NITORI Holdings Co., Ltd[Sapporo Head Office: ]1-2-39 Shinkotoni 7-jo, Kita-ku, Sapporo, Hokkaido 001-0907[Tokyo Head Quar ter]3-6-20, Kamiya, Kita-ku, Tokyo 115-0043[Osaka Head Quar ter]1-1, Kamisu-cho, Toyonaka, Osaka 561-0823[Homepage]

ht tp://www.ni tor ihd.co.jp/en/

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NITORI HOLDINGSCORPORATEREPORT2015-2016

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D r e a m

V i s i o n

Bringing comfortable, luxurious home living

to people all over the world.

2017 500 stores ¥550 billion in salesTransformation of Japanese lifestyles

Full-scale launch of global retail chain development.

2022 1,000 stores ¥1 trillion in salesExpansion in key sectors throughout the world

to transform people’s lifestyles.

2032 3,000 stores ¥3 trillion in salesWorking steadily towards the goal of offering

a high-quality lifestyle to people all over the world.

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Spreading the comfort and

enjoyment of high-quality

home living to as

many people as possible:

We take great pride and pleasure

in setting and achieving this goal.

“Enriching the lives of people in every geographic region through our products”

This is our goal, as well as the embodiment of our responsibility to society.

In 1972, when NITORI was a small furniture store on the brink of bankruptcy, my visit to the United States was eye-opening and

life-changing.

In the U.S., I found: product ranges coordinated by color and style, prices that were easily within reach of ordinary consumers,

stores situated in convenient locations so that people could visit them easily, and most importantly, the fact that those chain

retailers were making everyday life a more comfortable and enjoyable experience for everybody.

I thought to myself: “Someday, I want our stores to provide these same things, and to be able to bring comfortable, high-quality

home living to people all over the world.” NITORI remains committed to this vision today, and we continue to follow this path.

Another important aspect of our corporate mission is human resource development.

In order to enrich everyday life for everyone, we have to ensure complete satisfaction for our customers: from product

development through to when the products arrive at customers’ homes, and most definitely after they start to use the products.

”NITORI people” listen carefully to the feedback we get from customers, and use this information to plan for improvements and

upgrading.

We pour our efforts into developing world-class specialists in every facet of business by providing individuals with not only a

solid knowledge of chain retail store principles, but also with opportunities to obtain field experience and expertise from our wide

range of business ventures.

We build systems that enable us to internally control all steps from manufacturing, import-export, logistics and retail sales through

to customer service while simultaneously developing the people that can continuously enhance these systems.

In order to keep “Offering the Unexpected” not only for our customers but also for our stakeholders, we will continue to improve

and upgrade ourselves in the future.

Akio NitoriPresident and CEO

NITORI Holdings Co., Ltd.

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Trading, Planning & Development, and Logistics Functions

Sales Activities

NITORI Holdings Co., Ltd.

[Holding Company]

“Bringing comfortable, luxurious home living to people all over the world”Based on this aspiration, the NITORI Group has outlined a long-term vision and is devoting all of its energy to achieving this Dream.

[Logistics Company]HOME LOGISTICS Co., Ltd.

Advertising and Publicity Functions

Facility Management Functions

[Overseas Sales Companies]NITORI TAIWAN Co., Ltd.NITORI USA, Inc.

Manufacturing Functions

[Overseas Manufacturing Companies]PT. NITORI FURNITURE INDONESIANITORI FURNITURE VIETNAM EPE

[Furniture Manufacturing Factory]NITORI FURNITURE Co., Ltd.

HOME∙DECO CO.,LTD.

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Table of Contents

Our Dream and Vision ………………………… 1

President’s Message …………………………… 2

About the NITORI Group ……………………… 3

How to Achieve “Offering the Unexpected” ………… 5

Our Manufacturing …………………………… 8

Partnership with Our Clients …………………… 10

Our Logistics …………………………………… 11

Our Stores ……………………………………… 13

Other Businesses ………………………………… 15

Our Quality ……………………………………… 17

Environmental Policy …………………………… 19

Interaction with Society ………………………… 21

Looking towards the Future …………………… 21

Financial Highlights …………………………… 22

Company Profi le ………………………………… 22

The NITORI Group comprises several companies, including: NITORI Co., Ltd., which deals in retail home furnishings and home décor; NITORI FURNITURE Co., Ltd., with manufacturing subsidiaries in Indonesia and Vietnam; our logistics arm HOME LOGISTICS Co., Ltd.; NITORI PUBLIC Co., Ltd. for advertising and publicity, and insurance provider NITORI FACILITY Co., Ltd.By clarifying the functional roles and responsibilities within the group, we are able to ensure a more nimble and fl exible management style and enhance our corporate value in this rapidly changing business environment.

[Import Agent Companies]NITORI (China) Co., Ltd.

Shanghai Liqiao Industrial Co., Ltd.

Huizhou Shiniao Logistics Co., Ltd.

