Gap (GPS)

Corporate Governance

Notwithstanding anything to the contrary in any of our previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this Proxy Statement or future filings with the Securities and Exchange Commission, in whole or in part, the description set forth in this section below shall not be deemed to be incorporated by reference into any such filing.

Gap Inc. was founded in 1969 on the principle of conducting business in a responsible, honest and ethical manner. For the Company, good corporate governance means going beyond compliance. It means taking a leadership role in monitoring, adopting and maintaining practices that represent strong business ethics — and ensuring we communicate transparently and consistently with our shareholders.

Our adoption in September 2005 of a majority vote policy for director elections in our Corporate Governance Guidelines is one example of our ongoing commitment to adopting corporate governance best practices. Like us, most U.S. companies are incorporated in states with a default plurality standard for electing directors. This means that in a typical uncontested director election, where the number of nominees is equal to the number of seats, a candidate receiving less than a majority may be elected. In the last year, shareholder interest in changing from a plurality to a majority vote standard for electing directors emerged as a critical corporate governance issue.

We believe that an open and ongoing dialogue with shareholders and other external governance stakeholders is important to an understanding of the varying perspectives related to corporate governance issues. While assessing the legal and practical feasibility of adopting a majority vote standard, we sought the perspective of external governance stakeholders, including the Council of Institutional Investors (CII) and its members. CII is an organization composed of more than 140 public, union and corporate funds with more than $3 trillion in investments. As an active member of CII, Gap Inc. engaged in dialogue and responded to CII’s memo to Fortune 1,500 companies calling on boards to adopt a majority vote standard.

We also actively participated in a majority vote work group (Work Group) alongside thirteen other companies and four union pension funds. Throughout 2005, the Work Group examined many of the legal and practical concerns that have been raised, with a goal to promote informed shareholder and corporate consideration of a majority vote standard.

After closely monitoring the many perspectives and potential methods of implementing a majority vote standard, in September 2005, our Board adopted a majority vote policy for director

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elections in Gap Inc.’s Corporate Governance Guidelines. Our amended Corporate Governance Guidelines provide that at any shareholder meeting where there is an uncontested director election, any nominee for director that receives a greater number of votes “withheld” than votes “for” election would submit an offer letter of resignation. The Governance, Nominating and Social Responsibility Committee would consider the offer of resignation, and would recommend to the Board an action to be taken. The Board would act promptly to each letter of resignation, and would promptly notify the director concerned of its decision. The Board's decision would be disclosed publicly.

Our Corporate Governance Guidelines are available at gapinc.com or to our shareholders by writing to our Corporate Secretary at Gap, Inc., Two Folsom Street, San Francisco, CA 94105. If you would like further information, please go to our corporate governance section at gapinc.com. That section includes information about our governance practices, including:

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Corporate Governance

Notwithstanding anything to the contrary in any of our previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this Proxy Statement or future filings with the Securities and Exchange Commission, in whole or in part, the description set forth in this section below shall not be deemed to be incorporated by reference into any such filing.

Gap Inc. was founded in 1969 on the principle of conducting our business in a responsible, honest and ethical manner. For us, good corporate governance means going beyond compliance. It means taking a leadership role in instituting and maintaining practices that represent strong business ethics and ensuring we communicate consistently with our shareholders, customers and neighbors around the world.

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To help fulfill its responsibility to our shareholders, our Board has fully embraced good corporate governance practices, both in policy and spirit. In 2004, the Board continued to review corporate governance best practices and adopted meaningful changes including:

Our Corporate Governance Guidelines are available at gapinc.com or to our shareholders by writing our Corporate Secretary at The Gap, Inc., Two Folsom Street, San Francisco, CA 94105.

To reinforce our commitment to business integrity and legal compliance, in January 2005, “Principles of Integrity,” a global employee training program, was launched. The Principles of Integrity program, which includes a Gap Inc. Code of Business Conduct module, reinforces ethics and compliance utilizing real-world examples for employees around the world. In addition, in January 2005, the Board completed an ethics and compliance education program.

Transparency and shareholder communication are important to us. In 2004, we enhanced our corporate governance section at gapinc.com. This section includes useful information about our governance practices, including:

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The combination of these written guidelines, formal processes and management oversight helps us ensure that strong corporate governance is not just words on paper, but a way of doing business at Gap Inc.

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