Form 10-K GAP INC For: Jan 31

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March 23, 2015 3:11 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)



þ	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended January 31, 2015



¨	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from to

Commission File Number 1-7562

THE GAP, INC.

(Exact name of registrant as specified in its charter)



Delaware	94-1697231
(State of Incorporation)	(I.R.S. Employer Identification No.)



Two Folsom Street, San Francisco, California	94105
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (415) 427-0100

Securities registered pursuant to Section 12(b) of the Act:



Common Stock, $0.05 par value	The New York Stock Exchange
(Title of class)	(Name of exchange where registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:



Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of August 1, 2014 was approximately $11.5 billion based upon the last price reported for such date in the NYSE-Composite transactions.

The number of shares of the registrant’s common stock outstanding as of March 17, 2015 was 418,771,239.

Documents Incorporated by Reference

Portions of the registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 19, 2015 (hereinafter referred to as the “2015 Proxy Statement”) are incorporated into Part III.

Special Note on Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are forward-looking statements. Words such as “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “project,” and similar expressions also identify forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding the following:


•	international expansion, including new Gap and Old Navy stores in Asia, additional international outlet stores, increased international online sales, and franchise expansion;


•	opening additional Athleta stores;


•	Intermix opportunities;


•	Piperlime closure;


•	product acceptance and consistency improvements, in particular at Gap brand;


•	investment in digital capabilities and further enhancement of our shopping capabilities;


•	attracting, retaining, and training talent;


•	impact of foreign exchange rate fluctuations on financial results;


•	impact of West Coast port work slowdowns and stoppages on financial results;


•	our ability to supplement near-term liquidity, if necessary, with our revolving credit facility;


•	target cash balance and ability to provide for our working capital needs and for unexpected business downturns;


•	the outcome of proceedings, lawsuits, disputes, and claims;


•	returning excess cash to shareholders;


•	the number of new store openings and store closings in fiscal 2015;


•	net square footage change in fiscal 2015;


•	the number of new franchise stores in fiscal 2015;


•	current cash balances and cash flows being sufficient to support our business operations, including growth initiatives and planned capital expenditures;


•	cash spending for purchases of property and equipment in fiscal 2015;


•	our intent to increase our dividend in fiscal 2015;


•	the impact of accounting pronouncements;


•	the estimates and assumptions we use in our accounting policies;


•	the assumptions used to estimate the grant date fair value of stock options;


•	our intention to utilize undistributed earnings of our foreign subsidiaries;


•	total gross unrecognized tax benefits;


•	expected payments to International Business Machines Corporation (“IBM”); and


•	the impact of losses due to indemnification obligations.

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the following:


•	the risk that the adoption of new accounting pronouncements will impact future results;


•	the risk that we or our franchisees will be unsuccessful in gauging apparel trends and changing consumer preferences;


•	the risk that changes in global economic conditions or consumer spending patterns could adversely impact our results of operations;


•	the highly competitive nature of our business in the United States and internationally;


•	the risk that if we are unable to manage our inventory effectively, our gross margins will be adversely affected;


•	the risks to our efforts to expand internationally, including our ability to operate under a global brand structure, foreign exchange fluctuations, and operating in regions where we have less experience;


•	the risks to our business, including our costs and supply chain, associated with global sourcing and manufacturing;


•	the risks to our reputation or operations associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct;


•	the risk that trade matters could increase the cost or reduce the supply of apparel available to us and adversely affect our business, financial condition, and results of operations;


•	the risk that our franchisees’ operation of franchise stores is not directly within our control and could impair the value of our brands;


•	the risk that we or our franchisees will be unsuccessful in identifying, negotiating, and securing new store locations and renewing, modifying, or terminating leases for existing store locations effectively;


•	the risk that we are subject to data or other security breaches that may result in increased costs, violations of law, significant legal and financial exposure, and a loss of confidence in our security measures, which could have an adverse effect on our results of operations and our reputation;


•	the risk that the failure to attract and retain key personnel, or effectively manage succession, could have an adverse impact on our results of operations;


•	the risk that our investments in omni-channel shopping initiatives may not deliver the results we anticipate;


•	the risk that comparable sales and margins will experience fluctuations;


•	the risk that changes in our credit profile or deterioration in market conditions may limit our access to the capital markets and adversely impact our financial results or our business initiatives;


•	the risk that updates or changes to our information technology (“IT”) systems may disrupt our operations;


•	the risk that natural disasters, public health crises, political crises, or other catastrophic events could adversely affect our operations and financial results, or those of our franchisees or vendors;


•	the risk that changes in the regulatory or administrative landscape could adversely affect our financial condition, strategies, and results of operations;


•	the risk that we do not repurchase some or all of the shares we anticipate purchasing pursuant to our repurchase program; and


•	the risk that we will not be successful in defending various proceedings, lawsuits, disputes, claims, and audits.

Additional information regarding factors that could cause results to differ can be found in this Annual Report on Form 10-K and our other filings with the U.S. Securities and Exchange Commission (“SEC”).

Future economic and industry trends that could potentially impact net sales and profitability are difficult to predict. These forward-looking statements are based on information as of March 23, 2015, and we assume no obligation to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

THE GAP, INC.

2014 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS



		Page
PART I

Item 1.	Business	1

Item 1A.	Risk Factors	5

Item 1B.	Unresolved Staff Comments	11

Item 2.	Properties	11

Item 3.	Legal Proceedings	11

Item 4.	Mine Safety Disclosures	12

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13

Item 6.	Selected Financial Data	16

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 8.	Financial Statements and Supplementary Data	32

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	68

Item 9A.	Controls and Procedures	68

Item 9B.	Other Information	68

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	68

Item 11.	Executive Compensation	68

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	69

Item 13.	Certain Relationships and Related Transactions, and Director Independence	69

Item 14.	Principal Accounting Fees and Services	69

PART IV

Item 15.	Exhibits, Financial Statement Schedules	70

Part I

Item 1. Business.

General

The Gap, Inc. (Gap Inc., the “Company,” “we,” and “our”) was incorporated in the State of California in July 1969 and was reincorporated under the laws of the State of Delaware in May 1988.

Gap Inc. is a leading global apparel retail company. We offer apparel, accessories, and personal care products for men, women, and children under the Gap, Banana Republic, Old Navy, Piperlime, Athleta, and Intermix brands. Our portfolio of distinct brands across multiple channels and geographies gives us a competitive advantage in the global retail marketplace. In January 2015, we announced our decision to close the Piperlime brand. We expect to close the online platform and the store in New York by the end of the first half of fiscal 2015.

Gap Inc. has Company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, Italy, China, Hong Kong, and as of March 2014, Taiwan. We also have franchise agreements with unaffiliated franchisees to operate Gap, Banana Republic, and Old Navy stores throughout Asia, Australia, Europe, Latin America, the Middle East, and Africa. Under these agreements, third parties operate, or will operate, stores that sell apparel and related products under our brand names. Our products are also available to customers online through Company-owned websites and through the use of third parties that provide logistics and fulfillment services. Most of the products sold under our brand names are designed by us and manufactured by independent sources. We also sell products that are designed and manufactured by branded third parties, especially at our Piperlime and Intermix brands.

In addition to operating in the specialty, outlet, online, and franchise channels, Gap Inc. is a leader among apparel retailers in using omni-channel capabilities to bridge the digital world and physical stores, creating world-class shopping experiences regardless of where customers shop. The Company’s omni-channel services, including order-in-store, reserve-in-store, find-in-store, and ship-from-store, are tailored uniquely across its portfolio of brands.

Gap. Gap is one of the world's most iconic apparel and accessories brands anchored in American casual style. Founded in San Francisco in 1969, our collections continue to build the foundation of modern wardrobes - all things denim, classic white shirts, and khakis along with must-have trends.

Gap includes apparel and accessories for men and women, GapKids, babyGap, GapMaternity, GapBody, and GapFit collections. Beginning in 1987 with the opening of our first store outside North America in London, Gap continues to connect with customers around the world through specialty stores, online, and franchise stores. Gap also offers a suite of omni-channel services to its customers in the United States. In addition, we bring the brand to our value-conscious customers, with exclusively designed collections for Gap Outlet and Gap Factory Stores.

Banana Republic. Banana Republic is a global apparel and accessories lifestyle brand that delivers modern, covetable style for both men and women. Acquired with two stores in 1983 as a travel and adventure outfitter, Banana Republic has evolved to keep that unique spirit alive while outfitting men and women on the modern day journey of life.

The brand's collections include apparel, handbags, shoes, jewelry, personal care products, and eyewear for men and women at accessible prices. Today, customers can purchase Banana Republic products globally in our specialty and outlet stores, online, and in franchise stores. Banana Republic also offers a suite of omni-channel services to its customers in the United States.

Old Navy. Old Navy opened its first store in 1994, making current American essentials accessible to every family. The brand brings a fun, energizing shopping environment to its customers, offering on-trend clothing and accessories for adults and children at great prices. In 2012, Old Navy opened its first store outside North America in Odaiba, Japan and, since then, has continued to expand its global presence with its first Company-operated stores in China and franchise-operated stores in the Philippines in 2014. Customers can purchase Old Navy products globally in stores, online, and in franchise stores. Old Navy also offers a suite of omni-channel services to its customers in the United States.

Piperlime. Launched in 2006, Piperlime offers a mix of private label and branded apparel and accessories, as well as leading brands in shoes and handbags. In January 2015, the Company announced that it would close its Piperlime brand and focus on its portfolio of five other brands. By the end of the first half of fiscal 2015, the Company expects to discontinue its Piperlime brand, including the Piperlime e-commerce and social sites and the brand’s one store in New York City.

Athleta. Acquired in September 2008, Athleta is Gap Inc.’s premier fitness and lifestyle brand in the rapidly growing women's active apparel market. Athleta creates versatile and fashionable performance and lifestyle apparel for the fitness-minded woman who lives life on the go. Athleta offers apparel and gear for a range of activities from yoga to strength training and running, as well as seasonal sports, including skiing and tennis. Customers can purchase Athleta products online, in stores, and through its catalogs and seamlessly shop through its suite of omni-channel services in the United States.

Intermix. Acquired in December 2012, Intermix curates must-have styles from the most coveted emerging and established designers. Known for styling on-trend pieces in unexpected ways, Intermix delivers a unique point of view and an individualized approach to shopping and personal style. Customers can shop in stores in the United States and Canada, and online.

All sales to customers are tendered for cash, debit cards, credit cards, or personal checks. We also issue and redeem gift cards through our brands. Gap, Banana Republic, and Old Navy each have a private label credit card program and a co-branded credit card program through which frequent customers receive benefits. Private label and co-branded credit cards are provided by a third-party financing company.

The range of merchandise displayed in each store varies depending on the selling season and the size and location of the store. Stores are generally open seven days per week (where permitted by law) and most holidays.

We ended fiscal 2014 with 3,709 Company-operated and franchise store locations. For more information on the number of stores by brand and region, see the table in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 of this Form 10-K.

Certain financial information about international operations is set forth under the heading "Segment Information" in Note 17 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.

Merchandise Vendors

We purchase private label and non-private label merchandise from over 1,000 vendors. Our vendors have factories in about 40 countries. No vendor accounted for more than 5 percent of the dollar amount of our total fiscal 2014 purchases. Of our merchandise purchased during fiscal 2014, approximately 98 percent of purchases, by dollar value, were from factories outside the United States, while the remaining 2 percent of all purchases were from domestic factories. Approximately 27 percent of our purchases, by dollar value, were from factories in China. Product cost increases or events causing disruption of imports from China or other foreign countries, including the imposition of additional import restrictions or vendors potentially failing due to political, financial, or regulatory issues, could have an adverse effect on our operations. Substantially all of our foreign purchases of merchandise are negotiated and paid for in U.S. dollars. Also see the sections entitled “Risk Factors—Our business, including our costs and supply chain, is subject to risks associated with global sourcing and manufacturing," "Risk Factors—Risks associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct, could harm our business,” and “Risk Factors—Trade matters may disrupt our supply chain” in Item 1A of this Form 10-K.

Seasonal Business

Our business follows a seasonal pattern, with sales peaking during the end-of-year holiday period.

Brand Building

Our ability to develop and evolve our existing brands is a key to our success. We believe our distinct brands are among our most important assets. With the exception of Piperlime and Intermix, virtually all aspects of brand development, from product design and distribution to marketing, merchandising and shopping environments, are controlled by Gap Inc. employees. With respect to Piperlime and Intermix, we control all aspects of brand development except for product design related to third-party products. We continue to invest in our business and enhance the customer experience through significant investments in marketing and our omni-channel capabilities, enhancement of our online shopping sites, international expansion, remodeling of existing stores, and investments in our supply chain.

Trademarks and Service Marks

Gap, GapKids, babyGap, GapMaternity, GapBody, GapFit, Banana Republic, Old Navy, Piperlime, Athleta, and Intermix trademarks and service marks, and certain other trademarks, have been registered, or are the subject of pending trademark applications, with the United States Patent and Trademark Office and with the registries of many foreign countries and/or are protected by common law.

Franchising

We have franchise agreements with unaffiliated franchisees to operate Gap, Banana Republic, and Old Navy stores in a number of countries throughout Asia, Australia, Europe, Latin America, the Middle East, and Africa. Under these agreements, third parties operate, or will operate, stores that sell apparel and related products under our brand names. For additional information on risks related to our franchise business, see the sections entitled “Risk Factors—Our efforts to expand internationally may not be successful” and “Risk Factors—Our franchise business is subject to certain risks not directly within our control that could impair the value of our brands” in Item 1A of this Form 10-K.

Inventory

The nature of the retail business requires us to carry a significant amount of inventory, especially prior to peak holiday selling season when we, along with other retailers, generally build up inventory levels. We maintain a large part of our inventory in distribution centers. We review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes or colors) and we primarily use promotions and markdowns to clear merchandise. Also see the sections entitled “Risk Factors—We must successfully gauge apparel trends and changing consumer preferences to succeed” and "Risk Factors—If we are unable to manage our inventory effectively, our gross margins could be adversely affected" in Item 1A of this Form 10-K.

Competitors

The global apparel retail industry is highly competitive. We compete with local, national, and global apparel retailers. We are also faced with competition in European, Japanese, Chinese, and Canadian markets from established regional and national chains, and our franchisees face significant competition in the markets in which they operate. Also see the section entitled “Risk Factors—Our business is highly competitive” in Item 1A of this Form 10-K.

Employees

As of January 31, 2015, we had a workforce of approximately 141,000 employees, which includes a combination of part-time and full-time employees. We also hire seasonal employees, primarily during the peak end-of-year holiday period.

To remain competitive in the apparel retail industry, we must attract, develop, and retain skilled employees in our design, merchandising, marketing, and other functions. Competition for such personnel is intense. Our success is dependent to a significant degree on the continued contributions of key employees. Also see the section entitled “Risk Factors—The failure to attract and retain key personnel, or effectively manage succession, could have an adverse impact on our results of operations” in Item 1A of this Form 10-K.

Available Information

We make available on our website, www.gapinc.com, under “Investors, Financial Information, SEC Filings,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish them to the SEC.

Our Board of Directors Committee Charters (Audit and Finance, Compensation and Management Development, and Governance and Sustainability Committees) and Corporate Governance Guidelines are also available on our website under “Investors, Governance.” Our Code of Business Conduct can be found on our website under “Investors, Corporate Compliance, Code of Business Conduct.” Any amendments and waivers to the code will also be available on the website.

Executive Officers of the Registrant

The following are our executive officers:

Name, Age, Position, and Principal Occupation:

Arthur Peck, 59, Director and Chief Executive Officer since February 2015; President, Growth, Innovation, and Digital division from November 2012 to January 2015; President, Gap North America from February 2011 to November 2012; Executive Vice President of Strategy and Operations from May 2005 to February 2011; President, Gap Inc. Outlet from October 2008 to February 2011; Acting President, Gap Inc. Outlet from February 2008 to October 2008; Senior Vice President of The Boston Consulting Group, a business consulting firm, from 1982 to 2005.

Michelle Banks, 51, Executive Vice President, Global Sustainability, General Counsel, Corporate Secretary, and Chief Compliance Officer since February 2014; Executive Vice President, General Counsel, Corporate Secretary, and Chief Compliance Officer from March 2011 to February 2014; Senior Vice President and General Counsel from November 2006 to March 2008; Vice President from March 2005 to November 2006.

Solomon Goldfarb, 50, Executive Vice President, Digital and Customer Experience since February 2015; Senior Vice President, Digital Platform Strategy and Product Management from February 2013 to January 2015; Senior Vice President, Enterprise Product Management from March 2012 to February 2013; Vice President, International E-Commerce and Product Management from March 2009 to March 2012; Vice President, Growth, Innovation, and Digital Product Management from March 2006 to March 2009.

John T. (Tom) Keiser, 49, Executive Vice President, Global Product Operations since November 2013; Executive Vice President and Chief Information Officer from January 2010 to November 2013.

Jeff Kirwan, 48, Global President, Gap since December 2014; Executive Vice President and President, Gap China from February 2013 to December 2014; Senior Vice President, Managing Director and Chief Operating Officer, Gap China from May 2011 to February 2013; Senior Vice President, Stores and Operations, Old Navy from August 2008 to May 2011; Senior Vice President and General Manager, Old Navy Canada from March 2008 to August 2008; Vice President and General Manager, Old Navy Canada from April 2007 to March 2008.

Stefan Larsson, 40, Global President, Old Navy since October 2012; Head of Global Sales, H&M Hennes & Mauritz AB, an apparel company, from 2010 to 2012; Head of Global Expansion, H&M Hennes & Mauritz AB from 2009 to 2010; Head of Operations, Global Expansion, H&M Hennes & Mauritz AB from 2007 to 2009; Regional Manager, U.S. West Coast, H&M Hennes & Mauritz AB from 2005 to 2007.

Andi Owen, 49, Global President, Banana Republic since January 2015; Executive Vice President and General Manager, Global Gap Outlet from January 2013 to January 2015; Senior Vice President and General Manager, Gap Outlet / Shared Services from January 2008 to January 2013; Vice President, Merchandising - Outlet from July 2006 to January 2008.

Sabrina Simmons, 51, Executive Vice President and Chief Financial Officer since January 2008; Executive Vice President, Corporate Finance from September 2007 to January 2008; Senior Vice President, Corporate Finance and Treasurer from March 2003 to September 2007; Vice President and Treasurer from September 2001 to March 2003.

Sonia Syngal, 45, Executive Vice President, Global Supply Chain and Product Operations since February 2015; Executive Vice President, Global Supply Chain from November 2013 to January 2015; Senior Vice President, Old Navy International from February 2013 to November 2013; Senior Vice President and Managing Director, Europe from May 2011 to February 2013; Senior Vice President and General Manager, International Outlets from January 2010 to May 2011; Vice President of Global Production, Supply Chain - Outlet from July 2006 to January 2010; Vice President, Corporate Sourcing from July 2004 to July 2006.

Item 1A. Risk Factors.

Our past performance may not be a reliable indicator of future performance because actual future results and trends may differ materially depending on a variety of factors, including but not limited to the risks and uncertainties discussed below. In addition, historical trends should not be used to anticipate results or trends in future periods.

We must successfully gauge apparel trends and changing consumer preferences to succeed.

Our success is largely dependent upon our ability to gauge the tastes of our customers and to provide merchandise that satisfies customer demand in a timely manner. However, lead times for many of our design and purchasing decisions may make it more difficult for us to respond rapidly to new or changing apparel trends or consumer acceptance of our products. The global apparel retail business fluctuates according to changes in consumer preferences, dictated in part by apparel trends and season. To the extent we misjudge the market for our merchandise or the products suitable for local markets or fail to execute trends and deliver product to market as timely as our competitors, our sales will be adversely affected, and the markdowns required to move the resulting excess inventory will adversely affect our operating results. For example, during fiscal 2014, product acceptance at Gap brand, in particular, was below expectations, and as a result, our financial results were negatively impacted.

Global economic conditions and the impact on consumer spending patterns could adversely impact our results of operations.

The Company’s performance is subject to global economic conditions and their impact on levels of consumer spending worldwide. Some of the factors that may influence consumer spending include high levels of unemployment, higher consumer debt levels, reductions in net worth based on market declines and uncertainty, home foreclosures and reductions in home values, fluctuating interest rates and credit availability, government austerity measures, fluctuating fuel and other energy costs, fluctuating commodity prices, and general uncertainty regarding the overall future economic environment. Consumer purchases of discretionary items, including our merchandise, generally decline during periods when disposable income is adversely affected or there is economic uncertainty.

Adverse economic changes in any of the regions in which we and our franchisees sell our products could reduce consumer confidence, and thereby could negatively affect earnings and have a material adverse effect on our results of operations. In challenging and uncertain economic environments, we cannot predict whether or when such circumstances may improve or worsen, or what impact, if any, such circumstances could have on our business, results of operations, cash flows, and financial position.

Our business is highly competitive.

The global apparel retail industry is highly competitive. We and our franchisees compete with local, national, and global department stores, specialty and discount store chains, independent retail stores, and online businesses that market similar lines of merchandise. We face a variety of competitive challenges including:


•	anticipating and quickly responding to changing apparel trends and customer demands;


•	attracting customer traffic both in stores and online;


•	competitively pricing our products and achieving customer perception of value;


•	maintaining favorable brand recognition and effectively marketing our products to customers in several diverse market segments and geographic locations;


•	anticipating and responding to changing customer shopping preferences and practices, including the increasing shift to digital brand engagement, social media communication, and online shopping;


•	developing innovative, high-quality products in sizes, colors, and styles that appeal to customers of varying age groups and tastes; and


•	sourcing merchandise efficiently.

If we or our franchisees are not able to compete successfully in the United States or internationally, our results of operations would be adversely affected.

If we are unable to manage our inventory effectively, our gross margins could be adversely affected.

Fluctuations in the global apparel retail markets impact the levels of inventory owned by apparel retailers, as merchandise usually must be ordered well in advance of the season and frequently before apparel trends are confirmed by customer purchases. In addition, the nature of the global apparel retail business requires us to carry a significant amount of inventory, especially prior to the peak holiday selling season when we build up our inventory levels. We must enter into contracts for the purchase and manufacture of merchandise well in advance of the applicable selling season. As a result, we are vulnerable to demand and pricing shifts and to suboptimal selection and timing of merchandise purchases. In the past, we have not always predicted our customers’ preferences and acceptance levels of our trend items with accuracy. If sales do not meet expectations, too much inventory may cause excessive markdowns and, therefore, lower than planned margins.

We have key strategic initiatives designed to optimize our inventory levels and increase the efficiency and responsiveness of our supply chain, including our seamless inventory and responsive supply chain initiatives. Aspects of seamless inventory include more timely matching of product supply and demand across markets and channels to reduce stranded inventory. Aspects of responsive supply chain include more vendor fabric platforming, product demand testing, and in-season rapid response to demand. These initiatives involve significant systems and operational changes and we have limited experience operating in this manner. If we are unable to implement these initiatives successfully, we may not realize the return on our investments that we anticipate, and our operating results could be adversely affected.

Our efforts to expand internationally may not be successful.

Our current strategies include pursuing continued international expansion in a number of countries around the world through a number of channels. We currently plan to open additional Old Navy stores outside of North America, including in Japan and China, open additional Gap stores in China, open additional international outlet stores, and continue to grow online sales internationally. Our franchisees plan to open additional stores internationally. We have limited experience operating or franchising in some of these locations. In many of these locations, we face major, established competitors. In addition, in many of these locations, the real estate, employment and labor, transportation and logistics, regulatory, and other operating requirements differ dramatically from those in the places where we have more experience. Consumer tastes and trends may differ in many of these locations and, as a result, the sales of our products may not be successful or result in the margins we anticipate. If our international expansion plans are unsuccessful or do not deliver an appropriate return on our investments, our operations and financial results could be materially, adversely affected.

In addition, we are exposed to foreign currency exchange rate risk with respect to our sales, inventory purchases, operating expenses, profits, assets, and liabilities generated or incurred outside the U.S. Although we use instruments to hedge certain foreign currency risks, these measures may not succeed in fully offsetting the negative impact of foreign currency rate movements and generally only delay the impact of adverse foreign currency rate movements on our business and financial results. For example, in fiscal year 2014, foreign exchange fluctuations, in particular the depreciation of the currencies in Canada and Japan where we have significant retail operations, had a significant impact on our financial results. We expect this impact to continue in fiscal year 2015.

Our business, including our costs and supply chain, is subject to risks associated with global sourcing and manufacturing.

Independent third parties manufacture all of our products for us. As a result, we are directly impacted by increases in the cost of those products.

If we experience significant increases in demand or need to replace an existing vendor, there can be no assurance that additional manufacturing capacity will be available when required on terms that are acceptable to us or that any vendor would allocate sufficient capacity to us in order to meet our requirements. In addition, for any new manufacturing source, we may encounter delays in production and added costs as a result of the time it takes to train our vendors in our methods, products, quality control standards, and environmental, labor, health, and safety standards. Moreover, in the event of a significant disruption in the supply of the fabrics or raw materials used by our vendors in the manufacture of our products, our vendors might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price. Any delays, interruption, or increased costs in the manufacture of our products could result in lower sales and net income. In addition, certain countries represent a larger portion of our global sourcing. For example, approximately 27 percent of our merchandise, by dollar value, is purchased from factories in China. Accordingly, any delays in production and added costs in China could have a more significant impact on our results of operations.

Because independent vendors manufacture virtually all of our products outside of our principal sales markets, third parties must transport our products over large geographic distances. Delays in the shipment or delivery of our products due to the availability of transportation, work stoppages, port strikes, infrastructure congestion, or other factors, and costs and delays associated with transitioning between vendors, could adversely impact our financial performance. For example, the work slowdowns and stoppages at U.S. West Coast ports at the end of fiscal 2014 and beginning of fiscal 2015 created product delivery delays that impacted our ability to effectively manage our inventory and deliver seasonally correct product in a timely manner, which could significantly impact our financial results for fiscal 2015. Manufacturing delays, transportation delays, or unexpected demand for our products may require us to use faster, but more expensive, transportation methods such as aircraft, which could adversely affect our gross margins. In addition, the cost of fuel is a significant component in transportation costs, so increases in the price of petroleum products can adversely affect our gross margins.

Risks associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct, could harm our business.

We purchase nearly all merchandise from third-party vendors in many different countries and we require those vendors to adhere to a Code of Vendor Conduct which includes environmental, labor, health, and safety standards. From time to time, contractors or their subcontractors may not be in compliance with these standards or applicable local laws. Although we have implemented policies and procedures to facilitate our compliance with laws and regulations relating to doing business in foreign markets and importing merchandise into various countries, there can be no assurance that suppliers and other third parties with whom we do business will not violate such laws and regulations or our policies. Significant or continuing noncompliance with such standards and laws by one or more vendors could have a negative impact on our reputation, could subject us to liability, and could have an adverse effect on our results of operations.

Trade matters may disrupt our supply chain.

Trade restrictions, including increased tariffs or quotas, embargoes, safeguards, and customs restrictions against apparel items, as well as U.S. or foreign labor strikes, work stoppages, or boycotts, could increase the cost or reduce the supply of apparel available to us and adversely affect our business, financial condition, and results of operations. We cannot predict whether any of the countries in which our merchandise currently is manufactured or may be manufactured in the future will be subject to additional trade restrictions imposed by the United States or other foreign governments, including the likelihood, type, or effect of any such restrictions. In addition, we face the possibility of anti-dumping or countervailing duties lawsuits from U.S. domestic producers. We are unable to determine the impact of the changes to the quota system or the impact that potential tariff lawsuits could have on our global sourcing operations. Our sourcing operations may be adversely affected by trade limits or political and financial instability, resulting in the disruption of trade from exporting countries, significant fluctuation in the value of the U.S. dollar against foreign currencies, restrictions on the transfer of funds, and/or other trade disruptions.

Our franchise business is subject to certain risks not directly within our control that could impair the value of our brands.

We enter into franchise agreements with unaffiliated franchisees to operate stores and, in limited circumstances, websites in many countries around the world. Under these agreements, third parties operate, or will operate, stores and websites that sell apparel and related products under our brand names. The effect of these arrangements on our business and results of operations is uncertain and will depend upon various factors, including the demand for our products in new markets internationally and our ability to successfully identify appropriate third parties to act as franchisees, distributors, or in a similar capacity. In addition, certain aspects of these arrangements are not directly within our control, such as franchisee financial stability and the ability of these third parties to meet their projections regarding store locations, store openings, and sales. Other risks that may affect these third parties include general economic conditions in specific countries or markets, foreign exchange rates, changes in diplomatic and trade relationships, restrictions on the transfer of funds, and political instability. Moreover, while the agreements we have entered into and plan to enter into in the future provide us with certain termination rights, the value of our brands could be impaired to the extent that these third parties do not operate their stores in a manner consistent with our requirements regarding our brand identities and customer experience standards. Failure to protect the value of our brands, or any other harmful acts or omissions by a franchisee, could have an adverse effect on our results of operations and our reputation.

The market for prime real estate is competitive.

Our ability to effectively obtain real estate - to open new stores, distribution centers, and corporate offices nationally and internationally - depends on the availability of real estate that meets our criteria for traffic, square footage, co-tenancies, lease economics, demographics, and other factors. We also must be able to effectively renew our existing store leases. In addition, from time to time, we may seek to downsize, consolidate, reposition, relocate, or close some of our real estate locations, which in most cases requires a modification of an existing store lease. Failure to secure adequate new locations or successfully modify existing locations, or failure to effectively manage the profitability of our existing fleet of stores, could have a material adverse effect on our results of operations.

Additionally, the economic environment may at times make it difficult to determine the fair market rent of real estate properties within the United States and internationally. This could impact the quality of our decisions to exercise lease options at previously negotiated rents and the quality of our decisions to renew expiring leases at negotiated rents. Any adverse effect on the quality of these decisions could impact our ability to retain real estate locations adequate to meet our targets or efficiently manage the profitability of our existing fleet of stores and could have a material adverse effect on our results of operations.

We are subject to data security risks, which could have an adverse effect on our results of operations and consumer confidence in our security measures.

As part of our normal operations, we receive and maintain confidential, proprietary, and personally identifiable information, including credit card information, about our customers, our employees, job applicants, and other third parties. Our business employs systems and websites that allow for the secure storage and transmission of this information. However, despite our safeguards and security processes and protections, security breaches could expose us to a risk of loss or misuse of this information, litigation, and potential liability. The retail industry, in particular, has been the target of many recent cyber-attacks. We may not have the resources to anticipate or prevent rapidly evolving types of cyber-attacks. Attacks may be targeted at us, our customers, or others who have entrusted us with information. In addition, even if we take appropriate measures to safeguard our information security and privacy environment from security breaches, we could still expose our customers and our business to risk. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants. Advances in computer capabilities, new technological discoveries, or other developments may result in the technology used by us to protect transaction or other data being breached or compromised. Measures we implement to protect against cyber-attacks may also have the potential to impact our customers’ shopping experience or decrease activity on our websites by making them more difficult to use. Data and security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breach by our employees or

by persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential information. In addition, the regulatory environment surrounding information security, cybersecurity, and privacy is increasingly demanding, with new and changing requirements, and customers have a high expectation that the Company will adequately protect their personal information from cyber-attack or other security breaches. Security breaches and cyber incidents could result in a violation of applicable privacy and other laws, significant legal and financial exposure, and a loss of consumer confidence in our security measures, which could have an adverse effect on our results of operations and our reputation.

The failure to attract and retain key personnel, or effectively manage succession, could have an adverse impact on our results of operations.

Our ability to anticipate and effectively respond to changing apparel trends depends in part on our ability to attract and retain key personnel in our design, merchandising, marketing, and other functions. In addition, several of our strategic initiatives, including our technology initiatives and supply chain initiatives require that we hire and/or develop employees with appropriate experience. Competition for this personnel is intense, and we cannot be sure that we will be able to attract and retain a sufficient number of qualified personnel in future periods. If we are unable to retain, attract, and motivate talented employees with the appropriate skill sets, or if changes to our organizational structure, operating results, or business model adversely affect morale or retention, we may not achieve our objectives and our results of operations could be adversely impacted. In addition, the loss of one or more of our key personnel or the inability to effectively identify a suitable successor to a key role could have a material adverse effect on our business. At the end of fiscal 2014 and beginning of fiscal 2015, there were several changes made to the members of our senior leadership team, including our Chief Executive Officer, Global President, Gap, and Global President, Banana Republic. The effectiveness of the new leaders in these roles, and any further transition as a result of these changes, could have a significant impact on our results of operations.

