Annual Report 2013
Year Ended February 28, 2013

ONWARD HOLDINGS CO., LTD.

intent

Onward is changing.
During the past fiscal year, we faced a number of challenges, from a weak European economy to rising manufacturing costs in China. Despite these headwinds, we remained
focused and stayed the course set in our medium-term management plan. Utilizing our
substantial financial resources and deep expertise in fashion markets, our intent is tobecome a truly global purveyor of premier apparel and fashion products, the first Japanesecompany to ever do so.
Domestically, we will further respond to ever-changing customer needs and continue
to leverage our core brands while looking for acquisition opportunities to spur growth.
Overseas, we are reinforcing our three core properties in Europe, evaluating new sourcing
and manufacturing solutions in Asia, and building brand presence in North America.
Meeting the challenges we face now and developing a clear action plan for the future —that is the Onward commitment.

Contents
08 Key Performance Trends
10 letter to Our shareholders
12 looking Back on Fiscal Year 2013
14 looking ahead to Fiscal Year 201418 Brand History
20 Onward at a glance
22 Our Business
26 Environmental and social Contribution activities
28 Corporate governance0 Board of directors, audit & supervisory Board Members,
and Executive Officers / Organization Chart

1 Financial section
0 Main subsidiaries
2 Corporate/investor information
 History

Forward-looking statements
Future business plans, targets, and related numerical figures presented in this annual
report are intended to give an accurate picture of Onward Group’s future prospects.
However, no guarantee can be offered that plans, targets, and other numerical figuresdescribed herein will be realized. The achievement of stated targets is dependent not
only on the efforts of the Company but also the conditions facing the industry as awhole, and we ask for understanding in this regard.

2013–2014 Autumn/WinterJIL SANDER runway show in Milan

Autumn/Winter 2013 Nijyusanku

Autumn/Winter 2013 Kumikyoku campaign
with the actress Satomi Ishihara

Autumn/Winter 2013 ICB

Autumn/Winter 2013 Jiyuku

Autumn/Winter 2013 JOSEPH

Autumn/Winter 2013 JIL SANDER Navy

Key Performance Trends
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28 and 29

Thousands of
U.S. dollars*1

Millions of yen
2009

2010

2011

2012

2013

¥

¥ million

2013
300,000

For the year
Net sales258.4 billion

net sales¥261,006¥248,635¥244,551¥242,402¥258,370$2,792,883

Operating income

9,084

4,384

8,929

10,954

11,193

120,990

Net income (loss)(30,895)

2,188

2,723

3,529

4,503

48,679261,006 248,635

10,83914,058

11,207

13,181

10,138109,583

Cash flows from investing activities(40,950)(26)(5,152)(1,962)(10,683)(115,475)

Cash flows from financing activities

17,972(4,890)(9,272)(7,449)(7,848)(84,837)

Free cash flow*2(30,111)

14,032

6,055

11,219(545)(5,892)net sales

100,000

Although sales in overseas business operations fell substantially short offorecasts, domestic business operations recorded generally solid sales,
and consequently the Company’s net sales rose 6.6%, to ¥258.4 billion.

09

10

11

¥ million/%

10,954 11,193
9,084

4,178

5,794

5,405

6,230

8,949

96,731

Depreciation and amortization

5,986

5,747

5,642

5,478

5,721

61,842

13

12

Operating income and Operating Margin
12,000Capital expenditures+6.6% (YoY)

200,000

0

Cash flows from operating activities

244,551 242,402 258,370

8,929

6.0

4.3

8,000

At year-end

09

0

Cash and time deposits

23,41534,33030,93933,192

24,677

266,754

Total assets

296,283

292,569

281,643

276,939

286,779

3,099,984

Total net assets

158,418

158,164

158,745

157,303

165,372

1,787,617

Operating Income

10

11

12

Operating income

2.0

Operating income was up 15.1% year on year in domestic business operations, but overseas operations recorded a substantial decline, and as a result
the Company’s operating income was up 2.2%, to ¥11.2 billion.

13

0

4,503
2.8

5.0

Operating Margin (right scale)

net income (loss) and rOE¥ million/%
Yen

U.S. dollars*1

Per share information

10,000

2,188

2,723

3,529

0

0

Net income (EPS)¥ (197.21)¥ 13.97¥17.38¥ 22.52¥28.71$ 0.31–10,000–5.0

Net assets

1,001.36

998.981,002.34

995.11

1,043.64

11.28–20,000–10.0

Cash dividends

30.00

24.00

24.00

24.00

24.00

0.26

–30,000

Payout ratio (%)

—

171.9

138.1

106.6

83.6

—

–40,000–30,895

4.5 billion¥+27.6% (YoY)
net income

Net income increased ¥974 million, or 27.6%, to ¥4.5 billion,
and ROE increased 0.5 of a percentage point, to 2.8%.

–15.0

09

Net Income (Loss)

10

11

12

–20.0

13

ROE (right scale)4503

RatiosReturn on equity (ROE) (%)+2.2% (YoY)

4.0

4,384
4,000

11.2 billion¥(17.6)

1.4

1.7

2.3

2.8

—

Operating margin (%)

3.5

1.8

3.7

4.5

4.3

—

Total net assets and shareholders’ Equity ratio

Cash dividends per share and Payout ratio

SGA / Sales (%)

41.9

44.2

43.7

43.0

43.9

—

¥ million/%¥/%

Shareholders’ equity ratio (%)

52.9

53.5

55.8

56.3

57.1

—

200,000

158,418 158,164 158,745 157,303 165,372

150,000

Other information

57.1

100,000

Overseas sales (%)

13.0

17.4

16.0

17.1

17.1

—

Number of full-time employees

2,473

4,008

3,910

3,993

5,208

—

*1. Yen amounts have been translated, for convenience only, at ¥92.51=US$1, the approximate exchange rate on February 28, 2013.
*2. Free cash flow = Cash flows from operating activities + Cash flows from investing activities

50,0000Total Net Assets

09

10

11

12

Shareholders’ Equity Ratio (right scale)

13

80

200.0

40.00

60

30.00

40

20.00

20

10.00

0

0

30.00
24.00

24.00

24.00

24.00
83.6

150.0
100.0
50.0

09

Cash Dividends per Share

10

11

12

Payout Ratio (right scale)130letter to
Our shareholders

complexes and urban fashion malls—

rebuild this premier brand, driven by the

As a result of these measures, forcurrently the fastest growing sales

vision and ideals that she maintained

fiscal year 2014 we are targeting overall

channels in Japan—and increasing thesince establishing JIL SANDER manyGroup sales of ¥273.0 billion, a 5.7%

number of directly managed stores.

years ago. We recognize that realizing

rise over the previous year. We are ex-

Furthermore, we have implemented

her creative vision requires time and in-pecting operating income of ¥12.9

organizational reforms that will enable

vestment. While some may disagreebillion, an increase of 15.3%.

our product planning to more accurately

with our stance and insist on short-term

We launched the New Medium-reflect consumer opinions, invested in ameasures to boost returns, given our

Term Three-Year Plan during fiscal year

range of IT systems, and plan to contin-

brand building expertise at Onward, I

2013, marking a new beginning for theue acquiring small brands with a provenbelieve we can create and nurture

Onward Group. We faced a challenging

track record either in Japan or overseas.

JIL SANDER into a truly global luxury

environment during our first year, withWe plan to take advantage of our strong

brand. We aim to build the brand to ansome of our goals not being met.

gish, with the JOSEPH business infoundation and market presence in local

acceptable level of profitability within

However, the core of our growth strategy

n fiscal year 2013, ended February

Europe and Chinese retail operations

regions throughout Japan. This includes

three years, but are currently

remains unchanged, and we remain firm-

28, 2013, the Japanese fashion mar-suffering the most. To refresh themaking greater use of Onward

focused on investing in the brand toly committed to its execution and to de-ket recovered more rapidly than initially

JOSEPH brand image, we concentrated

Kashiyama’s nationwide network ofmake this turnaround a sustained, long-

livering results. We believe the transition

expected from the effects of the devas-on investing in product design and store

eight regional offices, which now serve

term success story. I feel encouraged

in the Japanese economy presents atating impact of the Great East Japan

renovations. Unfortunately, these efforts

as marketing centers for the Group’s

by the achievements already made bymajor opportunity, and we will strength-

Earthquake, and consumer confidence

were largely cancelled out by weak con-fashion brands and its new businesses.

the GIBO’Co Group, which will serve as

en our domestic businesses to capital-

improved. In contrast, the market situa-

sumer sentiment in Europe as economic

Department stores—our main sales

the springboard for significant growth inize on this. Overseas, we believe wetion overseas remained challenging due

problems persisted. In China, we werechannel—have recently seen a recovery

the European fashion business. A fash-

can prevail in returning our European

to economic instability in Europe, coupledplanning to capitalize on our early suc-in sales. In fact, each of our major

ion conglomerate engaged in appareland Asian businesses back to growth.

with issues surrounding Japan–China

cess and aggressively grow our retaildepartment store brands recorded

production—alongside Iris shoes,

relations. As a result, our domestic busi-

presence in this large market, particular-

substantially better than their previous

Frassineti bags, and Erika knitwear—theing my gratitude to all our shareholders

nesses performed largely in line withly in the second half of the fiscal year.

year’s sales performance. While we

GIBO’Co Group is capable of covering

for their support, cooperation, and trust.

expectations, but overseas operations

However, issues between China andhave not included any impact fromthe full gamut of high-end apparel andTakeshi Hirouchi

were less than what we had hoped for.

Japan placed a temporary strain on ourPrime Minister Shinzo Abe’s economic

accessories from manufacture to distri-

Representative Director,
Chairman and President

In the domestic business, robust

operations in China, resulting in a short-reforms in our forecasts for fiscal year

bution. Our plan in the coming years issales of full-price items, particularly in ourfall compared with our initial outlook.

2014, we believe these reforms may

to utilize GIBO’Co as the platform fordear shareholders,i

Our overseas operations were slug-

I would like to conclude by express-

August 2013

core brands sold by Onward Kashiyama,

In fiscal year 2014, ending February

boost demand for high-quality,

establishing the Onward Luxury Group,

helped drive a significant profit rise. I was28, 2014, we are focused on sustaining

high-value-added products that we pridewhich will become the centerpiece ofparticularly pleased to see Kumikyoku,

domestic growth and returning to profit-

ourselves on offering to consumers, andour European business. In Asia, theTakeshi Hirouchi

our second-largest brand, performing

ability in our overseas businesses backmay become an additional important driv-

Chinese market remains a challenge,

well. In the last few years, Kumikyoku

to fiscal year 2012 levels. In Japan, theer for our domestic growth.

with the luxury market below its peak

Representative Director,
Chairman and President

merchandising was somewhat lessonce-clear boundaries between business

Overseas, we anticipate the earn-

and ongoing weak demand for Japanesethan chic in the intensely competitive

domains continue to disappear as man-ings outlook to improve, starting withproducts. However, we expect our busi-

young market, and its sales had stag-

ufacturers enter the retail sphere and

JOSEPH in Europe. We are in the pro-ness there to recover somewhat as we

nated as a result. However, thanks to aretailers increase their involvement incess of revamping operations at JOSEPH

open shops in non-department store

revamp of the retail space, better plan-manufacturing. Amid intensified compe-and have adopted a more centralized

channels, introduce and grow the pres-ning, and recent TV advertising cam-tition, we are maximizing our advantag-

management structure, including more-ence of our European brands, and tighten

paigns, customers returned to thees as an established manufacturer ofthorough controls. We expect the prod-

production controls. In North America, webrand. The Kumikyoku turnaround is par-high-quality, high-value-added products,

ucts and stores in which the brand has

are building a stronger sales organization

ticularly satisfying since it coincided withwhile at the same time pursuing sales

invested over the past few years to

and working to grow our business withthe 20th anniversary of the brand’s

strategies and developing a presence thatbegin generating satisfactory returns

the new ICB and J. PRESS lines while

launch. Other domestic businesses per-draws on our expertise in the Japanese

shortly. Ms. Jil Sander returned lastpromoting dancewear and pet-fashion

formed in line with expectations, achiev-

retail market. Specifically, we are ex-

year as creative director of JIL SANDER.

products, having opened a flagship store

ing increases in sales and profits.

panding our presence in train station

She is at the forefront of efforts toin New York last year.

looking Back on Fiscal Year 2013
Note: Figures for sales and operating income in the Japan and Overseas segments are before eliminations.

results Overview

The Year in Briefin fiscal year 2013, ended February 28, 2013, net sales increased 6.6% compared with the previous fiscal
year, to ¥258,370 million, operating income increased 2.2%, to ¥11,193 million, and net income increased
27.6%, to ¥4,503 million.

2012

Japan

d

omestic sales increased 6.3%, toyear. Although sales began to pick up¥227,206 million, and operating

toward the end of fiscal year 2013, theincome increased 15.1%, to ¥14,965

recovery was not strong enough to en-

million. Sales at the Group’s main do-able the company to achieve its sales

mestic subsidiary, Onward Kashiyama,target. However, sales of high-margin¥increased 4.2%, to ¥156,280 million,

core brands, and those through newwhile operating income increased 16.0%,

distribution channels, including online

YoY +6.3%

to ¥11,049 million. Other domestic sub-sales, were robust, and contributed tosidiaries also performed well, as theiran improvement in gross profit mar-

Operating income

sales increased 11.3%, to ¥70,926 mil-gin compared with the previous year.

¥

lion, while operating income increased

Onward Kashiyama’s profitability im-

12.5%, to ¥3,916 million. Domestic

proved largely as projected, attributable

operations as a whole showed increased

to strict cost controls. Furthermore,

profitability over the previous fiscal year

other domestic subsidiaries performedin line with forecasts.

in line with our earnings forecasts, andsales

22.2billion
15.0 billion

YoY +15.1%

Sales at Onward Kashiyama were
adversely affected by lingering sum-

Overseas¥46.8 billionsales

YoY +6.6%

Operating income¥–45 million

verseas sales for fiscal year 2013

achieved significant profit growth during fiscal year 2013.

nesses were sluggish in Europe. The

lion, compared with the previous fiscal

JIL SANDER operations recorded ayear. However, the overseas businessdecline in operating income, mainly due

recorded an operating loss of ¥945 mil-to a change in designer, which led to alion compared with operating income ofdelay in the shipping of a new season’s¥1,090 million in fiscal year 2012. Sales

collection, together with increases inin Europe increased 3.4%, to ¥35,316

certain expenses. In addition, severe

million. The European business recorded

economic conditions in Europe and an

an operating loss of ¥607 million com-unsuccessful merchandising strategy

pared with operating income of ¥964

saw sales of the JOSEPH brand decline

million for fiscal year 2012. Sales in Asia

compared with the previous fiscal year.

increased 9.4%, to ¥7,543 million. The

Year-end inventory write-downs in-

Asian business posted an operating loss

creased at JOSEPH contributing to aof ¥147 million compared with operat-significant operating loss for European

ing income of ¥333 million in fiscal year

operations. In Asia, tensions in Japan–

2012. Overseas sales were significantly

China relations coupled with the deteri-lower than initial forecasts, leading toorating Chinese economy contributed

a substantial decline in overseas profit-

to a large decrease in sales in China,

ability. As a result, we recognized thatwhich affected overall overseas sales.

remains a challenge going forward.

Birz group acquired

Kumikyoku TV Commercials
Hit screens201

Popular among young Japanesewomen, actress Satomi Ishihara
was specially selected to be theface of Kumikyoku for the core
brand’s first TV advertising
campaign in 10 years.

september
Jil sander Japan

december
Onward Holdings

Jil sandEr navy Flagshipstore Opened

Participated in
Eco-Products 2012

JIL SANDER Navy opened its
world-first flagship store in Tokyo’s
fashionable Aoyama district.

Centered on its Onward Green
Campaign, the Group showcased
its environmental and social
contribution activities by exhibitingat Eco-Products 2012, Japan’slargest environmental exhibition.

January
Chacott, Creative Yoko

February
J. Press, inc.

Joint Venture Flagship storesOpened in new Yorknew J. PrEss York street
Flagship store Opened in
new York

The JIL SANDER and JOSEPH busi-

increased 6.6%, to ¥46,845 mil-achieving growth in overseas operations

september
Onward Kashiyama

Acquired the Birz Group, which
offers—primarily via outlets inside
train station complexes and urban
fashion malls—brands popularamong women in their 20s to 30s
and also possesses its own production capabilities in Vietnam.

mer heat in the middle of the fiscal

O

april
Onward Holdings

Chacott and Creative Yoko opened
joint venture flagship stores in New
York. Chacott by Freed of London
deals primarily in ballet and dancewear supplies, and Hannari &Mother Garden handles designer
pet products, children’s toys, andstationery.

As a part of celebrations to markthe 110th anniversary of theJ. PRESS brand in 2012, a flagship store with 150 sq.m. of floor
space was opened in New York to
showcase the debut of the new
J. PRESS York Street line targetingthe youth market.

looking ahead to Fiscal Year 2014
Note: Figures for sales and operating income in the Japan and Overseas segments are before eliminations.

Japan
i

OverseasOur overseas business is expected

control systems and promoting the sale

addressing various aspects of opera-

to account for sales of ¥54,419

of previous-year products. In addition,

tional efficiency, including point-of-salemillion in the fiscal year ending February

we expect e-commerce sales via theoperations, item tracking management,

Among our other domestic sub-28, 2014, a 16.2% increase compareddirectly managed website launched inand cost controls tailored to a harshdemand ahead of the scheduled hike insidiaries, Onward Trading will maintainwith the previous fiscal year. Operating

the previous year to increase.

external environment.

Japan’s consumption tax rate.

the earnings base of its existing busi-

income is projected to total ¥133 mil-n fiscal year 2014, ending February

will enhance our lineup of high-quality,

management through direct trading;28, 2014, sales in our domestic busi-

high-price-tag items, such as cashmere

and cost consolidation through logistics

ness are forecast to increase 3.7%

coats, in anticipation of an improve-

integration.

compared with the previous fiscal year,

ment in the economy and heightenedto ¥235,653 million. Our operating income is projected to total ¥17,481 mil-

GIBO’Co expects to incur upfront

nesses, while enhancing the school

lion, compared with an operating loss incosts due to added expenses for pro-United statesat Onward Kashiyama we plan touniforms and medical uniforms busi-

the previous fiscal year of ¥945 million.

duction of garment samples related to

In addition to expanding new lines for

Kashiyama we anticipate sales ofenhance our presence in new distribu-

nesses, which are expected to grow.

¥162,000 million, an increase of 3.7%,

tion channels. To that end, we will in-

Chacott will develop new products,

and operating income of ¥12,400 mil-crease the number of stores in train

lion, an increase of 12.2%. Our otherlion, an increase of 16.8%.
Within these figures, at Onward

With regard to our sales channels,

securing a contract for a new brand.

the J. PRESS and ICB brands, at theEuropeHowever, we expect a profit increase,

Onward Group we will be making

stores, and services geared to the yoga

At JIL SANDER, from the 2013 Spring/

attributable to higher orders for 2013

upfront investments in brand expan-

station complexes, urban fashion malls,

and wellness fields and promote over-Summer collection Ms. Jil Sander re-Autumn/Winter items, as well as ansion and promotion expenses in ourdomestic subsidiaries are expected toand shopping centers, as well as theseas retail business enhancements.

turned as creative director to the epony-

anticipated upswing in our Iris shoe

U.S. business.

record sales totaling ¥73,653 million, an

number of directly managed stores. At

In addition to the August 2013

mous brand she founded. Judging by

business, where we took steps toincrease of 3.8%, and operating

the same time, we will further expand

refurbishment of its flagship store in

the acclaim the collection has received,

expand our plant production capacity

systems relating to North Americanincome amounting to ¥5,081 million, an

e-commerce while maintaining our

Daikanyama, Tokyo, Island will aim toorders are expected to increase. In addi-

during the previous year.

department store channels, we will

increase of 29.7%, driven by a strength-

strengths in department stores.

improve the sales performance at eachtion, to raise the profile of JIL SANDER

of its stores.

Navy as an independent brand, at theasiamarket by adding JOSEPH andened focus on profitability.