NITORI TRADING VIETNAM COMPANY LIMITED(from Dec. 2015)

NITORI (Malaysia) Sdn. Bhd.

NITORI TRADING THAILAND COMPANY LIMITED(from Dec. 2015)

NITORI India Private Ltd.

[Product Planning & Development]Deco Home China Co., Ltd.

Advertising and Publicity Functions

Facility Management Functions

[Advertising Agency]NITORI PUBLIC Co., Ltd.

[Facility Management]

[Insurance Agent Business]NITORI FACILITY Co., Ltd.

[Store Management Companies]NITORI Co., Ltd.∙ HOME FURNISHING STORE∙ HOME FASHION STORE∙ NITORI MALL∙ DECOHOME∙ Online Shopping Business∙ Renovation Business∙ Corporate Sales Business etc.

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By establishing an all-inclusive

“Manufacturing, Logistics and Retail Sales” business model, we are able to offer life-enhancing products to our customers.

Providing products of consistently high quality at prices that are easily within reach for everybody:We gain satisfaction from meeting our customers’ expectations.

How to Achieve “Offering the Unexpected”.

NITORI’s Manufacturing Process

Coordination Proposal

Products coordinated by color, pattern, and style are developed from scratch. Effortless coordination to enable the creation of an ideal room setting.

Our manufacturing is always based on the customer’s perspective

To create a better everyday life for our customers, we develop products by undertaking research from the customer’s perspective.

1 Market Research / Product Planning 2 Product Development

We do everything in-house, from product planning, manufacturing and logistics through to retail sales:

All of our products provide “Unexpected Value”.

Enjoy shopping without having to worry too much about the price

NITORI’s low-priced products with new functionality make everyday life more fun.

7 Sales

Even our logistics is self-run

We have built our own distribution network, from product importation to delivery to customers.

6 Import and Logistics

1Market Research

Product Planning

2Product

Development

6Import and Logistics

Call CenterUtilizing customers’ feedback,

we develop new products from scratch to offer even

better products.

7Sales

Enjoy shopping without having to worry too much about the price

NITORI’s low-priced products with new functionality make everyday life more fun.

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In order to offer the “Unexpected” in our products, we place emphasis on the following 3 key elements:

1. Affordability ……………… prices that make products easily obtainable.

2. Quality and Functionality … use-appropriate quality and functionality.

3. Coordination ……………… 1) a full range of products to support each usage scenario.

2) the above are linked by style and color.

Components of “Offering the Unexpected”

Raw material procurement from all over the world

We do not leave raw material procurement to others. We collect information about potential sourcing areas and then visit the areas before we begin procurement.

All parts are managed individually in-house, from the parts manufacturing stage onwards

We direct and manage manufacturing all the way through production. NITORI’s system creates products with consistent quality.

3 Raw Material Procurement

We do everything in-house, from product planning, manufacturing and logistics through to retail sales:

All of our products provide “Unexpected Value”.

4 Manufacturing

Quality responsibility for all items

For our customers to be able to use our products with peace of mind, we evaluate safety and quality from every angle. Products will hit the store shelves only if they conform to our strict standards.

5 Quality Check

3Raw Material Procurement

4Manufacturing

5Quality Check

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Think and act from the customer’s point of view, not just as a retailer.

This is why WE make the decisions on everything we do. Of the 10,000

products in our product line-up, 90% are NITORI’s privately branded

products, planned and developed internally. We use our own eyes,

ears and shoe-leather to research and analyze existing sources of

dissatisfaction and inconveniences in the market, in order to figure out

where and what to sell. We are constantly improving and upgrading each

phase of all processes, including procurement, manufacturing, quality and

function, price and sales method, delivery to stores and customers, as

well as post-sales customer support, all in an effort to complete the whole

process without any outside support.

We aim to take full responsibility for all aspects of everything relating to our products, as we are the ones that sell those products.

Producing products that manufacturers want to produce.

Traditional retail sales

Manufacturers

Reta i l Sa les

Customers

Retailers become the voice of the consumer, producing what the consumer really needs.

NITORI’s vision of true chain stores

Manufacturers

Reta i l Sa les

Customers

Distribution Revolution

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Manufacturing to support “Offering the Unexpected” [Our Manufacturing]

In order to bring “comfortable, luxurious home living” to our customers,

we are continually working to enhance our quality and product efficiency

so as to offer “Unexpected” products that will satisfy our customers’ needs.

More than 90% of NITORI’s products are manufactured (and

imported from) overseas. NITORI has more than 700 subcontracted

factories throughout the world. We supervise and manage all aspects

of our contract manufacturers, which support most of NITORI’s

manufacturing efforts, including manufacturing methods, production

processes, product and facility management, factory environment, and

organizational structure.

