Enterprise for analysis: FAST RETAILING Co., Ltd.

The stocks code: 9983 Stock prices(July 21th,2011): ¥13720 Rating: “Buy”

Target Stock Prices: ¥21556

1. Investment Summary

The target stock price of Fast Retailing Co., Ltd. was estimated at ¥21556 by using the Discounted Cash Flow method

(hereafter, DCF method). It is 57% higher than current stock prices ¥13720. Thus the investment recommendation of Fast

Retailing is "buy". The core business of Fast Retailing, UNIQLO, succeeds in differentiating from other companies by offering

high-quality basic clothing at low cost, thus enable them to expand their business in Asia market in the future.

2. Company Overview

Fast Retailing is the Japanese apparel retailing company which offers high-quality basic clothing at reasonable prices and its

corporate statement is “changing clothes, changing conventional wisdom and changing the world”. The net sales were 814billion

yen and the operating income was 132billion yen as of the end of February 2010, which was ranked first for Japanese domestic

apparel retailers (Exhibit 1) and the fourth in the world (Exhibit 2). They have three main groups, “UNIQLO Japan”, “UNIQLO

International” and “Global Brands”. “UNIQLO Japan” and “UNIQLO International” account for 83% of net sale (Exhibit 3) and

they are operating 878 stores in Japan and 136 stores in the world. They aim to achieve the net sales of 8 trillion yen by 2020 and

they expect that the business in Asia will drive the expansion.

3. Characteristics of the Business of Fast Retailing

Fast Retailing introduced the system of SPA (Specialty store retailer of Private label Apparel) and it enabled them to offer

high-quality basic clothing at low price. These factors differentiate Fast Retailing from other companies in apparel retailing

companies.

■Dealing with “Basic Clothing ：“Fast Retailing created a new market in apparel industry, so called “Basic clothing”. Basic

clothing is different from fashion oriented clothing. In general, fashion oriented clothing is made in accordance with the trend. On

the other hand, basic clothing is the clothing like under shirts and jeans that anybody can wear, so Fast Retailing can target every

generation. This factor differentiates Fast Retailing from other companies and they have achieved rapid growth.

■”High Quality”：They achieved the rapid growth by offering high-quality products like “HEATTECH” and “Fleece”. The

reason why they can continue to create high quality products is that they have utilized the characteristic of basic clothing.

Generally speaking, if you deal with fashion clothing, you have to change the products once the trend has changed, so you don’t

need to improve the products because the trend has changed and you have to focus on creating the new trend clothing. On the

other hand, basic clothing is consistent and unchangeable because the trend doesn’t have influence on basic clothing. It means that

they can focus on the same products for a long time and they can improve the products as a result of trial and error. This enables

them to create the high quality products. The typical example is “HEATTECH”. This product was created as a result of trial and

error in cooperation with TORAY, which is a Japanese fibers and textiles company. This product sold 50 million in 2008.

■“Low cost”：Low cost is one of the factors that differentiate Fast Retailing from other apparel companies. There

are three reasons why they can offer their products at reasonable price. Firstly, they introduce the system of SPA.

SPA is the model encompassing all stages of the business from design and production to final sale (Exhibit 4).

Thanks to the model, they can exclude the middleman and save cost. Secondly, the low prices became possible by

placing large amount of orders with the factory. Thirdly, most of the products were made in China, so that they

can save cost.

4. Trend of Apparel Retailing Market

■Japanese Market：The scale of apparel retailing market is estimated approximately 10 trillion-yen as of 2009. The scale of the

market was 13 trillion-yen in 1991 and the scale has been shrinking for nearly 20 years because Japan has suffered deflation just

after the bubble burst (Exhibit 5). In the future, it is estimated that the scale of Japanese market will keep shrinking because Japan

is rapidly aging.

■Asian Market：There is a lot of demand in Asia as the number of rich people is increasing. There are 900 million middle class

in Asia in 2008 compared with 140 million in 1990. It is estimated that the number of middle class in Asia would reach 20 billion

by 2020. Especially in China, the number of middle class will be 1 billion (Exhibit 6) and the scale of apparel retailing industry

will expand rapidly. It is clear that taking their needs in China is the most important thing for apparel retailing companies.

5. Future Prospect

■Current Situation

・UNIQLO Japan：UNIQLO Japan is the core activities of the Group with 80% share of net sales. It is the nation’s largest apparel

retailer with net sales of 615.1 billion yen and operating income of 127.7 billion yen as of 2010, and 808 stores nationwide. At

present Japanese conditions remained severe with deflation and aging society with a falling birthrate. Within this environment, net

sales of department stores and General Merchandise Stores are decreasing and apparel retailers are having a difficult time.