We will further strengthen our com-

While strengthening management

work to develop the North American

By commencing summer sales inpetitiveness by providing high-quality

As part of efforts to strengthen its

Jil Sander Group we will open flagship

While maintaining sales through

JIL SANDER Navy to the aforemen-

mid-July 2013, as was the case in 2012,products so that consumers feel thatfashion accessories business, our hold-stores in Milan and London. To continue

department store channels, at thetioned brands.

we aim to maintain appropriate sales

they are getting more value than theing company, Onward Holdings, hasbuilding the value of the JIL SANDER

Onward Group we are taking steps toperiods for spring and summer fashion

incremental price increases due to the im-established a joint venture with Charles

brand, we plan to make ongoing invest-

bolster store openings within otheritems sold at full prices. From August

pact of the weaker yen on product costs.

& Keith, which is building a global fast-ments that focus on strengthening

distribution channels, centering on

to mid-October, we plan to enhance

In addition, we are taking the fol-

fashion business in shoes, bags, andproduct competitiveness as a top-class

young casual brands. In production,

luxury brand.

we plan to focus our efforts on

product planning and merchandising tolowing measures to reduce costs:

accessories from its base in Singapore,

correspond with the midsummer andpromotion of low-cost production by

and has begun opening Charles & Keithearly-autumn season in preparation for a

conducting production at best-locatedbrand stores in Japan. Steady prog-

prove merchandising of Essentials Linepossible heat wave or lingering summer

sites, including within the ASEAN

ress is being made in preparation foritems while aiming to achieve a recov-

heat, while moving to further improve

region and factories in Japan, andthree store openings as of the end of

ery in existing store sales. We also plan

Chinese economy and adverse con-the gross profit margin. In addition,

by reducing import costs; expansion

August 2013, including a flagship store

to boost the gross profit margin by im-

ditions in the luxury goods market,

during the Autumn/Winter season, weand reinforcement of low-costin Tokyo’s Harajuku district.

proving the accuracy of production

we will place particular emphasis on

Autumn/Winter 2013 Kumikyoku campaign

The new flagship store of Grace
Continental in Tokyo

2013–2014 Autumn/Winter JIL SANDER
campaign

JOSEPH 77 Fulham Road store in London

Charles & Keith flagship store in TokyoJOSEPH will work to further im-

strengthening in-house production
systems in the ASEAN region.
In response to a slowdown in the

The new shoe factory of Iris in VeniceSummer window display of Nijyusanku GINZA,
the flagship store of the core brand Nijyusanku

12

Brand History

Launches Kumikyoku brand, targeting
25-year-old women with its “standard
clothing that does not stand still” concept.
Launches Gotairiku brand, targeting men
in the 30–45 age range. Reflected in this
comfortable business wear collection is aseamless blending of contemporary andinternational fashion trends.

For more than 50 years, the business strategy of Onward has focused on our brands. as thefoundation stones of our business, the strength and value of these brands have continuously
enhanced our competitiveness.

10s
Develops overseas strategies andestablishes local subsidiaries in the
United States (1972), France (1973),
and Italy (1974).

Gotairiku

2000

Launches Jiyuku brand under which it
proposes high-quality everyday wear,
primarily targeting women in their 40s.

Kumikyoku

15

Junzo Kashiyama

12

Launches women’s wear brand ICB (International Concept
Brand) in 17 cities across eight countries.

150s to 160s
The popular Bus Stop store on Boulevard Saint-German in
Paris, which was acquired in 1973

Launches Nijyusanku range for women in their 30s,
a collection of high-quality, sophisticated casual wear.

Jean-Paul Gaultier’s debut Paris fashion show, 19781

Grows during the 1960s to become Japan’slargest manufacturer of men’s apparel byintroducing unique production techniquesand distribution strategies.

1
In the 1990s, Japanese consumers came to value simple
clothing that enabled them to deftly change their look tosuit the time and occasion, clothing that lent itself well tomixing and matching and yet was also sophisticated.
The brands Onward Kashiyama launched in the
1990s embodied the concept of the norm for clothingoriginating from Tokyo with Japanese brand names.These
have subsequently grown into the core brands of today.

Company founder Junzo Kashiyama
establishes Kashiyama Trading.

Commences production and sale of men’s
ready-to-wear apparel.

Nijyusanku

Jean-Paul GaultierInterviews the then aged 24, newcomer
designer Jean-Paul Gaultier in Paris; makes
decision to invest in creative activities,
including supporting his first fashion show
in Paris in 1978.

JiyukuAn ICB promotional event in New York

2012

2005

Budding designer Prabal
Gurung brought in as chief
designer; ICB NY Exclusive
Collection announced via
Digital Fashion Show.

Acquires Joseph Group, which has popular
London fashion brand JOSEPH.

Onward Kashiyama’s U.S. offices

2008

Acquires German-based Jil SanderGroup, which brought luxury brand
JIL SANDER to global prominence.

Grading machine modifies and cuts basic sewing patterns
to match each size
U.S. President Gerald
Ford presented witha J. PRESS blazer

JOSEPH2011

Opens Nijyusanku GINZA flagship store in Ginza,
Tokyo, with an eye toward Asia.

186

201

Acquires long-established U.S. brand J. PRESS,the birthplace of the quintessential Ivy League look.

10
The J. PRESS store in New YorkAcquires GIBO’ S.p.A., which manufactures and sells
luxury, ready-to-wear apparel in Italy.

The ICB NY Exclusive Collection forAutumn/ Winter 2012

Interior view of Nijyusanku GINZA flagship store

Founder of her
eponymous brand,
Ms. Jil Sander returns
as creative director
from 2013 Spring/
Summer collection.

Onward at a glance
Onward in Figures

Core Brands(As of February 28, 2013)

Consolidated net sales

258.4

¥

billionJapan: 83%
Overseas: 17%

in Business

for

86

years

founded in 1927

Employees

5,208Group Companies
Worldwide

Nijyusanku: Launched in 1993, Nijyusanku is theleading brand of Onward Kashiyama. The brand’score target is working women in their 30s and40s. Nijyusanku has over 200 stores throughout Japan, most of which are within department
stores, and recorded sales of ¥27 billion for the
fiscal year ended February 2013. The flagshipstore, Nijyusanku GINZA, was opened in 2011 in
the Ginza district of Tokyo.

Jiyuku: Jiyuku is one of the original Onward
Kashiyama brands and was launched in 2000.
With a core target of active women aged
between 35 and 45, Jiyuku offers modern
clothing, perfect for any occasion. Most of thebrand’s stores are located within department
stores, and it made sales of ¥9 billion for the fiscal year ended February 2013.

Kumikyoku: Launched in 1992, Kumikyoku
is the second largest brand of Onward
Kashiyama. With a target of working women
aged around 30 years old, and with the conceptof “standard clothing that does not stand still,”
Kumikyoku has over 150 stores throughout
Japan, mostly within department stores, andrecorded sales of ¥11 billion for the fiscal year
ended February 2013.

ICB: One of Onward Kashiyama’s original
brands, ICB was launched in 1995 as an international concept brand. ICB targets sophisticated,urban working women in their 30s. Most of thebrand’s stores are located within department
stores, with the brand having achieved salesof ¥9 billion for the fiscal year ended February
2013. The ICB NY Exclusive Collection was
launched in 2012 in North America.

JIL SANDER: Launched in 1973 by Ms. Jil
Sander in Germany, JIL SANDER is a luxury
brand. JIL SANDER has more than 120 storesthroughout Europe, Asia, and Japan, and also
wholesales throughout the world. Onward
Holdings acquired JIL SANDER in 2008. For the
fiscal year ended February 2013, JIL SANDER
made sales of ¥10.4 billion. In 2011, the brandlaunched the new casual line JIL SANDER Navy.

JOSEPH: JOSEPH is a London-based global
brand with more than 100 stores located in
major cities throughout the world. With aconcept of “SLICK&CHIC,” JOSEPH offers quality, comfortable casual clothing for sophisticatedurban men and women. Onward Holdings acquired JOSEPH in 2005, and for the fiscal year
ended February 2013, JOSEPH posted sales of¥8.8 billion.

number of stores

4,500

storesin 19 countries

Main subsidiaries

global network

Japan

EnglandCompany NameCore BusinessCore Brands / Itemsnnn

Onward Kashiyama

Core company of the Group engaged in the manufacture and sale of men’s,
women’s, and children’s wear, kimonos, etc.

Nijyusanku, Kumikyoku, ICB, Jiyuku,
J. PRESS, GotairikunOnward Trading

Manufacture and sale of uniforms and sales promotion goods.

Company, school, and medical-related
uniforms and sales promotion goodsnChacott

Manufacture and sale of ballet and other dance wear, shoes, and related goods.

Chacott, Freed of LondonnCreative Yoko

Manufacture and sale of pet-fashion items, character accessories, etc.

PET PARADISE, Mother Garden

IslandManufacture and sale of women’s clothing and accessories.

Korea

Shanghai

Joseph Ltd.
Freed of London Ltd.

FranceParisn Horloge Saint Benoit S.A.
Caen
n

n

China

LondonAttitude Diffusion S.A.

Onward Fashion Trading(China) Co., Ltd.
Shanghai Onward FashionCo., Ltd.
n Onward Fashion Trading(Shanghai) Co., Ltd.
n Shanghai Across Apparel
Processing Co., Ltd.
n

n

n

n

n
n

Onward Kashiyama Korea
Co., Ltd.
Chacott Korea Co., Ltd.

Dalian
nn

nn

asia

Overseas
Company Namennn

GIBO’Co
Jil Sander
JosephCore Business

OEM, production, and wholesale of European and American brands.
Manufacture and sale of luxury men’s and women’s clothing and accessories.
Manufacture and sale of men’s and women’s clothing andaccessories as well as the operation of multi-brand stores.

Core Brands / Items

Designer clothing, knitwear, bags, shoes, etc.
for luxury brands
JIL SANDER, JIL SANDER NavyJOSEPH

italy
Milan

Onward Italia S.p.A.
n Jil Sander S.p.A.

nn

n
n

Taicang Onward HighFashion Co., Ltd.

GIBO’ Co. S.p.A.
n Frassineti s.r.l.
nVeronanErika s.r.l.

Venicen

Iris S.p.A.

spain
MadridnGallardo Dance S.L.

Japan

Hong Kongnn

Florence

Nantong Haimeng
Garments Co., Ltd.

Onward Kashiyama
Hong Kong Ltd.

VietnamHo Chi Minh City
Onward Kashiyama
Vietnam Ltd.
n n Yasuda (Vietnam) Co., Ltd.
n n Showa (Vietnam) Co., Ltd.
n

Hanoi
n

Vina Birz Co., Ltd.

singapore
SingaporennOnward Holdings Co., Ltd.
Onward Kashiyama Co., Ltd.
Onward Trading Co., Ltd.
n Chacott Co., Ltd.
n Bus Stop Co., Ltd.
n Creative Yoko Co., Ltd.
n Island Co., Ltd.
n Birz Association Ltd.
n Charles & Keith Japan
Co., Ltd.
n Booklet Co., Ltd.
n Onward Creative Center
Co., Ltd.
n Onward Life Design
Network Inc.
n Across Transport Co., Ltd.
And 22 additional companiesnNantong

EuropeApparel
Other
Joint Venture FactoryTokyo

Onward Fashion Trading(Dalian) Co., Ltd.

Taicang

Grace Continental

n

Seoul

Onward Kashiyama
Singapore Pte. Ltd.
Charles & Keith Japan
Pte. Ltd.

United states
U.s.a.
New York

J. Press, Inc.
Onward Retail L.L.C
Freed USA Inc.
Guam
n
n
n

n

n

Onward Beach Resort
Guam, Inc.
Onward Golf Resort
Guam, Inc.

Our Businesssales by Business segment

sales Channels

Other Business(service / resort)

we develop our sales activities via a number of different sales channels. Maintaining our strength in department stores, we see new distribution channels as the key to domestic growth.

apparel Business sales by Clothing Type
Others6%15%%Children’s

department stores
women’s

61%

Men’s�

apparel Business

4

21%

%

Department stores are Onward Kashiyama’s main sales channel, with over
3,000 shops nationwide. Our Nijyusanku brand is the largest department
store brand by revenue in Japan—sold in more than 200 such shops. We
have been strategically relocating and redesigning our shops to maximize
individual shop sales and their operational efficiency.
Note: when operating shops inside Japanese department stores, apparel manufacturers—while de facto acting as retailers and owning the inventory—would typically bookrevenues net of department store margin as “wholesales sales.” Apart from owning
the goods, manufacturers would own some store fixtures, provide their own staff, andbe responsible for most merchandising decisions.

sales by geographic segment
asia

%

Europenorth america

1%

1%

Onward Kashiyama sales Channel
specialty stores%

Othersnew distribution Channels

2%

newdistribution
Channels*

1%
Japan

8

Onward Kashiyama

5%%

department store* Channels other than department
stores (including shopping centers, directly managed stores, ande-commerce)6%

Manufacturing

Train station Complexes / Fashion Malls

directly Managed storesCentered on young casual brands, this is the fastest growing sales channel
in Japan. Here we deploy fashionable and trendy products, such as thosefrom Island and Birz Group, and multi-brand stores.

At Onward, our brand flagship stores serve as brand billboards, showcasing
the brand’s image though store design and by carrying the full product line.

Our manufacturing capability consists of joint venture and contracted facilities in China and Vietnam, and a manufacturing platform in Europe managed by giBO’Co. Our manufacturing base is global but with a regional focus.

Onward Kashiyama

EuropeOnward Kashiyama employs over 600 professional staff in production planning teams looking after every aspect of the production process from plantselection and technical guidance, to quality control and fabric sourcing.
Although we mainly conduct our manufacturing in cooperation with trading
companies, we are planning to build our own production network in Japan,
China, and the ASEAN region.

Italian subsidiary GIBO’Co Group, our production platform in Europe, is incharge of manufacturing and distribution of the full gamut of high-end apparel and accessories. Centered on apparel-maker GIBO’Co, the group comprises several manufacturing companies, such as Iris (shoes), Frassinetti (bags),
and Erika (knitwear). In addition to manufacturing our own brands such asJIL SANDER Navy, the GIBO’Co Group is a contract manufacturer for numerous luxury brands.

Table showing Production areas
n

China

70%

shopping Centers

E-Commerce

n

Japan

20%

n

ASEAN Region

10%

For Onward, this channel is centered on casual lines and family apparel. We
have also started offering a broader range of lifestyle merchandise such as
interior design items, cosmetics, and accessories.

While targeting overall e-commerce sales of ¥10 billion in fiscal year 2015,
we plan to expand our Onward Crosset website, which was first launched in
December 2009, alongside other initiatives.

Back stage at 2013–2014 Autumn/WinterJIL SANDER collection

Environmental and social Contribution activities
Basic Philosophy
Onward works diligently to enrich people’s lives in its role as a lifestyle culture enterprise and positions
the preservation of the environment as a key management issue while being environmentally friendly
and socially responsible.

Environmental Concept
Thinking of the Earth. Clothing its People.
The world is evolving faster than ever with fashions and trends changing at a dizzying pace. In recent years, wehave seen an increase in products touting low prices, and perhaps many of us feel, more than before, that clothing is becoming disposable. The disposal of clothing as trends change is slowly placing an increasing burden on
the environment and may one day significantly affect our lives. The original role of fashion was to enrich and color
people’s lives while promoting and inspiring prosperity. Fashion should not be something that takes away fromour planet’s natural environment, nor should it detract from the infinite possibilities of our future.

Tie-up with the Japanese red Cross society
Under the Onward Green Campaign, and utilizing the extensive Red Cross network that reaches 186 countries
throughout the world, Onward in cooperation with the Japanese Red Cross Society is distributing blankets andwork gloves to areas that have been affected by, and are in the process of recovery from, a natural disaster.
Work gloves have also been donated domestically to individuals involved in forestry conservation efforts. These
gloves have also been distributed and utilized as a part of an awareness building campaign.

support Program Using recycled Blankets— Bangladesh
In May 2010, Onward donated 3,000 recycled blankets, made from garments collected in
2009, to a refugee camp in the Cox’s Bazar district of Chittagong in South East Bangladesh.
Blankets were also donated to the hospital that provides medical care in the area. The quality
and color of the blankets were very much appreciated at each of the facilities. Onward hasreceived letters of thanks from the hospital as well as from doctors and managers. Images of the blankets being
distributed also featured in a local newspaper.

Onward remains committed to taking on the challenge of achieving harmony with the planet and its people
through its corporate activities and a range of products that include fashion items, in its role as a leading organiza-— Japantion of the apparel industry that delivers fashion on a global scale.

In September 2011, Onward donated 1,000 recycled blankets to 31 community centers in
Miyagi Prefecture that were affected by the March 11 earthquake disaster. In response to theGreat East Japan Earthquake, Onward designated a number of affected areas in the Tohoku
region as recipients of the recycled blankets and work gloves. In the spring 2012 campaign,
Onward successfully collected 55,264 items of clothing from 11,389 customers.

Our Promise
1.

Provide quality products that can be enjoyed over a long period of time.

2. Develop leading-edge technology, products, and services that reduce the burden on the environment.
3. Implement the Onward Green Campaign, which is designed to create an apparel life-cycle circulation system.
4. Implement various environmental conservation measures: enhance the energy efficiency of offices,
introduce low-emission vehicles, and implement forest preservation initiatives at the “Tosayama Onward
Rainbow Forest.”
Our Promise is a reflection of our consideration for the planet’s future and our desire to responsibly deliver fashion that enriches and colors people’s lives. We are committed to developing strategies that fulfill Our Promise andour responsibilities as a good corporate citizen.

— Kazakhstan
In February 2011, Onward donated 3,000 recycled blankets, made from garments collected
in 2010, to refugees, orphans, other socially marginalized people, and communities in Almaty
city, Kazakhstan (Central Asia). It has been reported that the recycled blankets have been usedduring Kazakhstan’s harsh winter months, resulting in less cases of serious illness developingfrom the common cold.

— China

Onward green Campaign
The Onward Green Campaign is designed to create an apparel life-cycle circulation system.
In comparison to other consumables, the recycling of textile goods is relatively undeveloped.
Onward Kashiyama launched the Onward Green Campaign in 2009 with the objective of encouraging the circulation of apparel to promote the efficient utilization of limited resources andto ensure that our precious environment still exists for future generations to enjoy. Onward Kashiyama collects
men’s, women’s, and children’s clothing as well as sportswear and other items sold by Onward Kashiyama at
Onward Green Campaign collection booths in department stores. These items are recycled and reused where
possible. A portion of the collected garments are recycled as yarn, which is then used to create blankets, work
gloves, and other recycled textile products that contribute to the organization’s environmental and social contribution initiatives.

In March 2012, Onward donated 2,000 recycled blankets to a school and other facilities locatedin the mountainous regions of Sichuan Province that were affected by the earthquake in 2008.
The Red Cross continues to work in the region to assist restoration. The recipient school lost
both its main and branch campuses in the earthquake. Currently a dormitory is under construction on the main campus to enable those students who previously studied at the branch campus to relocate. The
blankets will be used by the students who are to move into the new dormitory.

— Mongolia
In September 2012, Onward donated 2,000 blankets, made from recycled garments collectedduring spring 2012, in cooperation with the Japanese Red Cross Society. Mongolia is periodically afflicted by snow damage referred to locally as “Dzud.” It is not uncommon for several
people living in impoverished and other areas to share one blanket during this period. Thanks tothis donation, a number of underprivileged people and children attending schools for the disabled received blankets to help them overcome the severity of Mongolia’s winter.

Corporate governance
Our Basic approach to Corporate governanceManagement Meetings, in accordance with audit policies and

The Onward Group believes that responding promptly tothe roles delegated by the Audit & Supervisory Board. In addi-changes in its business environment and ensuring a level oftion, the Internal Control Division and each department are un-corporate governance that enhances the health, fairness, trans-

der periodic monitoring in an effort to establish an effective andparency, and compliance of its management and operations is

lawful corporate structure.

one of its important responsibilities and integral to increasing

Corporate governance structure
General Meeting of Shareholders

Audit & Supervisory Board

The Audit & Supervisory Board meets with thecorporate and shareholder value. On this basis, every effort is

Representative Director and the Accounting Auditor on a regu-

being made to build trusting relationships with all stakehold-lar basis to share and exchange information and opinions. Thisers including shareholders, and to strengthen the Group’s man-initiative is also designed to ensure that a structure is in place

agement systems as well as the effectiveness of the Annualthat is capable of conducting audits in an effective and lawful

General Meeting, the Board of Directors, and the Audit &manner. Moreover, the Audit & Supervisory Board receives re-Supervisory Board. In this manner, the Onward Group is work-

ports from each member in accordance with audit policies anding diligently to bolster its corporate governance.

the roles delegated by the board. Deliberations are undertaken

Board of Directors

ReportSupervise

ReportStanding Audit &Supervisory Board Members

ReportAudit

Outside Audit &Supervisory Board Members

Onward Group
Compliance
Committee

Internal Control
DivisionGroup Strategy Meeting

and resolutions made based on this information as required.

directors and the Board of directors
In order to further clarify the management responsibilities of
directors, increase the ability and opportunity to gain the con-reasons for the appointment of Outside audit &supervisory Board Members
Name

ile management framework that is capable of responding to

Jotaro Yabe

We are expecting Mr. Yabe to use his wide rangeof experience in government organizations and his
deep insight to oversee the Company’s operations.