Our group company NITORI FURNITURE Co., Ltd. has its own

fully-owned factories in Indonesia and Vietnam. The total site area

of these factories amounts to around 70 thousand tsubo (more than

250,000 square feet, an area five times as large as the Tokyo Dome)

with 4,700 employees manufacturing 800,000 pieces of furniture every

year. “HOME DECO Co., Ltd. provide import and wholesale of ready-

made curtain,sewing of order curtain and its delivery. We supply NITORI with the latest design curtain from China ,Viet Nam,Turkey,etc.”

We never rely on others for raw materials, in order to ensure that we can offer products with appropriate quality and “Unexpected”

value. Starting off by examining what customers look for in quality and price, and going on to thoroughly investigate whether lead time,

functionality and cost criteria are fulfilled, NITORI handles its own negotiations and contracts. We believe that creating the right mechanisms

in manufacturing will lead to “Offering the Unexpected” with “Unexpected Value.”

NITORI’s sourcing activities throughout the world

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●Taiwan

●Vietnam

●Indonesia

NITORI’s manufacturing of “Unexpected Products” with the aim of offering better productsWe will continue to expand our operations, transcending boundaries and regions.

●Factory of NITORI FURNITURE in Vietnam

This factory, with an area of over 48,000 tsubo (over 1.7 million square feet), is located in the Quang Minh Industrial Zone in Me Linh District near Hanoi, the capital. The average age of the employees is in the early 20’s, and 90% are women aged around 20.

●ChinaOverseas

Subcontracting Factories

18 Regions740 Companies

(as of 2015)

●Japan

● Hong Kong

●Malaysia

●Thailand

Bangladesh●

●India

●Factory of NITORI FURNITURE in Indonesia

This factory, with an area of over 21,000 tsubo (over 752,000 square feet), is located in the capital of North Sumatra, Indonesia. Over 1,500 local employees work in this large scale factory, of whom 40% are women and 60% are men. This percentage shows that women play an active role in the factory. In order to improve productivity, we apply two Japanese-style methods thoroughly: “Mieruka” (identifying problems and bringing them to the foreground) and “5S” (Sort, Straighten, Shine, Standardize, and Sustain). Our key source of competitive advantage is the manufacturing process that eliminates “Muda, Mura, Muri” (Muda: Waste, Mura: Unevenness or irregularity in operations, Muri: Overburdening of people and equipment).

South Korea●

●Singapore

●Pakistan

● Philippines

●Cambodia

1990 (FY)1995 2000 2005 2010 2012 2014

(%)

0

20

40

60

80

100

DomesticOverseas

Furniture41.2%Home Fashion

58.8%

Change in Overseas / Domestic Product Ratio (based on sales)

Change in Furniture / Home Fashion* Products Ratio

(as of 2015)*HFa: Products other than furniture, including

tableware, sinks, curtains, rugs, decorative furnishings, etc.

●Turkey

●Egypt

●Spain

●France

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We share our “Dreams and Vision” and conduct business in a way that values partnership with our clients.

We believe that eliminating injustice, unfairness, or

opaqueness and building trust with clients will lead

to a sustainable business, as we strive to establish a

“truer partnership”.

The NITORI Group’s Client Charter (extract)

1. The NITORI Group companies, together with our partners,

aim to bring an “enriched lifestyle” to a global audience.

2. The NITORI Group companies, together with our partners,

strive to be the best in the world.

3. The NITORI Group companies, together with our partners,

aim for a true partnership to become the best in the world.

4. The NITORI Group companies, together with our partners,

will establish a true partnership that will realize a competitive

spirit, seeking ongoing improvements, in every related field.

5. The NITORI Group companies, together with our partners,

will establish a true partnership, eliminating injustice,

unfairness, or opaqueness.

[Partnership with Our Clients]

Factory Guidance and Open Houses Logistics Partnership

NITORI is also actively engaged in working with clients at manufacturing sites, striving to improve our products collaboratively

HOME LOGISTICS Co., Ltd. has begun strengthening relations with partner companies supporting logistics sites

We train employees using jigs, tool management improvement,

“Mieruka” using the “Kanban Method” (a set of principles and

practices that are applied to an existing process), and Modular

Production (Zero Intermediate State) to establish traceability. We also

carry out one-on-one development of younger human resources

together with our clients, focusing on education of quality control

engineers (both domestic and overseas). (FY2014 overseas results:

6 chief engineers and 78 technical advisors qualified) In addition,

we host factory tours

for clients to facilitate

upgrading technology

throughout an entire

manufacturing site.

We will also be

working to expand

our activities and host

“factory management

guidance” events.

The NITORI Group’s logistics is supported by delivery

companies as well as numerous partner companies. As a

result, HOME LOGISTICS Co., Ltd. has begun holding a

“Management Policy Meeting for Clients,” starting in FY2015,

to explain anticipated future management and partnership

developments. NITORI has adopted a proactive approach

towards working together with suppliers to implement training

relating to furniture product handling and delivery, and to jointly

organize initiatives aimed at achieving a further enhancement

in service quality. In the future, we will continue working with

partner companies in preparing for the installation of rest

facilities for drivers, as well as the introduction of materials

handling machinery* and tools etc. that can be used by all

workers, regardless of age or sex. These efforts will alleviate

issues in the logistics industry such as shortage of workers,

and will also help to address issues relating to changes in

society, such as the aging of the population and the growing

percentage of women working outside the home.

