,753 million yen;		 Fiscal year ended 31 August 2018: 63,063 million yen.
7. The above amounts do not include consumption taxes, etc.

— 20 —

(ii)Sales per unit

Summary

RevenueYear-on-year change (%)

1,668,199 million yen

115.5 %

2,176,567 m2

134.1 %

Sales floor area (average)

Sales per m2

Sales per m (yearly)
2

766 thousand yen

86.2 %

100,340 persons

162.7 %

16,625 thousand yen

71.0 %

Number of employees (average)

Sales per employee(Notes)Year ended
31 August 2018
(From 1 September 2017 to
31 August 2018)

Sales per employee (yearly)

1. These figures are solely for UNIQLO Japan operations and UNIQLO International operations.
2. Sales figures indicate store sales, and do not include internet sales, products supplied to franchise stores,
management and administrative fees, or alteration charges.
3. “Sales floor area (average)” is calculated based on the number of months each store is in operation.
4. “Number of employees (average)” includes junior employees, part-time workers, contract workers, or temporary
staff seconded from other companies, but does not include operating officers. Figures for junior employees andpart-time workers are based on the registered numbers at the end of the reporting period.
5. The above figures do not include consumption tax, etc.

(iii) Purchases
Year ended 31 August 2018
(From 1 September 2017 to 31 August 2018)

By product category

Purchases(Millions of yen)

Year-on-year change(%)

Percentage of total(%)

Men’s clothing

232,074

132.4

18.5

Women’s clothing

279,478

127.4

22.3

Children’s & babies clothing

45,536140.9

3.6

Goods and other items

15,549122.9

1.2

572,638

130.2

45.7

483,742

143.9

38.6

1,056,380

136.1

84.3

GU operations

134,384

121.0

10.7

Global Brands operations

62,445128.8

5.0

1,253,210

134.0

100.0

Total UNIQLO Japan operations
UNIQLO International operations
Total UNIQLO operations

Total(Notes)1. “UNIQLO operations” covers the selling of UNIQLO brand casual clothing.
2. “GU operations” covers the selling of GU brand casual clothing.
3. “Global Brands operations” consists of Theory operations (selling of Theory and PLST brand clothing), COMPTOIRDES COTONNIERS operations (selling of COMPTOIR DES COTONNIERS brand clothing), PRINCESSE TAM.TAM
operations (selling of PRINCESSE TAM.TAM brand clothing), and J Brand operations (selling of J Brand clothing).
4. There are businesses other than the above, mainly real estate leasing, but they do not involve purchasing due tothe nature of the activity.
5. The above figures do not include consumption tax, etc.

— 21 —

(3)(1)

Consideration of Performance Conditions on Management’s perspective
Significant accounting policies and estimations
The Group’s consolidated financial statements were prepared in accordance with IFRS. In preparing the consolidated
financial statements, estimates were made on a reasonable basis as necessary.
Please see “9. FINANCIAL INFORMATION (6) Notes to the consolidated financial statements” for details.

(2)

Analysis of management performance for the year ended 31 August 2018i)

Revenue and gross profit
Revenue grew to 2.1300 trillion yen, up 268.1 billion yen from the preceding consolidated fiscal year. For a detailed
breakdown of revenue, see “3. Management’s discussion and analysis of consolidated financial condition, resultsof operations and cash flows (1) Summary of Business Results (i) Business Results and (2) Summary of Revenue andPurchasing.”
The main reason behind the growth in revenue was significant growth in a 188.1 billion yen increase for UNIQLOInternational. In particular, Greater China as a whole showed strong performance with a 26.9% year-on-yearincrease in revenue, while sales in existing stores in Southeast Asia and Oceania continued to demonstrate doubledigit growth.
Gross profit grew to 1.0499 trillion yen, up 140.6 billion yen from the preceding consolidated fiscal year. As apercentage of revenue, gross profit was 49.3%, up 0.5 point from 48.8% the year before. This was mainly due totighter discounting and improvement in the gross profit margin following refinement of the sales plan for UNIQLOInternational.

ii)

Selling, general and administrative expenses, other income, other expenses, and operating income
Selling, general and administrative expenses grew to 797.4 billion yen, up 72.2 billion yen from the preceding
consolidated fiscal year. As a percentage of revenue, selling, general and administrative expenses was 37.4%, down
1.5% from 38.9% in the preceding consolidated fiscal year. The main reasons were cost-cutting efforts throughout
the group company. On the other hand, a deficit of 16.2 billion yen was posted under other income/expenses due
mainly to impairment losses recorded for Global Brands business and UNIQLO stores. Operating income was 236.2
billion yen, up 59.7 billion yen from the preceding consolidated fiscal year.

iii)

Finance income, finance costs, and profit before income taxes
Finance income was 9.6 billion yen, down 10.2 billion yen and Finance expense was 3.2 billion yen, up 0.2 billion
yen from the preceding consolidated fiscal year. The main reason for the decline in financial income was that,
despite recording foreign exchange gains of 13.3 billion yen in the previous consolidated fiscal year due to a sharp
depreciation of the yen, foreign exchange gains recorded in the current consolidated fiscal year remained at 2.1
billion yen due to stable foreign exchange rates.
As a result, profit before income taxes was 242.6 billion yen, up 49.2 billion yen from the preceding consolidated
fiscal year. As a percentage of revenue, profit before income taxes was 11.4%, up 1.0% from 10.4% the year before.

iv)

Profit attributable to owners of the parent
Income taxes were 73.3 billion yen, or 8.8 billion yen higher than the preceding consolidated fiscal year. As a result,profit attributable to owners of the parent was 154.8 billion yen, which was 35.5 billion yen higher than the year
before. Basic earnings per share for the year were 1,517.71 yen, up 348.01 yen.

— 22 —

(3)(4)

Sources of funding and analysis of fund liquidity
i)

Total assets
Total assets as at 31 August 2018 were ¥1.9534 trillion, which was an increase of ¥564.9 billion relative to the endof the preceding consolidated fiscal year. The principal factors were an increase of ¥315.8 billion in cash and cash
equivalents, an increase of ¥175.1 billion in inventories, an increase of ¥29.2 billion in derivative financial assets, anincrease of ¥11.0 billion in other current assets and an increase of ¥18.0 billion in property, plant and equipment.

ii)

Total liabilities
Total liabilities as at 31 August 2018 were ¥1.0506 trillion, which was an increase of ¥424.2 billion relative to theend of the preceding consolidated fiscal year. The principal factors were an increase of ¥10.5 billion in trade andother payables, an increase of ¥160.0 billion in other current financial liabilities, an increase of ¥17.8 billion in othercurrent liabilities and an increase of ¥229.2 billion in non-current financial liabilities.

iii)

Total net assets
Total net assets as at 31 August 2018 were ¥902.7 billion, which was an increase of ¥140.7 billion relative to theend of the preceding consolidated fiscal year. The principal factors were an increase of ¥116.5 billion in retained
earnings and an increase of ¥10.5 billion in other components of equity.

iv)

Status of funds
For a discussion of the status of the Group’s funds, see “3. Management’s discussion and analysis of consolidated
financial condition, results of operations and cash flows (1)Summary of Business Results (ii) Cash Flow Information.”

Parallel Disclosure
Items concerning the major differences between consolidated financial statements prepared under IFRS and consolidated
financial statements prepared under JGAAP.
Reclassification
Items stated under non-operating income, non-operating expenses, extraordinary gains, and extraordinary losses under
JGAAP have been reclassified under IFRS and presented as finance income, finance costs, other expenses, other income,or selling, general and administrative expenses.
Adjustment to amortization of goodwill
Under JGAAP, goodwill was amortized over an estimated amortization period. Under IFRS, this amortization ceased on thetransition date.
As a result, under IFRS, amortization of goodwill (selling, general and administrative expenses) decreased by 341 million
yen in the year ended 31 August 2018 and 837 million yen in the year ended 31 August 2017, and impairment losses(other expenses) increased by 3,776 million yen in the year ended 31 August 2018 and 1,004 million yen in the year ended
31 August 2017 compared with those under JGAAP.
Adjustment to exchange differences on monetary financial instruments denominated in foreign currencies
Under JGAAP, foreign exchange translation differences on monetary financial instruments denominated in foreign
currencies are recorded as unrealized gains or losses on available-for-sale securities under net assets. Under IFRS, theseexchange differences are treated as foreign exchange gains or losses.
As a result, under IFRS, foreign exchange translation differences (other income) increased by 65 million yen in the year
ended 31 August 2018 and 725 million yen in the year ended 31 August 2017 compared with those under JGAAP.

— 23 —

Adjustment to impairment losses of non-current assets
Under JGAAP, when there are indications that asset impairment is required, an assessment of the extent of the asset
impairment is made (by comparing book value with the value of future cash flows, before discounting). After that, ameasurement is made of asset-impairment losses (by comparing book value with recoverable value). Under IFRS, when
there are indications that asset impairment is required, the recoverable value of the fixed asset(s) is estimated, and if theestimated recoverable value is less than the book value, then a measurement is made of the asset impairment loss, eitherof the asset or the cash-generating unit group.
As a result, under IFRS, impairment losses increased by 681 million yen in the year ended 31 August 2017 compared withthose under JGAAP. The impact was nil in the year ended 31 August 2018.

4.

Major Contracts
Not applicable.

5.

Research and Development
Not applicable.

— 24 —

5.

CAPITAL EXPENDITURES

1.

Capital expenditures
UNIQLO Japan opened 15 new stores. UNIQLO International opened 94 stores in the Greater China, 8 in South Korea, 2 inSingapore, 7 in Malaysia, 6 in Thailand, 11 in the Philippines, 6 in Indonesia, 3 in Australia, 5 in the USA, 3 in Canada, 1 inEngland, 6 in France, 11 in Russia, 1 in Belgium, 2 in Spain and 1 in Sweden. GU opened 30 new stores. In addition, Global
Brands opened 42 new stores.
As a result, the Group’s capital expenditure amounted to 69.3 billion yen during the year ended 31 August 2018. Key
components of this were 31.9 billion yen for buildings, 4.7 billion yen for lease deposits for stores, 1.2 billion yen for
construction assistance funds, 16.5 billion yen for intangible assets and 14.8 billion yen for leased assets.
The above figures do not include consumption tax, etc

2.

Important Facilities
As at 31 August 2018, the Group’s important facilities were shown as below:(1)

Information about the Reporting Entity
Area (m2)Company name

FAST RETAILING
CO., LTD.

Type of facility

Location

Land

Land

Buildings

Deposits/
guarantees

Construction
assistance
funds

Others

Total

Number of
employees(Persons)

Head office

Yamaguchi City,
Yamaguchi Prefecture

95,255.83

1,047

809

—

—

148

2,005

40

Commercial
establishments

Chuo-ku, Fukuoka City,
etc.

—

—

87

1,309

—

0

1,397

—

29,308.87

76

5,325

5,074

—

1,405

11,8801,305

Others(2)

Capital expenditure (Millions of yen)

Subsidiaries in Japan
Area (m2)Company name

Type of facility

Stores in Japan, etc.
UNIQLO CO.,LTD.

Location

Yamaguchi City,
Yamaguchi Prefecture etc.

Land

Capital expenditure (Millions of yen)Land

2,591.06

450

Buildings

Deposits/
guarantees

Construction
assistance
funds

Others

Total

Number of
employees(Persons)

13,60528,553

9,055

9,859

61,523

11,080UNIQLO Japan, other

19,960.76

353

1,108

3,914

1,171

16,137

22,686

3,801

Total for UNIQLO Japan

22,551.82

803

14,71332,468

10,22725,996

84,20914,881

Stores in Japan, etc.

Yamaguchi City,
Yamaguchi Prefecture, etc.

—

—

9,378

8,106

4,080

5,111

26,677

4,167

LINK THEORY JAPAN CO., LTD. Stores in Japan, etc.

Yamaguchi City,
Yamaguchi Prefecture, etc.

—

—

438

1,380

—

810

2,629

1,681

G.U. CO., LTD.

— 25 —

(3)Overseas subsidiaries
Area (m2)Company name

Type of facility

Location

UNIQLO EUROPE LIMITEDUNIQLO International store

London, United Kingdom—

FAST RETAILING (CHINA)TRADING CO., LTD

UNIQLO International store

Shanghai, PRC

—

Land

Capital expenditure (Millions of yen)
Buildings

Deposits/
guarantees

Construction
assistance
funds

Others

Total

Number of
employees(Persons)—

11,159

494

—

5,207

16,861

2,276—

18,015

3,293

—

3,278

24,587

9,754

Land

FRL Korea Co., Ltd.

UNIQLO International store

Seoul, South Korea

—

—

4,920

5,310

—

2,514

12,746

2,595

UNIQLO TRADING CO., LTD.

UNIQLO International store

Shanghai, PRC

—

—

1,601

401

—

243

2,246

706

FAST RETAILING(SINGAPORE) PTE. Ltd.

UNIQLO International store

Republic of Singapore

—

—

3

28

—

3

35

46

UNIQLO (THAILAND)COMPANY LIMITEDUNIQLO International store

Bangkok, Kingdom ofThailand

—

—

1,036

838

—

626

2,500

1,181

PT. Fast Retailing Indonesia

UNIQLO International store

Jakarta, Indonesia

—

—

652

186

56

1,056

1,952

1,239

UNIQLO Australia Pty Ltd.

UNIQLO International store

Melbourne, Australia

—

—

2,083

8

—

400

2,491

495

FAST RETAILING (Shanghai)
TRADING CO., LTD

UNIQLO International store

Shanghai, PRC

—

—

1,454

248

—

96

1,799

175

Fast Retailing France S.A.S.

International store, etc.

Paris, France

—

—

483

21

—

50

556

385

PRINCESSE TAM.TAM S.A.S.

International store, etc.

Paris, France

—

—

446

259

—

72

778

239

COMPTOIR DES COTONNIERS
International store, etc.
S.A.S.

Paris, France

—

—

779

441

—

79

1,300

470

Fast Retailing USA, Inc.

International store, etc.

New York, U.S.A.

—

—

6,926

454

—

5,289

12,6702,200

J Brand, Inc.

International Stores, etc.

California, U.S.A.

—

—

266

2

—

344

614

157

(Notes)1. Most items in the “Others” category for the reporting entity are located at the Ariake head office (Koto-ku, Tokyo),
Roppongi head office (Minato-ku, Tokyo) or at the old head office (Ube City, Yamaguchi).
2. Monetary amounts are given at book value, not including construction in progress accounts. Also, the figures do
not include consumption tax, etc.
3. The number of employees does not include operating officers, junior employees, part-time workers, or temporary
staff seconded from other companies.
4. Assets are not expressed as allocated among business segments.

— 26 —

3.

Plans for new facility construction, old facility removal, etc.
The following are the important new facility construction and/or facility removal projects planned as at 31 August 2018.

(1)

Important New Facilities
The capital investment plans (new facility construction, expansion) for each segment in the year ending 31 August 2019
(1 September 2018 – 31 August 2019) are as follows.
Capital investment(Millions of yen)Segment

Details of investment

UNIQLO Japan

3,900

New store openings, etc. (approx. 30 stores)

UNIQLO International

32,800New store openings, etc. (approx. 181 stores)

GU

6,700

New store openings, etc. (approx. 40 stores)

Global Brands Business

3,100

New store openings, etc. (approx. 44 stores)

Others31,300IT-related investments

Total

77,800(Notes)1. It is expected that the Group will be able to meet its funding needs from equity capital, corporate bonds,
borrowings, etc.
2. The above figures do not include consumption tax, etc.

Also, the main new facility plans included in the plans described above are as follows.
Amount of planned investment
Construction
completion

Planned sales floorarea (m2)October 2018

5,459

Lease hold156

May 2018 September 2018

2,469

Lease hold

1,204

881

May 2018 September 2018

1,600

Lease hold

Cologne,Germany880

623

May 2018

October 2018

3,222

Lease holdAmsterdam,
The Netherlands

825

723

February 2018 September 2018

2,040

Lease holdAmount already Construction start
disbursed(Millions of yen)Company name

Type of facility

Name of business

Location

FAST RETAILING
PHILIPPINES, INC.

UNIQLOInternational
Store

UNIQLO Manila
Global Flagship
Store

Manila,Philippines

1,086

389

March 2018

UNIQLO CANADAINC.

UNIQLOInternationalStore

Uniqlo Vaughan
Mills

City of Vaughan,
Canada623

UNIQLO HAWAIIINC.

UNIQLOInternationalStore

UniqloAla Moana

Hawaii,USA

UNIQLO EUROPE
LIMITEDUNIQLOInternational
Store

UNIQLO Köln

UNIQLO EUROPE
LIMITEDUNIQLOInternationalStore

UniqloKalverstraat(Notes)(2)

Total(Millions of yen)

1. It is expected that the Group will be able to meet its funding needs from equity capital.
2. The above figures do not include consumption tax, etc.
3. Assets are not allocated among business segments.

Planned Removals of Important Facilities
There were no planned removals of important facilities as at 31 August 2018.

— 27 —

Reference6. Stock Information and Dividend Policy
1.
(1)

Stock Information
Number of Shares(i)

Total number of shares
Type

(ii)

Total number of authorized shares (shares)

Common stock

300,000,000

Total

300,000,000

Shares issued

Type

As at 31 August 2018

Number of sharesissued as at submission
date (Shares)(30 November 2018)

Common stock

106,073,656

106,073,656

Total

106,073,656

106,073,656

Name of financial
instrument exchangeof listing or authorized
financial instruments
firms association
First section of the Tokyo
Stock Exchange andthe Main board of
the Stock Exchange ofHong Kong Limited (Note)—

Details

100 sharesas one unit—

(Note) Hong Kong Depositary Receipts (“HDRs”) are listed on the Main Board of the Stock Exchange of Hong Kong Limited.

— 28 —

(2)Share Subscription Rights

1.

Details of the Stock Option Program
The company has instituted a stock option program that grants rights to acquire new shares pursuant to the Companies
Act of Japan. Matters stated below are details of the program current as of the final day of the current fiscal year (31August 2018). Details of changes made during the period from the final day of the current fiscal year until the end of theprevious month (31 October 2018) on the submission date are shown in brackets. Details of the 9th share subscription
rights on the submission date are stated.

(i)

Share subscription rights A type
1st

2nd

3rd

Resolution date

8 October 201012 October 2011

11 October 2012

Class and number of recipients(persons)

Employees of the Company
Employees of the Groupsubsidiaries

Employees of the Company 14
Employees of the Groupsubsidiaries
4

Employees of the Company 18
Employees of the Groupsubsidiaries
8

Number of stock options (Shares)

1,292 [888]6,495 [3,138]

5,304 [4,959]

Number of share subscription rights
for treasury stock (Shares)

7
3

—

—

—

Type of shares to be issued upon
exercise of share subscription rights

Common stock

Same as left

Same as left

Number of shares to be issued upon
exercise of share subscription rights(Shares)

1,292 [888]6,495 [3,138]

5,304 [4,959]

Amount to be paid upon exercise ofshare subscription rights (Yen)

Number of shares allocatedtimes ¥1 exercise price pershare for all shares to beobtained through exercise of
the share subscription rights.

Same as left

Same as left

Exercise period of share subscription
rightsFrom 8 November 2013
to 7 November 2020

From 15 November 2014
to 14 November 2021

From 13 November 2015
to 12 November 2022

Fair value on the grant date and amountof paid-in capital per share upon
exercise of share subscription rights(Yen)

Issue price: 10,624
Paid-in capital: 5,312

Issue price: 12,499
Paid-in capital: 6,250

Issue price: 15,222
Paid-in capital: 7,611

Exercise conditions of sharesubscription rights

If a holder of share subscription
rights waives the right toacquire shares, the sharesubscription rights shall be
forfeited and may not be
exercised.

Same as left

Same as left

Matters pertaining to transfer of sharesubscription rights

Any acquisition of sharesubscription rights by transfer
shall require an authorizing
resolution from the Board of
Directors.

Same as left

Same as left

Matters pertaining to substitute
payments
Matters pertaining to issuing of sharesubscription rights in conjunction withreorganization——(Note)

Same as left

— 29 ——
Same as left

4th

5th

6th

Resolution date

10 October 20139 October 20148 October 2015

Class and number of recipients(persons)

Employees of the Company 19
Employees of the Groupsubsidiaries
11

Employees of the Company 36
Employees of the Groupsubsidiaries
16

Employees of the Company 15
Employees of the Groupsubsidiaries
19

Number of stock options (Shares)

3,306 [2,975]

12,213 [10,000]

2,299 [2,229]

Number of share subscription rights
for treasury stock (Shares)

—

—

—

Type of shares to be issued upon
exercise of share subscription rights

Common stock

Same as left

Same as left

Number of shares to be issued upon
exercise of share subscription rights(Shares)

3,306 [2,975]

12,213 [10,000]

2,299 [2,229]

Amount to be paid upon exercise ofshare subscription rights (Yen)

Number of shares allocatedtimes ¥1 exercise price pershare for all shares to beobtained through exercise of
the share subscription rights.

Same as left

Same as left

Exercise period of sharesubscription rights

From 3 December 2016
to 2 December 2023

From 14 November 2017
to 13 November 2024

From 13 November 2018
to 12 November 2025

Fair value on the grant date and amountof paid-in capital per share upon
exercise of share subscription rights(Yen)

Issue price: 37,110
Paid-in capital: 18,555

Issue price: 42,377
Paid-in capital: 21,188

Issue price: 45,658
Paid-in capital: 22,829

Exercise conditions of sharesubscription rights

If a holder of share subscription
rights waives the right toacquire shares, the sharesubscription rights shall be
forfeited and may not be
exercised.

Same as left

Same as left

Matters pertaining to transferof share subscription rights

Any acquisition of sharesubscription rights by transfer
shall require an authorizing
resolution from the Board of
Directors.

Same as left

Same as left

Matters pertaining to substitute
payments—

Matters pertaining to issuing of sharesubscription rights in conjunction withreorganization—(Note)

Same as left

— 30 ——

Same as left

7th

8th

9th

Resolution date

13 October 201612 October 201711 October 2018

Class and number of recipients(persons)

Employees of the Company 16
Employees of the Groupsubsidiaries
23

Employees of the Company 19
Employees of the Groupsubsidiaries
27

Employees of the Company 17
Employees of the Groupsubsidiaries
32

Number of stock options (Shares)

2,549 [2,476]

5,101 [4,983]

4,057

Number of share subscription rights fortreasury stock (Shares)

—

—

—

Type of shares to be issued upon
exercise of share subscription rights

Common stock

Same as left

Same as left

Number of shares to be issued upon
exercise of share subscription rights(Shares)

2,549 [2,476]

5,101 [4,983]

4,057

Amount to be paid upon exercise ofshare subscription rights (Yen)

Number of shares allocatedtimes ¥1 exercise price pershare for all shares to beobtained through exercise of
the share subscription rights.

Same as left

Same as left

Exercise period of share subscription
rightsFrom 11 November 2019
to 10 November 2026

From 10 November 2020
to 9 November 2027

From 9 November 2021
to 8 November 2028

Fair value on the grant date and amountof paid-in capital per share upon
exercise of share subscription rights(Yen)

Issue price: 34,684
Paid-in capital: 17,342

Issue price: 37,648
Paid-in capital: 18,824

Issue price: 58,276
Paid-in capital: 29,138

Exercise conditions of share subscription
rightsIf a holder of share subscription
rights waives the right toacquire shares, the sharesubscription rights shall be
forfeited and may not be
exercised.

Same as left

Same as left

Matters pertaining to transfer of sharesubscription rights

Any acquisition of sharesubscription rights by transfer
shall require an authorizing
resolution from the Board of
Directors.

Same as left

Same as left

Matters pertaining to substitute
payments
Matters pertaining to issuing of sharesubscription rights in conjunction withreorganization——(Note)

Same as left

— 31 ——

Same as left

(Notes) Upon any reorganization of the Company (collectively referred to as “Reorganization”) consisting of merger (limited tocases where the Company becomes extinct thereby), absorption-type company split or incorporation-type company
split (in each event, limited to cases where the Company is the entity resulting from the company split), or exchangeor transfer of shares (in each event, limited to cases where the Company becomes a wholly owned subsidiary),
parties holding share subscription rights in existence immediately preceding the effective date of such Reorganization(hereinafter referred to as “Outstanding Share Subscription Rights”) shall, in each applicable case, be issued sharesubscription rights for shares of the resulting company as prescribed in Article 236 (1) viii of the Companies Act ofJapan (hereinafter referred to as the “Company Resulting From Reorganization”). In such event, any Outstanding Share
Subscription Rights shall lapse and the Company Resulting From Reorganization shall issue new share subscription rights;
provided, however, that terms and conditions stipulating that the Company Resulting From Reorganization shall issue
share subscription rights that prescribe the matters stated below shall be included in any absorption merger agreement,
new merger agreement, absorption-type company split agreement, incorporation-type company split plan, shareexchange agreement, or transfer of shares plan.
1.
2.
3.

4.

5.

6.

7.

8.
9.

Number of share subscription rights to be issued by the Company Resulting From Reorganization: Each holder of
Outstanding Share Subscription Rights shall be issued the same number thereof.
Type of shares of the Company Resulting From Reorganization underlying the share subscription rights: Common
stock of the Company Resulting From Reorganization.
Number of shares of the Company Resulting From Reorganization underlying the share subscription rights:
A proposal stating the conditions for Reorganization and the like shall include a finalized statement of the type andnumber of shares underlying the above-mentioned share subscription rights.
Value of property to be incorporated upon exercise of the share subscription rights:
The value of property to be incorporated upon exercise of share subscription rights that are issued shall be theamount obtained by multiplying the exercise price after reorganization prescribed below by the number of sharesof the Company Resulting From Reorganization underlying the share subscription rights that have been finalized asstated in No. 3. above. The exercise price after Reorganization shall be 1 yen per share of the Company Resulting
From Reorganization that can be issued upon exercise of each share subscription right that is issued.
Period during which share subscription rights can be exercised:
The period from the later of either the first day of the period during which share subscription rights can be
exercised as prescribed above or the day on which a Reorganization takes effect through the final day of theperiod during which share subscription rights can be exercised as prescribed above.
Matters pertaining to the increase of capital and capital reserve resulting from the issuance of shares upon
exercise of the share subscription rights:
To be determined in order to align with the conditions applicable to the subject share subscription rights.
Restrictions on acquisition of share subscription rights by transfer:Any acquisition of share subscription rights by transfer shall require an authorizing resolution from the Board of
Directors of the Company Resulting From Reorganization.
Terms and conditions for acquisition of share subscription rights:
To be determined in order to align with the conditions applicable to the subject share subscription rights.
Conditions for exercise of share subscription rights:
To be determined in order to align with the conditions applicable to the subject share subscription rights.

— 32 —

(ii)Share subscription rights B type
1st

2nd

3rd

Resolution date

8 October 201012 October 2011

11 October 2012

Class and number of recipients(persons)

Employees of the Company 266
Employees of the Groupsubsidiaries
413

Employees of the Company 139
Employees of the Groupsubsidiaries
584

Employees of the Company 136
Employees of the Groupsubsidiaries
615

Number of stock options (Shares)

10,225 [9,922]

8,364 [8,191]

8,447 [8,274]

Number of share subscription rights fortreasury stock (Shares)

—

—

—

Type of shares to be issued upon
exercise of share subscription rights

Common stock

Same as left

Same as left

Number of shares to be issued upon
exercise of share subscription rights(Shares)

10,225 [9,922]

8,364 [8,191]

8,447 [8,274]

Amount to be paid upon exercise ofshare subscription rights (Yen)

Number of shares allocatedtimes ¥1 exercise price pershare for all shares to beobtained through exercise of
the share subscription rights.

Same as left

Same as left

Exercise period of share subscription
rightsFrom 8 December 2010
to 7 November 2020

From 15 December 2011
to 14 November 2021

From 13 December 2012
to 12 November 2022

Fair value on the grant date and amountof paid-in capital per share upon
exercise of share subscription rights(Yen)

Issue price: 10,925
Paid-in capital: 5,463

Issue price: 12,742
Paid-in capital: 6,371

Issue price: 15,569
Paid-in capital: 7,785

Exercise conditions of share subscription
rightsIf a holder of share subscription
rights waives the right toacquire shares, the sharesubscription rights shall be
forfeited and may not be
exercised.

Same as left

Same as left

Matters pertaining to transfer of sharesubscription rights

Any acquisition of sharesubscription rights by transfer
shall require an authorizing
resolution from the Board of
Directors.

Same as left

Same as left

Matters pertaining to substitute
payments
Matters pertaining to issuing of sharesubscription rights in conjunction withreorganization——(Note)

Same as left

— 33 ——

Same as left

4th

5th

6th

Resolution date

10 October 20139 October 20148 October 2015

Class and number of recipients(persons)

Employees of the Company 180
Employees of the Groupsubsidiaries
706

Employees of the Company 223
Employees of the Groupsubsidiaries
785

Employees of the Company 274
Employees of the Groupsubsidiaries
921

Number of stock options (Shares)

8,838 [8,607]

13,458 [12,921]

13,172 [12,836]——

Number of share subscription rights fortreasury stock (Shares)—

Type of shares to be issued upon
exercise of share subscription rights

Common stock

Same as left

Same as left

Number of shares to be issued upon
exercise of share subscription rights(Shares)

8,838 [8,607]

13,458 [12,921]

13,172 [12,836]

Amount to be paid upon exercise ofshare subscription rights (Yen)

Number of shares allocatedtimes ¥1 exercise price pershare for all shares to beobtained through exercise of
the share subscription rights.

