Annual Report

Year Ended February 28, 2003

Profile
Since its establishment in 1947, ONWARD KASHIYAMA Co., Ltd., has been an active leader
in the world of fashion. The Company has drawn on its sophisticated capabilities in planning,technological development, information network management, and production to develop awide range of popular brands that appeal to the diverse tastes of consumers, who differ
not only in age but also in the values they hold. Onward’s products are marketed throughdepartment stores, direct merchants, shopping centers, and general retailers throughout
Japan as well as via a global sales network that spans Europe, Asia, and North America.
Onward has earned a strong reputation in all quarters for its continued ability to anticipate
consumer needs and offer new concepts that reflect those needs. As a leading retailer in the
global apparel industry, Onward will continue to fully use its long experience in planning anddevelopment, technology, information, and production to more actively develop businessin both domestic and overseas markets.

Contents
1 A Message to Our Stockholders
4 Business Overview and Strategy for the Current Fiscal Year
7 Consolidated Six-Year Summary
8 Financial Review
11 Consolidated Statements of Income
12 Consolidated Balance Sheets
14 Consolidated Statements of Stockholders’ Equity
15 Consolidated Statements of Cash Flows
16 Notes to Consolidated Financial Statements
29 Report of Independent Accountants
30 Non-Consolidated Balance Sheets
32 Non-Consolidated Statements of Income andRetained Earnings
33 Non-Consolidated Statements of Stockholders’ Equity
34 Notes to Non-Consolidated Financial Statements
39 Report of Independent Accountants
40 Board of Directors
41 Organization Chart
42 Principal Subsidiaries
43 Corporate Data and Locations

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

A Message

to Our Stockholders

The Operating Environment in Fiscal 2003

Overview of the Onward Group

Japan’s economy in fiscal 2003, ended February 28, 2003, con-

Despite difficult economic conditions, Onward succeededtinued to be hindered by a protracted deflationary slump, and thein increasing both sales and income during fiscal 2003. On

financial system struggled to dispose of a daunting amount of

a consolidated basis, net sales rose 2.4% from fiscal 2002,

bad debt. In addition, the pace of global economic growth slowedto ¥263.4 billion, operating income was up 8.2%, to ¥19.6 bil-amid an environment of international political uncertainty, andlion, and net income rose 88.3%, to ¥7.2 billion. Net income

economic conditions were harsh overall. Numerous changes

per share for fiscal 2003 was ¥41.55, and return on equity wasaffected the apparel industry, including greater diversification

3.8%. In addition, Onward will pay cash dividends applicable toin the consumer market, a rise in bankruptcies, modifications to

the period of ¥16.50 per share to stockholders.

distribution systems, the opening of new commercial buildings,

These impressive results for the year under review are attribut-

an influx of upmarket brands into centrally located urban shops,

able to our thorough reorganization of Group subsidiaries, which

an increasing number of large-scale direct merchants partici-

enabled us to dedicate corporate resources to more profitablepating in the apparel industry, and an increase in collaboration

businesses.

between trading and apparel companies. Net sales at department

On March 1, 2003, we merged three of our consolidated sub-and specialty stores were sluggish amid the severe economic

sidiaries—Impact 21 Co., Ltd., ACTY 21 Co., Ltd., and Partner

environment. The battle among upscale brand retailers and gen-

21 Co., Ltd.—that handle Polo Ralph Lauren Corporation cloth-eral merchandise stores (GMSs) for market supremacy seems to

ing for men and women, jeans, and other apparel. During thebe winding down, and the strengths and weaknesses of differing

year under review, Onward completed a 45% capital subscrip-

corporate strategies under unfavorable economic conditions

tion in Polo Ralph Lauren Japan Co., Ltd., bringing into effectare becoming apparent in light of corporate earnings.

a master sublicense agreement that endows the Company with

190,755

187,039

189,236

180,415

185,287

7,158
3,802

4,805

5,086

7,404

263,399

257,306

245,924

221,206

222,869

Financial Highlights(Millions of yen)
Years ended
February 28(Millions of yen)

’99 ’00 ’01 ’02 ’03

Consolidated
Net Sales

Years ended
February 28(Millions of yen)

’99 ’00 ’01 ’02 ’03

Consolidated
Net Income

Years ended
February 28’99 ’00 ’01 ’02 ’03

Consolidated Total
Stockholders’Equity1

an exclusive marketing license for Polo Ralph Lauren products inWith regard to distribution, we actively developed new mar-

Japan. In a reciprocal agreement, Onward transferred a portion of

keting channels centered on department stores, which are theits equity shareholdings of Impact 21 and ACTY 21 to Polo Ralph

engine of sales, in both urban and suburban areas and broad-

Lauren in the United States, an arrangement that we are confident

ened the scope of our distribution activities. Through the cre-

will strengthen our partnership. The merger will permit the rational-

ation of a supply chain management system responsive toization of back-office operations, and the consolidation of men’s

consumer demand and comprehensive management of demand

and women’s apparel into a single company will boost strength

forecasts, planning, production, and distribution, Onward

and competitiveness, particularly in opening new stores.

expanded net sales and strengthened its profit base.

In another move, Oak Co., Ltd., was made a wholly owned

To improve operational efficiency, Onward has put the highest

subsidiary through a stock swap on April 1, 2003. We willpriority on implementing Quick Response (QR), which is being

strengthen cooperation with Oak in planning, production, humandeveloped for every brand throughout Japan by Onward’s Brand

resources, and finance as a part of our restructuring.

Promotion Offices and Brand Promotion Officers responsible for

In addition, we liquidated +A VIA BUS CO., LTD., Field Dreamdeveloping QR. The system to support QR for all brands hasCo., Ltd., and Seagler Co., Ltd., bringing this phase of restruc-been strengthened, and a 52-week merchandising (MD) systemturing in our apparel subsidiaries to a close.

that immediately identifies products that are selling well to makeIn our hotel business in Guam, we strengthened our profit

product restocking faster and more efficient is in place. As abase with the completion of a new 145-room building in fiscal

result, Onward can more accurately determine the timing and2003, for a total of 430 rooms. Revenues were dampened byquantity for supplying popular products. This has smoothed thethreats of international terrorism and natural disasters, and initial

flow of production and sale of products, as well as improved thetargets were not achieved; however, Onward was applauded forinventory turnover rate, thereby pushing up gross profit margins.

its high safety standards, and net sales for the January to March

In our men’s and women’s fashion segments, we enhanced

quarter of 2003 jumped 35% from the same quarter in the previ-

new product development through the creation of the positionous fiscal year.

of division director responsible exclusively for the development

Looking at the operations of the parent company alone, we haveof new products.

responded to consumers’ increasingly diverse tastes with a greater
emphasis on our new business method we call Brand-leveraged

Going Forward

Management. This new business method incorporates the eight

The economic outlook for fiscal 2004 is bleak. The stinging

management pillars of in-house planning capabilities, low-cost pro-effects of continued deflation, flagging stock prices, the war induction, a system for meeting the demand for best-selling prod-

Iraq, the SARS crisis, corporate downsizing, and high unemploy-ucts, a flexible distribution system, attractive retail environments,

ment is expected to largely stifle economic growth. These dismal

topical advertising and PR activities, stronger sales capabilities, andeconomic conditions are likely to impede Onward’s businessstate-of-the-art IT systems. These efforts have resulted in theas well.

steady improvement of business performance in recent years.

2

To combat the sluggish economy, the Onward Group as a wholewill quickly move to strengthen promising businesses and scale
down or completely eliminate businesses with weak prospects. As
a part of these efforts, we will expand and develop the new Impact
21 (formed by the aforementioned merger) and completely restructure Oak’s business now that it is a wholly owned subsidiary. We
will also work to ensure a steady cash flow from the Guam resort
business. We are confident that these measures to reorganize andregulate subsidiaries will make the consolidated management baseeven more stable. In line with management strategy, the operationsof new businesses identified as having uncertain potential will be
evaluated in approximately two years, after which the Company will
determine whether to continue or withdraw from operations.
The parent company will increase the degree of precision of its
new business method, Brand-leveraged Management, and thus

Akira Baba, Chairman

enable us to strengthen flagship brands. The parent company
intends to devote a greater portion of corporate resources to thegrowth of its Luxury Brand Business Group and the development of
new brands. Onward will also redouble efforts to increase efficiency
by further expanding new distribution channels and establishing a
QR system for all brands. In particular, we will strengthen our newly
created 52-week MD system to accurately identify best-selling
goods on a week-by-week basis to permit quick changes to production quantities as needed. To accelerate distribution and cut
costs, Onward will work to resolve industrywide issues related to theuse of AT nets, IC tags, and the elimination of price stickers. Onward
will also seek to establish a supply chain and institute an electronic
data interchange trade system.
These strategies will give Onward the wherewithal to moveswiftly in allocating corporate resources to key areas andincrease sales and profitability.

May 23, 2003

Takeshi Hirouchi, President

3

Business Overview
and Strategy for the Current Fiscal Year

General Overview
In fiscal 2003, the Onward parent company and apparel-related subsidiaries banded together to promote Brand-leveraged Management, andthese efforts are steadily improving corporate performance. Onward’s business is also doing well in terms of both products and distribution.
With regard to products, sales of our flagship brands, NIJYUSANKU forpeople in their 30s and early 40s, KUMIKYOKU for people in their 20s, and
ICB for people in their late 20s are growing steadily. NIJYUSANKU andKUMIKYOKU have both developed into powerhouse brands, each with aretail base of over ¥50 billion. ICB’s retail base grew more than 10%, to
JIYUKU¥13 billion, and the retail base of our JIYUKU brand for ladies in their mid40s and mid-50s grew more than 30%, to ¥10 billion, making this a highly
profitable major brand for the Company, despite it only having beenlaunched in autumn 2000.
Distribution also improved in the fiscal year under review. Despite lackluster sales at department stores, which compose the bulk of our sales
channels, net sales increased 2.4%, thanks to the steady expansion ofshop floor space through the development of shops specializing in one ormore of Onward’s leading brands and moves to relocate to prime retaillocations. Onward has set up new sales channels by aggressively opening
new branches of MIX-O, which targets young professionals, KUMIKYOKU
FAM, for mothers and children, and other stores. This aggressive expansion has increased floor space and pushed up non-department store sales
40%. As a result, non-department store net sales increased to account for
more than 10% of net sales.

Men’s Fashions
In fiscal 2003, competition in business suits and coats was fierce, but consumers flocked to such highly versatile clothing items as jackets, trousers,
and half-coats that can be worn as either business or casual wear. Despite
GOTAIRIKU

the continued popularity of low-priced suits, the market expanded for prestigious and fashionable high-end brands. Customers also responded wellto such personalized products as semi-custom made clothing and products made from functional fabrics.

4

ICB

Children’s Fashion (KUMIKYOKU)

In business wear, pattern-made suits increased steadily, anddepartment store brands of children’s wear also saw firmsales increased of such high-end brands as GOTAIRIKU andreturns, but sales of long-established retail brands and brands

CERRUTI 1881. In fiscal 2003, ECO J suits, conceived of as a

at independent sales areas of department stores were subject

midsummer strategy, proved popular, and this helped secure

to fierce competition.

firm net sales in the middle of summer when sales tend to slump.

As stores are generally shrinking, the focus has been on

Sales of jackets, pants, and half-coats grew, but this growth wasincreasing sales by building and strengthening production sys-

not large enough to offset declines in other areas. In casual wear,

tems that are responsive to periods of actual demand andsales were strong. Onward began intensive marketing of sea-enhancing sales areas and storefront visual merchandising. In

sonal and holiday motif products in fiscal 2003, and this boosted

suburban areas, KUMIKYOKU FAM is selling well in preexistingsales. Our flagship brand NIJYUSANKU HOMME grew steadily inshops, and the number of newly opened stores has alsopart thanks to QR.

increased.

Consolidated net sales in the Men’s Fashion Business Group

Consolidated sales in Onward’s Children’s Fashion Businesswere ¥79.7 billion for fiscal 2003, down 3.5% from fiscal 2002,

Group climbed 16.5%, to ¥8.0 billion, which represented 3.1%

and accounted for 30.2% of net sales.

of net sales.

Women’s Fashions

Kimonos

Fiscal 2003 was punctuated by sales promotional events

The market for kimonos continued to shrink due to stagnant per-held ahead of season, shortened trend cycles, and an increase

sonal consumption, weakened demand for kimonos, and height-

in minor hits in the women’s clothing market.

ened price competition. Yukata—cotton summer kimonos—haveRegarding sales trends for Onward products, the Company

become fashionable among young women, but typhoons during

boosted sales by strengthening planning activities to precisely

the peak sales period in June and July and stiff market competi-

grasp market trends and its brand-oriented sales structure totion pushed down sales in fiscal 2003.

promote brand value. In particular, such leading brands as
NIJYUSANKU, KUMIKYOKU, ICB, JIYUKU, and SONIA RYKIEL
performed well. Also showing growth were sales of KUMIKYOKU
FAM and KUMIKYOKU SIS via new sales channels that include
suburban and urban shopping centers.
Consolidated sales in the Women’s Fashion Business Grouprose 5.3%, to ¥134.9 billion, and comprised 51.2% of net sales.