However, it is increasing net sales by utilizing their strength “high-quality”, “reasonable prices” and “basic clothing”.

There is another competing apparel retailing brands called SHIMAMURA in Japan. SHIMAMURA is offering fashionable

products at reasonable price. However, the kind of clothing SHIMAMURA deal with is different from UNIQLO and

SHIMAMURA can’t be their threat in the Japanese market.

・UNIQLO International：UNIQLO International net sales account for 10% of Fast Retailing net sales. They are seeing as this

business as a future core business for them. It has 138 stores overseas as of 2010 (Exhibit 7), net sales are 72.7 billion yen and

operating income is 6.3 billion yen. Though this business still only accounts for a small amount of UNIQLO Japan’s sales, the

increase in sales largely exceeds UNIQLO Japan (Exhibit 8). In the past, UNIQLO International strategy officially failed in 2002.

However, this business started succeeding in 2005 and the number of stores has been increasing six-fold compared with the

number of stores in 2005.

■Future Strategy

・UNIQLO Japan：It is expected that First Retailing will exert their strength in Japanese apparel market in the future. At the

moment, foreign apparel companies such as ZARA and H&M has been expanding their business in Japan. However, both

companies will not be a threat to UNIQLO Japan because the clothing that both companies are dealing with is different from the

clothing that UNIQLO offers. In other words, ZARA and H&M deal with fashionable clothing, while UNIQLO deal with basic

clothing. However, the size of market is shrinking because of deflation and aging society with a falling birthrate. That trend will

remain in the future and it is inevitable that UNIQLO JAPAN will be affected by that trend.

They also aim at expansion of women’s share in the future in Japan. In order to expand women’s share, they are increasing the

numbers of large stores. However this strategy is not working and it is not clear if UNIQLO Japan can realize the goal.

・”UNIQLO International”：At present, Fast Retailing aims at No.1 apparel retailing company in the world and net sales of five

trillion yen by 2020. In order to achieve the goal, they see the UNIQLO International as the most important business and they are

going to expand aggressively into the Asian Market. Currently, they are opening up 136 stores mainly in Asia and they will

accelerate the shop pace especially in China. In China, the population of middle class is increasing and they are willing to expand

the share.

Moreover, Fast Retailing is ranked 4th place behind "INDITEX (ZARA)" and "H&M" and "GAP" in the world apparel market.

In the future, the competing companies may become a threat of UNIQLO International. However, UNIQLO will utilize their

strength such as "high quality", "low price", and "basic clothing" and it will be hard for them to threaten UNIQLO International

(Exhibit 9).

6. Analysis of Financial Statement

Gross margin and operating margin is higher than other companies (Exhibit11.12). This becomes possible by offering high

quality products at low cost.

7. Future Net Sales

Fast Retailing has three main businesses, “UNIQLO Japan”, “UNIQLO International” and “Global Brands” The future net sales

of each business is estimated by expressing that the number of stores multiplied net sales per store equal net sales. (Exhibit 10)

■“UNIQLO Japan”：UNIQLO Japan is opening 842 stores. The normal size stores are 714 and the large scale stores are 128.

The number of the normal size stores hasn’t increased lately because the domestic apparel market size has been shrinking. On the

other hand, they are increasing the number of large scale stores in order to expand the women’s share in Japan and they scrap

normal size stores that may cannibalize demand in new areas. So we expect that when they open one new large scale store, they

scrap one normal size store. In the future, it is expected that the pace of opening large scale stores will decrease because they

haven’t been succeeding in getting women’s share so far.

Net sales per stores are expressed that net sales per square meter multiplied the size of the store equals net sales per

stores. The net sales per square meter of Fast Retailing is in the highest level in the apparel market and it is hard

to increase the number, so we expect that the net sales per square stays the same, approximately 900 thousands

yen. In addition, we assume that the size of normal stores is 766ｍ² and the size of large scale stores is 1566ｍ².

■“UNIQLO International”

We estimate the future net sales of UNIQLO International by dividing the area into China, other Asia and Western countries.

・China：At present, the population of middle class in China is increasing rapidly and there are a lot of demands in China. In

addition, the UNIQLO brand comes to be recognized and the local staff is being well educated because it has been 5 years since

they opened the first store in China. So we expect that UNIQLO in China will increase the net sales and the number of opening

stores will reach 527 and the net sales per square will increase and reach the same level as Japanese stores by 2020. We assume

that the size of large scale stores is 1566ｍ².

・Other Asia：The population of middle class is increasing in other Asia and it is clear that this area will be one of the most

attractive markets in the future for Fast Retailing. However, the time when they open in other area is later than China and

UNIQLO brand hasn’t been recognized by people yet and the education for staff is not enough. So we expect that the number of

stores and the net sales per square will increase to the same level as China after 5 years.