Same as left

Same as left

Exercise period of share subscription
rightsFrom 3 January 2014
to 2 December 2023

From 14 December 2014
to 13 November 2024

From 13 December 2015
to 12 November 2025

Fair value on the grant date and amountof paid-in capital per share upon
exercise of share subscription rights(Yen)

Issue price: 37,515
Paid-in capital: 18,757

Issue price: 42,799
Paid-in capital: 21,399

Issue price: 46,148
Paid-in capital: 23,074

Exercise conditions of share subscription
rightsIf a holder of share subscription
rights waives the right toacquire shares, the sharesubscription rights shall be
forfeited and may not be
exercised.

Same as left

Same as left

Matters pertaining to transfer of sharesubscription rights

Any acquisition of sharesubscription rights by transfer
shall require an authorizing
resolution from the Board of
Directors.

Same as left

Same as left

Matters pertaining to substitute
payments
Matters pertaining to issuing of sharesubscription rights in conjunction withreorganization——(Note)

Same as left

— 34 ——

Same as left

7th

8th

9th

Resolution date

13 October 201612 October 201711 October 2018

Class and number of recipients(persons)

Employees of the Company 339
Employees of the Groupsubsidiaries
1,096

Employees of the Company 395
Employees of the Groupsubsidiaries
1,152

Employees of the Company 419
Employees of the Groupsubsidiaries
1,267

Number of stock options (Shares)

18,287 [17,747]

33,082 [31,861]

36,275——

Number of share subscription rights fortreasury stock (Shares)—

Type of shares to be issued upon
exercise of share subscription rights

Common stock

Same as left

Same as left

Number of shares to be issued upon
exercise of share subscription rights(Shares)

18,287 [17,747]

33,082 [31,861]

36,275

Amount to be paid upon exercise ofshare subscription rights (Yen)

Number of shares allocatedtimes ¥1 exercise price pershare for all shares to beobtained through exercise of
the share subscription rights.

Same as left

Same as left

Exercise period of share subscription
rightsFrom 11 December 2016
to 10 November 2026

From 10 December 2017
to 9 November 2027

From 9 December 2018
to 8 November 2028

Fair value on the grant date and amountof paid-in capital per share upon
exercise of share subscription rights(Yen)

Issue price: 35,168
Paid-in capital: 17,584

Issue price: 38,133
Paid-in capital: 19,066

Issue price: 58,892
Paid-in capital: 29,446

Exercise conditions of share subscription
rightsIf a holder of share subscription
rights waives the right toacquire shares, the sharesubscription rights shall be
forfeited and may not be
exercised.

Same as left

Same as left

Matters pertaining to transfer of sharesubscription rights

Any acquisition of sharesubscription rights by transfer
shall require an authorizing
resolution from the Board of
Directors.

Same as left

Same as left

Matters pertaining to substitute
payments
Matters pertaining to issuing of sharesubscription rights in conjunction withreorganization——(Note)

Same as left

— 35 ——

Same as left

(Notes) Upon any reorganization of the Company (collectively referred to as “Reorganization”) consisting of merger (limited tocases where the Company becomes extinct thereby), absorption-type company split or incorporation-type company
split (in each event, limited to cases where the Company is the entity resulting from the company split), or exchangeor transfer of shares (in each event, limited to cases where the Company becomes a wholly owned subsidiary),
parties holding share subscription rights in existence immediately preceding the effective date of such Reorganization(hereinafter referred to as “Outstanding Share Subscription Rights”) shall, in each applicable case, be issued sharesubscription rights for shares of the resulting company as prescribed in Article 236 (1) viii of the Companies Act ofJapan (hereinafter referred to as the “Company Resulting From Reorganization”). In such event, any Outstanding Share
Subscription Rights shall lapse and the Company Resulting From Reorganization shall issue new share subscription rights;
provided, however, that terms and conditions stipulating that the Company Resulting From Reorganization shall issue
share subscription rights that prescribe the matters stated below shall be included in any absorption merger agreement,
new merger agreement, absorption-type company split agreement, incorporation-type company split plan, shareexchange agreement, or transfer of shares plan.
1.
Number of share subscription rights to be issued by the Company Resulting From Reorganization:
Each holder of Outstanding Share Subscription Rights shall be issued the same number thereof.
2.
Type of shares of the Company Resulting From Reorganization underlying the share subscription rights:
Common stock of the Company Resulting From Reorganization.
3.
Number of shares of the Company Resulting From Reorganization underlying the share subscription rights:
A proposal stating the conditions for Reorganization and the like shall include a finalized statement of the type andnumber of shares underlying the above-mentioned share subscription rights.
4.
Value of property to be incorporated upon exercise of the share subscription rights:
The value of property to be incorporated upon exercise of share subscription rights that are issued shall be theamount obtained by multiplying the exercise price after reorganization prescribed below by the number of sharesof the Company Resulting From Reorganization underlying the share subscription rights that have been finalized asstated in No. 3. above. The exercise price after Reorganization shall be 1 yen per share of the Company Resulting
From Reorganization that can be issued upon exercise of each share subscription right that is issued.
5.
Period during which share subscription rights can be exercised:
The period from the later of either the first day of the period during which share subscription rights can be
exercised as prescribed above or the day on which a Reorganization takes effect through the final day of theperiod during which share subscription rights can be exercised as prescribed above.
6.
Matters pertaining to the increase of capital and capital reserve resulting from the issuance of shares upon
exercise of the share subscription rights:
To be determined in order to align with the conditions applicable to the subject share subscription rights.
7.
Restrictions on acquisition of share subscription rights by transfer:Any acquisition of share subscription rights by transfer shall require an authorizing resolution from the Board of
Directors of the Company Resulting From Reorganization.
8.
Terms and conditions for acquisition of share subscription rights:
To be determined in order to align with the conditions applicable to the subject share subscription rights.
9.
Conditions for exercise of share subscription rights:
To be determined in order to align with the conditions applicable to the subject share subscription rights.

— 36 —

(iii)

Share subscription rights C type
6th

7th

8th

Resolution date

8 October 201513 October 201612 October 2017Class and number of recipients(persons)

Employees of the Company 26

Employees of the Company 30

Employees of the Company 29

Number of stock options (Shares)

5,467

5,110

5,929

Number of share subscription rights fortreasury stock (Shares)

—

—

—

Type of shares to be issued upon
exercise of share subscription rights

Common stock

Same as left

Same as left

Number of shares to be issued upon
exercise of share subscription rights(Shares)

5,467

5,110

5,929

Amount to be paid upon exercise ofshare subscription rights (Yen)

Number of shares allocatedtimes ¥1 exercise price pershare for all shares to beobtained through exercise of
the share subscription rights.

Same as left

Same as left

Exercise period of share subscription
rights

13 November 2018

11 November 201910 November 2020

Fair value on the grant date and amountof paid-in capital per share upon
exercise of share subscription rights(Yen)

Issue price: 46,841
Paid-in capital: 23,420

Issue price: 35,855
Paid-in capital: 17,928

Issue price: 38,823
Paid-in capital: 19,411

Exercise conditions of share subscription
rightsIf a holder of share subscription
rights waives the right toacquire shares, the sharesubscription rights shall be
forfeited and may not be
exercised.

Same as left

Same as left

Matters pertaining to transfer of sharesubscription rights

Any acquisition of sharesubscription rights by transfer
shall require an authorizing
resolution from the Board of
Directors.

Same as left

Same as left

Matters pertaining to substitute
payments
Matters pertaining to issuing of sharesubscription rights in conjunction withreorganization——(Note)

Same as left

— 37 ——

Same as left

9th
Resolution date

11 October 2018

Class and number of recipients (persons)

Employees of the Company

Number of stock options (Shares)

4,733

Number of share subscription rights for treasury stock (Shares)

40—

Type of shares to be issued upon exercise of share subscription rights

Common stock

Number of shares to be issued upon exercise of share subscription
rights (Shares)

4,733

Amount to be paid upon exercise of share subscription rights (Yen)

Number of shares allocated times ¥1 exercise
price per share for all shares to be obtained
through exercise of the share subscription rights.

Exercise period of share subscription rights

9 November 2021

Fair value on the grant date and amount of paid-in capital per shareupon exercise of share subscription rights (Yen)

Issue price: 59,764
Paid-in capital: 29,882

Exercise conditions of share subscription rights

If a holder of share subscription rights waives theright to acquire shares, the share subscription
rights shall be forfeited and may not be
exercised.

Matters pertaining to transfer of share subscription rights

Any acquisition of share subscription rights bytransfer shall require an authorizing resolution
from the Board of Directors.

Matters pertaining to substitute payments—

Matters pertaining to issuing of share subscription rights in conjunction
with reorganization— 38 —(Note)

(Notes) Upon any reorganization of the Company (collectively referred to as “Reorganization”) consisting of merger (limited tocases where the Company becomes extinct thereby), absorption-type company split or incorporation-type company
split (in each event, limited to cases where the Company is the entity resulting from the company split), or exchangeor transfer of shares (in each event, limited to cases where the Company becomes a wholly owned subsidiary),
parties holding share subscription rights in existence immediately preceding the effective date of such Reorganization(hereinafter referred to as “Outstanding Share Subscription Rights”) shall, in each applicable case, be issued sharesubscription rights for shares of the resulting company as prescribed in Article 236 (1) viii of the Companies Act ofJapan (hereinafter referred to as the “Company Resulting From Reorganization”). In such event, any Outstanding Share
Subscription Rights shall lapse and the Company Resulting From Reorganization shall issue new share subscription rights;
provided, however, that terms and conditions stipulating that the Company Resulting From Reorganization shall issue
share subscription rights that prescribe the matters stated below shall be included in any absorption merger agreement,
new merger agreement, absorption-type company split agreement, incorporation-type company split plan, shareexchange agreement, or transfer of shares plan.
1.
Number of share subscription rights to be issued by the Company Resulting From Reorganization:
Each holder of Outstanding Share Subscription Rights shall be issued the same number thereof.
2.
Type of shares of the Company Resulting From Reorganization underlying the share subscription rights:
Common stock of the Company Resulting From Reorganization.
3.
Number of shares of the Company Resulting From Reorganization underlying the share subscription rights:
A proposal stating the conditions for Reorganization and the like shall include a finalized statement of the type andnumber of shares underlying the above-mentioned share subscription rights.
4.
Value of property to be incorporated upon exercise of the share subscription rights:
The value of property to be incorporated upon exercise of share subscription rights that are issued shall be theamount obtained by multiplying the exercise price after reorganization prescribed below by the number of sharesof the Company Resulting From Reorganization underlying the share subscription rights that have been finalized asstated in No. 3. above. The exercise price after Reorganization shall be 1 yen per share of the Company Resulting
From Reorganization that can be issued upon exercise of each share subscription right that is issued.
5.
Period during which share subscription rights can be exercised:
The period from the later of either the day on which share subscription rights can be exercised as prescribedabove or the day on which a Reorganization takes effect.
6.
Matters pertaining to the increase of capital and capital reserve resulting from the issuance of shares upon
exercise of the share subscription rights:
To be determined in order to align with the conditions applicable to the subject share subscription rights.
7.
Restrictions on acquisition of share subscription rights by transfer:Any acquisition of share subscription rights by transfer shall require an authorizing resolution from the Board of
Directors of the Company Resulting From Reorganization.
8.
Terms and conditions for acquisition of share subscription rights:
To be determined in order to align with the conditions applicable to the subject share subscription rights.
9.
Conditions for exercise of share subscription rights:
To be determined in order to align with the conditions applicable to the subject share subscription rights.

2.

Content of Rights Plan
Not applicable.

3.

Other Share Subscription Rights
Not applicable.

— 39 —

(3)Exercise of convertible bonds with conditional permission for adjustment of exercise priceNot applicable.

(4)

Change in Total Number of Shares Issued, Capital Stock, Etc.
Increase/
Balance of total
Increase/
Balance of
decrease in total
number of
decrease
capital stocknumber of shares shares issued
in capital stock(Millions of yen)issued (Shares)(Shares)(Millions of yen)Date

31 August 2004
(Note)(5)—

106,073,656

7,000

10,273

Increase/
Balance of
decreaselegal capitalin legal capitalsurplussurplus(Millions of yen)
(Millions of yen)
(7,000)4,578This represents an addition to capital stock from capital reserve approved by resolution at a special meeting of theBoard of Directors on 30 August 2004.

Status by Type of Holder
As at 31 August 2018
Shares (One unit = 100 shares)
Government,
Financial
municipal
institutions
entities

Class

Foreign corporations, etc.
Traders of
Other
Individuals &financialExcl.
corporations
otherIndividuals
products
individuals

Number ofshareholders(persons)

—

63

31

99

760

8

Number ofshares held
(Trading units)—346,342

22,24284,808204,756

9

Percentage ofshares held (%)

—

32.67

2.10

8.00

19.31

0.00

(Notes) 1.
2.

(6)

4,623

Total

Sharesless than
one unit(shares)

5,584—

401,992 1,060,149

58,75637.92

100.00—The 4,053,872 shares of treasury stock include 40,538 units of shares held by individuals and others and 72 shares
held by individuals and others of less than one unit.
Figures shown in the columns “Other corporations” and “Shares less than one unit” include 27 units of shares and84 shares, respectively, in the name of Japan Securities Depository Center, Inc.

Major Shareholders
As at 31 August 2018
Name or trade name

Address

Number ofshares held(Thousand shares)

Percentage of
total number ofshares issued (%)

Tadashi Yanai

Shibuya-ku, Tokyo

22,987

22.53

The Master Trust Bank of Japan, Ltd.

2-11-3 Hamamatsu-cho, Minato-ku, Tokyo

19,153

18.77

Japan Trustee Services Bank, Ltd.

1-8-11 Harumi, Chuo-ku, Tokyo

11,111

10.89

TTY Management B.V.

Hoogoorddreef 15, 1101BA Amsterdam,
The Netherlands

5,310

5.20

Kazumi Yanai

New York, U.S.A.

4,781

4.69

Koji Yanai

Shibuya-ku, Tokyo

4,780

4.69

Fight & Step Co., Ltd.

1-4-3 Mita, Meguro-ku, Tokyo

4,750

4.66

Trust & Custody Services Bank, Ltd.

1-8-12 Harumi, Chuo-ku, Tokyo

3,680

3.61

MASTERMIND, LLC

1-4-3 Mita, Meguro-ku, Tokyo

3,610

3.54

Teruyo Yanai

Shibuya-ku, Tokyo

2,327

2.28

82,492

80.86

Total

―

— 40 —

(Notes) 1. “Number of shares held” is rounded down to the nearest unit of thousand shares.
2. The shares held by The Master Trust Bank of Japan, Ltd., Japan Trustee Services Bank, Ltd., and Trust & Custody
Services Bank, Ltd. are all held in conjunction with trust business.
3. According to the report of large shareholdings (report of change of composition) submitted on 3 September 2018
by Nomura Securities Co., Ltd., and the three parties of Nomura International plc, Nomura Securities International,
Inc., and Nomura Asset Management Co., Ltd., respectively, who are all as joint holders, each party was holding
the shares stated below as at 27 August 2018. However, since the Company has not been able to confirm thenumber of shares actually held as at the record date, of the end of the term, these shareholdings have not been
included in the above statement of principal shareholders.
Name or trade name
Nomura Securities Co., Ltd.
Nomura International plc
Nomura Securities International, Inc.
Nomura Asset Management
Co., Ltd.
4.

1‐9‐1 Nihonbashi, Chuo‐ku, Tokyo
1 Angel Lane, London EC4R 3AB, United
Kingdom
Worldwide Plaza 309 West 49th Street
New York, New York,U.S.A
1‐12‐1 Nihonbashi, Chuo‐ku, Tokyo

Number ofPercentage ofshares held
total number of(Thousand shares) shares issued (%)(12)(0.01)
113

0.11

154

0.15

11,081

10.45

According to the report of large shareholdings (report of change of composition) submitted on 6 September 2018
by Sumitomo Mitsui Trust Bank, Limited and the two parties of Sumitomo Mitsui Trust Asset Management Co.,
Ltd. and Nikko Asset Management Co., Ltd., respectively, who are all as joint holders, each party was holding
the shares stated below as at the record date. However, since the Company has not been able to confirm thenumber of shares actually held as of the end of the term, these shareholdings have not been included in the above
statement of principal shareholders.
Name or trade name

Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Trust AssetManagement Co., Ltd.
Nikko Asset Management Co., Ltd.
5.

Address

Number ofshares held(Thousand shares)
938

Percentage of
total number ofshares issued (%)
0.89

3‐33‐1 Shiba, Minato‐ku, Tokyo

382

0.36

9‐7‐1 Akasaka, Minato‐ku, Tokyo

5,826

5.49

Address
1‐4‐1 Marunouchi, Chiyoda‐ku, Tokyo

In addition to the above, 4,053,872 shares of treasury stock are held by the Company (3.82% of the total numberof authorized shares).

(7)

Voting Rights(i)

Shares issued
As at 31 August 2018Class

Non-voting shares
Shares subject to restrictions on voting
rights (treasury stock)
Shares subject to restrictions on voting
rights (others)
Shares with full voting rights(treasury stock, etc.)
Shares with full voting rights (others)
Shares less than one unit
Total number of shares issued
Total number of voting rights of allshareholders(Notes) 1.
2.

―

Number of voting rights(Number)
―

―

―

―

―

―

―

―

―

Number of shares (Shares)(Shares held astreasury stock)
Common stock
Common stock
Common stock

4,053,800
101,961,100
58,756
106,073,656―

Details―

1,019,611――(Note) 1(Notes) 1, 2―

1,019,611―

The columns for the number of shares of “Shares with full voting rights (others)” and “Shares less than one unit”
include, 2,700 shares and 84 shares, respectively, held in the name of Japan Securities Depository Center, Inc.
Common stock in the “Shares less than one unit” column includes 72 shares of treasury stock held by theCompany.

— 41 —

(ii)Treasury StockAs at 31 August 2018

Name or trade name ofholderFAST RETAILING
CO., LTD.

717-1 Sayama,
Yamaguchi-City,
Yamaguchi

Total

2.

―

Total numberof shares held
(Shares)

Percentage of
total number ofshares issued (%)

4,053,800―

4,053,800

3.82

4,053,800―

4,053,800

3.82

Treasury Stock Information
Type of Shares:(1)

Number of shares Number of shares
held in own name held in other’s(Shares)name (Shares)

Holder’s address

Buybacks of common stock under Companies Act of Japan, Article 155-7

Purchases approved by General Meeting of Shareholders
Not applicable.

(2)

Purchases approved by Board of Directors
Not applicable.

(3)

Details of items not based on General Meeting of Shareholders or Board of Directors’ resolutions
Purchases of shares less than one unit pursuant to Companies Act of Japan, Article 192-1.
Number of shares(Shares)Class

Total paid
(Thousand yen)

Treasury stock purchased in the fiscal year ended 31 August 2018

40

1,831

Purchases of Treasury stock in the year ending 31 August 2019——

(Note)(4)

Treasury stock purchased in the current year does not include shares of less than one unit purchased between 1
November 2018 and the submission date of this report.

Status of treasury stock purchased
Fiscal year ended 31 August 2018
Class

Number of shares(Shares)

Total disposal value(Thousands of yen)

Year ending 31 August 2019
Number of shares(Shares)

Total disposal value(Thousands of yen)

Treasury stock purchases for which
subscribers were solicited

—

—

—

—

Treasury stock cancelled after
purchase

—

—

—

—

Treasury stock transferred due
to mergers, share exchange, orcompany split

—

—

—

—

35,832

136,368

9,915

37,737

4,053,872—

4,043,957—

Other (Note)
Number of Treasury shares held
(Note)

3.

The breakdown of figures for the year ended 31 August 2018 reflects the exercise of 35,832 share subscription rights,
a share disposal value of 136,368 thousand yen. The breakdown of figures for the current year reflects the exercise ofshare subscription rights, and does not include shares of less than one unit purchased between 1 November 2018 andthe submission date of this report.

Dividend Policy

The Company regards the distribution of profits to shareholders as one of its most important considerations. Our basic policy is
to constantly increase earnings and to provide ongoing, appropriate profit distribution based on performance. Our policy is topay dividends that reflect business performance after taking into consideration funds needed to expand business and improve
revenues, and ensure the financial health of the Group.
The basic policy of the Group regarding the payment of dividends from surplus is to pay two dividends annually, an interim
dividend and a year-end dividend. These dividends are decided by the Board of Directors, unless otherwise stipulated by laws
and regulations.
— 42 —

Based on the policy outlined above and the earnings of the consolidated fiscal year ended 31 August 2018, we decided to
pay a year-end dividend of ¥240 per share. Together with the ¥200 interim dividend per share, this will bring the total annual
dividend for the current fiscal year to ¥440 per share. It is our intention to effectively utilize retained earnings and free cash
flow for financial investment and loans to strengthen the operational base of the Group companies.
The payment of an interim dividend under Article 454-5 of the Companies Act of Japan is stipulated by the Company’s Articles
of Incorporation.
Dividends for the Company’s 57th fiscal year are as follows:
Total dividends(Millions of yen)

Resolution date

Dividends per share(Yen)

Board of Directors resolution made at the meeting held on 12 April 2018

20,401

200

Board of Directors resolution made at the meeting held on 2 November 2018

24,484

240

4.
(1)

Share Price Trends
Share price high/low in past 5 fiscal years
Term

53rd Year54th Year

55th Year

56th Year

57th Year

Accounting period

Year ended
31 August 2014

Year ended
31 August 2015

Year ended
31 August 2016

Year ended
31 August 2017

Year ended
31 August 2018

High (Yen)

45,35061,97050,70044,37054,510Low (Yen)

30,35032,46025,30530,46030,000(Note)(2)

High/low share price data are from the first section of the Tokyo Stock Exchange.

Share price high/low (monthly) in past 6 months
Month

March 2018

April

May

June

July

AugustHigh (Yen)

43,96048,54049,82053,42054,51053,020Low (Yen)

38,90042,57046,73046,10046,90046,450(Note)

5.

High/low share price data are from the first section of the Tokyo Stock Exchange.

Waiver from compliance with Rule 19B.21

The Hong Kong Stock Exchange has granted us, subject to certain conditions, a waiver from Rule 19B.21 of the Hong Kong Listing
Rules regarding certain requirements for cancellation of HDRs upon a share repurchase. The Company has complied with therelevant conditions in the year ended 31 August 2018.

— 43 —

7. Board of Directors
Male: 13 persons Female: 1 person (7.1% of officers are female)
Position

Responsibilities

Name

Date of birth

September 1984
June 2001

CEO

Tadashi Yanai

7 February 1949

November 2002
September 2005
November 2005
September 2008
June 2009
November 2011
April 1959
October 2000
April 2003

Director

Toru Hambayashi

7 January 1937

Number ofshares held(Thousand shares)

Joined FAST RETAILING CO., LTD.
Director, FAST RETAILING CO., LTD.
Senior Managing Director, FAST RETAILING
CO., LTD.
President & CEO, FAST RETAILING CO., LTD.
External Director, Softbank Corp. (currently
SOFTBANK GROUP CORP.) (current)
Chairman and CEO, FAST RETAILING CO., LTD.
Chairman, President, and CEO, FAST
Note 4RETAILING CO., LTD. (current)
Chairman, President, and CEO, UNIQLO CO.,LTD. (current)
Director and Chairman, GOV RETAILING CO.,LTD. (currently G.U. CO., LTD.) (current)
External Director, Nippon Venture Capital Co.,
Ltd. (current)
Director, LINK THEORY JAPAN CO., LTD.
(current)

22,987

Joined Nichimen Company Limited (currently
Sojitz Corporation)
President, Nichimen Corporation (currently
Sojitz Corporation)
Chairman and Representative Director,
Sojitz Holdings Corporation (currently Sojitz
Corporation)
External Auditor, UNITIKA LTD.
External Director, FAST RETAILING CO., LTD. Note 4(current)
External Director, MAEDA ORPORATION
Advisor, The Association for the Promotion ofInternational Trade, Japan (current)
External Director,
DAIKYO INCORPORATED (current)
External Director, UNITIKA LTD. (current)
Advisor, Maeda Corporation (current)―

Brief biography
August 1972
September 1972
August 1973

Representative
director, chairman,
and president

Term ofofficeJune 2004
November 2005
June 2007
April 2009
June 2011
June 2015
June 2017— 44 —

Position

Responsibilities

Name

Date of birth

November 1998

October 2003
June 2005
November 2005
Nobumichi Hattori 25 December 1957

October 2006

April 2009
March 2015
June 2015
July 2016

April 1978
December 1991
August 2000
January 2001
April 2008

Director

Masaaki Shintaku 10 September 1954

Number ofshares held(Thousand shares)

Joined NISSAN MOTOR CO.,LTD.
Joined Goldman Sachs and Company,
Headquarters (New York)Managing Director of Goldman Sachs andCompany, Headquarters (New York), and
M&A Advisory of Goldman Sachs Japan Co.,
Ltd. Visiting Associate Professor, Graduate
School of International Corporate Strategy,
Hitotsubashi University
External Director, Miraca Holdings Inc.
External Director, FAST RETAILING CO., LTD.
(current)
Note 4
Visiting Professor, Graduate Schoolof International Corporate Strategy,
Hitotsubashi University
Visiting Professor, Waseda Graduate Schoolof Finance, Accounting and Law (current)
External Auditor, Frontier Management Inc.
(current)
External Director, Hakuhodo DY Holdings Inc.
(current)
Visiting Professor, Graduate School ofBusiness Administration, Keio University(current)―

Joined IBM Japan, Ltd.
Joined Oracle Corporation Japan
President & CEO, Oracle Corporation Japan
Executive Vice President, Oracle Corporation
Vice Chairman, Special Olympics Nippon(currently Special Olympics Nippon
Foundation) (current)
Note 4Chairman, Oracle Corporation Japan
Advisory Board Member, NTT DOCOMO, INC.
External Director, FAST RETAILING CO., LTD.
(current)
External Director, COOKPAD Inc.
External Director, Works Applications CO.,LTD. (current)―

Brief biography
April 1981
June 1989

Director

Term ofofficeJune 2008
May 2009
November 2009
July 2011
December 2015

— 45 —

Position

Responsibilities

Name

Date of birth

Takashi Nawa

8 June 1957

June 2010
September 2010
June 2011
November 2012
June 2014
June 2015
April 1971
June 2000
April 2004
April 2007

Director

Naotake Ohno

28 October 1948
April 2011
November 2017
November 2018
April 1988

Director

CFO

Takeshi Okazaki

9 July 1965

July 1998
January 2005
August 2011
August 2011
September 2012
November 2018
June 1997
July 2004

Director

Kazumi Yanai

23 April 1974

Number ofshares held(Thousand shares)

Note 4―

Joined Daiwa House Industry Co., Ltd.
Director, Daiwa House Industry Co., Ltd.
Senior Managing Director, Deputy Director,
Sales Division, Daiwa House Industry Co., Ltd.
Representative Director and Vice President,
Director, Sales Division, Daiwa House Industry
Co., Ltd.
Note 4
Representative Director and President, Daiwa
House Industry Co., Ltd.
Special Consultant, FAST RETAILING Co., Ltd.
(Current)
External Director, FAST RETAILING CO., LTD.
(current)―

Joined Long Term Credit Bank of Japan,
LimitedJoined McKinsey & Company
Partner, McKinsey & Company
Joined FAST RETAILING Co., Ltd.
Note 4
Group Executive Officer & CFO, Group Senior)
Executive Officer, FAST RETAILING Co., Ltd.
(current)
Director, FAST RETAILING CO., LTD. (current)―

Brief biography
April 1980
April 1991
June 2010

Director

Term ofofficeSeptember 2009
January 2012
November 2012
November 2013
November 2015
July 2017
November 2018

— 46 —

Joined Mitsubishi Corporation
Joined McKinsey & Company
Professor, The Graduate School ofInternational Corporate Strategy,
Hitotsubashi University (current)
President, Genesys Partners (current)
Senior Advisor, Boston Consulting Group
External Director, NEC Capital Solutions(current)
External Director, FAST RETAILING CO., LTD.
(current)
External Director, DENSO CORPORATION(current)
External Director, Ajinomoto Co., Inc.
(current)

Joined Goldman Sachs and Company
Joined Link Theory Holdings (US) Inc.
(currently Theory LLC), Headquarters (NewYork)
Joined FAST RETAILING Co., Ltd.
Chairman, Theory LLC (current)Group Executive Director, FAST RETAILING
Co., Ltd. (current)
UNIQLO USA LLC COO
Chairman, UNIQLO USA LLC (current)
CEO, Chairman and President,
J BRAND HOLDINGS, LLC (current)
Director, FAST RETAILING CO., LTD (current)

Note 4

4,781

Position

Responsibilities

Name

Date of birth

September 2012
Koji Yanai

19 May 1977
May 2013
September 2013
November 2018
April 1966

September 1972
March 1993

April 1997
Standing Statutory
AuditorAkira Tanaka

26 June 1942

Number ofshares held(Thousand shares)

Joined Mitsubishi Corporation
Seconded to Princes Limited (food businesssubsidiary in Great Britain)
Joined FAST RETAILING Co., Ltd., responsiblefor UNIQLO Sports Marketing
Note 4
Director, UNIQLO Global MarketingGroup Executive Officer, FAST RETAILING Co.,
Ltd. (current)
Director, FAST RETAILING CO., LTD (current)

4,780

Joined The Taisei Fire and Marine Insurance
Company Limited (currently Sompo Japan
Nipponkoa Insurance Inc.)
Joined McDonald’s Co. (Japan), Ltd. (currently
McDonald’s Holdings Company (Japan), Ltd.)
Director, McDonald’s Co. (Japan), Ltd.
(currently McDonald’s Holdings Company(Japan), Ltd.)
Deputy President and Director, McDonald’sCo. (Japan), Ltd. (currently McDonald’s
Holdings Company (Japan), Ltd.)
Note 5Advisor, FAST RETAILING CO., LTD.
Managing Director, FAST RETAILING CO., LTD.
Senior Vice President, UNIQLO CO., LTD.
Senior Vice President, FAST RETAILING CO.,LTD.
Statutory Auditor, FAST RETAILING CO., LTD.
(current)
Representative Director of FR Health
Insurance Organization (current)
Council member, Special Olympics Japan(current)

3

Brief biography
April 2001
April 2009

Director

Term ofofficeAugust 2003
November 2003
November 2005
March 2006
November 2006
April 2011
October 2011

— 47 —

Position

Responsibilities

Name

Date of birth

September 2005
January 2008

Masaaki Shinjo

28 January 1956

March 2009
September 2009
March 2011
April 2011
November 2012
November 1978
August 1982
April 1992
November 1993
August 2001

Statutory Auditor

Takaharu Yasumoto

10 March 1954

Number ofshares held(Thousand shares)

Note 6―

Joined Asahi & Co. (currently KPMG AZSA LLC)
Registered as a member of Japanese Instituteof Certified Public Accountants
President, Yasumoto CPA Office (current)
External Statutory Auditor, FAST RETAILING
CO., LTD. (current)
External Statutory Auditor, ASKULCorporation (current)
Statutory Auditor, LINK INTERNATIONAL CO., Note 6
LTD. (currently LINK THEORY JAPAN CO., LTD.)(current)
External Statutory Auditor, UNIQLO CO., LTD.
(current)
Guest Professor, Chuo Graduate School ofInternational Accounting
External Statutory Auditor, UBIC Inc.
(currently FRONTEO, Inc.) (current)

4

Brief biography
April 1983
February 1994
September 1998

Standing Statutory
AuditorTerm ofofficeJune 2003

November 2005
April 2007
June 2010— 48 —

Joined ASAHIPEN CORPORATION
Joined FAST RETAILING CO., LTD.
Entrusted operating officer, manager ofadministration, FAST RETAILING CO., LTD.
General Manager, Group Auditing, FASTRETAILING CO., LTD.
Director, Onezone Corp (currently G.U. CO.,LTD.)
General Manager, Corporate Administration,
FAST RETAILING CO., LTD.
Statutory Auditor, GOV Retailing Co., Ltd.
(currently G.U. CO., LTD.)
General Manager, Corporate Planning &Management, FAST RETAILING CO., LTD.
Auditor, FAST RETAILING (CHINA) TRADING
CO., LTD. (current)
Statutory Auditor, FAST RETAILING CO., LTD.
(current)

Position

Responsibilities

Name

Date of birth

April 1999

Keiko Kaneko

11 November 1967

January 2007
April 2007
November 2012
November 2012
June 2013
February 1975
January 1986
April 1986
March 1989
April 2002

Statutory Auditor

Takao Kashitani

7 November 1948
June 2012

June 2012
November 2018
Total
(Notes)

1
2.
3.
4.
5.
6.