Children’s Fashions
The trend toward polarization in the children’s clothing market
became more pronounced amid the stagnant market. Priceconscious family brands sold well in the suburbs, and urban
Yukata (NIJYUSANKU)

5Fashion Jewelry (KUMIKYOKU)

VANILLA CONFUSION

Sales of honkagayuzen-type kimonos were strong thanks to

Fiscal 2004 Business Plans

off-site sales activities. Demand for such traditional JapaneseIn fiscal 2004, Onward is seeking to augment growth by continu-

goods as kimonos for the “Shichi-Go-San” festival for children

ing to promote Brand-leveraged Management to actively expand

aged seven, five, and three years, kimono sandals and bags, andthe scope of its business. We will not be held captive to conven-

our WA-brand casual kimonos boosted sales levels, but bargain

tional thinking and will rebuild all areas of business from scratch

goods did not sell well and business was hurt by overly strong

to attain the ideal sales environment.

competition. Onward had anticipated a large increase in sales

Specifically, Onward established the Luxury Brand Businessof yukata in the first half of the fiscal year, but sales only climbed

Group in March 2003 to consolidate imported brands. In autumn

to approximately 108% of the fiscal 2002 level, and the weak

2003, we will be proud to add GIBO to the broad line of interna-market prevented the Company from meeting its sales goals.

tional brands we carry, which includes MICHAEL KORS, SONIA

Consolidated sales in Onward’s Kimono Business Group

RYKIEL, MISSONI, and GIANFRANCO FERRE. We expect theseedged down 0.6%, to ¥3.8 billion, making up 1.4% of thechanges to lift net sales from the targeted ¥10.0 billion in fiscal

Company’s net sales.

2004 to ¥13.0 billion in fiscal 2007.
In men’s fashions, we have made GOTAIRIKU, NIJYUSANKUOtherHOMME, and J. PRESS flagship brands. Onward has selected• Fashion Jewelry

the English designer Peter Johnston to design our popular

Overall, the market in this sector was lackluster, reflecting Japan’s

GOTAIRIKU brand and will begin sales of the popular U.S.

protracted economic malaise; however, there was an upturn in sales

designer brand JOHN VARVATOS now that we have obtainedof fashion jewelry that is individualistic and has brand appeal.

exclusive marketing rights in Japan.

High public awareness of Onward’s brands along with theWith regards to women’s fashion, we will start selling the pop-

Company tying sales activities to seasonal events and limitingular English brand ANTONI & ALISON in the Japanese market,

the marketing of certain goods to specific seasons led to growthand, having conducted a scrupulous market survey, we will com-in jewelry sales.

mence sales of VANILLA CONFUSION for women in their late

• Bags, Objets d’Art, and Other Goods

20s. The marketing of VANILLA CONFUSION brand products is

Sales to department stores continued to fall, although suchto be centered in department stores, and this brand will be culti-

everyday goods as bags, accessories, and shoes sold well,vated as one of our leading products, with a target of ¥3.0 billion

largely buttressed by luxury brand items. Nevertheless, sales

in sales on an annual retail basis in fiscal 2004.

started to falter in summer 2002, and consumer spending

We will make maximum use of our product planning abilities

showed a clear line between the luxury brand products thatand enlist the services of famous designers while investing inthey favored and those they did not.

new brands that capitalize on the name recognition of popular

The Other Operations Business Group posted consolidated
sales of ¥37.0 billion, up 3.1% from fiscal 2002, which represented 14.1% of net sales on a consolidated basis.

6

brands to aggressively develop business and ensure that we areable to carry out our growth strategies.

Consolidated
Six-Year Summary

ONWARD KASHIYAMA Co., Ltd.
Years ended February 28 or 29

Thousands of
U.S. dollars

Millions of yen
1998

1999

2000

2001

2002

2003

2003

$1,201,423

At year-end:
Total current assets¥117,382¥119,138¥120,922¥126,151¥146,080¥141,468

Total property, plant and equipment

91,51790,82092,956

103,581

99,274

101,188859,346

Total assets

281,752

291,484

296,715

312,258

312,443

302,188

2,566,351

Total current liabilities

65,947

69,691

79,63678,98599,67380,147680,656

Total stockholders’ equity

178,476

185,287

180,415

189,236

187,039

190,755

1,619,998

Net sales¥228,334¥222,869¥221,206¥245,924¥257,306¥263,399$2,236,933

Cost of sales

131,476

132,360

130,058

143,449

145,687

143,234

1,216,421

Selling, general and administrative expenses

75,54073,70073,88785,731

93,499100,558

853,996

Operating income

21,317

16,80917,261

16,744

18,12019,607

166,516

Income taxes, current

10,471

9,599

9,306

4,888

11,176

6,166

52,367

Net income

9,580

5,086

7,404

4,805

3,802

7,158

60,788For the year:

Yen

U.S. dollars

Per share (Yen and U.S. dollars):
Net income

¥55.6

¥30.0

¥43.0

¥27.9

¥22.1

¥41.6

$0.353

Cash dividends

16.5

16.5

16.5

16.5

16.5

16.5

0.140

Note: Yen amounts have been translated, for convenience only, at ¥117.75=US$1, the approximate exchange rate on February 28, 2003.

7

Financial
Review

Overview
In fiscal 2003, ended February 28, 2003, the overall operating environment was characterized by such challenges as theJapanese economy’s protracted deflationary slump and financial system instability due to non-performing loans, the slowdown in the U.S. and global economies, and uncertainties in the international political situation.
The apparel market was characterized by increased diversification in consumption patterns. Competition intensified as various industry participants developed new hit products and implemented sales strategies to counteract the trend of market
contraction.
Consumer spending, which exerts a strong influence over apparel sales, showed encouraging signs amid the increase inexports in the first half of fiscal 2003. However, overall, such factors as high unemployment and a worsened income environment heightened uncertainty regarding the future and dampened consumer sentiment more than had been expected.
In this management environment, for several years, Onward has focused on its policy of Brand-leveraged Management toaddress diversification of consumption patterns. As a part of this initiative, we launched a two-pronged strategy to establish
NIJYUSANKU, KUMIKYOKU, ICB, and GOTAIRIKU as large-scale flagship brands, and also expanded JIYUKU into a major
brand. As a result, Onward has steadily boosted its business performance amid sluggish market conditions on the whole.
Turning to sales channel strategy, we focused on business expansion via the opening of new sales channels to serve
department stores, which are the mainstay of our sales, including both urban shopping areas and suburban shopping
centers.
Furthermore, we both drove sales expansion and strengthened our earnings base through the use of a consumer-focused
supply chain management system, providing total solutions spanning supply and demand forecasting, planning, production,and distribution.
As a result, we achieved gains in both net sales and earnings, with net sales increasing 2.4% compared with fiscal 2002, to¥263.4 billion, and operating income rising 8.2%, to ¥19.6 billion. Net income jumped a full 88.3%, to ¥7.2 billion in fiscal
2003, thanks to the clearance of accumulated extraordinary loss associated with severance expenses in the preceding fiscal
year.
Results of Operations
Net Sales
Net sales for the period rose 2.4%, to ¥263.4 billion, pulled up by strong demand for women’s and children’s clothing. Salesby business segment are as follows.
Apparel and Textile Products Business GroupAs for our Brand-leveraged Management approach, we deployed growth strategies in the product and distribution areas, andrecorded favourable progress in both fields. On the products front, such core brands as NIJYUSANKU, KUMIKYOKU, andICB recorded healthy gains, with NIJYUSANKU and KUMIKYOKU alone attaining more than ¥50.0 billion in retail sales toreach major brand status. Sales of ICB expanded at an annual rate of over 10.0%, to more than ¥13.0 billion, and JIYUKULADIES has grown more than 30.0% since its autumn 2000 launch, to ¥10.0 billion, to become a highly profitable major
brand in just its third year of sales.
While distribution via department stores is the core focus of our distribution strategy, we significantly expanded stores specializing in our leading brands, relocated stores to choice locations, and steadily increased retail floor space. As a result,clothing segment sales for the period rose 2.3%, to ¥251.2 billion, accounting for 95.4% of total net sales, which was equivalent to the level of the prior fiscal year. In contrast, according to the Japan Department Stores Association, sales of clothing at
department stores dropped 2.2% on average between March 2002 and February 2003.
Looking at major product types, sales of men’s apparel declined 3.5% and made up 30.2% of segment sales, down 1.8
percentage points from fiscal 2002. Even as sales of GOTAIRIKU, CERRUTI 1881, and other prestigious high-end men’s
apparel increased, and sales of mid-summer clothing items were hits, the results were insufficient to offset the overall downswing in the business wear market.

8

Sales of women’s apparel increased 5.3% to account for 51.2% of segment sales, up 1.4 percentage points from the previous fiscal year. In the face of shortened trend cycles and fragmentation of core products, Onward increased Group sales bystrengthening its sales system to focus on major brands and boosting brand value backed by accurate assessments of market trends. Sales of children’s apparel leaped 16.5% and accounted for 3.1% of segment sales, up 0.4 percentage point fromfiscal 2002. The increase in sales was largely tied to measures to strengthen our production system to better respond to thepeak demand period, particularly as regards KUMIKYOKU and KUMIKYOKU FAM. Sales of kimonos decreased 0.6% andmade up 1.4% of segment sales, down 0.1 percentage point from fiscal 2002.
Other Division
The market for jewelry, bags, and other products was adversely affected by weakness in the economy overall. Our bag business has been slowed by intense market competition, but in fashion jewelry, we expanded sales growth by leveraging highbrand recognition to expand floor space, as well as investments in sales promotions linked to seasonal events and goods
offered at specific times of the year. Sales in the Other Division overall increased 3.0% and accounted for 4.6% of total net
sales, unchanged from the prior fiscal term.
Costs, Expenses, and Earnings
The cost of sales fell 1.7%, to ¥143.2 billion. The increase in net sales combined with the decline in the cost of sales improved
gross profit 7.7%, to ¥120.2 billion, and boosted the gross profit margin 2.2 percentage points to 45.6%.
Selling, general, and administrative (SG&A) expenses rose 7.5%, to ¥100.6 billion. SG&A expenses as a percentage of net
sales increased 1.9 percentage points from the previous fiscal year, to 38.2%. Contributing factors behind the increase werehigher rent and additional amortization and depreciation expenses related to the expansion of new sales channels, as well as
a rise in retirement benefit expenses resulting from the adoption of new accounting standards. Operating income increased
8.2%, to ¥19.6 billion, and the ratio of operating income to net sales improved 0.4 percentage point to 7.4%.
Other income (expenses) improved by ¥4.6 billion, going from ¥6.8 billion in expenses in fiscal 2002 to ¥2.2 billion in
expenses in fiscal 2003, principally due to the recording in fiscal 2002 of a one-time expense arising from the adoption of a
new accounting standard for retirement benefits. In the consolidated statement of income, costs related to the additional
retirement payments also declined, to ¥1.0 billion, having accounted for ¥3.9 billion in the previous term, but loss on writedown of investments in securities grew ¥0.8 billion.
These factors helped lead to a 54.0% increase in income before income taxes and minority interests to ¥17.4 billion. Net
income soared 88.3%, to ¥7.2 billion, which lifted the profit margin 1.2 percentage points to 2.7%. The return on equity (ROE)rose 1.8 percentage points, to 3.8%.
Financial Condition
The Onward Group’s total assets as of the year-end were down 3.3%, to ¥302.2 billion. Of the ¥10.3 billion decline in assets,¥4.6 billion was in current assets. The chief factors for the decline in current assets were falls in trade receivables of ¥2.5 billion and inventory assets of ¥1.8 billion, due to the shortening in the cycle for collecting accounts receivable. In investments
and advances, investments in securities increased 28.3%, or ¥3.5 billion, mainly owing to the acquisition of shares of Polo
Ralph Lauren Japan. On the other hand, a ¥2.7 billion decrease of deferred tax assets—noncurrent partially offset thisincrease, and overall investments and advances increased ¥1.0 billion, to ¥49.1 billion. Total property, plant and equipment
increased ¥1.9 billion and deferred charges and other assets decreased ¥8.5 billion, to ¥10.5 billion.
Looking at liabilities, total current liabilities declined ¥19.5 billion from the fiscal 2002 year-end. Short-term bank loans
decreased ¥8.3 billion and accrued income taxes fell ¥8.6 billion on account of loan repayments made after consolidated
subsidiaries sold equity shareholdings as well as debt repayment for consolidated subsidiaries that were liquidated. In shareholders’ equity, retained earnings contributed to an increase of ¥3.8 billion and our already commendable shareholders’equity ratio improved further from 59.9% to 63.1%. The broad decline in current liabilities bolstered the current ratio from
146.6% to 176.5%, further improving the liquidity of assets. Interest-bearing debt dropped from ¥33.5 billion to ¥24.9 billion,