Katsuaki Ohashi

We are expecting Mr. Ohashi to use his broad
knowledge and deep insight as a former academic
to oversee the Company’s operations.

changes in the business environment in a timely manner, theCompany has set the term of directors at one year. In addition,from outside the Company and selected on the basis of theirhigh level of independence. This initiative is aimed at reinforcing the supervisory function of the board.

reasons for the appointment of Outside directors
Name

Reasons for Appointment as an Outside Director

Hachiro Honjo

We are expecting Mr. Honjo to use his businessand management experience as a corporate officer
to enhance the Company’s management, basedon his broad perspective, free from the industry towhich the Company belongs.

Yoshihide Nakamura

We are expecting Mr. Nakamura to use his abundant experience and knowledge as a member ofthe management of other companies to enhance
the Company’s management.

directors and audit & supervisory Board
Members Compensation

Compliance structure

Compensation paid to directors, excluding outside directors, isphasis on efforts aimed at upgrading and expanding compli-

comprised of a basic compensation component, bonuses, andance structures, the Onward Group has positioned compliancestock options.

as an important issue for management. In specific terms,

Recognizing that society as a whole is placing greater em-

the Group published the Compliance Manual to clearly outline the direction of compliance activities taking into consid-that allows the Company’s Board of Directors to engage in stra-tion, the total amounts of compensation paid by type of com-

eration ethical concerns and social norms. Established by the

tegic decision-making and supervise operating companies. At

pensation, and details of the number of eligible officers are

Board of Directors, the Onward Group Compliance Committee

the same time, the Group has separated the supervisory andpresented as follows.)

takes the lead in conducting continuing educational activi-

execution functions in order to clarify the responsibilities andauthority of each operating company and to facilitate accelerated strategic decision-making.
When matters that require urgent attention arise, the Boardof Directors convenes as necessary. In this manner, the Onward

The Company has adopted a company with an Audit &system with the aim of clarifying other management decision-

Supervisory Board structure, under which the Company ap-

making and business execution functions. In order to facili-

points four audit & supervisory board members, two of whomtate agile decision-making as a corporate group, the Onward

are outside audit & supervisory board members. Audit & su-Group Strategy Meeting and Group Business Management

pervisory board members have also assigned staff to assist

Meeting have been established. This is where management

them in carrying out their duties and to strengthen their su-

strategies and the important management matters of operat-

pervisory function. Each member audits and monitors the per-ing companies are debated and where the state of operations

financial account settlement meetings, and Group BusinessAccounting Auditor(The total amounts of compensation paid by officer classifica-

ate response to rapid changes in the business environment.

meetings, such as the Board of Directors’ Meetings, GroupAccounting Audit

The Onward Group has adopted a holding company structure

audit & supervisory Board Members
and the audit & supervisory Board

documentation of important decisions and attending important

Audit

Business Execution structureGroup has a system in place that ensures a swift and appropri-

formance of directors; their responsibilities include reviewing

Group Companies

Supervise

Reasons for Appointment as an Outside Audit &Supervisory Board Member

fidence of shareholders, and to put in place an optimal and ag-

two of the seven-member Board of Directors are appointed

Coordinate

Moreover, the Group has introduced an executive officer

BasicCompensation

Directors(excluding outside directors)

410

222

Audit &
Supervisory
Board Members(excluding outside audit & supervisory board
members)

36

36

—

—

2

Compliance Regulations.

Outside Officers

40

40

—

—

4

risk Management structure

OfficerClassification

The Onward Group also has advisory contracts with a num-

Bonus

Stock Options

120

Number of Eligible
Officers

67

7

as follows.

ance, with energies channeled toward building and promoting

The risk management structure has been developed and is operated in line with the Onward Risk Management Regulations.
The Compliance Division is responsible for the development ofa risk management structure, the identification of issues, andthe development of risk management related plans. The divi-(Total amount of consolidated compensation by officer)

Takeshi Hirouchi(Director)

Compliance Division has been positioned to oversee compli-

the Compliance Manual, which is in turn based on the Onward

million are disclosed on an individual basis and are presented

Name (by officerclassification)

widespread awareness and understanding. Moreover, thean Onward Group compliance structure that is underpinned byPayments of compensation to persons that exceed ¥100is reviewed.
ber of attorneys to receive legal advice.

ties including in-house training as a part of efforts to ensure

Total Amount of Compensation Paid by Type ofCompensation (Millions of Yen)

Total Amount ofCompensation
Paid(Millions of Yen)

Total Amountof Consolidated
Compensation
Paid (Millions
of Yen)164

Company
Classification

Filing company

sion reports to the Board of Directors and works to establish

Total Amount of Consolidated Compensation Paid by
Type of Compensation (Millions of Yen)an effective structure to address natural disaster risk, informa-

Basic
Compensation

tion systems risk, and other risks that may severely impact the

94

Bonus

Stock Options

43

26

continuation of business. Additionally, the Board of Directors
works in cooperation with external specialists as the situation
requires in order to respond appropriately to such risks.

Board of directors, audit & supervisory Board Members,
and Executive Officers
As of May 23, 2013

Financial section

Board of directors

audit & supervisory Board
Members

Executive Officers

Representative Director
Chairman and President

Standing Audit & Supervisory
Board Members

Senior Managing Executive Ofﬁcer

Executive Ofﬁcers

Takeshi Hirouchi

Hitoshi aoyama
Kenichiro Tamai

Hiroshi ishidaKazuyuki suematsu
Yasuo Yokoyama
Takanobu Yamada
Tomohiko sakamoto
Osamu Miwa
Masanori shozu
Keiko Ueno

Senior Managing Director

Masaaki Yoshizawa
Managing Director

Managing Executive Ofﬁcers

Michio Ohsawa
Hidenobu Tanaka
Hirokazu Yoshizato
Michinobu Yasumoto
Eihachiro Umemiya
izumi sugita
Hisayuki ichinose

Outside Audit & Supervisory
Board Members

Jotaro Yabe
Katsuaki Ohashi

Kenichi iizuka
Directors

akinori Baba
Hiroaki Yamada

Contents
2 six-Year Financial summary
4 Management’s discussion and analysis
 Operating risks
8 Consolidated Balance sheets
40 Consolidated statements of Operations
41 Consolidated statements of Comprehensive income

Outside Directors

Hachiro Honjo
Yoshihide nakamura

42 Consolidated statements of Changes in net assets
44 Consolidated statements of Cash Flows
46 notes to Consolidated Financial statements
6 independent auditor’s report
Note: In the financial section, reporting is based on the Annual Securities Report(Yukashoken-Houkokusho) that is filed with the Financial Services Agency (FSA).
As a result, information is presented in accordance with the reportable segments,
Apparel Business and Other Business.

Organization Chart
As of March 1, 2013

General Meeting of Shareholders
Audit & Supervisory Board

Board of Directors

Compliance Committee

Representative Director, Chairman and President

Strategy Council

European Operations

Executive Management Council

North American Operations

International
Operations

Secretary Office, Corporate Communications
Corporate Planning, Investor Relations

Asian Operations
Management & Control, International Operations

Finance & Auditing

Advertising & Marketing, New Business Development
Administration

Human Resources & Compliance

Production, Logistics

Business
Management

General Affairs

Sales Personnel Management

Information Systems & Environmental Management

Hiroshima Region

Sendai Region

Sapporo Region

E-commerce

Nagoya Region

Fukuoka Region

Osaka Region

Kanto Region

Tokyo Region

six-Year Financial summary
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28 and 29

Thousands of
U.S. dollars*1

Millions of yen
2008

For the year
Net sales
Cost of sales
Selling, general andadministrative expenses
Operating income
Ordinary income
Income taxes, current
Net income (loss)
Cash flows
Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Free cash flow*2
Capital expenditures
Depreciation and amortization
At year-end
Cash and time deposits
Total current assets
Total property, plant andequipment
Total assets
Total current liabilities
Total shareholders’ equity
Total net assets

2009

2010

2011

2012

2013

RatiosROE (%)ROA (%)
Operating margin (%)
Gross profit margin (%)
SGA / Sales (%)
Shareholders’ equity ratio (%)
Other information
Number of full-time
employees

Operating income and Operating Margin¥ million¥ million/%

400,000

40,0002013¥287,032
156,842¥261,006
142,676¥248,635
134,459¥244,551
128,726¥242,402
127,288¥258,370
133,879$2,792,883
1,447,180

111,562
18,62824,128
9,780
12,214109,246
9,084
6,285
4,639
(30,895)

109,792
4,384
6,120
4,016
2,188

106,896
8,929
10,497
5,555
2,723

104,160
10,954
13,3307,528
3,529

113,298
11,193
13,405
7,398
4,503

1,224,713
120,990
144,905
79,973
48,67912,503

10,83914,058

11,207

13,181

10,138109,583

300,000

287,032

261,006 248,635 244,551 242,402 258,370

200,000(20,610)(40,950)(26)(5,152)(1,962)(10,683)(115,475)(12,583)(8,107)

17,972(30,111)(4,890)14,032(9,272)
6,055(7,449)
11,219(7,848)(545)(84,837)(5,892)

9,566
7,340

4,178
5,986

5,794
5,747

5,405
5,642

6,230
5,478

8,949
5,721

96,731
61,842

36,849112,519

23,41598,94634,330100,680

30,93995,54533,192
98,89524,677
100,320

266,754
1,084,434

95,008309,092
93,321
213,625
197,639

90,175296,283
92,369178,023
158,418

89,742
292,569
90,929175,450
158,164

86,623
281,643
82,677
174,454
158,745

82,988276,939
84,091
176,320
157,30386,862286,779
100,740
177,142
165,372

938,947
3,099,984
1,088,965
1,914,839
1,787,617

Yen

Per share information
Net income (EPS)
Net assets
Cash dividends
Payout ratio (%)

net sales

U.S. dollars*

1¥ 76.53
1,243.80
30.00
39.2

¥ (197.21)
1,001.36
30.00—¥ 13.97998.9824.00
171.9¥ 17.38
1,002.34
24.00
138.1

¥ 22.52995.11
24.00
106.6¥ 28.71
1,043.64
24.00
83.6

$ 0.31
11.28
0.26
—

6.1
4.0
6.5
45.4
38.9
63.0

(17.6)(10.4)
3.5
45.3
41.9
52.9

1.4
0.7
1.8
45.9
44.2
53.5

1.7
1.0
3.7
47.4
43.7
55.8

2.3
1.3
4.5
47.5
43.0
56.3

2.8
1.6
4.3
48.2
43.9
57.1

—
—
—
—
—
—

0

08

09

10

11

12

4,008

3,910

*1. Yen amounts have been translated, for convenience only, at ¥92.51=US$1, the approximate exchange rate on February 28, 2013.
*2. Free cash flow = Cash flows from operating activities + Cash flows from investing activities

3,993

5,208

—

0

13

08

Operating Income

net income (loss)rOE and rOa¥ million%

20,00010

12,214
2,188

2,723

3,529

4,503

0

1.8
4,384

8,929

09

10

11

–40,000

08–30,895
09

10

11

12

6.1
4.0

–20

08

ROE

ROA

13

2

12

13

1.7
1.0

2.3

2.8

1.3

1.6

11

12

13

¥ million/%

400,000

320,000

309,092 296,283 292,569

281,643 276,939 286,779

240,000

200,000

160,000

100,000

80,000

1.4
0.7

08

–17.6
09
10

09

10

11

12

0

13

80

63.0
197,639

52.9

53.5

55.8

56.3

08

09

10

11

12

Cash dividends per share and Payout ratio
¥/%
80

9,000

5,794

6,000

4,178

5,405

60

09

10

11

12

13

0

150

106.6
30.00

30.00

24.00

24.00

24.00

83.6
24.00

39.2
08

0

200

138.1

20

08

13

171.9

6,230
40

40

Shareholders’ Equity Ratio (right scale)¥ million

8,949

60

20

Capital Expenditures
9,566

57.1

158,418 158,164 158,745 157,303 165,372

Total Net Assets

12,0000Total net assets and shareholders’ Equity ratio¥ million

0

4

10,954 11,193–10

Total assets

300,000

6

4.3

Operating Margin (right scale)0–20,000

4.5

3.7

9,084

–10.4

0

2,473

3.5

18,62810,000

3,000

2,469

30,00020,000100,000

8

6.5

100
50

09

Cash Dividends per Share

10

11

12

Payout Ratio (right scale)

130Management’s discussion and analysis

Overview of Operating results

gross Profit

In fiscal year 2013, ended February 28, 2013, the Japanese economy exhibited signs of recovery, spurred on by such factors asreconstruction-related demand in the aftermath of the Great
East Japan Earthquake, which devastated parts of the nation in
March 2011. However, prospects remained uncertain, mainly due
to impacts of the ongoing debt crisis in Europe and a slowdown
in economic growth in emerging countries. On a positive note,
there were expectations that stimulus measures announced by
the new administration led by Prime Minister Shinzo Abe since
December 2012 would help lift the country’s economic performance. This in turn triggered a turnaround in stock prices and acorrection of the yen.
In the domestic apparel and fashion industries, consumer sentiment rebounded after a period of weakness following the 2011
earthquake. This contributed to a modest recovery, particularly for
spring items. Overall, however, market conditions remained somewhat harsh, reflecting such factors as lingering summer heat inearly autumn 2012 and fluctuating consumer sentiment.
Against this backdrop, we at the Onward Group launched our
new medium-term three-year plan, which clearly positions “fashion” as the main focus of our Group’s activities, and includes steps
to strengthen our domestic and overseas businesses.
In our domestic businesses, although sales at Onward
Kashiyama were not as robust as we had anticipated, both sales
and profits did increase substantially. Results in our other mainstay
apparel businesses were essentially in line with our expectations.
In our overseas businesses, we carried out aggressive investments with the aim of moving our global business onto a soundgrowth trajectory. Despite such efforts, earnings slumped compared with the previous fiscal year. Overall, our Group’s efforts
did not lead to the expected growth in our businesses, withthis outcome largely due to instability in global political and economic conditions.
While there may be several challenges remaining in our Group’s
overseas business activities, on a consolidated basis net sales andoperating income have recovered from the downturn in the previous fiscal year as a result of the earnings growth in Japan.

While cost of sales climbed 5.2%, to ¥133,879 million, we
achieved gross profit of ¥124,491 million, an increase of ¥9,377
million compared with the previous fiscal year. This was largely attributable to our growth in net sales. Our gross profit margin improved 0.7 of a percentage point, to 48.2% in fiscal year 2013,
from 47.5% in fiscal year 2012, mainly due to an improvement inour domestic business, despite a slide in gross profit margins at
our overseas subsidiaries.

Operating income

Our selling, general and administrative (SG&A) expenses grew
8.8% over the previous fiscal year, to ¥113,298 million. Our SG&A
expense-to-net sales ratio was 43.9%, up from 43.0% in the previous fiscal year. While at Onward Kashiyama we were successful in curtailing SG&A expenses by ¥1,600 million compared with
our initial plan, the overall increase largely reflected the ¥2,500
million added SG&A expense following the consolidation of the
Birz Group. As a result, our operating income margin contracted to
4.3% from 4.5%. However, bolstered by our strong net sales,
operating income improved ¥239 million, or 2.2%, compared withthe previous fiscal year, to ¥11,193 million.

Other income (Expenses)

Our other expenses, net, amounted to ¥3,444 million comparedwith other income, net, of ¥116 million in the previous year.
Despite the absence of such items as loss on adjustment forchanges of accounting standard for asset retirement obligationsof ¥1,086 million and loss on reconstruction of ¥1,320 million incurred in the previous fiscal year, as well as a gain on transitionof retirement benefit plan totaling ¥1,951 million, the reporting ofother expenses, net, was mainly attributable to a loss on writedown of investments in securities of ¥415 million, which was¥386 million higher than in the previous fiscal year, and an impairment loss on fixed assets of ¥6,919 million, which increased¥6,567 million.

segment information

Outlook for the Fiscal Year Ending
February 28, 2014

apparel BusinessIn the fiscal year ended February 28, 2013, sales in our ApparelBusiness segment climbed 6.7% compared with the previous fiscal year, to ¥242,676 million, and our operating income edged up
1.3%, to ¥14,489 million.

domestic BusinessDespite a shortfall in sales, we managed to achieve an improvement in our gross profit margin at Onward Kashiyama, mainly attributable to robust sales in our highly profitable core brands aswell as favorable contributions from new distribution channels,
including e-commerce. Earnings increased in line with our initialplans due to our successful efforts to control operating expenses in relation to sales. Earnings at our other domestic subsidiaries
also increased as expected.

Overseas Business
We at the Onward Group took aggressive steps to bolster ouroverseas business, which included investments and productlaunches in Europe and Asia in accordance with our business expansion plan. Despite such efforts, results fell somewhat short ofour expectations, mainly owing to a downturn in economic conditions and political instability, which resulted in a sharp and dramatic
drop in consumption. As a result, our Group recorded a decline inearnings, leaving us faced with several challenges in our overseas
business growth strategy.

Other Businessincome before income Taxes and Minority
interests and net income

Sales in our Apparel Business increased 6.7% compared with theprevious fiscal year, to ¥242,676 million, while sales in our Other
Business climbed 5.5%, to ¥15,694 million. As a result, our consolidated net sales grew ¥15,968 million, or 6.6%, compared with theprevious fiscal year, to ¥258,370 million.

Our income before income taxes and minority interests was ¥7,749
million, a decrease of ¥3,321 million, or 30.0%, compared withthe previous fiscal year. Income taxes declined ¥4,262 million, or
57.2%, to ¥3,189 million from ¥7,451 million in the previous fiscal
year. Accounting for these factors, our net income was ¥4,503 million, an increase of ¥974 million, or a gain of 27.6% over the previous fiscal year.

In the fiscal year ended February 28, 2013, sales in our Other
Business segment increased 5.5% compared with the previous
fiscal year, to ¥15,694 million, and our operating income jumped
153.2%, to ¥333 million.
In our service-related businesses, Onward Creative Center,
which designs and constructs commercial facilities, took steps toexpand sales by cultivating new businesses. As a result, the company became profitable. Across Transport, which provides apparel logistics and transportation services, worked to boost logistics
contracts for customers outside the Onward Group, and consequently achieved increases in both sales and profits. Our resort
business posted higher sales and profits thanks largely to a substantial increase in visitors to our resort facilities, coupled with ourefforts to enhance operating efficiency. As a result, our resort business achieved a turnaround and achieved operating income for the
fiscal year under review.

net sales

Operating income and net income (loss)

segment sales¥ million¥ million¥ million

300,000

20,000300,000

net sales

261,006

248,635

244,551

242,402258,370

10,000200,000

9,084

0

4,384

11,193
10,954
8,929
4,503
3,529
2,723

15,584

15,694
14,454
14,813
14,870245,422242,676
234,181229,738
227,532

200,000

2,188–10,000
100,0000–20,000

09

10

11

12

13

100,000–30,000–30,895–40,000

09

Operating Income

1011

Net Income (Loss)

12

13

0

09

Apparel Business10
Other Business

11

12

13

For the fiscal year ending February 28, 2014, we at the Onward
Group forecast that our operating income will grow 15.3%,
to ¥12,900 million, supported by a 5.7% gain on net sales of¥273,000 million. We forecast that our net income will increase
11.0%, to ¥5,000 million.
Although prospects for the Japanese economy have begun
to look brighter during the current modest recovery phase, various global economic issues—including the prolonged debt crisis
in Europe and uncertainty created by a slowdown in China’s rateof economic growth—leave little room for complacency. Personal
consumption in Japan is likely to remain sluggish as consumers
keep a tight rein on spending based on concerns over the weak
employment market and rising living costs. Hence, market conditions are expected to remain difficult.
Under these circumstances, and guided by our medium-term
three-year plan launched in March 2012, we at the Onward Groupintend to continue strengthening our domestic and overseas businesses, while working to further enhance our growth potential. We
plan to aggressively expand our sales efforts by focusing on our expertise, namely “fashion.”domestic Business

Domestically, we at the Onward Group will focus on facilitating
steady growth in our existing businesses while working to improve
our profit margin. At the same time, our efforts will be focused on
bolstering productivity by shifting personnel to new businesses
and pursuing structural reforms, including management. In new
businesses, we will promote the development of fields and markets that have significant growth potential. Taking advantage of oursynergies in existing businesses, we will especially emphasize expanding profits in new business fields.