Number ofshares held(Thousand shares)

Joined Mitsubishi Corporation
Registered as a member of Japan Federationof Bar Associations
Joined Anderson, Mori & Tomotsune (AM&T)
law firm
Partner, AM&T (current)
Guest associate professor, Tokyo
Note 6
University Graduate School of Law
External Statutory Auditor, FAST RETAILING
CO., LTD. (current)
External Statutory Auditor, UNIQLO CO., LTD.
(current)
External Statutory Auditor, The Asahi
Shimbun Company (current)―

Kashitani Public Accountant Office (current)
Representative, CENTURY Audit Corporation(currently Ernst & Young ShinNihon LLC)
Representative Director & CEO, Brain Core
Co., Ltd. (current)
Representative Director & CEO, F P Brain Co.,
Ltd. (current)
Specially appointed professor, Chuo
University Graduate School of International
Note 5
Accounting Department of Research(professional graduate school)
External Director, Tokyo Electric Power
Company (currently Tokyo Electric Power
Company Holdings)
External Director, Japan Freight Railway
Company (current)
External Statutory Auditor, FAST RETAILING
CO., LTD. (current)―

Brief biography
April 1991
April 1999

Statutory Auditor

Term ofoffice32,556

Directors Toru Hambayashi, Nobumichi Hattori, Masaaki Shintaku, Takashi Nawa and Naotake Ohno are External
Directors as provided for in Article 2, Paragraph 15 of the Companies Act.
Directors Kazumi Yanai and Koji Yanai are relatives in the second degree of Tadashi Yanai, Representative
Director, Chairman and President.
Statutory Auditors Takaharu Yasumoto, Keiko Kaneko and Takao Kashitani are External Statutory Auditors asprovided for in Article 2, Paragraph 16 of the Companies Act.
For a one-year term beginning at the conclusion of the Ordinary General Meeting of Shareholders on 29
November 2018.
For a four-year term beginning at the conclusion of the Ordinary General Meeting of Shareholders on 29
November 2018.
For a four-year term beginning at the conclusion of the Ordinary General Meeting of Shareholders on 24
November 2016.

— 49 —

8. Corporate Governance Report
1.
(1)

Corporate Governance Practice
Basic Thinking on Corporate Governance
To become the world’s No. 1 Digital Retailer, in harmony with society and the times, the Company strives to raise thelevel of its corporate governance to strengthen the independence and the degree of monitoring of the Board of Directors
while achieving management that is efficient and transparent.

(2)

Details of Company organization and internal control systems(i)

Details of company organization
The Company has built a corporate governance system consisting of a Board of Directors, a Board of Statutory Auditors,
and various committees. As a key element to strengthen our corporate governance systems, the Company has instituteda system to entrust operating officers (transferring some management authority away from the Board of Directors), to
separate management decision-making from operations performance functions. In addition, the management committee(Monday meeting) meets weekly, to examine tasks assigned to it by the Board of Directors, for the speedy revision ofmanagement strategy and planning.
Also, as at the previous General Meeting of Shareholders on 29 November, 2018, five of the nine Directors are External
Directors, with the CEO acting as chairman of the Board of Directors. The External Directors have an abundance ofknowledge and experience in corporate management. As the Company’s main decision-making body for the performanceof management and operations, the Board of Directors meets at least once a month to discuss and decide upon importantmanagement issues. The External Directors all participate actively in Board of Directors discussions, and offer theiropinions without reservations.
Three of the five members of the Board of Statutory Auditors are External Statutory Auditors. The Standing Statutory
Auditor presides. The External Statutory Auditors are fully independent, and they have ample knowledge and experience
as attorneys and certified public accountants. Through their participation in the Board of Directors, the Statutory Auditors
are fully aware of the decision-making process of the Board of Directors, and able to fulfill their supervisory obligations.
They also supervise the Directors’ performance of their executive duties through regular conversations with the Directors,
other executive officers, other employees, and Statutory Auditors of subsidiary corporations. The Board of Statutory
Auditors meets at least once a month to make decisions about audit policies and planning. It meets quarterly to receive
briefings and reports from the independent auditors.
The various committees complement the work of the Board of Directors. The External Directors and External Statutory
Auditors also serve as members of these committees. The roles and activities of the committees are shown below.
Human Resources Committee
The Human Resources Committee, chaired by external director, discusses important organizational changes andadjustments to human resource systems across the Group, and offers views and suggestions to the Board. The committee
held 4 meetings during fiscal 2018.
Sustainability Committee
The Sustainability Committee discusses and directs Fast Retailing’s overall sustainability strategy, from compiling andpublishing the annual sustainability report to promoting environmental protection, social responsibility, compliance, anddiversity. The head of the Sustainability Department chairs the committee. Members include outside experts, Statutory
Auditors, and Group officers. The committee held 4 meetings during fiscal 2018.
Disclosure Committee
The Disclosure committee, chaired by the company official in charge of disclosing information to the Tokyo Stock
Exchange (TSE), is tasked with boosting management transparency by “disclosing information that is timely, accurate, fair,and easy to understand.” The Committee is responsible for both timely and voluntary disclosures to the TSE and the Stock
Exchange of Hong Kong regarding matters that may materially impact investor and shareholder investment decisions. The
committee held 12 meetings during fiscal 2018.

— 50 —

IT Investment Committee
The IT Investment Committee debates and advises on the IT investments that will best achieve our targets for sweepingchanges to our information systems and business operations. That means deliberating the efficacy of each individual
investment, and checking whether IT investment budgets submitted by external specialist organizations are reasonable
and appropriate. The IT Investment Committee is chaired by the President, and the members and observers include
outside experts, external directors, and executives. The committee held 13 meetings during fiscal 2018.
Code of Conduct Committee
The Code of Conduct Committee considers how best to resolve any violations of the Fast Retailing Group Code of Conduct(CoC), and when to make improvements to it. It offers guidance on educating executives and employees about therequirements of the CoC, and on operating the confidential hotline. The committee is chaired by the head of the Legal
Department, and committee members include Statutory Auditors (including External Statutory Auditors) and executive
officers. The committee held 12 meetings during fiscal 2018.
Business Ethics Committee
This committee ensures the Group does not use an advantageous position to exert undue pressure on businesscounterparts such as partner factories and suppliers. The committee provides advice and counsel to departments basedon external field inspections and partner company surveys. The committee is chaired by the head of the Sustainability
Department, and includes Statutory Auditors (including External Statutory Auditors) and executive officers. The
committee held 12 meetings during fiscal 2018.
Risk Management Committee
To identify risks latent in business activities on a regular basis and to strengthen systems for detecting and managing
material risks, this committee analyzes and assesses the extent of impact and frequency of risks on business, anddiscusses countermeasures for business areas high in risk to contain risk before it occurs. The committee is chaired by
the Group CFO, and committee members include outside directors and executive officers. Activities of the committee
commenced in September 2018.
Human Rights Committee
Chaired by an outside expert, this committee deliberates and advises on the execution of human rights due diligence. The
committee also provides counselling and conducts education and awareness-raising activities for departments involved in
the execution of business to ensure that we fulfil our obligations to respect human rights under the Fast Retailing Group
Human Rights Policy established in 2018, and conduct business operations appropriately. In addition, the committee is
responsible for providing recommendations and supervision as well as conducting investigations and taking remedial
measures when a human rights violation occurs. The committee held one meeting during fiscal 2018.
Below is a diagram of our corporate governance system(As at November 30, 2018)
Shareholders (General Meeting of Shareholders)Elect/dismiss

Elect/dismiss
ReportBoard of Statutory Auditors

Audit/Report(Five out of nineare external)(Three out of ﬁve are external)

ReportBoard of Directors

Report/cooperation

Independent
Auditors

Sustainability Committee
Disclosure Committee

Consult

Elect/dismiss
Elect, dismiss, nominate,
remove, supervise

Audit/Report

Internal
Audit
Division

Human Resources Committee

IT Investment Committee
Code of Conduct Committee
Business Ethics Committee
Risk Management Committee

Report/Supervise

Chief Executive Oﬃcers
Group Oﬃcers— 51 —

Human Rights Committee

(ii)Establishing Internal Control Systems
The Company seeks to ensure its business operations are legitimate, fair, and efficient by establishing a system of internal
controls that covers the entire Fast Retailing Group (FR Group) and which adheres strictly to the Group’s policies andrules, including the Group’s management principles, the Fast Retailing Way (FR Way), and the Fast Retailing Group Codeof Conduct (FR Code of Conduct).

A.

Ensuring FR Group Directors’ Duties Comply with Laws, Regulations, and Articles of Incorporation
1.
Directors and Group officers (collectively, Directors) of all FR Group companies comply faithfully with the Group’s
management principles, the FR Way, the FR Code of Conduct, and other internal Company rules and regulations,and promote strict adherence to corporate ethics and compliance across the Group as a whole. The Directors also
ensure the effectiveness of the Company’s rules and principles by reviewing them regularly and revising themwhen necessary to reflect changes in society and Company business activities, and the operation of the FR Code of
Conduct.

B.

C.

2.

The Company appoints either the Group officer overseeing the Legal Department or the head of the Legal
Department as the compliance officer, tasked with establishing Company and Group-wide compliance frameworks
and resolving compliance-related issues.

3.

The Company promotes fairness and transparency in senior management decision-making by appointing two or
more External Directors to the Board of Directors. Statutory Auditors for the Company or Group subsidiaries may
attend the Board meetings of companies they audit and express timely opinions. Company or Group subsidiary
Directors may engage external lawyers, certified public accountants, etc. to avoid potential violation of laws andimplement preventive measures. If Company or Group subsidiary Directors discover another Director has acted
illegally, they must report immediately to the Statutory Auditors, the President, and the compliance officer.

Ensuring FR Group Employees’ Duties Comply with Laws, Regulations, and Articles of Incorporation
1.
Company and Group subsidiary Directors are responsible for establishing a framework to ensure that all Group
employees comply with the management principles, the FR Way, the FR Code of Conduct, and other internal
company rules. They are also responsible for training employees in compliance awareness.
2.

The Company has an Internal Audit Department that supervises the FR Group’s internal control systems, and a Legal
Department that oversees compliance.

3.

If Directors of the Company or Group subsidiaries discover a legal or compliance violation, they should report thematter immediately to other Directors. Any serious legal violation should be reported immediately to the Statutory
Auditors, the President, and the compliance officer.

4.

The Company has set up an internal reporting system (hotline) for Directors and employees of the Company orGroup subsidiaries to report illegal actions or compliance violations.

5.

The Code of Conduct Committee, which includes external specialists such as lawyers and certified public
accountants, conducts regular reviews of compliance maintenance and hotline operation, and makes necessary
improvements. If Directors of the Company or Group subsidiaries detect a problem with the hotline operation, theyshould apply to the Code of Conduct Committee and request improvements.

Data Storage and Management Relating to Execution of FR Group Directors’ Duties
The documents listed below relating to Company and Group subsidiary Directors’ duties are retained as proof of decisionmaking and business-execution processes, as stipulated by law, Articles of Incorporation, and Board of Directors andCompany regulations and guidelines on document management and confidential information. These documents are
stored and managed appropriately and can be easily retrieved for reference or inspection during the legally required
storage period.
•

Shareholders’ meeting minutes and relevant documentation•

Board meeting minutes and relevant documentation•

Minutes of important meetings held by Directors and relevant documentation•

Minutes of meetings held by other important employees and relevant documentation— 52 —

D.

Managing Risk of Losses to FR Group1.
The Company regularly analyzes risks relating to the Company and Group subsidiaries to identify risks that could,
directly or indirectly, cause financial loss, interrupt or stop business, damage brand images or the credibility of theCompany or FR Group, and manages any risks accordingly.
2.

E.

If unforeseen circumstances should arise, a task force headed by the President or a Director appointed by the
President shall be established to prevent increased losses and minimize damage. For a faster response, the task
force may organize an external advisory team including lawyers and certified public accountants.

Ensuring Efficient Execution of Director Duties
1.
To ensure that the duties of the Company and Group subsidiary Directors are performed efficiently, the Company
holds regular monthly meetings of the Board of Directors, which includes a number of External Directors, and holds
ad hoc meetings when necessary. Group subsidiaries which have their own Board of Directors also hold Board
meetings as stipulated by law.
2.

Important matters concerning Company and Group management policy and management strategy shall be
discussed beforehand at the weekly management meeting (Monday meeting) chaired by the President, anddecisions made after due deliberation.

3.

The execution of decisions made by the Board of Directors shall be conducted efficiently and appropriately by theoperating offers designated by the Board.

F.

Ensuring Reliable FR Group Financial Reports
Systems have been established to ensure reliable financial reporting of Company and FR Group subsidiary activities, andthe appropriate acquisition, holding, and disposal of assets. These activities are closely monitored. The Company has alsoestablished a Disclosure Committee to ensure the Company and Group subsidiaries disclose information in a timely andappropriate fashion.

G.

Ensuring Proper Execution of Corporate Groups Formed by Company and FR Group Subsidiaries
1.
To ensure appropriate operations of FR Group companies, all Group companies are required to uphold the
management principles, the FR Way, and the FR Code of Conduct. These principles also underpin the rules andregulations used when establishing entrusted individual Group companies. While respecting their autonomy,
the Company oversees associated companies by determining their rules of business and requiring them to refer
important items to the Company for consultation or final determination. The Company monitors associates ifnecessary. If Directors of Group subsidiaries discover any legal violations or serious compliance breaches, theyshould report them to the Statutory Auditors, the President, and compliance officer.
2.

H.

If Directors of Group subsidiaries consider the Company’s management principles or guidelines violate the law,undermine corporate ethics in a specific country, or create a compliance problem, they shall report to the Internal
Audit Department or the Legal Department. Those departments shall report swiftly to the Board of Statutory
Auditors, the President, and the compliance officer, and request appropriate improvements.

Employee Assistants Requested by Statutory Auditors and Ensuring the Independence and Effectiveness of Statutory
Auditors’ Instructions to Employee Assistants
1.
Upon receiving a request from the Board of Statutory Auditors, the Company shall establish rules to determine
which employees assist the Statutory Auditors with their duties, and assign appropriate internal personnel to the
Statutory Auditors or employ external lawyers or certified public accountants. To ensure assistants are independentof the Directors, their performance will be evaluated by Statutory Auditors, and the Board of Statutory Auditors willapprove decisions made by the Board of Directors on their assignment, dismissal, transfer, and wages, etc.
2.

Assistants shall report directly to the Statutory Auditors and may not hold concurrent positions that involve theexecution of Company business.

— 53 —

I.

Director and Employee Reporting to Statutory Auditors and Other Reports
1.
Directors and employees of the Company and Group subsidiaries shall report any important matters that might
impact the Company’s operations or corporate performance to the Statutory Auditors. Irrespective of these rules,
the Statutory Auditors may request reports from Directors or employees of the Company, or Directors, employees,
and Statutory Auditors of Group subsidiaries if necessary.
2.

The Company and Group subsidiaries shall uphold the Group’s management principles, the FR Way, and the FR
Code of Conduct, and maintain frameworks for reporting legal violations or breaches of compliance rules to the
Statutory Auditors. If the Statutory Auditors judge there is a problem with this framework, they can inform the
Directors and the Board of Directors and request improvements.

3.

The Company has made it widely known to Directors and employees across the entire FR Group that using reports
submitted to Statutory Auditors to penalize the submitter is forbidden. Submitted reports are protected by strict
information management systems.

4.

Statutory Auditors communicate closely with the Independent Auditor, the Internal Audit Department, andStatutory Auditors at Group companies through regular meetings and information exchange.

J.

Policy on Prepayment or Reimbursement of Expenses for Statutory Auditors
If Statutory Auditors submit requests for prepayment or reimbursement of expenses incurred during the course of theirduties, the Company shall pay invoices or settle debts swiftly, unless it proves the requested expenses or debt were notnecessary to the performance of the Statutory Auditor’s duties.

K.

Other Matters Ensuring Efficient Audits by Statutory Auditors
1.
Statutory Auditors attend Board of Directors meetings and other important meetings to observe the reporting anddiscussion of significant issues. They may voice opinions if necessary.
2.

L.

(iii)

The President meets regularly with Statutory Auditors to consult on pressing issues, ensure appropriate auditing
environments, and exchange views on significant issues highlighted in the auditing process.

Eliminating Anti-social Forces
The Company works to extinguish anti-social forces by incorporating the following content in the FR Code of Conduct, andinforming all executives and employees of its uncompromising stance:
1.

The Company adopts a firm stance against and refuses to engage with anti-social forces. The Company forbids theuse of financial payments to resolve unreasonable claims from anti-social forces.

2.

The Company forbids the use of anti-social forces for Company or individual gain.

Internal audits and audits by Statutory Auditors
The Company has an Internal Audit Department that is completely independent from business operations departments.
As at 31 August 2018, 6 specialists are employed. A regular review of this internal administrative system is conducted toensure it remains suitable and effective and the audit of operations performance is also conducted.
In addition, Statutory Auditors are members of the Board of Directors, and they also audit the status of management
performance. The Board of Statutory Auditors described above consists of two Full-time Standing Statutory Auditors andthree External Statutory Auditors. Its purpose is to receive reports on important matters regarding the Company’s internal
audit department as well as audits by the independent auditors, discuss these reports, and to cooperate as needed.
Moreover, Statutory Auditors Takaharu Yasumoto and Takao Kashitani are certified public accountants with substantial
expertise in the areas of finance and accounting.

— 54 —

(iv)Accounting audits
Name of audit firm

Deloitte Touche Tohmatsu LLC

Name of CPA, etc.

Number of years ofcontinuing auditing

Designated limited liability
partner and engagement
partner

Koichi Okubo—(Note)

Designated limited liability
partner and engagement
partner

Hirofumi Otani—(Note)

Designated limited liability
partner and engagement
partner

Emiko Minowa—(Note)

Based on the audit plan formulated by Deloitte Touche Tohmatsu LLC, the group of assistants to the independent auditors
consists of 19 CPAs, 3 successful applicants of CPA and 27 others.
(Note) Omitted because the number of years of continuing auditing is less than seven years.
(v)

Functions, roles, and selection of External Directors and External Statutory Auditors
The Company has five External Directors and three External Statutory Auditors.
It is the Company’s expectation that the External Directors will keep an eye on the management monitoring function.
From a business perspective, the advice of these individuals, with their abundance of experience and expertise, makes amajor contribution to enhance the value of our enterprise.
It is also expected that External Statutory Auditors will monitor the performance of the Board of Directors. The Company
receives valuable advice based on their rich experience in a wide variety of fields.
Director Naotake Ohno serves as a special consultant to Daiwa House Industry Co., Ltd., and we are currently engaged inbusiness negotiations concerning an office lease agreement with that company.
Aside from the above, there are no distinctive interests between the Company and other External Directors or External
Statutory Auditors.
The External Directors and External Statutory Auditors receive reports at the Board of Directors meeting regarding
internal audits, the operation of internal controls, audits by Statutory Auditors, and the results of accounting audits. In
addition, the External Statutory Auditors have mutual alliances with the Internal Audit Department and Independent
Auditors, as detailed in (iii) Internal audits and audits by Statutory Auditors.
With regard to the selection of External Directors and External Statutory Auditors, the Company has no specific standards
on independence from the Company, but it is the Company’s responsibility to reflect their advice and counsel in its
decision-making processes in an objective and independent fashion. For many years now, the Company has chosen many
External Directors with rich experience as corporate managers in industry, with broad-ranging expertise and discerningviews. In addition, to incorporate wide range of stakeholders’ views in the audits of our business activities, we value boththe independence and the diversity of our External Statutory Auditors in various fields.

— 55 —

(vi)Items regarding Independent officers
Five of the nine members of the Fast Retailing Board are external directors, and all of those five are recognized as
Independent officers in accordance with the rules of the Tokyo Stock Exchange. The majority of the directors on the Board
are external in order to heighten the Board’s independence and strengthen its supervisory function.
In addition to the independence criteria set by the Tokyo Stock Exchange, Fast Retailing has set the following
independence standards and qualifications for external officers, including External Directors:
A person shall not qualify as an independent officer of Fast Retailing, if:(1)he/she is, or has been within the past three years, a Business Partner*1 or an Executive Officer*2 of a Business
Partner*2 of the Fast Retailing Group, whose annual business dealings with Fast Retailing Group during the mostrecent business year constituted 2% or more of the Fast Retailing Group’s consolidated revenue;(2)

he/she is, or has been within the past three years, a Business Partner*1 of the Fast Retailing Group or an Executive
Officer of a Business Partner*2 of Fast Retailing, whose annual business dealings with the Fast Retailing Groupduring the most recent business year constituted 2% or more of the Business Partner’s consolidated revenue;(3)

he/she is a consultant, an accountant, or an attorney who receives, or has received over the past three years, any
monies or property equivalent to 10 million yen or more from the Fast Retailing Group, except for remuneration fora director or a statutory auditor; or(4)

he/she is, or has been over the past three years, a partner, an associate, or an employee of an independent auditorof Fast Retailing or its subsidiaries.

*1*2“Business Partner” includes law firms, auditing firms, tax accounting firms, consultants, and any other organizations.
“Executive Officer” means (i) for corporations, Executive Directors (as defined in the Companies Act of Japan),
Executive Officers (shikko-yaku, as defined in the Companies Act of Japan), corporate officers, and employees, and(ii) for non-corporate entities (including general incorporated associations (shadan-hojin), general incorporated
foundations (zaidan-hojin), and partnerships), directors with executive functions, officers, partners, associates,
staff, and other employees.

(vii) Outline of External Directors’ limited liability agreement
The Company has concluded agreements with the External Directors, External Statutory Auditors, and Independent
Auditor, limiting their liabilities based on provisions in Article 427, Paragraph 1 of the Companies Act, which limits theliabilities for damages as provided for in Article 423, Paragraph 1 of the Companies Act.
These agreements state that liabilities for damages shall be limited to the higher amount of either 5 million yen or theamount stipulated by law. For Deloitte Touche Tohmatsu LLC, the limit of liabilities for damages shall be limited to thehighest of the following amounts multiplied by two: the total economic benefits received or to be received from theCompany as remuneration and payment received for performance of duties in each business year during its service as the
Independent Auditor.
(viii) Limitation of liabilities for Directors and Statutory Auditors
Under the stipulations of the Company’s articles of incorporation (Article 426-1 of the Companies Act), the Company may
exempt, by decision of the Board of Directors, Directors (including former Directors) and Statutory Auditors (including
former Statutory Auditors) from liabilities for actions described in Article 423-1 of the Companies Act, to the extent
allowed by law. The purpose of this is to create an environment where Directors and Statutory Auditors can perform theirduties and pursue their expected roles to the full extent of their abilities.

— 56 —

(3)Details of executive remuneration
Details of remuneration of the Company’s executives are as follows:

Executive category

Total amount of
remuneration(Millions of yen)

Total amount of remuneration,by type (Millions of yen)
Basic
Compensation
BonusesNumber of
executives(Persons)

Directors (excluding external directors)

400

240

160

1

Statutory Auditors (excluding External
Statutory Auditors)

35

35

—

2

External Directors and External
Statutory Auditors

82

82

—

8

(i)
(ii)
(iii)

Directors’ remuneration 450 million yen (of which, External Directors 50 million yen)
Statutory Auditors’ remuneration 67 million yen (of which, External Statutory Auditors 32 million yen)
Total consolidated executive remuneration, by executive, but only for those whose total consolidated executive
remuneration is at least 1 million yen
Representative director Tadashi Yanai
400 million yen

Policies for determining executive compensation
Directors’ compensation is calculated based on various factors including areas of responsibility, liability, and earnings
performance. Directors’ compensation has to be approved by the Board of Directors in accordance with the guidelines for
executive compensation set by the General Meeting of Shareholders. Regarding compensation for Statutory Auditors, thisis fixed in consultation with the Statutory Auditors, following the guidelines for Statutory Auditor compensation set by theGeneral Meeting of Shareholders.

(4)

Other stipulations in the Company’s articles of incorporation(i)

Number of directors
The Company’s articles of incorporation stipulate that the number of directors shall be at least three but not more than
ten.

(ii)

Election criteria for directors
The Company’s articles of incorporation stipulate that the election of directors shall not be based on cumulative voting.
Also, the articles of incorporation stipulate that elections shall be based on a majority vote by shareholders, with at least
one-third of eligible shareholders participating.

(iii)

Procedure for deciding dividends from surplus
Regarding the payment of dividends from surplus pursuant to the Companies Act, Article 459-1, the Company’s articles ofincorporation stipulate that dividends are decided by a resolution of the Board of Directors, and not by a resolution of theGeneral Meeting of Shareholders, unless otherwise stipulated by law. The authority to decide payments of dividends fromsurplus is granted to the Board of Directors to give flexibility in the return of cash to shareholders.

(iv)

Interim dividend
As part of the Company’s efforts to be flexible in the return of cash to shareholders, and pursuant to the stipulations ofCompanies Act Article 454-5, and under the Company’s articles of incorporation, an interim dividend may be paid at theend of February every year by a resolution of the Board of Directors.

(v)

Special resolutions of the General Meeting of Shareholders
Regarding extraordinary resolutions of the General Meeting of Shareholders based on the Companies Act, Article 3092, the Company’s articles of incorporation stipulate that these resolutions shall be passed by two-thirds vote of theshareholders, in which at least one-third of the eligible shareholders participate. This easing of the quorum rules for
extraordinary resolutions by the General Meeting of Shareholders is meant to ensure the smooth functioning of theGeneral Meeting of Shareholders.

— 57 —

(5)Status of shareholding
The information about shareholding for the Company, which has held the largest investment shares in the Group, is asfollows:(i)

Investment shares held for purposes other than long-term holding: issues, number of issues, and balance sheet total
Number of issues

Balance sheet total

5 issues(ii)

2,656 million yen

Investment shares held for purposes other than long-term holding: class, issues, number of shares, balance sheet
total,and purpose of investment
Year ended 31 August 2017
Special investment shares
Not applicable.
Year ended 31 August 2018
Special investment shares
Issue(s)Number of shares

Balance sheet total

Purpose of investment

Matsuoka Corporation

286,500

1,052 million yen To maintain business relationship

Crystal International
Group Ltd

20,815,000

1,443 million yen To maintain business relationship(iii)

Investment shares held for purpose of long-term holding
Not applicable.

(2)
(i)

Details of Independent Auditors’ remuneration
Details of remuneration for CPAs, etc.
Year ended 31 August 2017

Year ended 31 August 2018

Remuneration for
Audit assurance
service(Millions of yen)

Remuneration for
Services other than
audit assurance(Millions of yen)

Remuneration foraudit andcertification duties(Millions of yen)

Remuneration forduties otherthan audit(Millions of yen)

Reporting Entity

161

57

219

36

Consolidated subsidiaries

30

—

40

—

Total

191

57

259

36

Class

(ii)

Other important details regarding remuneration
Year ended 31 August 2017 (1 September 2016 — 31 August 2017)
The Company’s consolidated subsidiaries paid 322 million yen as remuneration for audit and certification duties, andother duties, to member firms of the Ernst & Young global network.
Year ended 31 August 2018 (1 September 2017 — 31 August 2018)
The Company’s consolidated subsidiaries paid 352 million yen as remuneration for audit and certification duties, andother duties, to member firms of the Deloitte global network.