・Western Area：As for Western area, it is expected that the net sales per store will stay the same because the market in Western

area is enough mature and it is hard to realize the rapid growth.

8. Valuation

■DCF(Discounted Cash Flow) Model：The target stock price was estimated by discounting the future operating free cash flow

of ten years and continuation value with WACC (Weighted Average Cost of Capital:5.06%). As a result of it, the target stock price

is estimated to be 21556 yen. Hence, the target stock price is cheaper than the stock price of 13720 yen and investment

recommendation is “buy”.

■Scenario Analysis：The future net sales of UNIQLO International depend on the sales in China and other Asia and there are

possibilities that the stock price will go up and down in. So scenario analysis should be done to remove the fluctuation. It is the

analysis with which you can estimate the accurate stock price by assuming optimistic scenario and pessimistic scenario and

averaging the scenario probability. As a result of scenario analysis, the target stock price is 21556 yen.

9. Risk Factor

■Key Person Risk：The president Yanai has a strong influence on the management of Fast Retailing. Therefore, in case the

president of Yanai won’t be able to manage, this will have harmful effects on Fast Retailing.

■Human Material Risk: UNIQLO International is expanding rapidly and the education for staff is more needed. If the education

for staff doesn’t succeed in the future, this can lead to the decrease in the net sales.

UNIQLO Japan74%

UNIQLO International

9%

Global Brands

17%

Net Sales Component Ratio

Company Name

(Flagship Brand)Country

Sales(Bi l l io

ns of do l lar)

Change

(%)(loca l base)

INDITEX（ZARA） Spain 17.8 13

H&M Sweden 17.2 0.7

GAP USA 14.7 3.3

FAST

RETAILING(UNIQLO)Japan 9.8 18.9

Limited Brands USA 9.6 11.4

NEXT UK 5.6 1.4

Polo Ralph Lauren USA 5 ▲0.8

Esprit Hong Kong 4.3 ▲2.2

Abercrombie & Fitch USA 3.5 18.4

Liz Claiborne USA 2.5 ▲14.3

Notes: Compiled from the annual reports of the companies listed above.

APPENDIX

Exhibit 1: Japanese Domestic Clothing Retail Rankings

(Fast Retailing Web Site)

Exhibit 2: Worldwide Apparel Specialty Stores

(Fast Retailing Web Site)

Exhibit 3

(Fast Retailing Web Site)

Ranking Company Type of Bus inessApparel Retail

Sales (¥billion)Y/Y (%)

1 UNIQLO Specialty Store 571.9 12.5

2 Shimamura Specialty Store 440.1 2.4

3 Sogo and Seibu Department Store 384.4 ▲4.3

4 Takashimaya Department Store 325.2 ▲1.6

5Daimaru

MatsuzakayaDepartment Store 258.7 ▲22.0

6 Isetan Department Store 255.8 ▲8.2

Notes: Taken from the "FY2010 Buying Power Rankings" published in the Nikkei MJ (June 29, 2011).

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

Scale of Apparel Retailing Market(billions of yen）

Exhibit 4: SPA (Specialty store retailer of Private label Apparel) Business Model

(Fast Retailing Web Site)

Exhibit 5

（Ministry of Economy, Trade and Industry）

High

Low

Basic Fashion

220000

555,112

856,589

990,415

0

200000

400000

600000

800000

1000000

1200000

2001 2009 2015 2020

Population of Middle-Income Group（ thousand）

0

20

40

60

80

100

120

140

160Stores

Store Number Trends

UNIQLO international

Stores in China

Exhibit 6

Exhibit 7 Exhibit 8

Exhibit 9: Position in Apparel Industry

(Nikkei Business, 2009)

(Fast Retailing Web Site)

(Fast Retailing Web Site)

(JETRO Web Site)

0

500,000

1,000,000

1,500,000

2,000,000

0

500

1000

1500

2000

2500

Millions of yenStores

Trends of Net Sales andNumber of Stores

Others

Other Asia

China

UNIQLO Japan

Net sales

Furure Net Sales2002.8 2003.8 2004.8 2005.8 2006.8 2007.8 2008.8 2009.8 2010.8

Net sales 344170 309789 339999 383973 448819 525203 586451 685043 814811UNIQLO Japan 365305 393608 424701 462343 538187 605561UNIQLO International 3078 8737 16998 29344 37789 72792Others 15588 46471 83503 94761 109064 136455