9

which contributed to the significant decline in the interest-bearing debt to equity ratio from 17.9% to 13.0%. An overall viewshows a clear trend toward an increase in the liquidity of assets, improvement in financial stability, and decrease in financial
risk.
Cash FlowsNet cash provided by operating activities totaled an inflow of ¥15.5 billion, down ¥7.3 billion from fiscal 2002. Althoughincome before income taxes and minority interests rose, deductions from corporate income tax payments and other paid
expenses were also up.
Net cash used in investing activities resulted in a ¥6.6 billion outflow. Compared with the ¥3.0 billion inflow in fiscal 2002,
this represents a worsening of cash flow balance that was mainly due to aggressive investment in stores and sales floors.
Net cash used in financing activities amounted to an ¥11.5 billion outflow, a strong increase compared with the ¥305 million outflow in fiscal 2002, largely due to the repayment of long- and short-term debt.
As a result of the aforementioned factors, the balance of cash and cash equivalents at end of year under review was ¥76.9
billion, down ¥2.6 billion from the beginning of the period.
Policy on the Distribution of Profits
The Company’s management has long recognized as one of its top priorities the distribution of profit to stockholders. We will
strive to continue to make stable dividend payments while securing adequate internal capital resources to strengthen our
financial base and actively expand operations. Despite the current unfavorable operating environment, the Company managed to increase both sales and income, although the outlook for the future is unclear. Onward paid an annual dividend of¥16.50 per share, on par with the dividend applicable to the previous fiscal year. As a result, the payout ratio for fiscal 2003
was 39.3% and the ratio of dividends on stockholders’ equity was 1.5%.
Forward-Looking Statement
We expect the challenging business environment to continue and an autonomous economic recovery to take time as capital
investment will likely stay at low levels, and lackluster personal consumption continues due to the severe conditions surrounding the job market and personal incomes. In response, the Company will move forward with Brand-leveraged Management
and establish a predominant market position by strengthening our product development ability. In addition, Onward willdevelop and cultivate international brands and expand the scale of the retail markets of each global operating unit to develop
a global fashion business platform. We will coordinate our domestic and international businesses to proactively advance as acorporation capable of competing in the global marketplace. Onward is dedicated to carrying out all measures necessary toachieve these goals.
For fiscal 2004, we anticipate an increase in consolidated net sales of 3.3%, to ¥272.0 billion, and a 25.8% increase inconsolidated net income, to ¥9.0 billion. These forecasts, based on information possessed by the Onward Group at this point
in time, include the possibility of latent risks and uncertainties. Please be aware that a variety of factors may affect the Group’s
forecasts, and cause the actual results to differ significantly from projections.

10Consolidated
Statements of Income

ONWARD KASHIYAMA Co., Ltd. and Subsidiaries
For the years ended February 28, 2001, 2002 and 2003

Thousands of
U.S. dollars (Note 1)

Millions of yen
2001

2002

2003

2003

Net sales¥245,924¥257,306¥263,399$2,236,933

Cost of sales

143,449

145,687

143,234

1,216,421

Gross profit

102,475

111,619

120,165

1,020,512

Selling, general and administrative expenses

85,731

93,499100,558

853,996

Operating income

16,744

18,12019,607

166,516

Other income (expenses):
Interest income

374

297

160

1,358

Interest expenses

(268)

(185)

(149)

(1,267)

Loss on disposal of property(1,850)

(436)

(911)

(7,734)

(519)

2,444

1,338

11,367

Loss on write-down of investments in securities(175)(1,771)(2,549)(21,648)

Royalty income

1,136

1,106

1,030

8,748

Loss on backup for subsidiaries and affiliates

(820)

—

—

—

Loss on liquidation of subsidiaries and affiliates

(445)

(617)

(72)

(615)

Additional retirement payments(3,823)(3,902)(993)(8,435)Adjustment provision for accrued retirement benefit allowance(1,879)———Provision for doubtful accounts(2,477)

(611)

—

—

Reversal of revaluation allowance for investments in securities

1,156

—

—

—

Evaluation loss on investment in venture fund

(1,928)

—

—

—

—

8,542

—

—

standard for retirement benefits (Notes 1. (2), 2. (11) and 6)—(14,430)——

Foreign currency exchange gain (loss)

71

1,991

(665)

(5,648)(1,161)

782

649

5,507

4,136

11,33017,445

148,149

Current

4,888

11,176

6,166

52,367

Deferred(4,288)(4,884)

3,605

30,618

—

1,287

—

—

Income before minority interests

3,536

3,751

7,674

65,164

Minority interests in subsidiaries

1,269

51

(516)

(4,376)¥004,805¥003,802¥007,158$0,060,788

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

Gain on securities contributed to employee retirement
benefit trust (Note 1. (2))
Transition adjustment arising from adoption of the new accounting

Other, net
Income before income taxes and minority interests
Income taxes (Note 8):

Prior-year income taxes

Net income

Yen

U.S. dollars (Note 1)

Per share:
Net income

¥27.9

¥22.1

¥41.6

$0.353

Cash dividends

16.5

16.5

16.5

0.140

The accompanying notes are an integral part of these statements.

11

Consolidated
Balance Sheets

ONWARD KASHIYAMA Co., Ltd. and Subsidiaries
February 28, 2002 and 2003

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS

2002

2003

2003

¥079,943¥079,191$0,672,538

31,592

29,049246,705

(289)

(213)

(1,814)Current assets:
Cash and time deposits
Trade receivables
Less: Allowance for bad debts

31,303

28,836244,891

Inventories

26,88425,133

213,444

Deferred tax assets—current (Note 8)

4,044

3,116

26,459Other current assets

3,906

5,192

44,091

146,080

141,468

1,201,423

Investments in securities (Note 3)

12,332

15,820134,353

Long-term loans

2,716

2,833

24,061

Deferred tax assets—noncurrent (Note 8)

12,5209,776

83,020

Deferred tax assets—revaluation of land (Note 9)

1,702

1,701

14,443

Other investments

18,824

18,934

160,802

48,09449,064

416,679

Buildings and structures

67,046

67,464572,946

Other depreciable property

17,127

18,052

153,309(41,792)(41,164)(349,595)

42,38144,352376,660

56,89356,836482,686

99,274

101,188859,346

18,923

10,46788,892

Total current assets

Investments and advances:

Total investments and advances

Property, plant and equipment (Note 5):

Less: Accumulated depreciation

Land (Note 9)
Total property, plant and equipment

Deferred charges and other assets

Excess investment costs over net assets of subsidiaries

The accompanying notes are an integral part of these statements.

12

72

1

11

¥312,443¥302,188$2,566,351

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND STOCKHOLDERS’ EQUITY

2002

2003

2003

Current liabilities:
Short-term bank loans (Note 14)¥028,186¥019,930$0,169,253

Trade payables

45,75743,000365,176

Accrued expenses

5,793

6,863

58,288

Accrued income taxes

10,561

1,996

16,951

Consumption tax payable

1,513

1,504

12,776

Accrued bonuses to employees

3,012

2,807

23,841

Allowance for sales returns

1,563

1,409

11,964

Other current liabilities

3,288

2,638

22,407

99,67380,147680,656

Long-term debt

5,271

4,957

42,094

Accrued retirement benefits (Note 6)

6,710

8,088

68,687

11,981

13,045

110,781

13,75018,241

154,916

Total current liabilities

Long-term liabilities:

Total long-term liabilities

Minority interests in consolidated subsidiaries
Commitment and contingent liabilities (Note 10)
Stockholders’ equity:
Common stock, without par value:
Authorized—400,000,000 shares

30,08030,080255,454

Additional paid-in capital

Issued—172,292,587 shares

49,135

49,135417,282

Net revaluation loss of land (Note 9)(2,348)(2,347)(19,928)

110,942

114,791

974,869

Net unrealized losses on available-for-sale securities (Note 2. (5))

(278)

(175)

(1,488)Foreign currency translation adjustment (Note 1. (2))

(475)

(637)

(5,412)

187,056

190,847

1,620,777

(17)

(92)

(779)

Retained earnings

Less: Treasury stock, at cost, 13,000 shares and87,006 shares at February 28, 2002 and 2003, respectively
Total stockholders’ equity

187,039

190,755

1,619,998¥312,443¥302,188$2,566,351

13

Consolidated

Statements of Stockholders’ Equity

ONWARD KASHIYAMA Co., Ltd. and Subsidiaries
For the years ended February 28, 2001, 2002 and 2003

Millions of yen

Number ofshares ofcommon stock(thousands)

Commonstock

Additional
paid-in
capitalNet
revaluation
loss ofland

Retainedearnings

Net
unrealized
loss onsecurities

Foreigncurrencytranslation
adjustment

Treasurystock

Balance as at February 29, 2000:
Cash dividends
Directors’ bonuses
Selling of treasury stock, net
Adjustment of retained earnings for
newly consolidated subsidiaries
Cumulative effect of adopting deferred
tax accounting (Note 2. (10))
Net income for the year ended
February 28, 2001

172,293———¥30,080———¥49,135———¥ 000————¥101,201(2,843)
(303)
—

¥ 0,—
—
—
—

¥ 0,—
—
—
—

¥0(1)
—
—
(0)

—

—

—

—

322

—

—

—

—

—

—

—

6,840

—

—

—

—

Balance as at February 28, 2001:
Cash dividends
Directors’ bonuses
Selling of treasury stock, net
Adjustment of retained earnings for
newly consolidated subsidiaries
Net income for the year ended
February 28, 2002
Net revaluation loss of land (Note 9)
Net unrealized losses onavailable-for-sale securities (Note 2. (5))
Foreign currency translation
adjustment (Note 1. (2))

172,293
—
—
—

—

—

—

4,805

—

—

—

30,080———49,135
—
—
—

—
—
—
—

110,022(2,843)
(51)
—

—
—
—
—

—
—
—
—

0(1)
—
—
(16)

—

—

—

—

12

—

—

—

—
—

—
—

—
—

—
(2,348)

3,802
—

—
—

—
—

—
—

—

—

—

—

—

(278)

—

—

—

—

—

—

Balance as at February 28, 2002:
Cash dividends
Directors’ bonuses
Selling of treasury stock, net
Net income for the year ended
February 28, 2003
Reversal of reserve for land revaluation
Net unrealized gain on
available-for-sale securities
Foreign currency translation adjustment

172,293———

30,080———49,135———(2,348)
—
—
—

—

—

(475)

—

110,942(2,843)
(466)
—

(278)
—
—
—

(475)
—
—
—

(17)
—
—
(75)

—
—

—
—

—
—

—
1

7,158
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

103
—

—
(162)

—
—

Balance as at February 28, 2003

172,293¥30,080¥49,135¥(2,347)¥114,791¥(175)¥(637)¥(92)

Foreigncurrencytranslation
adjustment

Treasurystock

Thousands of U.S. dollars (Note 1)
Number ofshares ofcommon stock(thousands)

Commonstock

Additional
paid-in
capitalNet
revaluation
loss ofland

Retainedearnings

Net
unrealized
loss onsecurities

Balance as at February 28, 2002:
Cash dividends
Directors’ bonuses
Selling of treasury stock, net
Net income for the year ended
February 28, 2003
Reversal of reserve for land revaluation
Net unrealized gain on
available-for-sale securities
Foreign currency translation adjustment

172,293———$255,454———$417,282———$(19,939)———$942,172(24,141)(3,950)—$(2,361)———$(4,031)———$(142)
—
—
(637)

—
—

—
—

—
—

—
11

60,788
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

873
—

—
(1,381)——

Balance as at February 28, 2003

172,293$255,454$417,282$(19,928)$974,869$(1,488)$(5,412)$(779)

The accompanying notes are an integral part of these statements.

14

Consolidated

Statements of Cash Flows

ONWARD KASHIYAMA Co., Ltd. and Subsidiaries
For the years ended February 28, 2001, 2002 and 2003

Thousands of
U.S. dollars (Note 1)

Millions of yen

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization(Reversal of) provisions for allowance for doubtful accounts
Provisions for accrued retirement benefit allowance, net of payments
Gain on securities contributed to employee retirement benefit trust
Net interest and dividend income
Loss on disposal of fixed assets
Gain on sale of investments in securities, net
Gain on change in equity in affiliates(Reversal of) evaluation loss on investments in securities
Evaluation loss on fixed assets
Decrease in trade receivables(Increase) decrease in inventories(Decrease) increase in trade payables
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Increase in time deposits
Decrease in time deposits
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Acquisition of investments in securities
Proceeds from sale of investments in securities
Net (increase) decrease in deferred charges
Payments for deposit
Proceeds from deposit
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from short-term loans
Repayments of short-term loans
Net repayments of long-term debt
Proceeds from stock subscription by minority stockholders
Net proceeds from (payment for) treasury stock
Dividends paid
Dividends paid to minority stockholders
Net cash used in financing activities

2001

2002

2003

2003

¥04,136¥11,330¥17,445$148,149

6,245
259
733
—
(449)
1,850
(186)
(334)
(980)
4,429
4,938
(283)
(1,270)
(137)

7,179
421
14,220(8,542)(272)
436(2,444)
—
1,771
—
830
(89)
2,292
(591)

7,890
(658)
996
—
(43)
911
(1,338)
—
2,549
—
2,363
1,750
(2,396)
1,492

67,005(5,588)
8,460
—
(362)
7,734
(11,367)—
21,648—20,065
14,863(20,352)
12,683

18,951745(260)(8,330)26,541456(185)(3,992)30,961
190(156)(15,494)

262,938
1,614(1,327)(131,580)

11,10622,82015,501

131,645(6,651)
6,151(5,455)
1,494(1,912)402(2,335)(943)
1,186(3,994)(6,017)
12,265(7,155)231(433)
11,448(4,096)(2,279)1,331(2,254)(2,283)445(4,170)316(6,324)5,554
220(2,182)
2,370
(553)

(19,389)
3,779(35,414)
2,683(53,707)47,1681,870(18,527)
20,123(4,696)(12,057)

3,041(6,607)(56,110)

6,132(4,906)(7,905)803
1(2,843)
(164)

6,349
(3,631)——(16)(2,843)
(164)

3,156
(9,449)(2,060)—(75)(2,843)(196)

26,804(80,244)(17,499)—(637)(24,141)(1,662)(8,882)(305)(11,467)(97,379)

Effect of exchange rate changes on cash and cash equivalents(Decrease) increase in cash and cash equivalents

16(9,817)52
25,608(18)(2,591)(153)(21,997)

Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents
due to changes in the scope of consolidation

57,21053,81979,499675,146

6,426

72

—

—

Cash and cash equivalents at end of year

¥53,819¥79,499¥76,908$653,149

The accompanying notes are an integral part of these statements.