*Materialshandlingequipment:Machineryusedtoenhancetheefficiencyoflogisticsoperations.

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NITORI’s distribution network extends throughout Japan and overseas[Our Logistics]

We are able to control the flow of all products and achieve a high level of efficiency by having developed

our own proprietary distribution network and entry system.

All these efforts enable us to provide quality products at affordable prices.

NITORI group sources raw materials worldwide and has about 90%

of its products manufactured outside Japan. Importing approximately

150,000 20-feet-containers per year, NITORI group has the largest

distribution scale in Japan (for a single business enterprise). Besides

the 10 distribution centers inside Japan, we also have overseas

distribution bases in both China and Vietnam that supply products to

Japan every day. We also put a great deal of effort into making our

infrastructure more sophisticated. For the purpose of labor-saving and

preserving products better, our main domestic distribution centers

have introduced an automatic warehouse system. Our home-delivery

service utilizes an automatic planning system which can specify

the most suitable route to adjust to changes in delivery schedules.

Finding the best way of processing from a global point of view, and

returning the value to our customers, is one of our most important

missions.

Japan’s largest-scale distribution operations, with sophisticated infrastructure

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In order to deliver our “comfortable, luxurious home living,”

bringing products to our customers as fast as possible, we have

logistics centers located throughout Japan to control the main

arteries of our distribution network. By comparing track-records

against original plans, these logistics centers distill issues and

analyze reasons every day, to make improvements for the purpose

of preventing product shortages, maintaining product quality, and

reducing logistics costs. We have also introduced IT systems such

as CMS (Cart Management System) and Piece Sorter to improve

accuracy. “Quality Improvement” and “Cost Reduction” are two

areas on which we continue to focus heavily.

Large scale logistics centers support safe and smooth proprietary distribution

Having started by developing overseas distribution centers, NITORI

has repeatedly revolutionized distribution and logistics. After

introducing our innovative automatic warehouse system in 1980, we

went on to establish our own customs clearance system by setting up

the “Overseas Logistics Division.” NITORI’s products, which cover

almost all everyday commodity needs, are manufactured in many

different countries. Since each country has its own unique customs

clearance rules, overseas logistics operations have always been filled

with complicated “Apply, Approval, Permission, Contract” work. For

a long time, we entrusted all of these tasks to specialist companies,

because of the highly specialized nature of the work. By establishing

our own customs clearance system, we were able to handle all the

work by ourselves. This made it possible to substantially reduce costs

and to bring the products into Japan much more smoothly. Also, since

we were able to negotiate regarding vessels and routes with shipping

companies overseas, this made it possible to deliver from the port to

our distribution centers by the shortest route. Even though they are

manufactured overseas, our products are mainly sold in Japan. Reduced

loss and shorter time-lag are the focus of our logistics operations.

“Overseas Logistics Division” —Our own customs clearance system which expedites shipment by marine transport

Kansai Distribution Center

Kanto Distribution Center

Completing the import declaration process using an electronic customs clearance system.

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Stores that match our customers’ lifestyles[Our Stores]

NITORI has launched various different types of stores to make sure that our customers can freely

coordinate their living space and enjoy comfortable, luxurious home living.

10

0

20

30

40

50

60

5

15

25

35

45

55

(1M sets) (stores)

0

50

100

150

200

250

300

350

1967 1981 1992 1996 1999 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (FY)

StoresNo. of transactions

Change in the number of stores and number of customers

Not only do NITORI’s products offer a variety of colors, patterns and materials for

customers to choose from according to their particular lifestyle, they are also designed

to easily coordinate with other products. To make it easier and more convenient for our

customers to select the products they want, NITORI explores new locations and opens

new stores every year. Also, in order to deliver our products into the hands of customers

overseas, we are aggressively moving forward with opening new stores outside Japan.

Offering “Total Coordination” to help customers enjoy a more fulfilling lifestyle

By 2032:

3,000stores

2014 (Actual)

2022 (Planned)

2032 (Planned)

0 20 40 60 80 100 (%)

92% 8%

74% 26%

33% 67%

Domestic Overseas

U.S.A.Taiwan

JapanChina

Change in Ratio of Stores between Domestic and Overseas (Planned)

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Any good-quality product that enhances people’s lives can be bought

conveniently with “one-stop shopping”: this is NITORI’s idea of a

shopping center that is designed from a customer/user-centric perspective.

The “Power Center,” a type of shopping center that anchors fast-growing

stores from each retail model is very common in the U.S., but in Japan,

it is rare, especially GMC or realtor-operated shopping centers. Making

a contribution to enhancing people’s lives in the areas where they live by

promoting “NITORI MALL” is NITORI’s new “DREAM”.