2011.8 2012.8 2013.8 2014.8 2015.8 2016.8 2017.8 2018.8 2019.8 2020.8

Net sales 818279 997283 1067542 1142990 1223629 1348274 1486910 1639534 1809759 1997584UNIQLO Japan 577100 712696 730747 745188 756018 763238 766849 766849 766849 766849UNIQLO International 104724 148132 200340 261348 331156 448581 583606 736231 906456 1094280Others 136455 136455 136455 136455 136455 136455 136455 136455 136455 136455

Total store 2002.8 2003.8 2004.8 2005.8 2006.8 2007.8 2008.8 2009.8 2010.8

The number of total store 585 621 655 1232 1632 1828 1958 2258 2203Total UNIQLO 585 621 646 693 750 787 813 862 944UNIQLO Japan 570 595 637 679 720 748 759 770 808Standard store 570 595 637 676 713 720 709 699 706Large-scale store 3 7 28 50 71 102UNIQLO international 15 26 9 14 30 39 54 92 136China 5 6 8 7 9 13 33 54Other Asia 0 0 0 0 11 18 26 43 64Others 15 21 3 6 12 12 15 16 18Other project 9 539 882 1041 1145 1396 1259Furure total store 2011.8 2012.8 2013.8 2014.8 2015.8 2016.8 2017.8 2018.8 2019.8 2020.8

The number of total store 2178 2230 2282 2334 2386 2488 2590 2692 2794 2896Total UNIQLO 1037 1089 1141 1193 1245 1347 1449 1551 1653 1755UNIQLO Japan 854 854 854 854 854 854 854 854 854 854Standard store 717 687 662 642 627 617 612 612 612 612Large-scale store 137 167 192 212 227 237 242 242 242 242UNIQLO international 183 235 287 339 391 493 595 697 799 901China 77 127 177 227 277 327 377 427 477 527Other Asia 87 87 87 87 87 137 187 237 287 337Others 19 21 23 25 27 29 31 33 35 37Other project 1141 1141 1141 1141 1141 1141 1141 1141 1141 1141

Exhibit 10

0

10

20

30

40

50

60

2006 2007 2008 2009 2010

(%)Gross Margin

FAST RETAILING

Averageof ZARA,H&M,GAP

Industry average in Japan

0

2

4

6

8

10

12

14

16

18

2006 2007 2008 2009 2010

(%)Operating Margin

FAST RETAILING

Averageof ZARA,H&M,GAP

Industry average in Japan

0

5

10

15

20

25

2006 2007 2008 2009 2010

(%)ROA

FAST RETAILING

Averageof ZARA,H&M,GAP

Industry average in Japan

0

5

10

15

20

25

2006 2007 2008 2009 2010

(%)ROA

FAST RETAILING

Averageof ZARA,H&M,GAP

Industry average in Japan

0

5

10

15

20

25

30

35

2006 2007 2008 2009 2010

(%)ROE

FAST RETAILING

Averageof ZARA,H&M,GAP

Industry average in Japan

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2006 2007 2008 2009 2010

ROIC

FAST RETAILING

H＆M

GAP

ZARA

Exhibit11 Exhibit 12

Exhibit13 Exhibit14

Exhibit13

Figure1: Balance Sheet

Figure2: Income Statement

Figure3: Cash Flow Statement

(milions of yen)Condenced Consolidated Balance Sheet 2002.8 2003.8 2004.8 2005.8 2006.8 2007.8 2008.8 2009.8 2010.8

AssetsCush and time deposit 67771 76447 83862 74759 121950 64091 67248 43876 62466Funds surplusAcounts receivable trade 3143 4277 3223 4472 8396 9849 13411 15213 15371Inventries 30995 20867 28803 33594 42862 55173 53778 74580 74079Defferd tax assets 293 4365 3755 2894 928 1752 2545 22187 29715others 64394 64581 60511 64332 76190 87113 126714 142315 163994

Total current assets 166596 170537 180154 180051 250326 217978 263696 298171 345625Total tangible assets 15910 14720 15819 18676 29892 37339 40317 45946 50144Goodwill 0 0 0 10787 32996 32536 28122 39399 28798others 783 3351 4852 6366 8225 10465 12715 15913 19042

Total intangible fixed assets 783 3351 4852 17153 41221 43001 40837 55312 47840Total investments and other assets 27630 31245 40071 56965 58213 61450 59868 63854 63678(Investment in securities) 63 584 6093 7431 1146 907 669 686 844(Long-term loans reciable) 0 0 0 0 0 0 0 0 0