15

Notes toConsolidated Financial Statements

ONWARD KASHIYAMA Co., Ltd. and Subsidiaries

1. Basis of Presentation of the Consolidated Financial Statements(1) Accounting Principles
The accompanying consolidated financial statements have been prepared from the accounts maintained by ONWARD KASHIYAMA Co., Ltd.
(the “Company”), and its consolidated subsidiaries in accordance with the provisions set forth in the Japanese Commercial Code (the “Code”)
and the Securities 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 Accounting 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 theconsolidated financial position, results of operations or cash flows of the Company and its consolidated subsidiaries in accordance withaccounting principles and practices generally accepted in countries and jurisdictions other than Japan.
Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of ¥117.75=US$1, the rate of exchange
at February 28, 2003, has been used in translation. The inclusion of such amounts 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.
(2) Effect of Adoption of New Accounting Standards
Retirement Benefits
Effective from the year ended February 28, 2002, the Company and its consolidated subsidiaries adopted the “New Accounting Standard for
Retirement Benefits” (issued on June 16, 1998 by the Business Accounting Deliberation Council). The Company contributed securities to an
employee retirement benefit trust in order to fund the transition amount arising from adopting the new standard of ¥14,430 million at the beginning of the period, and a gain on securities contributed to the trust of ¥8,542 million, which is calculated as the difference between the market
value and the book value, is credited to income. As a result of adopting the new standard, net pension expense for the year ended February 28,
2003, increased by ¥14,607 million, operating income decreased by ¥178 million and income before income taxes and minority interests
decreased by ¥6,066 million. Please refer to Note 13 (segment information) for the impact on the segment information of adopting the newstandard.
Financial Instruments
Effective from the year ended February 28, 2002, the Company and its consolidated subsidiaries adopted the new Japanese accounting standard for financial instruments. Following this adoption, the valuation method of securities changed and income before income taxes and minority interests for the year ended February 28, 2002, increased by ¥623 million compared with the amount which would have been reported if theprevious standard had been applied consistently. Please refer to Note 13 (segment information) for the impact on the segment information of
adopting the new standard.
Foreign Currency Translation
Effective from the year ended February 28, 2002, the Company and its consolidated subsidiaries adopted the “Revised Accounting Standard
for Foreign Currency Translation” (issued on October 22, 1999 by the Business Accounting Deliberation Council). The adoption of the newstandard had no material impact on the accompanying consolidated financial statements, except that differences in yen amounts arising fromtranslating foreign currency financial statements of foreign subsidiaries and affiliates into Japanese yen were presented as “Foreign currencytranslation adjustments” in the stockholders’ equity at February 28, 2002, while they were presented as assets before the adoption of the
new standard.

16

2. Summary of Significant Accounting Policies(1) Scope of Consolidation
The Company had 53 subsidiaries as at February 28, 2003 (55 as at February 28, 2002, 56 as at February 28, 2001). The consolidated financial
statements include the accounts of the Company and its 23 consolidated subsidiaries (23 for 2002, 21 for 2001). The 23 subsidiaries whichhave been consolidated with the Company are listed below (the Company and these consolidated subsidiaries are together referred to as the“Companies”).
Name of subsidiary

Equity ownership percentage

Impact 21 Co., Ltd.
Acty 21 Co., Ltd.
Partner 21 Co., Ltd.
Onward Life Design Network Co., Ltd.
Freed of London Ltd.
O & K Co., Ltd.
Onward Beach Resort Co., Ltd.
Donna Karan Japan K.K.
Onward Creative Center Co., Ltd.
Excel Co., Ltd.
Across Transport Co., Ltd.
On Business Trend Co., Ltd.
Across Service Co., Ltd.
Onward Marine Co., Ltd.
Personal Order Japan Co., Ltd.
Onward Beach Resort Guam, Inc.
Bus Stop Co., Ltd.
Oak Co., Ltd.
Chacott Co., Ltd.
+A VIA BUS CO., LTD.
Field Dream Co., Ltd.
BOOKLET CORP.

40.7%
40.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
90.3
100.0
100.0
100.0
100.0
100.0
28.6
60.5
100.0
100.0
100.0

Closing dateFebruary 28
February 28
February 28
February 28
December 31
February 28
December 31
December 31
February 28
March 31/February 28
February 28
February 28
February 28
February 28
February 28
December 31
February 28
February 28
March 31/February 28
February 28
February 28
February 28

As a result of an increase in their materiality to the consolidated accounts, BOOKLET CORP. and Field Dream Co., Ltd. have been consolidated for the first time in the year ended February 28, 2002. +A VIA BUS CO., LTD., which was established in 2002, has been included in consolidation for the first time in the year ended February 28, 2002. On the contrary, Onward Resort Creation Inc. and Seagler Co., Ltd. wereliquidated in 2002 and 2003, respectively. +A VIA BUS CO., LTD. and Field Dream Co., Ltd. are under liquidation as of February 28, 2003. By
exchange of stock, O & K Co., Ltd. became a 100% owned subsidiary on April 1, 2003.
Financial statements of Donna Karan Japan K.K., Onward Beach Resort Co., Ltd., Onward Beach Resort Guam Inc., and Freed of London
Ltd., which have a fiscal year-end of December 31, have been used for consolidation. Significant transactions between January 1 and February
28 are reflected in the consolidated financial statements. Chacott Co., Ltd. and Excel Co., Ltd. changed their fiscal year-end from March 31
to February 28 in 2002.
The remaining 30 subsidiaries (32 for 2002, 35 for 2001) were not consolidated because their combined assets, net sales, net income, andretained earnings in the aggregate were not material compared with those of the consolidated financial statements of the Companies.
(2) Consolidation and Elimination
For the purposes of preparing the consolidated financial statements of the Companies, all significant intercompany transactions, accountbalances and unrealized profits among the Companies have been entirely eliminated, and the portion attributable to minority interests iscredited/charged thereto.
The assets and liabilities of consolidated subsidiaries are incorporated into the financial statements at fair value at the time of acquisition,and the difference between the cost of investments in consolidated subsidiaries and the equity in their net assets at dates of acquisition isamortized equally over a 5-year period.
(3) Investments in Unconsolidated Subsidiaries and Affiliates
Although the Company had 30 unconsolidated subsidiaries (32 in 2002, 35 in 2001) and 3 affiliates (4 in 2002 and 2001) as at February 28,
2003, the equity method was not applied to any of those subsidiaries and affiliates. This was because investment in the unconsolidated subsidiaries and affiliates would not have had a material effect on the consolidated financial statements.

17(4) Inventories
Inventories are stated at cost, cost being determined generally by the last purchase invoice price method which approximates the first-in, firstout cost method. Merchandise held at retail stores is valued at the retail cost method.
When the net realizable value of certain classes of inventories (consisting primarily of seasonal merchandise which remains unsold after theend of such seasons) is substantially less than the carrying value (cost), and the decline of value is not expected to be recovered in the near
future, appropriate write-downs are recorded on such inventory items. The amount of the write-down is determined based on the experienceof sales of merchandise similar to those unsold items during the immediately preceding three years. At February 28, 2002 and 2003, recorded
write-downs were ¥10,247 million and ¥9,347 million ($79,379 thousand), respectively.
(5) Investments in Securities
Until the year ended February 28, 2001, marketable securities listed at stock exchanges were stated at the lower of cost or market value.
Unlisted marketable and other securities were stated at cost. The cost of securities sold was based on the moving-average method.
Effective from the year ended February 28, 2002, the Companies adopted the new Japanese accounting standard for financial instruments,
which addresses the accounting and reporting requirements for certain investments in debt and equity securities, and derivatives.
Under the new standard, securities are classified into four categories: trading securities, held-to-maturity debt securities, equity securities of
unconsolidated subsidiaries and affiliates, and available-for-sale securities (“Other securities”). At February 28, 2002 and 2003, the Companies
did not have trading securities or held-to-maturity debt securities.
Debt securities and equity securities designated as other securities, whose fair values are readily determinable, are carried at the fair value
prevailing at the fiscal year-end date with unrealized gains or losses included as a component of stockholders’ equity, net of applicable taxes.
Other securities, whose fair values can not readily be determined, are stated principally at cost. In cases where declines in the fair value ofindividual securities are assessed to be other than temporary, the cost of the security is reduced to net realizable value and the loss is charged
to income. Realized gains and losses are determined using the moving-average method and are reflected in income.
Unconsolidated subsidiaries and affiliates are stated at the cost determined by the moving-average method.
(6) Derivative Transactions
Under the new standards, 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
Under the new standard, all gains or losses arising from changes in the fair value of the derivatives designated as “hedging instruments” aredeferred as an asset or liability and included in net profit or loss in the same period during which the gains and losses on the hedged items ortransactions are recognized. For foreign exchange forward contracts, if they meet conditions for hedge accounting, the difference between contract rate and spot rate at the date of the contract is recognized over the period from the contract date to the settlement date.
The derivatives designated as hedging instruments by the Company are principally foreign exchange forward contracts. The related hedged
items are trade accounts payable denominated in foreign currencies, and scheduled transactions.
The Company has a policy to utilize the above hedging instruments in order to reduce the exposure to the risk of foreign currency exchange
rate fluctuation, and to fix the cash disbursement of the trade account payable denominated in foreign currencies by domestic currency.
(8) Property, Plant and Equipment
Depreciation is computed using the declining-balance method, at rates based on the estimate useful lives of assets which are prescribed by
Japanese income tax regulations.
The Companies compute depreciation expense for buildings (other than improvements) acquired on and after April 1998 by the straight-line
method pursuant to the amendment to the Japanese income tax law.
(9) Amortization
Intangible assets and long-term prepaid expenses are amortized on a straight-line method over the period prescribed by the JapaneseCommercial Code or tax regulations.
Software costs for internal use are amortized over their expected useful lives (5 years or less) on a straight-line method.
(10) Income Taxes
Income taxes of the Company and its domestic consolidated subsidiaries consist of corporate income tax, local inhabitants’ tax and enterprise tax.

18

In the fiscal year ended February 28, 2001, the Company and its domestic consolidated subsidiaries adopted deferred tax accounting
in accordance with the new accounting standard for deferred tax accounting. Income taxes were determined using the asset and liability
approach whereby deferred tax assets and liabilities were recognized in respect of temporary differences between the tax basis of assets andliabilities and those as reported in the consolidated financial statements. The cumulative effect of adopting deferred tax accounting at March 1,
2000 was credited to retained earnings.
(11) Allowances
An allowance for bad debts is provided for estimated losses on known bad debts and doubtful accounts at the balance sheet date.
Accrued bonuses to employees are provided for at an amount determined based on the estimated bonuses to employees which wasincurred at the balance sheet date.
An allowance for sales returns is provided for the estimated losses on sales returns calculated under the Japanese tax regulations.
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. Until the year ended February 28, 2001, the Company provided for accrued
retirement benefits (unfounded) in an amount equivalent to 100% of the liabilities payable to all employees eligible for such benefits upon theirvoluntary retirement at the balance sheet date, less the accumulated balance of fund assets for the pension plan. As at February 28, 2001,
fund assets aggregated ¥7,339 million with the past service liabilities being amortized over a 6-year period.
Effective from the year ended February 28, 2002, the Company and its consolidated subsidiaries adopted the “New Accounting Standard
for Retirement Benefits.” The unrecognized difference of ¥14,430 million arising from adopting the new standard (the “transition adjustment”)
has been fully amortized for the year ended February 28, 2002. Unrecognized prior service costs are amortized and charged/credited to income
on a straight-line basis over the employees’ average remaining service years (from 5 to 10 year periods). Unrecognized actuarial differences
are amortized on a straight-line basis over the employees’ average remaining service years (from 5 to 10 year periods) from the year following
the one in which they arise.
Accrued retirement benefits for directors and statutory auditors is provided for at the amount required at the balance sheet dates in accordance with the Company’s internal rules of the Company, Impact 21 Co., Ltd., On Business Trend Co., Ltd., Acty 21 Co., Ltd., Donna KaranJapan K.K., Oak Co., Ltd. and Chacott Co., Ltd.
While the Company has no legal obligation, it is the customary practice in Japan to make lump-sum payments to a director or statutory auditor upon retirement with the approval of the general meeting of stockholders.
(12) Accounting for Leases
Finance leases other than those which are deemed to transfer the ownership of the lease assets to lessees are accounted for by a method similar to that applicable to ordinary operating leases.
(13) Accounting for Consumption Tax
The consumption tax withheld upon sales and the consumption tax paid by the Companies on the purchase of goods and services are notincluded in the accompanying consolidated statements of income.
(14) Dividends
Dividends are declared by the Board of Directors and approved by the stockholders at meetings held subsequent to the fiscal year to which
the dividends are applicable, and stockholders of record as at the end of such fiscal years are entitled to the subsequently declared dividends.
Dividends charged to retained earnings represent dividends approved by the stockholders and paid during the respective years.
(15) Net Income and Dividends per Share
Net income per share is based upon the weighted-average number of shares outstanding during each year. Cash dividends per share shownfor each year in the accompanying Consolidated Statements of Income represent dividends declared as applicable to the respective years
rather than those paid during the years.
(16) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statement of cash flows are composed of cash on hand, bank deposits which are able to bewithdrawn on demand, and short-term investments which are readily convertible into cash or with an original maturity of three months or less,which represent insignificant risk of changes in value.

