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Corporate Governance

Last Updated: 2019.08.08
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Our Approach to Corporate Governance

Fast Retailing seeks to expand its business operations according to the principles expressed in its corporate statement: "Changing clothes. Changing conventional wisdom. Change the world" and the Group's aim to become the world's No.1 digital consumer retailing company. At the same time, Fast Retailing is determined to build a timely and transparent management system that meets the needs of customers, business partners, shareholders and all other stakeholders through the earnest pursuit of clothing-focused sustainability activities.

To achieve these aims, Fast Retailing is working hard to establish an effective corporate governance structure. The company has adopted a corporate auditor governance model. To enhance the Board's independence and strengthen its surveillance ability, the majority of the directors on the Board are external directors. The company has introduced a corporate officer system designed to split management decision-making and business-execution functions, and facilitate fast management decisions and business implementation. In addition, Fast Retailing has established a variety of committees to complement the effective functioning of the Board, including the Human Resources, Sustainability, Disclosure, IT Investment, Code of Conduct, Business Ethics, and Human Rights committees. Each committee encourages effective, open debate and decision-making to fulfill its designated purpose and responsibilities.

Fast Retailing is committed to strengthening its corporate governance by encouraging all employees to adhere to the Fast Retailing Group Code of Conduct governing employee conduct and the Group's broader corporate culture, and by ensuring the consistent and proper implementation of the Group's internal control systems.

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Outline of Corporate Governance (Year ended November 30, 2018)

Form of OrganizationCorporate auditor governance model
Chairman of the BoardTadashi Yanai
Number of Directors9, including 5 external directors
Number of Auditors5, including 3 statutory auditors
Details of Board
of Directors
Meetings in
Fiscal 2018
Number of Meetings13
Director Attendance*198.7%
Auditor Attendance*296.9%
Sample AgendaFiscal year budget, Approval of corporate results, Approval of group officers appointments, UNIQLO USA business, Ariake project, revisions to Code of Conduct.
Details of Board
of Auditors
Meetings in
Fiscal 2018
Number of Meetings14
Auditor Attendance*297.1%
Sample AgendaAuditing policy, Auditing planning, Discussion with Executive Board, Automation of the Ariake warehouse, Update on structural reform of purchasing, PLST brand update and current issues, Auditing of UNIQLO Japan and UNIQLO International stores
Main Meetings Requiring Auditor AttendanceBoard of Directors Meetings, Human Resources Committee, Sustainability Committee, Disclosure Committee, IT Investment Committee, Code of Conduct Committee, Business Ethics Committee, Human Rights Committee, Risk Management Committee
Election of Independent Directors5 external directors and 3 statutory auditors elected
Determination of Individual Director RemunerationOverall limit approved at the general shareholders meeting. Individual remuneration determined by the Executive Board to reflect occupational duties, responsibilities, actual performance and contributions. Fiscal 2018 compensation to the six directors totaled 450 million yen, including 50 million yen to external directors.
Determination of Individual Auditor RemunerationOverall limit determined at the general shareholders meeting. Individual compensation decided through mutual consultation between auditors. Fiscal 2018 compensation to the five auditors totaled 67 million yen, including 32 million yen to statutory auditors.
Independent AuditorDeloitte Touche Tohmatsu LLC

*1. Average attendance of each director.
*2. Average attendance of each auditor.

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Corporate Governance at Fast Retailing (As of August 1, 2019)

Corporate Governance at Fast Retailing

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Messages from External Directors and Auditors

Create a Responsible, Accountable Public Company

Maximize Corporate Value

Invest in New Fields, Accelerate Corporate Evolution

Become a Global Leader on Sustainability Issues

Apply Wider Industrial Experience for a Broader Management Perspective

Offering Multifaceted Advice

Offer Candid Opinions on Diverse Issues

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Composition of Committees (As of August 1, 2019)

Composition of Committees

Note: The head of the Sustainability Department chairs the Sustainability and the Business Ethics Committees, the head of the Legal Department chairs the Code of Conduct Committee, and an external expert chairs the Human Rights Committee.
Directors and auditors of each company offer opinions based on their individual areas of expertise.

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Committees and Their Responsibilities

Human Resources Committee

The Human Resources Committee, chaired by an external director, discusses important organizational changes and adjustments to human resource systems across the Group, and offers views and suggestions to the Board.

Sustainability Committee

Discusses and determines Fast Retailing's overall sustainability strategy, the compilation and publication of the annual sustainability report, environmental protection, social responsibility activities, compliance, and diversity. The head of the Sustainability Department chairs the committee, which is also attended by external directors and autitors, as wel as others.

Disclosure Committee

The Disclosure committee, chaired by the individual in charge of disclosing information to the Tokyo Stock Exchange (TSE), boosts management transparency by "disclosing information that is timely, accurate, fair and easy to understand." The Committee is responsible for timely disclosure to the TSE and the Stock Exchange of Hong Kong and voluntary disclosure of information that may materially impact investor and shareholder investment decisions.

IT Investment Committee

This Committee debates and advises on the IT investments that will best achieve the Group's digital innovation targets, deliberating on the efficacy of individual investments, and checking whether IT investment budgets submitted by external specialist organizations are reasonable and appropriate.