Total fixed assets 44323 49316 60742 92794 129326 141790 141022 165112 161662

Total assets 210919 219853 240896 272845 379652 359768 404718 463283 507287

Liabilit iesAccounts payable trade 48146 43236 44706 33718 42794 40568 57035 56930 54098Short-term loans payable 1809 0 0 0 668 512 527 11775 7414New borrowingCurrent portion of lomg-term debt 0 0 0 0 2521 4484 3201 3098 9944Income tax repayable 0 7750 14840 12213 30340 14393 24570 27022 31512others 32631 27544 18717 28282 36169 30601 33258 76777 99650

Total current liabilit ies 82586 78530 78263 74213 112492 90558 118591 175602 202618Long-term loans payable 4000 0 52 4945 19584 19432 16288 17980 5865Reserve for retirement benefits 0 0 0 200 437 393 253 307 0others 703 820 1148 5992 6662 6104 5573 7982 10816

Total fixed liabikit ies 4703 820 1200 11137 26683 25929 22114 26269 16681

Total liabilit ies 87289 79350 79463 85350 139175 116487 140705 201871 219299

Net assetsCommon stock 3274 3274 10273 10273 10273 10273 10273 10273 10273Capital surplus 11579 11579 4578 4579 4999 4999 4999 5000 5000Legal reserve of retained earnings 124686 141406 163982 184293 211135 228958 259756 295442 336739Treasury stocks -16021 -16027 -16034 -16040 -15539 -15546 -15556 -16254 -16260

Owner's equity 123518 140232 162799 183105 210868 228684 259472 294461 335752Accumulated other comprehensive profit 114 273 -1365 -755 17359 11460 2496 -34822 -50313Minority stockholder's equity 0 0 0 5146 12252 3139 2046 1774 2548

Total net assets 123632 140505 161434 187496 240479 243283 264014 261413 287987

Total liabilit ies and net assets 210919 219853 240896 272845 379652 359768 404718 463283 507287

(mi l ions of yen)

Consolidated profit and loss statement 2002.8 2003.8 2004.8 2005.8 2006.8 2007.8 2008.8 2009.8 2010.8Net sales 344170 309789 339999 383973 448819 525203 586451 685043 814811Cost of sales 193765 172724 176804 213682 236401 276808 292769 343515 393930Gross profit 150405 137065 163194 170290 212418 248395 293682 341528 420881

Depliciation 1930 2272 1840 2433 5409 6567 8523 9765 12229Others 98057 93485 97400 111165 136653 176864 197666 223123 276274

Selling, general and administrative expenses 99987 95757 99240 113598 142062 183431 206189 232888 288503Operaring incom 50418 41308 63954 56692 70355 64963 87493 108639 132378

Interest incom 676 374 506 790 1045 1314 2240 847 344others 749 447 407 1939 3215 2953 513 881 657

Non-operating income 1425 821 913 2729 4260 4267 2753 1728 1001Interest payed 406 332 169 344 853 1775 1635 917 500others 328 228 515 470 624 2851 2912 8142 9124

Non-operating expenses 734 560 684 814 1477 4626 4547 9059 9624Ordinary income 51110 41569 64183 58607 73138 64604 85698 101308 123755

Extraordinary profit 109 0 0 6040 1300 1903 1027 464 917Extraordinary loss 773 6818 7735 6631 1685 3794 4731 6285 7804Net income before income tax 50445 34751 56448 58016 72752 62713 81994 95487 116867

Total income, inhabitant and business tax 22595 13817 25083 24058 30933 30775 38128 45433 54215Net income before minority stockholder's profit 27850 20934 31365 33958 41819 31938 43866 50054 62652Minority stockholder's profit 0 0 1 73 1381 163 336 257 971Net income 27850 20933 31365 33884 40437 31775 43529 49797 61681

(milions of yen)Cash flow　statement 2002.8 2003.8 2004.8 2005.8 2006.8 2007.8 2008.8 2009.8 2010.8Operating cash flow 30780 39563 13702 49965 -5342 36135 4062 46704

Net income 20933 31365 33884 40437 31775 43529 49797 61681Depliciation 2272 1840 2433 5409 6567 8523 9765 12229Acounts receivable trade -1134 1054 -1249 -3924 -1453 -3562 -1802 -158Inventries 10128 -7936 -4791 -9268 -12311 1395 -20802 501Defferd tax assets -4072 610 861 1966 -824 -793 -19642 -7528Dffered tax liabilities 0 0 0 0 0 0 0 0Others(current assets) -187 4070 -3821 -11858 -10923 -39601 -15601 -21679Accounts payable trade -4910 1470 -10988 9076 -2226 16467 -105 -2832Income tax repayable 7750 7090 -2627 18127 -15947 10177 2452 4490