Our investments in omni-channel shopping initiatives may not deliver the results we anticipate.

One of our strategic priorities is to further develop an omni-channel shopping experience for our customers through the integration of our store and digital shopping channels. Examples of our recent omni-channel initiatives include our ship-from-store, reserve-in-store, and order-in-store programs. We continue to explore additional ways to develop an omni-channel shopping experience, including further digital integration and customer personalization. These initiatives involve significant investments in IT systems and significant operational changes. In addition, our competitors are also investing in omni-channel initiatives, some of which may be more successful than our initiatives. If the implementation of our omni-channel initiatives is not successful, or we do not realize the return on our omni-channel investments that we anticipate, our operating results would be adversely affected.

We experience fluctuations in our comparable sales and margins.

Our success depends in part on our ability to improve sales, in particular at our largest brands. A variety of factors affect comparable sales or margins, including apparel trends, competition, current economic conditions, the timing of new merchandise releases and promotional events, changes in our merchandise mix, the success of marketing programs, foreign currency fluctuations, and weather conditions. These factors may cause our comparable sales results to differ materially from prior periods and from expectations. Our comparable sales, including the associated comparable online sales, have fluctuated significantly in the past on an annual, quarterly, and monthly basis. Over the past 12 months, our reported monthly comparable sales have ranged from an increase of 9 percent in April 2014 to a decrease of 7 percent in February 2014. Over the past five years, our reported gross margins have ranged from a high of 40.2 percent in fiscal 2010 to a low of 36.2 percent in fiscal 2011. In addition, over the past five years, our reported operating margins have ranged from a high of 13.4 percent in fiscal 2010 to a low of 9.9 percent in fiscal 2011.

Our ability to deliver strong comparable sales results and margins depends in large part on accurately forecasting demand and apparel trends, selecting effective marketing techniques, providing an appropriate mix of merchandise for our broad and diverse customer base, managing inventory effectively, using effective pricing strategies, and optimizing store performance. Failure to meet the expectations of investors, securities analysts, or credit rating agencies in one or more future periods could reduce the market price of our common stock and cause our credit ratings to decline.

Changes in our credit profile or deterioration in market conditions may limit our access to the capital markets and adversely impact our financial results or our business initiatives.

In April 2011, we issued $1.25 billion aggregate principal amount of 5.95 percent notes due April 2021. As a result, we have additional costs that include interest payable semiannually on the notes. In January 2014, we also entered into a 15 billion Japanese yen ($128 million as of January 31, 2015), four-year term loan due January 2018.

Our cash flows from operations are the primary source of funds for these debt service payments. In this regard, we have generated annual cash flow from operating activities in excess of $1 billion per year for well over a decade and ended fiscal 2014 with $1.5 billion of cash and cash equivalents on our balance sheet. We are also able to supplement near-term liquidity, if necessary, with our $500 million revolving credit facility. We continue to target a cash balance between $1.0 billion to $1.2 billion, which provides not only for our working capital needs, but also a reserve for unexpected business downturns. However, if our cash flows from operating activities decline significantly, we may be required to reprioritize our business initiatives to ensure that we can continue to service or refinance our debt with favorable rates and terms. In addition, any future reduction in our long-term senior unsecured credit ratings could result in reduced access to the credit and capital markets and higher interest costs on future financings.

For further information on our debt and credit facilities, see Part II, Item 8, Financial Statements and Supplementary Data, Notes 5 and 6 of Notes to Consolidated Financial Statements of this Form 10-K.

Updates or changes to our IT systems may disrupt operations.

We continue to evaluate and implement upgrades and changes to our IT systems, some of which are significant. Upgrades involve replacing existing systems with successor systems, making changes to existing systems, or cost-effectively acquiring new systems with new functionality. We are aware of inherent risks associated with replacing these systems, including accurately capturing data and system disruptions, and believe we are taking appropriate action to mitigate the risks through testing, training, and staging implementation, as well as ensuring appropriate commercial contracts are in place with third-party vendors supplying or supporting our IT initiatives. However, there can be no assurances that we will successfully launch these systems as planned or that they will be implemented without disruptions to our operations. IT system disruptions, if not anticipated and appropriately mitigated, or failure to successfully implement new or upgraded systems, could have a material adverse effect on our results of operations.

Our results could be adversely affected by natural disasters, public health crises, political crises, or other catastrophic events.

Natural disasters, such as hurricanes, tornadoes, floods, earthquakes, and other adverse weather and climate conditions; unforeseen public health crises, such as pandemics and epidemics; political crises, such as terrorist attacks, war, labor unrest, and other political instability; or other catastrophic events, such as disasters occurring at our vendors' manufacturing facilities, whether occurring in the United States or internationally, could disrupt our operations, the operations of our franchisees, or the operations of one or more of our vendors. In particular, these types of events could impact our product supply chain from or to the impacted region and could impact our ability or the ability of our franchisees or other third parties to operate our stores or websites. In addition, these types of events could negatively impact consumer spending in the impacted regions or depending upon the severity, globally. Disasters occurring at our vendors’ manufacturing facilities could impact our reputation and our customers’ perception of our brands. To the extent any of these events occur, our operations and financial results could be adversely affected.

Changes in the regulatory or administrative landscape could adversely affect our financial condition and results of operations.

Laws and regulations at the local, state, federal, and international levels frequently change, and the ultimate cost of compliance cannot be precisely estimated. In addition, we cannot predict the impact that may result from changes in the regulatory or administrative landscape. Any changes in regulations, the imposition of additional regulations, or the enactment of any new or more stringent legislation that impacts employment and labor, trade, product safety, transportation and logistics, health care, tax, privacy, operations, or environmental issues, among others, could have an adverse impact on our financial condition and results of operations.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We have Company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, Italy, China, Hong Kong, and as of March 2014, Taiwan. As of January 31, 2015, we had 3,280 Company-operated stores, which aggregated to approximately 38.1 million square feet. Almost all of these stores are leased, with one or more renewal options after our initial term. Economic terms vary by type of location.

We own approximately 937,000 square feet of corporate office space located in San Francisco, San Bruno, and Rocklin, California, of which approximately 193,000 square feet is leased to and occupied by others. We lease approximately 1.0 million square feet of corporate office space located in San Francisco, Rocklin, Petaluma, Pleasanton, and Los Angeles, California; New York, New York; Albuquerque, New Mexico; and Toronto, Ontario, Canada. We also lease regional offices in North America and in various international locations. We own approximately 8.6 million square feet of distribution space located in Fresno, California; Fishkill, New York; Groveport, Ohio; Gallatin, Tennessee; Brampton, Ontario, Canada; and Rugby, England. Of the 8.6 million square feet of owned distribution space, approximately 100,000 square feet is leased to others. We lease approximately 1.8 million square feet of distribution space located in Phoenix, Arizona; Grove City and Obetz, Ohio; Erlanger and Hebron, Kentucky; Bolton and Mississauga, Ontario, Canada; and Stafford, England. Third-party logistics companies provide logistics services to us through distribution warehouses in Chiba, Japan; Shanghai and Hong Kong, China; and Edison, New Jersey.

Item 3. Legal Proceedings.

As a multinational company, we are subject to various proceedings, lawsuits, disputes, and claims (“Actions”) arising in the ordinary course of our business. Many of these Actions raise complex factual and legal issues and are subject to uncertainties. Actions filed against us from time to time include commercial, intellectual property, customer, employment, and data privacy claims, including class action lawsuits. The plaintiffs in some Actions seek unspecified damages or injunctive relief, or both. Actions are in various procedural stages and some are covered in part by insurance.

We cannot predict with assurance the outcome of Actions brought against us. Accordingly, developments, settlements, or resolutions may occur and impact income in the quarter of such development, settlement, or resolution. However, we do not believe that the outcome of any current Action would have a material effect on our Consolidated Financial Statements.

Item 4. Mine Safety Disclosures.

Not applicable.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The principal market on which our stock is traded is the New York Stock Exchange. The number of holders of record of our stock as of March 17, 2015 was 7,264. The table below sets forth the market prices and dividends declared and paid for each of the fiscal quarters in fiscal 2014 and 2013.



	Market Prices								Dividends Declared and Paid
	Fiscal 2014				Fiscal 2013				Fiscal Year
	High		Low		High		Low		2014		2013
1st Quarter	$	44.59	$	37.00	$	39.13	$	31.19	$	0.22	$	0.15
2nd Quarter	$	42.37	$	38.38	$	46.56	$	38.28	0.22		0.15
3rd Quarter	$	46.85	$	35.46	$	46.53	$	36.13	0.22		0.20
4th Quarter	$	43.85	$	37.10	$	42.45	$	36.39	0.22		0.20
									$	0.88	$	0.70

Stock Performance Graph

The graph below compares the percentage changes in our cumulative total stockholder return on our common stock for the five-year period ended January 31, 2015, with (i) the cumulative total return of the Dow Jones U.S. Retail Apparel Index and (ii) the S&P 500 Index. The total stockholder return for our common stock assumes quarterly reinvestment of dividends.

TOTAL RETURN TO STOCKHOLDERS

(Assumes $100 investment on 1/30/2010)

Total Return Analysis



	1/30/2010		1/29/2011		1/28/2012		2/2/2013		2/1/2014		1/31/2015
The Gap, Inc.	$	100.00	$	102.59	$	103.57	$	183.44	$	215.72	$	238.34
S&P 500	$	100.00	$	122.19	$	127.34	$	148.71	$	180.70	$	206.41
Dow Jones U.S. Apparel Retailers	$	100.00	$	124.04	$	147.67	$	184.91	$	210.27	$	254.63

Source: Research Data Group, Inc. (415) 643-6000 (www.researchdatagroup.com)

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table presents information with respect to purchases of common stock of the Company made during the thirteen weeks ended January 31, 2015 by The Gap, Inc. or any affiliated purchaser, as defined in Exchange Act Rule 10b-18(a)(3):



	Total Number of Shares Purchased	Average Price Paid Per Share Including Commissions		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or approximate dollar amount) of Shares that May Yet be Purchased Under the Plans or Programs (1)
Month #1 (November 2 - November 29)	1,131,688	$	38.24	1,131,688	$407 million
Month #2 (November 30 - January 3)	693,824	$	40.08	693,824	$379 million
Month #3 (January 4 - January 31)	1,857,707	$	41.40	1,857,707	$302 million
Total	3,683,219	$	40.18	3,683,219

__________


(1)	On October 16, 2014, we announced that the Board of Directors approved a $500 million share repurchase authorization. On February 26, 2015, we announced that the Board of Directors approved a new $1 billion share repurchase authorization. These authorizations have no expiration date.

Item 6. Selected Financial Data.

The following selected financial data are derived from the Consolidated Financial Statements of the Company. We have also included certain non-financial data to enhance your understanding of our business. The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and the Company’s Consolidated Financial Statements and related notes in Item 8.



	Fiscal Year (number of weeks)
	2014 (52)			2013 (52)			2012 (53)			2011 (52)			2010 (52)
Operating Results ($ in millions)
Net sales	$	16,435		$	16,148		$	15,651		$	14,549		$	14,664
Gross margin	38.3		%	39.0		%	39.4		%	36.2		%	40.2		%
Operating margin	12.7		%	13.3		%	12.4		%	9.9		%	13.4		%
Net income	$	1,262		$	1,280		$	1,135		$	833		$	1,204
Cash dividends paid	$	383		$	321		$	240		$	236		$	252
Per Share Data (number of shares in millions)
Basic earnings per share	$	2.90		$	2.78		$	2.35		$	1.57		$	1.89
Diluted earnings per share	$	2.87		$	2.74		$	2.33		$	1.56		$	1.88
Weighted-average number of shares—basic	435			461			482			529			636
Weighted-average number of shares—diluted	440			467			488			533			641
Cash dividends declared and paid per share	$	0.88		$	0.70		$	0.50		$	0.45		$	0.40
Balance Sheet Information ($ in millions)
Merchandise inventory	$	1,889		$	1,928		$	1,758		$	1,615		$	1,620
Total assets	$	7,690		$	7,849		$	7,470		$	7,422		$	7,065
Working capital	$	2,083		$	1,985		$	1,788		$	2,181		$	1,831
Total long-term debt, less current maturities (1)	$	1,332		$	1,369		$	1,246		$	1,606		$	—
Stockholders’ equity	$	2,983		$	3,062		$	2,894		$	2,755		$	4,080
Other Data ($ and square footage in millions)
Cash used for purchases of property and equipment	$	714		$	670		$	659		$	548		$	557
Acquisition of business, net of cash acquired (2)	$	—		$	—		$	129		$	—		$	—
Percentage increase (decrease) in comparable sales (3)	—		%	2		%	5		%	(4		)%	2		%
Number of Company-operated store locations open at year-end	3,280			3,164			3,095			3,036			3,068
Number of franchise store locations open at year-end	429			375			312			227			178
Number of store locations open at year-end (4)	3,709			3,539			3,407			3,263			3,246
Square footage of Company-operated store space at year-end	38.1			37.2			36.9			37.2			38.2
Percentage increase (decrease) in square footage of Company-operated store space at year-end	2.4		%	0.8		%	(0.8		)%	(2.6		)%	(1.5		)%
Number of employees at year-end	141,000			137,000			136,000			132,000			134,000

__________


(1)	In April 2012, we made the first scheduled payment of $40 million related to our $400 million term loan and in August 2012, we repaid the remaining $360 million balance in full.


(2)	On December 31, 2012, we acquired all of the outstanding capital stock of Intermix, a multi-brand specialty retailer of luxury and contemporary apparel and accessories, for an aggregate purchase price of $129 million.


(3)	Includes the associated comparable online sales.


(4)	Includes Company-operated and franchise store locations.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We are a global retailer offering apparel, accessories, and personal care products for men, women, and children under the Gap, Banana Republic, Old Navy, Piperlime, Athleta, and Intermix brands. We have Company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, Italy, China, Hong Kong, and beginning in March 2014, Taiwan. We also have franchise agreements with unaffiliated franchisees to operate Gap, Banana Republic, and Old Navy stores in many other countries around the world. Under these agreements, third parties operate, or will operate, stores that sell apparel and related products under our brand names. In addition, our products are available to customers online through Company-owned websites and through the use of third parties that provide logistics and fulfillment services. Most of the products sold under our brand names are designed by us and manufactured by independent sources. We also sell products that are designed and manufactured by branded third parties, especially at our Piperlime and Intermix brands.

We identify our operating segments according to how our business activities are managed and evaluated. As of January 31, 2015, the Company operated under a global brand structure for our major brands, Gap, Old Navy, and Banana Republic. The Growth, Innovation, and Digital ("GID") division managed our newer brands, Piperlime, Athleta, and Intermix. As each of our operating segments (Gap Global, Old Navy Global, Banana Republic Global, and GID) share similar economic and other qualitative characteristics, the results of our operating segments are aggregated into one reportable segment.

In January 2015, we announced our decision to close the Piperlime brand. We expect to close the online platform and the store in New York by the end of the first half of fiscal 2015.

In fiscal 2014, we successfully grew both revenue and earnings per share, while delivering progress against our strategic objectives. We continued to execute on our key initiatives, including global growth and omni-channel innovation. While we are pleased with the performance by Old Navy and encouraged by the improvement at Banana Republic, we remain focused on improving the assortment at Gap brand.

In the face of challenging results at Gap brand, we demonstrated strong expense and inventory discipline across the Company. Additionally, we generated healthy free cash flow of $1.4 billion and cash flow from operating activities of $2.1 billion and continued our commitment to returning excess cash to shareholders, distributing $1.6 billion through dividends and share repurchases. Despite depreciating foreign currencies, which negatively impacted our operating results, our balanced approach of revenue growth combined with disciplined expense management and cash distribution drove earnings per share growth of 5 percent.

Free cash flow is defined as net cash provided by operating activities less purchases of property and equipment. For a reconciliation of free cash flow, a non-GAAP financial measure, from a GAAP financial measure, see the Liquidity and Capital Resources section.

Financial results for fiscal 2014 are as follows:


•	Net sales for fiscal 2014 increased 2 percent to $16.4 billion compared with $16.1 billion for fiscal 2013. Excluding the impact of foreign exchange, our net sales increased 3 percent for fiscal 2014 compared with fiscal 2013. See Net Sales discussion for impact of foreign exchange.


•	Comparable sales for fiscal 2014 were flat compared with a 2 percent increase last year.


•	Gross profit was $6.3 billion for fiscal 2014 and fiscal 2013. Gross margin for fiscal 2014 was 38.3 percent compared with 39.0 percent for fiscal 2013.


•	Operating margin for fiscal 2014 was 12.7 percent compared with 13.3 percent for fiscal 2013. Operating margin is defined as operating income as a percentage of net sales.


•	Net income was $1.3 billion for both fiscal 2014 and fiscal 2013; however, diluted earnings per share increased 5 percent to $2.87 for fiscal 2014 compared with $2.74 for fiscal 2013 due to share repurchase activities.

Fiscal 2014 and 2013 consisted of 52 weeks versus 53 weeks in fiscal 2012. Net sales and operating results for fiscal 2012 reflect the impact of the additional week. In addition, due to the 53rd week in fiscal 2012, comparable ("Comp") sales for fiscal 2013 are compared to the 52-week period ended February 2, 2013.

Our business priorities in 2015 include:


•	offering product that is consistent, brand-appropriate, and on-trend;


•	evolving our customer experience to reflect the intersection of digital and physical;


•	attracting, retaining, and training great talent; and


•	growing globally across our brands and channels.

For fiscal 2015, we expect to continue our investment in digital capabilities and to further enhance our shopping experience for our customers. We also plan to continue our global growth, including opening additional stores in Asia with a focus on Gap China, Old Navy China, and Old Navy Japan. In addition, we also expect to open additional Athleta stores in the United States.

In fiscal 2015, we expect that foreign exchange rate fluctuations will continue to have a meaningful negative impact on our results, particularly in our largest foreign subsidiaries in Canada and Japan. With the continuing depreciation of the Canadian dollar, Japanese yen, and other foreign currencies, we expect net sales translated into U.S. dollars will decrease and negatively impact our total Company net sales growth. In addition, we expect gross margins for our foreign subsidiaries to be negatively impacted as our merchandise purchases are primarily in U.S. dollars. In addition to the impact of the foreign exchange rate fluctuations, we also expect that delayed merchandise receipts at the U.S. West Coast ports will have meaningful negative impact on our fiscal 2015 operating results.

Results of Operations

Net Sales

See Item 8, Financial Statements and Supplementary Data, Note 17 of Notes to Consolidated Financial Statements for net sales by brand and region.

Comparable Sales

The percentage change in Comp sales by global brand and for total Company, as compared with the preceding year, is as follows:



	Fiscal Year
	2014		2013
Gap Global	(5	)%	3	%
Old Navy Global	5	%	2	%
Banana Republic Global	—	%	(1	)%
The Gap, Inc.	—	%	2	%

The Comp sales calculations include sales from stores and online. Comparable online sales favorably impacted total Company Comp sales by 2 percent and 3 percent in fiscal 2014 and 2013, respectively.

Only Company-operated stores are included in the calculations of Comp sales. The calculation of total Company Comp sales includes the results of Athleta, Intermix, and the Piperlime store, but excludes the results of our franchise business and Piperlime online.

A store is included in the Comp sales calculations when it has been open and operated by Gap Inc. for at least one year and the selling square footage has not changed by 15 percent or more within the past year. A store is included in the Comp sales calculations on the first day it has comparable prior year sales. Stores in which the selling square footage has changed by 15 percent or more as a result of a remodel, expansion, or reduction are excluded from the Comp sales calculations until the first day they have comparable prior year sales.

A store is considered non-comparable (“Non-comp”) when it has been open and operated by Gap Inc. for less than one year or has changed its selling square footage by 15 percent or more within the past year.

A store is considered “Closed” if it is temporarily closed for three or more full consecutive days or is permanently closed. When a temporarily closed store reopens, the store will be placed in the Comp/Non-comp status it was in prior to its closure. If a store was in Closed status for three or more days in the prior year, the store will be in Non-comp status for the same days the following year.

Online Comp sales are defined as sales through online channels in all countries where we have existing Comp store sales.

Current year foreign exchange rates are applied to both current year and prior year Comp sales to achieve a consistent basis for comparison.

Store Count and Square Footage Information

Net sales per average square foot is as follows:



	Fiscal Year
	2014		2013		2012
Net sales per average square foot (1)	$	361	$	365	$	364

__________


(1)	Excludes net sales associated with our online and franchise businesses.

Store count, openings, closings, and square footage for our stores are as follows:



	February 1, 2014	Fiscal 2014		January 31, 2015
	Number of Store Locations	Number of Stores Opened	Number of Stores Closed	Number of Store Locations		Square Footage (in millions)
Gap North America	968	38	46	960		10.0
Gap Asia	228	42	4	266		2.7
Gap Europe	193	2	6	189		1.6
Old Navy North America	1,004	33	24	1,013		17.2
Old Navy Asia	18	25	—	43		0.7
Banana Republic North America	596	29	15	610		5.1
Banana Republic Asia	43	5	4	44		0.2
Banana Republic Europe	11	—	—	11		0.1
Athleta North America	65	37	1	101		0.4
Piperlime North America	1	—	—	1		—
Intermix North America	37	5	—	42		0.1
Company-operated stores total	3,164	216	100	3,280		38.1
Franchise	375	67	13	429		N/A
Total	3,539	283	113	3,709		38.1
Increase over prior year				4.8	%	2.4	%

	February 2, 2013	Fiscal 2013		February 1, 2014
	Number of Store Locations	Number of Stores Opened	Number of Stores Closed	Number of Store Locations		Square Footage (in millions)
Gap North America	990	38	60	968		10.1
Gap Asia	191	40	3	228		2.3
Gap Europe	198	3	8	193		1.7
Old Navy North America	1,010	27	33	1,004		17.2
Old Navy Asia	1	17	—	18		0.2
Banana Republic North America	590	21	15	596		5.0
Banana Republic Asia	38	6	1	43		0.2
Banana Republic Europe	10	1	—	11		0.1
Athleta North America	35	30	—	65		0.3
Piperlime North America	1	—	—	1		—
Intermix North America	31	7	1	37		0.1
Company-operated stores total	3,095	190	121	3,164		37.2
Franchise	312	72	9	375		N/A
Total	3,407	262	130	3,539		37.2
Increase over prior year				3.9	%	0.8	%

Gap and Banana Republic outlet and factory stores are reflected in each of the respective brands.

In fiscal 2015, we expect net openings of about 115 Company-operated store locations. We expect square footage for Company-operated stores to increase about 2.5 percent for fiscal 2015. We expect our franchisees to open about 35 franchise stores in fiscal 2015.

Net Sales Discussion

Our net sales for fiscal 2014 increased $287 million, or 2 percent, compared with fiscal 2013 primarily due to an increase in net sales at Old Navy and Athleta; partially offset by the unfavorable impact of foreign exchange of about $130 million and a decrease in net sales at Gap. The unfavorable impact of foreign exchange was primarily due to the weakening of the Canadian dollar and Japanese yen against the U.S. dollar. The foreign exchange impact is the translation impact if net sales for fiscal 2013 were translated at exchange rates applicable during fiscal 2014. On this basis, our net sales for fiscal 2014 increased 3 percent compared with fiscal 2013. We believe this metric enhances the visibility of underlying sales trends by excluding the impact of foreign currency exchange rate fluctuations.

Our net sales for fiscal 2013 increased $497 million, or 3 percent, compared with fiscal 2012 primarily due to an increase in net sales at Gap Global and our newer brands; partially offset by the unfavorable impact of foreign exchange of about $240 million primarily due to the weakening of the Japanese yen and Canadian dollar against the U.S. dollar. The foreign exchange impact is the translation impact if net sales for fiscal 2012 were translated at exchange rates applicable during fiscal 2013. On this basis, our net sales for fiscal 2013 increased 5 percent compared with fiscal 2012. We believe this metric enhances the visibility of underlying sales trends by excluding the impact of foreign currency exchange rate fluctuations. Fiscal 2013 consisted of 52 weeks compared with 53 weeks in fiscal 2012.

Cost of Goods Sold and Occupancy Expenses



($ in millions)	Fiscal Year
($ in millions)	2014			2013			2012
Cost of goods sold and occupancy expenses	$	10,146		$	9,855		$	9,480
Gross profit	$	6,289		$	6,293		$	6,171
Cost of goods sold and occupancy expenses as a percentage of net sales	61.7		%	61.0		%	60.6		%
Gross margin	38.3		%	39.0		%	39.4		%

Cost of goods sold and occupancy expenses as a percentage of net sales increased 0.7 percent in fiscal 2014 compared with fiscal 2013.

•

Cost of goods sold increased 0.4 percent as a percentage of net sales in fiscal 2014 compared with fiscal 2013, primarily driven by increased promotional activities and markdowns; partially offset by the reclassification of a portion of income related to our credit card program from operating expenses to cost of goods sold. Cost of goods sold as a percentage of net sales in fiscal 2014 for our foreign subsidiaries was also negatively impacted by foreign exchange as our merchandise purchases are primarily in U.S. dollars.


•	Occupancy expenses increased 0.3 percent as a percentage of net sales in fiscal 2014 compared with fiscal 2013, primarily driven by the incremental cost related to new stores without a corresponding increase in total net sales.

Cost of goods sold and occupancy expenses as a percentage of net sales increased 0.4 percent in fiscal 2013 compared with fiscal 2012.


•	Cost of goods sold increased 0.5 percent as a percentage of net sales in fiscal 2013 compared with fiscal 2012, primarily driven by increased promotional activities.


•	Occupancy expenses decreased 0.1 percent as a percentage of net sales in fiscal 2013 compared with fiscal 2012, primarily driven by the increase in net sales.

In fiscal 2015, we expect that gross margins will continue to be negatively impacted by the continuing depreciation of the Canadian dollar, Japanese yen, and other foreign currencies as our merchandise purchases are primarily in U.S. dollars and also by our continuing expansion of Company-operated stores in international markets, which generally have higher occupancy costs.

Operating Expenses and Operating Margin



($ in millions)	Fiscal Year
($ in millions)	2014			2013			2012
Operating expenses	$	4,206		$	4,144		$	4,229
Operating expenses as a percentage of net sales	25.6		%	25.7		%	27.0		%
Operating margin	12.7		%	13.3		%	12.4		%

Operating expenses increased $62 million, or decreased 0.1 percent as a percentage of net sales, in fiscal 2014 compared with fiscal 2013. The increase in operating expenses was primarily due to the reclassification of a portion of income related to our credit card program from operating expenses to cost of goods sold and an increase in store payroll; partially offset by the gain on sale of a building owned but no longer occupied by the Company and lower bonus expense.

Operating expenses decreased $85 million, or 1.3 percent as a percentage of net sales, in fiscal 2013 compared with fiscal 2012. The decrease in operating expenses was primarily due to lower corporate overhead expenses and store payroll, as well as a decrease in marketing expenses.

Interest Expense



($ in millions)	Fiscal Year
($ in millions)	2014		2013		2012
Interest expense	$	75	$	61	$	87

Interest expense for fiscal 2014 includes interest on overall borrowings and obligations mainly related to our $1.25 billion long-term debt.

Interest expense for fiscal 2013 includes $75 million of interest on overall borrowings and obligations mainly related to our $1.25 billion long-term debt, offset by a net reversal of $14 million of interest expense resulting from the favorable resolution of tax matters in fiscal 2013.

Interest expense for fiscal 2012 primarily consists of interest expense related to our $1.25 billion long-term debt and $400 million term loan, which was repaid in full in August 2012.

Income Taxes



($ in millions)	Fiscal Year
($ in millions)	2014			2013			2012
Income taxes	$	751		$	813		$	726
Effective tax rate	37.3		%	38.8		%	39.0		%

The decrease in the effective tax rate for fiscal 2014 compared with fiscal 2013 was primarily due to the recognition of foreign tax credits upon a $473 million distribution of certain foreign earnings that occurred during the third quarter of fiscal 2014.

The decrease in the effective tax rate for fiscal 2013 compared with fiscal 2012 was primarily due to the favorable impact of changes in the mix of pre-tax income between our domestic and international operations, partially offset by higher federal and state tax credits recognized in fiscal 2012.

Liquidity and Capital Resources

Our largest source of cash flows is cash collections from the sale of our merchandise. Our primary uses of cash include merchandise inventory purchases, occupancy costs, personnel-related expenses, purchases of property and equipment, share repurchases, and payment of taxes.

We consider the following to be measures of our liquidity and capital resources:



($ in millions)	January 31, 2015		February 1, 2014		February 2, 2013
Cash, cash equivalents, and short-term investments	$	1,515	$	1,510	$	1,510
Debt	$	1,353	$	1,394	$	1,246
Working capital	$	2,083	$	1,985	$	1,788
Current ratio	1.93:1		1.81:1		1.76:1

As of January 31, 2015, over half of our cash and cash equivalents were held in the United States and are generally accessible without any limitations.

We believe that current cash balances and cash flows from our operations will be sufficient to support our business operations, including growth initiatives and planned capital expenditures, for the next 12 months and beyond. We are also able to supplement near-term liquidity, if necessary, with our $500 million revolving credit facility.

Cash Flows from Operating Activities

Net cash provided by operating activities during fiscal 2014 increased $424 million compared with fiscal 2013, primarily due to the following:


•	an increase of $284 million related to other current assets and other long-term assets primarily due to the change in timing of payments received related to our credit card program;


•	an increase of $132 million related to lease incentives and other long-term liabilities primarily due to the receipt of an upfront payment in fiscal 2014 related to the amendment of our credit card program agreement with the third-party financing company, which is being amortized over the term of the contract; and


•	an increase of $184 million related to merchandise inventory primarily due to timing of receipts; partially offset by


•	a decrease of $146 million related to accounts payable primarily due to timing of payments;


•	a decrease of $28 million related to accrued expenses and other current liabilities primarily due to timing of payments; and


•	a decrease of $18 million in net income.

Net cash provided by operating activities during fiscal 2013 decreased $231 million compared with fiscal 2012, primarily due to the following:


•	a decrease of $220 million related to income taxes payable, net of prepaid income taxes and other tax-related items, in fiscal 2013 compared with fiscal 2012 primarily due to the timing of tax payments;


•	a decrease of $73 million related to accrued expenses and other current liabilities primarily due to a higher bonus payout in fiscal 2013 compared with fiscal 2012;


•	a decrease of $71 million related to non-cash and other items primarily due to the realized gain related to our derivative financial instruments in fiscal 2013 compared with a realized loss in fiscal 2012;


•	a decrease of $67 million related to lease incentives and other long-term liabilities primarily due to the resolution of tax matters, including interest, and an increase in lease incentives in fiscal 2012 related to the relocation of our New York headquarter offices; and


•	a decrease of $50 million related to merchandise inventory primarily due to volume and timing of receipts; partially offset by


•	an increase in net income of $145 million; and


•	a deferred tax provision of $69 million in fiscal 2013 compared with a deferred tax benefit of $37 million in fiscal 2012.

We fund inventory expenditures during normal and peak periods through cash flows from operating activities and available cash. Our business follows a seasonal pattern, with sales peaking during the end-of-year holiday period. The seasonality of our operations may lead to significant fluctuations in certain asset and liability accounts between fiscal year-end and subsequent interim periods.

Cash Flows from Investing Activities

Net cash used for investing activities during fiscal 2014 decreased $28 million compared with fiscal 2013, primarily due to the following:


•	$121 million of proceeds from the sale of a building owned but no longer occupied by the Company in fiscal 2014; partially offset by


•	$50 million less maturities of short-term investments in fiscal 2014; and


•	$44 million more property and equipment purchases in fiscal 2014.

Net cash used for investing activities during fiscal 2013 decreased $220 million compared with fiscal 2012, primarily due to the following:


•	$129 million used for the acquisition of Intermix in fiscal 2012; and


•	$50 million of maturities of short-term investments in fiscal 2013 compared with $50 million of net purchases in fiscal 2012.

In fiscal 2014, cash used for purchases of property and equipment was $714 million. In fiscal 2015, we expect cash spending for purchases of property and equipment to be about $800 million.

Cash Flows from Financing Activities

Net cash used for financing activities during fiscal 2014 increased $503 million compared with fiscal 2013, primarily due to the following:


•	$200 million more repurchases of common stock in fiscal 2014;


•	$144 million proceeds from issuance of long-term debt in fiscal 2013;


•	$62 million more cash dividends paid in fiscal 2014; and


•	$59 million less net proceeds from issuances under share-based compensation plans in fiscal 2014.