— 58 —

(iii)

Non-auditing services provided by the CPA firm to the reporting entity
Year ended 31 August 2017 (1 September 2016 — 31 August 2017)
The Company pays the external independent auditors consideration for the provision of advisory and other services
concerning accounting matters.
Year ended 31 August 2018 (1 September 2017 — 31 August 2018)
The Company pays the external independent auditors consideration for the provision of advisory and other services
concerning accounting matters.

(iv)

Policies for determination of accounting audit remuneration
The Company’s articles of incorporation stipulate that remuneration to accounting independent auditors for audit
services is determined by the representative director, with the consent of the Board of Statutory Auditors.

— 59 —

9. FINANCIAL INFORMATION
1. Preparation of consolidated financial statements(1)

Since the Company meets all criteria of a “specific company” defined in Articles 1-2 of the Rules Governing Term, Formand Preparation of Consolidated Financial Statements (Financial Ministerial Order 28, 1976) (hereinafter referred to as
the “Rules on Consolidated Financial Statements”), the consolidated financial statements of the Group were prepared inaccordance with IFRS pursuant to Article 93 of the Rules on Consolidated Financial Statements.

(2)

The financial statements of the Company were prepared in accordance with the Rules Governing Term, Form and
Presentation of Non-consolidated Financial Statements (Financial Ministerial Order 59, 1963) (hereinafter referred to as
the “Rules on Non-consolidated Financial Statements”).
The non-consolidated financial statements are prepared in accordance with the provisions set out in Article 127 of theRules on Non-Consolidated Financial Statements, etc., as the Company is categorized as a company that may be allowed
to prepare its financial statements according to special provisions.

(3)

In this report, amounts are rounded down to the nearest million Japanese yen.

2. Accounting Audits
The Company’s consolidated and non-consolidated financial statements for the fiscal year from 1 September 2017 – 31
August 2018 have been audited by Deloitte Touche Tohmatsu LLC in accordance with auditing standards generally accepted inJapan pursuant to Article 193-2-1 of the Financial Instruments and Exchange Act. Deloitte Touche Tohmatsu LLC also conducted
the audit of consolidated financial statements of the Company in accordance with International Standards on Auditing (ISA).
Our independent auditor has changed as shown below.
Previous consolidated fiscal year and previous fiscal year
Current fiscal year and current fiscal year

Ernst & Young ShinNihon LLC
Deloitte Touche Tohmatsu LLC

The matters stated in the OVERSEAS REGULATORY ANNOUNCEMENT are as follows.

(1)

Overview of incoming and outgoing independent auditors

1.
2.

Incoming independent auditor Deloitte Touche Tohmatsu LLC
Outgoing independent auditor Ernst & Young ShinNihon LLC(2)

Expected date of change

30 November, 2017(3)

Date of most recent appointment of outgoing independent auditor

8 December, 2016(4) Opinions included in the past three years of Independent auditor’s reports and other documents created by
the outgoing independent auditor
No pertinent items.

(5)

Background and reasons behind the decision to change independent auditors
The appointment term of the Company’s current independent auditor, Ernst & Young ShinNihon LLC, is set to mature at theconclusion of the FY2017 Annual General Meeting of Shareholders of the Company scheduled to be held on November 30, 2017.
The Board of Statutory Auditors decided to take the opportunity to comprehensively assess the appointment based on the
Company’s standards for selecting and evaluating independent auditors. As a result, the Board of Statutory Auditors decided toappoint Deloitte Touche Tohmatsu LLC as its new independent auditor.

— 60 —

(6) Opinions of the outgoing independent auditor regarding the background and reasons for the decision listed inpoint 5 above and relating to entries in Independent auditor’s reports and other documents
The Company received communication from Ernst & Young ShinNihon LLC that the firm had no specific opinions to express
in relation to the above items. Ernst & Young ShinNihon LLC has also provided a confirmation to the Company that there areno circumstances that need to be brought to the attention of shareholders and Hong Kong Depository Receipt holders of theCompany in connection with its retirement.

3. Special measures for ensuring the accuracy of our consolidated financial statements and a framework forensuring consolidated financial statements are appropriately prepared in accordance with IFRSThe Company has taken special measures to ensure the appropriateness of our consolidated financial statements and has
established a framework to ensure our consolidated financial statements are appropriately prepared in accordance with IFRS.
Details of these are given below.
(1)

To establish a framework capable of adapting appropriately to changes in accounting standards, the Company has
made efforts to build specialist knowledge by appointing employees who are well versed in IFRS, joining the AccountingStandards Board of Japan and similar organizations, and participating in training programs.

(2)

To ensure that we appropriately prepared consolidated financial statements in accordance with IFRS, we drafted Group
guidelines for accounting practices based on IFRS, and have been conducting accounting procedures based on theseguidelines. We regularly obtain standards and press releases published by the International Accounting Standards Board(“IASB”), study the latest standards and their potential impact on our Company, and update our Group guidelines foraccounting practices accordingly.

— 61 —

1. Consolidated Financial Statements(1) CONSOLIDATED STATEMENT OF FINANCIAL POSITION(Millions of yen)
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Derivative financial assets
Income taxes receivable
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Financial assets
Investments in associates accounted
for using the equity method
Deferred tax assets
Other assets

Notes

As at 31 August 2017

As at 31 August 2018

8,31
9,31
11,31
10
31

683,80248,59830,426289,675
6,269
1,518
17,307

999,697
52,67735,359464,788
35,5191,702
28,353

1,077,598

1,618,097

13
14
14
11,31

136,979
15,88536,89577,608155,077
8,092
46,002
79,47616
19

13,47325,303
4,742

14,64926,378
5,691

12

12

Total non-current assets
Total assets
Liabilities and equity
LIABILITIESCurrent liabilities
Trade and other payables
Other financial liabilities
Derivative financial liabilities
Current tax liabilities
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Financial liabilities
Provisions
Deferred tax liabilities
Other liabilities

20,31
11,17,31
31
21
12

11,17,3121
19
12

310,888335,368

1,388,486

1,953,466

204,008
11,844
6,083
25,864
8,780
54,840214,542
171,854
6,917
21,503
11,86872,722

311,421499,410

273,467
15,40910,00016,144

502,671
18,912
13,003
16,690315,022551,277

626,443

1,050,688

10,273
14,373
698,584(15,563)
24,102

10,273
18,275815,146(15,429)
34,669Non-controlling interests

731,770
30,272862,936
39,841

Total equity

762,043902,777

1,388,486

1,953,466

Total non-current liabilities
Total liabilities
EQUITY
Capital stock
Capital surplus
Retained earnings
Treasury stock, at cost
Other components of equity
Equity attributable to ownersof the parent

22
22
22
22
22

Total liabilities and equity— 62 —

(2) CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Consolidated statement of profit or loss
(Millions of yen)
Year ended
31 August 2017

Notes
Revenue

23

Cost of sales
Gross profit
Selling, general andadministrative expenses
Other income
Other expenses
Share of profit and loss of associates
accounted for using the equity method

24
25
15,25

Year ended
31 August 2018

1,861,917(952,667)

2,130,060(1,080,123)

909,249

1,049,936(725,215)
6,321(14,567)(797,476)
3,385(20,244)

16

625

611

Operating profit/(loss)
Finance income

26

Finance costs

26

176,414
19,917(2,932)

236,212
9,693(3,228)19

193,398(64,488)242,678(73,304)

128,910

169,373

119,280
9,630

154,811
14,562

128,910

169,373

1,169.70
1,168.00

1,517.71
1,515.23

Profit/(loss) before income taxes
Income taxes
Profit/(loss) for the year
Profit/(loss) for the year attributable to:
Owners of the parent
Non-controlling interests
Earnings per share
Basic (Yen)
Diluted (Yen)28
28— 63 —

Consolidated statement of comprehensive income(Millions of yen)
Year ended
31 August 2017

Notes
Profit/(loss) for the year
Other comprehensive income/(loss),
net of income/(loss)
Items that will not be reclassified
subsequently to profit or loss
Total items that will not be reclassified
subsequently to profit or loss
Items that may be reclassified
subsequently to profit or loss
Net fair value gain/(loss) on
available-for-sales financial
assets during the period
Exchange differences on translating
foreign operations
Cash flow hedges
Total items that may be reclassified
subsequently to profit or loss
Other comprehensive income/(loss),
net of Income tax
Total comprehensive income/(loss)
for the year

Year ended
31 August 2018

128,910

169,373

―

—

―

―

27

(245)

34

27

26,285
47,109(6,285)
17,73573,148

11,484

73,148

11,484

202,059

180,858

190,566
11,493

165,378
15,480202,059

180,858

27

Attributable to:
Owners of the Parent
Non-controlling interests
Total comprehensive income/(loss)
for the year

— 64 —

(3) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 August 2017
(Millions of yen)
Other components of equity

Equityattributableto owners
Nonof the controlling
Totalparent interests(47,183) 574,501
23,159

Capitalstock
10,273

Capitalsurplus13,070Retainedearnings
613,974

Treasurystock, atcost(15,633)——

119,280

—

—

—

—

—

119,280

9,630

128,910

—

—

—

—

(245)

24,61846,91371,28571,285

1,862

73,148——119,280—(245)

24,61846,91371,285

190,566

11,493202,059

22

—

—

—

(6)

—

—

—

—

(6)

—

(6)

22
22
22

—
—
—
—

642
—
754
(94)

—
(34,670)
—
—

75
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

718
(34,670)
754
(94)

—
(3,994)
—
(385)

718
(38,664)
754
(480)

—

1,303

(34,670)

69

—

—

—

—

(33,297)(4,379)(37,677)—
10,273

1,303
14,37384,610698,58469(15,563)(245)
2

24,61821,806

46,9132,293

71,285
24,102

157,268
731,770

7,113
30,272

164,381762,043

Notes
As at 1 September 2016
Net changes during theyear
Comprehensive
income/(loss)
Profit/(loss) for the year
Other comprehensive
income/(loss)
Total comprehensive
income/(loss)
Transactions with theowners of the Parent
Acquisition oftreasury stock
Disposal oftreasury stock
Dividends
Share-based payments
OthersTotal transactions withthe ownersof the Parent
Total net changes during
the year
As at 31 August 2017

Foreign
Available- currency Cash-flow
for-sale translation
hedge
reserve
reserve
reserve248(2,811) (44,619)

27— 65 —

Total
equity597,661For the year ended 31 August 2018
(Millions of yen)
Other components of equity

Equityattributableto owners
Nonof the controlling
Totalparent interests
24,102
731,770
30,272

Capitalstock
10,273

Capitalsurplus14,373Retainedearnings
698,584

Treasurystock, atcost(15,563)——

154,811

—

—

—

—

—

154,811

14,562

169,373

—

—

—

—

34

(6,376)

16,90910,567

10,567917

11,484——

154,811—34(6,376)

16,90910,567

165,378

15,480180,858

22

—

—

—

(1)

—

—

—

—

(1)

—

(1)

22
22
22

—
—
—

1,169
—
857

—
(38,248)
—

136
—
—

—
—
—

—
—
—

—
—
—

—
—
—

1,306
(38,248)857—(7,840)—1,306(46,088)
857

22

—

—

—

—

—

—

—

—

—

173

173

—

1,874

—

—

—

—

—

—

1,874

1,754

3,629

—

3,901

(38,248)

134

—

—

—

—

(34,212)(5,911)(40,124)—
10,273

3,901
18,275116,562
815,146134(15,429)34
37(6,376)
15,42916,90919,202

10,567
34,669131,165
862,936

9,568
39,841

140,734
902,777

Notes
As at 1 September 2017
Net changes during theyear
Comprehensive
income/(loss)
Profit/(loss) for the year
Other comprehensive
income/(loss)
Total comprehensive
income/(loss)
Transactions with theowners of the Parent
Acquisition oftreasury stock
Disposal oftreasury stock
Dividends
Share-based payments
Increase/(decrease)in equity due tocapital increase of
consolidated
subsidiary
Changes in ownershipinterests in
subsidiaries without
losing controls
Total transactions withthe ownersof the Parent
Total net changes during
the year
As at 31 August 2018

Foreign
Available- currency Cash-flow
for-sale translation
hedge
reserve
reserve
reserve2
21,8062,293

27— 66 —

Total
equity762,043

(4) CONSOLIDATED STATEMENT OF CASH FLOWS(Millions of yen)
Year ended
31 August 2017

Note
Cash flows from operating
activities
Profit/(loss) before income taxes
Depreciation and amortization
Impairment losses
Increase/(decrease) in provisions
Interest and dividend income
Interest expenses
Foreign exchange losses/(gains)Share of profit and loss of associates
accounted for using theequity method
Losses on disposal of property, plantand equipment
Decrease/(increase) in trade andother receivables
Decrease/(increase) in inventories
Increase/(decrease) in trade andother payables
Decrease/(increase) in other assets
Increase/(decrease) in other liabilities

15

Others, net
Cash generated from operations
Interest and dividend income received
Interest paid
Income taxes paid
Income taxes refunded
Net cash generated by operating
activities
Cash flows from investing activities
Amounts deposited into bank deposits
with original maturities ofthree months or longer
Amounts withdrawn from bank deposits
with original maturities ofthree months or longer
Payments for property,
plant and equipment
Payments for intangible assets
Payments for lease and guarantee
deposits
Proceeds from collection of lease andguarantee deposits
Payments for construction assistancefund
Ret urns of construction assistance fund
Others, net
Net cash generated by/(used in)investing activities— 67 —

Year ended
31 August 2018

193,398
39,6889,324
1,674(6,124)
2,932(13,318)

242,678
45,055
12,376
4,654(7,560)3,169(2,132)

(625)

(611)

1,915

1,176

(1,442)(5,955)(2,852)(179,469)

9,949
(290)
6,417
(1,682)

9,758(13,053)
142,212
1,819

235,861
6,124(2,966)(47,691)
20,840257,220
7,409(2,393)(86,725)892

212,168

176,403(114,330)(63,490)282,667

59,185(33,600)(12,266)(31,962)(16,532)(3,211)(4,773)

1,789

3,064

(1,045)
1,713
1,072

(1,261)
2,057(3,467)

122,790(57,180)

(Millions of yen)
Year ended
31 August 2017

Notes
Cash flows from financing activities
Proceeds from short-term loans payable
Repayment of short-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of corporate
bonds
Dividends paid to owners of the Parent
Capital contributions from
non-controlling interests
Dividends paid to non-controllinginterests
Repayments of lease obligations

29
29
29

7,091
(10,314)(2,915)

1,767(1,596)(3,308)29
22—(34,671)249,319(38,244)—

3,803(3,965)(6,052)(8)(7,827)(5,918)224(50,836)

198,217

14,248(1,545)

298,371

315,8948

385,431

683,8028

683,802

999,697

29

Others, net
Net cash generated by/(used in)financing activities
Effect of exchange rate changes on thebalance of cash held in foreign
currencies
Net increase/(decrease) in cash andcash equivalents
Cash and cash equivalents
at the beginning of year
CASH AND CASH EQUIVALENTS
AT THE END OF YEAR

Year ended
31 August 2018

— 68 —

(5) Notes to the Consolidated Financial Statements
1. Reporting Entity
FAST RETAILING CO., LTD. is a company incorporated in Japan. The locations of the registered headquarters and principal
offices of the Company are disclosed at the Group’s website (http://www.fastretailing.com/eng/).
The principal activities of the Company and its consolidated subsidiaries are the UNIQLO business (casual wear retailbusiness operating under the “UNIQLO” brand in Japan and overseas), GU business and Theory business (apparel designingand retail business in Japan and overseas), etc.
2. Basis of Preparation(1) Compliance with IFRSThe consolidated financial statements of the Group have been prepared in compliance with IFRS issued by the IASB.
The Group meets all criteria of a “specified company” defined under Article 1-2 of the Rules Governing Term, Form, andPreparation of Consolidated Financial Statements accordingly, applies Article 93 of the Rules Governing Term, Form, andPreparation of Consolidated Financial Statements.
(2) Approval of the Consolidated Financial Statements
The consolidated financial statements were approved on 29 November 2018 by Tadashi Yanai, Chairman, President, andCEO, and Takeshi Okazaki, Group Executive Vice President and CFO.
(3) Basis of Measurement
The consolidated financial statements have been prepared on a historical cost basis, except for certain assets, liabilities,
and financial instruments which are measured at fair value as indicated in “3. Significant Accounting Policies.”(4) Functional Currency and Presentation Currency
The presentation currency for the Group’s consolidated financial statements is the Japanese yen (in units of millions ofyen), which is also the Company’s functional currency. All values are rounded down to the nearest million yen, except whenotherwise indicated.
(5) Use of Estimates and Judgments
The preparation of the consolidated financial statements in accordance with IFRS requires management to makejudgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets
and liabilities, income and expenses. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. The effects of the review of accounting
estimates are recognized in the accounting period in which the estimates were reviewed and in future accounting periods.
Information about important estimation and judgments that have significant effects on the amounts recognized in the
consolidated financial statements is as follows:• Valuation of inventories (3. Significant Accounting Policies (6) and Note 10. Inventories)• Recoverable amounts from cash-generating units for impairment tests (3. Significant Accounting Policies (10) and Note
15. Impairment Losses)• Useful lives of property, plant and equipment, and intangible assets (3. Significant Accounting Policies (7)(8), Note 13.
Property, Plant and Equipment and 14. Goodwill and intangible Assets)• Recoverability of deferred tax assets (3. Significant Accounting Policies (14) and Note 19. Deferred Tax and Income
Taxes)• Recoverability of trade and other receivables (3. Significant Accounting Policies (4), Note 9. Trade and Other
Receivables) and Note 31. Financial Instruments.
• Accounting treatment and valuation of provisions (3. Significant Accounting Policies (11) and Note 21. Provisions)• Fair value measurement of financial instruments (3. Significant Accounting Policies (4) and Note 31. Financial
Instruments)• Fair value measurement for unit price for share-based payments (3. Significant Accounting Policies (12) and Note 30.
Share-based Payments)— 69 —

3. Significant Accounting Policies(1) Basis of Consolidation(i) Subsidiaries
A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the company. The Group
controls enterprises when it is exposed, or has rights, to variable returns arising from its involvement in those enterprises
or when the Group has rights to variable returns in those enterprises and is able to have an impact on said variable returns
through its power over those enterprises. A subsidiary’s financial statements are incorporated into the Group’s consolidated
financial statements from the date on which the Group, obtains control until the date that control ceases.
The subsidiaries adopted the consistent accounting policies as the Company in the preparation of their financial
statements. All intra-group balances, transactions within the Group as well as unrealized profit and loss resulting fromtransactions within the Group are eliminated at the time of preparation of the consolidated financial statements.
The reporting dates for FAST RETAILING (CHINA) TRADING CO., LTD., UNIQLO TRADING CO., LTD., FAST RETAILING(SHANGHAI) TRADING CO., LTD. and eleven other companies are 31 December, 31 March or 30 June. The management
accounts of these subsidiaries are used for the Group’s consolidation purpose. The financial statements of other subsidiaries
are prepared using the same reporting period as the parent company.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
Any difference between the adjustment to the non-controlling interest and the fair value of the consideration received isrecognized directly in equity as interests attributable to owners of the parent.
Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to thenon-controlling interests, even if this results in the non-controlling interests having a deficit balance.
The number of consolidated subsidiaries as at 31 August 2018 is 130.
(ii) Investments in associates
An associate is an entity in which the Group has significant influence over the financial and operating policies.
If the Group holds 20% or more of the voting rights of another enterprise, it is presumed that the Group has a significant
influence over the other enterprise. Investments in associates are accounted by applying the equity method, and measured
at historical cost at the time of acquisition.
Thereafter the carrying amount of the investment is adjusted to recognize changes in the Group’s share of net assets of
the associate since acquisition date.
The consolidated statement of profit or loss reflects the Group’s share of the results of operations of the associate. Anychange in other comprehensive income of those investees is presented as part of the Group’s other comprehensive income.
Unrealized gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of
the interest in the associate.
The number of associates as at 31 August 2018 is four.

— 70 —

(2) Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured at theaggregation of the acquisition date fair values of assets transferred, liabilities assumed, and equity interests issued by theCompany in exchange for control of the acquired company.
If the cost of an acquisition exceeds the fair value of the identifiable assets and liabilities, it is recorded as goodwill on
the consolidated statement of financial position. If it is below the fair value, this is immediately recorded as gains on the
consolidated statement of profit or loss.
Acquisition-related costs are expensed as incurred. Additional acquisitions of non-controlling interests are accounted foras equity transactions, and no goodwill is recognized.
Contingent liabilities of acquired companies are recognized in a business combination only if they are present obligations,were incurred as a result of a past event, and their fair value can be reliably measured.
For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fairvalue or at the proportionate share of the acquiree’s identifiable net assets.
If the initial accounting for a business combination is incomplete by the reporting date of the fiscal year in which thebusiness combination occurs, the items for which the acquisition accounting is incomplete are reported using provisionalamounts. Those amounts provisionally recognized on the acquisition date are retrospectively adjusted to reflect new
information as if the acquisitions took place during the measurement period, had facts and circumstances that existed at theacquisition date been known at that time, they would have affected the amounts recognized on that date. Additional assets
and liabilities are recognized if new information results in the recognition of additional assets or liabilities. The measurement
period should be within one year.
(3) Foreign Currencies(i) Transactions and balances
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot
rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of
exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognized in profit orloss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translatedusing the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non—monetary items measured at fair value is treated in line with the recognition of gain or loss on change in fair value of theitem (i.e., translation differences on items whose fair value gain or loss is recognized in other comprehensive income or
profit or loss are also recognized in other comprehensive income or profit or loss, respectively).
(ii) Foreign Operations
On consolidation, the assets and liabilities of foreign operations are translated into Japanese yen at the rate of exchange
prevailing at each reporting date and their statements of profit or loss are translated at average exchange rates during theperiod. The exchange differences arising on translation for consolidation are recognized in other comprehensive income. On
disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operationis recognized in profit or loss.

— 71 —

(4) Financial Instruments
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, such as forward currency contracts, to hedge its foreign currency risks.
Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract isentered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value ispositive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for theeffective portion of cash flow hedges, which is recognized in other comprehensive income and later reclassified to profit orloss when the hedge item affects profit or loss.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which
the Group wishes to apply hedge accounting and the risk management objectives and strategy for undertaking the hedge.
The documentation includes identification of the specific hedging instrument, the hedged item or transaction, the nature of
the risk being hedged, and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure tochanges in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly
effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine thatthey actually have been highly effective throughout the financial reporting periods for which they were designated.
The Group has designated forward currency contracts as cash flow hedges and are accounted for as described below:
Cash flow hedges
When derivatives are designated as a hedging instrument to hedge the exposure to variability in cash flows that are
attributable to a particular risk associated with recognized assets or liabilities or highly probable forecast transactions
which could affect profit or loss, the effective portion of changes in the fair value of the derivatives is recognized in othercomprehensive income and included in “Cash flow hedges” in other components of equity. The balances of cash flow hedges
are subtracted from “other comprehensive income” on the consolidated statement of comprehensive income for the same
period when the hedged cash flows would affect profit or loss, and reclassified as profit or loss in the same line items as
the hedging instruments. The gain or loss relating to the ineffective portion of changes in the fair value of the derivatives isrecognized immediately in profit or loss. When a hedged item gives rise to the recognition of a non-financial asset or nonfinancial liability, the amount recognized as other comprehensive income is treated as an adjustment to the initial carrying
amount of the non-financial asset or liability.
If the forecast transaction or firm commitment is no longer expected to occur, cumulative profit or loss amounts
previously recognized in equity through other comprehensive income are reclassified as profits or losses. If the hedging
instrument expires or is sold, is terminated or exercised without replacement or rollover, or if its designation as a hedge isrevoked, the amounts previously recognized in equity through other comprehensive income are recorded as equity until theforecast transaction occurs or firm commitment is met.
Non-derivative financial instruments(i) Initial recognition and measurement
All purchases and sales of financial assets that take place through ordinary methods (purchase or sale of a financial asset
requiring delivery within the time frame established by market regulation or convention) are recognized or derecognized,
and measured at the initial fair value plus transaction costs, on the trade date.
Financial assets are classified, at initial recognition, into the following three categories:• Financial assets at fair value through profit or loss
• Loans and receivables• Available-for-sale financial assets
The classification depends on the nature and purpose of the financial assets and is determined at the time of initialrecognition.

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(ii) Financial assets at fair value through profit or loss
Financial assets are classified as “financial assets at fair value through profit or loss” if they are held for trading or if they
are designated as financial assets at fair value through profit or loss.
Financial assets other than financial assets held for trading may be designated as “financial assets at fair value throughprofit or loss” at initial recognition if any of the following applies:(a) If such designation eliminates or significantly reduces a measurement or recognition inconsistency (“accounting
mismatch”);(b) If the financial assets are part of a “group of financial assets or financial liabilities (or both)” which are managed andhave their performance evaluated on a fair value basis, in accordance with the Group’s documented risk management orinvestment strategy, and information about the grouping is provided internally on a fair value basis; or(c) If the contract contains at least one embedded derivative (International Accounting Standards [“IAS”] 39 allows theentire hybrid (combined) contract (assets or liabilities) to be designated as a “financial assets at fair value through profit orloss”), unless they are designated as an effective hedging instrument.
Financial assets at fair value through profit or loss are carried in the consolidated statement of financial position atfair value with net changes in fair value presented as finance costs (negative net changes in fair value) or finance income(positive net changes in fair value) in the consolidated statement of profit or loss. Recognized profit or loss, including theabove, are presented in the consolidated statement of profit or loss as dividend income, interest income, or gain or loss onchanges in fair value. Fair value is determined using the method described in “31. Financial Instruments.”(iii) Loans and receivables
Trade receivables, loans, and other receivables that are not quoted in an active market are classified as “loans andreceivables.” After initial measurement, such financial assets are subsequently measured at amortized cost using theeffective interest rate (“EIR”) method, less impairment. The EIR amortization is included in finance income in the statementof profit or loss.
(iv) Available-for-sale financial assets
Any non-derivative financial assets classified as “available-for-sale financial assets” are those that are neither classified as“financial assets at fair value through profit or loss” nor “loans and receivables,” or those that are designated as “availablefor-sale financial assets.”
Available-for-sale listed equity securities that are traded on a market are measured using quoted market prices. Fairvalue is determined using the method described in “31. Financial Instruments.” Profits or losses arising from changes in fairvalue are recognized as other comprehensive income. Impairment losses or foreign currency gains or losses associated with
monetary assets are treated as exceptions and recognized in profit or loss.
When available-for-sale financial assets are derecognized, or when an impairment loss is recognized, the cumulative
profits or losses that have been recognized as other comprehensive income up to that time are reclassified to profit or loss
for the period.
Dividends associated with available-for-sale financial assets are recognized in profit or loss when the Group’s right toreceive dividends is established. The fair value of available-for-sale financial assets denominated in foreign currencies
is translated at the respective exchange rate prevailing at each reporting date. The effects of changes in exchange rates
on foreign currency denominated monetary assets is recognized in foreign exchange gains or losses, while the effect ofchanges in exchange rates on other foreign currency denominated available-for-sale financial assets is recognized in othercomprehensive income.

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(v) Impairment of financial assets
Financial assets other than “Financial assets at fair value through profit or loss” pursuant to International AccountingStandards 39 (“IAS 39”), are evaluated at each reporting date to determine whether there is objective evidence ofimpairment. If there is objective evidence that one or more events having a negative impact on the estimated future cash
flows has occurred subsequent to the initial recognition of the financial asset, an impairment loss is recognized.
For listed and unlisted equity securities classified as “available-for-sale financial assets,” a significant or prolonged decline
in the fair value of the investment below its historical cost is considered to be objective evidence of impairment. For all otherfinancial assets, including redeemable securities and finance lease receivables classified as available-for-sale financial assets,
objective evidence of impairment may include the following:(a) Significant deterioration in the financial condition of the issuer or counterparty;(b) Default or delinquency in interest or principal payments; or(c) Probability that the issuer will enter bankruptcy or financial reorganization.
Certain categories of financial assets, such as trade receivables, are assessed for impairment on a collective basis even if
they are not impaired individually. Objective evidence of impairment for a portfolio of receivables could include changes innational or local economic conditions that correlate with default on receivables or an increase in the number of delinquent
payments in the portfolio past the average credit period.
For financial assets carried at amortized cost, the amount of the impairment loss is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original EIR.
An asset’s carrying amount is reduced directly by the impairment loss amount, with the exception of trade and otherreceivables, and other financial assets where the impairment loss is posted by using the allowance for doubtful accounts. An
allowance for doubtful accounts is established when it is determined that receivables are uncollectable, including receivables
for which the due date has been changed, and the allowance for doubtful accounts is reduced if the receivables aresubsequently abandoned or collected. Changes in the allowance for doubtful accounts are recognized in profit or loss except
for decreases related to receivables that were written off. Except for available-for-sale financial assets, if, in a subsequent
period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after
the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent
that the carrying amount of the investment after reversing the impairment loss does not exceed what the amortized cost
would have been had the impairment not been recognized.
For available-for-sale financial assets, impairment losses previously recognized in profit or loss cannot be reversed
through profit or loss. Any change in fair values after an impairment loss is recognized through other comprehensive income
as long as this does not give rise to an additional impairment loss.
(vi) Derecognition of financial assets
The Group derecognizes a financial asset only if the contractual rights to the cash flows from the financial asset expire
or if the Group has transferred almost all risks and rewards of ownership. If the Group maintains control of the transferredfinancial asset, it recognizes the asset and associated liabilities to the extent of its continuing involvement.
Non-derivative equity instruments and financial liabilities(i) Equity instruments (stocks)
An equity instrument is a contract that evidences ownership of a residual interest in the assets of a company after
deducting all of its liabilities.
(ii) Financial liabilities
Financial liabilities are classified as either “financial liabilities at fair value through profit or loss” or “other financial
liabilities”.