19

Cash and cash equivalents at February 28, 2002 and 2003 consisted of:Thousands of
U.S. dollars

Millions of yen

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

2002

2003

2003

¥79,943(444)¥79,191(2,283)$672,538(19,389)¥79,499¥76,908$653,149

3. Investments in Securities(1) Information as of and for the Year Ended February 28, 2003:(a) Available-for-sale securities (other securities) with fair value:
Investments in securities included equity and debt securities whose fair values were available at February 28, 2003, are analyzed as follows:
Millions of yen

Securities with unrealized gain:
Equity securities

Acquisition
cost

Fair value(Carrying value)¥0,298298

Difference

Fair value(Carrying value)

Difference¥0,376¥(078$02,532$03,197$(0,665

376

78

2,532

3,197

665

2,624

2,246

(378)

22,286

19,072(3,214)

2,624

2,246

(378)

22,286

19,072(3,214)¥2,922¥2,622¥(300)$24,818$22,269$(2,549)

Total
Securities with unrealized loss:
Equity securities
Total
Total

Thousands of U.S. dollars
Acquisition
cost

An impairment loss of ¥2,513 million ($21,346 thousand) was recognized for the decline of fair value of the available-for-sale equity securities.
(b) Other securities sold during the year ended February 28, 2003:

Proceeds from sale of other securities
Gross realized gain on sale of other securities
Gross realized loss on sale of other securities

Millions of yen

Thousands of
U.S. dollars(Note 1)

¥3
—
1

$21
—
9

Millions of yen

Thousands of
U.S. dollars¥00,775
4,400$006,578
37,368

5,175
8,023

43,946
68,138¥13,198$112,084(c) Major securities which are not stated at fair values as of February 28, 2003:

Other securities:
Non-listed equity securities
Non-listed foreign bonds
Subtotal
Investments in equity securities of unconsolidated subsidiaries and affiliates
Total(d) Redemption and maturity schedule of debt securities classified as other securities:
Millions of yen

Non-listed foreign bonds

20

Thousands of U.S. dollars

Within 1
year

1 to 5years

5 to 10years

Over 10years

Within 1
year

1 to 5years

5 to 10years

Over 10
years

¥—

¥—

¥4,400¥—$—$—$37,367$—(2) Information as of and for the Year Ended February 28, 2002:(a) Available-for-sale securities (other securities) with fair value:
Investments in securities whose fair values were available at February 28, 2002 are analyzed as follows:
Millions of yen

Securities with unrealized gain:
Equity securities

Acquisition
cost

Fair value(carrying value)

Difference¥0,307¥0,425

¥(118

307

425

118

3,294

2,661

(633)

3,294

2,661

(633)

¥3,601¥3,086¥(515)

Total
Securities with unrealized loss:
Equity securities
Total
Total

An impairment loss of ¥1,734 million was recognized for the decline of fair value of the available-for-sale equity securities.
(b) Other securities sold during the year ended February 28, 2002:
Millions of yen

Proceeds from sale of other securities
Gross realized gain on sale of other securities
Gross realized loss on sale of other securities¥8,9982,560116(c) Major securities which are not stated at fair values as of February 28, 2002:
Millions of yen

Other securities:
Non-listed equity securities
Non-listed foreign bonds¥0,7684,400

Subtotal
Investments in equity securities of unconsolidated subsidiaries and affiliates

5,168
4,072

Total

¥9,240(d) Redemption and maturity schedule of debt securities classified as other securities:
Millions of yen
Within 1
year

1 to 5years

5 to 10years

Over 10
years

¥—

¥—

¥4,400¥—Non-listed foreign bonds

4. Derivative Transactions
Derivatives are used in order to hedge foreign exchange market risk on the transactions and balances which occur in the normal course of business. Derivatives are not used for speculative purposes or for highly leveraged transactions. Derivatives are executed with creditworthy financial
institutions, and the Company does not anticipate significant losses due to the nature of its counterparties.
The Company and its consolidated subsidiaries applied hedge accounting for all derivative transactions as of February 28, 2002 and 2003,
therefore, no market value information is disclosed.

5. Property, Plant and Equipment
The Japanese income tax regulations allowed a company to defer capital gains on the sale of real property if the company intended to offset
such gains against the cost of newly acquired fixed assets. When such accounting was followed, the cost of the new fixed assets was reduced
to the extent of the deferred capital gains, thereby affecting related depreciation charges and accumulated depreciation.
Property, plant and equipment at February 28, 2002 and 2003, were reduced by ¥8,854 million and ¥8,752 million ($74,331 thousand),
respectively, representing accumulated deferred gains from eligible prior sales.

21

6. Retirement Plan and Retirement Benefits
The Company and its subsidiaries have defined benefit retirement plans covering substantially all employees. Defined benefit retirement plansinclude a plan which is governed by the regulations of the Japanese Welfare Pension Insurance Law (“welfare benefit plan”), tax qualified pension plans, and plans for lump sum retirement benefits.
The reserve for retirement benefits as of February 28, 2003, is analyzed as follows:
Millions of yen

Thousands of
U.S. dollars

Projected benefit obligations
Plan assets (including employee retirement benefit trust)¥(73,099)
48,006$(620,805))
407,698

Funded status
Unrecognized prior service costs
Unrecognized actuarial differences(25,093)(1,349)21,840(213,107)(11,460)
185,482

Subtotal
Prepaid pension cost

(4,602)
1,388(39,085)
11,788¥0(5,990))$0(50,873))

Millions of yen

Thousands of
U.S. dollars

Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized prior service costs
Amortization of unrecognized actuarial differences¥2,520
1,907
(997)
(165)
1,211

$21,398
16,193(8,464)(1,403)
10,286

Net pension expense¥4,476$38,010

Accrued pension and severance costs
Net pension expense for the year ended February 28, 2003, was as follows:

Assumptions used in the calculation of the aforementioned information were as follows:
As of February 28, 2003

Method of attributing the projected benefits to periods of service
Discount rate
Expected rate of return on plan assets
Welfare benefit plan
Tax qualified pension plans
Amortization of unrecognized prior service costs
Amortization of unrecognized actuarial differences

Straight-line basis
2.0 to 2.5% (2.0 to 3.0% at the beginning)
2.0 to 2.7%
1.1 to 1.5%
5 to 10 years
5 to 10 years

The reserve for retirement benefits as of February 28, 2002, is analyzed as follows:
Millions of yen

Projected benefit obligations
Plan assets (including employee retirement benefit trust)¥(67,815)
52,745Funded status
Unrecognized actuarial differences(15,070)
11,347

Subtotal
Prepaid pension cost

(3,723)
1,271

Accrued pension and severance costs22¥0(4,994)

Net pension expense for the year ended February 28, 2002 was as follows:
Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of transition adjustment
Amortization of unrecognized actuarial differences¥02,217
2,043(1,246)
14,43033

Net pension expense¥17,477

Assumptions used in the calculation of the aforementioned information were as follows:
As of February 28, 2002

Method of attributing the projected benefits to periods of service
Discount rate
Expected rate of return on plan assets
Welfare benefit plan
Tax qualified pension plans
Amortization of unrecognized actuarial differences

Straight-line basis
2.0 to 3.0% (3.5% at the beginning)
2.8 to 4.0%
1.1 to 1.5%
5 to 10 years

7. Lease Transactions
The Company’s finance lease contracts which are not deemed to transfer the ownership of the leased assets to lessees are not capitalized,
which is permitted by the Japanese accounting principles. Certain key information on such lease contracts of the Companies for the years
ended February 28, 2002 and 2003, are as follows:(Lessee)
Assumed data as to acquisition cost, accumulated depreciation, net book value and depreciation expense of the leased assets, which
included the portion of interest thereon, are summarized as follows:
Millions of yen

Thousands of U.S. dollars

2003
Tools, furniture,and fixtures

Other

Acquisition cost
Accumulated depreciation¥2,745(1,358)¥1,101(516)

Net book value¥1,387¥2,5852003
Total

Tools, furniture,and fixtures

Other

Total

¥3,846(1,874)$23,310(11,533)$9,353(4,386)$32,663(15,919)¥1,972$11,777$4,967$16,744

Millions of yen
2002
Tools, furniture,and fixtures

Other

Total

Acquisition cost
Accumulated depreciation¥2,943(1,405)¥1,236(558)¥4,179(1,963

Net book value¥1,538¥0,678¥2,216The scheduled maturities of future lease payments on such lease contracts as of February 28, 2002 and 2003, are as follows:
Millions of yen

Scheduled maturities of future lease payments:
Due within one year
Due over one year

Thousands of
U.S. dollars

2002

2003

2003

¥0,817
1,458¥0,817
1,213$06,938
10,301¥2,275¥2,030$17,239

23

Thousands of
U.S. dollars

Millions of yen
2002

2003

2003

Lease expenses for the year

¥828

¥958

$8,141

Depreciation

¥828

¥958

$8,141(Lessor)Assumed data as to acquisition cost, accumulated depreciation, net book value and depreciation expense of the leased assets, which
included the portion of interest thereon, are summarized as follows:
Millions of yen

Thousands of U.S. dollars

2003
Tools, furnitureand fixtures

Other

Acquisition cost
Accumulated depreciation

¥(7
(5)

¥71
(47)

Net book value

¥(2

¥24

2003
Total

Tools, furnitureand fixtures

Other

Total

¥78
(52)

$62
(47)

$601
(395)

$663
(442)

¥26

$15

$206

$221

Millions of yen
2002
Tools, furnitureand fixtures

Other

Total

Acquisition cost
Accumulated depreciation

¥85
(56)

¥48
(26)

¥133
(82)

Net book value

¥29

¥22

¥051

The scheduled maturities of future lease income on such lease contracts as of February 28, 2002 and 2003, are as follows:
Millions of yen

Scheduled maturities of future lease income:Due within one year
Due over one year

2002

2003

2003

¥034
79

¥033
74

$279
629

¥113

¥107

$907

Millions of yen

Lease income for the year

24

Thousands of
U.S. dollars

Thousands of
U.S. dollars

2002

2003

2003

¥27

¥20

$172

8. Income Taxes
Deferred tax assets and liabilities as at February 28, 2002 and 2003, consisted of the following elements:
Thousands of
U.S. dollars

Millions of yen

Deferred tax assets:
Valuation loss on inventories
Evaluation loss on investments in unconsolidated subsidiaries
Excess amount of tax-deductible accrued bonuses to employees
Excess amount of tax-deductible accrued employees’ retirement benefits
Allowance for directors’ retirement benefits
Tax losses carried forward
OthersSubtotal
Valuation allowance
Total deferred tax assets

2002

2003

2003

¥03,156
738
705
9,904
721
12,216
4,536¥02,801475
698
10,411882
13,1703,441$023,789
4,034
5,929
88,416
7,488
111,846
29,223

31,97631,878

270,725(11,798)(15,240)(129,426)

20,178

16,638141,299(3,589)(25)—(3,589)(25)(132)(30,482)(209)(1,129)Deferred tax liabilities:
Gain on securities contributed to an employee retirement benefit trust
Provision for deferred capital gains on real property
Other
Total deferred tax liabilities(3,614)(3,746)(31,820)

Net deferred tax assets¥16,564¥12,892$109,479

Reconciliation between statutory tax rate and effective tax rate as at February 28, 2002 and 2003:%

Statutory tax rate
Reconciliation:
Nondeductible items (entertainment expense, etc.)
Losses of consolidated subsidiaries to which deferred tax assets are not recognized
Tax recognition on liquidation of consolidated subsidiaries
Eliminated gains on sale of equities of consolidated subsidiaries
Other
Effective tax rate

2002

2003

42.0)%

42.0)%

3.2
20.3
—
—
1.4

2.1
11.3
(5.6)
4.5
1.7

66.9)%

56.0)%

With the implementation of the Revision of the Local Tax Law on March 31, 2003, the effective statutory tax rates of the Company and its
domestic subsidiaries will decrease from the fiscal years beginning after March 31, 2004. As a result, deferred tax assets, net of deferred tax liabilities, as of February 28, 2003 decreased by ¥311 million ($2,645 thousand), income taxes expense—deferred for the year then ended
increased by ¥311 million ($2,645 thousand), and net revaluation loss of land decreased by ¥55 million ($464 thousand).