Overseas Business

We at the Onward Group have implemented several organizational and operational reform measures in our European andAsian subsidiaries, where several issues remain unresolved fromthe previous period. We expect our overseas earnings to substantially improve during the coming year, supported by a steadyrecovery in overseas markets. Looking ahead, we are committed
to steadfastly growing our global business. In addition to effective investments, we will implement efforts to improve efficiencyof our overseas business operations to achieve our yearly business targets.

Operating risks

We at the Onward Group will also pursue M&A opportunities
in Japan and overseas, recognizing these activities as a potential
means to enhance growth, and expand businesses in new fields,
while significantly boosting synergies with our existing businesses.

previous fiscal year, mainly due to investments in sales facilities
and the acquisition of shares in the Birz Group.

Cash Flows from Financing activities

Our net cash used in financing activities for fiscal year 2013,
increased ¥399 million, to ¥7,848 million, attributable to repaymentof long-term loans and dividends paid.

Financial Position
assets

As of February 28, 2013, our total assets increased ¥9,840 million
from the previous fiscal year, to ¥286,779 million. Our current assets
grew ¥1,425 million, mainly from an increase in inventories, as well
as deferred tax assets. Fixed assets also increased ¥8,415 million,
largely owing to increases in buildings and structures on the back of
capital expenditure as well as an increase in investments in securities, reflecting higher market values of stockholdings.

liabilities

Our total liabilities as of February 28, 2013, increased ¥1,771 million from the previous fiscal year, to ¥121,407 million. Despitea decrease in accrued income taxes, our current liabilities grew
¥16,649 million, mainly attributable to an increase in the current
portion of long-term loans payable. Long-term liabilities declined¥14,878 million, due to a decrease in long-term loans payable.

net assets

As of February 28, 2013, our net assets increased ¥8,069 million
from the previous fiscal year, to ¥165,372 million. Our shareholders’ equity increased ¥822 million, reflecting growth in retained
earnings. Accumulated other comprehensive income expanded¥6,907 million, mainly attributable to an increase in net unrealized
gains on available-for-sale securities given the improvement in market values of our stockholdings.

Cash Flows
Cash Flows from Operating activities

Our net cash provided by operating activities for fiscal year 2013,
declined ¥3,043 million from the previous fiscal year, to ¥10,138
million, mainly related to an increase in income taxes paid of¥3,316 million.

Cash Flows from investing activities

Our net cash used in investing activities for fiscal year 2013,
totaled ¥10,683 million, an increase of ¥8,721 million over the

Our cash and cash equivalents as of February 28, 2013, declined¥7,543 million, to ¥24,545 million.

Capital Expenditure
We at the Onward Group undertake capital expenditure on a continuous basis in order to upgrade and expand our planning, production, sales, and logistics structures and systems. Our Group’s
capital expenditure is the wellspring that enables us to address thediverse needs of our customers. In the fiscal year ended February
28, 2013, our capital expenditure totaled ¥8,949 million.
In the Apparel Business segment, capital expenditure totaled¥6,258 million, the majority most of which was channeled to sales
floors at department stores and directly managed stores with theaim of strengthening our Group’s sales structure and systems. In
the Other Business segment, we at the Onward Group invested¥825 million to upgrade commercial facilities and enhance operational efficiency.

Profit distribution Policy
We at Onward Holdings recognize that the distribution of profits
to shareholders is one of our top priorities. Our basic policy is to
distribute regular and stable dividends to shareholders based on
our business performance, and target a dividend payout ratio ofat least 35%. Taking into consideration our business results andthe future outlook for our Group’s operating environment, we at
Onward Holdings decided to distribute a cash dividend of ¥24.00
per share for the fiscal year ended February 28, 2013, the same
payout as the previous fiscal year.
We intend to utilize our retained earnings flexibly and adopt abalanced approach to meet our funding requirements. Based on
this policy, our retained earnings will be used for strategic investments to build a solid business foundation and strengthen our financial position as and when considered appropriate.

Cash Flows¥ million¥ million

400,000

30,000300,000

292,569

281,643

276,939

286,779

15,00017,972
14,058
10,8390
200,000

158,418

158,164

158,745

157,3030–15,000

Total Assets–30,000

09

10

Total Net Assets

11

12

13

–45,000

11,207

13,181

10,138–26–1,962–7,848–4,890 –5,152–7,449–9,272–10,683

165,372

100,000

Changes in Consumer needs

To respond accurately to customer needs regarding fashion products, we work to develop original and competitive products
through the implementation of our Brand-Leverage Management
policy. However, our performance targets in our business plan may
be challenging at times, due to a number of external factors, suchas sluggish consumer spending as a result of fluctuations in economic conditions, increased competition, and sudden changes infashion trends. Falling short of our targets may have an impact on
our Group’s performance.

weather Conditions and disasters

Sales of our Group’s mainstay fashion products may be affectedby the weather. Consequently, we as a Group have put in place,and continue to strengthen our systems for planning and production for a quick turnaround cycle. However, unseasonal weather
over a prolonged period, such as cool weather in the summer or
warm weather in the winter, or a series of typhoons, may resultin the loss of sales opportunities during peak seasons. Such developments may have an adverse impact on our Group’s businessperformance.
In addition, the occurrence of a natural disaster, such as anearthquake, a flood, a fire or an accident, or an outbreak of an epidemic, such as a new strain of influenza, may compel us at the
Onward Group to suspend our business operations. Such an occurrence may have an adverse impact on our Group’s businessperformance.

Product liability

We at the Onward Group adhere to strict quality control of our
products in accordance with established quality control standards.
Despite the implementation of such quality control systems, aproduct liability incident may still occur as a result of matters relating to our Group or business partners, which may undermine
the image of both our Group and brands, leading to a substantial
cost burden. Such an outcome may have an adverse impact on ourGroup’s business performance.

Business Partners

Total assets and Total net assets

296,283

Risks that may have an impact on our Group’s operations are outlined as follows. After determining the potential for these risks tomaterialize, we at the Onward Group will implement measuresdesigned to mitigate these risks or to minimize their impact.
Forward-looking statements in this section are based on theGroup’s judgments in light of information available at the time thisreport was prepared.

–40,950

09

10

Cash Flows from Operating Activities
Cash Flows from Financing Activities

11

12

13

Cash Flows from Investing Activities

We at the Onward Group have put in place and are strengthening
internal systems for periodically assessing the operating conditions
and creditworthiness of our business partners. However, we may
still incur losses due to bad debts if a business partner fails to fulfill
its financial obligations, or as a result of an unexpected bankruptcy
of a large retail complex. Such an occurrence may have an adverse
impact on our Group’s business performance as well.

intellectual Property

We at the Onward Group own trademarks and other intellectual properties in Japan and overseas. We strive to safeguard therights relating to such property in accordance with laws and regulations. However, in the event of an infringement of such rights bya third party, both the image of our Group and brand image may

be undermined, resulting in impairment of our Group’s product development activities. Such an occurrence may have an adverse impact on our Group’s business performance.
Moreover, we at the Onward Group are actively engaged in licensed brand business activities. In undertaking these activities,
we as a Group secure rights to use intellectual property owned byour overseas partners. For unexpected reasons, the relevant contracts may be cancelled or the terms and conditions may become
unfavorable upon renewal. Such an outcome may have an adverse
impact on our Group’s business performance.

legal Procedures and ComplianceIn doing business, the Onward Group pays careful attention tolaws and regulations—including those concerning antitrust, thetreatment of subcontractors, labeling, consumer product safety,
as well as environment- and recycling-related laws—and strives
to ensure compliance. The Onward Group Compliance Committee
spearheads the Group’s efforts to raise awareness about the importance of ensuring legal compliance and maintaining internal
control procedures. Despite the implementation of such control
systems, an issue may arise as a result of the illegal acts of an employee or a business partner and may undermine the trust placedin the Company by society, leading to a substantial cost burden,such as the payment of indemnities. Such an eventuality may havean adverse impact on our Group’s business performance.

information security

We at the Onward Group have implemented comprehensive
measures aimed at ensuring the security of our information systems. Regarding the treatment of personal information, we haveestablished “Guidelines concerning the Personal Information
Protection Law” and strive to enhance information security awareness among all officers and employees. Although we as a Groupare strengthening our information management systems, an issue
may arise as a result of an information leak due to unauthorized access in our Group’s computer systems or criminal behavior that
may undermine the trust placed in us by society, leading to an increased cost burden. Such an occurrence may have an adverse impact on our Group’s business performance.

Overseas Business Operations

Our overseas business operations of the Onward Group are exposed to a range of risks, including natural disasters, political turmoil, changes in social and economic conditions, terrorism, war,fluctuations in foreign currency exchange rates, lawsuits related
to intellectual property, and infectious diseases. In the event thatsuch a risk materializes, it may become difficult for us to continue our business operations in the affected region. Such an occurrence may have an adverse impact on our Group’s businessperformance.

Business and Capital Tie-ups

As a part of our growth strategies, we at the Onward Group undertake a variety of investments in Japan and internationally througha broad spectrum of vehicles, including M&A transactions. In theevent of deterioration in business performance and financial position owing to a change in the business environment that exceeds
expectations, we may record a loss on impairment of goodwill.
Such an occurrence may have an adverse impact on our Group’sbusiness performance.

Consolidated Balance Sheets
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 29, 2012 and February 28, 2013

Thousands of
U.S. dollars(Note 2. (22))

Millions of yen

ASSETS

2012

2013

2013

Current assets:
Cash and time deposits (Notes 3 and 10)

Thousands of
U.S. dollars(Note 2. (22))

Millions of yen

LIABILITIES AND NET ASSETS

2012

2013

2013

Current liabilities:¥ 33,192¥ 24,677$  266,754

Accounts and notes payable (Note 3)¥ 33,238¥ 33,513$  362,262

26,42728,614309,308

Accounts and notes receivable (Note 3)

25,25725,864

279,577

Short-term loans payable (Notes 3 and 15)

Inventories (Note 2. (4))

31,44534,476372,686

Current portion of long-term loans payable (Notes 3 and 15)

3,439

18,967205,029

Accrued income taxes

5,700

4,830

52,205

Accrued bonuses to employees

1,266

1,290

13,942

Accrued bonuses to directors

267

252

2,726

Allowance for sales returns

514

528

5,712
2,695

Deferred tax assets (Note 12)

3,821

7,932

85,737

Other current assets

5,567

7,823

84,568

(387)

(452)

(4,888)98,895

100,320

1,084,434

		 Less: Allowance for bad debt
			Total current assets

Property, plant and equipment (Note 6):
Buildings and structures
Other depreciable property
		Less: Accumulated depreciation
Land (Note 13)
			 Total property, plant and equipment

Provision for point program

202

249

Allowance for losses on reconstruction

1,320

—

—

Other current liabilities

11,71812,497135,086

			Total current liabilities

84,091

100,740

1,088,965

90

250

2,702

Long-term liabilities:
76,491

78,572

849,338

Bonds (Note 15)

27,56330,798332,915

Long-term loans payable (Notes 3 and 15)

19,6401,324

14,312(70,479)(72,570)(784,455)

Deferred tax liabilities—revaluation of land (Notes 12 and 13)

3,966

3,966

42,87533,57536,800397,798

Accrued retirement benefits (Note 8)

4,123

3,058

33,057541,149

Accrued retirement benefits for directors and corporate auditors

140

153

1,648

938,947

Other

7,586

11,916

128,808

49,41382,98850,062
86,862

		 Total long-term liabilities

35,545

20,667

223,402

			Total liabilities

119,636

121,407

1,312,367

Commitments and contingent liabilities (Notes 11 and 14)
Net assets:
Shareholders’ equity (Note 16):
		Common stock:

Intangible assets, net:

			Authorized—400,000,000 shares

Goodwill

40,794

32,770354,227

Other

2,701

2,688

29,058			Issued—172,921,669 shares at February 29, 2012 and February 28, 2013,
respectively

30,08030,080325,150

43,49535,458383,285

		Capital surplus

50,04350,043

540,950

		Retained earnings

119,524

120,165

1,298,939

			Total intangible assets, net

Investments in securities (Notes 3 and 4)

35,17942,730461,898

Long-term loans receivable

5,029

5,276

57,029Long-term prepaid expenses

743

1,212

13,103

Deferred tax assets (Note 12)

4,495

3,601

38,921

8,916

13,862

149,845(2,801)(2,542)(27,478)

Other investments
			 Total investments and other assets
Total assets(23,327)(23,146)(250,200)

			Total shareholders’ equity

176,320

177,142

1,914,839
16,559

Accumulated other comprehensive income:Investments and other assets:

		 Less: Allowance for bad debt

		Less: Treasury stock, at cost, 16,162,243 shares and 16,046,184 sharesat February 29, 2012 and February 28, 2013, respectively

51,56164,139693,318¥276,939¥286,779$3,099,984

		 Net unrealized gain (loss) on available-for-sale securities (Note 4)(3,792)

1,532

		 Deferred gain on hedging instruments

10

34

370

		 Net revaluation loss of land (Note 13)(12,503)(12,503)(135,148)

		 Foreign currency translation adjustments(4,043)(2,484)(26,851)

			 Total accumulated other comprehensive income(20,328)(13,421)(145,070)

Stock acquisition rights

653

724

7,829

Minority interests in consolidated subsidiaries

658

927

10,019

			Total net assets

157,303

165,372

1,787,617

Total liabilities and net assets¥276,939¥286,779$3,099,984

PER SHARE:
Net assets per share
See accompanying notes to consolidated financial statements.

U.S. dollars(Note 2. (22))

Yen¥995.11¥1,043.64$11.28

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 29, 2012 and February 28, 2013

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 29, 2012 and February 28, 2013

Thousands of
U.S. dollars(Note 2. (22))

Millions of yen
2012

2013

Thousands of
U.S. dollars(Note 2. (22))

Millions of yen

2013

2012

2013

¥3,619¥ 4,560$ 49,295

2013

(920)

4,954

53,553

Net sales¥242,402¥258,370$2,792,883

Income before minority interests

Cost of sales

127,288

133,879

1,447,180

Other comprehensive income

Gross profit

115,114

124,491

1,345,703

Net unrealized gain (loss) on available-for-sale securities

Selling, general and administrative expenses

104,160

113,298

1,224,713

Deferred gain on hedging instruments

15

24

263

Operating income

10,954

11,193

120,990

Foreign currency translation adjustments

(447)

1,599

17,275

(87)

387

4,184

	Share of other comprehensive income of associates accounted
for using the equity method

Other income (expenses):
Interest income

110

119

1,285

Dividend income

388

417

Land and house rent received

595

623

4,504
6,733

Interest expenses

(651)

(636)

(6,875)

Royalty income

802

730

7,892

Equity in earnings of investees

715

251

2,708

Foreign currency exchange loss

(182)

(238)

(2,569)Gain on sale of investments in securities, net (Note 4)

14

—

—

Loss on write-down of investments in securities (Note 4)

(29)

(415)

(4,483)

Provision for allowance for bad debt

(350)

—

—

Gain (loss) on disposal of fixed assets, net

936

(106)

(1,149)Impairment loss on fixed assets (Note 7)(352)(6,919)(74,789)

Gain on transition of retirement benefit plan

—

1,951

21,093(1,086)——(1,320)

—

—

526

779

8,420

11,0707,749

83,760	Loss on adjustment for changes of accounting standard for asset retirement
obligations
Loss on reconstruction
Other, net
Income before income taxes and minority interests
Income taxes (Note 12):Current

7,528

7,398

79,973

Deferred(77)(4,209)(45,508)

3,619

4,560

49,295

Income before minority interests
Minority interests in subsidiaries
Net income

(90)

(57)

(616)

¥  3,529¥  4,503$   48,679

PER SHARE (Notes 16, 17 and 19):

U.S. dollars(Note 2. (22))

Yen

Net income—basic¥22.52¥28.71$0.31

Diluted net income per share

22.35

28.46

0.31

Cash dividends

24.00

24.00

0.26

See accompanying notes to consolidated financial statements.

Total other comprehensive income (Note 9)Comprehensive income(1,439)6,964

75,275¥2,180¥11,524$124,570¥2,105¥11,411$123,346

75

113

1,224

Comprehensive income attributable to:		 Owners of the parent
		Minority interests
See accompanying notes to consolidated financial statements.

Consolidated Statements of Changes in Net Assets
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 29, 2012 and February 28, 2013

Millions of yen

Millions of yen

Shareholders’ equity
Number ofshares ofcommon stock(thousands)

Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings(Note 16)

Treasurystock

172,922¥30,080¥50,043¥117,777¥(23,446)¥174,454

Cash dividends

—

—

—

(3,760)—(3,760)Net income

—

—

—

3,529

—

3,529

Purchase of treasury stock

—

—

—

—

(2)

(2)

Reissuance of treasury stock

—

—

—

(83)

121

38

Reversal of net revaluation loss of land

—

—

—

2,061

—

2,061

Net changes other than shareholders’ equity

—

—

—

—

—

—

Balance as at March 1, 2011

Net unrealized
gain (loss) on Deferred gain
Foreignavailable-for(loss)
Net revaluation currency
sale securities on hedging
loss of landtranslation(Note 4)
instruments(Note 13)adjustments

Total

		 Total changes during the year

—

—

—

1,747

119

1,866

Balance as at February 29, 2012

172,92230,08050,043

119,524(23,327)

176,320

Cash dividends

—

—

—

(3,762)—(3,762)

Net income

—

—

—

4,503

—

4,503

Purchase of treasury stock

—

—

—

—

(3)

(3)

Reissuance of treasury stock

—

—

—

(100)

184

84

Reversal of net revaluation loss of land

—

—

—

—

—

—

Net changes other than shareholders’ equity

—

—

—

—

—

—

		 Total changes during the year

—

—

—

641

181

822

Balance as at February 28, 2013

172,922¥30,080¥50,043¥120,165¥(23,146)¥177,142

Thousands of U.S. dollars (Note 2. (22))

Balance as at March 1, 2011¥(2,838)¥ (5) ¥(11,004)

StockacquisitionrightsTotal¥(3,558) ¥(17,405)¥532

Minority
interests
in consolidated
subsidiaries

Total net
assets¥1,164 ¥158,745

Cash dividends

—

—

—

—

—

—

—

(3,760)Net income

—

—

—

—

—

—

—

3,529

Purchase of treasury stock

—

—

—

—

—

—

—

(2)

Reissuance of treasury stock

—

—

—

—

—

—

—

38

Reversal of net revaluation loss of land

—

—

—

—

—

—

—

2,061

(954)

15

(1,499)(485)(2,923)

121

(506)

(3,308)

		 Total changes during the year

(954)

15

(1,499)(485)(2,923)

121

(506)

(1,442)

Balance as at February 29, 2012

(3,792)

10(12,503)(4,043)(20,328)653

658

157,303

Cash dividends

—

—

—

—

—

—

—

(3,762)

Net income

—

—

—

—

—

—

—

4,503

Purchase of treasury stock

—

—

—

—

—

—

—

(3)

Reissuance of treasury stock

—

—

—

—

—

—

—

84

Reversal of net revaluation loss of land

—

—

—

—

—

—

—

—

5,324

24

—

1,559

6,907

71

269

7,247

1,559

6,907

71

269

8,069

¥(2,484) ¥(13,421)¥724

Net changes other than shareholders’ equity

Net changes other than shareholders’ equity
		 Total changes during the year

5,324

24

—

Balance as at February 28, 2013

¥ 1,532¥34¥(12,503)¥  927 ¥165,372

Thousands of U.S. dollars (Note 2. (22))

Shareholders’ equity

Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings(Note 16)

$325,150$540,950$1,292,014

Cash dividends——(40,668)—(40,668)

Net income——

48,679—48,679Purchase of treasury stock

—

—

—

(38)

(38)

Cash dividends

—

—

—

—

—

—

—

(40,668)

Reissuance of treasury stock——(1,086)

1,993

907

Net income

—

—

—

—

—

—

—

48,679—Purchase of treasury stock

—

—

—

—

—

—

—

(38)

Reissuance of treasury stock

—

—

—

—

—

—

—

907

—

—

—

—

—

—

—

—

57,553263—

16,84974,665766

2,918

78,349263—

16,84974,665766

2,918

87,229$(26,851) $(145,070)$7,829Balance as at February 29, 2012

Reversal of net revaluation loss of land
Net changes other than shareholders’ equity
		 Total changes during the year
Balance as at February 28, 2013

—

—

—

Treasurystock$(252,155) $1,905,959

—

—

—

—

—

—

—

—

6,925

1,955

8,880

$325,150$540,950$1,298,939

Net unrealized
gain (loss) on Deferred gain
Foreignavailable-for(loss)
Net revaluation currency
sale securities on hedging
loss of landtranslation(Note 4)
instruments(Note 13)adjustments

Total$(250,200) $1,914,839

See accompanying notes to consolidated financial statements.