Net cash used for financing activities during fiscal 2013 decreased $477 million compared with fiscal 2012, primarily due to the following:


•	$419 million of payments of debt in fiscal 2012;


•	$144 million of proceeds from issuance of long-term debt in fiscal 2013; and


•	$51 million less repurchases of common stock in fiscal 2013 compared with fiscal 2012, partially offset by


•	$81 million more dividends paid in fiscal 2013 compared with fiscal 2012; and


•	$77 million less net proceeds from issuances under share-based compensation plans in fiscal 2013 compared with fiscal 2012.

Free Cash Flow

Free cash flow is a non-GAAP financial measure. We believe free cash flow is an important metric because it represents a measure of how much cash a company has available for discretionary and non-discretionary items after the deduction of capital expenditures, as we require regular capital expenditures to build and maintain stores and purchase new equipment to improve our business. We use this metric internally, as we believe our sustained ability to generate free cash flow is an important driver of value creation. However, this non-GAAP financial measure is not intended to supersede or replace our GAAP result.

The following table reconciles free cash flow, a non-GAAP financial measure, from a GAAP financial measure.



	Fiscal Year
($ in millions)	2014			2013			2012
Net cash provided by operating activities	$	2,129		$	1,705		$	1,936
Less: Purchases of property and equipment	(714		)	(670		)	(659		)
Free cash flow	$	1,415		$	1,035		$	1,277

Long-Term Debt and Credit Facilities

Certain financial information about the Company's long-term debt and credit facilities is set forth under the headings "Long-Term Debt" and "Credit Facilities" in Notes 5 and 6, respectively, of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.

Dividend Policy

In determining whether and at what level to declare a dividend, we consider a number of factors including sustainability, operating performance, liquidity, and market conditions.

We increased our annual dividend from $0.80 per share as of the end of fiscal 2013 to $0.88 per share for fiscal 2014. We intend to increase our annual dividend to $0.92 per share for fiscal 2015.

Share Repurchases

Certain financial information about the Company's share repurchases is set forth under the heading "Share Repurchases" in Note 9 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.

Contractual Cash Obligations

We are party to many contractual obligations involving commitments to make payments to third parties. The following table provides summary information concerning our future contractual obligations as of January 31, 2015. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain of these contractual obligations are reflected in the Consolidated Balance Sheet as of January 31, 2015, while others are disclosed as future obligations.



	Payments Due by Period
($ in millions)	Less than 1 Year		1-3 Years		3-5 Years		More Than 5 Years		Total
Long-term debt (1)	$	21	$	85	$	—	$	1,250	$	1,356
Interest payments on long-term debt	75		149		150		107		481
Operating leases (2)	1,136		2,016		1,398		1,701		6,251
Purchase obligations and commitments (3)	3,984		107		10		10		4,111
Total contractual cash obligations	$	5,216	$	2,357	$	1,558	$	3,068	$	12,199

__________


(1)	Represents principal maturities, excluding interest. See Note 5 of Notes to Consolidated Financial Statements.


(2)	Excludes maintenance, insurance, taxes, and contingent rent obligations. See Note 12 of Notes to Consolidated Financial Statements for discussion of our operating leases.


(3)	Represents estimated open purchase orders to purchase inventory as well as commitments for products and services used in the normal course of business.

There is $75 million of long-term liabilities recorded in lease incentives and other long-term liabilities in the Consolidated Balance Sheet as of January 31, 2015 that is being excluded from the table above as the amount relates to uncertain tax positions and we are not able to reasonably estimate the timing of the payments or the amount by which the liability will increase or decrease over time.

Commercial Commitments

We have commercial commitments, not reflected in the table above, that were incurred in the normal course of business to support our operations, including standby letters of credit of $21 million, surety bonds of $36 million, and bank guarantees of $17 million outstanding (of which $11 million was issued under the unsecured revolving credit facilities for our operations in foreign locations) as of January 31, 2015.

Other Cash Obligations Not Reflected in the Consolidated Balance Sheet (Off-Balance Sheet Arrangements)

The majority of our contractual obligations relate to operating leases for our stores. Future minimum lease payments represent commitments under non-cancelable operating leases and are disclosed in the table above with additional information provided in Item 8, Financial Statements and Supplementary Data, Note 12 of Notes to Consolidated Financial Statements.

Our other off-balance sheet arrangements are disclosed in Item 8, Financial Statements and Supplementary Data, Note 16 of Notes to Consolidated Financial Statements.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with GAAP requires management to adopt accounting policies and make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the financial statements of a large, global corporation. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information.

Our significant accounting policies can be found in Item 8, Financial Statements and Supplementary Data, Note 1 of Notes to Consolidated Financial Statements. The policies and estimates discussed below include the financial statement elements that are either judgmental or involve the selection or application of alternative accounting policies and are material to our financial statements. Management has discussed the development and selection of these critical accounting policies and estimates with the Audit and Finance Committee of our Board of Directors, which has reviewed our disclosure relating to critical accounting policies and estimates in this annual report on Form 10-K.

Merchandise Inventory

We value inventory at the lower of cost or market (“LCM”), with cost determined using the weighted-average cost method. We review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes or colors) and we primarily use promotions and markdowns to clear merchandise. We record an adjustment to inventory when future estimated selling price is less than cost. Our LCM adjustment calculation requires management to make assumptions to estimate the selling price and amount of slow-moving merchandise and broken assortments subject to markdowns, which is dependent upon factors such as historical trends with similar merchandise, inventory aging, forecasted consumer demand, and the promotional environment. In addition, we estimate and accrue shortage for the period between the last physical count and the balance sheet date. Our shortage estimate can be affected by changes in merchandise mix and changes in actual shortage trends. Historically, actual shortage has not differed materially from our estimates.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our LCM or inventory shortage adjustments. However, if estimates regarding consumer demand are inaccurate or actual physical inventory shortage differs significantly from our estimate, our operating results could be affected. We have not made any material changes in the accounting methodology used to calculate our LCM or inventory shortage adjustments in the past three fiscal years.

Impairment of Long-Lived Assets, Goodwill, and Intangible Assets

We review the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Events that result in an impairment review include the decision to close a store, corporate facility, or distribution center, or a significant decrease in the operating performance of the long-lived asset. Long-lived assets are considered impaired if the estimated undiscounted future cash flows of the asset or asset group are less than the carrying amount. For impaired assets, we recognize a loss equal to the difference between the carrying amount of the asset or asset group and its estimated fair value. The estimated fair value of the asset or asset group is based on estimated discounted future cash flows of the asset or asset group using a discount rate commensurate with the risk. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets. The asset group for our retail stores is reviewed for impairment primarily at the store level. Our estimate of future cash flows requires management to make assumptions and to apply judgment, including forecasting future sales and expenses and estimating useful lives of the assets. These estimates can be affected by factors such as future store results, real estate demand, and economic conditions that can be difficult to predict. We have not made any material changes in the methodology to assess and calculate impairment of long-lived assets in the past three fiscal years. We recorded a charge for the impairment of long-lived assets of $10 million, $1 million, and $8 million for fiscal 2014, 2013, and 2012, respectively.

We also review the carrying amount of goodwill and other indefinite-lived intangible assets for impairment annually and whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable. Events that result in an impairment review include significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable.

In connection with the acquisitions of Athleta in September 2008 and Intermix in December 2012, we allocated $99 million and $81 million of the respective purchase prices to goodwill. The aggregate carrying amount of goodwill was $180 million as of January 31, 2015. We review goodwill for impairment, as appropriate, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If it is determined that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the two-step test is performed to identify potential goodwill impairment. If it is determined that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, it is unnecessary to perform the two-step goodwill impairment test. Based on certain circumstances, we may elect to bypass the qualitative assessment and proceed directly to performing the first step of the two-step goodwill impairment test. The first step of the two-step goodwill impairment test compares the fair value of the reporting unit to its carrying amount, including goodwill. The second step includes hypothetically valuing all the tangible and intangible assets of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit’s goodwill is compared to the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying amount.

A reporting unit is an operating segment or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. We have deemed Athleta and Intermix to be the reporting units at which goodwill is tested for Athleta and Intermix, respectively. During the fourth quarter of fiscal 2014, we completed our annual impairment testing of goodwill and we did not recognize any impairment charges. We determined that the fair value of goodwill attributed to Athleta significantly exceeded its carrying amount as of the date of our annual impairment review. The fair value of goodwill attributed to Intermix exceeded its carrying amount by approximately 20 percent as of the date of our annual impairment review.

In connection with the acquisitions of Athleta in September 2008 and Intermix in December 2012, we allocated $54 million and $38 million of the respective purchase prices to trade names. The aggregate carrying amount of the trade names was $92 million as of January 31, 2015. A trade name is considered impaired if the estimated fair value of the trade name is less than the carrying amount. If a trade name is considered impaired, we recognize a loss equal to the difference between the carrying amount and the estimated fair value of the trade name. The fair value of the trade names is determined using the relief from royalty method. During the fourth quarter of fiscal 2014, we completed our annual impairment review of the trade names and we did not recognize any impairment charges. We determined that the fair value of the Athleta trade name significantly exceeded its carrying amount as of the date of our annual impairment review. The fair value of the Intermix trade name exceeded its carrying amount by approximately 30 percent as of the date of our annual impairment review.

These analyses require management to make assumptions and to apply judgment, including forecasting future sales and expenses, and selecting appropriate discount rates and royalty rates, which can be affected by economic conditions and other factors that can be difficult to predict.

We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate impairment losses of long-lived assets, goodwill, and intangible assets. However, if actual results are not consistent with our estimates and assumptions used in the calculations, we may be exposed to impairment losses that could be material.

Revenue Recognition

While revenue recognition for the Company does not involve significant judgment, it represents an important accounting policy. We recognize revenue and the related cost of goods sold at the time the products are received by the customers. For sales transacted at stores, revenue is recognized when the customer receives and pays for the merchandise at the register. For sales where we ship the merchandise to the customer from the distribution center or store, revenue is recognized at the time the customer receives the merchandise. We record an allowance for estimated returns based on our historical return patterns and various other assumptions that management believes to be reasonable.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our sales return allowance. However, if the actual rate of sales returns increases significantly, our operating results could be adversely affected. We have not made any material changes in the accounting methodology used to estimate future sales returns in the past three fiscal years.

Unredeemed Gift Cards, Gift Certificates, and Credit Vouchers

Upon issuance of a gift card, gift certificate, or credit voucher, a liability is established for its cash value. The liability is relieved and net sales are recorded upon redemption by the customer. Over time, some portion of these instruments is not redeemed (“breakage”). We determine breakage income for gift cards, gift certificates, and credit vouchers based on historical redemption patterns. Breakage income is recorded in other income, which is a component of operating expenses in the Consolidated Statements of Income, when we can determine the portion of the liability where redemption is remote, which is three years after the gift card, gift certificate, or credit voucher is issued. When breakage income is recorded, a liability is recognized for any legal obligation to remit the unredeemed portion to relevant jurisdictions. Substantially all of our gift cards, gift certificates, and credit vouchers have no expiration dates.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our breakage income. However, if the actual rate of redemption for gift cards, gift certificates, and credit vouchers increases significantly, our operating results could be adversely affected. We have not made any material changes in the accounting methodology used to estimate breakage income in the past three fiscal years.

Income Taxes

We record a valuation allowance against our deferred tax assets when it is more likely than not that some portion or all of such deferred tax assets will not be realized. In determining the need for a valuation allowance, management is required to make assumptions and to apply judgment, including forecasting future income, taxable income, and the mix of income or losses in the jurisdictions in which we operate. Our effective tax rate in a given financial statement period may also be materially impacted by changes in the mix and level of income or losses, changes in the expected outcome of audits, or changes in the deferred tax valuation allowance.

At any point in time, many tax years are subject to or in the process of being audited by various taxing authorities. To the extent our estimates of settlements change or the final tax outcome of these matters is different from the amounts recorded, such differences will impact the income tax provision in the period in which such determinations are made. Our income tax expense includes changes in our estimated liability for exposures associated with our various tax filing positions. Determining the income tax expense for these potential assessments requires management to make assumptions that are subject to factors such as proposed assessments by tax authorities, changes in facts and circumstances, issuance of new regulations, and resolution of tax audits.

We believe the judgments and estimates discussed above are reasonable. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

Recent Accounting Pronouncements

See Item 8, Financial Statements and Supplementary Data, Note 1 of Notes to Consolidated Financial Statements for recent accounting pronouncements, including the expected dates of adoption and estimated effects on our Consolidated Financial Statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Derivative Financial Instruments

Certain financial information about the Company's derivative financial instruments is set forth under the heading "Derivative Financial Instruments" in Note 8 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.

We have performed a sensitivity analysis as of January 31, 2015 based on a model that measures the impact of a hypothetical 10 percent adverse change in foreign currency exchange rates to U.S. dollars (with all other variables held constant) on our underlying estimated major foreign currency exposures, net of derivative financial instruments. The foreign currency exchange rates used in the model were based on the spot rates in effect as of January 31, 2015. The sensitivity analysis indicated that a hypothetical 10 percent adverse movement in foreign currency exchange rates would have an unfavorable impact on the underlying cash flow exposure, net of our foreign exchange derivative financial instruments, of $31 million as of January 31, 2015.

Long-Term Debt

Certain financial information about the Company's long-term debt is set forth under the heading "Long-Term Debt" in Note 5 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.

Our $1.25 billion aggregate principal amount of 5.95 percent notes due April 2021 are not subject to interest rate risk as they have a fixed interest rate.

Our interest rate risk associated with a 15 billion Japanese yen ($128 million as of January 31, 2015), four-year, unsecured term loan as of January 31, 2015 is as follows:



	Expected Maturity Date (Fiscal Year)
(¥ in billions)	2015			2016			2017			2018			Total			Fair Value (1)
Principal payments	¥	2.5		¥	2.5		¥	7.5		¥	—		¥	12.5		¥	12.5
Average interest rate (2)	1		%	1		%	1		%	—		%	1		%

__________


(1)	The carrying amount of the Japan Term Loan approximates its fair value as the interest rate varies depending on market rates.


(2)	The average interest rate for all periods presented was calculated based on the Tokyo Interbank Offered Rate plus a fixed margin as of January 31, 2015. As the interest rate for the term loan is variable, it is subject to change for all periods presented.

Cash Equivalents

We have highly liquid fixed and variable income investments classified as cash equivalents, which are placed primarily in money market funds, time deposits, and commercial paper. These investments are classified as held-to-maturity based on our positive intent and ability to hold the securities to maturity. We value these investments at their original purchase prices plus interest that has accrued at the stated rate. The value of our investments is not subject to material interest rate risk. However, changes in interest rates would impact the interest income derived from our investments. We earned interest income of $5 million in fiscal 2014.

Item 8. Financial Statements and Supplementary Data.

THE GAP, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




	Page

Report of Independent Registered Public Accounting Firm	33

Consolidated Balance Sheets as of January 31, 2015 and February 1, 2014	34

Consolidated Statements of Income for the fiscal years ended January 31, 2015, February 1, 2014, and February 2, 2013	35

Consolidated Statements of Comprehensive Income for the fiscal years ended January 31, 2015, February 1, 2014, and February 2, 2013	36

Consolidated Statements of Stockholders' Equity for the fiscal years ended January 31, 2015, February 1, 2014, and February 2, 2013	37

Consolidated Statements of Cash Flows for the fiscal years ended January 31, 2015, February 1, 2014, and February 2, 2013	38

Notes to Consolidated Financial Statements	39

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of The Gap, Inc.:

We have audited the accompanying consolidated balance sheets of The Gap, Inc. and subsidiaries (the "Company") as of January 31, 2015 and February 1, 2014, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three fiscal years in the period ended January 31, 2015. We also have audited the Company's internal control over financial reporting as of January 31, 2015 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Gap, Inc. and subsidiaries as of January 31, 2015 and February 1, 2014, and the results of their operations and their cash flows for each of the three fiscal years in the period ended January 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ Deloitte & Touche LLP

San Francisco, California

March 23, 2015

THE GAP, INC.

CONSOLIDATED BALANCE SHEETS



($ and shares in millions except par value)	January 31, 2015		February 1, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	1,515	$	1,510
Merchandise inventory	1,889		1,928
Other current assets	913		992
Total current assets	4,317		4,430
Property and equipment, net	2,773		2,758
Other long-term assets	600		661
Total assets	$	7,690	$	7,849
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of debt	$	21	$	25
Accounts payable	1,173		1,242
Accrued expenses and other current liabilities	1,020		1,142
Income taxes payable	20		36
Total current liabilities	2,234		2,445
Long-term liabilities:
Long-term debt	1,332		1,369
Lease incentives and other long-term liabilities	1,141		973
Total long-term liabilities	2,473		2,342
Commitments and contingencies (see Notes 12 and 16)
Stockholders' equity:
Common stock $0.05 par value
Authorized 2,300 shares for all periods presented; Issued 421 and 1,106 shares; Outstanding 421 and 446 shares	21		55
Additional paid-in capital	—		2,899
Retained earnings	2,797		14,218
Accumulated other comprehensive income	165		135
Treasury stock at cost (0 and 660 shares)	—		(14,245		)
Total stockholders' equity	2,983		3,062
Total liabilities and stockholders' equity	$	7,690	$	7,849

See Accompanying Notes to Consolidated Financial Statements

THE GAP, INC.

CONSOLIDATED STATEMENTS OF INCOME



	Fiscal Year
($ and shares in millions except per share amounts)	2014			2013			2012
Net sales	$	16,435		$	16,148		$	15,651
Cost of goods sold and occupancy expenses	10,146			9,855			9,480
Gross profit	6,289			6,293			6,171
Operating expenses	4,206			4,144			4,229
Operating income	2,083			2,149			1,942
Interest expense	75			61			87
Interest income	(5		)	(5		)	(6		)
Income before income taxes	2,013			2,093			1,861
Income taxes	751			813			726
Net income	$	1,262		$	1,280		$	1,135
Weighted-average number of shares—basic	435			461			482
Weighted-average number of shares—diluted	440			467			488
Earnings per share—basic	$	2.90		$	2.78		$	2.35
Earnings per share—diluted	$	2.87		$	2.74		$	2.33

See Accompanying Notes to Consolidated Financial Statements

THE GAP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Fiscal Year
($ in millions)	2014			2013			2012
Net income	$	1,262		$	1,280		$	1,135
Other comprehensive income (loss), net of tax:
Foreign currency translation, net of tax (tax benefit) of $(2), $5, and $-	(47		)	(51		)	(71		)
Change in fair value of derivative financial instruments, net of tax of $48, $30, and $18	118			48			28
Reclassification adjustment for realized gains on derivative financial instruments, net of tax of $(20), $(27), and $(4)	(41		)	(43		)	(5		)
Other comprehensive income (loss), net of tax	30			(46		)	(48		)
Comprehensive income	$	1,292		$	1,234		$	1,087

See Accompanying Notes to Consolidated Financial Statements

THE GAP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY



	Common Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock
($ and shares in millions except per share amounts)	Shares		Amount												Shares		Amount			Total
Balance as of January 28, 2012	1,106		$	55		$	2,867		$	12,364		$	229		(621	)	$	(12,760	)	$	2,755
Net income									1,135											1,135
Other comprehensive income, net of tax												(48		)						(48		)
Repurchases of common stock															(34	)	(1,026		)	(1,026		)
Reissuance of treasury stock under share-based compensation plans, net of shares withheld for employee taxes						(147		)							12		321			174
Tax benefit from exercise of stock options and vesting of stock units						33														33
Share-based compensation, net of estimated forfeitures						111														111
Common stock cash dividends ($0.50 per share)									(240		)									(240		)
Balance as of February 2, 2013	1,106		55			2,864			13,259			181			(643	)	(13,465		)	2,894
Net income									1,280											1,280
Other comprehensive loss, net of tax												(46		)						(46		)
Repurchases of common stock															(26	)	(1,009		)	(1,009		)
Reissuances of treasury stock under share-based compensation plans, net of shares withheld for employee taxes						(132		)							9		229			97
Tax benefit from exercise of stock options and vesting of stock units						50														50
Share-based compensation, net of estimated forfeitures						117														117
Common stock cash dividends ($0.70 per share)									(321		)									(321		)
Balance as of February 1, 2014	1,106		55			2,899			14,218			135			(660	)	(14,245		)	3,062
Net income									1,262											1,262
Other comprehensive loss, net of tax												30								30
Repurchases of common stock	(29	)	(1		)	(155		)	(973		)				(1	)	(35		)	(1,164		)
Reissuance of treasury stock under share-based compensation plans, net of shares withheld for employee taxes						(2		)							1		23			21
Retirement of treasury stock	(660	)	(33		)	(2,897		)	(11,327		)				660		14,257			—
Issuance of common stock under share-based compensation plans, net of shares withheld for employee taxes	4		—			17														17
Tax benefit from exercise of stock options and vesting of stock units						37														37
Share-based compensation, net of estimated forfeitures						101														101
Common stock cash dividends ($0.88 per share)									(383		)									(383		)
Balance as of January 31, 2015	421		$	21		$	—		$	2,797		$	165		—		$	—		$	2,983

See Accompanying Notes to Consolidated Financial Statements

THE GAP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Fiscal Year
($ in millions)	2014			2013			2012
Cash flows from operating activities:
Net income	$	1,262		$	1,280		$	1,135
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	564			536			559
Amortization of lease incentives	(64		)	(66		)	(76		)
Share-based compensation	100			116			113
Tax benefit from exercise of stock options and vesting of stock units	37			50			33
Excess tax benefit from exercise of stock options and vesting of stock units	(38		)	(56		)	(34		)
Non-cash and other items	(56		)	(60		)	11
Deferred income taxes	75			69			(37		)
Changes in operating assets and liabilities:
Merchandise inventory	(9		)	(193		)	(143		)
Other current assets and other long-term assets	240			(44		)	(44		)
Accounts payable	(41		)	105			91
Accrued expenses and other current liabilities	(33		)	(5		)	68
Income taxes payable, net of prepaid and other tax-related items	(87		)	(74		)	146
Lease incentives and other long-term liabilities	179			47			114
Net cash provided by operating activities	2,129			1,705			1,936
Cash flows from investing activities:
Purchases of property and equipment	(714		)	(670		)	(659		)
Proceeds from sale of property and equipment	121			—			—
Purchases of short-term investments	—			—			(200		)
Maturities of short-term investments	—			50			150
Acquisition of business	—			—			(129		)
Other	(3		)	(4		)	(6		)
Net cash used for investing activities	(596		)	(624		)	(844		)
Cash flows from financing activities:
Payments of short-term debt	—			—			(19		)
Proceeds from issuance of long-term debt	—			144			—
Payments of long-term debt	(21		)	—			(400		)
Proceeds from issuances under share-based compensation plans, net of withholding tax payments	38			97			174
Repurchases of common stock	(1,179		)	(979		)	(1,030		)
Excess tax benefit from exercise of stock options and vesting of stock units	38			56			34
Cash dividends paid	(383		)	(321		)	(240		)
Other	—			(1		)	—
Net cash used for financing activities	(1,507		)	(1,004		)	(1,481		)
Effect of foreign exchange rate fluctuations on cash and cash equivalents	(21		)	(27		)	(36		)
Net increase (decrease) in cash and cash equivalents	5			50			(425		)
Cash and cash equivalents at beginning of period	1,510			1,460			1,885
Cash and cash equivalents at end of period	$	1,515		$	1,510		$	1,460
Non-cash investing activities:
Purchases of property and equipment not yet paid at end of period	$	73		$	90		$	74
Supplemental disclosure of cash flow information:
Cash paid for interest during the period	$	77		$	77		$	83
Cash paid for income taxes during the period, net of refunds	$	714		$	805		$	582

See Accompanying Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

For the Fiscal Years Ended January 31, 2015, February 1, 2014, and February 2, 2013

Note 1. Organization and Summary of Significant Accounting Policies

Organization

The Gap, Inc., a Delaware Corporation, is a global retailer offering apparel, accessories, and personal care products for men, women, and children under the Gap, Banana Republic, Old Navy, Piperlime, Athleta, and Intermix brands. We have Company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, Italy, China, Hong Kong, and as of March 2014, Taiwan. We also have franchise agreements with unaffiliated franchisees to operate Gap, Banana Republic, and Old Navy stores in many other countries around the world. In addition, our products are available to customers online through Company-owned websites and through the use of third parties that provide logistics and fulfillment services.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of The Gap, Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated.

Fiscal Year and Presentation

Our fiscal year is a 52-week or 53-week period ending on the Saturday closest to January 31. The fiscal years ended January 31, 2015 (fiscal 2014) and February 1, 2014 (fiscal 2013) consisted of 52 weeks. The fiscal year ended February 2, 2013 (fiscal 2012) consisted of 53 weeks.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents and Short-Term Investments

Cash includes amounts in transit from banks for customer credit card and debit card transactions that process in less than seven days, and funds deposited in banks.

All highly liquid investments with original maturities of 91 days or less are classified as cash equivalents. Highly liquid investments with original maturities of greater than 91 days that will mature less than one year from the balance sheet date are classified as short-term investments. Our cash equivalents and short-term investments are placed primarily in money market funds, time deposits, and commercial paper and are classified as held-to-maturity based on our positive intent and ability to hold the securities to maturity. We value these investments at their original purchase prices plus interest that has accrued at the stated rate. Income related to these securities is recorded in interest income in the Consolidated Statements of Income.

Restricted Cash

Restricted cash consists primarily of cash that serves as collateral for our insurance obligations. Any cash that is legally restricted from use is classified as restricted cash. If the purpose of restricted cash relates to acquiring a long-term asset, liquidating a long-term liability, or is otherwise unavailable for a period longer than one year from the balance sheet date, the restricted cash is included in other long-term assets. Otherwise, restricted cash is included in other current assets in the Consolidated Balance Sheets.

Merchandise Inventory

We value inventory at the lower of cost or market, with cost determined using the weighted-average cost method. We record an adjustment when future estimated selling price is less than cost. We review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes or colors) and use promotions and markdowns to clear merchandise. In addition, we estimate and accrue shortage for the period between the last physical count and the balance sheet date.

Derivative Financial Instruments

Derivative financial instruments are recorded at fair value in the Consolidated Balance Sheets as other current assets, other long-term assets, accrued expenses and other current liabilities, or lease incentives and other long-term liabilities.

For derivative financial instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative financial instruments is reported as a component of other comprehensive income (“OCI”) and is recognized in income in the period in which the underlying transaction impacts the income statement. For derivative financial instruments that are designated and qualify as net investment hedges, the effective portion of the gain or loss on the derivative financial instruments is reported as a component of OCI and is reclassified into income in the period or periods during which the hedged subsidiary is either sold or liquidated (or substantially liquidated). Gains and losses on the derivative financial instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness, if any, are recognized in current income. For derivative financial instruments not designated as hedging instruments, the gain or loss on the derivative financial instruments is recorded in operating expenses in the Consolidated Statements of Income. Cash flows from derivative financial instruments are classified as cash flows from operating activities in the Consolidated Statements of Cash Flows.

Property and Equipment

Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are as follows:



Category		Term
Leasehold improvements		Shorter of remaining lease term or economic life, up to 15 years
Furniture and equipment		Up to 15 years
Buildings and building improvements		Up to 39 years
Software		3 to 7 years

When assets are sold or retired, the cost and related accumulated depreciation are removed from the accounts, with any resulting gain or loss recorded in operating expenses in the Consolidated Statements of Income. Costs of maintenance and repairs are expensed as incurred.

Lease Rights, Key Money, and Favorable Lease Assets

Lease rights are costs incurred to acquire the right to lease a specific property. A majority of our lease rights are related to premiums paid to landlords, lease buy-out costs, and broker fees. Key money is the amount of funds paid to a landlord or tenant to acquire the rights of tenancy under a commercial property lease. These rights can be subsequently sold by us to a new tenant or the amount of key money paid can potentially be recovered from the landlord should the landlord refuse to allow the automatic right of renewal to be exercised. Lease rights and key money are recorded at cost and are amortized over the corresponding lease term. Lease rights and key money are recorded in other long-term assets in the Consolidated Balance Sheets, net of related amortization.

In connection with our acquisition of Intermix in December 2012, we acquired favorable lease assets as a result of leases with terms that were considered favorable relative to market terms for similar leases as of the date of acquisition. The favorable lease assets are recorded in other long-term assets in the Consolidated Balance Sheets and recognized as rent expense in cost of goods sold and occupancy expenses in the Consolidated Statements of Income over the remaining term of the leases.

Insurance and Self-Insurance

We retain a portion of the risk for certain losses related to employee health and welfare, workers’ compensation, and general liability claims. Undiscounted liabilities associated with these programs are estimated based primarily on actuarially-determined amounts and are accrued in part by considering historical claims experience, demographic factors, severity factors, and other actuarial assumptions. These insurance liabilities are recorded in accrued expenses and other current liabilities and lease incentives and other long-term liabilities in the Consolidated Balance Sheets.

Asset Retirement Obligations

An asset retirement obligation represents a legal obligation associated with the retirement of a tangible long-lived asset that is incurred upon the acquisition, construction, development, or normal operation of that long-lived asset. The Company’s asset retirement obligations are primarily associated with leasehold improvements that we are contractually obligated to remove at the end of a lease to comply with the lease agreement. We recognize asset retirement obligations at the inception of a lease with such conditions if a reasonable estimate of fair value can be made. The asset retirement obligation is recorded in accrued expenses and other current liabilities and lease incentives and other long-term liabilities in the Consolidated Balance Sheets and is subsequently adjusted for changes in estimated asset retirement obligations. The associated estimated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and depreciated over its useful life.

Treasury Stock

We previously accounted for treasury stock under the cost method, using the first-in, first-out flow assumption, and we included treasury stock as a component of stockholders’ equity. As of March 1, 2014, the Company retired all existing treasury stock. All common stock repurchased subsequent to March 1, 2014 is immediately retired.

Revenue Recognition

Revenue is recognized for sales transacted at stores when the customer receives and pays for the merchandise at the register. For sales where we ship the merchandise to the customer from the distribution center or store, revenue is recognized at the time the customer receives the product. Amounts related to shipping and handling that are billed to customers are recorded in net sales, and the related costs are recorded in cost of goods sold and occupancy expenses in the Consolidated Statements of Income. Revenues are presented net of estimated returns and any taxes collected from customers and remitted to governmental authorities. Allowances for estimated returns are recorded based on estimated margin using our historical return patterns.

We sell merchandise to franchisees under multi-year franchise agreements. We recognize revenue from sales to franchisees at the time merchandise ownership is transferred to the franchisee, which generally occurs when the merchandise reaches the franchisee’s predesignated turnover point. These sales are recorded in net sales, and the related cost of goods sold is recorded in cost of goods sold and occupancy expenses in the Consolidated Statements of Income. We also receive royalties from franchisees based on a percentage of the total merchandise purchased by the franchisee, net of any refunds or credits due them. Royalty revenue is recognized when merchandise ownership is transferred to the franchisee and is recorded in net sales in the Consolidated Statements of Income.

Classification of Expenses

Cost of goods sold and occupancy expenses include the following:


•	the cost of merchandise;


•	inventory shortage and valuation adjustments;


•	freight charges;


•	shipping and handling costs;


•	costs associated with our sourcing operations, including payroll and related benefits;


•	production costs;


•	insurance costs related to merchandise; and


•	rent, occupancy, depreciation, and amortization related to our store operations, distribution centers, and certain corporate functions.

Operating expenses include the following:


•	payroll and related benefits (for our store operations, field management, distribution centers, and corporate functions);


•	marketing;


•	general and administrative expenses;


•	costs to design and develop our products;


•	merchandise handling and receiving in distribution centers;


•	distribution center general and administrative expenses;


•	rent, occupancy, depreciation, and amortization for our corporate facilities; and


•	other expenses (income).

Merchandise handling and receiving expenses and distribution center general and administrative expenses recorded in operating expenses were $255 million, $243 million, and $231 million in fiscal 2014, 2013, and 2012, respectively. We receive payments from third parties that provide our customers with private label credit cards and/or co-branded credit cards. The majority of such cash receipts are recorded in other income, which is a component of operating expenses, and the remaining portion of income is recognized as a reduction to cost of goods sold and occupancy expenses.

The classification of expenses varies across the apparel retail industry. Accordingly, our cost of goods sold and occupancy expenses and operating expenses may not be comparable to those of other companies.