Investment cash flow -7265 -13266 -34485 -41941 -19031 -7755 -33855 -8779Total current assets 1190 -1099 -2857 -11216 -7447 -2978 -5629 -4198Goodwill 0 0 -10787 -22209 460 4414 -11277 10601Others(intangible fixed assets) -2568 -1501 -1514 -1859 -2240 -2250 -3198 -3129Total investments and other assets -3615 -8826 -16894 -1248 -3237 1582 -3986 176

0 0 0 0 0 0 0 0Depliciation -2272 -1840 -2433 -5409 -6567 -8523 -9765 -12229

Free cash flow 23515 26297 -20783 8024 -24373 28380 -29793 37925

Financial cash flow -14839 -18883 11680 39168 -33486 -25224 6421 -19337Short-term loans payable -1809 0 0 668 -156 15 11248 -4361Current portion of lomg-term debt 0 0 0 2521 1963 -1283 -103 6846Others(current liabolities) -5087 -8827 9565 7887 -5568 2657 43519 22873Bonds 0 0 0 0 0 0 0 0Convertible bonds 0 0 0 0 0 0 0 0Long-term loans payable -4000 52 4893 14639 -152 -3144 1692 -12115Reserve for retirement benefits 0 0 200 237 -44 -140 54 -307Reserve for retirement benefits for officers 0 0 0 0 0 0 0 0Others(fixed liabolities) 117 328 4844 670 -558 -531 2409 2834Common stock 0 6999 0 0 0 0 0 0Capital surplus 0 -7001 1 420 0 0 1 0Legal reserve of retained earnings 1381 2907 -351 -361 -711 510 2179 3026Treasury stocks -6 -7 -6 501 -7 -10 -698 -6Others(owner's equity) 0 0 0 0 0 0 0 0Accumulated other comprehensive profit 159 -1638 610 18114 -5899 -8964 -37318 -15491Minority stockholder's equity 0 0 5146 7106 -9113 -1093 -272 774Divident paid -5594 -11696 -13222 -13234 -13241 -13241 -16290 -23410

Decrease and increase in cash and time deposit 8676 7414 -9103 47192 -57859 3156 -23372 18588

Cash and time deposit at beginning of year 67771 76447 83862 74759 121950 64091 67248 43876Cash and time deposit at end of year 76447 83862 74759 121950 64091 67248 43876 62466

Figure4: Future Balance Sheet

Condenced Consolidated Balance Sheet(milions of yen) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Assets

Cush and time deposit 62466 163656 199457 213508 228598 244726 269655 297382 327907 361952 399517Funds surplus 0 0 0 0 0 0 0 0 0 0Acounts receivable trade 15371 16595 20225 21650 23180 24815 27343 30154 33250 36702 40511Inventries 74079 80524 98140 105054 112478 120414 132680 146323 161342 178093 196577Defferd tax assets 29715others 163994 157225 191619 205118 219615 235109 259058 285696 315021 347728 383817

Total current assets 345625 417999 509440 545330 583871 625064 688736 759555 837520 924475 1020421

Total tangible assets 50144 50357 61373 65697 70340 75303 82974 91505 100898 111374 122933

Goodwill 28798

others 19042 17435 21248 22745 24353 26071 28727 31681 34933 38559 42561Total intangible f ixed assets 47840 17435 21248 22745 24353 26071 28727 31681 34933 38559 42561

Total investments and other assets 63678 85126 103748 111057 118906 127295 140262 154684 170562 188270 207810(Investment in securities) 844 1221 1488 1592 1705 1825 2011 2218 2446 2700 2980(Long-term loans reciable) 0 0 0 0 0 0 0 0 0 0 0

Total f ixed assets 161662 152918 186370 199500 213599 228669 251962 277870 306392 338203 373303

Total assets 507287 570917 695810 744830 797470 853732 940698 1037425 1143912 1262679 1393725

LiabilitiesAccounts payable trade 54098 57038 69516 74414 79673 85294 93982 103646 114285 126150 139243Short-term loans payable 7414 7414 7414 7414 7414 7414 7414 7414 7414 7414 7414New borrowing 82912 146612 141100 136194 131679 148673 168076 189270 213652 240439Current portion of lomg-term debt 9944 9944 9944 9944 9944 9944 9944 9944 9944 9944 9944Income tax repayable 31512others 99650 55291 55291 55291 55291 55291 55291 55291 55291 55291 55291

Total current liabilities 202618 212599 288777 288163 288516 289621 315304 344370 376203 412451 452331Long-term loans payable 5865 5865 5865 5865 5865 5865 5865 5865 5865 5865 5865Reserve for retirement benefits 0 0 0 0 0 0 0 0 0 0 0others 10816 10816 10816 10816 10816 10816 10816 10816 10816 10816 10816

Total f ixed liabikities 16681 16681 16681 16681 16681 16681 16681 16681 16681 16681 16681