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(iii) Financial liabilities at fair value through profit or loss
Financial liabilities are classified as “financial liabilities at fair value through profit or loss” if they are held for trading or ifthey are designated as financial liabilities at fair value through profit or loss.
A financial liability is classified as being held for trading purposes if any of the following applies:(a) It is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;(b) On initial recognition, it is part of a portfolio of identified financial instruments that are managed together and forwhich there is evidence of a recent actual pattern of short-term profit-taking; or(c) It is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging
instrument).
Financial liabilities other than financial liabilities held for trading may be designated as “financial liabilities at fair value
through profit or loss” at initial recognition if any of the following applies:(a) If such designation eliminates or significantly reduces a measurement or recognition inconsistency (“accounting
mismatch”) is likely to arise;(b) If the financial liabilities are part of a “group of financial assets or financial liabilities (or both)” which are managed
and have their performance evaluated on a fair value basis, in accordance with the Group’s documented risk management orinvestment strategy, and information about the grouping is provided internally on a fair value basis; or(c) If the contract contains at least one embedded derivative (IAS 39 allows the entire hybrid (combined) contract (assets
and liabilities) to be designated as “financial liabilities at fair value through profit or loss”).
Financial liabilities designated as “financial liabilities at fair value through profit or loss” are measured at fair value,with any changes recognized in profit or loss. Recognized profits and losses, including the above, are recognized in the
consolidated statement of profit or loss as interest expenses or gain or loss on change in fair value. Fair value is determinedusing the method described in “31. Financial Instruments.”(iv) Other financial liabilities
Other financial liabilities, including loans payable, are initially measured at fair value, net of directly attributabletransaction costs. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the EIR
method, and interest expenses are recognized using the EIR method.
(v) Derecognition of financial liabilities
The Group derecognizes a financial liability when it is extinguished, that is, when the obligation specified in the contract iseither discharged, cancelled, or expired.
(vi) Fair value of financial instruments
The fair value of financial instruments that are traded on an active financial market at each reporting date are based onquoted market prices and dealer prices.
The fair value of financial instruments for which there is no active market are calculated using appropriate valuation
techniques.
(vii) Offsetting financial Instruments
Financial assets and financial liabilities are only offset when there is an enforceable legal right to offset the recognizedamounts and when there is an intention to either settle on a net basis, or realize the asset and settle the liability
simultaneously; and the net amount is reported on the consolidated statement of financial position.

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(5) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, bank deposits available for withdrawal on demand, and short-term,
highly liquid investments due with a maturity of three months of the acquisition date or less that are readily convertible tocash and which are subject to an insignificant risk of changes in value.
(6) Inventories
Inventories are valued at the lower of cost and net realizable value; the weighted average method is principally used
to determine cost. Net realizable value is based on the estimated selling price in the ordinary course of business less any
estimated costs to be incurred to sell the goods.
(7) Property, plant and equipment (other than leased assets)(i) Recognition and measurement
Property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment
losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costsof bringing the asset to its working condition and location for its intended use, the initial estimate of the costs of dismantling
and removing the item and restoring the site on which it is located.
(ii) Depreciation
Assets other than land and construction in progress are depreciated using the straight-line method over the estimateduseful lives shown below:
Buildings and structures
Furniture, equipment, and vehicles

3-50 years
5 years

The useful lives, residual values, and depreciation methods are reviewed at each reporting date, with the effect of any
changes in estimates being accounted for on a prospective basis.
(8) Goodwill and intangible assets (other than leased assets)(i) Goodwill
Goodwill is stated at the carrying amount, which is the acquisition cost after deducting accumulated impairment losses.
Goodwill represents the excess amount of the historical cost of an interest acquired by the Group over the net amount of thefair value of the identifiable assets acquired and liabilities assumed.
Goodwill is not amortized but is allocated to identifiable cash-generating units based on the geographical region wherebusiness takes place and the type of business conducted, and then tested for impairment each year or when there is anindication that it may be impaired. Impairment losses on goodwill are recognized in the consolidated statement of profit orloss and cannot be subsequently reversed in future periods.
(ii) Intangible assets
Intangible assets are measured at cost, with any accumulated amortization and accumulated impairment losses deductedfrom the historical cost to arrive at the stated carrying amount.
Intangible assets acquired separately are measured at cost at initial recognition, and the cost of intangible assets acquired
in a business combination is measured as fair value at the acquisition date.
For internally generated intangible assets, the entire amount of the expenditure is recorded as an expense in the period inwhich it arises, except for development expenses that meet the requirements for capitalization.
Intangible assets with finite useful lives are amortized over their respective estimated useful lives using the straight-line
method, and they are tested for impairment when there is an indication that they may be impaired. The estimated useful life
and amortization method for an intangible asset with a finite useful life is reviewed at the end of each reporting period, andany changes are applied prospectively as a change in accounting estimate.

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The estimated useful lives of the main intangible assets with finite useful lives are as follows:• Software for internal use

Length of time it is usable internally (3 to 5 years)

Intangible assets with indefinite useful lives and intangible assets that are not yet available for use are not amortized.
They are tested for impairment annually or when there is an indication that they may be impaired, either individually or at
the cash-generating unit level.
(9) Leases
The determination of whether an arrangement is, or contains, a lease is made based on the substance of the arrangementon the inception date of the lease, or in other words, whether the fulfillment of the arrangement depends on the use of a
specific asset or group of assets and whether the arrangement conveys the right to such asset (whether explicitly stated in
the contract or not).
If the lease agreement substantially conveys the risks and rewards of the ownership of the asset to the lessee, the lease isclassified as a finance lease. Leases other than finance leases are classified as operating leases.
Finance leases are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, atthe present value of the minimum lease payments. Lease payments are apportioned between finance charges and reductionof the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges arerecognized in finance costs in the consolidated statement of profit or loss.
A leased asset is depreciated over the shorter of the estimated useful life of the asset and the lease term on a straight-line
basis.
Operating lease payments as lessee are recognized as an operating expense in the consolidated statement of profit or loss
on a straight-line basis over the lease term.
Operating lease income as lessor is recognized as an operating revenue in the consolidated statement of profit or loss ona straight-line basis over the lease term.
(10) Impairment
The carrying amounts of the Group’s non-financial assets, excluding inventories and deferred tax assets, are reviewed todetermine whether there is any indication of impairment at each reporting date. If there is any indication of impairment,
the recoverable amount for the asset is estimated. For goodwill, intangible assets with indefinite useful lives, and intangible
assets that are not yet available for use, the recoverable amount is estimated each year at the same time.
The recoverable amount for an asset or cash-generating unit (“CGU”) is the higher of value-in-use and fair value lesscosts of disposal. The fair value less costs of disposal calculation is based on available data from binding sales transactions,conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. In
assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount ratethat reflects the time value of money and the risks specific to the asset.
A CGU is the smallest group of assets which generates cash inflows from continuing use which are largely independent of
the cash inflows from other assets or groups of assets.
The CGU (or group of CGUs) for goodwill is determined based on the unit by which the goodwill is monitored for internalmanagement purposes and must not be larger than an operating segment before aggregation.
Because the corporate assets do not generate independent cash inflows, if there is an indication that corporate assets
may be impaired, the recoverable amount is determined for the CGU to which the corporate assets belong.

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If the carrying amount of an asset or a CGU exceeds the recoverable amount, an impairment loss is recognized in profit
or loss for the period. Impairment losses recognized in relation to a CGU are first allocated to reduce the carrying amount ofany goodwill allocated to the CGU and then allocated to the other assets of the CGU pro rata on the basis of their carrying
amounts.
An impairment loss related to goodwill cannot be reversed in future periods. Previously recognized impairment losses on
assets other than goodwill are reviewed at each reporting date to determine whether there is any indication that a loss has
decreased or no longer exists. A previously recognized impairment loss is reversed only if there has been a change in theassumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal
is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amountthat would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.
(11) Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event, it isprobable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. Provisions are recognized as the best estimate of the expenditure
required to settle the present obligation (future cash flows), taking into account the risks and uncertainties surrounding theobligation at each reporting date.
If the time value of money is material, provisions are measured as the estimated future cash flows discounted to thepresent value using a pre-tax rate that reflects, when appropriate, the time value of money and the risks specific to theliability. When discounting is used, the increase due to the passage of time is recognized as a finance cost.
Provision is described below:
Asset retirement obligations
The obligations to restore property to its original state under real estate leasing agreements for offices, such as corporate
headquarters and stores, are estimated and recorded as a provision. The expected length of use is estimated as thetime from acquisition to the end of the useful life, and discount rates ranging between 0.00-1.00% are generally used in
calculations.
(12) Employee benefits
1. Defined contribution system
We have adopted a defined contribution pension plan for employees of the Company and certain subsidiaries.
The defined contribution pension plan is a post-retirement benefit plan in which the employer contributes a certain
amount of contributions to the plan administered by other independent companies and is not subject to legal orpresumptive obligation on payment beyond those contributions.
Contributions to the defined contribution pension plan are charged to expense during the period in which employees
provide services.
2. Short-term employee benefits
For short-term employee benefits, no estimate is accrued for and expenses are recorded when employees provide
services.
For bonuses and paid leave expenses, we have legal or presumptive obligations to pay them and recognize as liabilities
the amount estimated to be paid based on those plans if reliable estimates are possible.

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3. Share-based payments
The Group grants share-based payments in the form of share subscription rights (stock options) to employees of theCompany and its subsidiaries. In doing so, the Group aims to heighten morale and motivate employees to improve theGroup’s business performance, thereby increasing shareholder value by reinforcing business development that is focused on
the interests of the shareholders. These share-based payments do this by rewarding contributions to the Group’s profit andby connecting the benefits received by these individuals to the Company’s stock price.
Stock options are measured at fair value based on the price of the Company’s shares on the grant date. Fair value of stock
options is further disclosed in “30. Share-based Payments.”
The fair value of the stock options determined at the grant date is expensed, together with a corresponding increase incapital surplus in equity, over the vesting period on a straight-line basis, taking into consideration the Group’s best estimatesof the number of stock options that will ultimately vest.
(13) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable by the Group, less returns, trade
discounts, and rebates. If a single transaction has multiple identifiable elements, the transaction is apportioned among theelements and revenue is recognized for each element. When two or more transactions make commercial sense only whenlinked in such a way that the commercial effect cannot be understood without reference to the series of transactions as
a whole, revenue is recognized for the transactions together. The recognition standards and method of presentation forrevenue are described below.
(i) Revenue recognition standards
Revenue from the sale of goods is recognized when all the following conditions have been satisfied:• The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;• The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor
effective control over the goods sold;• The amount of revenue can be measured reliably;• It is probable that the economic benefits associated with the transaction will flow to the Group; and• The costs incurred or to be incurred in respect of the transaction can be measured reliably.
(ii) Method of presentation for revenue
If the Group is acting as a principal in a transaction, revenue is measured at the fair value of the consideration received or
receivable from the customer.

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(14) Income taxes
Income taxes comprise current and deferred taxes and these are recognized in profit or loss, except taxes arising fromitems that are recognized as other comprehensive income.
Current taxes are measured at the amount expected to be paid to (or recovered from) taxation authorities on taxable
income or loss for the current year, using the rates that have been enacted or substantively enacted by each reporting datein the countries where the Group operates and generates taxable income, with adjustments to tax payments in past periods.
Through the use of an asset and liability approach, deferred tax assets and liabilities are recorded for the temporary
differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts of assets andliabilities for tax purposes. Deferred tax assets and liabilities are not recognized for temporary differences under any of thefollowing circumstances:• Temporary differences arising from goodwill;• Temporary differences arising from the initial recognition of an asset/liability which, at the time of the transaction,
does not affect either the accounting profit or the taxable income (other than in a business combination); or• Temporary differences associated with investments in subsidiaries, but only to the extent that it is possible to control
the timing of the reversal of the differences and it is probable that the reversal will not occur in the foreseeable future.
The consolidated taxation system is applied for the Company and 100% owned subsidiaries in Japan.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when thetemporary difference is realized or settled, based on tax laws that have been enacted or substantively enacted by eachreporting date. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets and liabilities and when income taxes are levied by the same taxation authority on either the same taxable entity or
on different taxable entities which intend either to settle current tax assets and liabilities on a net basis, or to realize theassets and settle the liabilities simultaneously.
Deferred tax assets are recognized for unused tax losses, tax credits, and deductible temporary differences to the extent
that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets arereviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefits will be
realized.
(15) Earnings per share
Basic earnings per share is calculated by dividing profit or loss attributable to common shareholders of the parent by theweighted-average number of common stocks outstanding during the period, adjusted for treasury stock. Diluted earnings per
share is calculated by adjusting for all dilutive potential ordinary shares having a dilutive effect.
4. Application of New and Amended Standards and Interpretations
The Group adopted the following standards and amendments from the beginning of the current fiscal year.
IFRS

Title

Summary

IAS 7 (Amendments)

Statement of Cash Flows

Request for disclosure of changes in liabilities related to financing activities

IAS12 (Amendments)

Income Taxes

Recognition of deferred tax assets for unrealized losses

The effect of adopting the above standards and amendments on the consolidated financial statements of the Group isimmaterial.

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5. Issued but Not Yet Effective IFRSAt the date of authorization of these consolidated financial statements, certain new standards, amendments, andinterpretations to existing standards were issued but not yet effective and have not been early adopted by the Group.
The Company assesses that the impact of the adoption of IFRS 9 and IFRS 15 is immaterial. The Company is in the processof assessing the impact of the adoption of IFRS 16 and IFRIC 23 but is not yet in a position to state whether these new andrevised IFRS would have a significant impact on the Group’s results of operation and financial position.

IFRS

Title

Mandatory
adoption date(year beginning on)

The Group’s
adoption date

Summary

IFRS 9Financial Instruments

1 January 2018Year ending
31 August 2019

Replaces IAS 39 Financial Instruments: Recognition
and Measurement, and all previous versions of IFRS 9.
Amendments for the classification and measurementof financial instruments, adoption of expected credit
loss impairment model for financial assets, and hedge
accounting.

IFRS 15

Revenue from Contracts
with Customers

1 January 2018Year ending
31 August 2019

Revised accounting standard for revenue recognition anddisclosures.

IFRS 16

Leases

1 January 2019Year ending
31 August 2020

Amendments to accounting treatment for leasearrangements

IFRIC 23

Uncertainty over Income
Tax Treatments

1 January 2019Year ending
31 August 2020

Clarifies the accounting for uncertainties in income taxes.

IFRS 16 does not require a lessee classify the leases as a financial lease or operating lease, and introduces a single lessee
accounting model. A lessee recognizes, for all leases, a right-of-use asset representing its right of use to the underlying
leased asset and a lease liability representing its obligation to make lease payments. However a lessee may elect not to apply
the above requirement to short-term (12 months or less) and low value leases. After the initial recognition of a right-of-use
asset and a lease liability, an entity recognizes depreciation cost of the right-of-use asset and interest expense of the leaseliability.
6. Segment Information(1) Description of reportable segments
The Group’s reportable segments are components for which discrete financial information is available and reviewed
regularly by the Board to make decisions about the allocation of resources and to assess performance.
From the current consolidated fiscal year, the operations of GU, which were previously included as a part of the Global
Brands segment, have been included in the GU segment (newly created segment). The Group now discloses the GU
reportable segment as a result of the Board’s increased focus as its scale of operations expands.
The Group’s main retail clothing business is divided into four reportable operating segments: UNIQLO Japan, UNIQLOInternational, GU and Global Brands, each of which is used to frame and form the Group’s strategy.
The main businesses covered by each reportable segment are as follows:
UNIQLO Japan:
UNIQLO International:
GU:
Global Brands:

UNIQLO clothing business within Japan
UNIQLO clothing business outside of JapanGU brand clothing business in Japan and overseas
Theory, COMPTOIR DES COTONNIERS, PRINCESSE TAM.TAM, and J Brand clothing operations— 81 —

(2) Method of calculating segment revenue and results
The methods of accounting for the reportable segments are the same as those stated in “3. Significant Accounting
Policies.”
The Group does not allocate assets and liabilities to individual reportable segments.
(3) Segment information
Year ended 31 August 2017
(Millions of yen)

Revenue
Operating profit/(losses)
Segment income/(losses)(i.e., profit before income taxes)
Other disclosure:
Depreciation and amortization
Impairment losses(Note1)(Note2)

Reportable segments
UNIQLOUNIQLOGU
Japan
International
810,734
708,171
199,139
95,914
73,143
13,542

Total

Others(Note1)

GlobalBrands141,003500

1,859,048
183,101

2,868
285

Consolidated
Adjustments
Statement of(Note2)
Profit or Loss—
1,861,917(6,972)
176,414

97,86872,814

13,583

340

184,608

285

8,504

193,398

8,966
284

17,214
1,603

3,776
5

2,701
3,848

32,659
5,741

153
—

6,875
3,583

39,6889,324“Others” includes the real estate leasing business, etc.
“Adjustments” primarily includes revenue and corporate expenses which are not allocated to individual reportablesegments. Please refer to “15. Impairment Losses” for details of impairment loss on IT system investments, which isallocated to “Adjustments.”

Year ended 31 August 2018
(Millions of yen)

Revenue
Operating profit/(losses)
Segment income/(losses)(i.e., profit before income taxes)
Other disclosure:
Depreciation and amortization
Impairment losses(Note1)(Note2)

Reportable segments
UNIQLOUNIQLOGU
Japan
International
864,778
896,321
211,831
119,040
118,897
11,774

Total

Others(Note1)

GlobalBrands154,464(4,115)

2,127,395
245,5962,664
240

Consolidated
Adjustments
Statement of(Note2)
Profit or Loss—
2,130,060(9,624)
236,212

119,685

119,172

11,572(4,248)

246,182

250(3,755)

242,678

9,448
415

18,693
944

5,463
268

3,137
9,962

36,744
11,590

12
—

8,298
785

45,055
12,376“Others” includes the real estate leasing business, etc.
“Adjustments” primarily includes revenue and corporate expenses which are not allocated to individual reportablesegments.

— 82 —

(4) Geographic Information
Year ended 31 August 2017
1. External Revenue(Millions of yen)
Japan

PRC
1,053,970

Overseas (Others)
260,039

Total

547,908

1,861,917

2. Non-current assets (excluding financial assets, Investments in associates accounted for using the equity method and deferred
tax assets)(Millions of yen)Japan

United Statesof America

PRC
73,13325,258Overseas (Others)

27,565

Total

68,544

194,502

Year ended 31 August 2018
1. External Revenue(Millions of yen)
Japan

PRC
1,121,186

Overseas (Others)
346,873

Total

662,000

2,130,060

2. Non-current assets (excluding financial assets, Investments in associates accounted for using the equity method and deferred
tax assets)(Millions of yen)Japan

United Statesof America

PRC
99,72026,804

26,868

7. Business Combination
Not applicable.

— 83 —

Overseas (Others)
61,469Total
214,863

8. Cash and Cash Equivalents
The breakdown of cash and cash equivalents as at each year end is as follows:(Millions of yen)
As at
31 August 2017
Cash and bank balances
Money market funds (MMF), negotiable certificates ofdeposits
Total

As at
31 August 2018562,656

853,380

121,146

146,316

683,802

999,697

9. Trade and Other Receivables
The breakdown of trade and other receivables as at each year end is as follows:(Millions of yen)
As at
31 August 2017

As at
31 August 2018

Accounts receivable — trade
Notes receivable
Other accounts receivable
Allowance for doubtful accounts

43,096
154
6,009
(661)

46,008
—
7,256
(587)

Total

48,59852,677

See note “31. Financial Instruments” for credit risk management and the fair value of trade and other receivables.
10. Inventories
The breakdown of inventories as at each year end is as follows:(Millions of yen)
As at
31 August 2017
Products
Materials and Supplies
Total(Note)As at
31 August 2018

286,499
3,176

460,751
4,036

289,675

464,788

As at 31 August 2018, the Group had inventories attributable to UNIQLO Japan, UNIQLO International and GU
segment amounting to 434,850 million yen in aggregate.

No inventories were pledged as collateral to secure debt.
Write-down of inventories to net realizable value is as follows:(Millions of yen)
Year ended
31 August 2017
Write-down of inventories to net realizable value(Note)

Year ended
31 August 2018
3,433

4,254

As at 31 August 2018, the Group had write-down of inventories attributable to UNIQLO Japan, UNIQLO International
and GU segment amounting to 2,044 million yen in aggregate.

— 84 —

11. Other Financial Assets and Other Financial Liabilities
The breakdowns of other financial assets and other financial liabilities as at each year end are as follows:(Millions of yen)
As at
31 August 2017
Other financial assets:
Available-for-sale financial assets
Loans and receivables
Loans and receivables
Allowance for doubtful accounts

As at
31 August 2018
303

2,674

107,998(267)

112,462(301)

Total loans and receivables

107,731

112,160

Total

108,034

114,835

30,426
77,60835,35979,476

Other current financial assets total
Other non-current financial assets total(Millions of yen)
As at
31 August 2017
Other financial liabilities:
Financial liabilities measured at amortized cost
Interest-bearing debts
Deposits
Deposits/guarantees received
Total
Other current financial liabilities total
Other non-current financial liabilities total

As at
31 August 2018

281,512
2,176
1,623

544,502
128,509
1,513

285,312674,526

11,844273,467

171,854502,671

12. Other Assets and Other Liabilities
The breakdowns of other assets and other liabilities as at each year end are as follows:(Millions of yen)
As at
31 August 2017
Other assets:
Prepayments
Long-term prepayments
Others
Total
Current
Non-current

As at
31 August 201813,084
4,742
4,223

13,503
5,691
14,84922,05034,04517,307
4,742

28,353
5,691(Millions of yen)

As at
31 August 2017
Other liabilities:
Accruals
Employee benefits liabilities
Others
Total
Current
Non-current— 85 —As at
31 August 2018
47,2905,931
17,76364,0896,348
18,97570,984

89,41354,84016,14472,722
16,69013. Property, Plant and Equipment
Increase/(decrease) in acquisition costs, accumulated depreciation and impairment of property, plant and equipment are as
follows:(Millions of yen)
Buildings andstructures

Furniture,equipment,
and vehicles

At 31 August 2016

195,986

39,253

Additions
Disposals
Transfers
Effect of change
in exchange rate., etc

13,009(9,718)18,404

Construction inprogress

Leased assets

1,962

11,02924,757

272,990

5,144(1,391)————

13,437—(18,404)

9,631(2,942)—

41,223(14,051)—

13,929

3,132

—

761

9

17,832

At 31 August 2017

231,612

46,139

1,962

6,824

31,455317,994

Additions
Disposals
Transfers
Effect of change
in exchange rate., etc

9,316(4,412)
18,8858,380(6,606)
4,639

—
—
—

28,242(2)(25,074)

31,922(14,911)
1,549

77,860(25,933)—(2,794)

(787)

—

(438)

(42)

(4,063)

At 31 August 2018

252,606

51,765

1,962

9,550

49,973365,858

Acquisition costs

Land

Total

(Millions of yen)
Accumulated depreciationand impairment losses
At 31 August 2016
Depreciation provided
during the year
Impairment losses
Reversal of impairment
losses
Disposals
Effect of change
in exchange rate., etc
At 31 August 2017
Depreciation provided
during the year
Impairment losses
Disposals
Effect of change
in exchange rate., etc
At 31 August 2018

Buildings andstructures

Furniture,equipment, andvehicles(114,226)(25,520)(22,766)(1,491)695
7,635

Construction inprogress

Leased assets——(11,389)(151,136)(5,748)
(571)

—
(34)

—
—

(5,143)(55)(33,658)(2,153)

—
1,003

—
—

—
—

—
2,824

695
11,464

Land

Total

(4,680)(1,545)——(1)(6,226)(134,833)(32,381)(34)—(13,765)(181,015)(26,231)(2,029)3,029(6,534)
(205)
878

—
—
—

—
—
—

(5,433)(99)
3,867(38,199)(2,335)
7,775

2,132

621

—

—

239

2,993

(157,933)(37,622)(34)—(15,191)(210,781)(Millions of yen)

Net carrying amount

Furniture,
Buildings andequipment, andstructures
vehiclesLand

Construction in
Leased assets
progress

Total

At 31 August 2017

96,77813,757

1,927

6,824

17,690136,979

At 31 August 2018

94,67314,143

1,927

9,550

34,782

155,077(Note)

As at 31 August 2018, the Group had store assets attributable to UNIQLO Japan, UNIQLO International and GU
segment amounting to 40,933 million yen, 79,448 million yen and 15,558 million yen, respectively.

— 86 —

Net carrying amounts of finance-leased assets are as follows:(Millions of yen)
Net carrying amount

Buildings andstructures

Furniture, equipment,
and vehicles

OthersTotal

At 31 August 2017

3,333

14,356—

17,690At 31 August 201819,335

15,447—34,782

There are no restrictions on ownership rights and no pledges on the Group’s property, plant and equipment.
14. Goodwill and Intangible Assets(1) The increase/(decrease) in acquisition costs, accumulated amortization, and impairment of goodwill and intangible assets are
as follows:(Millions of yen)
Intangible assets other than goodwill
Acquisition costs

Goodwill

SoftwareTrademarks

Otherintangible
assetsGoodwillandIntangible
assets total

Total

At 31 August 2016

38,14640,871

20,05821,07582,006

120,152

External purchases
Disposals
Effect of change in exchange rate., etc

—
—
5,023

11,511
(436)
513

—
—
1,366

924
(535)
884

12,435(972)
2,764

12,435(972)
7,788

At 31 August 2017

43,17052,46021,42522,34896,234

139,404

External purchases
Disposals
Effect of change in exchange rate., etc——(3,429)19,082(1,643)
842

3
(0)
120

166
(310)
(30)

19,252(1,953)932

19,252(1,953)(2,497)

At 31 August 2018

39,74070,741

21,54922,174

114,465

154,206(Millions of yen)
Intangible assets other than goodwill
Accumulated amortization andimpairment losses

Goodwill

SoftwareTrademarks

Otherintangible
assets

Total

GoodwillandIntangible
assets total

At 31 August 2016

(20,237)(23,319)(10,488)(13,992)(47,800)(68,038)

Amortization provided during the year
Impairment losses
Disposals
Effect of change in exchange rate., etc—(2,196)—(4,850)(5,899)(2,912)
44
(32)

—
(772)
—
(644)

(130)
(681)
535
(1,044)(6,029)(4,366)579(1,722)(6,029)(6,562)579(6,573)

At 31 August 2017(27,285)(32,118)(11,906)(15,314)(59,339)(86,624)

Amortization provided during the year
Impairment losses
Disposals
Effect of change in exchange rate., etc—(7,792)—
3,429(6,727)
(174)
355
(387)

—
(1,657)
—
(90)

(129)
(415)
110
(9)

(6,856)(2,246)465(486)(6,856)(10,039)465
2,942

At 31 August 2018(31,647)(39,052)(13,653)(15,757)(68,463)(100,111)(Note)

Amortization of intangible assets is included in “selling, general and administrative expenses” on the consolidated
statement of profit or loss.

— 87 —

(Millions of yen)
Intangible assets other than goodwill
Net carrying amount

Goodwill

SoftwareTrademarks

Otherintangible
assetsGoodwillandIntangible
assets total

Total

At 31 August 201715,885

20,341

9,519

7,034

36,89552,780At 31 August 2018

8,092

31,689

7,896

6,416

46,00254,094(2) Goodwill and intangible assets with indefinite useful lives
Goodwill and intangible assets recorded in the consolidated statement of financial position are primarily for goodwill andtrademarks related to the Theory business.
Trademarks and certain other intangible assets will continue to be used as long as the business remains viable; therefore,
management estimated the useful lives as indefinite.
The carrying amount of the goodwill and intangible assets with indefinite useful lives by CGU is as follows:(Millions of yen)
Goodwill
Net carrying amountAt 31 August 2017
At 31 August 2018

UNIQLOUNIQLOJapan International
—
—
—
—

GU
—
—

GlobalBrands
15,885
8,092

Intangible assets with indefinite
useful lives
UNIQLOUNIQLO
GlobalGU
Japan International
Brands———
15,797———
13,601

15. Impairment Losses
During the year ended 31 August 2018, the Group recognized impairment losses on certain store assets and goodwill etc., due
to reductions in profitability of the respective cash-generating units.
The breakdown of impairment losses by asset type is as follows:(Millions of yen)
Year ended
31 August 2017
Buildings and structures
Furniture, equipment and vehicles
Land
Leased assets (Note 1)
Subtotal impairment losses on property,
plant and equipment
Software
Goodwill
Trademark (Note 2)
Other intangible assets
Subtotal impairment losses on intangible assets
Other current assets (short-term prepayments)
Other non-current assets (long-term prepayments)
Total impairment losses

Year ended
31 August 2018
1,491
571
34
55

2,029
205
—
99

2,153
2,912
2,196
772
681
6,562
608
—
9,324

2,335
174
7,792
1,657
415
10,0390012,376(Note 1) Leased assets include furniture, equipment and vehicles.
(Note 2) 1,657 million yen represented impairment losses on the trademark of the Helmut Lang brand
The Group’s impairment losses during the year ended 31 August 2018 amounted to 12,376 million yen, compared with 9,324
million yen during the year ended 31 August 2017, and are included in “other expenses” on the consolidated statement of profit
or loss.