Rent Expense

Minimum rent expense is recognized over the term of the lease, starting when possession of the property is taken from the landlord, which normally includes a construction period prior to the store opening. When a lease contains a predetermined fixed escalation of the minimum rent, we recognize the related rent expense on a straight-line basis and record the difference between the recognized rent expense and the amounts payable under the lease as a short-term or long-term deferred rent liability. We also receive tenant allowances upon entering into certain leases, which are recorded as a short-term or long-term tenant allowance liability and amortized using the straight-line method as a reduction to rent expense over the term of the lease. A co-tenancy failure by our landlord during the lease term may result in a reduction of the required cash payments made to the landlord for the duration of the co-tenancy failure and is recorded as a reduction to rent expense as the reduced cash payments are made. Costs related to common area maintenance, insurance, real estate taxes, and other occupancy costs the Company is obligated to pay are excluded from minimum rent expense.

Certain leases provide for contingent rents that are not measurable at inception. These contingent rents are primarily based on a percentage of sales that are in excess of a predetermined level and/or rent increase based on a change in the consumer price index or fair market value. These amounts are excluded from minimum rent and are included in the determination of rent expense when it is probable that the expense has been incurred and the amount can be reasonably estimated.

Impairment of Long-Lived Assets

We review the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events that result in an impairment review include the decision to close a store, corporate facility, or distribution center, or a significant decrease in the operating performance of the long-lived asset. Long-lived assets are considered impaired if the estimated undiscounted future cash flows of the asset or asset group are less than the carrying amount. For impaired assets, we recognize a loss equal to the difference between the carrying amount of the asset or asset group and its estimated fair value, which is recorded in operating expenses in the Consolidated Statements of Income. The estimated fair value of the asset or asset group is based on discounted future cash flows of the asset or asset group using a discount rate commensurate with the risk. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail stores is primarily at the store level.

Goodwill and Intangible Assets

We review the carrying amount of goodwill and other indefinite-lived intangible assets for impairment annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that result in an impairment review include significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable. We assess potential impairment by considering present economic conditions as well as future expectations.

We review goodwill for impairment, as appropriate, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If it is determined that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the two-step test is performed to identify potential goodwill impairment. If it is determined that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, it is unnecessary to perform the two-step goodwill impairment test. Based on certain circumstances, we may elect to bypass the qualitative assessment and proceed directly to performing the first step of the two-step goodwill impairment test. The first step of the two-step goodwill impairment test compares the fair value of the reporting unit to its carrying amount, including goodwill. The second step includes hypothetically valuing all the tangible and intangible assets of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit’s goodwill is compared to the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying amount.

A trade name is considered impaired if the estimated fair value of the trade name is less than the carrying amount. If a trade name is considered impaired, we recognize a loss equal to the difference between the carrying amount and the estimated fair value of the trade name. The fair value of a trade name is determined using the relief from royalty method, which requires management to make assumptions and to apply judgment, including forecasting future sales and expenses, and selecting appropriate discount rates and royalty rates.

Goodwill and other indefinite-lived intangible assets, including the trade names, are recorded in other long-term assets in the Consolidated Balance Sheets.

Lease Losses

The decision to close a store, corporate facility, or distribution center can result in accelerated depreciation and amortization over the revised remaining useful lives of the associated long-lived assets. In addition, upon exiting leased premises, we record a charge and corresponding lease loss reserve equal to the incremental amount of the present value of the net future obligation greater than the remaining rent-related deferred balances. The net future obligation is determined as the remaining contractual rent obligations less the amount for which we are able to or expect to be able to sublease the properties. We estimate the amount for which we expect to be able to sublease the properties based on the status of our efforts to sublease vacant office space and stores, a review of real estate market conditions, our projections for sublease income, and our assumptions regarding sublease commencement. Lease losses are recorded in operating expenses in the Consolidated Statements of Income.

Pre-Opening Costs

Pre-opening and start-up activity costs, which include rent and occupancy, supplies, advertising, and payroll expenses incurred prior to the opening of a new store or other facility, are expensed in the period in which they occur.

Advertising

Costs associated with the production of advertising, such as writing, copy, printing, and other costs, are expensed as incurred. Costs associated with communicating advertising that has been produced, such as television and magazine costs, are expensed when the advertising event takes place. Advertising expense was $639 million, $637 million, and $653 million in fiscal 2014, 2013, and 2012, respectively, and is recorded in operating expenses in the Consolidated Statements of Income.

Prepaid catalog expense consists of the cost to prepare, print, and distribute catalogs. Such costs are recorded in other current assets in the Consolidated Balance Sheets and amortized over their expected period of future benefit, which is approximately one to eight months.

Share-Based Compensation

Share-based compensation expense for stock options and other stock awards is determined based on the grant-date fair value. We use the Black-Scholes-Merton option-pricing model to determine the fair value of stock options, which requires the input of subjective assumptions regarding the expected term, expected volatility, dividend yield, and risk-free interest rate. For units granted whereby one share of common stock is issued for each unit as the unit vests (“Stock Units”), the fair value is determined based on the Company’s stock price on the date of grant less future expected dividends during the vesting period. For stock options and Stock Units, we recognize share-based compensation cost net of estimated forfeitures and revise the estimates in subsequent periods if actual forfeitures differ from the estimates. We estimate the forfeiture rate based on historical data as well as expected future behavior. Share-based compensation expense is recorded primarily in operating expenses in the Consolidated Statements of Income over the period during which the employee is required to provide service in exchange for stock options and Stock Units.

Unredeemed Gift Cards, Gift Certificates, and Credit Vouchers

Upon issuance of a gift card, gift certificate, or credit voucher, a liability is established for its cash value. The liability is relieved and net sales are recorded upon redemption by the customer. Over time, some portion of these instruments is not redeemed. We determine breakage income for gift cards, gift certificates, and credit vouchers based on historical redemption patterns. Breakage income is recorded in other income, which is a component of operating expenses in the Consolidated Statements of Income, when we can determine the portion of the liability where redemption is remote. Based on our historical information, three years after the gift card, gift certificate, or credit voucher is issued, we can determine the portion of the liability where redemption is remote. When breakage income is recorded, a liability is recognized for any legal obligation to remit the unredeemed portion to relevant jurisdictions. Substantially all of our gift cards, gift certificates, and credit vouchers have no expiration dates.

Credit Cards

We have credit card agreements (the “Agreements”) with third parties to provide our customers with private label credit cards and/or co-branded credit cards (collectively, the “Credit Cards”). Each private label credit card bears the logo of Gap, Banana Republic, or Old Navy and can be used at any of our U.S. or Canadian store locations and online. The co-branded credit card is a VISA credit card bearing the logo of Gap, Banana Republic, or Old Navy and can be used everywhere VISA credit cards are accepted. A third-party financing company is the sole owner of the accounts and underwrites the credit issued under the Credit Card programs. We receive cash from the third-party financing company in accordance with the Agreements and based on usage of the Credit Cards. We also receive payment from Visa U.S.A. Inc. in accordance with the Agreements and based on specified transactional fees. We recognize income for such cash receipts when the amounts are fixed or determinable and collectibility is reasonably assured, which is generally the time at which the actual usage of the Credit Cards or specified transaction occurs. The majority of the income is recorded in other income, which is a component of operating expenses in our Consolidated Statements of Income, and the remaining portion of income is recognized as a reduction to cost of goods sold and occupancy expenses in our Consolidated Statements of Income.

The Credit Card programs offer incentives to cardholders in the form of reward certificates upon the cumulative purchase of an established amount. The cost associated with reward points and certificates is accrued as the rewards are earned by the cardholder and is recorded in accrued expenses and other current liabilities in the Consolidated Balance Sheets and in cost of goods sold and occupancy expenses in the Consolidated Statements of Income. Other administrative costs related to the Credit Card programs, including payroll, marketing expenses, and other direct costs, are recorded in operating expenses in the Consolidated Statements of Income.

Earnings per Share

Basic earnings per share is computed as net income divided by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed as net income divided by the weighted-average number of common shares outstanding for the period including common stock equivalents. Common stock equivalents consist of shares subject to share-based awards with exercise prices less than the average market price of our common stock for the period, to the extent their inclusion would be dilutive. Stock options and other stock awards that contain performance conditions are not included in the calculation of common stock equivalents until such performance conditions have been achieved.

Foreign Currency

Our international subsidiaries primarily use local currencies as their functional currency and translate their assets and liabilities at the current rate of exchange in effect at the balance sheet date. Revenue and expenses from their operations are translated using rates that approximate those in effect during the period in which the transactions occur. The resulting gains and losses from translation are recorded in the Consolidated Statements of Comprehensive Income and in accumulated OCI in the Consolidated Statements of Stockholders’ Equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in the Consolidated Statements of Income.

The aggregate transaction gains and losses recorded in operating expenses in the Consolidated Statements of Income are as follows:



	Fiscal Year
($ in millions)	2014			2013		2012
Foreign currency transaction gain (loss)	$	(34	)	$	1	$	(3	)
Realized and unrealized gain from certain derivative financial instruments	28			16		9
Net foreign exchange gain (loss)	$	(6	)	$	17	$	6

Comprehensive Income

Comprehensive income is comprised of net income and other gains and losses affecting equity that are excluded from net income. The components of OCI consist of foreign currency translation gains and losses, net of tax, changes in the fair value of derivative financial instruments, net of tax, and reclassification adjustments for realized gains and losses on derivative financial instruments, net of tax.

Income Taxes

Deferred income taxes are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements. A valuation allowance is established against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Our income tax expense includes changes in our estimated liability for exposures associated with our various tax filing positions. At any point in time, many tax years are subject to or in the process of being audited by various taxing authorities. To the extent our estimates of settlements change or the final tax outcome of these matters is different from the amounts recorded, such differences will impact the income tax provision in the period in which such determinations are made.

The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties related to unrecognized tax benefits in operating expenses in the Consolidated Statements of Income.

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. This ASU is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those years. We do not expect the adoption of this ASU to have a material impact on our Consolidated Financial Statements.

In May 2014, the FASB issued an ASU No. 2014-09, Revenue from Contracts with Customers, to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. This ASU is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2016. We are currently assessing the potential impact of this ASU on our Consolidated Financial Statements.

Note 2. Additional Financial Statement Information

Cash and Cash Equivalents

Cash and cash equivalents consist of the following:



($ in millions)	January 31, 2015		February 1, 2014
Cash (1)	$	1,086	$	991
Bank certificates of deposit and time deposits	341		323
Money market funds	88		196
Cash equivalents	429		519
Cash and cash equivalents	$	1,515	$	1,510

__________


(1)	Cash includes $77 million and $64 million of amounts in transit from banks for customer credit card and debit card transactions as of January 31, 2015 and February 1, 2014, respectively.

We did not record any impairment charges on our cash equivalents or short-term investments in fiscal 2014, 2013, or 2012.

Other Current Assets

Other current assets consist of the following:



($ in millions)	January 31, 2015		February 1, 2014
Accounts receivable	$	275	$	462
Prepaid minimum rent and occupancy expenses	149		155
Prepaid income taxes	148		84
Current portion of deferred tax assets	142		179
Derivative financial instruments	134		58
Other	65		54
Other current assets	$	913	$	992

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and consist of the following:



($ in millions)	January 31, 2015			February 1, 2014
Leasehold improvements	$	3,220		$	3,211
Furniture and equipment	2,560			2,493
Software	1,349			1,173
Land, buildings, and building improvements	1,009			1,106
Construction-in-progress	167			176
Property and equipment, at cost	8,305			8,159
Less: Accumulated depreciation	(5,532		)	(5,401		)
Property and equipment, net of accumulated depreciation	$	2,773		$	2,758

Depreciation expense for property and equipment was $560 million, $530 million, and $554 million for fiscal 2014, 2013, and 2012, respectively.

Interest of $7 million, $8 million, and $6 million related to assets under construction was capitalized in fiscal 2014, 2013, and 2012, respectively.

We recorded a charge for the impairment of long-lived assets of $10 million, $1 million, and $8 million for fiscal 2014, 2013, and 2012, respectively, which is recorded in operating expenses in the Consolidated Statements of Income.

Other Long-Term Assets

Other long-term assets consist of the following:



($ in millions)	January 31, 2015		February 1, 2014
Goodwill	$	180	$	180
Long-term income tax-related assets	124		185
Trade names	92		92
Other	204		204
Other long-term assets	$	600	$	661

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:



($ in millions)	January 31, 2015		February 1, 2014
Accrued compensation and benefits	$	278	$	327
Unredeemed gift cards, gift certificates, and credit vouchers, net of breakage	251		238
Short-term deferred rent and tenant allowances	102		93
Other	389		484
Accrued expenses and other current liabilities	$	1,020	$	1,142

No other individual items accounted for greater than five percent of total current liabilities as of January 31, 2015 or February 1, 2014.

Lease Incentives and Other Long-Term Liabilities

Lease incentives and other long-term liabilities consist of the following:



($ in millions)	January 31, 2015		February 1, 2014
Long-term deferred rent and tenant allowances	$	773	$	766
Long-term income tax-related liabilities	93		83
Long-term asset retirement obligations	63		59
Other	212		65
Lease incentives and other long-term liabilities	$	1,141	$	973

The activity related to asset retirement obligations includes adjustments to the asset retirement obligation balance and fluctuations in foreign currency exchange rates. The activity was not material for fiscal 2014 or 2013.

Sales Return Allowance

A summary of activity in the sales return allowance account is as follows:



($ in millions)	January 31, 2015			February 1, 2014			February 2, 2013
Balance at beginning of fiscal year	$	26		$	27		$	21
Additions	896			896			845
Returns	(893		)	(897		)	(839		)
Balance at end of fiscal year	$	29		$	26		$	27

Sales return allowances are recorded in accrued expenses and other current liabilities in the Consolidated Balance Sheets.

Note 3. Acquisition

On December 31, 2012, we acquired all of the outstanding capital stock of Intermix Holdco Inc. ("Intermix"), a multi-brand retailer of luxury and contemporary women's apparel and accessories based in New York, New York, for an aggregate purchase price of $129 million in cash. The acquisition allows us to extend our portfolio of brands and further penetrate the higher-end apparel market with an established brand.

The results of operations for Intermix since the date of acquisition were not material to the Consolidated Statement of Income for fiscal 2012. In addition, the impact of the acquisition on the Company's results of operations, as if the acquisition had been completed on the first day of fiscal 2012, is not significant.

During the fourth quarter of fiscal 2013, the valuation of assets acquired and liabilities assumed as of the acquisition date was completed. The following table summarizes the final purchase price allocation, as well as the measurement period adjustments made during fiscal 2013, to the amounts initially recognized as of the date of acquisition. The measurement period adjustments did not have a material impact on our Consolidated Financial Statements for any period reported, and therefore, we have not retrospectively adjusted our Consolidated Balance Sheet as of February 2, 2013.



($ in millions)	Purchase Price Allocation as of Acquisition Date (1)		Measurement Period Adjustments			Final Purchase Price Allocation
Goodwill	$	85	$	(4	)	$	81
Trade name	38		—			38
Intangible assets subject to amortization	3		—			3
Net assets acquired	3		4			7
Total purchase price	$	129	$	—		$	129

__________


(1)	As previously reported in our Form 10-K for the year ended February 2, 2013.

See Note 4 of Notes to Consolidated Financial Statements for disclosures about goodwill and intangible assets.

Note 4. Goodwill and Other Intangible Assets

Goodwill and other intangible assets consist of the following and are included in other long-term assets in the Consolidated Balance Sheets:



($ in millions)	January 31, 2015			February 1, 2014
Goodwill	$	180		$	180
Trade names	$	92		$	92
Other indefinite-lived intangible assets	$	6		$	6
Intangible assets subject to amortization	$	18		$	18
Less: Accumulated amortization	(17		)	(17		)
Intangible assets subject to amortization, net	$	1		$	1

Goodwill

During fiscal 2014 there were no changes in the $81 million carrying amount of goodwill related to Intermix. As discussed in Note 3 of Notes to Consolidated Financial Statements, the carrying amount of goodwill related to the acquisition of Intermix decreased by $4 million from $85 million to $81 million in fiscal 2013 due to an adjustment of the initial fair values.

During fiscal 2014 and 2013 there were no changes in the $99 million carrying amount of goodwill related to Athleta.

During the fourth quarter of fiscal 2014, we completed our annual impairment test of goodwill and we did not recognize any impairment charges.

Other Intangible Assets

Trade names consist of $54 million and $38 million related to Athleta and Intermix, respectively, as of January 31, 2015. During the fourth quarter of fiscal 2014, we completed our annual impairment test of trade names and we did not recognize any impairment charges.

The intangible assets subject to amortization consist of customer relationships and non-compete agreements related to Athleta and Intermix of $15 million and $3 million, respectively. Athleta's intangible assets subject to amortization were fully amortized by the end of fiscal 2012. Intermix's non-compete agreements were fully amortized by the end of fiscal 2013 and its customer relationships are being amortized over a period of four years.

There was no material amortization expense for intangible assets subject to amortization recorded in operating expenses in the Consolidated Statements of Income for fiscal 2014 and 2013.

Note 5. Long-Term Debt

Long-term debt consists of the following:



($ in millions)	January 31, 2015			February 1, 2014
Notes	$	1,247		$	1,247
Term loan	106			147
Total long-term debt	1,353			1,394
Less: Current portion	(21		)	(25		)
Total long-term debt, less current portion	$	1,332		$	1,369

We have $1.25 billion aggregate principal amount of 5.95 percent notes (the "Notes") due April 2021. Interest is payable semi-annually on April 12 and October 12 of each year, and we have an option to call the Notes in whole or in part at any time, subject to a make-whole premium. The Notes agreement is unsecured and does not contain any financial covenants. The amount recorded in long-term debt in the Consolidated Balance Sheets for the Notes is equal to the aggregate principal amount of the Notes, net of the unamortized discount. As of January 31, 2015 and February 1, 2014, the estimated fair value of the Notes was $1.44 billion and $1.39 billion, respectively, and was based on the quoted market price of the Notes (level 1 inputs) as of the last business day of the respective fiscal year.

In January 2014, we entered into a 15 billion Japanese yen ($128 million as of January 31, 2015), four-year, unsecured term loan ("Japan Term Loan") due January 2018. Repayments of 2.5 billion Japanese yen ($21 million as of January 31, 2015) are payable on January 15 of each year, and commenced on January 15, 2015, with a final repayment of 7.5 billion Japanese yen due on January 15, 2018. In addition, interest is payable at least quarterly based on an interest rate equal to the Tokyo Interbank Offered Rate plus a fixed margin. The average interest rate for fiscal 2014 was 1 percent. The carrying amount of the Japan Term Loan as of January 31, 2015 approximated its fair value, as the interest rate varies depending on quoted market rates (level 1 inputs). The Japan Term Loan agreement contains certain requirements, including that the covenants in our $500 million, five-year, unsecured revolving credit facility are upheld. As of January 31, 2015, we were in compliance with all such covenants. Violation of these covenants would result in a default under the Japan Term Loan agreement, which, at the bank's discretion, could require the immediate repayment of outstanding amounts.

Note 6. Credit Facilities

We have a $500 million, five-year, unsecured revolving credit facility (the "Facility"), which expires in May 2018. The Facility is available for general corporate purposes including working capital, trade letters of credit, and standby letters of credit. The Facility fees fluctuate based on our long-term senior unsecured credit ratings and our leverage ratio. If we were to draw on the Facility, interest would be a base rate (typically LIBOR) plus a margin based on our long-term senior unsecured credit ratings and our leverage ratio on the unpaid principal amount. To maintain availability of funds under the Facility, we pay a facility fee on the full facility amount, regardless of usage. As of January 31, 2015, there were no borrowings and no outstanding standby letters of credit under the Facility.

As of January 31, 2015, Standard & Poor's, Moody’s, and Fitch rate us at BBB-, Baa3, and BBB-, respectively. Any future change in the Standard & Poor’s or Moody’s ratings could change any future interest expense if we were to draw on the Facility.

We maintain multiple agreements with third parties that make unsecured revolving credit facilities available for our operations in foreign locations (the “Foreign Facilities”). They are uncommitted and are generally available for borrowings, overdraft borrowings, and the issuance of bank guarantees. The total capacity of the Foreign Facilities was $49 million as of January 31, 2015. As of January 31, 2015, there were no borrowings under the Foreign Facilities. There were $11 million in bank guarantees primarily related to store leases under the Foreign Facilities as of January 31, 2015.

We have a bilateral unsecured standby letter of credit agreement that is uncommitted and does not have an expiration date. As of January 31, 2015, we had $21 million in standby letters of credit issued under the agreement. We also have a $50 million, two-year, unsecured committed letter of credit agreement, which expires in September 2016. We had no trade letters of credit issued under this letter of credit agreement as of January 31, 2015.

The Facility and the unsecured committed letter of credit agreement contain financial and other covenants including, but not limited to, limitations on liens and subsidiary debt, as well as the maintenance of two financial ratios—a minimum annual fixed charge coverage ratio of 2.00 and a maximum annual leverage ratio of 2.25. As of January 31, 2015, we were in compliance with all such covenants. Violation of these covenants could result in a default under the Facility and letter of credit agreement, which would permit the participating banks to terminate our ability to access the Facility for letters of credit and advances, terminate our ability to request letters of credit under the letter of credit agreement, require the immediate repayment of any outstanding advances under the Facility, and require the immediate posting of cash collateral in support of any outstanding letters of credit under the letter of credit agreement.

Note 7. Fair Value Measurements

There were no purchases, sales, issuances, or settlements related to recurring level 3 measurements during fiscal 2014 or 2013. There were no transfers into or out of level 1 and level 2 during fiscal 2014 or 2013.

Financial Assets and Liabilities

Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents held at amortized cost are as follows:



			Fair Value Measurements at Reporting Date Using
($ in millions)	January 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	429	$	88	$	341	$	—
Derivative financial instruments	157		—		157		—
Deferred compensation plan assets	40		40		—		—
Total	$	626	$	128	$	498	$	—
Liabilities:
Derivative financial instruments	$	1	$	—	$	1	$	—



			Fair Value Measurements at Reporting Date Using
($ in millions)	February 1, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	519	$	196	$	323	$	—
Derivative financial instruments	64		—		64		—
Deferred compensation plan assets	37		37		—		—
Total	$	620	$	233	$	387	$	—
Liabilities:
Derivative financial instruments	$	15	$	—	$	15	$	—

We have highly liquid investments classified as cash equivalents, which are placed primarily in money market funds, time deposits, and commercial paper. These investments are classified as held-to-maturity based on our positive intent and ability to hold the securities to maturity. We value these investments at their original purchase prices plus interest that has accrued at the stated rate.

Derivative financial instruments primarily include foreign exchange forward contracts. The principal currencies hedged against changes in the U.S. dollar are British pounds, Canadian dollars, Euro, and Japanese yen. The fair value of the Company’s derivative financial instruments is determined using pricing models based on current market rates. Derivative financial instruments in an asset position are recorded in other current assets or other long-term assets in the Consolidated Balance Sheets. Derivative financial instruments in a liability position are recorded in accrued expenses and other current liabilities or lease incentives and other long-term liabilities in the Consolidated Balance Sheets.

We maintain the Gap Inc. Deferred Compensation Plan (“DCP”), which allows eligible employees to defer compensation up to a maximum amount. Plan investments are recorded at market value and are designated for the DCP. The fair value of the Company’s DCP assets is determined based on quoted market prices, and the assets are recorded in other long-term assets in the Consolidated Balance Sheets.

Nonfinancial Assets

As discussed in Note 2 of Notes to Consolidated Financial Statements, we recorded a charge for the impairment of long-lived assets of $10 million, $1 million, and $8 million in fiscal 2014, 2013, and 2012, respectively. The impairment charge reduced the then carrying amount of the applicable long-lived assets of $11 million, $2 million, and $11 million to their fair value of $1 million, $1 million, and $3 million during fiscal 2014, 2013, and 2012, respectively. The fair value of the long-lived assets was determined using level 3 inputs and the valuation techniques discussed in Note 1 of Notes to Consolidated Financial Statements.

There were no impairment charges recorded for goodwill or other indefinite-lived intangible assets for fiscal 2014, 2013, or 2012.

Note 8. Derivative Financial Instruments

We operate in foreign countries, which exposes us to market risk associated with foreign currency exchange rate fluctuations. Consistent with our risk management guidelines, we hedge a portion of our transactions related to merchandise purchases for foreign operations and certain intercompany transactions using foreign exchange forward contracts. These contracts are entered into with large, reputable financial institutions that are monitored for counterparty risk. The principal currencies hedged against changes in the U.S. dollar are British pounds, Canadian dollars, Euro, and Japanese yen. Our use of derivative financial instruments represents risk management; we do not enter into derivative financial contracts for trading purposes.

Cash Flow Hedges

We designate the following foreign exchange forward contracts as cash flow hedges: (1) forward contracts used to hedge forecasted merchandise purchases and related costs denominated in U.S. dollars made by our international subsidiaries whose functional currencies are their local currencies; (2) forward contracts used to hedge forecasted intercompany royalty payments denominated in foreign currencies received by entities whose functional currencies are U.S. dollars; and (3) forward contracts used to hedge forecasted intercompany revenue transactions related to merchandise sold from our regional purchasing entity, whose functional currency is the U.S. dollar, to certain international subsidiaries in their local currencies of British pounds and Euro. The foreign exchange forward contracts entered into to hedge forecasted merchandise purchases and related costs, intercompany royalty payments, and intercompany revenue transactions generally have terms of up to 24 months.

There were no material amounts recorded in income for fiscal 2014, 2013, or 2012 as a result of hedge ineffectiveness, hedge components excluded from the assessment of effectiveness, or the discontinuance of cash flow hedges because the forecasted transactions were no longer probable.

Net Investment Hedges

We also use foreign exchange forward contracts to hedge the net assets of international subsidiaries to offset the foreign currency translation and economic exposures related to our investment in the subsidiaries.

Other Derivatives Not Designated as Hedging Instruments

We use foreign exchange forward contracts to hedge our market risk exposure associated with foreign currency exchange rate fluctuations for certain intercompany balances denominated in currencies other than the functional currency of the entity with the intercompany balance. The gain or loss on the derivative financial instruments, as well as the remeasurement of the underlying intercompany balances, is recorded in operating expenses in the Consolidated Statements of Income in the same period and generally offset. We generally enter into foreign exchange forward contracts as needed to hedge intercompany balances that bear foreign exchange risk.

Outstanding Notional Amounts

As of January 31, 2015 and February 1, 2014, we had foreign exchange forward contracts outstanding in the following notional amounts:



(notional amounts in millions)	January 31, 2015		February 1, 2014
U.S. dollars (1)	$	1,395	$	1,309
Canadian dollars	C$	14	C$	8
Euro	€	1	€	25

__________


(1)	The principal currencies hedged against changes in the U.S. dollar were British pounds, Canadian dollars, Euro, and Japanese yen.

Contingent Features

We had no derivative financial instruments with credit-risk-related contingent features underlying the agreements as of January 31, 2015 or February 1, 2014.

Quantitative Disclosures about Derivative Financial Instruments

The fair values of foreign exchange forward contracts are as follows:



($ in millions)	January 31, 2015		February 1, 2014
Derivatives designated as cash flow hedges:
Other current assets	$	115	$	48
Other long-term assets	$	23	$	6
Accrued expenses and other current liabilities	$	—	$	13
Lease incentives and other long-term liabilities	$	—	$	1

Derivatives designated as net investment hedges:
Other current assets	$	1	$	1
Other long-term assets	$	—	$	—
Accrued expenses and other current liabilities	$	—	$	—
Lease incentives and other long-term liabilities	$	—	$	—

Derivatives not designated as hedging instruments:
Other current assets	$	18	$	9
Other long-term assets	$	—	$	—
Accrued expenses and other current liabilities	$	1	$	1
Lease incentives and other long-term liabilities	$	—	$	—

Total derivatives in an asset position	$	157	$	64
Total derivatives in a liability position	$	1	$	15

Substantially all of the unrealized gains and losses from designated cash flow hedges as of January 31, 2015 will be recognized in income within the next 12 months at the then-current values, which may differ from the fair values as of January 31, 2015 shown above.

Our foreign exchange forward contracts are subject to master netting arrangements with each of our counterparties and such arrangements are enforceable in the event of default or early termination of the contract. We do not elect to offset the fair values of our derivative financial instruments in the Consolidated Balance Sheets, and as such, the fair values shown above represent gross amounts. The amounts subject to enforceable master netting arrangements are $1 million and $1 million as of January 31, 2015 and February 1, 2014, respectively. If we did elect to offset, the net amounts of our derivative financial instruments in an asset position would be $156 million and $63 million and the net amounts of the derivative financial instruments in a liability position would be zero and $14 million as of January 31, 2015 and February 1, 2014, respectively.

See Note 7 of Notes to Consolidated Financial Statements for disclosures on the fair value measurements of our derivative financial instruments.

The effective portion of gains and losses on foreign exchange forward contracts in cash flow hedging and net investment hedging relationships recorded in OCI and the Consolidated Statements of Income, on a pre-tax basis, are as follows:



	Fiscal Year
($ in millions)	2014		2013		2012
Derivatives in cash flow hedging relationships:
Gain recognized in other comprehensive income	$	166	$	78	$	46
Gain reclassified into cost of goods sold and occupancy expenses	$	53	$	59	$	5
Gain reclassified into operating expenses	$	8	$	11	$	4

Derivatives in net investment hedging relationships:
Gain recognized in other comprehensive income	$	4	$	17	$	—

For fiscal 2014, 2013, and 2012, there were no amounts of gain or loss reclassified from accumulated OCI into income for derivative financial instruments in net investment hedging relationships, as we did not sell or liquidate (or substantially liquidate) any of our hedged subsidiaries during the periods.

Gains and losses on foreign exchange forward contracts not designated as hedging instruments recorded in the Consolidated Statements of Income, on a pre-tax basis are as follows:



	Fiscal Year
($ in millions)	2014		2013		2012
Gain recognized in operating expenses	$	20	$	5	$	5

Note 9. Common Stock

Common and Preferred Stock

The Company is authorized to issue 2.3 billion shares of common stock. We are also authorized to issue 60 million shares of Class B common stock, which is convertible into shares of common stock on a share-for-share basis. Transfer of the Class B shares is restricted. In addition, the holders of the Class B common stock have six votes per share on most matters and are entitled to a lower cash dividend. No Class B shares have been issued as of January 31, 2015.

The Company is authorized to issue 30 million shares of one or more series of preferred stock, which has a par value of $0.05 per share, and to establish at the time of issuance the issue price, dividend rate, redemption price, liquidation value, conversion features, and such other terms and conditions of each series (including voting rights) as the Board of Directors deems appropriate, without further action on the part of the stockholders. No preferred shares have been issued as of January 31, 2015.

Treasury Stock

As of March 1, 2014, the Company retired all existing treasury stock. Upon retirement, the treasury stock balance as of March 1, 2014 was reduced for the amount originally recorded for the shares repurchased. Common stock was also reduced, at par, for the shares repurchased, and the remaining balance was allocated between additional paid-in-capital and retained earnings. All common stock repurchased subsequent to March 1, 2014 is immediately retired and all shares related to stock options and other stock awards are issued from authorized but unissued common stock.

Share Repurchases

Share repurchase activity is as follows:



	Fiscal Year
($ and shares in millions except average per share cost)	2014		2013		2012
Number of shares repurchased	30		26		34
Total cost	$	1,164	$	1,009	$	1,026
Average per share cost including commissions	$	39.28	$	38.42	$	29.89

Between November 2011 and November 2013, the Board of Directors authorized a total of $3.5 billion for share repurchases, all of which was completed by the end of October 2014. In October 2014, we announced that the Board of Directors approved a $500 million share repurchase authorization, of which $302 million was remaining as of January 31, 2015.

All except $15 million and $30 million of the share repurchases were paid for as of January 31, 2015 and February 1, 2014, respectively. In February 2015, the Board of Directors approved a new $1 billion share repurchase authorization.

Note 10. Accumulated Other Comprehensive Income

Changes in accumulated OCI by component, net of tax, are as follows:



($ in millions)	Foreign Currency Translation			Cash Flow Hedges			Total
Balance at February 1, 2014	$	107		$	28		$	135
Foreign currency translation	(47		)	—			(47		)
Change in fair value of derivative financial instruments	—			118			118
Amounts reclassified from accumulated OCI	—			(41		)	(41		)
Other comprehensive income (loss), net	(47		)	77			30
Balance at January 31, 2015	$	60		$	105		$	165

($ in millions)	Foreign Currency Translation			Cash Flow Hedges			Total
Balance at February 2, 2013	$	158		$	23		$	181
Foreign currency translation	(51		)	—			(51		)
Change in fair value of derivative financial instruments	—			48			48
Amounts reclassified from accumulated OCI	—			(43		)	(43		)
Other comprehensive income (loss), net	(51		)	5			(46		)
Balance at February 1, 2014	$	107		$	28		$	135

See Note 8 of Notes to Consolidated Financial Statements for additional disclosures about reclassifications out of accumulated other comprehensive income and their corresponding effects on the respective line items in the Consolidated Statements of Income.