Home goods, fashion and food services: a shopping center designed from customers’ point of view

NITORI MALL Sagamihara

[NITORI MALL Opening plan]Store Name: NITORI MALL Hirakata (provisional name)

City: Hirakata City, Osaka

Ground Area: About 58,558m2

Commercial Area: About 40,000m2

Location: Adjacent to National Highway 1

Population of commercial area: About 600,000 people (estimate)

NITORI has been opening its stores in locations with a population of

200,000~400,000 in the area. However, in order to encourage customers

to visit our stores more frequently, there was a need to create a new and

smaller store format that would work for areas with smaller populations.

“DECO HOME” is our home-fashion model which carries frequently-

purchased everyday goods. This represents a brand new concept in product

assortment and store design, as well as in the operation of the stores.

Development of a brand new store format, and advancement into new markets, in line with our future store-opening strategy

DECO HOME AEON MALL Inagawa store

In April 2015, “NITORI Printemps Ginza store”, the very fi rst NITORI

outlet inside a department store, opened its doors. This store places

heavy emphasis on coordination, and the most fashionable of products

are selected from our regular assortment to create a sales fl oor with an

innovative lifestyle message. We will continue to make improvements so

that people that may not have been aware of our products in the past can

experience and feel the joy of NITORI’s home coordination.

Taking up the challenge of moving into a new fi eld, the “urban model”, to expand our clientele

NITORI Printemps Ginza store

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Handling everything from goods to construction work

NITORI has launched an interior renovation business for homes, stores and

other facilities. This business is focused on providing a complete overhaul

of any space. This total renovation service, with a focus on our proprietary

products such as integrated kitchen systems and restroom sink units, is a

holistic service from the initial proposal right through to construction work

for system-baths, toilets, and other indoor renovation. Our services are

not simply about replacing water supply equipment, but are rather about

offering total coordination with NITORI’s furniture and home goods around

the renovated space. NITORI’s philosophy of doing everything in-house

is precisely how new forms of businesses like these can be launched

effectively.

Penetrating the B2B market, by making effective use of our product development capability

We are expanding our B2B business with these five main business areas as

pillars.

●Office Business ●Commercial / Educational Business

●Nursing / Medical Facility Business ●Hotels and Living Conditions Business

●Model Home Business

Recently more and more corporate clients have been looking to lower the cost

of installations in their offices and facilities. It is now possible for us to meet

such needs, as we can develop products for corporate clients, utilizing the

SPA know-how which NITORI has acquired through its home furniture sales

business. The corporate sales business market has been expanding rapidly

over the past few years, and we are aiming at further growth in this market.

Interior Renovation Business

Business to Other Businesses

Showroom

Example of NITORI products in use: Office

Example of NITORI products in use: Commercial Facility

Positioning ourselves as a true “LIFE STYLE SUGGESTION COMPANY,” utilizing a wide range of business fields

[Other Businesses]

NITORI’s pursuit of our corporate vision is not limited to offering home furnishing goods in stores. In

order to deliver a truly enhanced lifestyle to every person in different ways, we will continue to expand

the range of business areas in which we operate.

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In order to offer NITORI goods to as many customers as possible, we have extended the joy of shopping to the Internet

As an advertising company, NITORI PUBLIC has developed a wide range of businesses that extend beyond the boundary of the NITORI group

NITORI PUBLIC is an integrated advertising agency which

provides a variety of services, including strategic communication

planning, advertising and sales promotion. We currently conduct

marketing work for several clients, including a real estate company

and a travel agency. We have recently also been putting efforts into

developing novelty goods. Improving its business skills by dealing

with a wide range of different enterprises, NITORI PUBLIC aims to

play a role in enhancing the value of the entire NITORI group.

From creating spaces for stores to insurance

NITORI FACILITY handles maintenance duties in order to

keep the stores and offices of the NITORI group in an optimal

condition, and pursues the goal of creating an ideal space

where our customers can feel comfortable, while at the same

time the maintenance cost is reduced. Furthermore, as an

insurance agency dealing with both life insurance and liability

insurance, we support our customers and employees to design

their future in a way that is both satisfactory and reliable.

“nitori-net” website homepage / Smartphone-optimized website pages (as of August 2015)

Online shopping site for furniture and interior goods

NITORI PUBLIC NITORI FACILITY

Our online shopping business has grown rapidly in

response to the needs of customers who want to

research goods online in advance, find it difficult

to drop by our stores, or want to make online

purchases at home after checking goods at the

store during the day. With a view to providing the

same convenience on our nitori-net site as we

do at our stores, we are now adding convenient

functions such as being able to view furniture

coordination on screen, or being able to search

stock at a specific store. In addition, we have

developed a special application for smartphones

which makes it easy to access nitori-net. As the

core feature of NITORI’s omni-channel strategy,

we continue offering a way of shopping that is

more convenient and more enjoyable for our

customers.