— 88 —

Year ended 31 August 2017
(1) Property, plant and equipment
Out of total impairment losses amounting to 9,324 million yen, 2,153 million yen represented write downs of the carrying
amounts of store assets to the recoverable amounts, primarily due to a reduction in profitability of certain stores, including
flagship stores.
The grouping of assets is based on the smallest cash-generating unit that independently generates cash inflow. In principle,
each store, including flagship stores, is considered as an individual cash-generating unit and recoverable amounts thereon arecalculated based on value in use.
The value in use is calculated based on the cash flow projections with estimates and growth rates compiled by management
at a discount rate of 14.6%. Theoretically, the projected cash flows cover a five-year period, and do not use a growth rate thatexceeds the long-term average market growth rate. The pre-tax discount rate calculation is based on the weighted-average costof capital.
The main cash-generating units for which impairment losses were recorded are as follows:
Operating segment

Cash-generating unit

Type

UNIQLO Japan

UNIQLO CO., LTD. stores

Buildings and structures

UNIQLO International

UNIQLO USA LLC, etc., stores

Buildings and structures

Global Brands

PRINCESSE TAM.TAM S.A.S., etc., stores

Buildings and structures(2) Goodwill and intangible assets, etc.
Impairment losses related to the J Brand businessOut of the total impairment losses amounting to 9,324 million yen, 3,650 million yen represented impairment losses on
goodwill, trademarks, and customer relationships of the J Brand business. The carrying amounts of cash-generating units related
to the J Brand business after recognition of the impairment losses were written down to zero yen of goodwill and customer
relationships, and 1,388 million yen of trademarks.
The recoverable amounts from goodwill and intangible assets relating to trademarks and customer relationships, related to
the J Brand business were calculated based on fair value less cost of disposal.
Fair value less costs of disposal is determined by taking into account the following two approaches:① The terminal value of the business plus the 10-year discounted cash flow projections were based on plans approved bymanagement. The fair value measurement is calculated based on post-tax discount rate. The post-tax discount rate is calculated
at 20.5% based on the weighted-average cost of capital of the cash-generating units (income approach).
In addition, deviation from the amount of future cash flows or the predictions about the implementation timing is primarilyreflected in the discount rate. Furthermore, the cash flows beyond the 10-year period are extrapolated using a 3% growth ratetaking into account the long-term average market growth rate.
② Calculation based on the market value of similar assets (market approach).
This measurement of fair value is classified as Level 3 in the fair value hierarchy based on significant inputs in used valuation
techniques. Adverse change in key assumptions — lower estimated future cash flows or a higher discount rate would cause
further impairment losses to be recognized.
See note “14. Goodwill and Intangible Assets” for impairment of goodwill, including goodwill related to the J Brand business.
(ii) Impairment losses related to IT system investment
Out of total impairment losses amounting to 9,324 million yen, 3,521 million yen is related to IT system investment for luxury
brands. 3,521 million yen is comprised of impairment losses for software assets which amounted to 2,912 million yen andimpairment losses for IT system assets, which are included in other current assets, which amounted to 608 million yen.

— 89 —

These impairment losses represented write downs of the carrying amounts of the aforementioned assets to the recoverable
amounts in order to reflect the decreased profitability that resulted from replacing the system. The Company allocates thesoftware, as corporate assets, to each luxury brand, whereby representing individual cash-generating units.
The recoverable amounts of each cash-generating unit, related to the luxury brands, are calculated based on their value in
use. As a result, the carrying amounts of software after recognition of impairment losses were written down to zero yen.
(3) Reversal of impairment losses
Since recovery in profitability was identified in certain stores in the UNIQLO Japan business where impairment losses wererecorded in the past (mainly buildings and structures), the total reversal of impairment losses amounting to 695 million yen was
included in “Other income” in the consolidated statement of profit or loss. The recoverable amounts are based on value in use.
The calculation basis for value in use is cash flow projections based on estimates and growth rates compiled by management
at discount rates ranging from 16.3% to 19.3%. Theoretically, the projected cash flows are based on the remaining estimateduseful lives of the respective property, plant and equipment, and do not use a growth rate that exceeds the long-term average
market growth rate. The pre-tax discount rate calculation is based on the weighted-average cost of capital.
Year ended 31 August 2018
(1) Property, plant and equipment
Out of total impairment losses amounting to 12,376 million yen, 1,725 million yen represented write downs of the carrying
amounts of store assets to the recoverable amounts, primarily due to a reduction in profitability of certain stores, including
flagship stores.
The grouping of assets is based on the smallest cash-generating unit that independently generates cash inflow. In principle,
each store, including flagship stores, is considered as an individual CGU and recoverable amounts thereon are calculated basedon value in use.
The value in use is calculated based on the cash flow projections with estimates and growth rates compiled by management
at a discount rate of 7.5%. Theoretically, the projected cash flows cover a five-year period, and do not use a growth rate thatexceeds the long-term average market growth rate. The pre-tax discount rate calculation is based on the weighted-average costof capital.
The main cash-generating units for which impairment losses were recorded are as follows:
Operating segment

Cash-generating unit

Type

UNIQLO Japan

UNIQLO CO., LTD. stores

Buildings and structures

UNIQLO International

UNIQLO EUROPE LTD. etc., stores

Buildings and structures

GU

G.U. CO., LTD. etc., stores

Buildings and structures

Global Brands

COMPTOIR DES COTONNIERS S.A.S., etc stores

Buildings and structures(2) Goodwill and intangible assets, etc.
(i) Impairment losses related to the COMPTOIR DES COTONNIERS businessOut of the total impairment losses amounting to 12,376 million yen, 7,792 million yen represented impairment losses on
goodwill, of the COMPTOIR DES COTONNIERS business. The carrying amounts of cash-generating units related to the COMPTOIRDES COTONNIERS business after recognition of the impairment losses were written down to zero yen of goodwill.
The recoverable amounts from goodwill related to the COMPTOIR DES COTONNIERS business were calculated based on fairvalue less cost of disposal.
Fair value less costs of disposal is determined by taking into account the following two approaches:
The terminal value of the business plus the three year discounted cash flow projections were based on plans approved bymanagement.

— 90 —

The fair value measurement is calculated based on post-tax discount rate. The post-tax discount rate is calculated at 13.6%
based on the weighted-average cost of capital of the cash-generating units (income approach).
In addition, deviation from the amount of future cash flows or the predictions about the implementation timing is primarilyreflected in the discount rate. Furthermore, the cash flows beyond the 10-year period are extrapolated using a 1% growth ratetaking into account the long-term average market growth rate.
16. Investments in Associates Accounted for Using the Equity Method(1) Information on associates accounted for using the equity method
Information on associates accounted for using the equity method is as follows:(Millions of yen)
Year ended
31 August 2017

Year ended
31 August 2018

Share of profit and loss of associates accounted for using
the equity method

625

611

Share of other comprehensive income of investments inassociates——

Share of comprehensive income of investments inassociates

625

611

13,473

14,649Carrying amount of investments in associates accounted
for using the equity method(2) Determination regarding significant influence and financial information on important associates
In June 2016, the Company invested in a domestic real estate investment trust aiming to own a distribution facility. The
Company has significant influence over the financial and operating policy.
The Company’s maximum exposure to losses due to its investments in the associates is limited to the amount of theinvestments by the Company and is included in the consolidated statement of financial position as “Investments in associates
accounted for using the equity method,” which amounted to 13,292 million yen. The Group’s share of profit and comprehensive
income of the associates was 611 million yen and was included in the consolidated statement of profit or loss and consolidated
statement of comprehensive income, respectively.
Total assets of the associates amounted to 70,739 million yen, which mainly comprised non-current assets such as
warehouse, etc. The Company invested in the associates at the time of incorporation and no goodwill is recognized.
The Company received dividends amounting to 612 million yen from the associates during the year ended 31 August 2018.
The Group has entered into lease contracts with one of the associates relating to warehouse rental, etc.

— 91 —

17. Finance Lease Obligations
The breakdown of finance lease obligations is as follows:(Millions of yen)
Future minimum
lease payments
As at 31
August 2017
Finance lease obligations
Due within one year
Due after one year through five years
Due after five years
Total

Present value of
future minimum lease payments

As at 31
August 2018

As at 31
August 2017

As at 31
August 2018

5,820
12,474
1,410

8,565
23,5095,442

5,596
12,0681,358

7,952
22,432
5,258

19,70637,51719,02335,643

Deductions — future finance costs(682)(1,873)——

Total net finance lease payables

19,02335,64319,02335,643Current portion

—

—

5,596

7,952

Non-current portion——

13,427

27,690

The Group has no sublease contracts, accrued variable lease fees or escalation clauses (clauses enabling upward revisionof rental charges), and no limitations imposed by lease contracts (limitations regarding dividends, additional borrowing, oradditional leases, etc.).
18. Operating Lease Commitments(1) As Lessee
The Group’s total future minimum lease payments on non-cancellable operating leases as at each year end are as follows:(Millions of yen)
As at
31 August 2017
Due within one year
Due after one year through five years
Due after five years
Total

As at
31 August 2018

47,901
138,904
132,439

49,129137,288
107,617319,246

294,034

The total minimum lease payments and contingent rents for operating lease contracts recognized as expenses during the year
are as follows:(Millions of yen)
Year ended
31 August 2017

Year ended
31 August 2018

Total minimum lease payments
Contingent rents

94,25879,776111,980
79,832

Total

174,034

191,813

Contingent rents are primarily for rents which move in tandem with sales, that are defined in the contracts for store open.
Contingent rents, renewal options, and escalation clauses (clauses enabling upward revision of rental charges) are included in
the operating lease agreements.
There are no limitations imposed by lease contracts (limitations regarding dividends, additional borrowing, or additional
leases, etc.).

— 92 —

(2) As lessor
The Company sub-leases some of the properties it leased through operating leases, and so while it pays rent to the property
owner, it also receives rent from the sub-tenant.
A breakdown of the future minimum rental receivables under non-cancellable leases is as follows:(Millions of yen)
As at
31 August 2017

As at
31 August 2018

Due within one year
Due after one year through five years
Due after five years
Total

3
14
—

14
14
—

18

29

The total of contingent rents recorded as revenue during each reporting period is as follows:(Millions of yen)
Year ended
31 August 2017
Contingent rents

Year ended
31 August 2018
1,116

1,088

19. Deferred Taxes and Income Taxes(1) Deferred taxes
The main factors in the increase/(decrease) of deferred tax assets and deferred tax liabilities are as follows:(Millions of yen)
As at
1 September 2016
Temporary differences
Accrued business tax
Accrued bonuses
Allowance for doubtful accounts
Impairment losses on non-current assets
Unrealized gains/(losses)
on available-for-sale securities
Depreciation
Net gains/(losses) on revaluation of cash flow hedges
Temporary differences on shares of subsidiaries
Accelerated depreciation
OthersSubtotal

Recognizedin profit or loss
(Note)

Recognizedin othercomprehensive
incomeAs at
31 August 2017

1,129
3,385
186
3,553

99
299
(23)
(4)

—
—
—
—

1,228
3,685
163
3,549

(36)

—

35

(1)

6,419
22,617(1,893)(5,496)
4,496

1,212
—
—
(1,030)(3,578)—(22,981)
—
—
—

7,632
(364)
(1,893)(6,527)917

34,361(3,024)(22,946)

8,391

Tax losses carried forward

6,257

654

—

6,911

Net deferred tax assets/(liabilities)

40,618(2,369)(22,946)

15,303(Note)The difference between the total amount recognized in profit or loss and the amount of deferred tax is due to effect ofchange in exchange rate.

— 93 —

(Millions of yen)
As at
1 September 2017
Temporary differences
Accrued business tax
Accrued for bonuses
Allowance for doubtful accounts
Impairment losses on non-current assets
Unrealized gains/(losses)
on available-for-sale securities
Depreciation
Net gains/(losses) on revaluation of cash flow hedges
Temporary differences on shares of subsidiaries
Accelerated depreciation
OthersSubtotal
Tax losses carried forward
Net deferred tax assets/(liabilities)(Note)

Recognizedin profit or loss
(Note)

Recognizedin othercomprehensive
incomeAs at
31 August 2018

1,228
3,685
163
3,549

713
562
(32)
616

—
—
—
—

1,942
4,247
130
4,165

(1)

—

(89)

(91)

7,632
(364)
(1,893)(6,527)
917

487
—
—
2,320
4,225

—
(7,485)
—
—
—

8,120
(7,849)(1,893)(4,206)
5,143

8,391

8,892

(7,574)

9,708

6,911

(3,245)—

3,666

15,303

5,646(7,574)

13,374The difference between the total amount recognized in profit or loss and the amount of deferred tax is due to effect ofchange in exchange rate.

Tax effects of unrecognized tax losses carried forward and deductible temporary differences for which deferred tax assets
were not recognized is as follows:(Millions of yen)
As at
31 August 2017
Unrecognized tax losses carried forward
Deductible temporary differences
Total

As at
31 August 2018
18,844
15,79814,862
11,706

34,642

26,568Tax effects of unrecognized tax losses carried forward of which no deferred tax asset is recognized in the consolidated
statement of financial position, if unutilized, will expire as follows:(Millions of yen)
As at
31 August 2017
First year
Second year
Third year
Fourth year
Fifth year and thereafter
Total

As at
31 August 2018————
18,844————
14,862

18,844

14,862

Temporary differences on shares of subsidiaries for which deferred tax liabilities were not recognized
The aggregate amounts of temporary differences associated with undistributed retained earnings of subsidiaries for which
deferred tax liabilities have not been recognized as at 31 August 2017 and 31 August 2018 were 296,630 million yen and354,468 million yen, respectively.

— 94 —

No liability has been recognized with respect to these differences because the Group is in a position to control the timing of
the reversal of the temporary differences and it is probable that such differences will not be reversed in the foreseeable future.
(2) Income taxes(Millions of yen)
Year ended
31 August 2017
Current tax
Deferred tax
Total(Note)

Year ended
31 August 2018
61,136
3,351

78,234(4,929)64,48873,304

The federal corporate income tax rate in the United States was lowered from 35% to 21% following the enactment of
the Tax Cuts and Jobs Act in the United States (22 December 2017). As a result of this change, income of 1,819 million
yen was recorded in income taxes in the consolidated statements of profit and loss for the current consolidated fiscal
year due mainly to the reversal of deferred tax liabilities.

Reconciliations between the statutory income tax rates and the effective tax rates are as follows. The effective tax rate shownis the corporate income tax rate applied to the Group’s profit before income taxes.
(Millions of yen)
Year ended
31 August 2017

Year ended
31 August 2018

Statutory income tax rate
Unrecognized deferred tax assets
Difference in statutory income tax rates of subsidiaries
Impairment loss of goodwill
Undistributed earnings of foreign subsidiaries
Inhabitant tax on per capita basis
Others30.8%
2.4%(3.9%)
0.4%
3.1%
0.1%
0.3%

30.8%
1.1%
(4.3%)
1.0%
0.6%
0.2%
0.8%

Effective tax rate

33.3%

30.2%

20. Trade and Other Payables
The breakdown of trade and other payables as at each year end is as follows:(Millions of yen)
As at
31 August 2017
Trade payables
Other payables
Total— 95 —As at
31 August 2018

137,325
66,683

161,488
53,054

204,008

214,54221. Provisions
The breakdown of provisions as at each year end is as follows:(Millions of yen)
As at 31 August 2017
Asset retirement obligations
Total
Current liabilities
Non-current liabilities

As at 31 August 201824,18930,781

24,18930,781

8,780
15,40911,86818,912The primarily factors for the increase/(decrease) in provision are as follows:(Millions of yen)
Asset retirement obligations
Balances as at 31 August 201724,189Additional provisions
Amounts utilized
Increase in discounted amounts arising from passage of time
Others

7,244
(982)
254
74

Balances as at 31 August 2018

30,781

Please refer to “3. Significant Accounting Policies (11) Provisions” for an explanation of respective provisions.
22. Equity and Other Equity Items(1) Share Capital
Number of
Number of
Number of
authorized sharesissued shares outstanding shares
Capital stock(Common stock(Common stock(Common stock(Millions of yen)with no par-value) with no par-value) with no par-value)(Shares)(Shares)(Shares)
Balances as at 1 September 2016

300,000,000

Increase/(decrease) (Note)
Balances as at 31 August 2017

(Note)

101,964,153

10,273

13,070——19,839—1,303

300,000,000

106,073,656

101,983,992

10,273

14,373

Increase/(decrease) (Note)
Balances as at 31 August 2018

106,073,656

Capital surplus(Millions of yen)——

35,792—

3,901

300,000,000

106,073,656

102,019,784

10,273

18,275The primarily factor for the increase/(decrease) in the number of shares in circulation was the increase/(decrease) in
the number of treasury stock as indicated below.

(2) Treasury Stock and Capital Surplus➀

Treasury Stock
Number of shares (Shares)

Balances as at 1 September 2016
Acquisition of treasury stock less than one unit
Exercise of stock options
Balances as at 31 August 2017
Acquisition of treasury stock less than one unit
Exercise of stock options
Balances as at 31 August 2018

— 96 —

Amount (Millions of yen)

4,109,503

15,633

155(19,994)

6(75)

4,089,664

15,56340(35,832)1(136)

4,053,872

15,429➁

Capital surplus(Millions of yen)
Capital reserve

Gain/(loss) on
disposalof treasury stock

Stock options

4,578

3,112

3,599

1,779

13,070

—
—
—

642
—
—

—
754
—

—
—
(94)

642
754
(94)

4,578

3,754

4,354

1,685

14,373

—
—

1,169
—

—
857

—
—

1,169
857

—

—

—

1,874

1,874

4,578

4,924

5,211

3,559

18,275

Balances as at
1 September 2016
Disposal of treasury stock
Share-based payments
OthersBalances as at 31 August 2017
Disposal of treasury stock
Share-based payments
Capital contributions from
non-controlling interests
Balances as at 31 August 2018

Others

Total

Please refer to “30. Share-based Payments” for details of share-based payments (stock options).
(3) Other components of equity
The breakdown of other comprehensive income included in non-controlling interests is as follows:(Millions of yen)
Year ended
31 August 2017

Year ended
31 August 2018

Exchange differences on translation of foreign operations
Cash flow hedges

1,666
196

91
826

Other comprehensive income

1,862

917

(4) Dividends
The Company’s basic policy is to pay dividends twice a year, an interim dividend and a year-end dividend. These dividends are
decided by resolution of the Board, unless otherwise stipulated by laws and regulations.
The total amount of dividends paid was as follows:Year ended 31 August 2017
Resolutions

Amount of dividends(Millions of yen)

Dividends per share(Yen)

Board of Directors’ meeting held on 4 November 2016

16,824

165

Board of Directors’ meeting held on 13 April 2017

17,846

175

Year ended 31 August 2018
Resolutions

Amount of dividends(Millions of yen)

Dividends per share(Yen)

Board of Directors’ meeting held on 2 November 2017

17,847

175

Board of Directors’ meeting held on 12 April 2018

20,401200— 97 —

Dividend which effective date is after fiscal 2018 is as follow:

Resolutions

Amount of dividends(Millions of yen)

Board of Directors’ meeting held on 2 November 2018

Dividends per share(Yen)

24,484240

Regarding the proposed dividends per common stock, the Board has approved the proposal subsequent to the year-end date,
and this sum is not recognized as a liability at year end.
23. Revenue
The breakdown of revenue for each year is as follows:(Millions of yen)
Year ended
31 August 2017
Revenue
Sales of goods
Service revenue
Total

Year ended
31 August 2018

1,857,065
4,852

2,124,793
5,267

1,861,917

2,130,060

24. Selling, General and Administrative Expenses
The breakdown of selling, general and administrative expenses for each year is as follows:(Millions of yen)
Year ended
31 August 2017
Selling, general and administrative expenses
Advertising and promotion
Rental expenses
Depreciation and amortization
Outsourcing
Salaries
OthersTotal— 98 —

Year ended
31 August 201870,937174,034
39,68833,244
252,520
154,790

70,310191,81345,05541,005285,105
164,186

725,215

797,47625. Other Income and Other Expenses
The breakdowns of other income and other expenses for each year are as follows:(Millions of yen)
Year ended
31 August 2017

Year ended
31 August 2018

Other income
Foreign exchange gains*
Reversal of impairment losses
Others

2,137
695
3,488

—
—
3,385

Total

6,321

3,385
(Millions of yen)

Year ended
31 August 2017

Year ended
31 August 2018

Other expenses
Foreign exchange Iosses*
Losses on retirement of property, plant and equipment
Impairment losses
Others

—
1,915
9,324
3,327

1,450
1,176
12,376
5,241

Total

14,567

20,244* Currency adjustments incurred in the course of operating transactions are included in “other income” or “other expenses”.
26. Finance Income and Finance Costs
The breakdowns of finance income and finance costs for each year are as follows:(Millions of yen)
Year ended
31 August 2017
Finance income
Foreign exchange gains*
Interest income
Others
Total

Year ended
31 August 201813,318
6,110
488

2,132
7,545
15

19,917

9,693(Millions of yen)

Year ended
31 August 2017
Finance costs
Interest expenses
Others
Total

Year ended
31 August 2018
2,932
—

3,169
58

2,932

3,228

* Currency adjustments incurred in the course of non-operating transactions are included in “finance income.”— 99 —

27. Other Comprehensive Income
The breakdown of amounts recorded during the year, reclassification adjustments, and income tax effect generated byindividual comprehensive income items included in “other comprehensive income” for each year are as follows:Year ended 31 August 2017
(Millions of yen)Amount recorded
during the year

Reclassification
adjustment

Amount before
income tax

Incometax effectAmount after
income tax

193

(474)

(280)

35

(245)

Net gain/(loss) on revaluation ofavailable-for-sale investments
Exchange differences ontranslation offoreign operations
Cash flow hedges

26,285—26,285—26,28592,496(22,405)

70,091(22,981)

47,109Total

118,974(22,879)

96,095(22,946)

73,148Amount recorded
during the year

Reclassification
adjustment

Amount before
income tax

65

58

124

(89)

34

Year ended 31 August 2018
(Millions of yen)
Incometax effectAmount after
income tax

Net gain/(loss) on revaluation ofavailable-for-sale investments
Exchange differences ontranslation offoreign operations
Cash flow hedges(6,285)—(6,285)—(6,285)15,155

10,06525,221(7,485)

17,735

Total

8,936

10,12319,059(7,574)

11,484— 100 —

28. Earnings per ShareYear ended 31 August 2017
Equity per share attributable to ownersof the parent (Yen)
Basic earnings per share for the year (Yen)
Diluted earnings per share for the year (Yen)Year ended 31 August 2018
7,175.35
1,169.70
1,168.00

Equity per share attributable to ownersof the parent (Yen)
Basic earnings per share for the year (Yen)
Diluted earnings per share for the year (Yen)

8,458.52
1,517.71
1,515.23

Note: The basis for calculation of basic earnings per share and diluted earnings per share for the year is as follows:Year ended
31 August 2017
Basic earnings per share for the year
Profit for the year attributable to ownersof the parent (Millions of yen)
Profit not attributable to common shareholders(Millions of yen)
Profit attributable to common shareholders(Millions of yen)
Average number of common stock during the year
(Shares)
Diluted earnings per share for the year
Adjustment to profit (Millions of yen)
Increase in number of common stock (Shares)(Number of share subscription rights included in
the increase)

Year ended
31 August 2018

119,280

154,811——

119,280

154,811

101,975,416

102,002,997—
148,207—
167,434(148,207)(167,434)

29. Cash Flow Information(1) Liabilities of financing activities
Liabilities of financing activities are as follows:Year ended 31 August 2018
(Millions of yen)
Variation without cash flow

Short-term borrowings
Long-term borrowings
Corporate bonds
Lease obligations
Total

Balances as at 31
August 2017

Variation withcash flow

Foreign currencytranslation
reserve758
12,146
249,583
19,023170(3,308)249,319(5,918)

(41)
92
—
14

66
(44)
116
22,524954
8,884
499,020
35,643

281,512240,26265

22,662544,502— 101 —

OthersBalances as at 31
August 2018

(2) Information on corporate bonds as at 31 August 2017 and 2018 is as follows:(Millions of yen)
Name of bonds

Date ofissuance

FAST RETAILING CO., LTD.

1st non-collateralized
corporate bonds

18 December
2015

29,97729,9950.110

18 December
2018

FAST RETAILING CO., LTD.

2nd non-collateralized
corporate bonds

18 December
2015

99,86999,9090.291

18 December
2020

FAST RETAILING CO., LTD.

3rd non-collateralized
corporate bonds

18 December
2015

49,901

49,9200.491

16 December
2022

FAST RETAILING CO., LTD.

4th non-collateralized
corporate bonds

18 December
2015

69,83569,8550.749

18 December
2025

FAST RETAILING CO., LTD.

5th non-collateralized
corporate bonds

6 June 2018—

79,8450.110

6 June 2023

FAST RETAILING CO., LTD.

6th non-collateralized
corporate bonds

6 June 2018—

29,9190.220

6 June 2025

FAST RETAILING CO., LTD.

7th non-collateralized
corporate bonds

6 June 2018—

99,731

0.405

6 June 2028

FAST RETAILING CO., LTD.

8th non-collateralized
corporate bonds

6 June 2018—

39,8430.880

4 June 2038

Total

—

—

249,583

499,020—

Company name

As at 31
As at 31
Interest rate
August 2017 August 2018(%)

Date ofmaturity—

30. Share-based Payments
The Group has a program for issuing share subscription rights as share-based compensation stock options for employees of
the Company and its subsidiaries as a means of recognizing their contribution to the Group’s profit. By linking the Company’s
stock price to the benefits received by personnel, this program aims to boost staff morale and motivation, improve Group
performance, and enhance shareholder value by strengthening business development with a focus on shareholder return.
1. Details, scale, and changes in stock options(1) Description of stock options
1st Share subscription rights
A typeCategory and number of grantees

Employees of the Company :Employees of Groupsubsidiaries:

1st Share subscription rights
B type7 Employees of the Company :Employees of Group
3 subsidiaries
:

266
413

Number of stock options by type of shares (Note)

Common stock:maximum 3,370 shares

Common stock:maximum 77,542 shares

Grant date

8 November 2010

8 November 2010

Vesting conditions

To serve continuously until thevesting date (7 November2013) after the grant date
(8 November 2010)

To serve continuously until thevesting date (7 December2010) after the grant date
(8 November 2010)

Eligible service period

From 8 November 2010 to
7 November 2013

From 8 November 2010 to
7 December 2010

Exercise period

From 8 November 2013 to
7 November 2020

From 8 December 2010 to
7 November 2020

Settlement

Equity settlement

Equity settlement— 102 —

2nd share subscription rights
A typeCategory and number of grantees

Employees of the Company :Employees of Groupsubsidiaries:

2nd share subscription rights
B type14 Employees of the Company :Employees of Group
4 subsidiaries
:

139
584

Number of stock options by type of shares (Note)

Common stock:maximum 13,894 shares

Common stock:maximum 51,422 shares

Grant date

15 November 201115 November 2011

Vesting conditions

To serve continuously until thevesting date (14 November 2014)
after the grant date
(15 November 2011)

To serve continuously until thevesting date (14 December 2011)
after the grant date
(15 November 2011)

Eligible service period

From 15 November 2011 to
14 November 2014

From 15 November 2011 to
14 December 2011

Exercise period

From 15 November 2014 to
14 November 2021

From 15 December 2011 to
14 November 2021

Settlement

Equity settlement

Equity settlement

3rd share subscription rights
A type

3rd share subscription rights
B typeCategory and number of grantees

Employees of the Company :Employees of Groupsubsidiaries:

Number of stock options by type of shares (Note)

Common stock:maximum 10,793 shares

Common stock:maximum 39,673 shares

Grant date

13 November 2012

13 November 2012

Vesting conditions

To serve continuously until thevesting date (12 November 2015)
after the grant date
(13 November 2012)

To serve continuously until thevesting date (12 December 2012)
after the grant date
(13 November 2012)

Eligible service period

From 13 November 2012 to
12 November 2015

From 13 November 2012 to
12 December 2012

Exercise period

From 13 November 2015 to
12 November 2022

From 13 December 2012 to
12 November 2022

Settlement

Equity settlement

Equity settlement

4th share subscription rights
A type18 Employees of the Company :Employees of Group
8 subsidiaries
:

136
615

4th share subscription rights
B typeCategory and number of grantees

Employees of the Company :Employees of Groupsubsidiaries:

Number of stock options by type of shares (Note)

Common stock:maximum 7,564 shares

Common stock:maximum 29,803 shares

Grant date

3 December 2013

3 December 2013

Vesting conditions

To serve continuously until thevesting date (2 December 2016)
after the grant date
(3 December 2013)

To serve continuously until thevesting date (2 January 2014)
after the grant date
(3 December 2013)

Eligible service period

From 3 December 2013 to
2 December 2016

From 3 December 2013 to
2 January 2014

Exercise period

From 3 December 2016 to
2 December 2023

From 3 January 2014 to
2 December 2023

Settlement

Equity settlement

Equity settlement— 103 —

19 Employees of the Company :Employees of Group
11 subsidiaries
:

180
706

5th share subscription rights
A typeCategory and number of grantees

Employees of the Company :Employees of Groupsubsidiaries:

5th share subscription rights
B type36 Employees of the Company :Employees of Group
16 subsidiaries
:

223
785

Number of stock options by type of shares (Note)

Common stock:maximum 21,732 shares

Common stock:maximum 33,062 shares

Grant date

14 November 2014

14 November 2014

Vesting conditions

To serve continuously until thevesting date (13 November 2017)
after the grant date
(14 November 2014)

To serve continuously until thevesting date (13 December 2014)
after the grant date
(14 November 2014)

Eligible service period

From 14 November 2014 to
13 November 2017

From 14 November 2014 to
13 December 2014

Exercise period

From 14 November 2017 to
13 November 2024

From 14 December 2014 to
13 November 2024

Settlement

Equity settlement

Equity settlement

6th share subscription rights
A type

6th share subscription rights
B typeCategory and number of grantees

Employees of the Company :Employees of Groupsubsidiaries:

Number of stock options by type of shares (Note)

Common stock:maximum 2,847 shares

Common stock:maximum 25,389 shares

Grant date

13 November 2015

13 November 2015

Vesting conditions

To serve continuously until thevesting date (12 November 2018)
after the grant date
(13 November 2015)

To serve continuously until thevesting date (12 December 2015)
after the grant date
(13 November 2015)

Eligible service period

From 13 November 2015 to
12 November 2018

From 13 November 2015 to
12 December 2015

Exercise period

From 13 November 2018 to
12 November 2025

From 13 December 2015 to
12 November 2025

Settlement

Equity settlement

Equity settlement

6th share subscription rights
C type15 Employees of the Company :Employees of Group
19 subsidiaries
:

274
921

7th share subscription rights
A typeCategory and number of grantees

Employees of the Company: 26

Employees of the Company :Employees of Groupsubsidiaries:

Number of stock options by type of shares (Note)

Common stock:maximum 6,072 shares

Common stock:maximum 2,821 shares

Grant date

13 November 2015

11 November 2016

Vesting conditions

To serve continuously until thevesting date (12 November 2018)
after the grant date
(13 November 2015)

To serve continuously until thevesting date (10 November 2019)
after the grant date
(11 November 2016)

Eligible service period

From 13 November 2015 to
12 November 2018

From 11 November 2016 to
10 November 2019

Exercise period

13 November 2018

From 11 November 2019 to
10 November 2026

Settlement

Equity settlement

Equity settlement— 104 —

16
23

7th share subscription rights
B type7th share subscription rights
C typeCategory and number of grantees

Employees of the Company : 339
Employees of Group
Employees of the Company: 30
subsidiaries: 1,096

Number of stock options by type of shares (Note)

Common stock:maximum 31,726 shares

Common stock:maximum 5,205 shares

Grant date

11 November 2016

11 November 2016

Vesting conditions

To serve continuously until thevesting date (10 December 2016)
after the grant date
(11 November 2016)

To serve continuously until thevesting date (10 November 2019)
after the grant date
(11 November 2016)

Eligible service period

From 11 November 2016 to
10 December 2016

From 11 November 2016 to
10 November 2019

Exercise period

From 11 December 2016 to
10 November 2026

11 November 2019

Settlement

Equity settlement

Equity settlement

8th share subscription rights
A type8th share subscription rights
B typeCategory and number of grantees

Employees of the Company :Employees of Groupsubsidiaries:

19 Employees of the Company : 395
Employees of Group
27 subsidiaries: 1,152

Number of stock options by type of shares (Note)

Common stock:maximum 5,454 shares

Common stock:maximum 48,178 shares

Grant date

10 November 2017

10 November 2017

Vesting conditions

To serve continuously until thevesting date (9 November 2020)
after the grant date
(10 November 2017)

To serve continuously until thevesting date (9 December 2017)
after the grant date
(10 November 2017)

Eligible service period

From 10 November 2017 to
9 November 2020

From 10 November 2017 to
9 December 2017

Exercise period

From 10 November 2020 to
9 November 2027

From 10 December 2017 to
9 November 2027

Settlement

Equity settlement

Equity settlement

8th share subscription rights C type
Category and number of grantees

Employees of the Company: 29

Number of stock options by type of shares (Note)

Common stock: maximum 5,929 shares

Grant date

10 November 2017

Vesting conditions

To serve continuously until the vesting date (9 November 2020) after
the grant date (10 November 2017)

Eligible service period

From 10 November 2017 to 9 November 2020

Exercise period

10 November 2020

Settlement

Equity settlement

Note: The number of stock options is equivalent to the number of shares.