Note 11. Share-Based Compensation

Share-based compensation expense is as follows:



	Fiscal Year
($ in millions)	2014			2013			2012
Stock units	$	86		$	99		$	92
Stock options	9			12			17
Employee stock purchase plan	5			5			4
Share-based compensation expense	100			116			113
Less: Income tax benefit	(37		)	(45		)	(44		)
Share-based compensation expense, net of tax	$	63		$	71		$	69

No material share-based compensation expense was capitalized in fiscal 2014, 2013, or 2012.

There were no material modifications made to our outstanding stock options and other stock awards in fiscal 2014, 2013, or 2012.

General Description of Stock Option and Other Stock Award Plans

The 1996 Stock Option and Award Plan (the “1996 Plan”) was established on March 26, 1996 and amended and restated on January 28, 2003. The 1996 Plan was further amended and restated on January 24, 2006 and renamed the 2006 Long-Term Incentive Plan (the “2006 Plan”). The 2006 Plan was amended and restated on August 20, 2008. The 2006 Plan was further amended and restated on May 17, 2011 and renamed the 2011 Long-Term Incentive Plan (the “2011 Plan”). The 2011 Plan was further amended and restated in February 2014. Under the 2011 Plan, nonqualified stock options and other stock awards are granted to officers, directors, eligible employees, and consultants at exercise prices or initial values equal to the fair market value of the Company’s common stock at the date of grant or as determined by the Compensation and Management Development Committee of the Board of Directors (the “Committee”).

The 2002 Stock Option Plan (the “2002 Plan”) was established on January 1, 1999. The 2002 Plan empowered the Committee to award nonqualified stock options to non-officer employees. On May 9, 2006, the 2002 Plan was discontinued, and those awards then outstanding continued to be subject to the terms of the 2002 Plan under which they were granted. Pursuant to the 2011 Plan, any shares (not to exceed 28,019,786 shares) that otherwise would have been returned to the 2002 Plan after May 9, 2006 on account of expiration, cancellation, or forfeiture of awards granted are available for grant under the 2011 Plan.

As of January 31, 2015, there were 216,586,781 shares that have been authorized for issuance under the 2011 Plan, including those shares available for issuance under the 2002 Plan, which have or may become available for issuance under the 2011 Plan.

As discussed in Note 9 of Notes to Consolidated Financial Statements, the Company retired all existing treasury stock as of March 1, 2014. All common stock repurchased subsequent to March 1, 2014 is immediately retired and all shares related to stock options and other stock awards are now issued from authorized but unissued common stock.

Stock Units

Under the 2011 Plan, Stock Units are granted to employees and members of the Board of Directors. Vesting generally occurs over a period of three to four years of continued service by the employee in equal annual installments. Vesting is immediate in the case of members of the Board of Directors. In some cases, Stock Unit vesting is subject to the attainment of a pre-determined financial target (“Performance Shares”). Performance Shares generally vest over a period of three to four years.

At the end of each reporting period, we evaluate the probability that the Performance Shares will vest. We record share-based compensation expense on an accelerated basis based on the grant-date fair value and the probability that the pre-determined financial target will be achieved.

A summary of Stock Unit activity under the 2011 Plan for fiscal 2014 is as follows:



	Shares		Weighted-Average Grant-Date Fair Value
Balance as of February 1, 2014	8,660,635		$	28.25
Granted	1,994,936		$	39.88
Granted, with vesting subject to performance conditions	1,314,252		$	40.67
Vested	(4,305,360	)	$	26.47
Forfeited	(2,017,985	)	$	38.28
Balance as of January 31, 2015	5,646,478		$	33.02

A summary of additional information about Stock Units is as follows:



	Fiscal Year
	2014		2013		2012
Weighted-average fair value per share of Stock Units granted	$	40.20	$	36.15	$	24.95
Grant-date fair value of Stock Units vested (in millions)	$	114	$	63	$	50

The aggregate intrinsic value of unvested Stock Units as of January 31, 2015 was $233 million.

As of January 31, 2015, there was $77 million (before any related tax benefit) of unrecognized share-based compensation, adjusted for estimated forfeitures, related to unvested Stock Units, which is expected to be recognized over a weighted-average period of 1.46 years. Total unrecognized share-based compensation may be adjusted for future changes in estimated forfeitures.

Stock Units Granted Based on Performance Metrics

Under the 2011 Plan, some Stock Units are granted to certain employees only after the achievement of pre-determined performance metrics. Once the Stock Unit is granted, vesting is then subject to continued service by the employee, and expense is recognized over a period of three years on an accelerated basis.

At the end of each reporting period, we evaluate the probability that Stock Units will be granted. We record share-based compensation expense based on the probability that the performance metrics will be achieved, with an offsetting increase to current liabilities. We revalue the liability at the end of each reporting period and record an adjustment to share-based compensation expense as required, based on the probability that the performance metrics will be achieved. Upon achievement of the performance metrics, a Stock Unit is granted. At that time, the associated liability is reclassified to stockholders’ equity.

Out of 1,994,936 Stock Units granted in fiscal 2014, 214,043 Stock Units were granted based on satisfaction of performance metrics.

The liability related to potential Stock Units based on performance metrics, which is recorded in accrued expenses and other current liabilities in the Consolidated Balance Sheets, was $1 million and $2 million as of January 31, 2015 and February 1, 2014, respectively.

Stock Options

We have stock options outstanding under the 2011 Plan and the 2002 Plan. Stock options generally expire 10 years from the grant date, three months after employee termination, or one year after the date of an employee’s retirement or death, if earlier. Vesting generally occurs over a period of four years of continued service by the employee, with 25 percent vesting on each of the four anniversary dates.

The fair value of stock options issued during fiscal 2014, 2013, and 2012 was estimated on the date of grant using the following assumptions:



	Fiscal Year
	2014		2013		2012
Expected term (in years)	4.4		4.5		4.6
Expected volatility	27.3	%	31.5	%	33.6	%
Dividend yield	2.1	%	1.7	%	2.1	%
Risk-free interest rate	1.3	%	0.7	%	1.0	%

A summary of stock option activity under the 2011 Plan and the 2002 Plan for fiscal 2014 is as follows:



	Shares		Weighted- Average Exercise Price
Balance as of February 1, 2014	7,399,822		$	24.89
Granted	1,556,625		$	42.18
Exercised	(2,892,590	)	$	21.35
Forfeited/Expired	(868,592	)	$	31.69
Balance as of January 31, 2015	5,195,265		$	30.89

A summary of additional information about stock options is as follows:



	Fiscal Year
	2014		2013		2012
Weighted-average fair value per share of stock options granted	$	8.20	$	8.25	$	6.35
Aggregate intrinsic value of stock options exercised (in millions)	$	63	$	125	$	94
Fair value of stock options vested (in millions)	$	10	$	14	$	15

Information about stock options outstanding, vested or expected to vest, and exercisable as of January 31, 2015 is as follows:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Shares as of January 31, 2015	Weighted- Average Remaining Contractual Life (in years)	Weighted- Average Exercise Price		Number of Shares as of January 31, 2015	Weighted- Average Exercise Price
$11.77 - $21.79	1,531,249	4.84	$	20.63	1,087,788	$	20.22
$22.25 - $25.09	1,048,257	6.31	$	24.63	406,831	$	24.03
$27.43 - $36.45	1,195,284	7.77	$	36.25	289,965	$	36.10
$36.87 - 42.12	128,300	9.02	$	39.94	12,849	$	39.15
$42.20 - $46.41	1,292,175	9.14	$	42.28	800	$	43.31
	5,195,265	6.98	$	30.89	1,798,233	$	23.79
Vested or expected to vest as of January 31, 2015	4,913,907	6.89	$	30.46

The aggregate intrinsic value of options outstanding, options vested or expected to vest, and options exercisable as of January 31, 2015 was $55 million, $54 million, and $31 million, respectively. Stock options exercisable as of January 31, 2015 had a weighted-average remaining contractual life of 4.92 years.

Employee Stock Purchase Plan

Under our Employee Stock Purchase Plan (“ESPP”), eligible U.S. employees are able to purchase our common stock at 85 percent of the closing price on the New York Stock Exchange on the last day of the three-month purchase periods. Accordingly, compensation expense is recognized for an amount equal to the 15 percent discount. Employees pay for their stock purchases through payroll deductions at a rate equal to any whole percentage from 1 percent to 15 percent. There were 785,794, 811,223, and 960,930 shares issued under the ESPP in fiscal 2014, 2013, and 2012, respectively. As of January 31, 2015, there were 3,467,942 shares reserved for future issuances under the ESPP.

Note 12. Leases

We lease most of our store premises and some of our corporate facilities and distribution centers. These operating leases expire at various dates through 2030. Most store leases have a five-year base period and include options that allow us to extend the lease term beyond the initial base period, subject to terms agreed upon at lease inception. Some leases also include early termination options, which can be exercised under specific conditions.

The aggregate minimum non-cancelable annual lease payments under leases in effect on January 31, 2015 are as follows:



($ in millions)
Fiscal Year
2015	$	1,136
2016	1,096
2017	920
2018	760
2019	638
Thereafter	1,701
Total minimum lease commitments	$	6,251

The total minimum lease commitment amount above does not include minimum sublease rent income of $22 million receivable in the future under non-cancelable sublease agreements.

Rent expense related to our store premises, corporate facilities, and distribution centers under operating leases is as follows:



	Fiscal Year
($ in millions)	2014			2013			2012
Minimum rent expense	$	1,209		$	1,162		$	1,104
Contingent rent expense	114			121			123
Less: Sublease income	(4		)	(4		)	(4		)
Total	$	1,319		$	1,279		$	1,223

Note 13. Income Taxes

Effective February 2, 2014, we adopted ASU No. 2013-11, Income Taxes, which clarifies the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This adoption did not have a material impact on our Consolidated Financial Statements.

For financial reporting purposes, components of income before income taxes are as follows:



	Fiscal Year
($ in millions)	2014		2013		2012
United States	$	1,842	$	1,817	$	1,692
Foreign	171		276		169
Income before income taxes	$	2,013	$	2,093	$	1,861

The provision for income taxes consists of the following:



	Fiscal Year
($ in millions)	2014			2013			2012
Current:
Federal	$	547		$	616		$	617
State	61			65			56
Foreign	68			63			90
Total current	676			744			763
Deferred:
Federal	70			76			(37		)
State	6			—			(6		)
Foreign	(1		)	(7		)	6
Total deferred	75			69			(37		)
Total provision	$	751		$	813		$	726

The difference between the effective tax rate and the U.S. federal statutory tax rate is as follows:



	Fiscal Year
	2014		2013		2012
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal benefit	3.3		3.1		2.7
Tax impact of foreign operations	1.0		0.8		2.0
Excess foreign tax credits	(2.0	)	—		—
Other	—		(0.1	)	(0.7	)
Effective tax rate	37.3	%	38.8	%	39.0	%

In connection with a review of the Company’s overall cash position and anticipated cash needs, we made a $473 million distribution of certain foreign earnings in fiscal 2014, resulting in an overall net tax benefit of approximately $41 million. The benefit is primarily due to the recognition of foreign tax credits which exceeded the taxes due on the distribution of foreign earnings.

Deferred tax assets (liabilities) consist of the following:



($ in millions)	January 31, 2015			February 1, 2014
Gross deferred tax assets:
Deferred rent	$	162		$	147
Accrued payroll and related benefits	107			127
Nondeductible accruals	113			104
Inventory capitalization and other adjustments	63			62
Deferred income	69			28
Federal, State, and foreign net operating losses	48			45
Other	70			70
Total gross deferred tax assets	632			583
Valuation allowance	(94		)	(85		)
Total deferred tax assets, net of valuation allowance	538			498
Deferred tax liabilities:
Depreciation and amortization	(173		)	(71		)
Unremitted earnings of certain foreign subsidiaries	(56		)	(38		)
Unrealized net gain on cash flow hedges	(45		)	(17		)
Other	(3		)	(16		)
Total deferred tax liabilities	(277		)	(142		)
Net deferred tax assets	$	261		$	356
Current portion (included in other current assets)	$	142		$	179
Non-current portion (included in other long-term assets)	119			177
Total	$	261		$	356

As of January 31, 2015, we had approximately $2 million federal, $71 million state, and $171 million foreign loss carryovers in multiple taxing jurisdictions that could be utilized to reduce the tax liabilities of future years. The tax-effected loss carryovers were approximately $1 million for federal, $4 million for state, and $43 million for foreign as of January 31, 2015. We provided a valuation allowance of approximately $2 million and $35 million against the deferred tax assets related to the state and foreign loss carryovers, respectively. We also provided a valuation allowance of approximately $57 million related to other federal, state, and foreign deferred tax assets. The federal losses expire in fiscal 2033, the state losses expire between fiscal 2019 and fiscal 2033, approximately $77 million of the foreign losses expire between fiscal 2015 and fiscal 2034, and $94 million of the foreign losses do not expire.

In fiscal 2014, we assessed the forecasted cash needs and overall financial position of our foreign subsidiaries. As a result, we determined that approximately $155 million of current year earnings was in excess of the amount we expect to utilize in certain foreign operations for an indefinite period of time and we have recorded related tax expense of $28 million in fiscal 2014.

U.S. income tax has not been recognized on the excess of the amount for financial reporting over the tax basis of investments in certain foreign subsidiaries that is indefinitely reinvested outside the United States, as we intend to utilize the undistributed foreign earnings of these subsidiaries in our operations outside the United States for an indefinite period of time, primarily to support our international growth. This amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. The amount of such temporary differences totaled approximately $581 million as of January 31, 2015. The amount of any unrecognized deferred income tax liability on this temporary difference is estimated to be approximately $72 million.

The activity related to our unrecognized tax benefits is as follows:



	Fiscal Year
($ in millions)	2014			2013			2012
Balance at beginning of fiscal year	$	72		$	109		$	102
Increases related to current year tax positions	9			8			10
Prior year tax positions:
Increases	4			8			10
Decreases	(9		)	(47		)	(12		)
Cash settlements	(1		)	(5		)	(4		)
Expiration of statute of limitations	—			—			3
Foreign currency translation	—			(1		)	—
Balance at end of fiscal year	$	75		$	72		$	109

Of the $75 million, $72 million, and $109 million of total unrecognized tax benefits as of January 31, 2015, February 1, 2014, and February 2, 2013, respectively, approximately $31 million, $27 million, and $29 million, respectively, represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.

During fiscal 2014, 2013, and 2012, interest expense of $2 million, $4 million, and $5 million, respectively, was recognized in the Consolidated Statements of Income relating to tax liabilities. In fiscal 2013, we also recognized an interest expense reversal of $18 million in the Consolidated Statement of Income relating to the favorable resolution of foreign tax matters. As of January 31, 2015 and February 1, 2014, the Company had total accrued interest related to the unrecognized tax benefits of $18 million and $17 million, respectively. There were no accrued penalties related to the unrecognized tax benefits as of January 31, 2015 or February 1, 2014.

The Company conducts business globally, and as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the United States, Canada, France, Hong Kong, Japan, India, and the United Kingdom. We are no longer subject to U.S. federal income tax examinations for fiscal years before 2009, and with few exceptions, we are also no longer subject to U.S. state, local, or non-U.S. income tax examinations for fiscal years before 2008.

The Company engages in continual discussions with taxing authorities regarding tax matters in the various U.S. and foreign jurisdictions. As of January 31, 2015, it is reasonably possible that we will recognize a decrease in gross unrecognized tax benefits within the next 12 months of up to $5 million, primarily due to the closing of audits. If we do recognize such a decrease, the net impact on the Consolidated Statement of Income would not be material.

Note 14. Employee Benefit Plans

We have two qualified defined contribution retirement plans, the GapShare 401(k) Plan and the GapShare Puerto Rico Plan (the “Plans”), which are available to employees who meet the eligibility requirements. The Plans permit eligible employees to make contributions up to the maximum limits allowable under the applicable Internal Revenue Codes. Under the Plans, we match, in cash, all or a portion of employees’ contributions under a predetermined formula. Our contributions vest immediately. Our matching contributions to the Plans were $40 million, $37 million, and $37 million in fiscal 2014, 2013, and 2012, respectively.

We maintain the Gap Inc. DCP, which allows eligible employees and non-employee directors to defer compensation up to a maximum amount. Plan investments are recorded at market value and are designated for the DCP. The fair value of the Company’s DCP assets is determined based on quoted market prices. As of January 31, 2015 and February 1, 2014, the assets related to the DCP were $40 million and $37 million, respectively, and were recorded in other long-term assets in the Consolidated Balance Sheets. As of January 31, 2015 and February 1, 2014, the corresponding liabilities related to the DCP were $40 million and $37 million, respectively, and were recorded in lease incentives and other long-term liabilities in the Consolidated Balance Sheets. We match all or a portion of employees’ contributions under a predetermined formula. Plan investments are elected by the participants, and investment returns are not guaranteed by the Company. Our matching contributions to the DCP in fiscal 2014, 2013, and 2012 were not material.

Note 15. Earnings per Share

Weighted-average number of shares used for earnings per share is as follows:



	Fiscal Year
(shares in millions)	2014	2013	2012
Weighted-average number of shares—basic	435	461	482
Common stock equivalents	5	6	6
Weighted-average number of shares—diluted	440	467	488

The above computations of weighted-average number of shares—diluted exclude 2 million shares related to stock options and other stock awards for both fiscal 2014 and 2013 as their inclusion would have an anti-dilutive effect on earnings per share. There were no material shares with an anti-dilutive effect on earnings per share for fiscal 2012.

Note 16. Commitments and Contingencies

Our future purchase obligations and commitments as of January 31, 2015 are as follows:



	Payments Due by Period
($ in millions)	Less than 1 Year		1-3 Years		3-5 Years		More Than 5 Years		Total
Purchase obligations and commitments (1)	$	3,984	$	107	$	10	$	10	$	4,111

__________


(1)	Represents estimated open purchase orders to purchase inventory as well as commitments for products and services used in the normal course of business.

In January 2006, we entered into a ten-year non-exclusive services agreement with IBM under which IBM operates certain significant aspects of our IT infrastructure. The service agreement was set to expire in March 2016. During the first quarter of fiscal 2013, we executed an amendment to extend the term of the agreement through February 2018 and to reduce the scope of services provided by IBM as we opted to take back certain services related to our mainframe services, our data centers, and our corporate network. We pay IBM a combination of fixed and variable charges, with the variable charges fluctuating based on our actual consumption of services, and we have various options to terminate the agreement. IBM also has certain termination rights in the event of our material breach of the agreement and failure to cure. We paid $38 million, $64 million, and $95 million to IBM for fixed charges in fiscal 2014, 2013, and 2012, respectively. Based on the current projection of service needs, we expect to pay approximately $112 million to IBM over the remaining three years of the contract.

We are a party to a variety of contractual agreements under which we may be obligated to indemnify the other party for certain matters. These contracts primarily relate to our commercial contracts, operating leases, trademarks, intellectual property, financial agreements, and various other agreements. Under these contracts, we may provide certain routine indemnifications relating to representations and warranties (e.g., ownership of assets, environmental or tax indemnifications), or personal injury matters. The terms of these indemnifications range in duration and may not be explicitly defined. Generally, the maximum obligation under such indemnifications is not explicitly stated, and as a result, the overall amount of these obligations cannot be reasonably estimated. Historically, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our Consolidated Financial Statements taken as a whole.

As a multinational company, we are subject to various Actions arising in the ordinary course of our business. Many of these Actions raise complex factual and legal issues and are subject to uncertainties. As of January 31, 2015, Actions filed against us included commercial, intellectual property, customer, employment, and data privacy claims, including class action lawsuits. The plaintiffs in some Actions seek unspecified damages or injunctive relief, or both. Actions are in various procedural stages and some are covered in part by insurance. As of January 31, 2015 and February 1, 2014, we recorded a liability for an estimated loss if the outcome of an Action is expected to result in a loss that is considered probable and reasonably estimable. The liability recorded as of January 31, 2015 and February 1, 2014 was not material for any individual Action or in total. Subsequent to January 31, 2015 and through the filing date of March 23, 2015, no information has become available that indicates a change is required that would be material to our Consolidated Financial Statements taken as a whole.

Note 17. Segment Information

We identify our operating segments according to how our business activities are managed and evaluated. As of January 31, 2015, we had four operating segments: Gap Global, Old Navy Global, Banana Republic Global, and Growth, Innovation, and Digital (“GID”). Each brand's specialty, outlet, online, and franchise operations were managed by global brand presidents and Piperlime, Athleta, and Intermix were managed by the president of the GID division. Each of our brands serves customers through its store and online channels, allowing us to execute on our omni-channel strategy where customers can shop seamlessly in retail stores and online through desktop or mobile devices. We have determined that each of our operating segments share similar economic and other qualitative characteristics, and therefore the results of our operating segments are aggregated into one reportable segment as of January 31, 2015.

Online sales are reflected within the respective results of each brand and region in the net sales below. Fiscal 2012 net sales have been conformed to the current year presentation.

Net sales by brand and region are as follows:



($ in millions)	Gap Global			Old Navy Global			Banana Republic Global			Other (2)			Total			Percentage of Net Sales
Fiscal 2014	Gap Global			Old Navy Global			Banana Republic Global			Other (2)			Total			Percentage of Net Sales
U.S. (1)	$	3,575		$	5,967		$	2,405		$	725		$	12,672		77	%
Canada	384			500			249			4			1,137			7
Europe	824			—			93			—			917			6
Asia	1,208			149			145			—			1,502			9
Other regions	174			3			30			—			207			1
Total	$	6,165		$	6,619		$	2,922		$	729		$	16,435		100	%
Sales growth (decline)	(3		)%	6		%	2		%	8		%	2		%
($ in millions)	Gap Global			Old Navy Global			Banana Republic Global			Other (2)			Total			Percentage of Net Sales
Fiscal 2013	Gap Global			Old Navy Global			Banana Republic Global			Other (2)			Total			Percentage of Net Sales
U.S. (1)	$	3,800		$	5,698		$	2,365		$	668		$	12,531		78	%
Canada	404			482			238			4			1,128			7
Europe	809			—			82			—			891			5
Asia	1,165			77			155			—			1,397			9
Other regions	173			—			28			—			201			1
Total	$	6,351		$	6,257		$	2,868		$	672		$	16,148		100	%
Sales growth (decline)	2		%	2		%	(1		)%	70		%	3		%
($ in millions)	Gap Global			Old Navy Global			Banana Republic Global			Other (2)			Total			Percentage of Net Sales
Fiscal 2012	Gap Global			Old Navy Global			Banana Republic Global			Other (2)			Total			Percentage of Net Sales
U.S. (1)	$	3,783		$	5,630		$	2,386		$	395		$	12,194		78	%
Canada	384			473			238			—			1,095			7
Europe	787			—			83			—			870			6
Asia	1,138			9			163			—			1,310			8
Other regions	162			—			20			—			182			1
Total	$	6,254		$	6,112		$	2,890		$	395		$	15,651		100	%
Sales growth	6		%	8		%	9		%	31		%	8		%

__________


(1)	U.S. includes the United States, Puerto Rico, and Guam.


(2)	Includes Piperlime and Athleta. Fiscal 2014 and 2013 net sales also include Intermix.

Total online sales were $2.5 billion, $2.3 billion, and $1.9 billion in fiscal 2014, 2013, and 2012, respectively.

Net sales by region are allocated based on the location in which the sale was originated. This is determined based on the location of the store where the customer paid for and received the merchandise or the distribution center or store from which the products were shipped.

Long-lived assets, excluding long-term derivative financial instruments in an asset position and long-term deferred tax assets, by geographic location are as follows:



($ in millions)	January 31, 2015		February 1, 2014
U.S. (1)	$	2,547	$	2,548
Canada	156		176
Total North America	2,703		2,724
Other regions	528		513
Total long-lived assets	$	3,231	$	3,237

__________


(1)	U.S. includes the United States, Puerto Rico, and Guam.

Note 18. Quarterly Information (Unaudited)

Selected quarterly and annual operating results are as follows:



	13 Weeks Ended		13 Weeks Ended		13 Weeks Ended		13 Weeks Ended		52 Weeks Ended
($ in millions except per share amounts)	May 3, 2014		August 2, 2014		November 1, 2014		January 31, 2015		January 31, 2015 (fiscal 2014)
Net sales	$	3,774	$	3,981	$	3,972	$	4,708	$	16,435
Gross profit	$	1,466	$	1,569	$	1,596	$	1,658	$	6,289
Net income	$	260	$	332	$	351	$	319	$	1,262
Earnings per share—basic (1)	$	0.58	$	0.76	$	0.81	$	0.75	$	2.90
Earnings per share—diluted (1)	$	0.58	$	0.75	$	0.80	$	0.75	$	2.87

	13 Weeks Ended		13 Weeks Ended		13 Weeks Ended		13 Weeks Ended		52 Weeks Ended
($ in millions except per share amounts)	May 4, 2013		August 3, 2013		November 2, 2013		February 1, 2014		February 1, 2014 (fiscal 2013)
Net sales	$	3,729	$	3,868	$	3,976	$	4,575	$	16,148
Gross profit	$	1,544	$	1,567	$	1,589	$	1,593	$	6,293
Net income	$	333	$	303	$	337	$	307	$	1,280
Earnings per share—basic (1)	$	0.72	$	0.65	$	0.73	$	0.69	$	2.78
Earnings per share—diluted (1)	$	0.71	$	0.64	$	0.72	$	0.68	$	2.74

__________


(1)	Earnings per share was computed individually for each of the periods presented; therefore, the sum of the earnings per share amounts for the quarters may not equal the total for the year.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Management conducted an assessment of our internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (released in 2013). Based on the assessment, management concluded that as of January 31, 2015, our internal control over financial reporting is effective. The Company’s internal control over financial reporting as of January 31, 2015 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s fourth quarter of fiscal 2014 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information.

Not applicable.

Part III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated herein by reference to the sections entitled “Nominees for Election as Directors,” “Corporate Governance—Audit and Finance Committee,” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the 2015 Proxy Statement. See also Part I, Item 1 in the section entitled “Executive Officers of the Registrant.”

The Company has adopted a code of ethics, our Code of Business Conduct, which applies to all employees including our principal executive officer, principal financial officer, controller, and persons performing similar functions. Our Code of Business Conduct is available on our website, gapinc.com, under “Investors, Corporate Compliance, Code of Business Conduct.” Any amendments and waivers to the code will also be available on the website.

Item 11. Executive Compensation.

The information required by this item is incorporated herein by reference to the sections entitled “Compensation of Directors,” “Corporate Governance—Compensation and Management Development Committee,” and “Executive Compensation and Related Information” in the 2015 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is incorporated herein by reference to the sections entitled “Executive Compensation and Related Information—Equity Compensation Plan Information” and “Beneficial Ownership of Shares” in the 2015 Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is incorporated herein by reference to the sections entitled “Other Information” and “Corporate Governance—Director Independence” in the 2015 Proxy Statement.

Item 14. Principal Accounting Fees and Services.

The information required by this item is incorporated herein by reference to the section entitled “Principal Accounting Firm Fees” in the 2015 Proxy Statement.

Part IV

Item 15. Exhibits, Financial Statement Schedules.



1.	Financial Statements: See “Index to Consolidated Financial Statements” in Part II, Item 8 of this Form 10-K.



2.	Financial Statement Schedules: Schedules are included in the Consolidated Financial Statements or notes of this Form 10-K or are not required.



3.	Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Form 10-K.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




		THE GAP, INC.

Date:	March 23, 2015	By	/s/ ARTHUR PECK
			Arthur Peck Chief Executive Officer (Principal Executive Officer)

Date:	March 23, 2015	By	/s/ SABRINA L. SIMMONS
			Sabrina L. Simmons Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.





Date:	March 23, 2015	By	/s/ DOMENICO DE SOLE
			Domenico De Sole, Director

Date:	March 23, 2015	By	/s/ ROBERT J. FISHER
			Robert J. Fisher, Director

Date:	March 23, 2015	By	/s/ WILLIAM S. FISHER
			William S. Fisher, Director

Date:	March 23, 2015	By	/s/ ISABELLA D. GOREN
			Isabella D. Goren, Director

Date:	March 23, 2015	By	/s/ BOB L. MARTIN
			Bob L. Martin, Director

Date:	March 23, 2015	By	/s/ JORGE P. MONTOYA
			Jorge P. Montoya, Director

Date:	March 23, 2015	By	/s/ ARTHUR PECK
			Arthur Peck, Director

Date:	March 23, 2015	By	/s/ MAYO A. SHATTUCK III
			Mayo A. Shattuck III, Director

Date:	March 23, 2015	By	/s/ KATHERINE TSANG
			Katherine Tsang, Director

Date:	March 23, 2015	By	/s/ PADMASREE WARRIOR
			Padmasree Warrior, Director

Exhibit Index




3.1		Registrant’s Amended and Restated Certificate of Incorporation, filed as Exhibit 3.1 to Registrant’s Annual Report on Form 10-K for the year ended January 30, 1993, Commission File No. 1-7562.

3.2		Certificate of Amendment of Amended and Restated Certificate of Incorporation, filed as Exhibit 3.2 to Registrant’s Annual Report on Form 10-K for year ended January 29, 2000, Commission File No. 1-7562.

3.3		Amended and Restated Bylaws of the Company (effective February 1, 2015), filed as Exhibit 3(ii) to Registrant’s Form 8-K on November 14, 2014, Commission File No. 1-7562.

4.1		Indenture, dated as of April 12, 2011, by and between Registrant and Wells Fargo Bank, National Association, as Trustee, filed as Exhibit 4.1 to Registrant’s Form 8-K on April 12, 2011, Commission File No. 1-7562.

4.2		First Supplemental Indenture, dated as of April 12, 2011, relating to the issuance of $1,250,000,000 aggregate principal amount of Registrant’s 5.95% Notes due 2021, filed as Exhibit 4.2 to Registrant’s Form 8-K on April 12, 2011, Commission File No. 1-7562.

4.3		Form of Registrant’s 5.95% Notes due 2021, included as Exhibit A to First Supplemental Indenture, filed as Exhibit 4.2 to Registrant’s Form 8-K on April 12, 2011, Commission File No. 1-7562.

10.1		3-Year LC Agreement dated as of May 6, 2005 among The Gap, Inc., LC Subsidiaries, and HSBC Bank USA, National Association (formerly HSBC Bank USA), as LC Issuer, filed as Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended May 1, 2010, Commission File No. 1-7562.

10.2		Letter Amendment No. 1 to the 3-Year Letter of Credit Agreement with HSBC Bank USA, National Association dated May 18, 2007, filed as Exhibit 10.3 to Registrant’s Form 8-K on May 24, 2007, Commission File No. 1-7562.

10.3		Letter Amendment No. 2 to the 3-Year Letter of Credit Agreement with HSBC Bank USA, National Association dated September 21, 2010, filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarter ended October 30, 2010, Commission File No. 1-7562.

10.4		Letter Amendment No. 3 to the 3-Year Letter of Credit Agreement with HSBC Bank USA, National Association dated August 24, 2012, filed as Exhibit 10.4 to Registrant’s Form 10-Q for the quarter ended October 27, 2012, Commission File No. 1-7562.

10.5		Letter Amendment No. 4 to the 3-Year Letter of Credit Agreement with HSBC Bank USA, National Association dated April 15, 2014, filed as Exhibit 10.11 to Registrant’s Form 10-Q for the quarter ended May 3, 2014, Commission File No. 1-7562.

10.6		Letter Agreement dated April 1, 2008 regarding the 3-Year Letter of Credit Agreement with HSBC Bank USA, National Association, filed as Exhibit 10.8 to Registrant’s Form 10-Q for the quarter ended May 3, 2008, Commission File No. 1-7562.

10.7		Term Loan and Revolving Credit Agreement dated April 7, 2011, filed as Exhibit 10.1 to Registrant’s Form 8-K on April 7, 2011, Commission File No. 1-7562.



10.8		Amendment No. 1 to Term Loan and Revolving Credit Agreement dated April 25, 2011, filed as Exhibit 10.4 to Registrant’s Form 10-Q for the quarter ended April 30, 2011, Commission File No. 1-7562.

10.9		Amendment No. 2 to the Credit Agreement dated as of May 1, 2013, filed as Exhibit 10.1 to Registrant’s Form 8-K on May 1, 2013, Commission File No. 1-7562.