9. Revaluation of LandIn the year ended February 28, 2002, the Company revaluated land for its business use at a market value as a result of application of the law,which permits a one-time revaluation of land for business use. The revaluation loss amounted to ¥4,050 million, the related deferred tax asset
recognized was ¥1,702 million, and the net revaluation loss of ¥2,348 million was presented as a separate component of stockholders’ equity
as a “net revaluation loss of land”.
The difference between the market value of land subject to the revaluation and the book value was ¥2,478 million ($21,045 thousand) as at
February 28, 2003.

25

10. Commitment and Contingent Liabilities
The Company was contingently liable as a guarantor for certain affiliates’ bank loans and for customers. The outstanding balance guaranteed
as at February 28, 2002 and 2003 aggregated ¥4,930 million and ¥5,026 million ($42,684 thousand), respectively.

11. Legal Reserve and Appropriation of Retained Earnings
Under the Code and the Company’s Articles of Incorporation, a proposal for appropriation of retained earnings must be submitted by the Boardof Directors to the stockholders’ meeting held within three months following the fiscal year-end for shareholders’ approval.
The appropriation of retained earnings reflected in the accompanying Consolidated Statements of Income represents the result of suchan appropriation applicable to the preceding fiscal period.
Under Japanese accounting practices, bonuses to directors and statutory auditors are paid out of retained earnings instead of being charged
to income of the year, and constitute a part of the appropriation explained above.
The Code requires that an amount equal to at least 10% of any payment by way of appropriation of retained earnings be set aside as alegal reserve until the total additional paid-in capital and a legal reserve equals 25% of paid-in capital. Additional paid-in capital and/or a legal
reserve in excess of 25% of stated capital in total may be reduced by resolution of the stockholders, and may be available for distribution to
stockholders.

12. Subsequent Events
Subsequent to February 28, 2003, the Board of Directors proposed a plan for the appropriation of retained earnings applicable to the year
ended February 28, 2003, which was approved at the general meeting of stockholders held on May 22, 2003.
The approved appropriation of retained earnings is shown below:

Reversal of a reserve for deferred capital gains on real property
Appropriations:
Cash dividends (¥16.5 per share)
Directors’ bonuses
Arbitrary reserve:
General reserve

26

Millions of yen

Thousands of
U.S. dollars¥0,000$00,006

2,842
348

24,131
2,955

3,500

29,724¥6,690$56,80413. Segment Information(1) Industry Segment Information
The Company and its subsidiaries operate principally in two industrial segments: Clothing and Other.
The Clothing Division produces and sells a wide range of women’s and men’s clothing, including: dresses, suits, shirts, skirts, sweaters,
trousers, and casualwear.
The Other Businesses operates logistics, sports facilities, resort facilities, etc.
Segment information classified by industry segment of the Company for each of the two years ended February 28, 2001 and 2002, is asfollows:
Year ended February 28, 2002

Millions of yen
Industry segment
Clothing

Other

Total

Elimination ofintersegment sales

Consolidated
total

Sales to outside customers
Intersegment sales¥245,469
721¥11,837
13,480¥257,306
14,201¥ 0000—(14,201)¥257,306—

Total
Costs and expenses

246,190
228,088

25,31725,300271,507
253,388(14,201)(14,202)257,306
239,186

Operating income¥018,102¥00,017¥018,119¥00,(001¥018,120

AssetsDepreciation
Capital expenditures¥291,263
6,274
8,202

¥42,848933
2,069¥334,111
7,207
10,271¥(21,668)
(77)
(122)

¥312,443
7,130
10,149Year ended February 28, 2003

Millions of yen
Industry segment
Clothing

Other

Total

Elimination ofintersegment sales

Consolidated
total

Sales to outside customers
Intersegment sales¥251,207
117¥12,192
13,332¥263,399
13,449¥ 0000—(13,449)¥263,399—

Total
Costs and expenses

251,324
231,654

25,52425,562276,848257,216(13,449)(13,424)

263,399
243,792

Operating income¥019,670¥000(38)¥019,632¥00,0(25)¥019,607

AssetsDepreciation
Capital expenditures¥281,164
6,950
7,733

¥42,314
1,031
1,345

¥323,478
7,981
9,078

¥(21,290)
(91)
(130)

¥302,188
7,890
8,948

Notes: 1. As explained in Note 1. (2), the Companies adopted the new accounting standard for retirement benefits for the year ended February 28, 2002. As a result of
the adoption, operating income of Clothing decreased by ¥178 million, and assets of Clothing and Other increased by ¥1,251 million and ¥20 million, respectively, compared with the prior accounting.
Notes: 2. As explained in Note 1. (2), the Companies adopted the new accounting standard for financial instruments for the year ended February 28, 2002. As a resultof adoption, assets of Clothing increased by ¥107 million ($796 thousand), as compared with the prior accounting, but operating income of industry segment
was not significantly affected.

27

Year ended February 28, 2003

Thousands of U.S. dollars
Industry segment
Clothing

Other

Total

Elimination ofintersegment sales

Consolidated
total

Sales to outside customers
Intersegment sales$2,133,394
990$103,539
113,224$2,236,933
114,214$ 00000—(114,214)$2,236,933—

Total
Costs and expenses

2,134,384
1,967,341

216,763
217,079

2,351,147
2,184,420(114,214)(114,003)

2,236,933
2,070,417

Operating income$0,167,043$000(314)$0,166,727$000,(211)$0,166,516

AssetsDepreciation
Capital expenditures$2,387,798
59,026
65,672$359,359
8,752
11,421$2,747,157
67,77877,093$(180,806)(773)(1,107)$2,566,351
67,00575,986(2) Geographic Segment Information
Geographic segment information is omitted because over 90 percent of total sales and total assets relate to only the domestic segment.
(3) Overseas Sales
Overseas sales information is omitted because the total overseas sales of the Companies is under 10 percent of consolidated sales amount.

14. Loans
Short-term loans at February 28, 2002 and 2003 represented loans, principally from banks. The weighted average interest rates on these loans
were 0.5% in 2002 and 0.6% in 2003, respectively.
Long-term loans at February 28, 2002 and 2003 comprised the following:Thousands of
U.S. dollars

Millions of yen

28

2002

2003

2003

Loans, principally from banks with a weighted-averageinterest rate of 0.7% at February 28, 2002¥(2,113)¥—$—

Less—Portion due within one year

(2,113)

—

—

¥000—

¥—

$—

Report of

Independent Accountants

The Board of Directors of ONWARD KASHIYAMA Co., Ltd.:We have audited the accompanying consolidated balance sheets of ONWARD KASHIYAMA Co., Ltd. and its consolidated subsidiaries as ofFebruary 28, 2002 and 2003, and the related consolidated statements of income and stockholders’ equity, and cash flows for each of the three
years in the period ended February 28, 2003, all expressed in Japanese yen. Our audits were made in accordance with auditing standards, procedures and practices generally accepted and applied in Japan and, accordingly, included such tests of the accounting records and such otherauditing procedures as we considered necessary in the circumstances.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of
ONWARD KASHIYAMA Co., Ltd. and its consolidated subsidiaries as of February 28, 2002 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended February 28, 2003, in conformity with accounting principles and practices generally accepted in Japan (see Note 1) applied on a consistent basis.

The amounts expressed in U.S. dollars, provided solely for the convenience of the reader, have been translated on the basis set forth in Note 1
to the accompanying consolidated financial statements.

ChuoAoyama Audit Corporation

Tokyo, JapanMay 22, 2003

29

Non-Consolidated
Balance Sheets

Onward Kashiyama Co., Ltd.
February 28, 2002 and 2003

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS

2002

2003

2003

¥015,065¥018,036$0,153,172

44,10430,993

263,210

Current assets:
Cash
Time deposits
Trade receivables:
Notes

3,165

2,543

21,597

Accounts

16,80916,316

138,565

19,97418,859160,162

(142)

(120)

(1,019)Less: Allowance for bad debts

19,832

18,739159,143

Inventories (Note 3)

17,767

16,892

143,453

Advance payments

275

408

3,470

3,080

1,998

16,967

Deferred tax assets—current (Note 8)
Other current assets
Total current assets

2,263

2,974

25,255102,386

90,040764,670

Investments and advances:
Investments in securities

7,177

6,772

57,510Investments in and advances to subsidiaries and affiliates

26,112

31,590268,281Long-term loans to employees
Deferred tax assets—noncurrent (Note 8)

313

267

2,270

12,726

10,85592,184

Deferred tax assets—revaluation of land (Note 5)

1,702

1,701

14,443

Other investments

10,215

11,881

100,900—(1,959)(16,637)

58,245

61,107518,951

Buildings and structures

48,331

48,759414,090

Machinery and equipment

2,024

1,469

12,479Tools, furniture and fixtures

7,038

8,032

68,20857,39358,260494,777(27,733)(29,020)(246,456)

29,66029,240248,32143,48843,483369,283

73,14872,723

617,604

6,098

7,268

61,727¥239,877¥231,138$1,962,952

Less: Allowance for bad debts
Total investments and advances

Property, plant and equipment (Note 4):

Less: Accumulated depreciation

Land: (Note 5)
Total property, plant and equipment

Deferred charges and other assets
Total assets
The accompanying notes are an integral part of these statements.

30

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND STOCKHOLDERS’ EQUITY

2002

2003

2003

¥024,594¥024,279$0,206,188

6,200

6,258

53,147

Current liabilities:
Trade payables:
Notes
Accounts

30,79430,537259,335

Non-trade payables

1,712

1,406

11,936

Accrued expenses

3,853

4,250

36,092

Accrued income taxes

8,949

—

—

Consumption tax payable

1,174

798

6,780

Accrued bonuses to employees

2,091

1,926

16,357

Allowance for sales returns

1,385

1,266

10,751Other current liabilities

1,253

737

6,262

51,21140,920347,513Long-term guarantee money deposited

2,138

2,201

18,695

Accrued retirement benefits

1,492

2,846

24,169Provision for loss on guarantee obligations

3,870

—

—

Total long-term liabilities

7,500

5,047

42,86458,71145,967

390,377

Total current liabilities

Long-term liabilities:

Total liabilities

Other commitments and contingent liabilities (Note 9)
Stockholders’ equity:
Common stock, without par value:
Authorized—400,000,000 shares issued
30,08030,080255,454

Additional paid-in capital

Outstanding—172,292,587 shares

49,135

49,135417,282

Legal reserve (Note 10)

5,483

5,483

46,560

Net revaluation loss of land (Note 5)(2,348)(2,347)(19,928)

General reserves (Note 10)

92,70992,709787,337

35

34

294

Retained earnings (Note 10)

6,344

10,342

87,833Net unrealized loss on available-for-sale securities

(255)

(173)

(1,478)

(17)

(92)

(779)

Special reserves

Less: Treasury stock, at cost, 13,000 shares and87,006 shares at February 28, 2002 and 2003, respectively
Total stockholders’ equity
Total liabilities and stockholders’ equity

181,166

185,171

1,572,575¥239,877¥231,138$1,962,952

31

Non-Consolidated

Statements of Income and Retained Earnings

Onward Kashiyama Co., Ltd.
For the years ended February 28, 2001, 2002 and 2003

Thousands of
U.S. dollars (Note 1)

Millions of yen
2001

2002

2003

2003

¥161,281
88,486¥171,109
93,111¥175,031
92,843$1,486,462
788,472

72,79577,99882,188697,990

Reversal of allowance for sales returns, net

511

89

119

1,011

Gross profit
Selling, general and administrative expenses

73,306
61,70978,08761,86582,30765,423

699,001
555,613

Operating income

11,597

16,222

16,884

143,388

850
(60)
1,156
(146)
750
—
(12,131)(4,898)(2,657)(3,075)591(36)—(1,738)
587
8,542
—
(617)
(511)
(2,691)431(77)—(2,380)536——(4,435)
(800)
(929)

3,659
(656)
—
(20,212)
4,552——(37,667)(6,794)(7,886)

—
—
982
(950)

(13,940)
—
1,116
3,015

—
2,197
1,197
515

—
18,658
10,161
4,377

Net sales
Cost of sales

Other income (expenses):
Interest and dividend income
Loss on disposal of property
Reversal of revaluation allowance for investment in securities
Loss on write-down of investments in securities, net
Royalty income
Gain on securities contributed to employee retirement benefit trust
Loss on backup for subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Provision for allowance for doubtful accounts
Additional retirement payments
Transition adjustment arising from adoptionof the new accounting standard for retirement benefits
Gain on sale of equities in affiliates
Rents received
Other, net(20,179)(5,682)(3,745)(31,808)

Income (loss) before income taxes(8,582)

10,54013,139111,580

Income taxes (Note 7):
Current
Deferred
Prior-year income taxes

2,049(4,351)—

8,474(5,045)
1,287

3,005
2,895
—

25,51924,587—(2,302)

4,716

5,900

50,106(6,280)

5,824

7,239

61,474

9,495
6,224

3,611
—

6,344
—

53,886
—

32
—

37
—

1
(1)

5
(11)

(2,843)(210)(307)(2,500)(2,843)—(285)—(2,843)(398)——(24,141)(3,380)——Net income (loss)
Retained earnings:
Balance at beginning of year
Cumulative effect of adopting deferred tax accounting
Reversal of reserve for deferred capital gains on property
due to adoption of deferred tax accounting
Reversal of reserve for land revaluation
Appropriations (Note 10):
Cash dividends
Directors’ bonuses
Transfer to legal reserve
Transfer to general reserves

Balance at end of year

(5,860)(3,128)(3,241)(27,521)¥03,611¥006,344¥010,342$0,087,833

Yen

Per share:
Net (loss) income—Basic
Cash dividends

32

The accompanying notes are an integral part of these statements.