Balance as at February 29, 2012

Reversal of net revaluation loss of land
Net changes other than shareholders’ equity
		 Total changes during the year

57,553

Balance as at February 28, 2013

$ 16,559

See accompanying notes to consolidated financial statements.

(Continued)$(40,994)$107 $(135,148)$370 $(135,148)

StockacquisitionrightsTotal$(43,700) $(219,735)$7,063

Minority
interests
in consolidated
subsidiaries

Total net
assets$ 7,101 $1,700,388$10,019 $1,787,617

Consolidated Statements of Cash Flows
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 29, 2012 and February 28, 2013

Thousands of
U.S. dollars(Note 2. (22))

Millions of yen
2012

2013

2013

2012

Cash flows from operating activities:
Income before income taxes and minority interests¥11,070¥ 7,749$ 83,760

		 Depreciation and amortization

5,478

5,721

61,842

		 Impairment loss on fixed assets

352

6,919

74,789

3,665

3,938

42,563138(285)(3,081)

		 Increase (decrease) in provision for accrued retirement benefits

686(5,419)(58,582)

		 Interest and dividend income

(498)

(536)

(5,789)

		Interest expense

651

636

6,875

		 Equity in earnings of investees

(715)

(251)

(2,708)

		 (Gain) loss on disposal of fixed assets, net

(936)

106

1,149

		 (Gain) loss on sale of investments in securities, net

(13)

—

—

		 Loss on write-down of investments in securities

29

415

4,483

		 Increase (decrease) in provision for allowance for bad debt

		 (Increase) decrease in trade receivables
		 (Increase) decrease in inventories
		 Increase (decrease) in trade payables

(188)

455

4,915

(1,444)(2,094)(22,638)

761

(655)

(7,076)

		Other, net(1,187)

894

9,668

			Subtotal

17,84917,593

190,170

Interest and dividends received

746

769

8,311

Interest paid

(674)

(647)

(6,994)

Income taxes paid

(5,973)(9,289)(100,410)

Refunded income taxes

1,233

1,712

18,506

13,181

10,138109,583

				Net cash provided by operating activities
Cash flows from investing activities:
Increase in time deposits(1,021)

(68)

(739)

Decrease in time deposits

2,243

1,087

11,756

Acquisition of property, plant and equipment(4,163)(6,411)(69,300)

Proceeds from sale of property, plant and equipment

4,754

23

251

Acquisition of investments in securities(1,138)(994)(10,740)

Proceeds from sale of investments in securities

14

—

—

Payments for long-term prepaid expenses

(642)

(635)

(6,868)

Payments for security deposits(510)(1,001)(10,823)

Proceeds from security deposits

800

769

8,312

Purchase of investments in subsidiaries resulting in change in scope of consolidation—(1,940)(20,969)

Payment for additional acquisition of shares of consolidated subsidiaries
Other, net
				Net cash used in investing activities

2013

2013

Cash flows from financing activities:	Adjustments to reconcile income before income taxes and minority interests to
net cash provided by operating activities:

		 Net amortization of goodwill on consolidation

Thousands of
U.S. dollars(Note 2. (22))

Millions of yen(1,396)

(16)

(173)

(903)

(1,497)(16,182)(1,962)(10,683)(115,475)(Continued)

Increase (decrease) in short-term loans payable

(330)

(368)

(3,973)

Proceeds from long-term loans payable

833

2,205

23,834

Repayments of long-term loans payable(3,586)(5,038)(54,456)

(2)

(3)

(38)

(3,760)(3,762)(40,668)

Acquisition of treasury stock
Dividends paid by the parent company
Dividends paid to minority shareholders

(55)

(54)

(584)

Other, net

(549)

(828)

(8,952)(84,837)				 Net cash used in financing activities(7,449)(7,848)

Effect of exchange rate changes on cash and cash equivalents

(316)

850

9,193

Net increase (decrease) in cash and cash equivalents

3,454(7,543)(81,536)

Cash and cash equivalents at beginning of year

28,63432,088346,859

Cash and cash equivalents at end of year (Note 10)¥32,088¥24,545$265,323

See accompanying notes to consolidated financial statements.

Notes to Consolidated Financial Statements
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 29, 2012 and February 28, 2013

1. Basis of Presentation of the Consolidated Financial Statements(2) Consolidation and Elimination

The accompanying consolidated financial statements have been prepared from the accounts maintained by
ONWARD HOLDINGS Co., Ltd. (the “Company”), and its consolidated subsidiaries in accordance with the provisions
set forth in the Corporation Law of Japan (the “Corporation Law”) and the Financial Instruments and Exchange Law
and in conformity with accounting principles and practices generally accepted in Japan, which are different in certain
respects from the application and disclosure requirements of International Financial Reporting Standards.
Certain items presented in the consolidated financial statements submitted to the Director of the Kanto Finance
Bureau in Japan have been reclassified for the convenience of readers outside Japan.
The accompanying consolidated financial statements are not intended to present the consolidated financial position, results of operations and cash flows of the Company and its consolidated subsidiaries in accordance withaccounting principles and practices generally accepted in countries and jurisdictions other than Japan.

2. Summary of Significant Accounting Policies(1) Scope of Consolidation

The Company had 86 subsidiaries as at February 28, 2013 (76 as at February 29, 2012). The accompanying consolidated financial statements include the accounts of the Company and 73 of its subsidiaries (65 for 2012). Major consolidated subsidiaries are listed below (the Company and the consolidated subsidiaries are collectively referred to as
the “Companies”):
Name of subsidiary

Onward KASHIYAMA Co., Ltd.
Onward Trading Co., Ltd.
Chacott Co., Ltd.
Creative Yoko Co., Ltd.
Island Co., Ltd.
Birz Association Co., Ltd.
Bus Stop Co., Ltd.
Project Sloane Ltd.
Joseph Ltd.
Gibo’ Co. S.p.A.
Jil Sander Italy S.p.A
Onward Fashion Trading (China) Co., Ltd.
J. Press, Inc.
Across Transport Co., Ltd.
Onward Creative Center Co., Ltd.
Booklet Co.,Ltd.
Excel Co., Ltd.
Onward Resort & Golf Co., Ltd.
Onward Life Design Network Co., Ltd.
Onward Beach Resort Guam, Inc.
Onward Mangilao Guam, Inc.

Equity ownership percentage

Closing date

100.0%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

February 28
February 28
February 28
February 28
February 28
February 28
February 28
November 30
November 30
November 30
November 30
December 31
December 31
February 28
February 28
February 28
February 28
February 28
February 28
December 31
December 31

Vertigo S.r.l., Onward Fashion Trading (Shanghai) Co., Ltd., Freed USA Inc., Charles & Keith Japan Pte. Ltd. andCharles & Keith Japan Co., Ltd. were established during the year ended February 28, 2013; therefore, these companies became consolidated subsidiaries of the Company.
Birz Association Co., Ltd., Birth Village Ltd. (Presently, Birth Village Co., Ltd.), Naima Co., Ltd., Vina Birz Co., Ltd.,LaLa Plan Co., Ltd., Sakula Co., Ltd., Jitensya Shokunin Co., Ltd. and Vintage Co., Ltd. were acquired during the year
ended February 28, 2013; therefore, these companies became consolidated subsidiaries of the Company.
Also, O.K.N. Amsterdam B.V. merged with Violin S.à r.l.
In the Gibo’ Co. Group, Iris S.p.a. merged with Red Iris S.r.l., Gibo France S.a.r.l. (Presently, Onward Luxury Group
S.a.r.l.) merged with Iris France S.a.r.l. and Gibo USA Inc. (Presently Onward Luxury Group Inc.) merged with Iris
North America Inc.
In the Jil Sander AG Group, Viola S.à r.l. was liquidated and removed from the scope of consolidation.
The financial statements of the aforementioned subsidiaries with fiscal year-ends of December 31 or November
30 have been used for consolidation and the fiscal year-end date at Vintage Co., Ltd. is July 31 and the fiscal year-end
date at Jitensya Shokunin Co., Ltd. is August 31. Significant adjustments considered necessary due to different closing date from 2/28 have be made with consolidation.
The remaining 13 subsidiaries (11 for 2012) were not consolidated because their total assets, net sales, net
income and retained earnings were not material individually or in the aggregate compared with those of the consolidated financial statements of the Companies.

For the purposes of preparing the consolidated financial statements of the Companies, all significant intercompany
transactions, account balances and unrealized profits among the Companies have been entirely eliminated, and the
portion attributable to minority interests is credited/charged thereto.
The assets and liabilities of newly acquired subsidiaries are measured at fair value at the time of acquisition, andthe differences between the cost of investments in the consolidated subsidiaries and the equity in their net assets atfair value are accounted for as goodwill, which is amortized on a straight-line basis within 20 years.

(3) Investments in Unconsolidated Subsidiaries and Affiliates

Investments in unconsolidated subsidiaries and affiliates are accounted for by the equity method. A total of 19 companies (20 companies for 2012) are accounted for by the equity method for the year ended February 28, 2013.
The Company did not apply the equity method to Onward Italia S.p.A. and others as the effect on net income orretained earnings of their consolidated financial statements are not material individually or in the aggregate.
The Company applied the equity method by using the November 30 financial statements of Gailyglen Ltd., which
has a fiscal year-end of November 30. Also, the December 31 financial statements of Daidoh Limited, which has a fiscal
year-end of March 31, prepared on a basis similar to that for year-end closing, were used for consolidation purposes.

(4) Inventories

Inventories held for sale in the ordinary course of business are measured at the lower of cost or net selling value,
which is defined as the selling price less additional estimated manufacturing costs and estimated direct selling
expenses, determined principally by the specific identification method. For the year ended February 28, 2013, therecorded write-downs were ¥10,769 million ($116,414 thousand). For the year ended February 29, 2012, the recorded
write-downs were ¥9,494 million.

(5) Investments in Securities

Debt securities and equity securities classified as available-for-sale securities whose fair values are readily determinable are carried at the fair values prevailing at the fiscal year-end date with unrealized gains or losses included as acomponent of net assets, net of applicable taxes. Available-for-sale securities whose fair values cannot readily be
determined are stated principally at cost.
In cases where declines in the fair values of individual securities are assessed to be other than temporary, thecost of the security is reduced to net realizable value and the impairment loss is charged to income. Realized gains
and losses are determined using the moving-average method and are reflected in income.

(6) Derivative Transactions

All derivatives are stated at fair value, and changes in fair value are included in income for the period in which theyarise, except for derivatives that are designated as “hedging instruments” (see “(7) Hedge Accounting” below).

(7) Hedge Accounting

All gains or losses arising from changes in the fair values of the derivatives are designated as “hedging instruments,”
which are deferred as a component of net assets, net of applicable taxes. The gains or losses on the hedging instruments are included in net income in the same period during which the gains and losses on the hedge items or transactions are recognized. For foreign exchange forward contracts, if they meet conditions for hedge accounting, thedifference between the contract rate and spot rate at the date of the contract is recognized over the period from thecontract date to the settlement date.
The derivatives designated as hedging instruments are principally foreign exchange forward contracts. The related
hedged items are trade accounts payable and trade accounts receivable denominated in foreign currencies and scheduled transactions.
The Company has a policy of utilizing hedging instruments in order to reduce the exposure to the risk of foreign currency exchange rate fluctuation.

(8) Property, Plant and Equipment

The Company and its domestic consolidated subsidiaries provide depreciation by the declining-balance method at
rates based on the estimated useful lives of assets which are prescribed by Japanese income tax regulations, except
for certain buildings (other than improvements) acquired on and after April 1998, which are depreciated by thestraight-line method pursuant to an amendment to Japanese income tax law.
Overseas consolidated subsidiaries provide depreciation by the straight-line method.
The useful lives of property, plant and equipment are summarized as follows:
Buildings and structures 3 to 50 years
Other
2 to 20 years(9) Intangible Assets and Long-term Prepaid Expenses

Intangible assets and long-term prepaid expenses are amortized by the straight-line method.
Software costs for internal use are amortized over their expected useful lives (five years) by the straight-line method.

(10) Income Taxes

The accounting standards for income taxes require that deferred income taxes be accounted for under the asset andliability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled, and the effect on deferred tax assets and liabilities of achange in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance isprovided to reduce deferred tax assets to the amount that is realizable.

(11) Allowances for Bad Debt

An allowance for doubtful accounts, including trade notes and accounts receivable and certain investments and otherassets, is provided against probable future losses on collection. The Company and subsidiaries designate certain
accounts as highly doubtful accounts and provide a specific allowance for these accounts based on the management’s detailed credit analysis. Other than these accounts, the Company provides an allowance for doubtful
accounts based on the Company’s historical average charge-off ratio.

(12) Allowances for Sales Returns

An allowance for sales returns is provided for the estimated losses based on the actual percentage of sales return inprior years and gross profit margin.

(13) Retirement Benefits

Accrued retirement benefits are provided for at the present value of the projected benefit obligation less the estimated fair value of plan assets and deferred gains or losses at the balance sheet date. Unrecognized prior service
costs are amortized and charged or credited to income on a straight-line basis over 5 to 10 years, which is within therelated employees’ average remaining service years. Unrecognized actuarial differences are amortized on a straightline basis over 5 to 10 years, which is within the related employees’ average remaining service years, from the year
following the one in which they arise.
Accrued retirement benefits for directors and statutory auditors are provided for at the amount required at the balance sheet dates in accordance with the internal rules of the Company and certain consolidated subsidiaries.

(14) Provision for Point Program

The provision for point program was provided for the future cost generating from the utilization of points that customers of certain consolidated subsidiaries have earned under the point service program which is for sales promotions. The Company reserves an amount considered appropriate to cover possible utilization of the points during andafter the next fiscal year.

(15) Accounting for Leases

Leased assets related to finance lease transactions without title transfer are depreciated on a straight-line basis, overthe lease periods as their useful lives and no residual value. Regarding finance leases transactions without title transfer for which the starting date for the lease transactions is prior to February 28, 2009, the Company and its domestic
consolidated subsidiaries have continued to recognize lease payments as expenses.

(16) Accounting for Japanese Consumption Taxes

The Japanese consumption taxes withheld upon sale of goods and services and the consumption taxes paid by theCompanies on the purchase of goods and services are not included in the accompanying consolidated statementsof operations.

(17) Cash and Cash Equivalents

Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits which can be withdrawn on demand, and short-term investments which are readily convertible into cash or withan original maturity of three months or less, which represent insignificant risk of changes in value.

(18) Impairment of Long-Lived Assets

The standard of impairment of long-lived assets requires that fixed assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of
the undiscounted future cash flows expected to be generated from the continued use and eventual disposition of theasset or asset group. The impairment loss would be measured as the amount by which the carrying amount of theasset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use andeventual disposition of the asset or the net selling price at disposition.

(19) Accrued Bonuses to Employees

Allowance for bonuses to employees are provided by the estimated amounts, which are obligated to pay to employees after the fiscal year-end, based on services provided during the current period.

(20) Directors’ Bonuses

Under the standard of directors’ bonuses, directors’ bonuses are accounted for as an expense as incurred, instead ofbeing accounted for as an appropriation of retained earnings upon approval at a general meeting of shareholders.

(21) Allowances for Losses on Reconstruction

An allowance is provided for the estimated losses to be incurred with the reconstruction of the Head Office buildingof the Company.

(22) United States Dollar Amounts

Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of¥92.51=US$1, the rate of exchange as of February 28, 2013, has been used in translation. The inclusion of suchamounts is not intended to imply that Japanese yen have been or could be readily converted, realized or settled in
U.S. dollars at that rate or any other rate.

(23) Reclassifications

Certain reclassifications have been made to the prior year’s consolidated financial statements to conform with thepresentation used for the year ended February 28, 2013.

(24) Goodwill

Goodwill is evaluated on an individual basis and amortized on a straight-line basis within 20 years.

(25) Accounting Changes and Error Corrections

For accounting changes and corrections of prior periods errors which have been made from the beginning of the
fiscal year ended February 28, 2013, the Company and its subsidiaries have adopted the “Accounting Standard for
Accounting Changes and Error Corrections” (the Accounting Standard Board of Japan (ASBJ) Statement No.24,
December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes and Error Corrections”(ASBJ Guidance No.24, December 4, 2009)

3. Financial Instruments
1. Matters pertaining to the status of financial instruments(1) Policy on financial instruments
The Company and its subsidiaries invest their funds in short-term deposits and meet their financing needs throughbank loans. The Company and its subsidiaries utilize derivatives to hedge various risks as described in detail below
and do not enter into derivatives for trading or speculative purposes.
(2) Financial instruments and risks
Accounts and notes receivable are exposed to credit risk of customers. Trade receivables denominated in foreign currencies, being subject to risks associated with changes in the foreign currency exchange rates, are hedged by forward exchange contracts.
Investment securities mainly comprise stocks of companies with which the Company and its subsidiaries havebusiness alliances and are exposed to risks associated with fluctuations of their market prices.
Accounts and notes payable are due within one year. Trade payables denominated in foreign currencies, being
subject to risks associated with changes in foreign currency exchange rates, are hedged by forward exchange contracts, and currency option trading. The purpose for loans is for working capital (mainly short-term) and funds of capital investment (long-term). Interest-rate swaps are used to fix interest expenses for interest rate risk of a portion of
long-term loans payable.
Regarding derivatives, forward foreign exchange contracts, and currency option trading are used to hedge the foreign exchange rate fluctuation risk associated with the operating receivables and payables, and interest rate swap isused to mitigate the interest rate risk for loans payable.
(3) Risk management for financial instruments(a) Monitoring of credit risk (the default risk for customers and counterparties)
In accordance with the internal policies of the Company and its consolidated subsidiaries for managing credit risk
arising from notes and accounts receivable, the Company and its subsidiaries monitor creditworthiness of their main
customers and counterparties on a periodical basis and monitor due dates and outstanding balances by individual
customers. Additionally, as means to mitigate credit risks, derivative transactions are only conducted with high-credit
worthy financial institutions as counterparties.

