Onward Holdings Co., LTD.

Head Office:Toda Building, 7-1, Kyobashi 1-chome,
Chuo-ku, Tokyo 104-8329, Japan
Tel: +81-3-4512-1020

http://www.onward-hd.co.jp/

Printed in Japan

Annual Report 2014

ONWARD HOLDINGS CO., LTD.

Annual Report 2014
Year Ended February 28, 2014

Onward Holdings Co., LTD.

Progress
Fiscal year 2014 presented challenges—from Japanese consumers acting in anticipation of
the consumption tax hike, to difficult conditions in China, to macro- and micro-level issues
confounding our European growth.
However, we are achieving considerable progress in our drive to become a global fashion company.
We strengthened our brand offerings in Japan, streamlined our organization, and developed new
distribution channels. In Europe, we addressed management challenges and continued to bolster
our brand positioning. In Asia, we are diversifying our geographic focus to reduce our dependence
on any one single market.
Deflation and polarization have become keywords for global fashion markets, with luxury brands on
one end and fast fashion on the other. We trust that adhering to what we believe in—offering classic
apparel that represents enduring quality for a diverse customer base—will ensure sustained growthfor Onward. Quality is what we do best. Tenacity and progress are in our name.

Contents
02	Letter to Our Shareholders
04

Key Performance Trends

06	Looking Back on Fiscal Year 201408	Looking Ahead to Fiscal Year 201510

Onward at a Glance

12

Our Core Brands

18

Our History

20

Our Business26

Our Network

28

Environmental and Social Responsibility

32

Corporate Governance34	Board of Directors, Audit & Supervisory Board Members,
and Executive Officers / Organization Chart
35

Financial Section

74

Main Subsidiaries

76

Corporate/Investor Information

77

History

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

2014-2015 Autumn/WinterJIL SANDER runway show01

Letter to
Our Shareholders
Dear Shareholders,I

Takeshi Hirouchi
Representative Director,
Chairman and President

n fiscal year 2014, ended February
28, 2014, full-year sales slightly outperformed our target due to a robust firsthalf performance in the domestic
business and the boost that the weak yen
gave to overseas results. However, profits
were below our full-year targets, as
second-half domestic sales lost pace andwe continued investing for future
growth, mainly in Europe. Sales werealso slow to pick up in the Chinese
market.
As the second year of the MediumTerm Three-Year Plan that we launchedin fiscal year 2013, results have deviatedfrom targets. We are aware of the seriousness of falling profits midway
through our plan; however, our commitment to growth and our basic strategy
remain firm. We will adjust growthstrategies across our businesses and reform our organizational structure on theway to achieving our targets for fiscal
year 2015. As ever, we placed our brands
at the core of our businesses and hope tomaximize their value by using ourstrengths as a leading apparel manufacturer to provide products of value.

Fiscal Year 2014
Abenomics (Prime Minister Shinzo
Abe’s economic reforms) brought

02

optimism for an economic recovery,leading us to increase our inventories
and press ahead with promotional campaigns for our domestic brands. Sales
grew at a healthy pace until September
2013. However, growth slowed in
October and did not recover enough tomeet our targets for the second half.
Typhoons and other poor weather
hurt performance, and consumer behavior became extremely polarized after thedecision to raise the consumption tax.
There was a rush of last-minute demandthat was concentrated on big-ticket
items and luxury brands but caused consumer appetites to wane for other products. As a result, sales at department
stores—our main distribution channel—
were exceptionally strong, but otherproducts faced tough conditions, especially our mainstay affordable high-end
women’s brands.
Overseas, Joseph succeeded in turning earnings around in Europe.
However, profits fell at Jil Sander. We
acquired Joseph in 2005, followed by
Jil Sander in 2008, and have since built
our global strategy around these twobrands. But demand for high-end apparel slumped worldwide in the wake ofthe financial crisis of 2008. In response,
we have had to make changes to growthstrategies and the structure of the brandbusiness.
We have strengthened JOSEPH’s
brand image by improving our merchandizing and investing in store

refurbishments. We have also completely
overhauled our management and manufacturing structure. This brand is now on
the path to full-fledged growth.
There is still some way to go for
JIL SANDER. We have continued toinvest in this brand, and the reappointment of the brand’s founder, Ms. Jil
Sander, as creative director showed ourcommitment to raising brand value. Ms.
Jil Sander brought to the role a founder’s passion and experience and made ahuge contribution to the brand’s value.
However, sales did not grow enough tomatch our considerable investment. She
stepped down from the role in October
2013. I feel her creativity took the brandto new heights, and now it is time for us
to grow it as a business. Our aim is topreserve the brand value that has beencultivated over the years, while driving
up profitability and growing the brandas a core business in Europe.
Profits fell in our other overseas
businesses in Asia. Sales of luxury goods
were flat due to government cutbacks in
China, meaning the recovery in retailsales was slower than we expected.
As a result of the above factors, infiscal 2014 we reported net sales of¥279.1 billion, an 8.0% rise from theprevious year. Operating income was¥9.4 billion, down 15.8%. Ordinary income was ¥12.2 billion, down 8.9%.

