Press Release

GAP INC.’S 2004 SOCIAL RESPONSIBILITY REPORT REVEALS CONTINUED PROGRESS AND CITES EXPANDED EFFORTS TO IMPROVE GARMENT MANUFACTURING CONDITIONS ACROSS INDUSTRY

Discussion Highlights More Effective Factory Monitoring, New Steps to Embed Labor Standards in Business Practices and Expanded Stakeholder Engagement

SAN FRANCISCO − July 13, 2005 − Gap Inc. (NYSE:GPS) issued today its 2004 social responsibility report, underscoring its continued commitment to improving conditions not only within its own sourcing base but throughout the global garment industry.

The report, the company’s second, details progress made over the last year across four main areas of focus. Highlights include:

· More effective techniques and strategies for monitoring factories and improving conditions;

· Steps to embed labor standards across the company’s purchasing practices;

· Expanded stakeholder engagement and collaboration to achieve broader impact; and

· Ongoing commitment to communication and transparency.

The full report is available online at www.gapinc.com.

"We recognize our responsibility to be a catalyst for sustainable change, and believe an integrated approach that includes collaborative multi-stakeholder engagement can help drive lasting progress across our industry," said Gap Inc. CEO and President Paul Pressler. "Although we still face many challenges, we are encouraged by the progress we’ve made over the past year across several areas."

The report was prepared with input and guidance from the Public Reporting Working Group – a group of advisors from the socially responsible investment community that joined together in late 2002 to help the company increase transparency around its operations and ethical sourcing work. The group is comprised of Domini Social Investments, the Calvert Group, the As You Sow Foundation, the Center for Reflection, Education and Action, and the Interfaith Center on Corporate Responsibility.

As part of a statement included in the report, the working group said: "We believe that Gap Inc. has made substantial progress in focusing on the connections between its core business, systemic global concerns and workers' lives."

The report places particular emphasis on the continued evolution of Gap Inc.’s extensive factory monitoring program, which employs more than 90 people around the world, most of whom are Vendor Compliance Officers (VCOs) who visit factories, conduct inspections, document violations and work with garment manufacturers to improve conditions on a daily basis.

In 2004, Gap Inc. monitored 99.9% of garment factories approved for production for all of fiscal year 2004 – up from 94% in 2003. Gap Inc. also invited Social Accountability International (SAI) and Verité to conduct thorough assessments of its monitoring program and inspection protocols. Insights from the analyses are helping the company drive continued improvement in its monitoring techniques and strategies.

Gap Inc.’s 2004 report also outlines how the company is working to integrate labor standards into its business practices and supply chain operations by building closer relationships with garment manufacturers, reducing inefficiencies in its supply chain process and re-evaluating its purchasing practices. For example, in 2004, the company hosted its first-ever Vendor Summit, a forum designed to share business and sourcing strategies as well as set expectations with top garment manufacturers from around the world.

Underscoring the company’s continued focus on stakeholder engagement, the report also cites expanded collaboration efforts through multi-stakeholder initiatives and with external stakeholders and training organizations. Gap Inc. has been actively involved in the Multi-Fiber Arrangement (MFA) Forum, a multi-stakeholder effort that has developed a broad set of recommendations to help stakeholders responsibly manage the transition to a post-quota environment. The company also continued to support the work of the International Labor Organization (ILO) to improve working conditions and boost productivity in Cambodian factories. 

In addition to a focus on Gap Inc.’s ethical sourcing practices, the report describes activities in other areas of Social Responsibility:

· Increasing donations and volunteer hours by encouraging the Gap Giving program, Community Corps and Founders' Award. As a result, employee participation in both volunteerism and financial contributions increased from 2003 to 2004.

· Responding to the South Asia Tsunami by double-matching employee contributions to designated agencies with a gift of $1.3 million from Gap Foundation.

· Managing its impact on the environment by conducting an environmental impact assessment for each stage of the apparel product lifecycle, maintaining compliance with applicable laws and regulations, encouraging non-merchandise vendors to adopt more environmentally sound practices and decreasing energy consumption in U.S. stores.

· Ensuring workplace health and safety by exploring better processes and stricter enforcement of safety protocols. As a result, the worker injury rate decreased nine percent from 2003.

· Attracting and retaining talented employees by providing training and development opportunities, offering a holistic rewards programs that incorporates compensation, benefits and a recognition component, and encouraging open dialogue through formal and informal channels, including surveys, focus groups and the open-door policy.

"Over the past year, we've learned the power of collective engagement, and of open, honest discussion about the issues that we and many other companies face," Mr. Pressler said. "We know we still have a long way to go. That's why we're continuing to push the boundaries of what's possible, developing new programs and learning along the way."

Gap Inc. is a leading international specialty retailer offering clothing, accessories and personal care products for men, women, children and babies under the Gap, Banana Republic and Old Navy brand names. Fiscal 2004 sales were $16.3 billion. Gap Inc. operates about 3,000 stores in the United States, the United Kingdom, Canada, France and Japan. For more information, please visit gapinc.com.