10.10		Second Amended and Restated Master Services Agreement between Registrant and IBM, dated as of March 13, 2013, filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarter ended May 4, 2013, Commission File No. 1-7562. (1)

10.11		Amended and Restated Consumer Credit Card Program Agreement by and among Registrant, Gap (Puerto Rico), Inc., GPS Consumer Direct, Inc., Gap (Apparel), LLC, Gap (ITM) Inc., GE Capital Retail Bank and GE Capital Retail Finance Corporation, dated as of February 28, 2014, filed as Exhibit 10.1 to Amendment No. 1 to Registrant’s Form 10-Q for the quarter ended May 3, 2014, Commission File No. 1-7562. (1)

10.12		First Amendment to Amended and Restated Consumer Credit Card Program Agreement by and among Registrant, Gap (Puerto Rico), Inc., GPS Consumer Direct, Inc., Gap (Apparel), LLC, Gap (ITM) Inc., Synchrony Bank (f/k/a GE Capital Retail Bank) and Synchrony Financial, dated as of January 31, 2015. (2)


EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

10.13		Executive Management Incentive Compensation Award Plan, filed as Appendix A to Registrant’s definitive proxy statement for its annual meeting of stockholders held on May 18, 2010, Commission File No. 1-7562.

10.14		The Gap, Inc. Executive Deferred Compensation Plan, filed as Exhibit 10.3 to Registrant’s Form 10-Q for the quarter ended October 31, 1998, Commission File No.1-7562.

10.15		Amendment to Executive Deferred Compensation Plan - Freezing of Plan Effective December 31, 2005, filed as Exhibit 10.1 to Registrant’s Form 8-K on November 8, 2005, Commission File No. 1-7562.

10.16		Amendment to Executive Deferred Compensation Plan - Merging of Plan into the Supplemental Deferred Compensation Plan, filed as Exhibit 10.29 to Registrant’s Form 10-K for the year ended January 31, 2009, Commission File No. 1-7562.

10.17		Amendment to Executive Deferred Compensation Plan - Suspension of Pending Merger into Supplemental Deferred Compensation Plan, filed as Exhibit 10.30 to Registrant’s Form 10-K for the year ended January 31, 2009, Commission File No. 1-7562.

10.18		Amendment to Executive Deferred Compensation Plan - Merging of Plan into the Deferred Compensation Plan, filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarter ended October 31, 2009, Commission File No. 1-7562.

10.19		Deferred Compensation Plan, amended and restated effective September 1, 2011, filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarter ended October 29, 2011, Commission File No. 1-7562.

10.20		Supplemental Deferred Compensation Plan, filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8, dated November 29, 2005, Commission File No. 333-129986.




10.21		First Amendment to Supplemental Deferred Compensation Plan, filed as Exhibit 10.32 to Registrant’s Form 10-K for the year ended January 31, 2009, Commission File No. 1-7562.

10.22		Second Amendment to Supplemental Deferred Compensation Plan - Merging of Executive Deferred Compensation Plan into the Plan and Name Change to Deferred Compensation Plan, filed as Exhibit 10.33 to Registrant’s Form 10-K for the year ended January 31, 2009, Commission File No. 1-7562.

10.23		Third Amendment to Supplemental Deferred Compensation Plan - Suspension of Pending Merging of Executive Deferred Compensation Plan into the Plan and Name Change to Deferred Compensation Plan, filed as Exhibit 10.34 to Registrant’s Form 10-K for the year ended January 31, 2009, Commission File No. 1-7562.

10.24		Fourth Amendment to Supplemental Deferred Compensation Plan - Merging of Executive Deferred Compensation Plan into the Plan and Name Change to Deferred Compensation Plan, filed as Exhibit 10.2 to Registrant’s Form 10-Q for the quarter ended October 31, 2009, Commission File No. 1-7562.

10.25		1981 Stock Option Plan, filed as Exhibit 4.1 to Registrant’s Registration Statement on Form S-8, Commission File No. 33-54690.

10.26		Management Incentive Restricted Stock Plan II, filed as Exhibit 4.1 to Registrant’s Registration Statement on Form S-8, Commission File No. 33-54686.

10.27		1996 Stock Option and Award Plan, filed as Exhibit A to Registrant’s definitive proxy statement for its annual meeting of stockholders held on May 21, 1996, Commission File No. 1-7562.

10.28		Amendment Number 1 to Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarter ended August 2, 1997, Commission File No. 1-7562.

10.29		Amendment Number 2 to Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.15 to Registrant’s Form 10-K for the year ended January 31, 1998, Commission File No. 1-7562.

10.30		Amendment Number 3 to Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarter ended October 31, 1998, Commission File No. 1-7562.

10.31		Amendment Number 4 to Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.3 to Registrant’s Form 10-Q for the quarter ended July 29, 2000, Commission File No. 1-7562.

10.32		Amendment Number 5 to Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.13 to Registrant’s Form 10-K for the year ended February 3, 2001, Commission File No. 1-7562.

10.33		Amendment Number 6 to Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarter ended May 5, 2001, Commission File No. 1-7562.

10.34		1996 Stock Option and Award Plan (as Amended and Restated effective as of January 28, 2003), filed as Appendix C to Registrant’s definitive proxy statement for its annual meeting of stockholders held on May 14, 2003, Commission File No. 1-7562.

10.35		Form of Non-Qualified Stock Option Agreement for employees under Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.5 to Registrant’s Form 10-Q for the quarter ended August 2, 1997, Commission File No. 1-7562.



10.36		Form of Non-Qualified Stock Option Agreement for directors under Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.6 to Registrant’s Form 10-Q for the quarter ended August 2, 1997, Commission File No. 1-7562.

10.37		Form of Non-Qualified Stock Option Agreement for consultants under Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.4 to Registrant’s Form 10-Q for the quarter ended October 31, 1998, Commission File No. 1-7562.

10.38		Form of Non-Qualified Stock Option Agreement for employees in France under Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.5 to Registrant’s Form 10-Q for the quarter ended October 31, 1998, Commission File No. 1-7562.

10.39		Form of Non-Qualified Stock Option Agreement for international employees under Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.6 to Registrant’s Form 10-Q for the quarter ended October 31, 1998, Commission File No. 1-7562.

10.40		Form of Non-Qualified Stock Option Agreement for employees in Japan under Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.7 to Registrant’s Form 10-Q for the quarter ended October 31, 1998, Commission File No. 1-7562.

10.41		Form of Stock Option Agreement for employees under the UK Sub-plan to the U.S. Stock Option and Award Plan, filed as Exhibit 10.8 to Registrant’s Form 10-Q for the quarter ended October 31, 1998, Commission File No. 1-7562.

10.42		Form of Non-Qualified Stock Option Agreement for directors effective April 3, 2001 under Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.4 to Registrant’s Form 10-Q for the quarter ended May 5, 2001, Commission File No. 1-7562.

10.43		Form of Non-Qualified Stock Option Agreement under Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.3 to Registrant’s Form 10-Q for the quarter ended November 3, 2001, Commission File No. 1-7562.

10.44		Form of Stock Award Agreement under Registrant’s 1996 Stock Option and Award Plan filed as Exhibit 10.2 to Registrant’s Form 8-K on January 27, 2005, Commission File No. 1-7562.

10.45		Form of Stock Award Agreement under Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.2 to Registrant’s Form 8-K on March 16, 2005, Commission File No. 1-7562.

10.46		Form of Stock Award Agreement under Registrant’s 1996 Stock Option and Award Plan, filed as Exhibit 10.4 to Registrant’s Form 10-Q for the quarter ended October 29, 2005, Commission File No. 1-7562.

10.47		UK Employee Stock Purchase Plan, filed as Exhibit 4.1 to Registrant’s Registration Statement on Form S-8, Commission File No. 333-47508.

10.48		2002 Stock Option Plan, as amended (formerly the 1999 Stock Option Plan as amended and Stock Up On Success, The Gap, Inc.’s Stock Option Bonus Program), filed as Exhibit 4.1 to Registrant’s Registration Statement on Form S-8, Commission File No. 333-103128.

10.49		Form of Non-Qualified Stock Option Agreement under Registrant’s 2002 Stock Option Plan (formerly the 1999 Stock Option Plan as amended), filed as Exhibit 4.6 to Registrant’s Registration Statement on Form S-8, Commission File No. 333-76523.



10.50		Form of Domestic Non-Qualified Stock Option Agreement under Registrant’s 2002 Stock Option Plan, as amended, filed as Exhibit 4.6 to Registrant’s Registration Statement on Form S-8, Commission File No. 333-72921.

10.51		Form of International Non-Qualified Stock Option Agreement under Registrant’s 2002 Stock Option Plan, as amended, filed as Exhibit 4.7 to Registrant’s Registration Statement on Form S-8, Commission File No. 333-72921.

10.52		Non-Employee Director Retirement Plan, dated October 27, 1992, filed as Exhibit 10.43 to Registrant’s Annual Report on Form 10-K for the year ended January 30, 1993, Commission File No. 1-7562.

10.53		Amendment, authorized as of August 20, 2008, to Nonemployee Director Retirement Plan, dated October 27, 1992, filed as Exhibit 10.2 to Registrant’s Form 10-Q for the quarter ended November 1, 2008, Commission File No. 1-7562.

10.54		Statement Regarding Non-Employee Director Retirement Plan, filed as Exhibit 10.25 to Registrant’s Form 10-K for the year ended January 31, 1998, Commission File No. 1-7562.

10.55		Nonemployee Director Deferred Compensation Plan, filed as Exhibit 4.1 to Registrant’s Registration Statement on Form S-8, Commission File No. 333-36265.

10.56		Amendment Number 1 to Registrant’s Nonemployee Director Deferred Compensation Plan, filed as Exhibit 10.2 to Registrant’s Form 10-Q for the quarter ended October 31, 1998, Commission File No. 1-7562.

10.57		Amendment Number 2 to Registrant’s Nonemployee Director Deferred Compensation Plan, filed as Exhibit 10.4 to Registrant’s Form 10-Q for the quarter ended July 29, 2000, Commission File No. 1-7562.

10.58		Amendment Number 3 to Registrant’s Nonemployee Director Deferred Compensation Plan, filed as Exhibit 10.2 to Registrant’s Form 10-Q for the quarter ended May 5, 2001, Commission File No. 1-7562.

10.59		Nonemployee Director Deferred Compensation Plan, as amended and restated on October 30, 2001, filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarter ended November 3, 2001, Commission File No. 1-7562.

10.60		Nonemployee Director Deferred Compensation Plan, as amended and restated on December 9, 2003, filed as Exhibit 10.35 to Registrant’s Form 10-K for the year ended January 31, 2004, Commission File No. 1-7562.

10.61		Form of Discounted Stock Option Agreement under the Nonemployee Director Deferred Compensation Plan, filed as Exhibit 4.5 to Registrant’s Registration Statement on Form S-8, Commission File No. 333-36265.

10.62		Form of Non-Qualified Stock Option Agreement for directors effective April 3, 2001 under Registrant’s Nonemployee Director Deferred Compensation Plan, filed as Exhibit 10.5 to Registrant’s Form 10-Q for the quarter ended May 5, 2001, Commission File No. 1-7562.

10.63		Nonemployee Director Deferred Compensation Plan - Suspension of Plan Effective January 6, 2005, filed as Exhibit 10.1 to Registrant’s Form 8-K on January 7, 2005, Commission File No. 1-7562.



10.64		Nonemployee Director Deferred Compensation Plan - Termination of Plan Effective September 27, 2005, filed as Exhibit 10.1 to Registrant’s Form 8-K on September 28, 2005, Commission File No. 1-7562.

10.65		2006 Long-Term Incentive Plan, filed as Appendix B to Registrant’s definitive proxy statement for its annual meeting of stockholders held on May 9, 2006, Commission File No. 1-7562.

10.66		2006 Long-Term Incentive Plan, as amended and restated effective August 20, 2008, filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarter ended November 1, 2008, Commission File No. 1-7562.

10.67		Amendment No. 1 to Registrant’s 2006 Long-Term Incentive Plan, filed as Exhibit 10.62 to Registrant’s Form 10-K for the year ended February 3, 2007, Commission File No. 1-7562.

10.68		2011 Long-Term Incentive Plan, filed as Appendix A to Registrant’s definitive proxy statement for its annual meeting of stockholders held on May 17, 2011, Commission File No. 1-7562.

10.69		Amended and Restated 2011 Long-Term Incentive Plan (effective February 26, 2014), filed as Exhibit 10.1 to Registrant’s Form 8-K on March 6, 2014, Commission File No. 1-7562.

10.70		Form of Non-Qualified Stock Option Agreement for Executives under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.1 to Registrant’s Form 8-K on March 23, 2006, Commission File No. 1-7562.

10.71		Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.8 to Registrant’s Form 10-Q for the quarter ended April 30, 2011, Commission File No. 1-7562.

10.72		Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.9 to Registrant’s Form 10-Q for the quarter ended July 28, 2012, Commission File No. 1-7562.

10.73		Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.72 to Registrant's Form 10-K for the year ended February 2, 2013, Commission File No. 1-7562.

10.74		Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.2 to Registrant's Form 8-K on March 6, 2014, Commission File No. 1-7562.

10.75		Form of Stock Award Agreement for Executives under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.2 to Registrant’s Form 8-K on March 23, 2006, Commission File No. 1-7562.

10.76		Form of Non-Qualified Stock Option Agreement for Chief Executive Officer under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.3 to Registrant’s Form 8-K on March 23, 2006, Commission File No. 1-7562.

10.77		Form of Stock Award Agreement for Chief Executive Officer under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.4 to Registrant’s Form 8-K on March 23, 2006, Commission File No. 1-7562.

10.78		Form of Stock Unit Agreement and Stock Unit Deferral Election Form for Nonemployee Directors under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.5 to Registrant’s Form 8-K on March 23, 2006, Commission File No. 1-7562.



10.79		Form of Stock Unit Agreement and Stock Unit Deferral Election Form for Nonemployee Directors under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.2 to Registrant’s Form 10-Q for the quarter ended July 29, 2006, Commission File No. 1-7562.

10.80		Form of Performance Share Agreement for Executives under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.2 to Registrant’s Form 8-K on July 26, 2007, Commission File No. 1-7562.

10.81		Form of Performance Share Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.9 to Registrant’s Form 10-Q for the quarter ended April 30, 2011, Commission File No. 1-7562.

10.82		Form of Performance Share Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.8 to Registrant’s Form 10-Q for the quarter ended July 28, 2012, Commission File No. 1-7562.

10.83		Form of Performance Unit Award Agreement under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.2 to Registrant’s Form 10-Q for the quarter ended November 3, 2007, Commission File No. 1-7562.

10.84		Form of Performance Share Agreement under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.3 to Registrant’s Form 10-Q for the quarter ended November 3, 2007, Commission File No. 1-7562.

10.85		Form of Performance Share Agreement under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.5 to Registrant’s Form 10-Q for the quarter ended May 1, 2010, Commission File No. 1-7562.

10.86		Form of Performance Share Agreement under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.1 to Registrant’s Form 8-K on March 11, 2011, Commission File No. 1-7562.

10.87		Form of Performance Share Agreement under the 2011 Long-Term Incentive Plan., filed as Exhibit 10.85 to Registrant's Form 10-K for the year ended February 2, 2013, Commission File No. 1-7562.

10.88		Form of Performance Share Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.4 to Registrant's form 8-K on March 6, 2014, Commission File No. 1.7562.

10.89		Form of Restricted Stock Unit Award Agreement under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarter ended November 3, 2007, Commission File No. 1-7562.

10.90		Form of Restricted Stock Unit Award Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.7 to Registrant’s Form 10-Q for the quarter ended April 30, 2011, Commission File No. 1-7562.

10.91		Form of Restricted Stock Unit Award Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.10 to Registrant’s Form 10-Q for the quarter ended July 28, 2012, Commission File No. 1-7562.

10.92		Form of Restricted Stock Unit Award Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.89 to Registrant's Form 10-K for the year ended February 2, 2013, Commission File No. 1-7562.

10.93		Form of Restricted Stock Unit Award Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.3 to Registrant's Form 8-K on March 6, 2014, Commission File No. 1-7562.



10.94		Form of Director Stock Unit Agreement and Stock Unit Deferral Election Form under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.4 to Registrant’s Form 10-Q for the quarter ended November 3, 2007, Commission File No. 1-7562.

10.95		Form of Director Stock Unit Agreement and Stock Unit Deferral Election Form under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.10 to Registrant’s Form 10-Q for the quarter ended April 30, 2011, Commission File No. 1-7562.

10.96		Form of Director Stock Unit Agreement and Stock Unit Deferral Election Form under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.5 to Registrant's Form 8-K on March 6, 2014, Commission File No. 1-7562.

10.97		Summary of Revised Timing of Annual Board Member Stock Unit Grants, effective August 20, 2008, filed as Exhibit 10.3 to Registrant’s Form 10-Q for the quarter ended November 1, 2008, Commission File No. 1-7562.

10.98		Agreement for Post-Termination Benefits with Michelle Banks dated May 23, 2012, filed as Exhibit 10.6 to Registrant's Form 10-Q for the quarter ended April 28, 2012, Commission File No. 1-7562.

10.99		Amendment to Agreement for Post-Termination Benefits with Michelle Banks dated June 4, 2014, filed as Exhibit 10.3 to Registrant’s Form 10-Q for the quarter ended May 3, 2014, Commission File No. 1-7562.

10.100		Agreement for Post-Termination Benefits with Jack Calhoun dated June 9, 2012, filed as Exhibit 10.121 to Registrant's Form 10-K for the year ended February 2, 2013, Commission File No. 1-7562.

10.101		Agreement with Jack Calhoun dated October 29, 2012 and confirmed on November 1, 2012, filed as Exhibit 10.2 to Registrant’s Form 10-Q for the quarter ended May 3, 2014, Commission File No. 1-7562.

10.102		Amendment to Agreement for Post-Termination Benefits with Jack Calhoun dated June 4, 2014, filed as Exhibit 10.4 to Registrant’s Form 10-Q for the quarter ended May 3, 2014, Commission File No. 1-7562.

10.103		Agreement with Solomon Goldfarb dated January 23, 2015 and confirmed on January 28, 2015. (2)

10.104		Agreement with Tom Keiser dated November 18, 2009 and confirmed on November 20, 2009, filed as Exhibit 10.103 to Registrant's Form 10-K for the year ended January 28, 2012, Commission File No. 1-7562.

10.105		Amendment to Agreement with Tom Keiser dated November 4, 2011 and confirmed on December 7, 2011, filed as Exhibit 10.104 to Registrant's Form 10-K for the year ended January 28, 2012, Commission File No. 1-7562.

10.106		Agreement for Post-Termination Benefits with Tom Keiser dated May 31, 2012, filed as Exhibit 10.3 to Registrant's Form 10-Q for the quarter ended April 28, 2012, Commission File No. 1-7562.

10.107		Amendment to Agreement for Post-Termination Benefits with Tom Keiser dated June 4, 2014, filed as Exhibit 10.5 to Registrant’s Form 10-Q for the quarter ended May 3, 2014, Commission File No. 1-7562.

10.108		Agreement with Jeff Kirwan dated November 17, 2014 and confirmed on November 18, 2014. (2)



10.109		Agreement with Stefan Larsson dated April 26, 2012 and confirmed on April 27, 2012, filed as Exhibit 10.1 to Registrant's Form 10-Q for the quarter ended October 27, 2012, Commission File No. 1-7562.

10.110		Amendment to Agreement with Stefan Larsson dated September 12, 2012 and confirmed on September 17, 2012, filed as Exhibit 10.2 to Registrant's Form 10-Q for the quarter ended October 27, 2012, Commission File No. 1-7562.

10.111		Amendment to Agreement with Stefan Larsson dated October 29, 2012 and confirmed on November 6, 2012, filed as Exhibit 10.3 to Registrant's Form 10-Q for the quarter ended October 27, 2012, Commission File No. 1-7562.

10.112		Amendment to Agreement for Post-Termination Benefits with Stefan Larsson dated June 4, 2014, filed as Exhibit 10.6 to Registrant’s Form 10-Q for the quarter ended May 3, 2014, Commission File No. 1-7562.

10.113		Amended and Restated Employment Agreement by and between Glenn Murphy and the Company, dated December 1, 2008 and confirmed on December 1, 2008, filed as Exhibit 10.106 to Registrant’s Form 10-K for the year ended January 31, 2009, Commission File No. 1-7562.

10.114		Modification to Amended and Restated Employment Agreement by and between Glenn Murphy and the Company dated February 9, 2009, filed as Exhibit 10.2 to Registrant’s Form 10-Q for the quarter ended May 2, 2009, Commission File No. 1-7562.

10.115		Description of Arrangement with Glenn Murphy for Corporate Jet Usage and Reimbursement for Commercial Travel, filed as Exhibit 101 to Registrant’s Form 10-K for the year ended February 2, 2008, Commission File No. 1-7562.

10.116		CEO Performance Share Agreement dated May 4, 2012, filed as Exhibit 10.1 to Registrant's Form 8-K on May 4, 2012, Commission File No. 1-7562.

10.117		Agreement with Andi Owen dated November 17, 2014 and confirmed on November 18, 2014. (2)

10.118		Letter Agreement with Art Peck dated October 3, 2014, filed as Exhibit 10.1 to Registrant’s Form 8-K on October 8, 2014, Commission File No. 1-7562.

10.119		Agreement with Eva Sage-Gavin dated March 16, 2007 and confirmed on March 27, 2007, filed as Exhibit 10.6 to Registrant’s Form 10-Q for the quarter ended May 5, 2007, Commission File No. 1-7562.

10.120		Amendment to Agreement with Eva Sage-Gavin dated November 23, 2008 and confirmed on November 10, 2008, filed as Exhibit 10.101 to Registrant’s Form 10-K for the year ended January 31, 2009, Commission File No. 1-7562.

10.121		Amendment to Agreement with Eva Sage-Gavin dated November 4, 2011 and confirmed on January 3, 2012, filed as Exhibit 10.94 to Registrant's Form 10-K for the year ended January 28, 2012, Commission File No. 1-7562.

10.122		Amendment to Post-Termination Benefits with Eva Sage-Gavin dated May 24, 2012, filed as Exhibit 10.8 to Registrant's Form 10-Q for the quarter ended April 28, 2012, Commission File No. 1-7562.

10.123		Agreement with Sabrina L. Simmons dated February 4, 2008 and confirmed on February 6, 2008, filed as Exhibit 10.1 to Registrant’s Form 8-K on February 12, 2008, Commission File No. 1-7562.




10.124		Amendment to Agreement with Sabrina Simmons dated November 23, 2008 and confirmed on December 22, 2008, filed as Exhibit 10.110 to Registrant’s Form 10-K for the year ended January 31, 2009, Commission File No. 1-7562.

10.125		Amendment to Agreement with Sabrina L. Simmons dated November 4, 2011 and confirmed on January 5, 2012, filed as Exhibit 10.99 to Registrant's Form 10-K for the year ended January 28, 2012, Commission File No. 1-7562.

10.126		Agreement for Post-Termination Benefits with Sabrina Simmons dated May 31, 2012, filed as Exhibit 10.5 to Registrant's Form 10-Q for the quarter ended April 28, 2012, Commission File No. 1-7562.

10.127		Amendment to Agreement for Post-Termination Benefits with Sabrina Simmons dated June 4, 2014, filed as Exhibit 10.8 to Registrant’s Form 10-Q for the quarter ended May 3, 2014, Commission File No. 1-7562.

10.128		Amended Service Agreement with Stephen Sunnucks dated June 10, 2009, filed as Exhibit 10.117 to Registrant's Form 10-K for the year ended February 2, 2013, Commission File No. 1-7562.

10.129		Amendment to the Amended Service Agreement with Stephen Sunnucks dated August 25, 2011, filed as Exhibit 10.118 to Registrant's Form 10-K for the year ended February 2, 2013, Commission File No. 1-7562.

10.130		Amendment to the Amended Service Agreement with Stephen Sunnucks dated May 30, 2012, filed as Exhibit 10.119 to Registrant's Form 10-K for the year ended February 2, 2013, Commission File No. 1-7562.

10.131		Agreement with Stephen Sunnucks dated October 31, 2012 and confirmed on November 1, 2012, filed as Exhibit 10.120 to Registrant's Form 10-K for the year ended February 2, 2013, Commission File No. 1-7562.

10.132		Amendment to Service Agreement Regarding Post-Termination Severance Period with Stephen Sunnucks dated June 4, 2014, filed as Exhibit 10.9 to Registrant’s Form 10-Q for the quarter ended May 3, 2014, Commission File No. 1-7562.

10.133		Agreement with Stephen Sunnucks dated November 17, 2014. (2)

10.134		Agreement with Sonia Syngal dated August 23, 2013 and confirmed on September 3, 2013, filed as Exhibit 10.1 to Registrant's Form 10-Q for the quarter ended November 2, 2013, Commission File No. 1-7562.

10.135		Amendment to Agreement for Post-Termination Benefits with Sonia Syngal dated June 4, 2014, filed as Exhibit 10.10 to Registrant’s Form 10-Q for the quarter ended May 3, 2014, Commission File No. 1-7562.

10.136		Summary of Changes to Non-employee Director Compensation effective February 15, 2008, filed as Exhibit 10.6 to Registrant’s Form 10-Q for the quarter ended May 3, 2008, Commission File No. 1-7562.

10.137		Summary of Changes to Non-employee Director Compensation, filed as Exhibit 10.5 to Registrant’s Form 10-Q for the quarter ended May 2, 2009, Commission File No. 1-7562.




10.138		Summary of Changes to Executive Compensation Arrangements, filed as Exhibit 10.5 to Registrant’s Form 10-Q for the quarter ended May 3, 2008, Commission File No. 1-7562.

10.139		Summary of Changes to Executive Compensation Arrangements, filed as Exhibit 10.6 to Registrant’s Form 10-Q for the quarter ended May 2, 2009, Commission File No. 1-7562.

12		Ratio of Earnings to Fixed Charges. (2)

14		Code of Business Conduct, filed as Exhibit 14 to Registrant’s Form 10-K for the year ended January 30, 2010, Commission File No. 1-7562.

21		Subsidiaries of Registrant. (2)

23		Consent of Independent Registered Public Accounting Firm. (2)

31.1		Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002). (2)

31.2		Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002). (2)

32.1		Certification of the Chief Executive Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (3)

32.2		Certification of the Chief Financial Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (3)

101		The following materials from The Gap, Inc.’s Annual Report on Form 10-K for the year ended January 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements. (2)

__________


(1)	Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted and have been provided separately to the Securities and Exchange Commission.


(2)	Filed herewith.


(3)	Furnished herewith.

Exhibit 10.12

Execution Version

FIRST AMENDMENT TO

AMENDED AND RESTATED CONSUMER CREDIT CARD

PROGRAM AGREEMENT

This First Amendment to the Amended and Restated Consumer Credit Card Program Agreement, dated as of January 31, 2015 (the “Amendment”) amends that certain Amended and Restated Consumer Credit Card Program Agreement dated as of February 28, 2014 (as amended, modified and supplemented from time to time, the “Agreement”) by and among Synchrony Bank (f/k/a GE Capital Retail Bank), a federal savings bank (“Bank”), Synchrony Financial, a Delaware corporation (“Bank Parent”), The Gap, Inc., a Delaware corporation (“The Gap, Inc.”), Gap (Puerto Rico), Inc., a Puerto Rico corporation, GPS Consumer Direct, Inc., a California corporation, Gap (Apparel), LLC, a California limited liability company, and Gap (ITM) Inc., a California corporation (jointly and severally, the “Retailers”). Capitalized terms used herein and not otherwise defined have the meaning given in the Agreement.

WHEREAS, Bank and Retailers are parties to the Agreement, pursuant to which Bank provides consumer credit to qualified customers of Retailers for the purchase of goods and services from Retailers through the use of a private label credit card and from Retailers and other retailers through the use of a co-branded bankcard;

WHEREAS, the parties hereto desire to amend the Agreement as set forth herein;

NOW, THEREFORE, in consideration of the mutual promises and subject to the terms and conditions hereinafter set forth, the parties hereby agree as follows:

I. AMENDMENTS TO THE AGREEMENT

1.1 Preamble. The Preamble to the Agreement shall be deleted entirely and shall be replaced with the following:

“This AMENDED AND RESTATED CONSUMER CREDIT CARD PROGRAM AGREEMENT (hereinafter the “Agreement”) is made as of the 28th day of February, 2014 by and among Synchrony Bank, a federal savings bank (“Bank”), Synchrony Financial, a Delaware corporation (“Bank Parent”), The Gap, Inc., a Delaware corporation (“The Gap, Inc.”), Gap (Puerto Rico), Inc., a Puerto Rico corporation, GPS Consumer Direct, Inc., a California corporation, Gap (Apparel), LLC, a California limited liability company, and Gap (ITM) Inc., a California corporation (jointly and severally, the “Retailers”).

1.2 References To GE Capital Retail Bank. All references to “GE Capital Retail Bank” anywhere in the Agreement or the exhibits and schedules thereto shall be deemed to refer to “Synchrony Bank”.

1.3 References to GE Capital Retail Finance Corporation. All references to “GE Capital Retail Finance Corporation” anywhere in the Agreement or the exhibits or schedules thereto shall be deemed to refer to “Synchrony Financial.”

1.4 Amendments to Definitions. The definition of “Bank,” “Bank Parent” and “Program Year” are hereby deleted and replaced with the definitions set forth below:

“Bank” means Synchrony Bank and its permitted successors, transferees and assigns.

“Bank Parent” means Synchrony Financial, a Delaware corporation.

“Program Year” means each period of time set forth below (it being agreed that each referenced date reflects the beginning or end of a Bank fiscal month and that such dates are subject to change if Bank alters its fiscal months, provided that Bank shall provide such advance notice to Retailers of any such change as is reasonably practicable):


•	February 3, 2014 through January 31, 2015


•	February 1, 2015 through January 31, 2016


•	February 1, 2016 through January 31, 2017


•	February 1, 2017 through January 31, 2018


•	February 1, 2018 through January 31, 2019


•	February 1, 2019 through January 31, 2020


•	February 1, 2020 through January 31, 2021


•	February 1, 2021 through January 31, 2022


•	February 1, 2022 through April 30, 2022.

With respect to any Program Year consisting of less than twelve full Bank fiscal months, any amounts payable or otherwise to be determined pursuant to this Agreement based on a Program Year, shall be ratably reduced as applicable.

1.5. Amendment to Section 11.01 of the Agreement. Section 11.01 of the Agreement shall be deleted in its entirety and replaced with the following:

Section 11.01 Operation Period. The Operation Period shall commence on the Effective Date and shall continue until April 30, 2022 (the “Initial Term”). Unless Retailers, acting collectively, shall provide written notice of non-extension to Bank or Bank shall provide written notice of non-extension to Retailers, in each case, at least twelve (12) months prior to the

expiration of the Initial Term (or, where applicable, the expiration of any extension term) the Operation Period shall thereafter be extended automatically for successive 1-year periods, each of which shall expire on the date that is the last day of the fiscal month of Bank that is closest to the end of any such twelve (12) month extension period.

II. GENERAL

2.1 Authority for Amendment. The execution, delivery and performance of this Amendment has been duly authorized by all requisite corporate action on the part of Retailers and Bank and upon execution by all parties, will constitute a legal, binding obligation thereof.

2.2 Effect of Amendment. Except as specifically amended hereby, the Agreement, and all terms contained therein, remains in full force and effect. The Agreement, as amended by this Amendment, constitutes the entire understanding of the parties with respect to the subject matter hereof.

2.3 Binding Effect; Severability. Each reference herein to a party hereto shall be deemed to include its successors and assigns, all of whom shall be bound by this Amendment and in whose favor the provisions of this Amendment shall inure. In case any one or more of the provisions contained in this Amendment shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

2.4 Further Assurances. The parties hereto agree to execute such other documents and instruments and to do such other and further things as may be necessary or desirable for the execution and implementation of this Amendment and the consummation of the transactions contemplated hereby and thereby.

2.5 Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Utah.

2.6 Counterparts. This Amendment may be executed in counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one agreement.

[The remainder of page intentionally left blank]

IN WITNESS WHEREOF, Bank, Bank Parent and Retailers have caused this Agreement to be executed by their respective officers thereunto duly authorized as the date first above written.

RETAILERS:

THE GAP, INC.,

By /s/ Sabrina Simmons

Sabrina Simmons, CFO

GAP (PUERTO RICO), INC.,

By /s/ Sabrina Simmons

Sabrina Simmons, CFO

GPS CONSUMER DIRECT, INC.