¥(36.5)
16.5

¥33.8
16.5

U.S. dollars (Note 1)

¥42.0
16.5

$0.3570.140

Non-Consolidated
Statements of Stockholders’ Equity

Onward Kashiyama Co., Ltd.
For the years ended February 28
2001, 2002 and 2003

Balance as at February 29, 2000:
Cumulative effect of adopting
deferred tax accounting
Reversal of reserve fordeferred capital gains on property
Cash dividends
Transfer to legal reserve

Millions of yen

Number ofshares ofcommonstock(thousands)

Commonstock

172,293

LegalreserveNet
revaluation
loss ofland

Generalreserves

SpecialreservesNet
unrealized Treasury
Retained loss on
stock,
earnings securities at cost

¥30,080 ¥49,135 ¥4,891¥ 000—¥90,209¥104¥09,495

¥ 0,—

¥,—

Additional
paid-in
capital

—

—

—

—

—

—

—

6,224

—

—

—
—
—

—
—
—

—
—
—

—
—
307

—
—
—

—
—
—

(32)
—
—

32
(2,843)
(307)

—
—
—

—
—
—

—

—

—

—

—

2,500

—

(2,500)——

Balance as at February 28, 2001:
Reversal of reserve for deferred
capital gains on property
Cash dividends
Transfer to legal reserve
Net income for the year ended February 28, 2002
Net revaluation loss of land (Note 5)
Net unrealized loss on available-for-sale securities
Treasury stock, at cost (Note 1. (2))

172,293

30,08049,135

5,198—

92,709

72

3,611

—

—

—
—
—
—
—
—
—

—
—
—
—
—
—
—

—
—
—
—
—
—
—

—
—
285
—
—
—
—

—
—
—
—
(2,348)
—
—

—
—
—
—
—
—
—

(37)
—
—
—
—
—
—

37
(2,843)
(285)
5,824
—
—
—

—
—
—
—
—
(255)
—

—
—
—
—
—
—
(17)

Balance as at February 28, 2002:
Reversal of reserve for deferred
capital gains on property
Reversal of reserve for land revaluation
Cash dividends
Directors’ bonuses
Net income for the year ended February 28, 2003
Net unrealized gain on available-for-sale securities
Treasury stock, at cost

172,293

30,08049,135

5,483(2,348)92,709

35

6,344

(255)

(17)

—
—
—
—
—
—
—

—
—
—
—
—
—
—

—
—
—
—
—
—
—

—
—
—
—
—
—
—

—
1
—
—
—
—
—

—
—
—
—
—
—
—

(1)
—
—
—
—
—
—

1
(1)
(2,843)
(398)
7,239
—
—

—
—
—
—
—
82
—

—
—
—
—
—
—
(75)

Balance as at February 28, 2003

172,293¥(2,347) ¥92,709¥034¥10,342¥(173)¥(92)

Transfer to general reserves¥30,080 ¥49,135 ¥5,483

Thousands of U.S. dollars (Note 1)

Number ofshares ofcommonstock(thousands)

Commonstock

Generalreserves

Specialreserves

Retainedearnings

Net
unrealized Treasury
loss onstock,
securities at cost

Balance as at February 28, 2002:
Reversal of reserve for deferred
capital gains on property
Reversal of reserve for land revaluation
Cash dividends
Directors’ bonuses
Net income for the year ended
February 28, 2003
Net unrealized gain on
available-for-sale securities
Treasury stock, at cost

172,293$255,454 $417,282 $46,560 $(19,939) $787,337$299$53,886$(2,171)$(142)

Balance as at February 28, 2003

172,293

Additional
paid-in
capitalLegalreserveNet
revaluation
loss of
land

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
11
—
—

—
—
—
—

(5)
—
—
—

5
(11)
(24,141)(3,380)

—
—
—
—

—
—
—
—

—

—

—

—

—

—

—

61,474

—

—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

693
—

—
(637)

$255,454 $417,282 $46,560 $(19,928) $787,337$294$87,833$(1,478)$(779)

The accompanying notes are an integral part of these statements.

33

Notes to

Non-Consolidated Financial Statements

Onward Kashiyama Co., Ltd.

1. Basis of Presentation of the Non-Consolidated Financial Statements(1) Accounting Principles
The accompanying non-consolidated financial statements have been prepared from the accounts maintained by ONWARD KASHIYAMA Co.,
Ltd. (the “Company”), in accordance with the provisions set forth in the Japanese Commercial Code (the “Code”) and the Securities andExchange Law, and in conformity with accounting principles and practices generally accepted in Japan, which are different in certain respects
as to application and disclosure requirements of International Accounting Standards.
Certain items presented in the non-consolidated financial statements submitted to the Director of the Kanto Finance Bureau in Japan havebeen reclassified for the convenience of readers.
The accompanying non-consolidated financial statements are not intended to present the financial position or results of operations of theCompany in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan.
Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of ¥117.75=US$1, the rate of exchange
at February 28, 2003, has been used in translation. The inclusion of such amounts 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.
(2) Effect of Adoption of New Accounting Standards
Retirement Benefits
Effective from the year ended February 28, 2002, the Company adopted the “New Accounting Standard for Retirement Benefits” (issued onJune 16, 1998 by the Business Accounting Deliberation Council). The Company contributed securities to an employee retirement benefit trust,in order to fund the transition amount arising from adopting the new standards of ¥13,940 million at the beginning of the period, and a gain on
securities contributed to the adopting trust of ¥8,542 million is credited to income. As a result of the new standard, net pension expense for theyear ended February 28, 2002 increased by ¥14,118 million and operating income decreased by ¥179 million and income before income taxes
decreased by ¥5,577 million.
Financial Instruments
Effective from the year ended February 28, 2002, the Company adopted the new Japanese accounting standard for financial instruments.
Following this adoption, the valuation method of securities has changed and income before income taxes for the year ended February 28, 2002
increased by ¥546 million compared with the amount which would have been reported if the previous standard had been applied consistently.
Foreign Currency Translation
Effective from the year ended February 28, 2002, the Company adopted the “Revised Accounting Standard for Foreign Currency Translation”(issued on October 22, 1999, by the Business Accounting Deliberation Council). The adoption of the new method had no material impact on
the accompanying non-consolidated financial statements.
Treasury Stocks
Effective from the fiscal year ended February 28, 2002, under the amended financial statements regulations in Japan, treasury stocks, whichwere previously presented in “Current assets”, have been presented as a deduction of “Stockholders’ equity”.

2. Summary of Significant Accounting Policies(1) Inventories
Inventories are stated at cost, cost being determined generally by the last purchase invoice price method which approximates the first-in
first-out cost method. Merchandise held at retail stores is valued at the retail cost method.
When the net realizable value of certain classes of inventories (consisting primarily of seasonal merchandise which remains unsold after theend of such seasons) is substantially less than the carrying value (cost), and the decline of value is not expected to be recovered in the near
future, appropriate write-downs are recorded on such inventory items. The amount of write-down is determined based on the experience ofsales of merchandise similar to those unsold items during the immediately preceding three years. At February 28, 2002 and 2003, recorded
write-down was ¥6,569 million and ¥6,243 million ($53,023 thousand), respectively.

34

(2) Investments in Securities
Refer to Note 2. (5) to the consolidated financial statements.
(3) Derivative Transactions
Refer to Note 2. (6) to the consolidated financial statements.
(4) Hedge Accounting
Refer to Note 2. (7) to the consolidated financial statements.
(5) Property, Plant and Equipment
Refer to Note 2. (8) to the consolidated financial statements.
(6) Amortization
Refer to Note 2. (9) to the consolidated financial statements.
(7) Income Taxes
Refer to Note 2. (10) to the consolidated financial statements.
(8) Allowances
An allowance for bad debts is provided for estimated losses on known bad debts and doubtful accounts at the balance sheet date.
Accrued bonuses to employees is provided for at an amount determined based on the estimated bonuses to employees which was incurredat the balance sheet date.
An allowance for sales returns is provided for the estimated losses on sales returns calculated under the Japanese tax regulations.
Accrued retirement benefit is 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.
Employees with more than 2 years of service with the Company are generally entitled to lump-sum retirement benefits determined by reference to the current rate of pay, length of service and conditions under which termination occurs. The Company has a funded pension plan
which covers 55% of retirement benefits payable to employees who retire at the mandatory retirement age. Until the year ended February 28,
2001, the Company adopted a policy to provide for accrued retirement benefits (unfunded) in an amount equivalent to 100% of the liabilities
payable to all employees eligible for such benefits upon their voluntary retirement at the balance sheet date, less the accumulated balance offund assets for the pension plan.
As at February 28, 2001, fund assets aggregated ¥6,813 million, with the past service liabilities being amortized over a 6-year period.
Effective from the year ended February 28, 2002, the Company adopted the “New Accounting Standard for Retirement Benefits.” The unrecognized difference arising from adopting the new standard (the “transition adjustment”) of ¥13,940 million has been fully amortized for the year
ended February 28, 2002. Unrecognized prior service costs are amortized on a straight-line basis over the average remaining service life of theemployees (10-year periods). Unrecognized prior service costs are amortized on a straight-line basis over the employees’ average remaining
service years (over 10 year periods).
Accrued retirement benefits for directors and statutory auditors is provided for at the amount required at the balance sheet date in accordance with the Company’s internal rules.
The provisions for loss on guarantee obligations was provided in case the Company is obliged to pay for the guaranteed subsidiaries. In estimating the allowance, the Company considers the financial condition of each subsidiary.
(9) Accounting for Leases
Refer to Note 2. (12) to the consolidated financial statements.
(10) Accounting for Consumption Tax
Refer to Note 2. (13) to the consolidated financial statements.
(11) Dividends
Refer to Note 2. (14) to the consolidated financial statements.
(12) Net Income and Dividends per Share
Refer to Note 2. (15) to the consolidated financial statements.

35

3. Inventories
Inventories at February 28, 2002 and 2003 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Merchandise and finished goods
Raw materials
Work-in-process
Supplies

2002

2003

2003

¥15,252
1,315
1,051
149

¥14,382
1,469
844
197

$122,138
12,474
7,165
1,676¥17,767¥16,892$143,453

4. Property, Plant and Equipment
The Japanese tax regulations allowed a company to defer capital gains on the sales of real property if the company intended to offset suchgains against the cost of newly acquired fixed assets. When such accounting was followed, the cost of the new fixed assets was reduced to theextent of the deferred capital gains thereby affecting related depreciation charges and accumulated depreciation.
Property, plant and equipment at February 28, 2002 and 2003, was reduced by ¥8,854 million and ¥8,752 million ($74,331 thousand),
respectively, representing accumulated deferred gains from eligible prior sales.