In-store insurance shop: “Nitori no hoken + Life salon” (at NITORI Minami-suna store)Examples of major

innovations

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[Our Quality]

A thorough-going commitment to quality improvement – That is our mission as a company that delivers goods to customers.

In NITORI, where approximately 90% of our products are PB (Private Brand) products, we set our own original

quality standards and work on improving quality on a daily basis. We carry out an in-house quality inspection

before each new product launch and, if a problem is discovered, we send it back to the manufacturer with a

request for improvement. The process is repeated until the standard for quality is met. In addition, when a defect

is found in a product, we do not simply hand off the issue to the factory. We are involved at every step of the

way, including in-house investigation of the cause, development of a remedial action plan, and providing training

to support implementation of the corrective measure at the factories. Developing products that are the most

price-competitive while ensuring that an appropriate level of quality is maintained, and being responsible for our

products from beginning to end as the last point-of-contact to customers: we believe that these two things are

necessary to truly help customers achieve a comfortable, luxurious lifestyle.

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More recognition for our quality and safety initiatives

Before letting the production line start, we dismantle each product and check its structure thoroughly in order to confirm the safety of the product. It is rare for a new product to pass the in-house standard at first go, and many products repeat the improvement steps until quality standards are met.

We have worked to build an unprecedented in-house distribution network, as we believed that a complete overhaul of distribution would be a shortcut to realizing our “low price with appropriate quality” policy. We have now realized distribution cost reduction with an in-house customs clearance system and become able to supply imported products to the domestic market more smoothly.

In order for our customers to be able to shop more conveniently, we have set up a 1, 5, and 30-year warranty program for repairs or part replacement services. In addition, loyalty cards have been set up in such a way that they can be used for warranty purposes in case a product defect occurs, while effective management of the card holder’s purchase history helps us to create better products.

At the NITORI customer service center, more than 200 staff handle customers’ inquiries about stores and goods as well as customer complaints about our services. Information provided from customers is shared with all necessary departments and becomes the starting point for providing better products and services.

When a defect is discovered in a product, we investigate the cause thoroughly by analyzing the goods, while also implementing thorough after-sales service. The knowledge and know-how gained from the investigation are consistently utilized in the development of new products.

Our actions towards enhancing quality control were evaluated and we received a

commendation from the Ministry of Economy, Trade and Industry in 2014 (Manufacturing

and import company section), following on from a similar commendation in 2013 (Retail

and sales company section). We received a comment that "actions towards product safety

are leading to improvement of corporate value" from a member of the award committee.

●Quality improvement ●Product development

●Continuous improvement of products ● Member’s card●Call center

Quality control in logistics

We check, based on our in-house Quality Assurance Manual, whether our partner factories can meet our quality requirements. Even after production starts, we do not leave quality control to the factories. We carry out on-site inspections regularly so that unevenness in the product quality does not emerged during the manufacturing process.

Thorough quality control from production and logistics through to after-sales service

Quality control in production

Quality control in after-sales service provision

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19

To reduce negative impacts on the environment[Environmental Policy]

The NITORI Group is implementing environmental measures

at every stage from manufacturing through to logistics and retail sales.

Efficiency of transportation by compressing the packing size of the product

We work on reducing the frequency of transportation by increasing the number of products that can be carried at a time, by means of compressing the packing size of the product. In this way, we contribute to a substantial reduction in carbon dioxide emissions.Having started from relatively small products such as cushions and futons, we now do the same for larger items like spring bed mattresses. With compression packing of these mattresses, we expect to be able to achieve reduction of approximately 800 containers and 550 tons of carbon dioxide emissions a year.

Environmentally-friendly product development

NITORI’s original “Randoseru” (schoolchild’s satchel) co-developed with TEIJIN LIMITED, a leading material manufacturer, is an environmental-friendly product that uses recycled fiber made from PET bottles.According to an LCA (Life Cycle Assessment: a method for assessing environmental impact at every stage in a product’s life cycle, from manufacturing through to shipment, sale, usage, disposal and recycling) study, using this recycled fiber helps to reduce carbon dioxide emissions by 47% and cut energy consumption by 33%, as compared to using petroleum as the raw material.

* Data that adds in the carbon dioxide emitted in the case of burning rather than recycling (based on estimates compiled by the Industry Information Center)

Initiatives in product development

In addition, NITORI’s corporate sales division offers an outdoor bench using reclaimed wood or recycled plastic.

Simplification of product packaging

We are trying to get rid of unnecessary individual packing while promoting FRM (Floor Ready Merchandise) packaging, which enables us to display goods for sale at our stores without unpacking individually.

Efficient use of wood and paint

In order to make the most efficient possible use of wood (which is a limited resource), we utilize the edge pieces which were discharged at the production stage as reinforcing structures for furniture at our factories in Vietnam and in Indonesia. Furthermore we even use small pieces of wood as fuel for the boiler used to dry paint, in order to reduce waste. The fuel is burnt at a high temperature of 1,000 - 1,500 degrees to avoid emitting smoke. In addition, we re-use the left-over paint from the furniture production line in a solvent to wash production machines.