Fiscal Year 2015
In fiscal year 2015, we will select andconcentrate our strategies in businesses
both at home and abroad. We are targeting Group sales of ¥290.7 billion, a 4.2%
rise from the previous year. We expect
operating income of ¥12.3 billion, a30.5% rise, and ordinary income of ¥13.7
billion, a 12.2% rise.

Uncertainty remains about the future of the Japanese economy, but therecovery is continuing, and the green
shoots of higher consumer spending are
visible. Protracted deflation has given
Japanese consumers an appetite for low
prices. But consumers are leaving thismind-set behind and now want quality
products of true value. In other words,
they want “the real thing.”
In times like this, it is imperativethat we focus on creating value. We havean established network of quality material manufacturers all over the world anda dedicated in-house planning and manufacturing team. We intend to use theseadvantages as we focus on quality overquantity. We will not just create products—we will create the styles that lie attheir core. Only then can we make products with true value. This will be ourstrategy as we focus on growing profits
at four core domestic brands—
Nijyusanku, Kumikyoku, Jiyuku, andGotairiku—and three global brands—
JOSEPH, J.PRESS, and ICB.
We will also accelerate growththrough new distribution channels.
Where people shop has been changing in
the domestic market: together with thegrowth of e-commerce, we are accelerating store openings at easily accessible
train station complexes and fashion malls.
In light of these trends, we arefocusing on urban fashion malls as we
expand our new brand, Share Park.
This brand offers consumers a comfortable and sophisticated lifestyle with aquality casual clothing and accessories
collection. We are targeting 40 storesand sales of ¥6.0 billion by fiscal year
2018. We also aim to build a structurethat can take advantage of synergies between online sites and brick-and-mortar
stores, driving our e-commerce sales to¥7.0 billion in fiscal year 2015.

Restructuring our European businesses and making them profitable liesat the heart of our overseas strategy. In
March 2014, we combined GIBO’Co
and Jil Sander to establish Onward
Luxury Group S.p.A. We aim to makeour European operations, including
Joseph, more efficient and profitable byunifying business management, productplanning, and showroom functions.
We expect a significant fall in designerrelated expenses at Jil Sander in the second half of fiscal 2015. During this year,
we will work to improve profitability
while pursuing a larger scale of revenues
by increasing the number of retail andwholesale locations.
In Asia, we intend to lay thegroundwork for future growth strategies.
This will include improving profitability
in China by ending unprofitable businesses as well as opening stores in shopping centers and expanding e-commerce
operations.
I will conclude by saying that in fiscal 2015, we will place the utmost priority on achieving our full-year targets
both at home and abroad, in addition to
working on the foundations for sustainable growth.
I would like to express my gratitude
to all our shareholders for their ongoingsupport, cooperation, and trust.
August 2014

Takeshi Hirouchi
Representative Director, Chairman and President

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

Thousands of
U.S. dollars*1

Millions of yen
2010

2011

2012

2013

2014

2014

¥ million
300,000¥248,635¥244,551¥242,402¥258,370¥279,073$2,737,620

200,000

Operating income

4,384

8,929

10,954

11,193

9,422

92,431

Net income

2,188

2,723

3,529

4,503

4,659

45,703For the year
Net sales

14,058

11,207

13,181

10,13813,362131,072

Cash flows from investing activities(26)(5,152)(1,962)(10,683)(14,301)(140,288)

Cash flows from financing activities(4,890)(9,272)(7,449)(7,848)2,122

20,812

Free cash flow*2

14,032

6,055

11,219

(545)

(939)

(9,216)248,635 244,551 242,402 258,370

2010

2011

Depreciation and amortization

5,794
5,747

5,405
5,642

6,230
5,478

8,949
5,721

16,750
6,801

2012

2013

10,954 11,193

164,31366,714+8.0% (YoY)
Net Sales
Sales of core brands were favorable in the domestic business, whereas
the overseas business benefited from recovered conditions in Europe.
Net sales increased 8.0% year on year, to ¥279.1 billion, following higher
sales in both businesses.