(b) Monitoring of market risk (the risk arising from fluctuations in foreign exchange rates, interest rates and others)
The Company and its consolidated subsidiaries hedge risks associated with changes in the foreign currency
exchange rates, arising from trade receivable and payable denominated in foreign currencies mainly by forward
exchange contracts. Additionally, interest rate swap contracts are used to mitigate the risks associated with fluctuations in the interest payments on the long-term loans payable.
For investment securities, the Company and its consolidated subsidiaries periodically review their fair values andthe financial position of the issuers. Additionally, the Company and its consolidated subsidiaries continuously evaluate
whether securities should be maintained taking into account their fair values and relationships with the issues.
In derivative transactions, the division in charge of each derivative transaction follows the internal management
policies within the actual demand. Additionally, the Company and its consolidated subsidiaries monthly review transactions balance and the valuation gain (loss).
(c) Monitoring of liquidity risk related to fund procurement (the risk that the Company and its consolidated subsidiaries may not be able to meet their obligations on scheduled due dates)
In order to manage liquidity risk, the Company and its consolidated subsidiaries timely prepare and update the cash
flow plans based upon the report and maintain fund liquidity.
(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price if available. When no quoted market priceis available, fair value is reasonably estimated. Since various variable assumptions are reflected in estimating the fairvalue, different assumptions could result in different fair values.
2. Matters related to fair values of financial instruments
The following are the consolidated balance sheet amounts, the fair values and the differences between them as ofFebruary 28, 2013 and February 29, 2012 (the closing dates of the consolidated account).
Millions of yen
February 28, 2013(a) Cash and time deposits(b) Accounts and notes receivable(c)	Investment in securities
Available-for-sale securities
Investment to affiliates(d) Accounts and notes payable(e) Short-term loans payable(f)	Long-term loans payable (Cover current portion of
long-term loans payable)(g) Derivative transactions

Book value

Fair value

Difference¥ 24,677
25,864¥ 24,677
25,864¥    ——

33,0998,852(33,513)(28,614)33,0995,092(33,513)(28,614)—(3,760)——(20,291)37(20,409)
37

118—

Notes:
1. Fair value measurement of financial instruments, including securities and derivatives(a) Cash and time deposits and (b) Accounts and notes receivable
Since these items are settled in a short period of time, their book value approximates fair value.
(c) Investment in securities
The fair value of equity securities is calculated by the quoted market price.
(d) Accounts and notes payable and (e) Short-term loans payable
Since these items are settled in a short period of time, their book value approximates fair value.
(f) Long-term loans payable	The fair values of long-term loans payable are measured as present values obtained by discounting the total amount of principal and interest at the estimated interest rate if similar loans payable were newly made. Of long-term loans payable that havea variable interest rate, the book value is used as fair value, as they are deemed to reflect market interest rates within ashort time.
(g) Derivative transactions
The fair value is calculated on the basis of the price quoted by the financial institutions.
2. Book values of financial instruments deemed extremely difficult to determine their fair value as of February 29, 2012 andFebruary 28, 2013 are as follows:

Classification

Investment securities
Unlisted equity securities(a) Cash and time deposits(b) Accounts and notes receivable(c) Investment in securities
Available-for-sale securities
Investment to affiliates(d) Accounts and notes payable(e) Short-term loans payable(f)	Long-term loans payable (Cover current portion of
long-term loans payable)(g) Derivative transactions

Book value

Fair value

Difference$ 266,754
279,577$ 266,754
279,577$     ——

357,791
95,685(362,262)(309,308)

357,791
55,043(362,262)(309,308)—(40,642)——(219,341)
401(220,617)
401

1,276
—

Millions of yen
February 29, 2012(a) Cash and time deposits(b) Accounts and notes receivable(c) Investment in securities
Available-for-sale securities
Investment to affiliates(d) Accounts and notes payable(e) Short-term loans payable(f)	Long-term loans payable (Cover current portion of
long-term loans payable)(g) Derivative transactions

Book value

Fair value

Difference¥ 33,192
25,257¥ 33,192
25,257¥    ——

25,923
8,464(33,238)(26,427)

25,923
5,411(33,238)(26,427)—(3,053)——(23,079)(990)(23,169)
(990)

90
—

February 29, 2012

February 28, 2013

February 28, 2013

¥792

¥779

$8,422

The fair values of these items are not included in (c) “Investment in securities” because their market prices are
not available and whose fair values are deemed extremely difficult to determine.
3. The redemption schedule for monetary receivables and marketable securities with maturities as of February 28, 2013 andFebruary 29, 2012 is as follows:
Millions of yen
February 28, 2013

Cash and time deposits
Accounts and notes receivable
Marketable and investment securities
Available for sale securities with maturities
Total

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years¥24,677
25,863

¥—
1

¥—
—

¥  —
—

—
¥50,540

58
¥59

—
¥—

600
¥600

Thousands of U.S. dollars
February 28, 2013

Thousands of
U.S. dollars

Millions of yen

Thousands of U.S. dollars
February 28, 2013

Cash and time deposits
Accounts and notes receivable
Marketable and investment securities
Available for sale securities with maturities
Total

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years$266,754
279,569

$ —
8

$—
—

$    ———$546,323

635
$643

—
$—

6,486
$6,486

Millions of yen
February 29, 2012

Cash and time deposits
Accounts and notes receivable
Marketable and investment securities
Available for sale securities with maturities
Total

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years¥33,192
25,256

¥—
1

¥—
—

¥  —
—

—
¥58,448

58
¥59

—
¥—

600
¥600

4. Expected repayment amounts of long-term loans payable subsequent to the balance sheet date
See Note 15. “Short-Term Loans payable and Long-Term Loans payable.”4. Investments in Securities

5. Derivative Transactions(1) Information as of and for the Year Ended February 28, 2013

The contract or notional amounts and fair value of derivative financial instruments held as of February 28, 2013 andFebruary 29, 2012 are summarized as follows:(1) Derivative transactions not subject to hedge accounting:(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2013 are summarized asfollows:
Millions of yen
Carrying
value

Securities with unrealized gain:
Equity securities
Other
Total
Securities with unrealized loss:
Equity securities
Other
Total
		
Total

Millions of yen

Thousands of U.S. dollars

Acquisition
cost

Unrealized
gain (loss)¥25,786
254
26,040¥20,149
194
20,343

6,934
125
7,059
¥33,099

7,918
131
8,049
¥28,392

February 28, 2013

Carrying
value

Acquisition
cost

Unrealized
gain (loss)¥5,63760
5,697$278,739
2,746
281,485$217,806
2,100
219,906$60,933
646
61,579Currency option contracts:
Buy: U.S. dollar call
Sell: U.S. dollar put
Buy: Euro call
Sell: Euro put

(984)
(6)
(990)
¥4,707

74,9561,350
76,306$357,791

85,5871,419
87,006$306,912(10,631)(69)(10,700)$50,879

Interest rate swap agreements:
Variable rate received for variable rate
Variable rate received for fixed rate
Fixed rate received for variable rate

Contract or notionalamounts

Valuation
gain (loss)

Fair value¥  312680
68137¥1,197

¥  5
(68)
4
(2)
¥(61)

¥  5
(68)
4
(2)
¥(61)

¥  30057
100¥  457

¥  4
(0)
1
¥  5

¥  4
(0)
1
¥  5

Note: Non-Marketable equity securities of ¥338 million ($3,655 thousand) are not included in the above table because there were
no quoted market prices available and they are extremely difficult to determine the fair value.

Thousands of U.S. dollars(b) Available-for-sale securities sold during the year ended February 28, 2013:
Not applicableFebruary 28, 2013(c) Losses on impairment of available-for-sale securities recognized to reflect declines in market value considered tobe other than temporary were ¥415 million ($4,483 thousand) for the year ended February 28, 2013.
(d) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28,
2013 was ¥9,293 million ($100,452 thousand).

(2) Information as of and for the Year Ended February 29, 2012

Currency option contracts:
Buy: U.S. dollar call
Sell: U.S. dollar put
Buy: Euro call
Sell: Euro put
Interest rate swap agreements:
Variable rate received for variable rate
Variable rate received for fixed rate
Fixed rate received for variable rate(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 29, 2012 are summarized
as follows:

Securities with unrealized gain:
Equity securities
Other
Total
Securities with unrealized loss:
Equity securities
Other
Total
Total

Acquisition
cost

Valuation
gain (loss)

Fair value$ 3,367
7,354
738
1,476
$12,935$   58
(730)
39
(23)
$(656)$   58
(730)
39
(23)
$(656)$ 3,243613
1,081$ 4,937$   42(3)
14$   53$   42(3)
14$   53

Millions of yen
February 29, 2012

Millions of yen
Carrying
value

Contract or notionalamounts

Unrealized gain
(loss)¥ 8,561
148,575¥ 7,059
13
7,072¥ 1,502
1
1,503

17,080268
17,348¥25,923

20,443312
20,755¥27,827(3,363)(44)(3,407)¥(1,904)

Note: Non-Marketable equity securities of ¥338 million are not included in the above table because there were no quoted market
prices available and they are extremely difficult to determine the fair value.

(b) Available-for-sale securities sold during the year ended February 29, 2012:
Millions of yen

Proceeds from sale of securities
Realized gain on sale of securities
Realized loss on sale of securities

¥15
14
1

Forward exchange contracts:
To buy foreign currency:
U.S. dollar
To sell foreign currency:
U.S. dollar
Currency swap agreements:
U.S. dollars received for Japanese yen
Currency option contracts:
Buy: U.S. dollar call
Sell: U.S. dollar put
Buy: Euro call
Sell: Euro put
Interest rate swap agreements:
Variable rate received for variable rate
Variable rate received for fixed rate
Fixed rate received for variable rate

Contract or notionalamounts

Valuation
gain (loss)

Fair value¥2,744¥  (354)¥  (354)

38

(1)

(1)

1,361

(173)

(173)

2,253
2,782
102
205
¥9,485

67
(538)
2
(17)
¥(1,014)

67
(538)
2
(17)
¥(1,014)¥  30079100¥  479¥     4(1)(0)¥     3¥     4(1)(0)¥     3

(2) Derivative transactions processed by hedge accounting:Millions of yen(c) Losses on impairment of available-for-sale securities recognized to reflect declines in market value considered tobe other than temporary were ¥29 million for the year ended February 29, 2012.
(d) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 29,
2012 was ¥8,918 million.

February 28, 2013

Forward exchange contracts:
To buy foreign currency:
U.S. dollar
Euro
Pound
Chinese Yuan
To sell foreign currency:
U.S. dollar

Hedged Items

Contract ornotional amounts

Accounts payable
Accounts payable
Accounts payable
Accounts payable¥1,315
1,701
127
0

¥27
64
0
0

Accounts receivable578¥3,721

2¥93

Fair value

Thousands of U.S. dollars
February 28, 2013

Forward exchange contracts:
To buy foreign currency:
U.S. dollar
Euro
Pound
Chinese Yuan
To sell foreign currency:
U.S. dollar

Hedged Items

Contract ornotional amounts

Accounts payable
Accounts payable
Accounts payable
Accounts payable$14,216
18,386
1,371
0

$ 291
687
2
0

Accounts receivable

6,252$40,225

24$1,004

Fair value

Millions of yen
February 29, 2012

Forward exchange contracts:
To buy foreign currency:
U.S. dollar
Euro
Pound
To sell foreign currency:
U.S. dollar

Hedged Items

Contract ornotional amounts

Accounts payable
Accounts payable
Accounts payable¥  695
1,355
72

¥ 33
3
6

Accounts receivable682¥2,804(20)¥ 22

Fair value

6. Property, Plant and Equipment
The Japanese tax regulations allow a company to defer capital gains on the sale of qualified real property, if the company intends to offset such gains against the cost of newly acquired fixed assets. When such accounting is followed,
the cost of the new fixed assets is reduced to the extent of the deferred capital gains, thereby affecting related
depreciation charges and accumulated depreciation.
Property, plant and equipment at February 29, 2012 and February 28, 2013 were reduced by ¥8,127 million and¥8,079 million ($87,331 thousand), respectively, representing accumulated deferred gains from eligible sales.

7. Impairment Loss on Fixed Assets
For the years ended February 29, 2012 and February 28, 2013, the Company reviewed its long-lived assets for impairment and, as a result, recognized an impairment loss as follows:
February 28, 2013
Location

Tokyo metropolitan area and other

Usage

Business assets

Description

Millions of yen

Thousands of
U.S. dollars¥   791
135
6,704$   848
9
1,459
72,473

Buildings and structures
Other intangible assets
Other
Goodwill

February 29, 2012
Location

Tokyo metropolitan area and other

Usage

Business assets

Description¥200

Other intangible assets

1

The Company and its certain subsidiaries have defined benefit retirement plans covering substantially all employees.
Defined benefit retirement plans include a plan which is governed by the regulations of the Japanese Welfare
Pension Insurance Law, tax-qualified pension plans and plans for lump-sum retirement benefits.
Regarding certain part of the plan which is governed by the regulations of the Japanese Welfare Pension
Insurance Law, the Company and its certain subsidiaries have started to adopt defined contribution retirement plansfrom March 2013.
The reserve for retirement benefits as of February 29, 2012 and February 28, 2013 is analyzed as follows:
Thousands of
U.S. dollars

Millions of yen

Projected benefit obligations
Plan assets (including employee retirement benefit fund)Funded status
Unrecognized prior service costs
Unrecognized actuarial differences
Subtotal
Prepaid pension costAccrued retirement benefits

February 29, 2012

February 28, 2013

February 28, 2013¥(36,940)
25,642(11,298)
(451)
7,638
(4,111)12¥ (4,123)¥(28,122)
25,801(2,321)
(427)
4,042
1,294
4,352
¥ (3,058)$(303,986)
278,902(25,084)(4,615)43,684
13,98547,042$ (33,057)

The net periodic pension expenses for the years ended February 29, 2012 and February 28, 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen
2012

Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized prior service costs
Amortization of unrecognized actuarial differences
Net periodic pension expenses

2013¥1,524
524
(160)
(57)
1,273
¥3,1042013¥1,550
515
(207)
(57)
949
¥2,750$16,7565,568(2,243)(614)
10,265$29,732

Actuarial assumptions used in the calculation of the aforementioned information are as follows:

Method of attributing the projected benefits to periods of service
Discount rate
Expected rate of return on plan assets
Amortization of unrecognized prior service costs
Amortization of unrecognized actuarial differences

As of February 29, 2012

As of February 28, 2013

Straight-line basis
1.5%
0.2~1.5%
5~10 years
5~10 years

Straight-line basis
1.5%
0.2~1.5%
5~10 years
5~10 years(Note) Partial adoption of a defined contribution retirement plans has the following impact on the balance sheet as of February
28, 2013.

150

The long-lived assets are basically grouped by brand, and assets for lease and idle assets are grouped individually
by each item. The Company has recognized a loss on impairment on assets for lease and idle assets due to a significant decline in their market value, and on business assets due to a continuous loss generated from their operating
activities, by reducing their book value to the respective net realizable value of each asset.
The impairment loss on long-lived assets for the years ended February 29, 2012 and February 28, 2013 consistedof the following:Thousands of
U.S. dollars

Millions of yen
February 29, 2012

Other intangible assets
Other
Goodwill
Total

8. Retirement Plan and Retirement Benefits

Millions of yen

Buildings and structures
Other

Buildings and structures

Based on the result of future cash flow analysis that the recoverable amount of goodwill on Project Sloane Ltd.,
which is the considered subsidiary of the Company was less than the carrying amount, the Company recognizedimpairment loss of ¥6,704 million ($72,473 thousand) on the remaining unamortized portion of the goodwill.
The net realizable value for these assets is based on their net selling price or their value in use. The net selling
price is estimated by using their estimated disposal price. The value in use is calculated by discounting the future
cash flow with 6.8% and 4.6% discount rates for the years ended February 29, 2012 and February 28, 2013,
respectively.

¥200
2
150
—
¥352

February 28, 2013

¥

79
1
135
6,704
¥6,919February 28, 2013$   848
9
1,459
72,473$74,789

Millions of yen

Thousands of
U.S. dollars

Decrease in projected benefit obligations¥ 8,625$ 93,230

Transfer of plan assets(1,965)(21,239)

Unrecognized actuarial differences
Decrease in accrued retirement benefits(719)(7,776)¥ 5,941$ 64,215

9. Notes to Consolidated Statements of Comprehensive Income

Lease expenses, reversal of impairment loss of leased assets, depreciation and impairment loss for the years ended
February 29, 2012 and February 28, 2013 are as follows:

Other Comprehensive income for the year ended February 28, 2013 consisted of the following:
Millions of yen

Thousands of U.S. dollars

February 28, 2013

February 28, 2013

Net unrealized gain on available-for-sales securities:
Amount arising during the year
Reclassification adjustment for gain and loss
Amount before income tax effect
Income tax effect
Total
Deferred gain on hedging instruments:
Amount arising during the year
Reclassification adjustment for gain and loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments:
Amount arising during the year
Total
Share of other comprehensive income of associates accounted for using
the equity-method:Amount arising during the year
Total
Total other comprehensive income¥ 6,196415
6,611(1,657)
4,954$ 66,980
4,483
71,463(17,910)53,553

70
(22)
48
(24)
24

757
(236)
521
(258)
263

1,599
1,599

17,275
17,275387
387¥ 6,964

4,184
4,184
$ 75,275

The corresponding information for the year ended February 29, 2012 was not required under the accounting standard
for presentation of comprehensive income as an exemption for the first year of adopting that standard and not disclosed herein.

Cash and cash equivalents at February 29, 2012 and February 28, 2013 consisted of the following:Thousands of U.S.
dollars

Millions of yen
February 29, 2012

February 28, 2013

February 28, 2013¥33,192(1,104)¥32,088¥24,677(132)¥24,545$266,754(1,431)$265,323

11. Lease Transactions
Certain finance lease contracts that are not deemed to transfer the ownership of the leased assets to lessees areaccounted for as operating leases, which is still permitted by Japanese accounting principles. Certain key information
on such lease contracts of the Companies for the years ended February 29, 2012 and February 28, 2013 are
as follows:(Lessee)
Assumed data as to acquisition cost, accumulated depreciation, accumulated impairment loss and net book value ofthe leased assets, which included the portion of interest thereon, as of February 29, 2012 and February 28, 2013 aresummarized as follows:
Millions of yen
February 29, 2012

Acquisition cost
Accumulated depreciation
Net book value

Tools,
furniture,and fixtures

Other

¥ 606
(505)
¥ 101

¥ 487
(389)
¥ 98

Thousands of U.S. dollars
February 28, 2013

Total

Tools,
furniture,and fixtures

Other¥1,093(894)¥  199

¥ 353
(334)
¥ 19

¥ 258
(242)
¥ 16

February 28, 2013

Total

Tools,
furniture,and fixtures

Other

Total

¥ 611
(576)
¥ 35

$ 3,816(3,610)$   206$ 2,781(2,613)$   168$ 6,597(6,223)$   374

The scheduled maturities of future lease payments on such lease contracts as of February 29, 2012 and February 28,
2013 are as follows:
Thousands of U.S.
dollars

Millions of yen

Scheduled maturities of future leases:
Due within one year
Due over one year

Lease expenses for the year
Depreciation

February 29, 2012

February 28, 2013

February 28, 2013

¥212
212

¥145
145

$1,5701,570

The Companies’ operating lease contracts:
The scheduled maturities of future lease payments on operating lease contracts as of February 29, 2012 andFebruary 28, 2013 are as follows:
Thousands of U.S.
dollars

Millions of yen

Scheduled maturities of future leases:
Due within one year
Due over one year

February 29, 2012

February 28, 2013

February 28, 2013

¥80
91
¥171

¥64
27
¥91

$692
288
$980

(Lessor)
The scheduled maturities of future lease income on such lease contracts as of February 29, 2012 and February 28,
2013 are as follows:
Millions of yen
February 29, 2012

Scheduled maturities of future leases:
Due within one year
Due over one year

¥20
3
¥23

The scheduled maturities of future lease income on such lease contracts as of February 29, 2013 have not been disclosed because the amount is immaterial.

10. Notes to Consolidated Statements of Cash Flows

Cash and time deposits
Time deposits with maturities of more than three months
Cash and cash equivalents

Thousands of U.S.
dollars

Millions of yen

February 29, 2012

February 28, 2013

February 28, 2013

¥151
48
¥199

¥32
3
¥35

$346
28
$374

12. Income Taxes
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities as at February 29, 2012 and February 28, 2013 consisted of the following elements:
Thousands of U.S.
dollars

Millions of yen

Deferred tax assets:
Loss on write-down of inventories
	Loss on write-down of investments in unconsolidated
subsidiaries
Accrued bonuses to employees
Accrued retirement benefits
Accrued retirement benefits for directors and corporate auditors
Allowance for bad debt
Tax loss carry forwards
Impairment loss on fixed assets
Investments in securities
Net unrealized loss on available-for-sale securities
Other
		Subtotal
Less: Valuation allowance
			 Total deferred tax assets
Deferred tax liabilities:
Prepaid pension cost	Gain on securities contributed to an employee retirement
benefit trust	Provision for deferred capital gain on real property for tax
purposes
Net unrealized gain on available-for-sale securities
Other
			 Total deferred tax liabilities
				Net deferred tax assets

February 29, 2012

February 28, 2013

February 28, 2013

¥ 2,015¥ 2,127$ 22,989

141
515
3,494
54
1,040
8,519
6,372
397
694
4,880
28,121(18,473)
9,648

192
490
3,698
58
937
12,518
6,284
433
1
5,381
32,119(16,544)
15,5752,076
5,297
39,974627
10,128135,319
67,9304,675
14
58,168347,197(178,836)
168,361—(1,653)(17,871)

(141)

(141)

(1,528)(18)(16)(1,370)(1,545)¥ 8,103(18)(1,657)(1,451)(4,920)¥ 10,655(188)(17,915)(15,687)(53,189)$ 115,172

The reconciliation of the difference between the statutory tax rate and the effective tax rate for the years ended
February 29, 2012 and February 28, 2013 is as follows:

The aggregate annual maturities of long-term loans payable after February 28, 2014 are as follows:%
2012

Statutory tax rate
Reconciliation:
Permanently non-deductible expenses (entertainment expenses, etc.)
Income not taxable for tax purposes (dividends received, etc.)
Amortization of goodwill
Effect of tax rate changes
Other
Effective tax rate

2013

40.7

—

3.2
(1.4)
9.6
5.5
9.7
67.3

—
—
—
—
—
—

The reconciliation of the difference between the statutory tax rate and the effective tax rate for the year ended
February 28, 2013 has not been disclosed because such a difference is immaterial.
(Application of consolidated taxation system)
The Company and its certain subsidiaries have been approved by the Commission of the National Tax Agency regarding the application of the consolidated taxation system from the year ending February 28, 2014. Therefore, effective
the fiscal year ended February 28, 2013, related accounting procedures have been based on the “Practical Solution
on Tentative Treatment of Tax Effect Accounting under Consolidated Taxation System (Part 1)” (Practical Issues Task
Force (PITF) No.5 of March 18, 2011) and the “Practical Solution on Tentative Treatment of Tax Effect Accounting
under Consolidated Taxation System (Part 2)” (PITF No.7 of June 30, 2010).