— 105 —

Expenses recognized as share-based payments are as follows:(Millions of yen)
Year ended
31 August 2017

Year ended
31 August 2018

Expenses recognized
Share-based payments

1,425

2,188

(2) Scale of stock options program and changes
Outstanding balance of stock options as at 31 August 2018 are converted into equivalent number of shares.

➀ Number and weighted average exercise prices of stock options
Stock options
Year ended
31 August 2017

Year ended
31 August 2018

Number of shares(Shares)Number of shares(Shares)Non-vested
Non-vested at beginning of the year
GrantedForfeited
Vested32,43430,12039,752(4,275)(37,791)

59,561(793)(62,433)

Non-vested at end of the year

30,12026,455

Year ended
31 August 2017

Year ended
31 August 2018

Number of shares(Shares)Number of shares(Shares)

VestedOutstanding at beginning of the year
VestedExercised
Forfeited

98,881

116,373

37,791(19,994)(305)

62,433(35,832)(491)

Outstanding at end of the year

116,373

142,483

All stock options are granted with an exercise price of 1 yen per share.

➁ Stock price on exercise date
Stock options exercised during the year ended 31 August 2018 are as follows:Type

Number of shares(Shares)

Stock options

Weighted-average stock priceon exercise date (Yen)35,832➂ Expected life of stock options
The weighted-average expected life of outstanding stock options as at 31 August 2018 was 5.96 years.
In addition, the weighted-average expected life of outstanding stock options as at 31 August 2017 was 6.29 years.

— 106 —

45,4102. Methods of estimating fair value of stock options, etc.
The methods of estimating fair value of 8th share subscription rights A type, B type, and C type granted during the year ended
31 August 2018, were as follows:➀ Valuation model: Black-Scholes model➁ The following table lists the inputs to the model used:
8th share subscription rights
A type8th share subscription rights
B typeFair value

37,648 yen

38,133 yen

Share price

39,860 yen

39,860 yen

1 yen

1 yen

Exercise price
Stock price volatility (Note 1)
Expected life of options (Note 2)
Expected dividends (Note 3)
Risk-free interest rate (Note 4)

34%

36%

6.5 years

5.04 years

350 yen/share

350 yen/share(0.095%)(0.14%)
8th share subscription rights
C typeFair value

38,823 yen

Share price

39,860 yen

Exercise price

1 yen

Stock price volatility (Note 1)

37%

Expected life of options (Note 2)

3.0 years

Expected dividends (Note 3)

350 yen/share

Risk-free interest rate (Note 4)
Notes:

1.

2.
3.
4.

(0.17%)

Stock price volatility is computed based on the actual results of 6.5 years for A type (from May 2011 to October
2017), 5.04 years for B type (from November 2012 to October 2017), and 3 years for C type (from November
2014 to October 2017).
Expected life of options is estimated to be the reasonable period from the grant date until the exercise date.
Expected dividends are projected with reference to the historical actual dividends declared in prior years.
Risk-free interest rate refers to the yield of Japanese government bonds corresponding to the expected life of
options.

Also, the method of estimating fair value for the 7th share subscription rights A type, B type, and C type granted during theyear ended 31 August 2017 are as follows:➀ Valuation model: Black-Scholes model➁ The following table lists the inputs to the model used:
7th share subscription rights
A type7th share subscription rights
B typeFair value

34,683 yen

35,167 yen

Share price

36,890 yen

36,890 yen

Exercise price

1 yen

1 yen

Stock price volatility (Note 1)

37%

36%

Expected life of options (Note 2)
Expected dividends (Note 3)
Risk-free interest rate (Note 4)— 107 —

6.5 years

5.04 years

350 yen/share

350 yen/share(0.205%)(0.213%)

7th share subscription rights
C typeFair value

35,854 yen

Share price

36,890 yen

Exercise price

1 yen

Stock price volatility (Note 1)

38%

Expected life of options (Note 2)

3.0 years

Expected dividends (Note 3)

350 yen/share

Risk-free interest rate (Note 4)
Notes:

1.

2.
3.
4.

(0.254%)

Stock price volatility is computed based on the actual results of 6.5 years for A type (from May 2010 to October2016), 5.04 years for B type (from November 2011 to October 2016), and 3 years for C type (from November
2013 to October 2016).
Expected life of options is estimated to be the reasonable period from the grant date until the exercise date.
Expected dividends are projected with reference to the historical actual dividends declared in prior years.
Risk-free interest rate refers to the yield of Japanese government bonds corresponding to the expected life of
options.

3. Estimation method of the number of share subscription rights which have already been vested
Because it is difficult to reasonably estimate the number of options that will expire in the future, the method reflecting actual
numbers of forfeiture is adopted.
31. Financial Instruments(1) Capital risk management
The Group engages in capital management to achieve continuous growth and maximize corporate value.
The ratio of the Group’s net interest-bearing debts to equity is as follows:(Millions of yen)
As at
31 August 2017

As at
31 August 2018

Interest-bearing debts
Cash and cash equivalents
Net interest-bearing debts

281,512683,802(402,289)

544,502
999,697(455,194)

Equity762,043902,777

To maximize corporate value, the Group engages in cash flow-oriented management. As at 31 August 2017 and 2018, theGroup maintained a position where the carrying amount of cash and cash equivalents exceeded interest-bearing debts.
As at 31 August 2018, the Group is not subject to any externally imposed capital requirement.

— 108 —

(2) Significant accounting policies
See Note “3. Significant Accounting Policies” for significant accounting policies regarding standards for recognizing financial
assets, financial liabilities, equity financial instruments, as well as the fundamentals of measurement and recognition of profit orloss.
(3) Categories of financial instruments(Millions of yen)
As at
31 August 2017
Financial assets
Loans and receivables
Trade and other receivables
Other current financial assets
Other non-current financial assets
Available-for-sale investments
Derivatives
Financial assets at fair value through profit or loss(“FVTPL”)
Foreign currency forward contracts designated as
hedging instruments
Financial liabilities
Financial liabilities at amortized cost
Trade and other payables
Other current financial liabilities
Other non-current financial liabilities
Derivatives
Financial liabilities at FVTPL
Foreign currency forward contracts designated as
hedging instruments

As at
31 August 2018

48,59830,42677,304303

52,67735,35976,801
2,674

0

141

6,269

35,377204,008
11,844273,467

214,542
171,854502,671

86

4

5,996

6,913

No items in the above categories are included in discontinued operations or disposal groups held-for-sale. Also, there are no
financial assets or liabilities valued using the fair value option to measure fair value.
On the consolidated statement of financial position, available-for-sale investments are included under “non-current financial
Assets.”(4) Financial risk management
In relation to cash management, the Group seeks to ensure effective utilization of Group funds through the Group’s CashManagement Service. The Group obtained credit facilities from financial institutions and issuance of bonds. Any temporary
surplus funds are invested mainly in fixed interest rate-bearing instruments with minimal credit risk.
The Group entered into foreign currency forward contracts to hedge risk arising from fluctuations in foreign currency
exchange rates and did not conduct any speculative trading in derivatives.

— 109 —

(5) Market risk management
The Group conducts its business on a global scale, and is therefore exposed to the price fluctuation risk of currencies andequity financial instruments.

➀ Foreign currency risk
1) Foreign currency risk management
The Group conducts its business on a global scale, and is exposed to foreign currency risk in relation to purchases and sales
transactions and financing denominated in currencies other than the local currencies of those countries in which the Group
operates its business.
In regard to operating obligations denominated in foreign currencies, the Group in principle hedges risk by using foreign
currency forward contracts and other instruments for foreign currency risk assessed on a monthly basis.
For imports, the Group endeavors to stabilize purchasing costs by concluding foreign currency forward contracts andstandardizing import exchange rates. If the yen should weaken significantly against the US dollar in the future and this situation
continued for an extended period, it could have a negative impact on the Group’s performance.
The Group identifies concentration of risk in regard to foreign currency forward contracts.
The Group’s notional amount of foreign currency forward contracts was 1,231,878 million yen as at 31 August 2018.
2) Foreign currency sensitivity analysis
Below is an analysis of the impact an 1% increase in the yen against the Euro (“EUR”) and the United States dollar (“USD”)
would have on the Group’s profit for the year and other comprehensive income in the respective reporting periods.
These calculations assume no changes in the value of other foreign currencies not included herein.
Year ended
31 August 2017
Average exchange rate (Yen)
USD
EUR
Impact on profit for the year (Millions of yen)
USD
EUR
Impact on other comprehensive income (Millions of yen)
USD
EUR

Year ended
31 August 2018110.09120.68110.30131.45(1,492)(19)(4,056)(444)(9,827)—(10,399)—

3) Currency derivatives and hedges
The Group uses foreign currency forward contract transactions to hedge against the risk of future fluctuations in exchange
rates in regard to foreign currency transactions and applies hedge accounting to transactions that meet hedge requirements,
and did not conduct any speculative trading in derivatives.
Cash flow hedges
A cash flow hedge is a hedge for avoiding risk of volatility in future cash flows. The Company uses foreign currency forward
contracts to hedge cash flow fluctuations relating to forecast transactions.
Fluctuations in the fair value of derivative transactions designated as cash flow hedges are recognized as othercomprehensive income, and included in other components of equity, and are reclassified to profit or loss at the time net profit
is recognized on the hedged item.
The gain/(loss) on derivative transactions (after tax effects) projected to be reclassified to profit or loss within one year was
11,828 million yen (loss) as at 31 August 2018, and 4,483 million yen (loss) as at 31 August 2017.

— 110 —

1. Derivative transactions to which hedge accounting is not applied
Foreign currencies
Average exchange(Millions ofrespective currency)
31 August
31 August
31 August
31 August
2017
2018
2017
2018
Foreign currency forward contracts
Within 1 year
1,126.35—
Buy USD (sell KRW)
0—
(KRW/$)(KRW/$)
30.33
30.84
2
10
Buy USD (sell TWD)
(TWD/$)(TWD/$)
1.34
1.32
Buy USD (sell AUD)
14
19
(AUD/$)(AUD/$)
2. Derivative transactions to which hedge accounting is applied
Foreign currencies
Average exchange rates(Millions ofrespective currency)
31 August
31 August
31 August
31 August
2017
2018
2017
2018
Foreign currency forward contracts
Over 1 year
104.91101.89
Buy USD (sell JPY)
5,884
6,368
(¥/$)
(\/$)
0.88
0.81
Buy USD (sell EUR)
63
67
(€/$)
(€/$)
0.76
0.81
Buy USD (sell GBP)
26
30
(£/$)
(£/$)
1,132.55
1,095.27
Buy USD (sell KRW)
306
771
(KRW/$)(KRW/$)
1.39
1.36
Buy USD (sell SGD)
88
97
(SG$/$)(SGD/$)—
32.67
Buy USD (sell THB)—11
(THB/$)(THB/$)—
54.94
Buy USD (sell PHP)—
10
(PHP/$)(PHP/$)—
63.22
Buy USD (sell RUB)—
0
(RUB/$)(RUB/$)—
1.34
Buy USD (sell CAD)—
2
(CAD/$)(CAD/$)—
1.32
Buy USD (sell AUD)—
11
(AUD/$)(AUD/$)— 111 —

Contract principal(Millions of yen)

Fair value(Millions of yen)

31 August2017

31 August2018

31 August2017

31 August
2018

3

—

0

—

291

1,144

(1)

50

1,678

2,020

(85)

86

Contract principal(Millions of yen)

Fair value(Millions of yen)

31 August2017

31 August2018

31 August2017

31 August2018

617,328

648,881

5,967

16,755

7,323

7,073

(482)

120

2,843

3,174

0

125

34,161

84,381

(603)

(387)

10,044

10,724

(126)

(8)

—

1,317

—

(15)

—

1,165

—

(9)

—

6

—

0

—

252

—

4

—

1,169

—

50

Average exchange rates
31 August2017

31 August2018

109.71
(¥/$)
0.89
(€/$)
0.76
(£/$)
1,147.45(KRW/$)
30.64(TWD/$)
1.37(SGD/$)
34.45(THB/$)
4.33(MYR/$)
1.34(AUD/$)
79.98(RUB/$)
1.32(CAD/$)
13,798.80(IDR/$)—(PHP/$)—($/IDR)

106.35
(¥/$)
0.85
(€/$)
0.83
(£/$)
1,085.98(KRW/$)
29.47(TWD/$)
1.36(SGD/$)
32.35(THB/$)
4.04(MYR/$)
1.32(AUD/$)
62.99(RUB/$)
1.27(CAD/$)
14,903.68(IDR/$)
53.09(PHP/$)
14,951.41($/IDR)

Foreign currencies(Millions ofrespective currency)
31 August
31 August
2017
2018

Contract principal(Millions of yen)

Fair value(Millions of yen)

31 August2017

31 August2018

31 August2017

31 August
2018

Within 1 year
Buy USD (sell JPY)
Buy USD (sell EUR)
Buy USD (sell GBP)
Buy USD (sell KRW)
Buy USD (sell TWD)
Buy USD (sell SGD)
Buy USD (sell THB)
Buy USD (sell MYR)
Buy USD (sell AUD)
Buy USD (sell RUB)
Buy USD (sell CAD)
Buy USD (sell IDR)
Buy USD (sell PHP)
Buy IDR (sell USD)

3,405

3,520

373,567

374,386(1,265)

9,989

124

159

14,603

17,446

(906)

27

56

62

6,073

6,762

122

166

364

45

41,115

4,928

(974)

65

107

71

12,077

7,627

(241)

280

99

167

11,055

18,492

(138)

163

58

81

6,687

8,948

(246)

66

21

53

2,421

5,788

(30)

55

29

29

3,475

3,147

(177)

135

39

54

5,971

5,613

(401)

500

30

45

3,531

4,925

(169)

78

24

3

2,760

339

(53)

(0)

—

61

—

6,769

—

101

—

47

—

5,386

—

198

➁ Interest rate risk management
The Group’s interest-bearing borrowings are mainly bonds with fixed interest rates, and the Group maintains positions incash and cash equivalents that exceed the outstanding balance of its interest-bearing debts.
At present, the impact of interest payments on the Group is quite small. Consequently, the Group’s current level of interestrate risk is minor, and the Group has not performed any interest rate sensitivity analysis.

➂ Price risk management in equity instruments
The Group is exposed to the risk of price volatility in equity financial instruments. The Group holds no equity financial
instruments for short-term trading purposes.
The Group makes regular periodic checks of the market value of the equity financial instruments it holds, as well as thefinancial health of the issuers.

— 112 —

(6) Credit risk management
When the Group initiates ongoing transactions where receivables will be generated on an ongoing basis, the financedepartment manages the Group’s risk exposure by setting credit limits and credit periods, as needed.
Trade receivables encompass many customers spanning a wide range of industries and geographic regions. The Group
conducts regular credit checks of the companies it does business with, and when necessary takes appropriate protective
measures, such as requiring collateral.
The Group does not have excessively concentrated credit risk exposure to any single company or corporate group.
As for deposits and guarantees, the Group mitigates risk by conducting regular monitoring of the companies with which itdoes business for early detection of any worsening of their financial health.

➀ Financial assets and other credit risk exposure
The carrying amounts after adjustment for impairment shown in the consolidated financial statements represent the Group’s
maximum exposure to credit risk before consideration of collateral assets.

➁ Past-due or impaired financial assets
Below is an aged analysis of financial assets whose due date had not passed as at each reporting date, and financial assetsthat are overdue whereof no asset impairment was recognized.
(Millions of yen)
Total

Within due date

Overdue amounts
Within 90 days

91 days to 1 year

Over 1 year

Balances as at 31 August 2017
Trade and other receivables(total)Allowance for doubtful accounts

49,26046,513

2,179

177

389

(661)

(381)

(31)

(20)

(228)

Trade and other receivables (net)

48,59846,131

2,148

156

161

Other financial assets (total)
Allowance for doubtful accounts

108,302(267)

108,248
(267)

—
—

6
—

46
—

Other financial assets (net)108,034

107,981—6

46

53,264

51,523

1,198

318

224

Balances as at 31 August 2018
Trade and other receivables(total)Allowance for doubtful accounts

(587)

(388)

(9)

(43)

(145)

Trade and other receivables (net)52,677

51,135

1,189

274

78

Other financial assets (total)
Allowance for doubtful accounts

115,137(301)

115,127
(301)

9
—

—
—

—
—

Other financial assets (net)

114,835

114,825

9——The Group does not hold any collateral or other credit enhancements associated with the above financial assets.
When the Group recognizes impairment of a financial asset, it does not subtract the impairment directly from the carrying
amount. Rather, this is recorded as an allowance for doubtful accounts.

— 113 —

The main factors increasing/decreasing the Group’s allowances for doubtful accounts were as follows:(Millions of yen)
Allowance for
doubtful accounts(current)

Allowance for
doubtful accounts(non-current)

Balances as at 1 September 2016

667

218

885

Provision for the year
Amounts utilized
Others

123
(149)
19

212
(176)
12

336
(325)
32

Balances as at 31 August 2017

661

267

929

Provision for the year
Amounts utilized
Others

173
(249)
1

46
(14)
3

220
(264)
4

Balances as at 31 August 2018

587

301

889

Total

Where recoverability is uncertain, the Group conducts ongoing monitoring of the credit status of companies with which itdoes business, including receivables whose maturity dates have been changed.
Based on the credit facts uncovered by this monitoring, the Group assesses the recoverability of trade receivables, etc., andmakes provisions accordingly, in the form of allowances for doubtful accounts.
In addition, because the Group does business on a world-wide scale and its credit risk is distributed, it is not overly reliant on
any specific counterparty and faces minimal exposure to the impact of chain-reaction credit risk due to the worsening of thecredit conditions of any given counterparty.
Consequently, there is no need to record additional allowances for doubtful accounts based on credit risk concentration.

— 114 —

(7) Liquidity risk management
The Group manages liquidity risk by formulating and revising its funding plans on a timely basis and maintains an appropriate
level of liquidity on hand.
The ultimate responsibility for management of liquidity risk lies with the CFO appointed by the Board of Directors. The
finance department, under the direction of the CFO, performs the day-to-day aspects of liquidity risk management by
maintaining appropriate levels of surplus funds and bank loans, and by monitoring budgets and cash flows.

As at 31 August 2017
Non-derivative financial
liabilities
Trade and other payables
Long-term borrowings(excluding current portion)
Current portion of long-termborrowings
Short-term borrowings
Corporate bonds
Long-term finance leaseobligations
Short-term finance leaseobligations
Deposits
Derivative financial liabilities
Foreign currency forward
contracts
Total
As at 31 August 2018
Non-derivative financial
liabilities
Trade and other payables
Long-term borrowings(excluding current portion)
Current portion of long-termborrowings
Short-term borrowings
Corporate bonds
Long-term finance leaseobligations
Short-term finance leaseobligations
Deposits
Derivative financial liabilities
Foreign currency forward
contracts
Total(Note)

1 to 2years

More than
2 years
but within
3 years

More than
3 years
but within
4 years(Millions of yen)More than
4 yearsOver
but within
5 years
5 years

Carrying
amountContractual
cash flows

Less than
1 year

204,008

204,008

204,008

—

—

—

—

—

8,833

8,833

—

4,416

4,416

—

—

—

3,312

3,312

3,312

—

—

—

—

—

758
249,583758
250,000

758——
30,000———100,000———
120,000

13,427

13,427

—

4,481

3,410

2,593

1,583

1,358

5,596

5,596

5,596

—

—

—

—

—

2,176

2,176

2,176

—

—

—

—

—

6,083

—

493,781

489,114215,853

38,898

7,827

102,593

1,583

121,358

214,542

214,542

214,542

—

—

—

—

—

4,442

4,442

—

4,442

—

—

—

—

4,442

4,442

4,442

—

—

—

—

—

954
499,020954
500,000

954
30,000———100,000———
130,000—
240,000

27,69027,690

—

7,454

6,455

5,498

3,023

5,258

7,952

7,952

7,952

—

—

—

—

—

128,509

128,509

128,509

—

—

—

—

—

6,917

6,917

5,104

558

1,254

—

—

—

894,473895,453

391,506

12,455

107,7105,498

133,023

245,258

Guaranteed obligations are not included in the above, as the probability of having to act on those guarantees isremote.

— 115 —

(8) Fair value of financial instruments(Millions of yen)
As at 31 August 2017
Carrying amounts

As at 31 August 2018

Fair value

Carrying amounts

Fair value

Financial assets
Security deposits/guarantees

61,33761,42561,75262,253

Total

61,33761,42561,75262,253Financial liabilities
Long-term borrowings (Note)
Corporate bonds (Note)
Lease obligations (Note)

12,146
249,583
19,023

12,253
253,504
19,1318,884
499,020
35,6438,924
500,73136,807

Total

280,753284,889543,548

546,464(Note)

The above includes the outstanding balance of borrowings due within one year.

The fair values of current financial assets, current financial liabilities and non-current financial assets, which are measured byamortized cost, approximate their carrying amounts.
The fair value of security deposits/guarantees is calculated on the basis of the current value, applying the current market
interest rate.
The fair value of corporate bonds is calculated with reference to publicly available market prices.
The fair value of long-term borrowings and finance lease obligations are classified by term, and are calculated on the basis of
the current value, applying a discount rate that takes into account the time remaining to maturity, and credit risk.
Financial assets whose fair value is considered difficult to calculate are not included in available-for-sale financial assets.
The fair value measurements of corporate bonds, long-term borrowings, and lease obligations are classified as Level 2.
(9) Fair value hierarchy of financial instruments
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within thefair value hierarchy described as follows, based on the lowest level input that is significant to the fair value measurement as awhole:
Level 1 – based on quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement isobservable, either directly or indirectly
Level 3 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement isunobservable
The following tables illustrate the fair value measurement hierarchy of the Group’s financial instruments:— 116 —

(Millions of yen)
As at 31 August 2017

Level 1

Available-for-salefinancial assets
Financial assets/(liabilities)at FVTPL
Foreign currency forward
contracts designated as
hedging instruments
Net amountAs at 31 August 2018
Available-for-salefinancial assets
Financial assets/(liabilities) at FVTPL
Foreign currency forward
contracts designated as
hedging instruments
Net amount

Level 2

Level 3

Total

16

—

—

16

—

(86)

—

(86)

—

273

—

273

16

186

—

202

Level 1

Level 2

Level 3

Total

2,513

—

—

2,513

—

136

—

136

—

28,464—28,4642,513

28,601—

31,114

For the valuation of Level 2 derivative financial instruments for which a market value is available, we use a valuation modelthat uses observable data on the measurement date using inputs such as interest rates, yield curves, currency rates, andvolatility in comparable instruments.
The Company did not have any transfers between levels of fair value measurements during the year ended 31 August 2017
and the year ended 31 August 2018.
32. Related Party Disclosures
Remuneration of key management personnel
Remuneration of the Group’s key management personnel is as below:(Millions of yen)
Year ended
31 August 2017

Year ended
31 August 2018

Short-term employee benefits

362

450

Total

362

450

Transactions with officers and major shareholders (individuals only), etc. of the reporting entity submitting these consolidated
financial statements.

— 117 —

Year ended 31 August 2017 (from 1 September 2016 to 31 August 2017)

Name ofCategory company orindividual

Officer

Notes:

1.
2.
		

Toru
Murayama

Location—

Capitalstock orinvestment—

Businessdetails or
profession

Nonexecutive
Director

Percentage
Relationshipof shares
with relatedwith voting
partiesrights (%)

Direct0.00

Details oftransaction

Consulting
and advisory
agreements
Outsourcing
about trainingof management
personnel

Amount oftransaction(Millions ofyen)Account

Balance at
31 August
2017(Millions of
yen)

18

Trade
and otherpayables1

Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
Terms of transactions and policy for the terms
Transaction amounts were determined based on the negotiation with the related party considering market
prices.

Year ended 31 August 2018 (from 1 September 2017 to 31 August 2018)

Name ofCategory company orindividual

Officer

Notes:

1.
2.
		

Toru
Murayama

Location—

Capitalstock orinvestment—

Businessdetails or
profession

Nonexecutive
Director

Percentage
Relationshipof shares
with relatedwith voting
partiesrights (%)

Direct0.00

Details oftransaction

Consulting
and advisory
agreements
Outsourcing
about trainingof management
personnel

Amount oftransaction(Millions ofyen)Account

Balance at
31 August
2018(Millions of
yen)

18

Trade
and otherpayables1

Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
Terms of transactions and policy for the terms
Transaction amounts were determined based on the negotiation with the related party considering market
prices.

— 118 —

33. Major Subsidiaries
The Group’s major subsidiaries are as listed in “3.Corporate Profile 3. Subsidiaries and Associates.”
34. Commitments
The Group had the following commitments at each reporting date:(Millions of yen)
As at
31 August 2017
Commitment for the acquisition of property,
plant and equipment
Commitment for acquisition of intangible assets
Total

As at
31 August 2018
17,347

10,046

11,1101,461

28,457

11,50835. Contingent Liabilities
Year ended 31 August 2017
Not applicableYear ended 31 August 2018
Not applicable
36. Subsequent EventsThe Issue of Share-based Compensation Stock Options (Share Subscription Rights)
Based on Articles 236, 238, and 240 of the Companies Act and on the decision taken by the Board of Directors at its meeting
held on 11 October 2018, the Company decided to issue share subscription rights as share-based compensation stock options
for the purpose of rewarding employees of the Company and its subsidiaries for their contribution to the Group’s profit. By
linking the Company’s stock price more closely to the benefits received by highly productive personnel, the share subscription
rights program is designed both to boost staff morale and their motivation to improve Group performance and to boost
shareholder value by strengthening business development with a focus on shareholder return.
Please see “6.Stock Information and Dividend Policy 1. Stock Information (2) Share Subscription Rights” for details.