2014

Operating Income and Operating Margin¥ million/%
12,000Capital expenditures

279,073

100,000

0

Cash flows from operating activities¥279.1 billion

Net Sales

8,929

6.0

9,422
3.4

8,000

4.0

4,384
2.0

4,000

At year-end
Cash and time deposits

34,33030,93933,192

24,677

27,376

268,549

Total assets

292,569

281,643

276,939

286,779

313,4313,074,657

Total net assets

158,164

158,745

157,303

165,372

175,029

1,716,981

0

2010

Operating Income

2011

2012

2013

2014

0

Operating Margin (right scale)

Net Income and ROE
YenU.S. dollars*1

Per share information
Net income (EPS)¥ 13.97¥   17.38¥ 22.52¥   28.71¥   29.69$ 0.29Net assets

998.981,002.34

995.11

1,043.64

1,102.99

10.82

Cash dividends

24.00

24.00

24.00

24.00

24.00

0.24

Payout ratio (%)

171.9

138.1

106.6

83.6

80.8

—

¥ million/%
6,000

6.0

4,503
3,529

4,000

2,188

4,659

2,723

2.0

2,000

0

2010

Net Income

2011

2012

2013

2014

1.4

1.7

2.3

2.8

2.8

—

Operating margin (%)

1.8

3.7

4.5

4.3

3.4

—

SGA / Sales (%)

44.2

43.7

43.0

43.9

43.2

—

¥4.7 billion+3.5% (YoY)
Net Income
Net income increased ¥156 million, or 3.5%, to ¥4.7 billion, and ROE
was unchanged at 2.8%.

0Shareholders’ equity ratio (%)

53.5

55.8

56.3

57.1

55.2

—

Total Net Assets and Shareholders’ Equity Ratio

Cash Dividends per Share and Payout Ratio¥ million/%
200,000

80

¥/%
40.00

60

30.00

100,000

40

20.00

20

10.00

0

0

175,029
158,164 158,745 157,303 165,372

150,000

Other information
17.4

16.0

17.1

17.1

20.9

—

50,000

4,008

3,910

3,993

5,208

5,224

—

0

*1. Yen amounts have been translated, for convenience only, at ¥101.94=US$1, the approximate exchange rate on February 28, 2014.
*2. Free cash flow = Cash flows from operating activities + Cash flows from investing activities

04

Operating Income
In the domestic business, both sales and profit increased in the firsthalf of the fiscal year, but the impact of second-half sales declines
weighed heavy, and full-year profits were down as a result. The overseas business also suffered from lower profit. As a result, operating
income decreased 15.8% year on year, to ¥9.4 billion.

4503

Return on equity (ROE) (%)

Number of full-time employees−15.8% (YoY)

ROE (right scale)

RatiosOverseas sales (%)

4.0

2.8

¥9.4 billion

55.2

2010

Total Net Assets

2011

2012

2013

2014

Shareholders’ Equity Ratio (right scale)

200.0

24.00

24.00

24.00

24.00

24.00
80.8

150.0
100.0
50.0

2010

2011

Cash Dividends per Share

2012

2013

2014

0

Payout Ratio (right scale)05

Looking Back on Fiscal Year 2014
Note: Figures for net sales and operating income (loss) in the Japan and Overseas segments are before eliminations.

Results Overview

The Year in Brief

In fiscal year 2014, ended February 28, 2014, net sales increased 8.0% year on year, to ¥279,073 million; operating income
decreased 15.8%, to ¥9,422 million; ordinary income declined 8.9%, to ¥12,211 million; and net income was up 3.5%, to¥4,659 million. Onward Kashiyama recorded an increase in profits, while other domestic subsidiaries and the overseas
business registered decreases in profits.

2013

T

Japan
Net Sales¥ million
300,000

216,482 217,932 213,730 227,206

233,718

200,000

100,000

0

2010

2011

2012

2013

2014

he domestic business is our mainstay business, generating 79.1% ofconsolidated sales, and the core Onward Kashiyama accounted for
54.0% of domestic sales. In light of economic recovery, aggressive sales
plans were promoted, and performance was solid during the first halfof the year. However, sales slowed down after the third quarter. In addition, yen depreciation resulted in a rise in manufacturing costs. As aresult, operating income from the domestic business decreased 7.3% year
on year, to ¥13,850 million.