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 make improvements. It advices on educating executives and employees about the CoC, and on operating the internal reporting system (hotline). The committee is chaired by the head of the Legal and Compliance Department and committee members include a lawyer acting in the capacity of an external auditor.

Business Ethics Committee

This committee ensures the Group does not use an advantageous position to exert undue pressure on business counterparts such as partner factories and suppliers. The committee provides advice and counsel to departments based on external field inspections and partner company surveys. The committee is chaired by the head of the Sustainability Department and committee members include a lawyer acting in the capacity of an external auditor.

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, and discusses 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.

Nomination and Remuneration Advisory Committee

This discretionary committee discusses important items relating to Fast Retailing corporate governance, such as the requirements and nomination policy regarding candidates for director and auditor positions, the policy for determining director remuneration, requirements relating to the company's chief executive officer, and smooth management succession planning, and advises the Board of Directors based on these discussions. The committee is chaired by the director nominated by the Board, and the majority of committee members are external directors or auditors.

Human Rights Committee

Chaired by an external professional, this committee debates and advises on the execution of human rights due diligence. The committee is responsible for ensuring human rights are upheld according to the 2018 Fast Retailing Group human rights policy. It provides various educational activities and advises business administration sections to ensure all business is conducted appropriately. As part of its counselling and supervisory responsibilities, the committee also investigates human rights violations and implements relief measures.

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General Meeting of Shareholders

Fast Retailing views the annual general meeting of shareholders as a precious opportunity to talk directly with shareholders. We try to make the most of the meeting to fully explain any proposals on the agenda, the company's current operations, management strategy and current challenges, and to answer questions on these issues.

Our general meeting of shareholders is held towards the end of November each year at our corporate headquarters in Yamaguchi, Japan.

We send out a convocation notice for the general shareholders' meeting to our shareholders, and we also disclose this notice in advance on the Fast Retailing website to ensure shareholders have time to consider the agenda. The Convocation notice is also published on the website in English and Chinese at least three weeks prior to the general shareholders' meeting.

Once concluded, we then disclose the minutes of the general shareholders' meeting on our website for the benefit of any shareholders who were unable to attend.

We pay close attention to any company proposal that was voted against by a considerable number of shareholders, even if the proposal was passed at the shareholders' meeting. The Board of Directors will analyze the cause and extent of any shareholder opposition and consider what action to take.

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Shareholder Engagement

In addition to the general meeting of shareholders, Fast Retailing has various other means of communicating directly with shareholders.

As the two departments responsible for communicating with shareholders, our Investor Relations and Public Relations departments have regular discussions with the CEO and the officer in charge of disclosing information on the best means of communication, and any action required to facilitate that communication.

Our Disclosure Committee regularly explores if there is any important information that should be disclosed. If so, they disclose that information swiftly, to the Tokyo Stock Exchange, the Hong Kong Stock Exchange and via our corporate website.

Fast Retailing uses a number of media to help deepen shareholders' understanding of our corporate strategy and business environment, such as publishing news releases on our website, transmitting live footage of our quarterly results announcement, and disclosing written information about our corporate results performance.

To ensure our shareholders have a clear understanding of our operations, we send them our business review, and also a copy of our annual report in Japanese and English. We also disclose all of these documents on our website.

Our shareholder opinions are precious to us, and so we make sure to share those opinions in reports to management meetings or as feedback to relevant departments.

We have a strict IR policy and strive to manage internal information and disclose appropriate information accurately, fairly and swiftly to ensure shareholders and other stakeholders are able to understand our company and make a fair evaluation of our business. We also impose a voluntary quiet period from the day following the end of a quarterly business period through to the announcement of that period's business results, during which we do not conduct any IR activities.

We disclose details of our IR policy on our website: https://www.fastretailing.com/eng/ir/policy/.

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The Board of Directors

(1) The Role of the Board of Directors

The Board of Directors (the "Board") adheres to the company's rules governing the Board, and any other appropriate internal regulation, when making decisions in its board meetings on items that require Board approval by law or by the articles of incorporation, and also when making decisions on important management-related items. In order to strengthen its corporate governance system, Fast Retailing operates a delegated authority, in which the representative director and the Board delegates discretion over the execution of business administration to corporate officers. The authority to determine and -implement individual executive matters or matters that do not require Board approval is delegated to the appointed corporate officer in accordance with internal stipulations. Fast Retailing also has separate governance committees which support the decision-making duties of the Board.

(2) The Structure of the Board of Directors

To ensure substantive and lively discussion in Board meetings, as well as appropriate and swift decision-making, Fast Retailing believes it is best to have between three and ten directors on its Board. Our Board consists of a good balance of both internal and external experts with specialist expertise and knowledge in various areas that are vital to Fast Retailing's corporate strategy. We disclose details about Fast Retailing directors and auditors who also serve on the boards of other listed companies, both on our website and in the reference materials accompanying convocation notices for annual general shareholders' meetings.