13. Revaluation of Land
On February 28, 2002, the Company revaluated its land for business use at market value as a result of the applicationof the Land Revaluation Law, which permits a one-time revaluation of land for business use.
As of February 28, 2013, the net accumulated revaluation loss amounted to ¥12,503 million ($135,148 thousand),
which is presented as a separate component of net assets as “Net revaluation loss of land.” Related deferred tax liabilities of ¥3,966 million ($42,875 thousand) are recognized.
As of February 29, 2012, the net accumulated revaluation loss amounted to ¥12,503 million, which is presented
as a separate component of net assets as “Net revaluation loss of land.” Related deferred tax liabilities of ¥3,966 million are recognized.
The difference between the market value of land subject to the revaluation and the book value as at February 28,
2012 and 2013 was ¥2,660 million and ¥3,467 million ($37,476 thousand), respectively.

14. Commitments and Contingent Liabilities
The Company was contingently liable as a guarantor for certain affiliates’ bank loans. The outstanding balance of suchbank loans guaranteed as at February 29, 2012 and February 28, 2013 aggregated to ¥22 million and ¥39 million($420 thousand), respectively.

15. Short-Term Loans payable and Long-Term Loans payable
Short-term loans payable at February 29, 2012 and February 28, 2013 represented loans, principally from banks. The
weighted-average interest rate on these loans was 1.3% in 2012 and 0.8% in 2013.
Long-term loans payable at February 29, 2012 and February 28, 2013 are summarized as follows:
Thousands of U.S.
dollars

Millions of yen

Unsecured loans, principally from banks, maturing in installments through2019 with weighted average interest of 3.0% at February 28, 2013
Less current portion

February 29, 2012

February 28, 2013

February 28, 2013

¥23,079
3,439¥19,640¥20,291
18,967¥ 1,324$219,341
205,029$ 14,312

Lease obligations at February 29, 2012 and February 28, 2013 are summarized as follows:
Thousands of U.S.
dollars

Millions of yen

Lease obligations
Less current portion of lease obligations

February 29, 2012

February 28, 2013

February 28, 2013

¥1,332458¥  874¥1,644585¥1,059$17,772
6,320$11,452

Millions of yen

Thousands of U.S.
dollars

¥165
148
987
24

$ 1,780
1,601
10,675
256

Millions of yen

Thousands of U.S.
dollars

¥486
339
186
46

$5,257
3,664
2,006
496

Year ending February 28 or 29:
2015
2016
2017
2018

The aggregate annual maturities of lease obligations after February 28, 2014 are as follows:Year ending February 28 or 29:
2015
2016
2017
2018

Bonds at February 29, 2012 and February 28, 2013 are summarized as follows:
Thousands of U.S.
dollars

Millions of yen

1.73% unsecured yen bonds issued by a subsidiary, due 2012
0.56% unsecured yen bonds issued by a subsidiary, due 2013
0.82% unsecured yen bonds issued by a subsidiary, due 2012
0.72% unsecured yen bonds issued by a subsidiary, due 2012
0.90% unsecured yen bonds issued by a subsidiary, due 2014
0.45% unsecured yen bonds issued by a subsidiary, due 2018
0.45% unsecured yen bonds issued by a subsidiary, due 2013
0.99% unsecured yen bonds issued by a subsidiary, due 2014
0.40% unsecured yen bonds issued by a subsidiary, due 2013
Less current portion

February 29, 2012

February 28, 2013

February 28, 2013

¥150
30
34
33
120
—
—
—
—
367
277
¥ 90

¥ —
10
—
—
80
250
20
20
33
413
163
¥250

$   —
108
—
—
865
2,702
216
216
359
4,466
1,764
$2,702Millions of yen

Thousands of U.S.
dollars

¥100
50
50
50

$1,082
540
540
540

The aggregate annual maturities of bonds after February 28, 2014 are as follows:Year ending February 28 or 29:
2015
2016
2017
2018

16. Shareholders’ Equity
Under the Corporation Law of Japan, the entire amount of the issue price of shares is required to be designated as astated common stock account, although a company in Japan may, by resolution of its Board of Directors, account for
an amount not exceeding 50% of the issue price of new shares as additional paid-in capital.
The Corporation Law of Japan provides that an amount equal to 10% of distributions from retained earnings paidby the Company and its Japanese subsidiaries be appropriated as a legal reserve. No further appropriations are
required when the total amount of the additional paid-in capital and the legal reserve equals 25% of their respective
stated capital. The Corporation Law of Japan also provides that additional paid-in capital and the legal reserve areavailable for appropriations by a resolution of the shareholders. Balances of the legal reserve are included in retained
earnings in the accompanying consolidated balance sheets.
Cash dividends charged to retained earnings for the years ended February 29, 2012 and February 28, 2013 represent dividends paid out during those years. The amount available for dividends is based on the amount recorded in
the Company’s non-consolidated books of account in accordance with the Corporation Law of Japan.
Dividends to be paid after the balance sheet date, which were approved by the general meeting of shareholders
held on May 23, 2013, are as follows:(a) Total dividends(b) Source of dividends(c) Cash dividends per common share(d) Date to determine which shareholders receive the dividends(e) Effective date

¥3,765 million ($40,698 thousand)
Retained earnings¥24 ($0.26)
February 28, 2013
May 24, 2013

17. Per Share Information

The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock
option because it is difficult to estimate forfeiture in the future.

Net income per share of common stock is computed based upon the weighted-average number of shares ofcommon stock outstanding during each year. Cash dividends per share shown for each year in the accompanying
consolidated statements of operations represent dividends declared as applicable to the respective years rather thanthose paid during the years.
The basis for the calculation of basic and diluted net income per share for the years ended February 29, 2012 andFebruary 28, 2013 is as follows:
Thousands of U.S.
dollars

Millions of yen

Net income
Less: Components not pertaining to common shareholders
Net income pertaining to common stock
Average outstanding shares of common stock (thousand shares)
Effect of dilutive stock options (thousand shares)

2012

2013

2013

¥  3,529—¥  3,529
156,715
1,178¥  4,503—¥  4,503
156,836
1,390$48,679—$48,679

2012 Stock Option Plan (No. 11)

Under the 2012 stock option plan (No. 11), stock options were granted to 1 executive officer of the Company, 9 directors and 18 executive officers of the Company’s subsidiary on March 19, 2012. They are exercisable in the period
from March 20, 2012 to February 28, 2042. The terms of the options include certain limitations on the exercisability
under which grantees can exercise their options during a five-year period starting a year after they lose their positions
as executive officer of the Company, directors or executive officers of the Company’s subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥444 ($4.80)
234,700 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2013 is
as follows:

18. Related-Party Transactions

2012 stock option plan (No. 11)

Year Ended February 28, 2013

The Company leased land from Takeshi Hirouchi, Representative Director, Chairman and President of ONWARD
HOLDINGS Co., Ltd., during the year and the rental fee was ¥7 million ($78 thousand). Also, Mr. Hirouchi paid arental fee of ¥16 million ($176 thousand) to the Company for a house. The rental fees were determined by the average market prices.

Year Ended February 29, 2012

The Company leased land from Takeshi Hirouchi, Representative Director, Chairman and President of ONWARD
HOLDINGS Co., Ltd., during the year and the rental fee was ¥7 million. Also, Mr. Hirouchi paid a rental fee of ¥16 million to the Company for a house. The rental fees were determined by the average market prices.

19. Stock Options

Non-vested:
Outstanding at February 29, 2012
GrantedForfeited
VestedOutstanding at February 28, 2013—
234,700
37,400—
197,300

The fair value of the 2012 stock options (No. 11) was estimated using the Black-Scholes option-valuation modelwith the following assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

31.57%
9 years and 3 months¥24 per share
0.971%

The cost recognized for the stock options for the years ended February 29, 2012 and February 28, 2013 was ¥162 million and ¥171 million ($1,851 thousand), respectively, which is included in selling, general andadministrative expenses.

The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock
option because it is difficult to estimate forfeiture in the future.

2012 Stock Option Plan (No. 12)2011 Stock Option Plan (No. 10)

Under the 2012 stock option plan (No. 12), stock options were granted to 5 directors of the Company on June 20,
2012. They are exercisable in the period from June 21, 2012 to June 20, 2042. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period startinga year after they lose their positions as directors of the Company.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥458 ($4.95)
141,400 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2013 is
as follows:

Under the 2011 stock option plan (No. 10), stock options were granted to 5 directors of the Company on June 20,
2011. They are exercisable in the period from June 21, 2011 to June 20, 2041. The terms of the options include certain
limitations on the exercisability under which grantees can exercise their options during a five-year period starting ayear after they lose their positions as directors of the Company.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted

A summary of the scale and movement of the stock option plan for the year ended February 28, 2013 is
as follows:2011 stock option plan (No. 10)2012 stock option plan (No. 12)

Non-vested:
Outstanding at February 29, 2012
GrantedForfeited
VestedOutstanding at February 28, 2013—
141,400——
141,400

The fair value of the 2012 stock options (No. 12) was estimated using the Black-Scholes option-valuation modelwith the following assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

32.00%
7 years and 8 months¥24 per share
0.510%¥1 ($0.01)¥510 ($5.51)
144,800 shares

Non-vested:
Outstanding at February 29, 2012
GrantedForfeited
VestedOutstanding at February 28, 2013

144,800———
144,800

The fair value of the 2011 stock options (No. 10) was estimated using the Black-Scholes option-valuation modelwith the following assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

34.28%
5 years and 8 months¥24 per share
0.50%

The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock
option because it is difficult to estimate forfeiture in the future.

2011 Stock Option Plan (No. 9)

Under the 2011 stock option plan (No. 9), stock options were granted to 1 executive officer of the Company, 12 directors and 18 executive officers of the Company’s subsidiary on March 18, 2011. They are exercisable in the period fromMarch 19, 2011 to February 28, 2041. The terms of the options include certain limitations on the exercisability underwhich grantees can exercise their options during a five-year period starting a year after they lose their positions as
executive officer of the Company, directors or executive officers of the Company’s subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥444 ($4.80)
199,900 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2013 is
as follows:2011 stock option plan (No. 9)

Non-vested:
Outstanding at February 29, 2012
GrantedForfeited
VestedOutstanding at February 28, 2013

181,500———
181,500

The fair value of the 2011 stock options (No. 9) was estimated using the Black-Scholes option-valuation modelwith the following assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

32.09%
9 years and 1 month¥24 per share
1.10%

The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock
option because it is difficult to estimate forfeiture in the future.

2010 Stock Option Plan (No. 8)

Under the 2010 stock option plan (No. 8), stock options were granted to 5 directors of the Company on June 18,
2010. They are exercisable in the period from June 19, 2010 to June 18, 2040. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period startinga year after they lose their positions as directors of the Company.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥645 ($6.97)¥613 ($6.63)
115,800 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2013 is
as follows:2010 stock option plan (No. 8)

Non-vested:
Outstanding at February 29, 2012
GrantedForfeited
VestedOutstanding at February 28, 2013
Vested:Outstanding at February 29, 2012
VestedExercised
Forfeited
Outstanding at February 28, 2013

113,100——
8,300
104,800
—
8,300
8,300
—
—

The fair value of the 2010 stock options (No. 8) was estimated using the Black-Scholes option-valuation modelwith the following assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

33.456%
5 years and 10 months¥24 per share
0.5110%The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock
option because it is difficult to estimate forfeiture in the future.

2010 Stock Option Plan (No. 7)

Under the 2010 stock option plan (No. 7), stock options were granted to 8 directors and 22 executive officers of theCompany’s subsidiary on March 19, 2010. They are exercisable in the period from March 20, 2010 to February 29,
2040. The terms of the options include certain limitations on the exercisability under which grantees can exercise
their options during a five-year period starting a year after they lose their positions as directors or executive officersof the Company’s subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥640 ($6.92)¥475 ($5.13)
194,600 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2013 is
as follows:2010 stock option plan (No. 7)

Non-vested:
Outstanding at February 29, 2012
GrantedForfeited
VestedOutstanding at February 28, 2013
Vested:Outstanding at February 29, 2012
VestedExercised
Forfeited
Outstanding at February 28, 2013

181,500——
29,000152,500
1,000
29,00020,600—9,400

The fair value of the 2010 stock options (No. 7) was estimated using the Black-Scholes option-valuation modelwith the following assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

33.080%9 years and 8 months¥30 per share
1.3046%

The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock
option because it is difficult to estimate forfeiture in the future.

2009 Stock Option Plan (No. 6)

Under the 2009 stock option plan (No. 6), stock options were granted to 5 directors of the Company on June 19,
2009. They are exercisable in the period from June 20, 2009 to June 19, 2039. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period startinga year after they lose their positions as directors of the Company.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥645 ($6.97)¥432 ($4.67)
155,000 sharesA summary of the scale and movement of the stock option plan for the year ended February 28, 2013 is
as follows:

A summary of the scale and movement of the stock option plan for the year ended February 28, 2013 is
as follows:2009 stock option plan (No. 6)

Non-vested:
Outstanding at February 29, 2012
GrantedForfeited
VestedOutstanding at February 28, 2013
Vested:Outstanding at February 29, 2012
VestedExercised
Forfeited
Outstanding at February 28, 2013

155,000——
13,500141,500—
13,50013,500——2008 stock option plan (No. 4)

Non-vested:
Outstanding at February 29, 2012
GrantedForfeited
VestedOutstanding at February 28, 2013
Vested:Outstanding at February 29, 2012
VestedExercised
Forfeited
Outstanding at February 28, 2013

49,900——5,000
44,90011,9005,000
15,300—1,600

The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock
option because it is difficult to estimate forfeiture in the future.

The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock
option because it is difficult to estimate forfeiture in the future.

2009 Stock Option Plan (No. 5)

2008 Stock Option Plan (No. 3)

Under the 2009 stock option plan (No. 5), stock options were granted to 11 directors and 19 executive officers of theCompany’s subsidiary on March 18, 2009. They are exercisable in the period from March 19, 2009 to February 28,
2039. The terms of the options include certain limitations on the exercisability under which grantees can exercise
their options during a five-year period starting a year after they lose their positions as directors or executive officersof the Company’s subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥607 ($6.56)¥362 ($3.91)
268,900 shares¥1 ($0.01)¥615 ($6.65)¥944 ($10.20)
70,000 shares2008 stock option plan (No. 3)

2009 stock option plan (No. 5)

197,300——
32,200165,100
14,80032,20039,200—7,800

The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock
option because it is difficult to estimate forfeiture in the future.

2008 Stock Option Plan (No. 4)

Under the 2008 stock option plan (No. 4), stock options were granted to 12 directors and 21 executive officers of theCompany’s subsidiary on June 20, 2008. They are exercisable in the period from June 21, 2008 to February 28, 2038.
The terms of the options include certain limitations on the exercisability under which grantees can exercise theiroptions during a five-year period starting a year after they lose their positions as directors or executive officers of theCompany’s subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted

Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted

A summary of the scale and movement of the stock option plan for the year ended February 28, 2013 is
as follows:

A summary of the scale and movement of the stock option plan for the year ended February 28, 2013 is
as follows:
Non-vested:
Outstanding at February 29, 2012
GrantedForfeited
VestedOutstanding at February 28, 2013
Vested:Outstanding at February 29, 2012
VestedExercised
Forfeited
Outstanding at February 28, 2013

Under the 2008 stock option plan (No. 3), stock options were granted to 5 directors of the Company on June 20,
2008. They are exercisable in the period from June 21, 2008 to June 20, 2038. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period startinga year after they lose their positions as directors of the Company.
A summary of information for the stock option plan is as follows:¥1 ($0.01)¥621 ($6.71)¥905 ($9.78)
91,100 shares

Non-vested:
Outstanding at February 29, 2012
GrantedForfeited
VestedOutstanding at February 28, 2013
Vested:Outstanding at February 29, 2012
VestedExercised
Forfeited
Outstanding at February 28, 2013

65,000———65,000
3,800
—
3,800
—
—

The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock
option because it is difficult to estimate forfeiture in the future.

2007 Stock Option Plan (No. 2)

Under the 2007 stock option plan (No. 2), stock options were granted to 5 directors and 2 corporate auditors of theCompany on July 20, 2007. They are exercisable in the period from July 21, 2007 to July 20, 2037. The terms of theoptions include certain limitations on the exercisability under which grantees can exercise their options during a fiveyear period starting a year after they lose their positions as directors or corporate auditors.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥643 ($6.95)¥1,284 ($13.88)
40,000 sharesA summary of the scale and movement of the stock option plan for the year ended February 28, 2013 is asfollows:(3) Information on sales, profit or loss, assets, liabilities and other items by reportable segment for the years ended
February 28, 2013 and February 29, 2012 are as follows:2007 stock option plan (No. 2)

Millions of yen
ApparelNon-vested:
Outstanding at February 29, 2012
GrantedForfeited
VestedOutstanding at February 28, 2013
Vested:Outstanding at February 29, 2012
VestedExercised
Forfeited
Outstanding at February 28, 2013

23,300———23,300
4,700
—
4,700
—
—

The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock
option because it is difficult to estimate forfeiture in the future.

For the year ended February 28, 2013

Japan

EuropeSale to outside customers
Intersegment sales
Total
Segment income (loss)
Segment assets
Depreciation and amortization(Note 2)
Investments in equity-method
affiliates
Increases in property, plant andequipment, and intangible
assets (Note 2)¥202,353
1,714¥204,067¥ 15,499¥135,336¥33,215426¥33,641¥   (438)¥25,905¥  3,549

Asia/North
America

Adjustments Consolidated(Note 1) total (Note 3)

Total

Other

Total

¥7,108403¥7,511¥ (572)¥5,911¥242,676
2,543¥245,219¥ 14,489¥167,152¥15,694
7,792¥23,486¥   333¥32,440¥258,370
10,335¥268,705¥ 14,822¥199,592¥     —
(10,335)¥(10,335)¥ (3,629)¥ 87,187¥258,370—¥258,370¥ 11,193¥286,779¥   726¥  284¥  4,559¥   796¥  5,355¥    366¥  5,721

8,852

13

—

8,865

16

8,881

—

8,881

4,224

1,447

587

6,258

825

7,083

1,866

8,949

Thousands of U.S. dollars
Apparel2006 Stock Option Plan (No. 1)

Under the 2006 stock option plan (No. 1), stock options were granted to 12 directors and 2 corporate auditors of theCompany on June 20, 2006. They are exercisable in the period from July 1, 2006 to June 30, 2036. The terms of theoptions include certain limitations on the exercisability under which grantees can exercise their options during a fiveyear period starting a year after they lose their positions as directors or corporate auditors.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥616 ($6.66)¥1,541 ($16.66)
63,000 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2013 is
as follows:
2006 stock option plan (No. 1)

Non-vested:
Outstanding at February 29, 2012
GrantedForfeited
VestedOutstanding at February 28, 2013
Vested:Outstanding at February 29, 2012
VestedExercised
Forfeited
Outstanding at February 28, 2013

20,000———20,00019,500—16,500—3,000

The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock
option because it is difficult to estimate forfeiture in the future.