Total liabilities 219299 229280 305458 304844 305197 306302 331985 361051 392884 429132 469012

Figure5: Future Income Statement

Condenced Consolidated Balance Sheet(milions of yen)Net assets 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Common stock 10273 10273 10273 10273 10273 10273 10273 10273 10273 10273 10273Capital surplus 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000Legal reserve of retained earnings 336739 373362 421122 469750 520955 574947 634936 701164 774235 855000 944227Treasury stocks -16260

Owner's equity 335752 388635 436395 485023 536228 590220 650209 716437 789508 870273 959500

Accumulated other comprehensive profit -50313 -50313 -50313 -50313 -50313 -50313 -50313 -50313 -50313 -50313 -50313Minority stockholder's equity 2548 3314 4269 5275 6358 7522 8816 10248 11832 13585 15525

Total net assets 287987 341636 390351 439985 492273 547429 608712 676372 751026 833545 924712

Total liabilities and net assets 507287 570917 695810 744830 797470 853732 940698 1037425 1143912 1262679 1393725

Figure6: Future Cash Flow Statement

Cash f low　statement(milions of yen) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Operating cash f low 46704 69638 40312 73093 78599 84564 84824 93617 103643 114332 126570

Net income 61681 56899 70926 74740 80420 86480 96114 106369 117642 130234 144106Depliciation 12229 12495 12548 15294 16371 17528 18765 20676 22802 25143 27753Acounts receivable trade -158 -1224 -3630 -1425 -1530 -1635 -2528 -2812 -3095 -3452 -3809Inventries 501 -6445 -17615 -6914 -7425 -7935 -12266 -13643 -15019 -16751 -18483Defferd tax assets -7528 29715 0 0 0 0 0 0 0 0 0Dffered tax liabilities 0 0 0 0 0 0 0 0 0 0 0Others(current assets) -21679 6769 -34394 -13500 -14497 -15494 -23950 -26637 -29325 -32707 -36089Accounts payable trade -2832 2940 12478 4897 5259 5621 8688 9664 10639 11866 13092Income tax repayable 4490 -31512 0 0 0 0 0 0 0 0 0

Investment cash f low -8779 -3751 -46000 -28423 -30471 -32597 -42058 -46584 -51324 -56954 -62853Total current assets -4198 -213 -11016 -4324 -4643 -4963 -7671 -8532 -9393 -10476 -11559Goodwill 10601 28798 0 0 0 0 0 0 0 0 0Others(intangible fixed assets) -3129 1607 -3814 -1497 -1608 -1718 -2656 -2954 -3252 -3627 -4002Total investments and other assets 176 -21448 -18622 -7309 -7849 -8389 -12967 -14422 -15878 -17709 -19539

0 0 0 0 0 0 0 0 0 0 0Depliciation -12229 -12495 -12548 -15294 -16371 -17528 -18765 -20676 -22802 -25143 -27753

Free cash f low 37925 65886 -5688 44669 48128 51967 42766 47033 52318 57378 63717

Financial cash f low -19337 -47608 -22211 -25106 -28132 -31324 -34831 -38709 -42988 -47715 -52939Short-term loans payable -4361 0 0 0 0 0 0 0 0 0 0Current portion of lomg-term debt 6846 0 0 0 0 0 0 0 0 0 0Others(current liabolities) 22873 -44359 0 0 0 0 0 0 0 0 0Bonds 0 0 0 0 0 0 0 0 0 0 0Convertible bonds 0 0 0 0 0 0 0 0 0 0 0Long-term loans payable -12115 0 0 0 0 0 0 0 0 0 0Reserve for retirement benefits -307 0 0 0 0 0 0 0 0 0 0Reserve for retirement benefits for officers 0 0 0 0 0 0 0 0 0 0 0Others(fixed liabolities) 2834 0 0 0 0 0 0 0 0 0 0Common stock 0 0 0 0 0 0 0 0 0 0 0Capital surplus 0 0 0 0 0 0 0 0 0 0 0Legal reserve of retained earnings 3026 0 0 0 0 0 0 0 0 0 0Treasury stocks -6 16260 0 0 0 0 0 0 0 0 0Others(owner's equity) 0 0 0 0 0 0 0 0 0 0 0Accumulated other comprehensive profit -15491 0 0 0 0 0 0 0 0 0 0Minority stockholder's equity 774 766 955 1006 1083 1164 1294 1432 1584 1753 1940Divident paid -23410 -20275 -23166 -26112 -29215 -32488 -36125 -40141 -44571 -49469 -54879

Decrease and increase in cash and time deposit 18588 18278 -27900 19564 19996 20643 7935 8324 9331 9663 10778