Our directors and auditors ensure they have the necessary information to fulfill their duties effectively by regularly obtaining information from lawyers and external specialists about the latest laws, rules and regulations. In addition, the relevant officer in charge provides information to directors and auditors on important operational issues, finance matters and organizational management. To promote a better understanding among board members of Fast Retailing's Group operations and management principles, Fast Retailing provides opportunities for directors and auditors to visit stores and factories both inside and outside of Japan and to participate in the semi-annual FR convention.

(3) Meetings of the Board of Directors

In principle, the Board of Directors meets once a month. The annual meeting schedule is determined in advance to ensure that the greatest number of directors and auditors can attend. The agenda and any relevant material are sent to directors and auditors two working days prior to the Board meeting to encourage a lively discussion in the meeting.

Fast Retailing conducts an annual survey of all Board members and statutory auditors for the purpose of analyzing and evaluating the effectiveness of the Board as a whole. We received responses on the FY2018 Board survey from all Board members and statutory auditors. The overall survey results and suggestions were shared and discussed among Board members and statutory auditors in a Board meeting. The survey evaluated the Board of Directors highly for conducting free and lively debate on pertinent issues, and judged there to be no immediate problems regarding the construction, operation or deliberation of the Board. The Board will continue to discuss the diversity and expertise of its membership pertaining to future business development.

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The Board of Auditors

The Board of Auditors discusses reports presented by the accounting auditor around the time of Fast Retailing's quarterly business results. These reports outline the company's auditing processes and how well they are being implemented. The Board of Auditors maintains strong communication links with Fast Retailing's Internal Auditing Department at all times. The Internal Auditing Department reports to the Board of Auditors on auditing plans and frameworks, and provides updates on auditing at Group companies in conjunction with Fast Retailing's half-yearly results, or at any other time deemed necessary.

Fast Retailing's Board of Auditors consists of five members; three external statutory auditors and two internal corporate auditors. This balance of external and internal members helps ensure effective auditing, guaranteeing both independence and strong information gathering capability.

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The Nomination and Remuneration of Directors, Auditors and Corporate Officers

At Fast Retailing, the Board of Directors nominates new director candidates. The Board of Directors also nominates all new auditor candidates after receiving agreement from the Board of Auditors. Candidates for the Board of Directors and the Board of Auditors are selected according to whether they have sufficient specialist expertise and experience in finance, accounting, legal affairs or other areas to fulfill their duties. The Board makes decisions regarding the appointment or reappointment of the CEO or other corporate officers after considering candidates' appropriateness, knowledge, experience, and specialist skills, and consulting with the Human Resources Committee, which is chaired by an external director. The Board of Directors constitutes a good balance of members with the international experience or the specialist knowledge, expertise or aptitude in the areas most required to fulfill our management strategy, regardless of the members' age, gender or whether they originate from inside or outside the company.

The Board of Directors proposes candidates for director and auditor positions to the annual general meeting of shareholders, and list its reasons for selecting specific candidates in both the governance report and the convocation notice.
The general meeting of shareholders has approved an overall annual limit for directors' remuneration of 1 billion yen. A director assigned by the Board then decides, in discussion with other external directors, what portion of that total to allocate to each individual director, depending on their contribution to the Board. The annual shareholders' meeting also approved an overall annual limit for auditors' remuneration of 100 million yen. The Board of Auditors then apportions that total by mutual consultation. Corporate officers are evaluated based on their duties, responsibilities, performance and contribution, and are remunerated according to internal criteria for the Fast Retailing Group determined by the Board of Directors.

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Independent External Directors

Five of the nine members of the Fast Retailing Board are external directors, and all the external directors are recognized as independent directors 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 directors and auditors:
A person shall not qualify as an independent director or auditor 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 most recent 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 Group during 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 for a director or an auditor; or

(4) he/she is, or has been over the past three years, a partner, an associate or an employee of an accounting auditor of Fast Retailing or its subsidiaries.

*1
"Business Partner" includes law firms, auditing firms, tax accounting firms, consultants and any other organizations.
*2
"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.

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Shareholder Dividends

Returning a portion of our profits to shareholders is a top priority for Fast Retailing. Our policy is to pay an appropriate and consistent dividend. We aim to offer high dividends, after considering the funds required to expand Group operations, increase profits and maintain financial soundness.

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Strategic Shareholdings

As a general policy, the Fast Retailing Group does not maintain strategic shareholdings, but in certain cases may own the smallest shareholding required.

In regard to strategic shareholdings, every year the Fast Retailing Board of Directors verifies the economic rationale of holding each individual stock, including medium- to long-term business relations, and makes a comprehensive judgement on the significance of any specific holdings. We are not able to disclose the content of our verifications owing to our business relationship with the companies in which we hold a stake.

As for exercising voting rights linked to strategic shareholdings, Fast Retailing would first evaluate a specific proposal by considering whether it is likely to boost shareholder value or not, and would not approve the proposal if it was likely to adversely affect shareholder value.

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FR Policy on Transactions between Related Parties

If Fast Retailing wants to conduct business transactions with directors or major shareholders of related businesses, it would apply to the Board of Directors. The Board, which includes a majority of external directors, would then discuss the business and operational rationale behind the intended transaction, and consider whether the business conditions were reasonable before making a decision.

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