By /s/ Sabrina Simmons

Sabrina Simmons, CFO

GAP (APPAREL), LLC,

By /s/ Sabrina Simmons

Sabrina Simmons, CFO

GAP (ITM) INC.,

By /s/ Sabrina Simmons

Sabrina Simmons, CFO

BANK:

SYNCHRONY BANK

By /s/ Tom Quindlen

Tom Quindlen

SYNCHRONY FINANCIAL

By /s/ Tom Quindlen

Tom Quindlen

Exhibit 10.103

[Gap Inc. Letterhead]

January 23, 2015

Solomon Goldfarb

Dear Sol:

This letter is to confirm our offer to you as Executive Vice President, Digital and Customer Experience, Gap Inc.

Salary. Effective on your Start Date, your annual salary will be $550,000, payable every two weeks.

You are scheduled to receive a compensation review in March 2016, based on your time in the position.

Start Date. Your first day in your new position will be February 1, 2015, reporting to Art Peck, Chief Executive Officer, Gap Inc.

Annual Bonus. Based on your position as Executive Vice President, you will be eligible for an annual bonus based on Gap Inc. and/or Division financial objectives (weighted at 75%) and individual performance (weighted at 25%). Under the current program, your annual target bonus will be 80% of your base salary. Depending on results, your actual bonus, if any, may be higher or lower and can reach a maximum of 160%. Bonus payments will be prorated based on active time in position, divisional or country assignment and changes in base salary or incentive target that may occur during the fiscal year including any changes related to your acceptance of this position. Bonuses for fiscal 2015 are scheduled for payment in March 2016 and you must be employed by Gap Inc. on the payment date. Gap Inc. has the right to modify the program at any time. Management discretion can be used to modify the final award amount. Bonus payments are subject to supplemental income tax withholding.

Special Stock Award. The Compensation and Management Development Committee of the Board of Directors (the “Committee”), pursuant to the provisions of Gap Inc.’s stock plan, has approved a stock award grant covering 15,000 shares of Gap Inc. common stock with an effective grant date of February 1, 2015. Awards are in the form of units that are paid in Gap Inc. stock upon vesting. The award will become vested as shown in the schedule below, provided you are employed by Gap Inc. on the vesting date. Awards are subject to income tax withholding upon vesting.

Stock Award of 7,500 shares vesting two years from grant date.

Stock Award of 7,500 shares vesting three years from grant date.

Long-Term Growth Program. Based on your position as Executive Vice President, you will be eligible to participate in the Long-Term Growth Program that rewards achievement of Gap Inc. and/or Division financial objectives over a three year period. Under the current program, your target opportunity to earn performance shares is 100% of your base salary. Depending on results, your actual performance shares, if any, may be higher or lower and can reach a maximum of 300% of target shares. Awards are made in the form of performance shares that are paid in Gap Inc. stock upon vesting. The number of earned performance shares, if any, will be determined no later than March 2018. Payout is subject to certification by the Committee and the provisions of Gap Inc.’s stock plan. Earned shares will vest 50% on the date the Committee certifies attainment and 50% one year from the certification date provided you are employed by Gap Inc. on the vesting dates. Gap Inc. has the right to modify the program at any time. Committee discretion can be used to modify the final share amount. Shares are subject to income tax withholding upon vesting.

The Long-Term Growth Program replaces the annual Performance Stock Award Program, for which you are no longer eligible. However, to the extent earned, you will receive a final award under the Performance Stock Award Program in March 2015.

Sol Goldfarb

January 23, 2015

Page 2

Termination/Severance. In the event that your employment is involuntarily terminated by the Company for reasons other than For Cause (as defined below) prior to February 13, 2018, the Company will provide you the following after your "separation from service" within the meaning of Section 409A of the Internal Revenue Code (the "Separation from Service”), provided you sign a general release of claims in the form requested by the Company and it becomes effective within 45 calendar days after such Separation from Service (such 45^th day, the “Release Deadline”):

(1) Your then current salary, at regular pay cycle intervals, for eighteen months commencing in the first regular pay cycle following the Release Deadline (the “severance period”). Payments will cease if you accept other employment or professional relationship with a competitor of the Company (defined as another company primarily engaged in the apparel design or apparel retail business or any retailer with apparel sales in excess of $500 million annually), or if you breach your remaining obligations to the Company (e.g., your duty to protect confidential information, agreement not to solicit Company employees). Payments will be reduced by any compensation you receive (as received) during the severance period from other employment or professional relationship with a non-competitor. Each payment will be treated as a separate payment for purposes of Section 409A of the Internal Revenue Code.

(2) Through the end of the period in which you are receiving payments under paragraph (1) above, if you properly elect and maintain COBRA coverage, payment of a portion of your COBRA premium in a method as determined by the Company. This payment may be taxable income to you and subject to tax withholding. Notwithstanding the foregoing, the Company’s payment of the monthly COBRA premium shall cease immediately if the Company determines in its discretion that paying such monthly COBRA premium would result in the Company being in violation of, or incurring any fine, penalty, or excise tax under, applicable law (including, without limitation, any penalty imposed for violation of the nondiscrimination requirements under the Patient Protection and Affordable Care Act or guidance issued thereunder).

(3) Through the end of the period in which you are receiving payments under paragraph (1) above, reimbursement for your costs to maintain the same or comparable financial counseling program the Company provides to senior executives in effect at the time of your Separation from Service. The amount of expenses eligible for reimbursement during a calendar year shall not affect the expenses eligible for reimbursement in any other calendar year. Reimbursement shall be made on or before the last day of the calendar year following the calendar year in which the reimbursement is incurred but not later than the end of the second calendar year following the calendar year of your Separation from Service.

(4) Prorated Annual Bonus for the fiscal year in which the termination occurs, on the condition that you have worked at least 3 months of the fiscal year in which you are terminated, based on actual financial results and 100% standard for the individual component. Such bonus will paid in March of the year following termination at the time Annual Bonuses for the year of termination are paid, but in no event later than the 15th day of the third month following the later of the end of the Company’s taxable year or the end of the calendar year in which such termination occurs.

(5) Accelerated vesting (but not settlement) of restricted stock units (“RSUs”) and performance shares that remain subject only to time vesting conditions (excluding any performance shares that remain subject to performance-based vesting conditions) scheduled to vest prior to April 1 following the fiscal year of termination. Shares of the Company stock in settlement of any vested RSUs and/or performance shares under this section will be delivered on the applicable regularly scheduled vesting dates subject to the terms and conditions of the applicable award agreement including, without limitation, the Internal Revenue Code Section 409A six-month delay language thereunder to the extent necessary to avoid taxation under Section 409A of the Internal Revenue Code.

The payments in (1), (3), (4) and (5) above are, and the payment described in (2) above may be, taxable income to you and are subject to tax withholding. If the aggregate amount that would be payable to you under paragraphs (1), (2), (3) and (4) above through the date which is six months after your Separation from Service (excluding amounts exempt from Section 409A of the Internal Revenue Code under the short-term deferral rule thereunder or Treas. Reg. Section 1.409A-1(b)(9)(v)) exceeds the limit under Treas. Reg. Section 1.409A-1(b)(9)(iii)(A) and you are a “specified employee” under Treas. Reg. Section 1.409A-1(i) on the date

Sol Goldfarb

January 23, 2015

Page 3

of your Separation from Service, then the excess will be paid to you no earlier than the date which is six months after the date of such separation (or such earlier time permitted under Section 409A(a)(2)(B)(i) of the Internal Revenue Code). This delay will only be imposed to the extent required to avoid the tax for which you would otherwise be liable under Section 409A(a)(1)(B) of the Internal Revenue Code. Any delayed payment instead will be made on the first business day following the expiration of the six month period, as applicable (or such earlier time permitted under Section 409A(a)(2)(B)(i) of the Internal Revenue Code). Payments that are not delayed will be paid in accordance with their terms determined without regard to such delay.

The term “For Cause” shall mean a good faith determination by the Company that your employment be terminated for any of the following reasons: (1) indictment, conviction or admission of any crimes involving theft, fraud or moral turpitude; (2) engaging in gross neglect of duties, including willfully failing or refusing to implement or follow direction of the Company; or (3) breaching Gap Inc.’s policies and procedures, including but not limited to the Code of Business Conduct.

At any time, if you voluntarily resign your employment from Gap Inc. or your employment is terminated For Cause, you will receive no compensation, payment or benefits after your last day of employment. If your employment terminates for any reason, you will not be entitled to any payments, benefits or compensation other than as provided in this letter.

Recoupment Policy. As an Executive Vice President, the Company’s recoupment policy will apply to you. Under the current policy, subject to the discretion and approval of the Board, Gap Inc. will, to the extent permitted by governing law, in all appropriate cases as determined by the Board, require reimbursement and/or cancellation of any bonus or other incentive compensation, including stock-based compensation, awarded to an executive officer or other member of the Gap Inc.’s executive leadership team where all of the following factors are present: (a) the award was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement, (b) in the Board’s view, the executive engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and (c) a lower award would have been made to the executive based upon the restated financial results. In each such instance, Gap Inc. will seek to recover the individual executive’s entire annual bonus or award for the relevant period, plus a reasonable rate of interest.

Abide by Gap Inc. Policies/Protection of Gap Inc. Information. You agree to abide by all Gap Inc. policies including, but not limited to, policies contained in the Code of Business Conduct. As a Corporate Executive Vice President, you are subject to Stock Ownership Requirements for Gap Inc. Executives which can be found on Gapinc.com. You also agree to abide by the Confidentiality and Non-Solicitation terms below during and after your employment with Gap Inc.

Insider Trading Policies. Based on the level of your position, you will be subject to Gap Inc.'s Securities Law Compliance Manual, which among other things places restrictions on your ability to buy and sell Gap Inc. stock and requires you to pre-clear trades. This position will subject you to the requirements of Section 16 of the United States Securities and Exchange Act of 1934, as amended. If you do not already have a copy of the compliance manual, or have questions about it, you should contact Gap Inc. Global Equity Administration, at (415) 427-8478.

Confidentiality. You acknowledge that you will be in a relationship of confidence and trust with Gap Inc. As a result, during your employment with Gap Inc., you will acquire “Confidential Information,” which is information (whether in electronic or any other format) that people outside Gap Inc. never see, such as unannounced product information or designs, business or strategic plans, financial information and organizational charts, and other materials.

You agree that you will keep the Confidential Information in strictest confidence and trust. You will not, without the prior written consent of Gap Inc.’s General Counsel, directly or indirectly use or disclose to any person or entity any Confidential Information, during or after your employment, except as is necessary in the ordinary course of performing your duties while employed by Gap Inc., or if required to be disclosed by order of a court of competent jurisdiction, administrative agency or governmental body, or by subpoena, summons

Sol Goldfarb

January 23, 2015

Page 4

or other legal process, provided that prior to such disclosure, Gap Inc. is given reasonable advance notice of such order and an opportunity to object to such disclosure.

You agree that in the event your employment terminates for any reason, you will immediately deliver to Gap Inc. all company property, including all documents, materials or property of any description, or any reproduction of such materials, containing or pertaining to any Confidential Information.

Non-Solicitation of Employees. In order to protect Confidential Information, you agree that so long as you are employed by Gap Inc., and for a period of one year thereafter, you will not directly or indirectly, on behalf of yourself, any other person or entity, solicit, call upon, recruit, or attempt to solicit any of Gap Inc.’s employees or in any way encourage any Gap Inc. employee to leave their employment with Gap Inc. You further agree that you will not directly or indirectly, on behalf of yourself, any other person or entity, interfere or attempt to interfere with Gap Inc.’s relationship with any person who at any time was an employee, consultant, customer or vendor or otherwise has or had a business relationship with Gap Inc.

Non-disparagement. You agree now, and after your employment with the Gap Inc. terminates not to, directly or indirectly, disparage Gap Inc. in any way or to make negative, derogatory or untrue statements about Gap Inc., its business activities, or any of its directors, managers, officers, employees, affiliates, agents or representatives to any person or entity.

Employment Status. You understand that your employment is “at-will”. This means that you do not have a contract of employment for any particular duration or limiting the grounds for your termination in any way. You are free to resign at any time. Similarly, Gap Inc. is free to terminate your employment at any time for any reason. The only way your at-will status can be changed is through a written agreement with Gap Inc., signed by an officer of Gap Inc. and the most senior officer of Human Resources. In the event that there is any dispute over the terms, enforcement or obligations in this letter, the prevailing party shall be entitled to recover from the other party reasonable attorney fees and costs incurred to enforce any agreements.

Please note that except for those agreements or plans referenced in this letter and attachments, this letter contains the entire understanding of the parties with respect to this offer of employment and supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) with respect to this offer. Please review and sign this letter and return it to Eric Severson. You may keep one original for your personal records.

Sol, welcome to your new position and congratulations on this latest achievement in your career path at Gap Inc.

Yours sincerely,

/s/ Art Peck

Art Peck

Chief Executive Officer, Gap Inc.

Confirmed this 28^th day of January, 2015

/s/ Solomon Goldfarb

Solomon Goldfarb

Exhibit 10.108

[Gap Inc. Letterhead]

November 17, 2014

Jeff Kirwan

Dear Jeff:

This letter is to confirm our offer to you as Global President, Gap. This position is based in New York and as a result, your international assignment will end.

Salary. Effective on your Start Date, your annual salary will be $850,000, payable every two weeks.

Start Date. Your first day in your new position is anticipated to be December 1, 2014, reporting to the Chief Executive Officer of Gap Inc.

Annual Bonus. Based on your position as Global President, you will be eligible for an annual bonus based on Gap Inc. and/or Division financial objectives (weighted at 75%) as well as individual performance (weighted at 25%). Effective at the beginning of fiscal 2015, your annual target bonus will be 100% of your base salary. Depending on results, your actual bonus, if any, may be higher or lower and can reach a maximum of 200%. Your annual bonus for fiscal 2015 is scheduled for payment in March 2016. For the remainder of fiscal 2014, your annual target bonus will continue to be 55% of base salary and will be based on China financials as well as individual performance. You must be employed by Gap Inc. on the payment date to receive an award. Gap Inc. has the right to modify the program at any time. Management discretion can be used to modify the final award amount. Bonus payments are subject to supplemental income tax withholding.

Special Stock Award. Subject to approval by the Compensation and Management Development Committee of the Board of Directors (the “Committee”) and the provisions of Gap Inc.'s stock plan, you will be granted stock awards covering 75,000 shares of Gap Inc. common stock on the date the award is approved by the Committee (the “date of grant”). Awards are in the form of units that are paid in Gap Inc. stock upon vesting. The award will become vested as shown in the schedule below, provided you are employed by Gap Inc. on the vesting date. Awards are subject to income tax withholding upon vesting.

Stock Award of 37,500 shares vesting two years from date of grant.

Stock Award of 37,500 shares vesting three years from date of grant.

Long-Term Growth Program. Based on your position as Global President, you will be eligible to participate in the Long-Term Growth Program that rewards achievement of Gap Inc. and/or Division financial objectives over a three year period. You are eligible to participate in the program for the fiscal 2015-2017 performance cycle. Under the current program, your target opportunity to earn performance shares is 150% of your base salary. Depending on results, your actual performance shares, if any, may be higher or lower and can reach a maximum of 300% of target shares. Awards are made in the form of performance shares that are paid in Gap Inc. stock upon vesting. The number of earned performance shares, if any, will be determined no later than March 2018. Payout is subject to certification by the Committee and the provisions of Gap Inc.’s stock plan. Earned shares will vest 50% on the date the Committee certifies attainment and 50% one year from the certification date provided you are employed by Gap Inc. on the vesting dates. Gap Inc. has the right to modify the program at any time. Committee discretion can be used to modify the final share amount. Shares are subject to income tax withholding upon vesting.

The Long-Term Growth Program replaces the annual Performance Stock Award Program, which you will no longer be eligible for as of the beginning of fiscal 2015. However, to the extent earned, you will receive a final award under the Performance Stock Award Program in March 2015 for fiscal 2014 performance. Your performance stock award target remains 60% of base salary for the balance of fiscal 2014, and will continue to be based on China financial performance.

Jeff Kirwan

November 17, 2014

Jeff Kirwan

November 17, 2014

after the date of such separation (or such earlier time permitted under Section 409A(a)(2)(B)(i) of the Internal Revenue Code). This delay will only be imposed to the extent required to avoid the tax for which you would otherwise be liable under Section 409A(a)(1)(B) of the Internal Revenue Code. Any delayed payment instead will be made on the first business day following the expiration of the six month period, as applicable (or such earlier time permitted under Section 409A(a)(2)(B)(i) of the Internal Revenue Code). Payments that are not delayed will be paid in accordance with their terms determined without regard to such delay.

Recoupment Policy. As a Global President, the Company’s recoupment policy will apply to you. Under the current policy, subject to the discretion and approval of the Board, Gap Inc. will, to the extent permitted by governing law, in all appropriate cases as determined by the Board, require reimbursement and/or cancellation of any bonus or other incentive compensation, including stock-based compensation, awarded to an executive officer or other member of the Gap Inc.’s executive leadership team where all of the following factors are present: (a) the award was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement, (b) in the Board’s view, the executive engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and (c) a lower award would have been made to the executive based upon the restated financial results. In each such instance, Gap Inc. will seek to recover the individual executive’s entire annual bonus or award for the relevant period, plus a reasonable rate of interest.

Abide by Gap Inc. Policies/Protection of Gap Inc. Information. You agree to abide by all Gap Inc. policies including, but not limited to, policies contained in the Code of Business Conduct. As a Global President, you are subject to Stock Ownership Requirements for Gap Inc. Executives which can be found on Gapinc.com. You also agree to abide by the Confidentiality, Non-Compete and Non-Solicitation terms below during and after your employment with Gap Inc.

Repatriation. Gap Inc. will provide you with repatriation assistance for your move from Shanghai to New York in accordance with the Gap Inc. Long-Term Assignment Policy.

Domestic Relocation. Gap Inc. will provide you with relocation benefits in accordance with the Gap Inc. Domestic Relocation Policy. As part of the provision of this relocation package, it is expected that you will remain employed with the Company for a period of at least 24 months from your start date. To acknowledge your understanding and acceptance, please sign and return the included Payback Agreement. Please note that the relocation process cannot be started until a signed copy of the Payback Agreement has been received.

A summary of the repatriation and relocation benefits will be provided to you. The summary will also include information on the cessation of your international assignment allowances and benefits.

Jeff Kirwan

November 17, 2014

Non-Compete and Non-Solicitation. You recognize that Gap Inc. is engaged in an extremely competitive business throughout the United States and internationally, and that as Global President, Gap, you possess unique skills that provide a particular competitive value to Gap Inc. and will also be given access to Gap Inc.’s Confidential Information. For that reason, you agree that, during your employment and for a period of one year after the termination of your employment for any reason, you will not, directly or indirectly whether as an owner, operator, employee, consultant, advisor or agent:

(1) Become employed by, work for, perform services for, acquire an interest in (other than acquiring, solely as an investment, publicly traded shares of capital stock of any corporation), or participate, provide, supervise or manage activities for a Competitor in a capacity similar in function or purpose to that in which you were employed by Gap Inc. or in any other capacity in which you could use Gap’s Confidential Information to benefit the Competitor or hurt Gap Inc.’s business. For purposes of this paragraph, “Competitor” is defined as “any business, person or entity in the apparel and accessory retail business or any other business that Gap Inc. is engaged in that sells or is taking steps in anticipation of selling clothing, accessories, and related items or any goods that would displace or compete with the goods sold by Gap Inc., including without limitation Polo Ralph Lauren, Aeropostale, Abercrombie & Fitch, Charlotte Russe, J. Crew, Fast Retailing, H&M, Kohl’s, Macy’s, Children’s Place, Gymboree, Inditex Group, Express, Nautica, Tommy Hilfiger, American Eagle Outfitters, DKNY Jeans, Calvin Klein, Target, JC Penney, Nordstrom, Urban Outfitters, Ann Taylor, and Limited Brands. In the event that you are not otherwise offered severance pursuant to the Termination/Severance section above, the Company agrees to pay you your then current base salary for the period up to one year in which Gap Inc. intends to enforce the provisions of this subparagraph after the termination of your employment.

(2) Directly or indirectly solicit, call upon, recruit, or attempt to solicit any of Gap Inc.’s employees or in any way encourage any Gap Inc. employee to leave their employment with Gap Inc; or

(3) Interfere or attempt to interfere with Gap Inc.’s relationship with any person or entity who was an employee, consultant, customer, or vendor of Gap Inc. or who otherwise has or had a business relationship with Gap at the time your employment terminates.

You agree that the restrictions contained in this section are necessary to protect Gap Inc.’s legitimate business interests and are reasonably limited in time, geography and scope so that they do not impose a greater restriction upon you than is needed to achieve this purpose and to prevent a Competitor (as that term is defined above) from gaining an unfair advantage in the market place through the use of Gap Inc.’s Confidential Information.

Because of the valuable and unique nature of your position with Gap Inc. and the information to which you will be given access to in conjunction with your position, you understand that, if you violate this section, Gap Inc. will be irreparably harmed and that money damages will be inadequate to remedy any harm to Gap Inc.

Jeff Kirwan

November 17, 2014

as a result of the violation. Accordingly, you acknowledge that Gap Inc. shall have the right to obtain an injunction to enforce this section, in addition to any other rights or remedies it may be entitled to recover. You also agree that Gap Inc.’s failure or delay in exercising its rights under this section shall not operate as a waiver thereof.

In order to help avoid disputes and related litigation costs, during the restricted period, you agree to provide Gap Inc. with thirty (30) days advance written notice prior to accepting any position with a Competitive Business, and will engage in an interactive dialogue and exchange of information about the position you are considering. You understand that, to the extent you violate this section, the one year restriction shall be extended by the length of time in which you were in violation of this section.

You understand that the restrictions in this section shall survive the termination of your employment, for any reason.

Employment Status. You understand that your employment is “at-will”. This means that you do not have a contract of employment for any particular duration or limiting the grounds for your termination in any way. You are free to resign at any time. Similarly, Gap Inc. is free to terminate your employment at any time for any reason. The only way your at-will status can be changed is through a written agreement with Gap Inc., signed by an officer of Gap Inc. In the event that there is any dispute over the terms, enforcement or obligations in this letter, the prevailing party shall be entitled to recover from the other party reasonable attorney fees and costs incurred to enforce any agreements.

Please note that except for those agreements or plans referenced in this letter and attachments, this letter contains the entire understanding of the parties with respect to this offer of employment and supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) with respect to this offer. Please review and sign this letter and return it to me. You may keep one original for your personal records.

Jeff, welcome to your new position and congratulations on this latest achievement in your career path at Gap Inc.

Yours sincerely,

/s/ Dan Henkle

Dan Henkle

Senior Vice President, Human Resources, Gap Inc.

Confirmed this 18^th day of 11, 2014

/s/ Jeff Kirwan

Jeff Kirwan

Exhibit 10.117

[Gap Inc. Letterhead]

November 17, 2014

Andrea Owen

Dear Andi:

This letter is to confirm our offer to you as Global President, Banana Republic.

Salary. Effective on your Start Date, your annual salary will be $850,000, payable every two weeks.

Start Date. Your first day in your new position is anticipated to be January 5, 2015, reporting to the Chief Executive Officer of Gap Inc.

Annual Bonus. Based on your position as Global President, you will be eligible for an annual bonus based on Gap Inc. and/or Division financial objectives (weighted at 75%) as well as individual performance (weighted at 25%). Effective at the beginning of fiscal 2015, your annual target bonus will be 100% of your base salary. Depending on results, your actual bonus, if any, may be higher or lower and can reach a maximum of 200%. Your annual bonus for fiscal 2015 is scheduled for payment in March 2016. For the remainder of fiscal 2014, your annual target bonus will continue to be 55% of base salary and will be based on Gap Global financials as well as individual performance. You must be employed by Gap Inc. on the payment date to receive an award. Gap Inc. has the right to modify the program at any time. Management discretion can be used to modify the final award amount. Bonus payments are subject to supplemental income tax withholding.

Stock Award of 37,500 shares vesting two years from date of grant.

Stock Award of 37,500 shares vesting three years from date of grant.

The Long-Term Growth Program replaces the annual Performance Stock Award Program, which you will no longer eligible for as of the beginning of fiscal 2015. However, to the extent earned, you will receive a final award under the Performance Stock Award Program in March 2015 for fiscal 2014 performance. Your performance stock award target remains 60% of base salary for the balance of fiscal 2014, and will continue to be based on Gap Global financial performance.

Andrea Owen

November 17, 2014

Page 2

Andrea Owen

November 17, 2014

Page 3

Abide by Gap Inc. Policies/Protection of Gap Inc. Information. You agree to abide by all Gap Inc. policies including, but not limited to, policies contained in the Code of Business Conduct. As a Global President, you are subject to Stock Ownership Requirements for Gap Inc. Executives which can be found on Gapinc.com. You also agree to abide by the Confidentiality and Non-Solicitation terms below during and after your employment with Gap Inc.

Andrea Owen

November 17, 2014

Page 4

Employment Status. You understand that your employment is “at-will”. This means that you do not have a contract of employment for any particular duration or limiting the grounds for your termination in any way. You are free to resign at any time. Similarly, Gap Inc. is free to terminate your employment at any time for any reason. The only way your at-will status can be changed is through a written agreement with Gap Inc., signed by an authorized officer of Gap Inc. In the event that there is any dispute over the terms, enforcement or obligations in this letter, the prevailing party shall be entitled to recover from the other party reasonable attorney fees and costs incurred to enforce any agreements.

Please note that except for those agreements or plans referenced in this letter and attachments, this letter contains the entire understanding of the parties with respect to this offer of employment and supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) with respect to this offer. Please review and sign this letter and return it to me. You may keep one original for your personal records.

Andi, welcome to your new position and congratulations on this latest achievement in your career path at Gap Inc.

Yours sincerely,

/s/ Dan Henkle

Dan Henkle

Senior Vice President, Human Resources, Gap Inc.

Confirmed this 18^th day of November, 2014

/s/ Andrea Owen

Andrea Owen

Exhibit 10.133

[COMPANY LOGO]

Stephen Sunnucks

17 November 2014

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

Dear Stephen,

Further to our recent discussions regarding our proposed mutual separation and the consequent termination of your assignment to Gap Inc. and your employment and Directorship with GPS Great Britain Limited (the "Company"), I set out below the settlement package which the Company is prepared to offer you. This package is more generous than your statutory entitlements and consequently (and in accordance with your agreed contractual severance arrangements), it is subject to the terms and conditions detailed below. As this letter is intended to constitute a Settlement Agreement between us in accordance with Section 203(3) Employment Rights Act 1996, it is a fundamental condition of the Settlement Agreement that you must receive independent legal advice on its terms and effects and particularly its effect on your ability to pursue your rights before an Employment Tribunal and that you and your legal adviser must sign and date the Settlement Agreement and Appendices (as applicable) where marked and return one copy of each to me on 17 November 2014 (or, in the case of the US Release, on the Termination Date or such earlier date as requested by the Company provided you have had at least 21 days to consider this Settlement Agreement by then) to acknowledge your agreement with the terms and conditions.

As you will appreciate, this offer cannot remain open indefinitely and therefore if you have not returned the completed Settlement Agreement and Appendices to me by 17 November 2014 (or, in the case of the US Release, on the Termination Date or such earlier date as requested by the Company provided you have had at least 21 days to consider this Settlement Agreement by then), then it may be withdrawn.

Please note that, for the purposes of this Settlement Agreement, "Group Company" shall refer to any undertaking which is a parent undertaking of the Company or a subsidiary undertaking of the Company or of any such parent undertaking (as such expressions are defined in Sections 1161 and 1162 of the Companies Act 2006), including without limitation Gap Inc.

Your assignment to Gap Inc. and your employment with the Company will terminate on 19 December 2014 (the "Termination Date"). It is intended that this date will be your separation from service for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”). By your signature to this Settlement Agreement, you also resign any and all Directorships you may hold in the Company and any Group Companies with effect from

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

19 December without compensation for loss of office and you undertake to provide the Company with a signed director’s resignation letter, in the form attached at Appendix 3, in respect of each such company.

Pursuant to clause 3.2 of your service agreement with the Company dated 10 June 2009 as amended most recently by letter dated 30 May 2012 (the “Service Agreement”), you are entitled to 6 months’ notice of termination (the “Notice Period”). This Notice Period will commence on 17 November 2014 and will terminate on the Termination Date, which will be your last day of employment with the Company and the end of your assignment to Gap Inc. You will be paid basic salary in lieu of the remaining balance of the Notice Period following the Termination Date (“Payment in Lieu”) after deduction of the appropriate income tax and national insurance charges, in accordance with clause 3.3 of the Service Agreement and subject to your compliance with the terms and conditions detailed in this Settlement Agreement. Such Payment in Lieu will be paid in a single lump sum within 30 days of the Termination Date, subject to your compliance with the Compensation Conditions described below.

You will be required to continue working, under your existing terms and conditions, up to and including the Termination Date, unless we agree prior to that date that you may leave early, in which case you will be paid basic salary in lieu of any additional outstanding notice (after deduction of the appropriate income tax and National Insurance charges).

Legitimate and reasonable business expenses incurred prior to the Termination Date will also be paid if supported by proper receipts and invoices.

Subject to the Compensation Conditions detailed below, the Company will pay to you without admission of liability and you will accept by way of compensation for loss of employment and office an amount equivalent to one year’s basic salary at the applicable current rate of £640,000 (the "Compensation Payment") which will be paid in twelve equal monthly instalments between February 2015 and January 2016 (the “Post-termination Severance Period”), after deduction of income tax and National Insurance contributions as applicable, in accordance with the payment schedule below:


(a)	The first two instalments will be paid on the Company’s last regular pay date of each successive month commencing with February 2015;

(b) The 3^rd, 4^th and 5^th instalments will be paid in a lump sum on the Company’s first regular pay date on or after 22 June 2015;


(c)	The remaining 7 instalments will be paid on the Company’s last regular pay date of each successive month, commencing July 2015 and ending January 2016.

Notwithstanding the foregoing, in the event that the Company exercises its right to terminate your employment prior to the Termination Date, the payment dates above will be adjusted

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

to reflect your earlier separation from service to the extent required by Section 409A and your long-term assignment agreement with Gap Inc. dated 31 October 2012.

Payment of the Compensation Payment is subject to the following conditions (the “Compensation Conditions”):


•	Prior receipt by me of a signed, completed copy of this Settlement Agreement, the US Release (as defined below), director’s resignation letter and the Adviser’s certificate (in the forms attached at Appendices 1-3).


•	Your prior compliance with the conditions set out in Clause 6 below.


•	Your ongoing compliance with the conditions set out in Clauses 8, 10 and 12 below (including without limitation the Post-termination Severance Obligations).

Furthermore, the Compensation Payment shall be reduced and/or any remaining payments or instalments shall cease, as applicable, in the following circumstances (the “Reduction and Cessation Provisions”):

•

The Compensation Payment shall be reduced by an amount equivalent to any payments which you receive during the Post-termination Severance Period from any employment or professional relationship which is not with the Company or any Group Company. At the Company’s absolute discretion, these amounts may be deducted from any remaining instalments (such deductions to be made as the payments that are the basis of the reduction are received) of the Compensation Payment and/or you may be required to repay any remaining balance upon the Company’s request.

•

In the event that (i) you are in actual or potential (in the Company’s reasonable opinion) breach of this Settlement Agreement or (ii) if, during the Post-termination Severance Period, you accept any other employment or professional relationship with another company primarily engaged in the apparel design or apparel retail business or any retailer with apparel sales in excess of US$500 million annually, all and any further instalments or payments of the Compensation Payment will cease immediately.


4.	Subject to the same conditions as detailed in the Compensation Conditions above:


(a)	You will be eligible for a prorated annual bonus as described in clause 7.4 of the Service Agreement for the fiscal year 2014, based on actual financial results and 100% standard for the individual component, to be calculated at the absolute discretion of the Company (the “Bonus”). The Bonus will be paid in 2015 at the time

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

annual bonuses for the fiscal year 2014 are paid but in any event no later than the 15th day of the third month following the end of the Company’s 2014 fiscal year.