— 119 —

(6) Others
Quarterly information for the year ended 31 August 2018
(Cumulative)

First quarter

Second quarter

Third quarter

Fiscal year

Revenue (Millions of yen)

617,026

1,186,765

1,704,149

2,130,060

Profit before income taxes(Millions of yen)

117,832

165,196

237,475

242,678

Profit for the year attributable to
Owners of the Parent(Millions of yen)

78,540104,150

148,335

154,811

Earnings per share (Yen)770.11

1,021.16

1,454.29

1,517.71(Accounting period)
Earnings per share (Yen)First quarter

Second quarter

770.11251.09— 120 —

Third quarter
433.13

Fourth quarter
63.48

2. Non-consolidated financial statements(1) Balance Sheet(Millions of yen)
As at 31 August 2017
ASSETS
Current assets
Cash and deposits
Operating accounts receivable
Securities
Short-term loans receivable from subsidiaries andassociates
Accounts receivable from subsidiaries and associates
Deferred tax assets
Others*1

As at 31 August 2018

256,687
13,470121,134*1

536,837
19,946
146,304

Allowance for doubtful accounts

68,055
15,211
1,014
2,443
(0)

120,886
22,305
1,018
3,902
(32)

Total current assets

478,018

851,168

Non-current assets
Property, plant and equipment
Buildings

12,604

Accumulated depreciation*3(5,367)

12,583*3(6,361)

7,236

Buildings, net
Structures

6,221

359

Accumulated depreciation*3

Structures, net
Tools, furniture and fixtures
Accumulated depreciation

*3

Land
Leased assets
Accumulated depreciation

*3

(237)

134

127
1,639
*3

(1,455)

117

184

1,123
1,324

1,123
1,281

(169)
1,155

Leased assets, net

*3

1,523
(1,406)

Tools, furniture and fixtures, net

364

(225)

*3

(390)
890

7

351

9,774

8,899

Others13,533
5,494
60

25,343
3,966
61

Total intangible assets

19,087

29,371

284
76,392
10,181

2,656
70,579
9,936

Allowance for doubtful accounts

69,092
5,066
—
2,212
—

17,740
6,383
961
1,777
(6,061)

Total investments and other assets

163,231103,974

192,093

142,245

670,111

993,413

Construction in progress
Total property, plant and equipment
Intangible assets
Software
Software in progress

Investments and other assets
Investment securities
Shares of subsidiaries and associates
Investments in capital of subsidiaries and associates
Long-term loans receivable from subsidiaries andassociates
Leases and guarantee deposits
Deferred tax assets
OthersTotal non-current assets
Total assets— 121 —

(Millions of yen)
As at 31 August 2017
LIABILITIESCurrent liabilities
Current portion of corporate bonds
Accounts payable
Accrued expenses
Deposits received
Provision for bonuses
Income taxes payable

As at 31 August 2018

—
5,294
780
*1 20,245
2,026
10,291
772

29,986
10,964
1,297*1 8,162
2,440
749
1,457

39,41155,058Others250,000
1,089
5
—
2,501

470,013
2,277
—
330
2,503

Total non-current liabilities

253,596475,125

293,008

530,184

10,273

10,273

Other capital surplus

4,578
3,666

4,578
4,816

Total capital surplus

8,245

9,395

Retained earnings
Legal retained earnings

818

818

185,100
184,377

185,100
268,286

OthersTotal current liabilities
Non-current liabilities
Corporate bonds payable
Guarantee deposits received
Deferred tax liabilities
Provision for loss on guarantees

Total liabilities
NET ASSETS
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus

Other retained earnings
General reserve
Retained earnings brought forward

370,295

454,204

Treasury stock(15,563)(15,429)

Total shareholders’ equity

373,251

458,445

(502)

(427)

Total retained earnings

Valuation and translation adjustments
Valuation differences on available-for-sale securities
Total valuation and translation adjustments
Share subscription rights
Total net assets
Total liabilities and net assets— 122 —

(502)

(427)

4,354

5,211

377,103463,229

670,111

993,413

(2) Statement of Income(Millions of yen)
Year ended
31 August 2017
Operating revenue
Management income from operating companies*1

Dividends income from subsidiaries and associates*1

Total operating revenue
Operating expenses
Selling, general and administrative expenses
Salaries
Bonuses
Allowance for bonuses
Rental expenses
Depreciation
Outsourcing expenses
OthersTotal operating expenses*1

Year ended
31 August 2018

37,683102,187*1*1

48,709144,334

139,871

193,044

5,259
365
1,676
5,711
6,239
15,837
10,846

6,147
573
1,762
7,698
7,933
20,386
12,02245,936*1

56,524

93,934

136,519

Others

2,736
66
19,546
380

3,451
128
1,557
120

Total non-operating income

22,730

5,258

Others

1,095
80

1,318
799

Total non-operating expenses

1,175

2,118

115,488

139,660

Gains on sales of securities

474—

Total extraordinary income

474—

Operating profit
Non-operating income
Interest income
Interest on securities
Foreign exchange gains

Non-operating expenses
Interest expenses

Ordinary profit
Extraordinary income

Extraordinary losses
Losses on retirement of non-current assets*2

Loss on valuation of shares of subsidiaries andassociates
Provision of allowance for doubtful accounts for
subsidiaries and associates
Impairment losses
OthersTotal extraordinary losses
Income/(loss) before income taxes
Income taxes – current
Income taxes – deferred

24

*2

641

44,169

7,486

—
3,145
—

6,061
—
1,704

47,33815,894

68,624

123,766

3,911
447

2,694
(1,086)

Total income taxes

4,359

1,608

Profit64,264

122,158— 123 —

(3) Statement of Changes in Net Assets
Year ended 31 August 2017
(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Balance at the beginning of year

Capital
stock

Legal
capitalsurplus

OthercapitalsurplusTotal
capitalsurplusLegalretainedearnings

10,273

4,578

3,071

7,650

818

Generalreserve

Retainedearnings
brought
forwardTotal
retainedearnings

185,100

154,782

340,701

Changes during the year
Dividends

—

—

—

—

—

—

(34,670)(34,670)

Profit

—

—

—

—

—

—

64,26464,264

Acquisition of treasury stock

—

—

—

—

—

—

—

—

Disposal of treasury stock

—

—

594

594

—

—

—

—

Net changes of items otherthan those in shareholders’equityNet changes during the year
Balance at the end of year

—

—

—

—

—

—

—

—

—

—

594

594

—

—

29,59429,594

10,273

4,578

3,666

8,245

818

185,100

184,377

370,295

Valuation and translation
adjustments

Shareholders’ equity

Valuation
Total valuationdifferences on
and translation
available-foradjustments
sale securities

Share
subscription
rightsTotal net assets

Treasury stock

Total
shareholders’equity(15,633)

342,992

(818)

(818)

3,599

345,773

Dividends—(34,670)———(34,670)

Balance at the beginning of year
Changes during the year
Profit—64,264———64,264

Acquisition of treasury stock

(6)

(6)

—

—

—

(6)

Disposal of treasury stock

75

669

—

—

—

669

Net changes of items other thanthose in shareholders’ equity

—

—

316

316

754

1,071

Net changes during the year
Balance at the end of year69

30,258

316

316

754

31,329(15,563)

373,251

(502)

(502)

4,354

377,103— 124 —

Year ended 31 August 2018
(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Balance at the beginning of year

Capital
stock

Legal
capitalsurplus

OthercapitalsurplusTotal
capitalsurplusLegalretainedearnings

Generalreserve

Retainedearnings
brought
forwardTotal
retainedearnings

10,273

4,578

3,666

8,245

818

185,100

184,377

370,295

—

—

—

—

—

—

(38,248)(38,248)

Changes during the year
Dividends
Profit

—

—

—

—

—

—

122,158

122,158

Acquisition of treasury stock

—

—

—

—

—

—

—

—

Disposal of treasury stock

—

—

1,149

1,149

—

—

—

—

Net changes of items otherthan those in shareholders’equity

—

—

—

—

—

—

—

—

Net changes during the year
Balance at the end of year

—

—

1,149

1,149

—

—

83,90983,90910,273

4,578

4,816

9,395

818

185,100

268,286454,204

Valuation and translation
adjustments

Shareholders’ equity

Balance at the beginning of year

Treasury stock

Total
shareholders’equity(15,563)

373,251

Valuation
Total valuationdifferences on
and translation
available-foradjustments
sale securities
(502)

(502)

Share
subscription
rightsTotal
net assets

4,354

377,103

Changes during the year
Dividends—(38,248)———(38,248)

Profit—122,158———

122,158

Acquisition of treasury stock

(1)

(1)

—

—

—

(1)

Disposal of treasury stock

136

1,286

—

—

—

1,286

Net changes of items other thanthose in shareholders’ equity

—

—

74

74

857

931

Net changes during the year

134

85,193

74

74

857

86,125

Balance at the end of year

(15,429)

458,445

(427)

(427)

5,211

463,229— 125 —

(4) Notes(Significant accounting policies)
1. Valuation methods for securities(a) Investments in subsidiaries and associates:
The Company’s investments in subsidiaries and associates are stated at cost. The cost of securities sold is determinedby the average method.
(b) Available-for-sale securities:(i) Listed securities:
Listed securities are stated at fair value registered on the balance sheet date (31 August), with fair value gains
and losses, net of applicable taxes, reported as “unrealized gains/(losses) on available-for-sale securities,” aseparate component of net assets. The cost of securities sold is determined based on the moving-average cost
method.
(ii) Unlisted securities:
Unlisted securities are stated at cost, which is determined by the average method.
2. Depreciation method for non-current assets(a) Property, plant and equipment (other than leased assets)
Depreciation of property, plant and equipment is calculated using the straight-line method. The principal ranges of
estimated useful lives are as follows:
Buildings and structures
5–10 years
Tools, furniture, and fixtures
5 years(b) Intangible assets (other than leased assets)
Amortization of intangible assets is calculated using the straight-line method. The principal range of estimated usefullife is as follows:
Software for internal use
5 years(c) Leased assets
Assets held under capitalized finance leases are depreciated using the straight-line method over the lease terms atzero residual value.
3. Accounting for deferred assets
Issuance expenses of corporate bonds
Issuance expenses of corporate bonds are expensed as incurred.
4. Provision basis for allowances(a) Allowance for doubtful accounts
Provision for potential bad debts, loan loss ratios are recorded for general accounts receivable. Specified doubtful
accounts receivable are reviewed individually to determine their recoverability, and an estimate for the nonrecoverable portion is recorded.
(b) Provisions for bonuses
Bonuses to employees are accrued on the balance sheet date.
(c) Provisions for loss on guarantees
To prepare for losses related to loan guarantees for associated companies, the Company considers the financial
position of the guarantee, and records an anticipated loss figure.
5. Other significant matters for the preparation basis of non-consolidated financial statements(1) Accounting for consumption tax
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(2) Application of consolidated taxation system
The consolidated taxation system is applied for the Company.

— 126 —

(Notes to balance sheet)
1. Breakdown of assets and liabilities related to subsidiaries and associates which were not separately presented are as follows:(Millions of yen)
As at 31 August 2017
Trade accounts receivable
Deposits received

13,38919,911As at 31 August 201819,8787,817

2. Contingent liabilities(Millions of yen)
As at 31 August 2017
Guarantees for office and retail store leases
Guarantees on loans payable to financial institutions

81,80312,366As at 31 August 2018
62,7889,208

3. Accumulated depreciation includes accumulated impairment losses.

(Notes to statement of income)1. Transactions related to the subsidiaries and associates are as follows:(Millions of yen)
Year ended
31 August 2017
Ordinary revenue:
Management income from operating companies
Dividends income from subsidiaries and associates
Ordinary expense:

Year ended
31 August 2018

34,902102,187
2,072

46,473
144,334
1,003

2. The breakdown of losses on retirement of non-current assets is as follows:(Millions of yen)
Year ended
31 August 2017
Buildings
Other non-current assets
SoftwareYear ended
31 August 2018
—
—
24

228
65
347

(Marketable securities)
As at 31 August 2017
The fair values of the shares of subsidiaries and associates (subsidiaries 63,196 million yen and associates 13,196 million
yen on the balance sheet) are not described as they do not have a market price and the fair value is extremely difficult todetermine.
As at 31 August 2018
The fair values of the shares of subsidiaries and associates (subsidiaries 55,705 million yen and associates 14,873 million
yen on the balance sheet) are not described as they do not have a market price and the fair value is extremely difficult todetermine.

— 127 —

(Deferred taxes)
1. The breakdown of causes of deferred tax assets and deferred tax liabilities is as follows:(Millions of yen)
As at
31 August 2017
Deferred tax assets:
Provisions for bonuses
Depreciation
Loss on shares of subsidiaries and associates
Impairment losses
Allowance for doubtful accounts
Valuation differences on available-for-sale securities
Unused tax losses carried forward
Software
OthersSubtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Temporary differences on shares of subsidiaries
OthersTotal deferred tax liabilities
Net deferred tax liabilities

As at
31 August 2018

687
478
46,467
970
0
205
3,049
523
3,119
55,501(52,255)
3,246

802
562
48,654
1,009
1,865
449
2,827
1,213
3,316
60,700(56,450)
4,250(1,893)(343)(2,237)
1,009(1,893)(376)(2,269)1,980(Change in method of presentation)“Software” that was included in “Others” under deferred tax assets in the previous fiscal year is separately listed from thecurrent fiscal year due to its increased financial importance. Therefore, the notes of the previous fiscal year have beenreorganized to reflect this change in the method of presentation.
As a result, the amount of 3,642 million yen which was stated in “Others” under deferred tax assets in the previous fiscal year
has been reclassified as “Software” of 523 million yen and “Others” of 3,119 million yen.
2. The differences between the effective tax rate after applying tax effect and the statutory income tax rate are as follows:(Percentage)
As at
31 August 2017
Statutory income tax rate
(adjustments)
Non-taxable dividend income
Increase/(decrease) in valuation allowance
Foreign withholding tax
Others
Effective tax rates after applying tax effect accounting— 128 —As at
31 August 2018

30.8%

30.8%

(44.4)
19.1
1.0
(0.3)

(34.9)
3.3
2.0
0.1

6.3

1.3

(Business Combination)
Not applicable.
(Notes on Significant Subsequent Events)
Year ended 31 August 2018 (1 September 2017–31 August 2018)
The Issue of Stock-based Compensation Stock Options (Share Subscription Rights)
Based on Articles 236, 238, and 240 of the Companies Act and on the decision taken by the Board of Directors at its meeting
held on 11 October 2018, the Company decided to issue share subscription rights as stock-based compensation stock options
for the purpose of rewarding employees of the Company and its subsidiaries for their contribution to the Group’s profit. By
linking the Company’s stock price more closely to the benefits received by highly productive personnel, the share subscription
rights program is designed both to boost staff morale and their motivation to improve Group performance and to boost
shareholder value by strengthening business development with a focus on shareholder return.
Please see “6.Stock Information and Dividend Policy 1. Stock Information (2) Share Subscription Rights” for details.

— 129 —

(5) Supplementary information
Details of fixed asset(Millions of yen)

Types of assets

Property, plant and equipment
Buildings
Structures
Tools, furniture, and equipment
Land
Leased assets
Construction in progress
Total property, plant andequipment
Intangible assets
Software
Software in progress
OthersTotal intangible assets

Balances as at
1 September
2017

Increase

Decrease

Accumulated
Depreciation, Balances as at depreciation oramortization
31 Augustamortization
during the year2018
as at 31 August
2018

7,236
134
117
1,123
1,155
7

300
4
5,770
—
79
860

187
—
5,651
—
122
515

1,128
11
51
—
221
—

6,221
127
184
1,123
890
351

6,361
237
1,455
34
390
—

9,774

7,014

6,476

1,412

8,899

8,479

13,5335,494
60

18,877
17,191
2

548
18,719
—

6,519
—
1

25,343
3,966
61

—
—
—

19,08736,071

19,267

6,520

29,371—(Notes) 1. The main factors listed as increase during the year are as follows:
Types of assets

Amount (Millions of yen)Contents

Software

18,877 Construction cost for new system

Software in progress

17,191 Construction cost for new system

2. The main factors listed as decrease during the year are as follows:
Types of assets
Software in progress

Amount (Millions of yen)
18,719Contents
Construction cost for new systems (transferred tosoftware as the new system was launched)

3. In the “Decrease” column, the figures in parentheses represented impairment losses recognised.

— 130 —

Details of provisions(Millions of yen)
Categories

Balance as at
1 September
2017

Increase

Balance as at
31 August2018

Decrease

Allowance for doubtful accounts (current)

0

32

0

32

Allowance for doubtful accounts(non-current)

—

6,061

—

6,061

2,026

2,440

2,026

2,440

—

330

—

330

Provision for bonuses
Provision for loss on guarantees(Note1)(Note2)(Note3)The increase in the allowance for doubtful accounts for the current fiscal year is mainly for associated companies.
The decrease in the allowance for doubtful accounts in the current fiscal year is due to a reversal of the allowance in
full.
The increase in the provision for loss on guarantees for the current fiscal year is based on a review of the estimatedloss, which takes into consideration financial conditions of affiliated companies.

(6) Main details of assets and liabilities
Omitted because the consolidated financial statements are prepared.

(7) Others
Not applicable.

— 131 —

INDEPENDENT AUDITOR’S REPORTTo the Board of Directors of FAST RETAILING CO., LTD.

OpinionWe have audited the consolidated financial statements of FAST RETAILING CO., LTD. and its subsidiaries (the “Group”), which
comprise the consolidated statement of financial position as at 31 August 2018, and the consolidated statement of profit
or loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated
statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary ofsignificant accounting policies.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial
position of the Group as at 31 August 2018, and its consolidated financial performance and its consolidated cash flows for theyear then ended in accordance with International Financial Reporting Standards (“IFRSs”).

Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements sectionof our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’
Code of Ethics for Professional Accountants (“IESBA Code”) together with the ethical requirements that are relevant to our auditof the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.

Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of theconsolidated financial statements for the current period. These matters were addressed in the context of our audit of theconsolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion onthese matters.

— 132 —

Valuation of inventories at the lower of cost or net realizable value
Key audit matter

Audit procedures performed

As disclosed in Note 10 to the consolidated financial
statements, the Group’s total inventories as at 31 August
2018 are comprised of JPY434,850 million related to the
UNIQLO Japan segment, the UNIQLO International segment,
and the GU segment, in the aggregate, representing 22.3%of the Group’s total assets. Inventories are valued at thelower of cost or net realizable value.

In response to this key audit matter, our audit included,
among others, the following procedures:•

Assessment of the design, implementation andoperational effectiveness of the relevant controls inplace in the inventory management and measurement
process.

The sales pattern for inventories is to establish an initial
price, and then subsequently adjust the price afterwards
based on the season, weather and customer tastes
and demand. The net realizable value of inventories isdetermined by management after considering customer
demand and an aging analysis, which may be impacted by
fast-changing market conditions, economic conditions ofcountries where the Group operates and fashion trends.

•

Involvement of our IT experts in the audit team toevaluate the measurement of inventories, including
standard costing and the logic of allocating purchaseprice variances, managed in the IT system; andperformance of tests of automated controls integrated
in the relevant IT system.

•

Evaluation of the inventory costing methodology andvaluation policy established by management, including
compliance with the applicable international financial
reporting standard.

•

Assessment of the inventory costing methodology
and valuation policy maintained and applied in the IT
system.

•Verification of the determination of net realizablevalue on a representative sample basis.

Given the nature of the Group’s businesses, a large volume
of inventories turn over based on the season and fastchanging market conditions. The number of Stock Keeping
Units (“SKUs”), high volume of movement of inventories andcost accounting of inventories are managed by an IT system,
which results in inventory being highly dependent on the IT
system.
As part of our risk assessment, we determined that slowmoving inventory is not significant to the Group given thatthe pricing strategy for both the UNIQLO and GU brands is inplace.
However, due to a large number of SKUs, the determinationof net realizable value of inventory in the IT system could
lead to material misstatement of the inventory amount.
As disclosed in Note 10 to the consolidated financial
statements, write-downs of inventory to its net realizablevalue amounted to JPY2,044 million and were recognized at
the UNIQLO Japan, UNIQLO International and GU segment,
in aggregate, for the year ended 31 August 2018.
We identified this matter as key in our audit due to themateriality of the value of inventories, and the numerous
SKUs and high volume of movement in the inventory.

— 133 —

Impairment assessment of store assets
Key audit matter

Audit procedures performed

As disclosed in Note 13 to the consolidated financial
statements, the Group has store assets attributable to
UNIQLO Japan, UNIQLO International and GU segment
amounting to JPY40,933 million, JPY79,448 million
and JPY15,558 million, respectively, in the aggregate
representing 7.0% of the Group’s total assets as at 31 August
2018.

In response to this key audit matter, our audit included,
among others, the following procedures:•

Assessment of the design and implementation of therelevant controls implemented by the Group to ensure
the completeness and accuracy of the estimatedimpairment losses recognized.

The Group has implemented a “scrap and build” strategy
to ensure maximum cost-effectiveness. The indicators of
impairment of store assets include external and internal
factors. In accordance with IAS 36, “Impairment of Assets”,
management is required to perform an impairment test on
stores where there are indicators of impairment.

•

Evaluation of the methodology established bymanagement to identify indicators of impairment andthe appropriateness in determination of each CGU,
and evaluation of the methodology’s compliancewith the applicable international financial reporting
standard.

In principle, each store is considered as an individual cashgenerating unit (“CGU”) and the recoverable amount of
the CGU is determined using the “value-in-use” method.
The performance result of each CGU is maintained in the IT•

Involvement of our IT experts in the audit team toverify certain components of performance results ofeach store that was input into the system.

system.

•During the process of management’s assessment, changes indetermination of the performance results of each CGU could
lead to a material effect on the determination of storessubject to impairment, impacting potential impairment
losses.

Evaluation of the performance results of each store,
and assessment of the reasonableness of allocating
relevant headquarter costs to each store.

•

Verification on a representative sample basis of theaccuracy of the determination of the carrying amountof the newly-added CGUs•

Verification of the accuracy of impairment losses
for those CGUs with impairment indicators being
identified.

As disclosed in Notes 6 and 15 to the consolidated financial
statements, impairment losses attributable to UNIQLO
Japan, UNIQLO International and GU segments were JPY415
million, JPY944 million and JPY268 million, respectively,
while the total impairment losses for property, plant andequipment is JPY2,335 million for the year ended 31 August
2018.
We identified this matter as key in our audit due to themateriality of the value of store assets and the importanceof management’s assessment of the performance results
used for identification of impairment indicators.

— 134 —

Impairment assessment of goodwill
Key audit matter

Audit procedures performed

As disclosed in Note 14 to the consolidated financial
statements, the Group’s goodwill as at 1 September 2017
was JPY15,885 million, which has been allocated to the
Global brands segment. The Global brands segment has
been underperforming in recent periods.

In response to this key audit matter, our audit included,
among others, the following procedures:

In accordance with IAS 36, “Impairment of Assets”, goodwill
is not amortized but rather tested for impairment at least
annually or more frequently when there is an indicator of
impairment.
In particular, the Comptoir des Cotonniers business,
which is included in the Global brands segment, has been
underperforming compared to its business plans, which is anindicator of impairment of goodwill. Changes in assumptions
related to impairment tests of the Comptoir des Cotonniers
business could lead to material changes to impairment
losses.
As disclosed in Note 15 to the consolidated financial
statements, for the year ended 31 August 2018, goodwill
attributed to the Comptoir des Cotonniers business was
fully impaired, resulting in the impairment loss of JPY7,792
million of goodwill during the year.

•

Assessment of the design and implementation of therelevant controls implemented by the Group to ensure
the reasonableness of the valuation of goodwill.

•

Evaluation of the methodology established bymanagement to identify indicators of impairment,
and evaluation of the methodology’s compliance itwith the applicable international financial reporting
standard.

•

Evaluation of the process and controls over the
preparation of the business plans, assessing thequality of management’s forecast by comparing
historical results to historical budgets from theprevious period.

•

Analysis of the reasonableness of the key assumptions
used in business plans, comparing them to historicalinformation and external data.

•

Involvement of our valuation experts in the audit
team to review the valuation reports prepared bymanagement’s expert to evaluate the competence,capability and objectivity of management’s expert,
and the methodologies, valuation techniques andassumptions used to determine the fair value,
particularly the discount rate and long-term growthrate.

We identified this matter as key in our audit due to theimportance of management’s judgement applied onassumptions used in the impairment tests.

— 135 —

Other Matter
The consolidated financial statements of the Group for the year ended 31 August 2017, were audited by another auditor who
expressed an unmodified opinion on those statements on 30 November 2017.

Other Information
Management is responsible for the other information. The other information comprises the information included in the annual
report, but does not include the consolidated financial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form ofassurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and,in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, weconclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing
to report in this regard.

Responsibilities of Management and Board of Statutory Auditors for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements that give a trueand fair view in accordance with IFRSs, and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as agoing concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The board of statutory auditors is responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole arefree from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on thebasis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficientand appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,misrepresentations, or the override of internal control.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal
control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.

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•Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if suchdisclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going
concern.

•

Evaluate the overall presentation, structure and content of the consolidated financial statements, including thedisclosures, and whether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

•

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the board of statutory auditors regarding, among other matters, the planned scope and timing of theaudit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the board of statutory auditors with a statement that we have complied with relevant ethical requirements
regarding independence, and communicate with them all relationships and other matters that may reasonably be thought tobear on our independence, and where applicable, related safeguards.
From the matters communicated with the board of statutory auditors, we determine those matters that were of mostsignificance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about thematter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our reportbecause the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
The engagement partners on the audit resulting in this independent auditor’s report are Koichi Okubo, Hirofumi Otani, andEmiko Minowa.

Deloitte Touche Tohmatsu LLC
Tokyo, Japan
30 November 2018

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(TRANSLATION)

INDEPENDENT AUDITOR’s REPORT
30 November 2018
To the Board of Directors of
FAST RETAILING CO.,LTD.:
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Koichi Okubo
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Hirofumi Otani
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Emiko Minowa
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited theaccompanying nonconsolidated financial statements, namely, the nonconsolidated balance sheet, and the related
nonconsolidated statements of income and changes in net assets of FAST RETAILING CO., LTD. (the “ Company”) for the 57th
fiscal year from 1 September 2017 to 31 August 2018, and a summary of significant accounting policies and other explanatory
information, and supplementary schedules.

Management’s Responsibility for the Nonconsolidated Financial Statements
Management is responsible for the preparation and fair presentation of these nonconsolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for such internal control as management determines isnecessary to enable the preparation of nonconsolidated financial statements that are free from material misstatement, whether
due to fraud or error.

Auditor’s Responsibility
Our responsibility is to express an opinion on these nonconsolidated financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the nonconsolidated financial statements are free from material
misstatement.

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An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the nonconsolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the nonconsolidated financial statements, whether due to fraud or error. In making thoserisk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of thenonconsolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the nonconsolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Audit Opinion
In our opinion, the nonconsolidated financial statements referred to above present fairly, in all material respects, the financial
position of FAST RETAILING CO., LTD., as at 31 August 2018, and the results of its operations for the year then ended inaccordance with accounting principles generally accepted in Japan.

Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required under theprovisions of the Certified Public Accountants Act.
The above represents a translation, for convenience only, of the original report issued in the Japanese language.
******************— 139 —

Internal Control Report
1. Basic framework of internal control in connection with financial reporting
Chairman, President and CEO Tadashi Yanai and Chief Financial Officer Takeshi Okazaki hold responsibility for the preparationand management of internal controls in connection with financial reporting for the Company, its consolidated subsidiaries
and associates (hereinafter, the “Group”). The preparation and management of internal controls in connection with financial
reporting are conducted in accordance with the basic framework of internal controls described in the “On the Setting of theStandards and Practice Standards for Management Assessment and Audit concerning Internal Control Over Financial Reporting— Council Opinions”, published by the Business Accounting Council.
The basic elements of our internal controls are organically interconnected, and function as a single whole. Our aim is to achieve
their purposes within a reasonable range. For this reason, these internal controls on financial reporting may not completely
prevent or discover all misstatements in the financial reports.

2. Scope of evaluation, book-close dates, and evaluation procedures
The internal control evaluation of our financial reports was made on 31 August 2018, which was the last day of the fiscal year
under review. This evaluation was made using generally accepted internal control evaluation standards for financial reports.
This evaluation was started with an evaluation of internal controls that have a significant influence on our consolidated financial
reports as a whole (company-wide internal controls). The operational processes to be evaluated were selected on the basis of
this evaluation. In the evaluation of these operational processes, the selected operational processes were analyzed, and the
key points of internal controls that might have a significant influence on the credibility of financial reports were categorized.
Then, the status of preparation and operation was evaluated in terms of these key points of internal controls to determine theeffectiveness of the internal controls.
The scope of the evaluation of the internal controls on financial reporting is of great importance, both fiscally and qualitatively,
for the credibility of the Group’s financial reports. The methods and procedures employed are:Based on the principle that the operational procedures for the entire Company’s internal controls, accounts, and financial
reports should best be evaluated from a company-wide perspective, these evaluations are performed for the Group as a whole.
However, because some consolidated subsidiaries are very small, both fiscally and qualitatively, they are not included within thescope of the evaluation.
Regarding operational procedures, based on the results of the company-wide evaluation of internal controls, and as an indicatorof sales (adjusted to exclude intra-group sales) for each of our businesses in the fiscal year under review, those businesses thatmake up roughly two-thirds of consolidated sales in the fiscal year under review are designated “important businesses.” Theselected important businesses are evaluated in terms of broad indicators such as sales, accounts receivable, inventories andother operational procedures. Next, the impact on the Group’s financial reports is calculated. Those operational proceduresthat are of particular importance are added to the evaluation process.

3. Results of evaluation
Based on the evaluation results discussed above, it was determined that the Group’s internal controls on financial reports wereeffective as at the end of the fiscal year under review.

4. Additional items
None

5. Special items
None— 140 —

Confirmation Note
1.

The Company’s Chairman, President and CEO Tadashi Yanai and Chief Financial Officer Takeshi Okazaki have reviewed thecontents of the financial reports for the Company’s 57th fiscal year (September 1, 2017–August 31, 2018), and confirm they
are true, based on the Financial Instruments and Exchange Law.

2. Special items
None— 141 —