Initiatives in the manufacturing process

*Annual total transportation distance: Sea transportation distance

+ land transportation distance.

2012 2013 2014 (FY)56

57

58

59

60

61

57.7

59.4

60.6

Total transportation distancereduced by 3,900km/year *

Total transportation distancereduced by 2,700km/year *

(CBM)

Average loading (CBM) per container

< Compression Packaged >

*The illustration is for reference purposes only

16cm

97cm

197cm

103cm

28cm28cm

Made using 6 recycled PET bottles (500ml x 6)

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20

[Traditional Method] [Container Round Use]

Reduction of CO2 emissions by making transportation more efficient

We promote efficiency in product transportation and work on reduction of CO2 emissions by shortening movement distance.Although we used to deliver ordered goods to customers via an in-house distribution center, we are now working on creating a new mechanism that enables us to deliver the goods directly from the manufacturer to the customer, eliminating relay points.As a result of these actions, CO2 emissions from our stores will decrease.

Container Round Use

Container Round Use (CRU) is a concept in which a devanned container is used for export without returning it to the shipping company. In cooperation with many of our business partners, NITORI applied the round use approach to 2,000 containers in 2014 and was able to reduce CO2 emissions by approximately 130 tons.

Initiatives in logistics

Initiatives in store operations

Energy saving at stores

In 2013, we started to introduce the use of LED ceiling lights to newly-opened stores. As for existing stores, we are also changing their illumination sequentially. Besides LED lights, other energy saving facilities such as a heat pump type air conditioner, demand control system (which suppresses electric power consumption) and BEMS (Building Energy Management System), have also been introduced.

Use of eco-friendly packing material

We use reusable packing materials for furniture product transportation between bases to reduce consumption of corrugated cardboard or urethane foam.In 2014 we introduced special packing materials for case goods (e.g. cupboards) into approximately 200 stores. We will continue introducing new packing materials and expect to be able to thereby reduce garbage discharge by 550 tons annually.

Other initiatives

Introduction of TV/WEB meetings

We have organized a system which enables us to have meetings anytime, anywhere, through each office’s TVs or personal PCs. This leads to a reduction of CO2 emissions by enabling people to not have to meet in person.

Actions aimed at energy saving and resource saving in offices

We have introduced fluorescent lamps equipped with reflecting plates with a high reflection ratio into our large-scale distribution centers in the Kanto and Kansai regions, and this has contributed to a reduction in electric power consumption. In addition, we implement “paperless” projects, including computerization of several types of documents, and deployment of projectors to meeting rooms.

PortFacility

PortFacility

ImporterImporter

Exporter Exporter

Empty

Empty

Cargo

Cargo

Cargo Cargo

Empty

2013 2014 (FY)

(kg)

68

72

76

80

84

8885

74

Approx. 10%Reduction

2011 (FY)2012 2013 2014

(t-CO2)

0

30

60

90

120

150

Change in CO2 emissions per store from domestic transportation

Annual consumption of corrugated cardboard per sales transaction (kg)

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21

“Glad to have NITORI”Aiming to be a company that is appreciated by societyWe conduct a variety of social contribution activities to give something back to the society that has supported us and helped us to achieve today’s success, with a particular focus on initiatives in Hokkaido, the region in Which NITORI was originally founded.

Endowed Chairs at Universities

Arranging lectures on chain store management to convey basic principles of distribution and service to young people who will be the mainstay of society in the future. Lectures are given by key personnel from individual companies in the NITORI group.

Public Interest Incorporated Foundation “NITORI International Scholarship Foundation”The NITORI Group has received a great deal of support from Asian countries in relation to several business activities, such as product supply. Hoping to “return the favor to Asian countries”, NITORI International Scholarship Foundation was established in March 2005 with a monetary donation from its Representative Director. We have been providing scholarships, developing human resources, and arranging exchange activities for international students from all over the world studying in Japan. In FY2015, the cumulative total number of scholars supported by the Foundation has reached 895 scholars from 38 countries and regions, including China, Indonesia, and the United States. We have also started expanding our network worldwide, providing financial support to local students studying at universities overseas. * Other activities: Scholarships for high school students who were affected by the East Japan Earthquake.

Public Interest Incorporated Foundation “NITORI Culture Foundation”NITORI Culture Foundation was established in April 2011 to serve as a bridge for new culture formation by developing, passing on, and supporting Culture, Art, and Tradition. We changed the Foundation’s status to that of a public interest incorporated foundation in December 1st 2012. As of FY2015, we have provided grants to 105 organizations, supporting environmental activities such as tree planting and other regional revitalization activities.

● Approx. ¥1.2 billion monetary donation to help those affected by the East Japan Earthquake

● ¥200 million monetary donation to help those affected by the Sumatra Earthquake (Indonesia)

● ¥100 million monetary donation to help those affected by the Niigata-Chuetsu Earthquake in Japan.