(b)

You will be eligible for assistance during the Post-termination Severance Period in relation to your tax return preparation/tax equalization benefits, as detailed in this Clause 4(b). You will continue to be covered under the Gap Inc. Tax Equalization program for tax years 2014/2015 and 2015/2016 and PricewaterhouseCoopers (“PwC”) will continue to provide these services as per the Gap Inc Tax Equalization policy. PwC will continue to prepare your US income tax returns for tax year 2014 and 2015 (and 2016, if necessary). For your UK tax returns for tax years 2014 and 2015 (and 2016, assuming US based income from Gap, Inc. is paid to you in 2016), you shall either: (i) have Gap Inc. retain PWC to prepare them; or (ii) prepare them at your own expense using your own accountant, on the condition that you provide PwC with a copy of your UK tax returns for 2014 and 2015 (and 2016, if a US tax filing is required for 2016), within 30 days of filing the returns. PwC will determine the need for any additional tax assistance after that time relating to your employment with the Company or assignment to Gap Inc. Any foreign tax credits resulting from Company-paid taxes in connection with your assignment to Gap Inc., which offset your home country (UK) tax, will be for the benefit of the Company. This includes foreign tax credit carryovers or carry-backs to non-assignment years. Any tax benefits realized from the use of such credits must be returned to the Company within sixty (60) days of filing your UK tax return. Should you realize tax benefits in future years from the utilization of foreign tax credit carryovers or carrybacks referenced above, you will be required to reimburse the Company for the amount of the tax benefit realized within 60 days of filing your UK tax return. Although PwC may (at the Company’s sole discretion) prepare your individual income tax returns beyond tax year 2015 if those tax returns relate to income received from the Company or any Group Company pursuant to the Service Agreement, your assignment to Gap Inc. or this Agreement, you will be responsible for paying all home country taxes in that event. You are required to provide all reasonable assistance and co-operation to PwC in relation to any tax return filing or required information for their preparation or otherwise in relation to the tax return preparation/tax equalization benefits and if you fail to provide the required receipts and tax documentation when requested, you will be responsible for paying any and all penalties and interest that may be incurred due to late tax filing. When tax filing assistance in relation to your employment with the Company or assignment to Gap Inc. is no longer necessary, PwC will prepare a final tax settlement calculation. If the Company reimburses you as a result of this settlement calculation, you will be compensated to offset the additional income taxes you will owe due to this final tax reimbursement (the “gross-up”). This gross-up is required when the Company reimburses home- or assignment-country income taxes. Such reimbursements are

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

generally considered taxable income for tax purposes (and generally, for assignment-country tax purposes as well). Under the Tax Equalization Policy, any tax paid with respect to income tax reimbursements is fully reimbursed. Notwithstanding the foregoing and for the avoidance of doubt, the foregoing tax equalization benefits shall not reimburse you or otherwise compensate you for any taxes or related interest and penalties imposed under Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”).

(c)

The Company will arrange for continued coverage (subject always to the rules of the relevant plan and the approval of the insurer in each case) of private medical and dental health insurance for you and your eligible dependents, if any, of an equivalent of the Company’s current contribution to the cost as at the Termination Date (or a payment in lieu of continued coverage, in an amount equivalent to such cost of contributions, in the event that the Company is unable to arrange continued coverage for whatever reason), for up to 18 months from the start of the Notice Period, provided that such coverage shall cease immediately in the event of the circumstances detailed in the Reduction and Cessation Provisions.


(d)	You will be eligible for repatriation to the UK pursuant to the Company’s Long Term Assignment policy provided that you repatriate within 30 days of the Termination Date or by 31 January 2015, whichever is the later.

(e)

You will be entitled to the accelerated vesting (but not settlement) of your restricted stock units (“RSUs”) and performance shares that remain subject only to time vesting conditions (excluding any performance shares that remain subject to performance-based vesting conditions) which are scheduled to vest in March 2015 or otherwise prior to 1 April 2015, subject to the terms and conditions of the applicable award agreement and plan. Your rights, entitlements and obligations in respect of all vested and unvested RSUs, performance shares or stock options remain subject to the terms of the applicable award agreement and plan.


(f)	Your entitlement to any other benefit (contractual or otherwise) from the Company or any Group Company will terminate on the Termination Date, save as detailed in this Settlement Agreement.


(g)	To the extent applicable, the Company shall maintain directors’ and officers’ liability insurance for your benefit on terms and conditions generally applicable to the Company’s other senior executives, in relation to any directorships or officerships you have held with the Company or any Group Company during your employment with the Company.

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

(h)

The intent of the parties is that payments and benefits to you under this Settlement Agreement and otherwise comply with Section 409A and the regulations and guidance promulgated thereunder (or an exemption therefrom) and, accordingly, to the maximum extent permitted, they shall be interpreted to be in compliance therewith (or an exemption therefrom) and any provision that is ambiguous as to its compliance with Section 409A will be read in a manner to comply with Section 409A (or an exemption therefrom). The preceding sentence, however, shall not be construed as a guarantee by the Company, Gap Inc. or any other person or entity of any particular tax effect and you are advised to consult with your tax advisor with respect to the tax consequences of this Settlement Agreement.

With respect to reimbursements or in-kind benefits provided to you hereunder or otherwise that are not exempt from Section 409A (other than tax equalization payments and tax gross-up payments, as described below), the following rules shall apply: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any one of your taxable years shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, (ii) in the case of any reimbursements of eligible expenses, reimbursement shall be made on or before the last day of your taxable year following the taxable year in which the expense was incurred, (iii) the right to reimbursement or in-kind benefits shall not subject to liquidation or exchange for another benefit.

Each payment hereunder and under the Service Agreement shall, to the maximum extent permitted under Section 409A, be treated as a separate payment for purposes of Section 409A.

Any tax equalization payments (within the meaning of Treas. Reg. Section 1.409A-1(b)(8)(iii)) made to you hereunder or otherwise shall be made in accordance with such section to the extent necessary to avoid taxation under Section 409A. Any tax gross-up payments (within the meaning of Treas. Reg. Section 1.409A-3(i)(1)(v)) made to you hereunder or otherwise shall be made in accordance with such section to the extent necessary to avoid taxation under Section 409A.

Any offset of any payment or benefit hereunder or under your Service Agreement shall be done in a manner intended to avoid taxation under section 409A of the Internal Revenue Code of 1986 as amended. To the extent it is not possible to avoid such taxation, then no offset shall be made.


5.	You agree that you are solely responsible for any charge to tax or employee's National Insurance which may arise on the Compensation Payment and/or the payment in lieu of notice and/or the benefits received by you in accordance with Clause 4 above or otherwise and/or arising out of your termination and/or this Settlement Agreement generally, save as

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

detailed otherwise in Clause 4(b) above and/or to the extent that such tax or National Insurance has already been deducted by the Company from your salary, notice payment, the Compensation Payment or otherwise. You also agree to indemnify us upon request within 28 days of written notice if any such charge to tax or employee's National Insurance should arise on the Compensation Payment, notice payment or on any of the other terms or benefits of this Settlement Agreement or if any fine, interest or costs become payable. No payment of any charge to tax, National Insurance or fine or interest will be made by us without particulars of the proposed payment being given to you first and you having the opportunity at your own expense to make representations to HM Revenue and Customs. The Company agrees that this indemnity shall not cover any fine, interest or costs which become payable by reason of any undue delay on the part of the Company. Further, you undertake to keep the Company fully informed in respect of and to return to the Company any tax benefits you realize in the UK as a result of the double taxation of your Gap-related income and withholdings made in the US by the Company or Gap Inc. as applicable, in that respect.

Payment of the Compensation Payment is conditional upon you first returning any and all property belonging to the Company or any Group Company which remains in your possession or control and any other documentation or property belonging to or entrusted to the Company or Group Company which is now in your possession or control including without limitation keys, documents, files, records, tapes, photographs, microfiches, magnetic disks, software, mobile telephones, SIM cards, computer equipment, swipe-cards, passwords, security codes and season tickets. For the avoidance of doubt, any copies of the Company's or any Group Company's property or any other documentation (in whatever medium) must be returned at the same time and you warrant that you have not and will not retain any such copies.

You warrant further that on or before the Termination Date, you will delete any information belonging to the Company or any Group Company from any personal computer that you may have at home or elsewhere other than the Company’s offices, without retaining any copies of any such information, in electronic or other format, and will permit the Company to have access to such computer on reasonable request and notice to confirm such deletion (including by way of forensic examination). You undertake to notify the Company of any and all passwords used by you in relation to its computer systems promptly on request and in any event on or before the Termination Date.

You accept the terms set out in this Settlement Agreement in full and final settlement of all claims of any nature whatsoever, in the UK, US or any other jurisdiction and howsoever arising, which you may have against the Company, Gap Inc. or any other Group Company or any of its or their officers or employees arising out of or in connection with your employment and/or Directorship and/or assignment with the Company, Gap Inc. or any other Group Company or its/their termination, and you agree to waive all such claims and other rights

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

against the Company, Gap Inc. and/or any other Group Company or its/their officers or employees if applicable, including without limitation the following:


(a)	any claim for unfair dismissal;


(b)	any claim for statutory or contractual redundancy payments;


(c)	any claim for unlawful sex discrimination and/or victimisation;


(d)	any claim for unlawful race discrimination and/or victimisation;


(e)	any claim for unlawful disability discrimination and/or victimisation;


(f)	any claim for unlawful deductions from wages;


(g)	any claim under the Equal Pay Act 1970 or Article 141 of the Treaty of Rome;


(h)	any complaint relating to a protective award under the Trade Union and Labour Relations (Consolidation) Act 1992;


(i)	any claim under Regulations 30, 31, 32 or any other provision of the Working Time Regulations 1998;


(j)	any claim under Sections 11, 17, 24, 25, 26 or any other provision of the National Minimum Wage Act 1998;


(k)	any claim under the Maternity and Parental Leave Regulations 1999;


(l)	any claim under the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002;


(m)	any claim under the Employment Equality (Religion or Belief) Regulations 2003;


(n)	any claim under the Employment Equality (Sexual Orientation) Regulations 2003;


(o)	any claim under the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000;


(p)	any claim for wrongful dismissal;


(q)	any claim in respect of bonus, commission, profit share, share options or any other benefits;


(r)	any other claim for damages for breach of contract howsoever arising;

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT


(s)	any claim under section 47B of the Employment Rights Act 1996;


(t)	any claim under the Employment Equality (Age) Regulations 2006;


(u)	any claim under the Equality Act 2010;


(v)	any existing personal injury claims of which you are or ought to be aware as at the date of signing this Agreement;


(w)	any latent personal injury claims, whether or not you are or ought to be aware of them, arising or which might arise as a result of acts, omissions, incidents or facts prior to the date of this Agreement;

but excluding any future personal injury claims (and in signing this Settlement Agreement, you confirm that you are not and ought not to be aware of any personal injury claim or any acts, omissions, incidents or facts which may lead to such claim as at the date of signing this Settlement Agreement) or in relation to accrued pension rights.

You confirm that you have received independent legal advice from:-


•	Name of legal adviser (the "Adviser"): Richard Isham


•	Name of Adviser's firm: Wedlake Bell LLP


•	Address of firm: 52 Bedford Row, London WC1R 4LR

You confirm that the Adviser has specifically advised you on the terms and effect of this Settlement Agreement and in particular its effect on your ability to pursue your rights in relation to any of the above claims before an Employment Tribunal. The Adviser has also confirmed to you that he/she is a relevant independent adviser for the purposes of Section 203 Employment Rights Act 1996, Section 77 Sex Discrimination Act 1975, Section 72 Race Relations Act 1976, Section 9 and Schedule 3A Disability Discrimination Act 1995, Paragraph 2(2) Schedule 4 of the Employment Equality (Religion or Belief) Regulations 2003, Paragraph 2(2) Schedule 4 of the Employment Equality (Sexual Orientation) Regulations 2003, Section 49 National Minimum Wage Act 1998, Regulation 35 Working Time Regulations 1998, Section 288 Trade Union and Labour Relations (Consolidation) Act 1992 (as amended) and Regulation 43, Schedule 5 Part 1 Employment Equality (Age) Regulations 2006 and Section 147 of the Equality Act 2010 (the "Statutory Provisions") and that his firm maintains a contract of insurance or an indemnity provided for members of a profession or professional body in respect of the advice provided to you. After receiving that advice, you agree with the Company that this Settlement Agreement satisfies the conditions for regulating Compromise Agreements and Settlement Agreements under the Statutory Provisions listed above.

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT


8.	You warrant and undertake to the Company (for itself and on behalf of all Group Companies) as follows:


(a)	you have not presented a claim form at an office of the Employment Tribunals, or issued a claim form in the High Court or County Court, in respect of any claim in the United Kingdom in connection with your employment and/or directorship with the Company, your assignment to Gap Inc. or its/their termination;


(b)	you have not commenced any other legal proceedings in the United Kingdom, the United States, or any other jurisdiction, in respect of any claim in connection with your employment or directorship with the Company, your assignment to Gap Inc. or its/their termination;

(c)

other than those claims referred to in Clause 7 above and having taken the legal advice referred to in this Settlement Agreement you are not aware of any claim you may have against the Company, Gap Inc. and/or any other Group Company of whatever nature arising out of your employment and directorship with the Company, your assignment to Gap Inc. or its/their termination, nor of any circumstances which might give rise to such a claim;

(d)

you have provided to the Adviser referred to in Clause 7 above all relevant information relating to your employment and directorship with the Company, your assignment to Gap Inc. and its/their termination to enable the Adviser to advise you on any statutory claims you may have in the UK in connection therewith and after taking that advice, the claims which you assert you have or may have against the Company, Gap Inc. or any other Group Company are those referred to in sub-clauses (a), (b), (d), (f), (i), (j), (p), (q), (r), (t), (u), (v) and (w) of Clause 7;

(e)

you will not submit or pursue any grievances or appeals to the Company or any Group Company in relation to any fact or matter of which you are aware at the date of this Settlement Agreement relating to your employment and/or office and/or its/their termination and you will not make or pursue a Data Protection Act subject access request to the Company or any Group Company. You agree that any such grievances and/or appeals and/or requests made prior to the date of this Settlement Agreement shall be deemed to have been withdrawn by you as at the date of this Settlement Agreement;


(f)	you have not done any act or omitted to do any act which:


(i)	if it was done or omitted to have been done (as appropriate) and had come to the Company’s attention prior to the Termination Date

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

would have entitled the Company to terminate your employment summarily and without compensation; or


(ii)	if it had been done or omitted to have been done (as appropriate) after the date of this Settlement Agreement would have been in breach of the terms of this Settlement Agreement;


(g)	you have committed no breach of duty (including fiduciary duty) owed to the Company or any Group Company;


(h)	you have not at the date of completion of this Settlement Agreement accepted, agreed to accept or been made any offer of a new contract of service or for services nor entered into any form of arrangement that such an offer will be made at any time in the future.

You acknowledge that the Compensation Payment includes any protective award to which you may be entitled in connection with your employment with the Company or any Group Company or its termination under Regulations 13-15 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (as amended) or under Chapter II of the Trade Union and Labour Relations (Consolidation) Act 1992, to the extent applicable. In the event that you make any application for such an award or bring any other claim against the Company, Gap Inc. and/or any Group Company for any of the matters referred to in Clause 7 above and you obtain an award or judgment against the Company, Gap Inc. and/or any other Group Company notwithstanding the terms of this Settlement Agreement, the Compensation Payment paid or payable under this Settlement Agreement and the value of the benefits detailed in Clause 4 shall be set off in full or partial satisfaction of such award or judgment together with any interest or costs associated therewith except as would result in taxation under IRS Code Section 409A. Without prejudice to its set-off rights under this Clause 9 and/or any other rights or remedies which it may have against you, the Company may require you forthwith to pay to the Company a sum equivalent to the Compensation Payment and/or the value of the benefits detailed in Clause 4 and in that case such sum shall be recoverable by the Company as a debt, in the event that you have commenced or in the future commence any legal proceedings of any nature against the Company, Gap Inc. or any other Group Company in breach of this Settlement Agreement and/or if you are otherwise in fundamental breach of any obligation, warranty or undertaking contained in this Settlement Agreement.

10.

Subject to Clause 11 below you agree to keep the circumstances leading up to the termination of your employment and the completion of this Settlement Agreement confidential save as required by law or a regulatory authority or HMRC (or the SEC, IRS or any other regulatory or tax authority) or to your immediate family or in relation to the duties of your legal or financial advisers (provided that disclosure to your family or professional advisers must be

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

on terms requiring them to maintain the confidentiality obligations detailed in this Settlement Agreement). You warrant that you will not directly or indirectly make, issue or publish or cause to be made issued or published any derogatory or otherwise comments which may harm the Company, Gap Inc. or any other Group Company or any of its/their officers, employees or shareholders or its/their reputation and that you have not done so prior to the completion of this Settlement Agreement.


11.	Upon request of a prospective employer addressed to Dan Henkle, the Company will provide a suitable written factual reference covering the period of your employment with us and will use reasonable endeavours to ensure that any verbal reference given is in similar terms.

In addition, the Company will (or will procure that Gap Inc. will) issue a press release (the “Press Release”) incorporating the following terms, or terms consistent with them:

“Stephen Sunnucks will leave the company on December 19 after steering the growth of its namesake brand to almost 50 countries over the past decade…Over the past decade, Steve helped make Gap Inc. a much stronger and more global company. We appreciate his hard work and passion for our brands, people and customers.”

You and the Company agree that neither party will disclose, publish or issue a statement regarding the circumstances of or reasons for your departure save in terms consistent with the Press Release and/or any publicly available documents and/or save as may be required by law or a regulatory authority or HMRC (or the SEC, IRS or other regulatory or tax authority) or to our respective legal advisers.


12.	In specific consideration of the Compensation Payment and the benefits detailed in Clause 4 above, you covenant with the Company as follows (the “Post-termination Severance Obligations”):


(a)	You will sign the US Release attached at Appendix 2 and deliver it to me on the Termination Date (or such earlier date as requested by the Company provided you have had at least 21 days to consider this Settlement Agreement by then).

(b)

You will promptly comply with all tax filings in the UK and US and will fully and promptly disclose all necessary tax-related documents to PwC as required by the Company or PwC from time to time. You will also co-operate fully with PwC and the Company and provide all reasonable assistance to ensure that the Company (and/or any applicable Group Company) is able to recover any applicable foreign tax credits and/or any tax benefits realized due to double taxation on your Gap-related income which you receive directly in the UK.

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT


(c)	You acknowledge and agree that your duties of confidentiality (both contractual and common law) to the Company, Gap Inc. and any other Group Company will continue to apply after the termination of your employment and assignment and you warrant that you have not directly or indirectly breached those duties prior to completion of this Settlement Agreement.


(d)	You will continue to comply with the restrictive covenants and confidentiality provisions detailed in clauses 13 and 15 of the Service Agreement and in the Post-Termination Restrictions paragraph of your long-term assignment letter to Gap Inc. dated 31 October 2012 (the “Assignment Letter”), all of which shall remain in full force and effect both before and after the Termination Date.

(e)

Prior to and during the Post-termination Severance Period (and without prejudice to your duties under this Settlement Agreement and/or under your Service Agreement or Assignment Letter generally), you undertake to provide such reasonable assistance as the Company, Gap Inc. or any other Group Company may require from time to time in relation to any queries regarding any client or business matters in which you or your reports have been involved, the conduct of any internal or external investigation, the defense or prosecution of any current or future claim that may be made against or by the Company, Gap Inc. or any Group Company, including but not limited to any proceeding before any arbitrary, administrative, regulatory, judicial, legislative or other body or agency to the extent such claims, investigations or proceedings relate directly or indirectly to services performed, or required to be performed by you at any time, pertinent knowledge possessed by you, or any act or omission by you or your reports.

13.

For the avoidance of doubt it is intended that this Agreement does confer rights on any Group Company who may enforce such rights against you pursuant to the Contracts (Rights of Third Parties) Act 1999. However nothing in this Agreement is intended to confer any rights on any other person not a party to this Agreement and no consent of any such person shall be needed for the termination, rescission or amendment of this Agreement or any of its terms.

14.

Save in relation to any provisions of the Service Agreement and Assignment Letter which are stated to apply following the termination of your employment, this Agreement sets out the entire agreement between you and the Company, Gap Inc. and any other Group Company in relation to your rights arising upon or in relation to your employment or its termination. You acknowledge and warrant to the Company that you are not entering into this Agreement in reliance upon any representation not expressly set out herein.


15.	This Agreement shall be governed by and construed in accordance with the laws of England and Wales and the parties submit to the exclusive jurisdiction of the English Courts and

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

Tribunals with regard to any dispute or claim arising under this Agreement, save that the US Release shall be subject to the laws of the State of New York and the parties submit to the exclusive jurisdiction of the Federal and State Courts in New York with regard to any dispute or claim arising under the US Release.


16.	Although this Agreement is marked Without Prejudice & Subject to Contract, upon completion and return of this Agreement and the Adviser’s certificate to me its without prejudice nature shall cease and it shall become open and binding.

I trust that the above terms are acceptable and on that assumption I look forward to receiving a completed copy of this Agreement. If, however, you have any queries in respect of the above terms, please do not hesitate to contact me or, if your Adviser has any particular queries, please arrange for them to contact the Company’s solicitor direct (Nicola Whiteley of Orrick, Herrington & Sutcliffe (Europe) LLP, Telephone No: 020 7862 4670).

I look forward to hearing from you.

Yours sincerely,

Dan Henkle

Senior Vice President, Human Resources

Authorized on Behalf of GPS (Great Britain) Limited

...................................................................................................................................

I accept the above terms and Agreement.

Signed /s/ Stephen Sunnucks Dated 17/11/14

Stephen Sunnucks

GPS (Great Britain) Limited

APPENDIX 1 – ADVISER’S CERTIFICATE

I, Richard Isham, of Wedlake Bell, certify as follows:

I am a relevant independent adviser for the purposes of Section 203 Employment Rights Act 1996, Section 77 Sex Discrimination Act 1975, Section 72 Race Relations Act 1976, Section 9 and Schedule 3A Disability Discrimination Act 1995, Paragraph 2(2) Schedule 4 of the Employment Equality (Religion or Belief) Regulations 2003, Paragraph 2(2) Schedule 4 of the Employment Equality (Sexual Orientation) Regulations 2003, Section 49 National Minimum Wage Act 1998, Regulation 35 Working Time Regulations 1998, Section 288 Trade Union and Labour Relations (Consolidation) Act 1992 (as amended), Regulation 43 and Schedule 5 Part 1 Employment Equality (Age) Regulations 2006 and Section 147 of the Equality Act 2010.


2.	I confirm that at all relevant times there was and is in force a contract of insurance or an indemnity provided for members of a profession or professional body covering the risk of a claim by Stephen Sunnucks in respect of loss arising in consequence of the advice I have given him in connection with this matter.


3.	I have advised Stephen Sunnucks in connection with the completion of this Agreement and specifically on the terms and effect of the Agreement and its effect on his ability to pursue his rights before an Employment Tribunal including in particular, all of those claims listed in Clause 7 of the attached Settlement Agreement.


4.	I am not acting (and have not acted) in relation to this matter for GPS (Great Britain) Limited, Gap Inc, or any associated employer or company.

Signed /s/ Richard Isham Dated 17 November 2014

Richard Isham

GPS (Great Britain) Limited, a company registered in England and Wales with company number 02275771.

Registered office at Berkeley Square House, Berkeley Square, London W1J 6BS, United Kingdom.

GPS (Great Britain) Limited

APPENDIX 2 - US RELEASE

In consideration of the payment and benefits described in the attached Settlement Agreement, I, Stephen Sunnucks of _______________________, hereby release and forever discharge GPS (Great Britain) Limited, Gap Inc. and any other subsidiary or affiliate (collectively referred to herein as the “Company”) and its/their officers, directors, agents and employees from all claims of any kind, which I now have or may have, whether they be based in tort, contract or statute, known or unknown. These claims include, but are not limited to, all claims and rights I may have under Title VII of the Civil Rights Act of 1964, as amended, the Worker Adjustment and Retraining Notification Act (“WARN”), the federal Age Discrimination in Employment Act, as amended, the Americans with Disabilities Act, as amended, New York State Human Rights Law, or other similar federal, state, local or common laws, except those claims that I cannot lawfully waive.

I understand that this is a legally binding Agreement and it includes a release of any and all age discrimination claims under the federal Age Discrimination in Employment Act, as amended. I acknowledge that entering into this Agreement is purely voluntary on my part, and I have carefully read and fully understand the provisions of this Agreement. I have had at least twenty-one (21) calendar days to consider this Agreement. After signing this Agreement I understand that I may change my mind within 7 days. In order to do so, I must notify Paul Adams or Michelle Banks of Gap Inc. in writing within 7 days after the date I sign this Agreement that I intend to revoke it or I will be forever bound by the terms of this Agreement. I further understand that any payments or benefits described in the attached Settlement Agreement will not be made if I revoke this Agreement. Because of the revocation period, this Agreement will not become effective and enforceable until the eighth (8th) day after the date I sign it. I have been advised to consult an attorney prior to signing this Agreement.

This Release shall be governed by and construed in accordance with the laws of the State of New York and the parties submit to the exclusive jurisdiction of the Federal and State Courts in New York with regard to any dispute or claim arising under this Release.

Signed /s/ Stephen Sunnucks Dated 19/12/14

Stephen Sunnucks

GPS (Great Britain) Limited, a company registered in England and Wales with company number 02275771.

Registered office at Berkeley Square House, Berkeley Square, London W1J 6BS, United Kingdom.

GPS (Great Britain) Limited

APPENDIX 3 – LETTER OF RESIGNATION AS DIRECTOR

The Board of Directors

[Insert Relevant Companies’ Names and Addresses]

19 December 2014

Dear Sirs

I hereby resign with immediate effect as a director of the [above] Compan[y][ies] and confirm that I have no claim whatsoever outstanding against the Company in respect thereof or otherwise howsoever save as set out in a Settlement Agreement dated 17 November 2014.

Yours faithfully

Stephen Sunnucks

GPS (Great Britain) Limited, a company registered in England and Wales with company number 02275771.

Registered office at Berkeley Square House, Berkeley Square, London W1J 6BS, United Kingdom.

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

[Wedlake Bell Letterhead]

Nicola Whiteley

Orrick, Herrington & Sutcliffe (Europe) LLP

107 Cheapside

London

EC2V 6DN

Dear Nicola

Your Clients: Gap Inc and GPS (Great Britain) Ltd

Our Client: Stephen Sunnucks

I now write to certify as follows:


2.	I confirm that at all relevant times there was and is in force a contract of insurance or an indemnity provided for members of a profession or professional body covering the risk of a claim by Stephen Sunnucks in respect of loss arising in consequence of the advice I have given him in connection with this matter.


3.	I have advised Stephen Sunnucks in connection with the completion of this Agreement and specifically on the terms and effect of the Agreement and its effect on his ability to pursue his rights before an Employment Tribunal including in particular, all of those claims listed in Clause 7 of the attached Settlement Agreement.


4.	I am not acting (and have not acted) in relation to this matter for GPS (Great Britain) Limited, Gap Inc, or any associated employer or company.

Signed /s/ Richard Isham Dated 17 November 2014

Richard Isham

Exhibit 12

Ratio of Earnings to Fixed Charges



	Fiscal Year (number of weeks)
($ in millions except ratios)	2014 (52			2013 (52)			2012 (53)			2011 (52)			2010 (52)
Earnings before income taxes and interest expense	$	2,088		$	2,154		$	1,948		$	1,443		$	1,974
Less: capitalized interest, net	(7		)	(8		)	(6		)	(4		)	—
Total fixed charges	551			522			675			644			534
Earnings for calculation	$	2,632		$	2,668		$	2,617		$	2,083		$	2,508
Fixed charges:
Gross interest incurred	$	75		$	61		$	87		$	74		$	(8	)
Interest portion of rent expense (1)	476			461			588			570			542
Total fixed charges	$	551		$	522		$	675		$	644		$	534
Ratio of earnings to fixed charges	4.8			5.1			3.9			3.2			4.7

__________

(1) The interest portion of rent expense for fiscal 2014 and 2013 was calculated as 36 percent of rent expense. For all other periods presented, the interest portion of rent expense was calculated as 48 percent of rent expense.

Exhibit 21

The Gap, Inc.

Subsidiary List as of January 31, 2015



Athleta (ITM) Inc.	California
Athleta LLC	Delaware
Athleta, Inc.	Delaware
Banana Republic (Apparel), LLC	California
Banana Republic (ITM) Inc.	California
Banana Republic (Japan) Y.K.	Tokyo, Japan
Banana Republic, LLC	Delaware
Corporate HQ Support Mexico, S. de R.L. de C.V.	Mexico
Direct Consumer Services, LLC	California
Forth & Towne (Apparel) LLC	California
Forth & Towne (Japan) Y.K.	Tokyo, Japan
Gap (Apparel), LLC	California
Gap (Beijing) Commercial Co., Ltd.	Beijing, China
Gap (Canada) Inc.	Canada
Gap (France) S.A.S.	Paris, France
Gap (Italy) Srl.	Milan, Italy
Gap (ITM) Inc.	California
Gap (Japan) K.K.	Tokyo, Japan
Gap (Netherlands) B.V.	Amsterdam, The Netherlands
Gap (Puerto Rico), Inc.	Puerto Rico
Gap (RHC) B.V.	Amsterdam, The Netherlands
Gap (Shanghai) Commercial Co., Ltd.	Shanghai, China
Gap (UK Holdings) Limited	England and Wales
Gap Europe Limited	England and Wales
Gap International Sales, Inc.	Delaware
Gap International Sourcing (Americas) LLC	California
Gap International Sourcing (California), Inc.	California
Gap International Sourcing (Holdings) Limited	Hong Kong
Gap International Sourcing (India) Private Limited	New Delhi, India
Gap International Sourcing (JV), LLC	California
Gap International Sourcing (Mexico) S.A. de C.V.	Mexico
Gap International Sourcing (U.S.A.) Inc.	California
Gap International Sourcing Limited	Hong Kong
Gap International Sourcing Pte. Ltd.	Singapore
Gap International Sourcing, Inc.	California
Gap Limited	Hong Kong



Gap Services, Inc.	California
Gap Stores (Ireland) Limited	Dublin, Ireland
Gap Taiwan Limited	Taipei, Taiwan
GPS (Great Britain) Limited	England and Wales
GPS Consumer Direct, Inc.	California
GPS Corporate Facilities, Inc.	California
GPS Import Services, S. de R.L. de C.V.	Mexico
GPS Real Estate, Inc.	California
GPS Services, Inc.	California
GPS Sourcing (South Africa) (Proprietary) Limited	Durban, South Africa
GPS Strategic Alliances LLC	Delaware
GPSDC (New York) Inc.	Delaware
Intermix Canada Inc.	New Brunswick
Intermix Holdco Inc.	Delaware
Intermix (ITM) Inc.	California
Old Navy (Apparel), LLC	California
Old Navy (Canada) Inc.	Canada
Old Navy (ITM) Inc.	California
Old Navy (Japan) Y.K.	Tokyo, Japan
Old Navy, LLC	Delaware
ON Stores Mexico, S. de R.L. de C.V.	Mexico
Piperlime (Japan) G.K.	Tokyo, Japan
WCB Twenty-Eight Limited Partnership	Delaware

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 2-72586, No. 2-60029, No. 33-39089, No. 33-40505, No. 33-54686, No. 33-54690, No. 33-56021, No. 333-00417, No. 333-12337, No. 333-36265, No. 333-68285, No. 333-72921, No. 333-76523, No. 333-47508, No. 333-59292, No. 333-88470, No. 333-90414, No. 333-103128, No. 333- 105934, No. 333- 129986, No. 333-136295, No. 333-147986, No. 333-151560, No. 333-173146, No. 333- 189232, No. 333-192723 and No. 333-200806 on Form S-8, and No. 333-173348 on Form S-3 of our report dated March 23, 2015, relating to the consolidated financial statements of The Gap, Inc. and subsidiaries (the “Company”) and the effectiveness of the Company's internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the fiscal year ended January 31, 2015.

/s/ Deloitte & Touche LLP

San Francisco, California

March 23, 2015

Exhibit 31.1

CERTIFICATIONS

I, Arthur Peck, certify that:


1.	I have reviewed this annual report on Form 10-K of The Gap, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 23, 2015

/s/ Arthur Peck

Arthur Peck

Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

CERTIFICATIONS

I, Sabrina L. Simmons, certify that:


1.	I have reviewed this annual report on Form 10-K of The Gap, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 23, 2015

/s/ Sabrina L. Simmons

Sabrina L. Simmons

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Exhibit 32.1

Certification of the Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of The Gap, Inc. (the “Company”) on Form 10-K for the period ended January 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Arthur L. Peck, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Arthur Peck

Arthur Peck

Chief Executive Officer

March 23, 2015

Exhibit 32.2

Certification of the Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of The Gap, Inc. (the “Company”) on Form 10-K for the period ended January 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sabrina L. Simmons, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Sabrina L. Simmons

Sabrina L. Simmons

Executive Vice President and Chief Financial Officer

March 23, 2015

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