Cash and time deposit at beginning of year 43876 62466 163656 199457 213508 228598 244726 269655 297382 327907 361952Cash and time deposit at end of year 62464 163656 199457 213508 228598 244726 269655 297382 327907 361952 372730

Figure7: Valuation

(mi l i ons of yen) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020UNIQLO Japan 577100 712696 730747 745188 756018 763238 766849 766849 766849 766849UNIQLO International 104724 148132 200340 261348 331156 448581 583606 736231 906456 1094280Others 136455 136455 136455 136455 136455 136455 136455 136455 136455 136455Tota l sa les 818279 997283 1067542 1142990 1223629 1348274 1486910 1639534 1809759 1997584

Cost of sales 415342 506201 541863 580159 621090 684357 754726 832195 918598 1013934Selling, general and administrative expenses 289945 350692 377260 403919 432418 475917 524835 578711 638769 705064EBITA 112992 140390 148419 158912 170121 188000 207348 228628 252392 278586

Tax 46% 46% 46% 46% 46% 46% 46% 46% 46% 46%NOPLAT 60549 75231 79534 85157 91164 100744 111113 122516 135251 149287

Depliciation 12495 12548 15294 16371 17528 18765 20676 22802 25143 27753Gross cash f l ow 73045 87780 94827 101528 108692 119509 131789 145318 160393 177040

A change in working capital 4729 8768 3441 3696 3950 6105 6791 7476 8338 9200Capital investment 30932 37698 40354 43206 46254 50966 56206 61976 68410 75510Aggregate investment 35660 46466 43795 46901 50204 57071 62997 69451 76748 84710Operating f ree cash f l ow 37384 41314 51032 54626 58488 62438 68792 75867 83645 92330

Discount rate 1.05 1.10 1.16 1.22 1.28 1.34 1.41 1.48 1.56 1.64Present va lue 35584 37430 44008 44838 45695 46432 48693 51114 53640 56358

Tota l present va lue 463792

Risk free rate 1.17%Tarminal growth rate 2% Risk puremium 5.26%Discount rate 1.72 Levered beta 0.797Continuous va lue 1754650 Cost of equity 5.36%

Cost of debt 2.15%Enterpri se va lue 2218442 Tax rate 40%

Debt 23,223Non-enterprize assets 63678 Total net assets 287,987Corporate va lue 2282120 After-tax WACC 5.06%

Debt 23223Shares of minor shareholders 2548Shareholder's equi ty 2256349

Shares issueed 106073656Target s tock price 21272 （Yen）

Figure7: Scenario Analysis

Figure8: Future Net Sales Per Square Meter（Hundred of Yen)

Figure9:Area per store(m²)

The number of store prediction 2009.8 2010.8 2011.8 2012.8 2013.8 2014.8 2015.8 2016.8 2017.8 2018.8 2019.8 2020.8base UNIQLO international 76 118 164 214 264 314 364 464 564 664 764 864

China 33 54 77 127 177 227 277 327 377 427 477 527Other Asia 43 64 87 87 87 87 87 137 187 237 287 337

Total net sales (milions of yen) 685043 814811 818279 997283 1067542 1142990 1223629 1348274 1486910 1639534 1809759 1997584good UNIQLO international 92 136 183 285 387 489 591 793 995 1197 1399 1601

China 33 54 77 177 277 377 477 577 677 777 877 977Other Asia 43 64 87 87 87 87 87 187 287 387 487 587

Total net sales (milions of yen) 685043 814811 818279 1032845 1147465 1276075 1418675 1645243 1903401 2193149 2518096 2878243bad UNIQLO international 92 136 183 205 227 249 271 313 355 397 439 481

China 33 54 77 97 117 137 157 177 197 217 237 257Other Asia 43 64 87 87 87 87 87 107 127 147 167 187

Total net sales (milions of yen) 685043 814811 818279 974876 1018517 1062069 1105531 1169022 1235944 1306295 1383687 1468118

【scenario】 probability stock pricebase 0.8 21272good 0.1 28426bad 0.1 16966

21556target stock price

2005.8 2006.8 2007.8 2008.8 2009.8 2010.8 2011.8 2012.8 2013.8 2014.8 2015.8 2016.8 2017.8 2018.8 2019.8 2020.8UNIQLO Japan 913 895 913 885 970 995 756 904 904 904 904 904 904 904 904 904UNIQLO International 140 186 278 347 262 342 365 403 446 492 541 581 626 675 724 776China 398 454 510 567 623 679 735 791 848 904Other Asia 342 342 342 342 342 398 454 510 567 623Others 342 342 342 342 342 342 342 342 342 342

Area per store

Standard store 766ｍ²Large-scale store 1566ｍ²