● ¥48 million in Scholarships for International Students from Asian countries● Monetary donation to Japan Alliance for Humanitarian Demining Support (JAHDS)

● Approx. ¥100 million to help those affected by the Great Sichuan Earthquake (China)

● Hosting a Joint Seminar with Hokkaido University● Donation of 25 satellite phones to an NGO● Donation of bedding to help those affected by the

Hiroshima Landslides

Activities of the Public Interest Incorporated Foundation

Main donations and donation activities

Regional and Social Contribution through Sports

●NITORI Ladies Golf Tournament

●Establishing NITORI Ladies Track & Field Club

[Interaction with Society]

Looking towards the Future

Currently, we are experiencing a period of

dramatic change. NITORI has over 400 stores in

Japan, and our overseas markets now extend

to the U.S. and China. We believe that “not

being satisfied with the current situation and

always looking for improvements,” instead of

being content with the status quo, is essential.

This is why we focus on communicating with

our employees. We are actively trying new

things, such as extracting ideas from mid-level

employees and female employees.

The “human resources” that support

manufacturing, logistics, and sales are one of

the most valuable assets of our company, and

we believe that communication with them can

be a major driver of growth for the future. We

will keep on challenging ourselves to realize our

Dreams and our Vision.

Toshiyuki ShiraiExecutive Vice PresidentNITORI Holdings Co., Ltd.

President and CEONITORI Co., Ltd.

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22

Closing month Feb. 2011 Feb. 2012 Feb. 2013 Feb. 2014 Feb. 2015

Revenue (millions of Yen) 314,291 331,016 348,789 387,605 417,285

Ordinary income (millions of Yen) 53,594 59,151 62,195 63,474 67,929

Current net income (millions of Yen) 30,822 33,548 35,811 38,425 41,450

Net assets (millions of Yen) 146,038 174,949 209,764 247,898 310,531

Total assets (millions of Yen) 246,187 267,153 284,290 321,703 404,793

Capital ratio (%) 59.2 65.3 73.6 76.8 76.4

Number of employees (persons)

(Average no. of temporary employees)6,073

(6,431)7,213

(7,145)7,496

(7,776)8,373

(8,511)9,215

(9,877)

Number of stores (stores)* 244 268 300 331 373

* Includes DECO HOME and overseas stores (Taiwan, U.S., and China)

[Changes in revenue and stockholding value]

Transition of stockholding value (Yen)

Ordinary income (billions of Yen)

'16(Forecast)

'15'14'13'12'11'10'09'08'07'06'05'04'03'02'01'00'99'98'97'96'95'94'93'92'91'90'89Initial

① ② ② ③ ②② ②

②

④

④

Stock was split 10 times, resulting in an 18-fold increase in the number of shares.

※

(Yen) (billion Yen)

0

50,000

0

10

20

30

40

50

60

70

80

100,000

150,000

2008 Global

Financial Crisis

200,000

250,000

3,100 4,650 4,965 5,616 5,897 5,647 7,144 8,002 8,328 5,839 3,018 5,95711,757 7,446 9,798

17,94924,808

29,581

49,09954,366

46,74747,970

64,99470,168

64,43064,806

89,920

142,968

205,800

1989 Listed on Sapporo S

tock Exchange

2003 Listed on Tokyo Stock E

xchange

At time of listing in 1989

As of February 2015

Comparison

Number of stores 18 373 20.7 timesRevenue (100 million yen) 117 4,172 35.7 timesOrdinary income (100 million yen) 8 679 84.9 timesFair value of shares (per share) 3,100 yen *205,800 yen 66.4 times

Changes in the company’s performance since listing on the stock market

① Stock split: 1 stock 1.5 stocks

② 1 stock 1.2 stocks

③ 1 stock 1.05 stocks

④ 1 stock 2 stocks

U.S.5 stores

Japan367 stores

China5 stores

Taiwan24 stores

[Financial Highlights (on a Consolidated Basis)]

[Corporate Profi le]Company Name

Sapporo Head Offi ce

Tokyo Headquarters

Osaka Headquarters

Established

Registered

Capital

Number of employees

Business areas

NITORI Holdings Co., Ltd.

1-2-39 Shinkotoni 7-jo, Kita-ku, Sapporo,

Hokkaido 001-0907

3-6-20, Kamiya, Kita-ku, Tokyo 115-0043

1-1, Kamisu-cho, Toyonaka, Osaka 561-0823

December 1967

March 1972

133.7 million yen (as per the consolidated fi nancial

statements issued in February 2015)

9,215 full-time employees

(average no. of part-time workers: 9,877 employees)

(as of February 2015 [on a consolidated basis])

Business administration of the group companies and

other related business

Number of stores

(as of the end of Oct. 2015)

NITORI 330

DECO HOME 37

TAIWAN 24

U.S. 5

CHINA 5

TOTAL 401

*As of August 2015

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