5. Revaluation of Land
Refer to Note 9 to the consolidated financial statements.

6. Lease Transactions
The Company’s finance lease contracts which are not deemed to transfer the ownership of the leased assets to lessees are not capitalized,
which is permitted by the Japanese accounting principles. Certain key information on such lease contracts of the Company for the years ended
February 28, 2002 and 2003, is as follows.
Assumed data as to acquisition cost, accumulated depreciation, net book value and depreciation expense of the leased assets, which
included the portion of interest thereon, were summarized at February 28, 2002 and 2003 as follows:
Millions of yen
2002

36

Tools, furniture,and fixtures

Other

Acquisition cost
Accumulated depreciation¥1,473
(603)

¥290
(122)

Net book value¥0,870¥168

Thousands of U.S. dollars
2003

Total

Tools, furniture,and fixtures

Other¥1,763(725)¥1,467
(678)

¥326
(116)

¥1,038¥0,789

¥210

2003
Total

Tools, furniture,and fixtures

Other

Total

¥1,793(794)$12,464(5,760)$2,764(982)$15,228(6,742)¥0,999$06,704$1,782$08,486

The scheduled maturities of future lease payments on such lease contracts as of February 28, 2002 and 2003, are as follows:
Thousands of
U.S. dollars

Millions of yen

Scheduled maturities of future lease payments:
Due within one year
Due over one year

2002

2003

2003

¥0,346
692

¥395
604

$3,3555,131¥1,038¥999$8,486
Thousands of
U.S. dollars

Millions of yen

Lease expenses for the year
Depreciation

2002

2003

2003

¥338
338

¥441
441

$3,7493,749

7. Securities
Shares of subsidiaries with market value:
Millions of yen
2002

Shares of subsidiaries

Book
value

Marketvalue¥572¥7,966

Thousands of U.S. dollars
2003

Difference

Book
value

Marketvalue¥7,394¥508¥7,5362003
Difference

Book
value

Marketvalue

Difference¥7,028$4,318$63,996$59,678

8. Income Taxes
Deferred tax assets and liabilities as at February 28, 2002 and 2003, consisted of the following elements:
Millions of yen

Deferred tax assets:
Valuation loss on inventories
Evaluation loss on investments in subsidiaries
Excess amount of tax-deductible employees’ accrued retirement benefits
Allowance for directors’ retirement benefits
Provision for guarantee obligations
OthersTotal deferred tax assets
Deferred tax liabilities:
Gain on securities contributed to an employee retirement benefit trust
Provision for deferred capital gains on real property
Other

Thousands of
U.S. dollars

2002

2003

2003

¥01,532
2,799
8,007
613
1,626
4,843

¥01,410
2,841
8,496
753
—
3,099

$011,974
24,126
72,1496,398—
26,323

19,42016,599140,970(3,589)(25)—(3,589)(25)(132)(30,482)(209)(1,128)

Total deferred tax liabilities(3,614)(3,746)(31,819)

Net deferred tax assets¥15,806¥12,853$109,151

37

Reconciliation between statutory tax rate and effective tax rate as at February 28, 2002 and 2003:%

Statutory tax rate
(Reconciliation)
Nondeductible items (entertainment, expenses, etc.)
Nontaxable items (dividend income, etc.)
Inhabitant tax per capita basis
Effective tax rate

2002

2003

42.0)%

42.0)%

3.0
(1.0)
0.7

2.3
(0.5)
1.1

44.7)%

44.9)%

Please also refer to Note 8 to the consolidated financial statements.
With the implementation of the Revision of the Local Tax Law on March 31, 2003, the effective statutory tax rates will decrease for fiscal
years beginning after March 31, 2004. As a result, deferred tax assets, net of deferred tax liabilities, as of February 28, 2003, decreased by¥345 million ($2,927 thousand), income taxes expense—deferred for the year then ended increased by ¥345 million ($2,927 thousand) and net
revaluation loss of land decreased by ¥55 million ($464 thousand).

9. Commitment and Contingent Liabilities
The Company was contingently liable as a guarantor for certain affiliates’ bank loans. The outstanding balance guaranteed as at February 28,
2002 and 2003, aggregated ¥20,030 million and ¥19,564 million ($166,177 thousand), respectively.

10. Legal Reserve and Appropriation of Retained Earnings
Refer to Note 11 to the consolidated financial statements.

11. Subsequent Event
Refer to Note 12 to the consolidated financial statements.

38

Report of

Independent Accountants

The Board of Directors of Onward Kashiyama Co., Ltd.:We have audited the accompanying non-consolidated balance sheets of ONWARD KASHIYAMA Co., Ltd., as of February 28, 2002 and 2003,
and the related non-consolidated statements of income and retained earnings, and of stockholders’ equity for each of the three years in the
period ended February 28, 2003, all expressed in Japanese yen. Our audits were made in accordance with auditing standards, procedures andpractices generally accepted and applied in Japan and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, the non-consolidated financial
position of ONWARD KASHIYAMA Co., Ltd., as of February 28, 2002 and 2003, and the results of its operations for each of the three years in
the period ended February 28, 2003 in conformity with accounting principles and practices generally accepted in Japan (see Note 1) applied ona consistent basis.

The amounts expressed in U.S. dollars, provided solely for the convenience of the reader, have been translated on the basis set forth in Note 1
to the accompanying non-consolidated financial statements.

ChuoAoyama Audit Corporation

Tokyo, JapanMay 22, 2003

39

Board of

Directors<DIRECTORS><CORPORATE AUDITORS>

Executive Officers

ChairmanStanding Corporate Auditors

Akio Date

Akira Baba*

Katsutoshi Kashiyama

Nobutake Matsuo

Yukio Sugimoto

Susumu Maeda

President

Yasumitsu Miyamoto

Kisaku Uragami

Takeshi Hirouchi*

Masao Kusunoki

Hiroshi Imai
Toshio Tobita
Shigeru Kamakari

Vice President<OFFICERS>

Yoshihiko SatoManaging Executive Officers

Wataru Sakai

Senior Managing Directors

Takashi Nakamura

Hideo Matsumoto

Fumiyasu Yamashita

Yoshiaki Hanada

Kenichiro Tamai

Masaru Kusaki

Ryuji Horie

Hiroaki Yamada

Tetsuji Wada

Hiroshi Ishida

Managing Directors

Kentaro Mizuno

Tsutomu Hagihira

Masao Ohno

Masabumi Kiyohara

Eiji Tono

Kazuya Baba

Tadayoshi Kobayashi

Masayoshi Tomura

Kenji Takada*

Isao Yamane
Masaaki Yoshizawa
Shigeru Uemura* Representative Director40

As of May 22, 2003

Organization
Chart

Board of Directors
Board ofCorporate
Auditors

Chairman
Onward GroupManagement Council
President

Vice President (Onward
Apparel Group Sales Officer)
Supply Chain
Management
Promotion Division

Onward Group Supply
Chain Management
Promotion Officer

Management
Planning Division

Management
Planning Office

Management
Information
Division

Onward Apparel Group Production Officer
Onward Apparel Group New Distribution Business Officer
Men’s Office Clothes Business Group
Men’s Casual Clothes Business GroupSportswear Business Group
Women’s Fashion Business Group

Secretarial Office

JIYUKU and JANE MORE Business GroupNIJYUSANKU Business Group

Advertising Division

Public Relations
Division
Customer Service
OfficeKUMIKYOKU Business GroupICB Business Group
Business
Coordination
Headquarters

Jean-Paul Gaultier Business GroupPaul Smith Business GroupKORS Business Group

Fashion Award
Department

J. Press Business Group

General Affairs
Division

Youth Apparel Business Group

Onward ResearchInstitute

Family Apparel Business Group

Lifestyle Goods Business GroupNew Business Group
Luxury Brand Business GroupAccounting Division

Men’s Apparel ProductDevelopment Office

Human Resources
Division

Women’s Apparel ProductDevelopment Office

Tokyo Branch
Kanto Branch
Osaka Branch

Brand Promotion Group
Fukuoka Branch
Production Division
Nagoya Branch
New Business Distribution Officer
Sapporo Branch
Sales Promotion OfficeSendai BranchInternational Operations
Business Group

Hiroshima Branch

Trading Business Group

Trading Business
Division

Kimono Business Group
Kimono Sales
Business Division

As of May 22, 2003

41

Principal

Subsidiaries

OVERSEAS SUBSIDIARIES
J. PRESS INC.
262 York Street,
New Haven, CT 06511, U.S.A.
Tel: (1) 203-772-1310
ONWARD KASHIYAMAFRANCE S.A.
6, Rue Vivienne,
75002 Paris, France
Tel: (33) 1-5504-8787
ONWARD KASHIYAMA
U.S.A. INC.
530 Seventh Avenue,
29th Floor,
New York, NY 10018, U.S.A.
Tel: (1) 212-997-3600
ONWARD KASHIYAMAHONG 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, 2721-7074
ONWARD KASHIYAMA U.K. LTD.
47, Conduit Street,
London W1S 2YP, U.K.
Tel: (44) 20-7494-2074
ONWARD KASHIYAMACANADA INC.
Suit 3600,
Toronto Dominion Bank Tower,
Toronto-Dominion Centre,
Toronto, Ontario, Canada M5K ING6

GIBO CO. S.p.A.
Via Cassia 69, 50029 Tavarnuzze,
Firenze, Italy
Tel: (39) 055-237-2020
ONWARD ITALIA S.p.A.
Via Della Spiga 9, 20121 Milano, Italy
Tel: (39) 02-783-667
SHANGHAI ONWARD
FASHION CO., LTD.
5F Jinjiang Dickson Center,
400# Changle Road, Shanghai,
People’s Republic of China
Tel: (86) 21-6466-6466
ONWARD TRADING (SHANGHAI)
CO., LTD.
5F Jinjiang Dickson Center,
400# Changle Road, Shanghai,
People’s Republic of China
Tel: (86) 21-6472-3660
ONWARD RETAIL L.L.C.
499 Seventh Avenue,
7th & 8th Floors, South Tower,
New York, NY 10018, U.S.A.
Tel: (1) 212-629-6100
ONWARD KASHIYAMAKOREA CO., LTD.
U-SAM BLDG., 2F, 584-1 Shinsa-Dong,
Kangnam-ku, Seoul,
Republic of Korea
Tel: (82) 2-548-5841
HORLOGE SAINT BENOIT S.A.
22 Rue Saint Benoit,
75006 Paris, France
Tel: (33) 1-4544-1118
ONWARD BEACH RESORTGUAM, INC.
445 Governor Carlos G. Camacho Road,
Tamuning, Guam 96911, U.S.A.
Tel: (1) 671-647-7777
FREED OF LONDON LTD.
94, St. Martin’s Lane,
London WC2N 4AT, U.K.
Tel: (44) 20-7240-0432

42

DOMESTIC SUBSIDIARIES<APPAREL AND TEXTILEPRODUCTS>IMPACT 21 CO., LTD.
OAK CO., LTD.
CHACOTT CO., LTD.
ON BUSINESS TREND CO., LTD.
DONNA KARAN JAPAN K.K.
BUS STOP CO., LTD.
PERSONAL ORDER JAPANCO., LTD.
<SERVICES>ACROSS TRANSPORT CO., LTD.
ACROSS SERVICE CO., LTD.
ONWARD CREATIVE CENTER
CO., LTD.
ONWARD LIFE DESIGNNETWORK CO., LTD.
EXCEL CO., LTD.
BOOKLET CORP.
<RESORTS>
O & K CO., LTD.
ONWARD MARINE CO., LTD.
ONWARD BEACH RESORT
CO., LTD.

As of May 22, 2003

Corporate

Data and Locations

Head Office

3-10-5, Nihonbashi, Chuo-ku, Tokyo 103-8239
Tel: (81) 3-3272-2317
Fax: (81) 3-3272-2314
URL: http://www.onward.co.jp/

Established

September 1947

Paid-in Capital¥30,080 million

Common Stock

Authorized—400,000,000 shares
Issued—172,292,587 shares

Number of Shareholders

7,801

Stock Listings

Tokyo, Osaka, and Nagoya stock exchanges

Transfer Agent

UFJ Trust Bank Ltd.
1-4-3, Marunouchi, Chiyoda-ku, Tokyo 100-0005, Japan

Number of Employees

1,754

OFFICES
Head Office
3-10-5, Nihonbashi,
Chuo-ku, Tokyo 103-8239
Tel: (81) 3-3272-2317
Tokyo Shibaura Bldg. No. 1
3-9-32, Kaigan,
Minato-ku, Tokyo 108-8439
Tokyo Shibaura Bldg. No. 2
3-11-6, Kaigan,
Minato-ku, Tokyo 108-8439
Tokyo Shibaura Bldg. No. 3
3-14-11, Kaigan,
Minato-ku, Tokyo 108-8439
Tokyo Shibaura Bldg. No. 4
3-14-21, Kaigan,
Minato-ku, Tokyo 108-8439

Atsugi Distribution Center
1434, Aikokatamachi,
Atsugi, Kanagawa 243-0035

Osaka Branch
4-3-6, Honmachi,
Chuo-ku, Osaka 541-0053

Tokyo Branch
3-14-21, Kaigan,
Minato-ku, Tokyo 108-8439

Miyakojima Operations Center
5-10-7, Takadono,
Asahi-ku, Osaka 535-0031

Kanto Branch
3-11-6, Kaigan,
Minato-ku, Tokyo 108-8439

Hiroshima Branch
3-12-10, Minami-Kanon,
Nishi-ku, Hiroshima 733-0035

Sapporo Branch
16-1, Kitaichijonishi,
Chuo-ku, Sapporo,
Hokkaido 060-0001

Fukuoka Branch
2-6-43, Daimyo,
Chuo-ku, Fukuoka 810-0041

Sendai Branch
1-6-8, Kamisugi,
Aoba-ku, Sendai, Miyagi 980-0011
Nagoya Branch
4-11-31, Meiekiminami,
Nakamura-ku, Nagoya,
Aichi 450-0003

Institute Onward S ōken
3-9-3, Ushikubo,
Tsuzuki-ku, Yokohama,
Kanagawa 224-0012

As of February 28, 2003

43

Head Office: 3-10-5, Nihonbashi, Chuo-ku, Tokyo 103-8239
Tel: (81) 3-3272-2317

Printed in Japan