20. Segment Information(1) Summary of reportable segments
The Onward Group’s reportable segments are components for which separate financial information is available andregular evaluation by the Board of Directors is being performed to decide how management resources are allocatedand to assess performance.
The principal business of the Onward Group is the apparel business (planning, production and sales of textile
products, including men’s and women’s clothing). Additionally, the Onward Group also operates service andresort businesses.
The reportable segments of the Onward Group comprise the “Apparel Business,” which has been divided geographically into “Japan,” “Europe,” “Asia/North America,” and “Other Business.”
The “Apparel Business (Japan)” operates the apparel business in Japan; the “Apparel Business (Europe)” operates the apparel business in Europe; and the “Apparel Business (Asia/North America)” operates the apparel businessin Asia and North America. “Other Business” operates the logistics, sports facilities and resort facilities businesses.
(2) Method of calculating sales, profit or loss, assets, liabilities and other items by reportable segment
Accounting methods for reportable segments are mostly the same as the accounting methods described in “Basis of
Presentation of the Consolidated Financial Statements.”
Income by reportable segment refers to operating income. Intersegment sales and transfers are based onmarket values.

Asia/North
America

Other

Total

Adjustments Consolidated(Note 1) total (Note 3)$76,835 $2,623,238
4,354
27,488$81,189 $2,650,726$ (6,178) $  156,623$63,898 $1,806,858$169,645
84,233$253,878$  3,598$350,663$2,792,883
111,721$2,904,604$  160,221$2,157,521$       — $2,792,883(111,721)—$(111,721) $2,792,883$ (39,231) $  120,990$ 942,463 $3,099,984$ 3,073 $   49,278$  8,603 $   57,881$   3,961 $   61,842

For the year ended February 28, 2013

Japan

Europe

Total

Sale to outside customers
Intersegment sales
Total
Segment income (loss)
Segment assets
Depreciation and amortization(Note 2)
Investments in equity-method
affiliates
Increases in property, plant andequipment, and intangible
assets (Note 2)$2,187,364
18,532$2,205,896$  167,537$1,462,937$359,039
4,602$363,641$  (4,736)$280,023$   38,361$  7,844

95,685142—

95,827

167

95,994—

95,99445,663

15,638

6,341

67,642

8,917

76,55920,172

96,731(Notes) 1. Adjustments consist of the following:(1)	The adjustment amount for segment income (loss) of ¥(3,629) million ($(39,231) thousand) includes amortization of
goodwill of ¥(3,938) million ($(42,563) thousand), elimination of intersegment sales of ¥3,869 million ($41,815 thousand), and corporate expenses not allocated to reportable segments of ¥(3,560) million ($(38,483) thousand).
Corporate expenses are mainly general administrative expenses not allocated to reportable segments.
(2)	The adjustment amount for segment assets of ¥87,187 million ($942,463 thousand) includes the unamortized balance of goodwill of ¥32,770 million ($354,227 thousand), elimination of intersegment sales of ¥(139,931) million($(1,512,600) thousand), and corporate assets not allocated to reportable segments of ¥194,348 million ($2,100,836
thousand). Corporate assets are mainly assets held by the Company, a pure holding company.
2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include longterm prepaid expenses (furniture and fixtures).
3.	Segment income (loss) coincides with the amount of operating income in the Consolidated Statementsof Operations.
Millions of yen
Apparel
For the year ended February 29, 2012

Japan

EuropeSale to outside customers
Intersegment sales
Total
Segment income
Segment assets
Depreciation and amortization(Note 2)
Investments in equity-method
affiliates
Increases in property, plant andequipment, and intangible
assets (Note 2)¥189,112
1,880¥190,992¥ 13,271¥127,481¥31,879397¥32,276¥   944¥23,550¥  3,500

Asia/North
America

Adjustments Consolidated(Note 1) total (Note 3)

Total

Other

Total

¥6,541
212¥6,753¥   88¥4,249¥227,532
2,489¥230,021¥ 14,303¥155,280¥14,8706,702¥21,572¥   131¥30,574¥242,402
9,191¥251,593¥ 14,434¥185,854¥    —(9,191)¥ (9,191)¥ (3,480)¥91,085¥242,402—¥242,402¥ 10,954¥276,939¥   759¥  204¥  4,463¥   604¥  5,067¥   411¥  5,478

8,464

12

—

8,476

10

8,486

—

8,486

3,699

1,209

339

5,247

896

6,143

87

6,230

(Notes) 1. Adjustments consist of the following:(1)	The adjustment amount for segment income of ¥(3,480) million includes amortization of goodwill of ¥(3,664) million,
elimination of intersegment sales of ¥3,847 million, and corporate expenses not allocated to reportable segments of¥(3,663) million. Corporate expenses are mainly general administrative expenses not allocated toreportable segments.
(2)	The adjustment amount for segment assets of ¥91,085 million includes the unamortized balance of goodwill of¥40,794 million, elimination of intersegment sales of ¥(133,464) million, and corporate assets not allocated to reportable segments of ¥183,755 million. Corporate assets are mainly assets held by the Company, a pureholding company.
2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include longterm prepaid expenses (furniture and fixtures).
3.	Segment income coincides with the amount of operating income in the Consolidated Statements of Operations.

Independent Auditor’s Report(4) Segment information by geographical areas for the year ended February 28, 2013 and February 29, 2012 are
as follows:(a) Sales
For the year ended February 28, 2013

Millions of yen

Japan

Europe¥218,018

Other¥18,813

For the year ended February 28, 2013

Total

¥21,539¥258,370

Thousands of U.S. dollars

Japan

Europe$2,356,693

Other$203,357

For the year ended February 29, 2012

Total

$232,833$2,792,883

Millions of yen

Japan

Europe¥204,656

Other¥19,635

Total¥18,111¥242,402(b) Property, plant and equipment
For the year ended February 28, 2013

Millions of yen

Japan

Europe¥70,915

Other¥7,664

For the year ended February 28, 2013

Total

¥8,283¥86,862

Thousands of U.S. dollars

Japan

Europe$766,563

Other$82,843

For the year ended February 29, 2012

Total

$89,541$938,947

Millions of yen

Japan

Europe¥68,753

Other¥6,777

Total¥7,458¥82,988(5) Segment information on impairment losses on property, plant and equipment by reportable segment for the year
ended February 28, 2013 and February 29, 2012 are as follows:
Millions of yen
Apparel
For the year ended February 28, 2013

Impairment loss

Japan

EuropeAsia/North
America

¥172

¥—

¥42

Total

¥214

Other

¥—

Elimination ofintersegment
amounts

Total¥6,705¥6,919Thousands of U.S. dollars
Apparel
For the year ended February 28, 2013

Japan

EuropeAsia/North
America

Impairment loss

$1,864

$—

$452

Total

$2,316

Other$—

Elimination ofintersegment
amounts

Total$72,473$74,789

Elimination ofintersegment
amounts

Total

Millions of yen
Apparel
For the year ended February 29, 2012

Impairment loss

Japan

EuropeAsia/North
America

¥351

¥—

¥1

Total

¥352

Other

¥—

¥—

¥352

Main subsidiaries

Japan
Onward group engages in businessactivities through a network that is
made up of 86 subsidiaries and 23
affiliates for a total of 110 groupcompanies. The group operates in thefour geographic segments of Japan,
Europe, asia, and the United states.

Overseas

Onward Kashiyama Co., ltd.

across Transport Co., ltd.

Toda Building, 1-7-1 Kyobashi, Chuo-ku,
Tokyo 104-8329, Japan
Tel: (81) 3-4512-1020

3-9-32 Kaigan, Minato-ku, Tokyo 108-0022, Japan
Tel: (81) 3-3455-2311

Onward Trading Co., ltd.

O & K Co., ltd.

6-3-2 Kiba, Koto-ku, Tokyo 135-8508, Japan
Tel: (81) 3-3649-3111

Toda Building, 1-7-1 Kyobashi, Chuo-ku,
Tokyo 104-8329, Japan
Tel: (81) 3-4512-1130

Chacott Co., ltd.

Onward resort & golf Co., ltd.

1-20-8 Jinnan, Shibuya-ku, Tokyo 150-0041, Japan
Tel: (81) 3-3476-1311

Toda Building, 1-7-1 Kyobashi, Chuo-ku,
Tokyo 104-8329, Japan
Tel: (81) 3-4512-1130

Bus stop Co., ltd.
Onden Imaizumi Building, 5-7-4 Jingumae,
Shibuya-ku, Tokyo 150-0001, Japan
Tel: (81) 3-5778-2391

Onward Creative Center Co., ltd.
3-11-6 Kaigan, Minato-ku, Tokyo 108-8439, Japan
Tel: (81) 3-5476-5590

Charles & Keith Japan Co., ltd.

Booklet Co., ltd.

4-31-10 Jingumae, Shibuya-ku,
Tokyo 150-0001, Japan
Tel: (81) 3-5785-1873

1-5-26, Shinkita, Joto-ku, Osaka City,
Osaka 536-0015, Japan
Tel: (81) 6-6939-3345

Jil sander Japan K.K.
Minami-Aoyama Building, 3-13-18 MinamiAoyama, Minato-ku, Tokyo 107-0062, Japan
Tel: (81) 3-6406-0350

Fusion Co., ltd.
Onden Imaizumi Building, 5-7-4 Jingumae,
Shibuya-ku, Tokyo 150-0001, Japan
Tel: (81) 3-5778-2391

Creative Yoko Co., ltd.
667-16 Takada, Nagano City,
Nagano Prefecture 381-8545, Japan
Tel: (81) 26-226-2001

island Co., ltd.
Fiore Daikanyama Building, 6-6 Daikanyama-cho,Shibuya-ku, Tokyo 150-0034, Japan
Tel: (81) 3-3780-6805

Candela international Co., ltd.
Onden Imaizumi Building, 5-7-4 Jingumae,
Shibuya-ku, Tokyo 150-0001, Japan
Tel: (81) 3-5766-3507

J. direction Co., ltd.
401, Parkvilla Yakumo Building, 3-12-10 Yakumo,
Meguro-ku, Tokyo 152-0023, Japan
Tel: (81) 3-5731-6239

Birz association ltd.
BIRZ Building, 3-26-8 Sendagaya, Shibuya-ku,
Tokyo 151-0051, Japan
Tel: (81) 3-5786-3655

Onward life design network inc.
Toda Building, 1-7-1 Kyobashi, Chuo-ku,
Tokyo 104-8329, Japan
Tel: (81) 3-4512-1133

Bien Co., ltd.
Toda Building, 1-7-1 Kyobashi, Chuo-ku,
Tokyo 104-8329, Japan
Tel: (81) 3-4512-1120

O.P.s. Co., ltd.
3-11-6 Kaigan, Minato-ku, Tokyo 108-8439, Japan
Tel: (81) 3-5476-6131

Europeasia

United states

Onward italia s.p.a.

Onward Fashion Trading (China)
Co., ltd.

J. Press, inc.

Via Della Spiga 9, 20121 Milano, Italy
Tel: (39) 02-783-667

giBO’ Co. s.p.a.
Via Cassia 69, 50029 Tavarnuzze, Firenze, Italy
Tel: (39) 055-237-2020

iris s.p.a.
Via Pampagnina, 42 30032 FIESSO D’ART ICO(Venezia), Italy
Tel: (39) 041-516-9911

Erika s.r.l.
Via Boschi n.,42bis 37060
Maccacari di Veronese-(VR), Italy
Tel: (39) 0442-56666

Frassineti s.r.l.
Via E. Fermi, 7 Loc. Scopeti - Rufina,
50068 Firenze, Italy
Tel: (39) 055- 839-7385

Jil sander s.p.a.
Piazza Castello 1 20121 Milano, Italy
Tel: (39) 02-806-9131

Joseph ltd.
Unit 11, 50 Carnwath Road,
London SW6 3JX, U.K.
Tel: (44) 20-7736-2522

Freed of london ltd.
94 St. Martin’s Lane, London WC2N 4AT, U.K.
Tel: (44) 20-7240-0432

Horloge saint Benoit s.a.
22, Rue Saint Benoit, 75006 Paris, France
Tel: (33) 1-4544-1118

12/F, Onward Building, No.1238,
Danba Road, Putuo District of Shanghai,
People’s Republic of China
Tel: (86) 21-6472-3660

shanghai Onward Fashion Co., ltd.
13/F, Onward Building, No.1238,
Danba Road, Putuo District of Shanghai,
People’s Republic of China
Tel: (86) 21-6466-6466

Onward Fashion Trading (shanghai)Co., ltd.
14/F, Onward Building, No.1238,
Danba Road, Putuo District of Shanghai,
People’s Republic of China
Tel: (86) 21-6271-3535

Taicang Onward High FashionCo., ltd.
28 group of Taixi Village, Shaxi Town, Taicang City,
Jiangsu Province, People’s Republic of China
Tel: (86) 512-5325-4297

Onward Kashiyama Hong Kong ltd.
Unit 1208-9, Lippo Sun Plaza,
28 Canton Road, T.S.T., Kowloon, Hong Kong,
People’s Republic of China
Tel: (852) 2367-2055

Onward Kashiyama Korea Co., ltd.
GF, HwanKyoung B/D, 1-118,
Jang Chung-Dong, Chung-ku, Seoul 100-391,
Republic of Korea
Tel: (82) 2-548-5841

Onward Kashiyama singapore
Pte. ltd.
1 Scotts Road, #17-7 Shaw Centre,
Singapore 228208, Republic of Singapore
Tel: (65) 6838-0690

Onward Kashiyama Vietnam ltd.
11th Floor, 60 Nguyen Dinh Chieu St.,
Dist.1 Ho Chi Minh City, Vietnam
Tel: (84) 8-3911-8857

Vina Birz Co., ltd.
C6,C7, Dinh Tram Industrial Zone,
Bac Giang, Vietnam
Tel: (84) 240-366-1410

shanghai across apparel Processing
Co., ltd.
Building 6, No 258 Jinglian Road, Minhang,
Shanghai, People’s Republic of China
Tel : (86) 21-6434-3099

530 7th Ave 29th Floor, New York,NY 10018, U.S.A.
Tel: (1) 212-997-3600

Onward retail l.l.C
530 7th Ave 29th Floor, New York,NY 10018, U.S.A.
Tel: (1) 212-997-3600

Onward Beach resort guam, inc.
445 Governor Carlos G.Camacho Road,
Tamuning, Guam 96913, U.S.A.
Tel: (1) 671-647-7777

Onward golf resort guam, inc.
825, Route 4A, Talofofo, Guam 96915, U.S.A.
Tel: (1) 671-789-5555

Corporate/investor information

History

Head Office

1927

February

Junzo Kashiyama established Kashiyama Trading.

1947

september

Established Kashiyama Co., Ltd., in Oimatsu-cho, Kita-ku, Osaka City, Osaka (later relocated to Honmachi, Higashi-ku in 1952).

1960

October

Listed on the second sections of the Tokyo, Osaka, and Nagoya stock exchanges.

1962

april

Established Onward Sales Co., Ltd. (formerly Oak Co., Ltd., currently Onward Trading Co., Ltd.).

1964

July

Listing was transferred to the first sections of the Tokyo, Osaka, and Nagoya stock exchanges.

1966

september

Transferred head office from Honmachi, Kita-ku, Osaka to Nihonbashi, Chuo-ku, Tokyo.

1972

July

Established Onward Transport Co., Ltd. (currently Across Transport Co., Ltd.).

september

Established Onward Kashiyama U.S.A. INC.

As of February 28, 2013

Toda Building, 7-1, Kyobashi 1-chome, Chuo-ku, Tokyo 104-8329, Japan
Tel: (81) 3-4512-1020
Fax: (81) 3-4512-1021
URL: http://www.onward-hd.co.jp/

Established

September 1947

Capital¥30,079 million

Common stock

Authorized—400,000,000 shares
Issued—172,921,669 shares
Note: The total number of issued and outstanding shares included 16,046,000 shares of treasury stock.

number of shareholders 11,608

1973

February

Established Onward Kashiyama France S.A.

stock Exchange listings Tokyo, Osaka, and Nagoya

1974

February

Established Onward Kashiyama Italia S.p.A. (currently Onward Italia S.p.A.).

Transfer agent

1986

October

Acquired J. Press, Inc.

1988

February

Established Onward Kashiyama Hong Kong Ltd.

septemberCompany name changed to Onward Kashiyama Co., Ltd. (currently Onward Holdings Co., Ltd.).

1989

decemberEstablished Onward Kashiyama U.K. Ltd.

1990

January

Acquired GIBO’ S.p.A. (name was changed to GIBO’ Co. S.p.A. in April 1994).

July

Acquired Chacott Co., Ltd.

1991

February

Launched Onward Research and Development Institute.

1992

May

Opened Onward Agana Beach Hotel in Guam (currently Onward Beach Resort).

1994

May

Established Bus Stop Co., Ltd.

1995

June

Established Shanghai Onward Fashion Co., Ltd.

1997

June

Established Onward Kashiyama Korea Co., Ltd.

2004

January

Acquired Erika s.r.l.

2005

May

Acquired Project Sloane Ltd. (Joseph Group).

July

Acquired Iris S.p.A.

2006

October

Acquired Mangilao Golf Club (currently Onward Mangilao Golf Club).

2007

april

Onward Fashion Trading (Shanghai) Co., Ltd., increased its capital and changed its name to
Onward Fashion Trading (China) Co., Ltd.

May

Acquired Frassineti s.r.l.

June

Established J. Direction Co., Ltd.

september

Changed to a holding company structure through corporate restructuring under the new company name,
Onward Holdings Co., Ltd.

number of Employees(Consolidated)

Mitsubishi UFJ Trust & Banking Co., Ltd.
10-11, Higashisuna 7-chome, Koto-ku, Tokyo 137-8081, Japan
5,208

Major shareholders
Number of
Shares Held(thousands)

Percentage ofTotal Shares
Issued (%)

Kashiyama Scholarship Foundation

8,710

5.5

Japan Trustee Services Bank, Ltd. (Trust account)

6,759

4.3

Nippon Life Insurance Company

6,227

3.9

The Master Trust Bank of Japan, Ltd. (Trust account)

5,911

3.7

Isetan Mitsukoshi, Ltd.

5,001

3.1

The Dai-ichi Mutual Life Insurance Company Ltd.

4,200

2.6

Japan Trustee Services Bank, Ltd. (Trust account nine)

3,919

2.4

Onward Holdings Customers’ Shareholding Association

3,513

2.2

MARUI GROUP CO., LTD.

3,417

2.1

Northern Trust Co. AVFC Re U.S. Tax Exempted Pension Funds

2,948

1.8

Notes:
1. The Company holds 16,046,000 shares of treasury stock. Treasury stock is not included in the above Major
Shareholders information.
2. Percentage of total shares issued are calculated after deducting 16,046,000 shares of treasury stock.

distribution of Ownership amongshareholders(On a number of shares basis)

Japanese individuals
and others
23.9%

Foreigninstitutions
and others
18.2%

Japanesefinancial
institutions
32.5%

Japanese
securities
companies
1.6%

Other Japanese
corporations
23.8%

Note: Japanese individuals and others data include
treasury stock.

stock Price range and Trading Volume
Stock Price
Yen

Trading Volume
Thousand Shares
100,000

1,200

75,000900

Established new companies, Onward Kashiyama Co., Ltd., and Onward Trading Co., Ltd.

2008

October

Acquired Corporate s.r.l.

October

Acquired Creative Yoko Co., Ltd.
Acquired Jil Sander A.G.

600

50,000300

025,0002011/3

2012/3

2013/30

2009

decemberAcquired a controlling interest in Island Co., Ltd.

2010

June

Established Onward Kashiyama Singapore Pte. Ltd.

2011

augustEstablished Onward Kashiyama Vietnam Ltd.

2012

april

Acquired a controlling interest in Birz Group including Birz Association Ltd.

May

Established Onward Fashion Trading (China) Co., Ltd.

decemberEstablished Charles & Keith Japan Co., Ltd.

ONWARD HOLDINGS CO., LTD.

Head Office:Toda Building, 7-1, Kyobashi 1-chome,
Chuo-ku, Tokyo 104-8329, Japan
Tel: +81-3-4512-1020
http://www.onward-hd.co.jp/

Printed in Japan

Annual Report 2013

ONWARD HOLDINGS CO., LTD.