Achievements
Sales of high-quality men’s suits increased, particularly for the core
brand Gotairiku
E-commerce exceeded sales targets and the sales of the directly managed
e-commerce website Onward Crosset grew to ¥5.4 billion
Future Tasks
Responding to increased costs resulting from yen depreciation, higher
factory wages, and rising material prices

Net Sales¥ million
75,00050,00061,90941,500 43,955

46,84525,000

0

2010

2011

2012

2013

2014

oseph recorded profits on a full-year basis as planned. Meanwhile,
Jil Sander registered an expansion in losses, reflecting delayed
growth in JIL SANDER Navy sales that resulted in a failure to absorb
rising designer-related expenses and ongoing investment outlays. The
Asian business experienced declines in both revenues and income, following decreased sales through department stores in China. In the U.S.
business, upfront investments for the renovation of stores resulted in an
operating loss. As a result of the above, the overseas business recorded
an operating loss of ¥941 million, down ¥1,194 million year on year.
Achievements
Full-year profits recorded by Joseph
JIL SANDER Navy European flagship stores opened in London and Milan
Future Tasks
Achieving profitability in the Jil Sander businessExpanding non-department store sales channels in China

06

August—September

Charles & Keith Japan

Jil SanderCharles & Keith
Launched in JapanJIL SANDER Navy
Flagship StoresOpened in London
and Milan

Onward has created an alliancewith Charles & Keith, a major
Singaporean retailer of women’s
shoes and accessories, to bringthis brand to Japanese shores.

JIL SANDER Navy’s first
European flagship stores appeared on London’s Draycott
Avenue and Milan’s Via
Sant’Andrea street.

October

October

Onward Kashiyama

Onward Kashiyama

Kabuki Actor Quintet
Advertise Gotairiku

Missoni Appears
at Mercedes-Benz
Fashion Week Tokyo

A new advertising campaign for
the Gotairiku menswear brand
was launched, featuring a quintet
of Kabuki actors as spokesmen.

Missoni participated in
Mercedes-Benz Fashion Week
TOKYO’s 2014 Spring/Summer
opening show.

J

Overseas45,530April

December

2014

February

Onward Kashiyama

JosephModeling Experience
for Children
at Theme Park Kandu

Joseph Makes First
Appearance at London
Fashion Week Autumn/
Winter 2014 Show

At the work-experience theme
park Kandu, Onward Kashiyama
provides the “venue” of fashion
model, giving children the
chance to experience modeling.

Celebrating the 25th anniversaryof its London flagship store,
Joseph made its first appearance at London Fashion Week in
the Autumn/Winter 2014 show.

07

Looking Ahead to Fiscal Year 2015
Note: Figures for net sales and operating income (loss) in the Japan and Overseas segments are before eliminations.

Japan
I

n fiscal year 2015, ending February
28, 2015, sales in the domestic business are forecast to increase 6.5% year on
year, to ¥248,917 million, and operating
income is projected to rise 19.4%, to¥16,530 million. We expect earnings toincrease year on year during the second
half of fiscal year 2015.
Onward Kashiyama

Of these amounts, at Onward
Kashiyama we anticipate that sales will
increase 2.4%, to ¥163,500 million, andoperating income will rise 10.9%, to¥12,800 million. By sales channel, we
forecast that department store sales willedge up 1.6%, and new distribution
channel sales will rise 14.2%. In our
mainstay department store sales channel,
we expect to record our third consecutive year of higher sales, and we plan toexpand total sales floor space for the firsttime in seven years.
In fiscal year 2015, expanding new
distribution channels will be at the center of growth strategies. Specific measures will include accelerating store
openings in shopping centers and fashion malls, cultivating the new SHAREPARK brand, and strengthening brandpromotion activities for the any SiS
brand, the flagship brand for new distribution channels.
For e-commerce sales, we are projecting a 30% year-on-year increase in
full-year sales, to ¥7,000 million.

08

OverseasThe overseas business is expected tosee sales decline 1.5% year on year,to ¥60,988 million, and operating income
to improve to ¥1,374 million, comparedwith the operating loss of ¥941 million
recorded in fiscal year 2014.

Other Domestic Subsidiaries

Other domestic subsidiaries are expected
to record a sales increase of 15.4% year
on year, to ¥85,417 million, and a rise inoperating income of 61.7%, to ¥3,730
million.
Onward Trading will approach newcustomers with the aim of capturing
large-scale orders in its uniform andsales promotion businesses. At thesame time, the company will strengthen
production and material procurement
efforts in the ASEAN region to improveits gross profit margin.
Island will work to attract a greaternumber of customers by strengthening
its lineup of accessories and fashion
jewelry.
Chacott plans to increase store
openings in its new innerwear businesswhile opening stores in train station
complexes.
The Birz Group will concentrate
management resources on core brands
while eliminating unprofitable businesses to decrease operating loss.

EuropeSHARE PARK LaLaport TOKYO-BAY store

any SiS 2014 Autumn/Winter advertising campaign

Chut! INTIMATESIn Europe, sales are forecast to move up
1.6% year on year, to ¥48,823 million,
and operating income is expected toamount to ¥1,438 million, comparedwith an operating loss of ¥235 million in
the fiscal year under review. Onward
Luxury Group, formed through a merger of the GIBO’Co Group and the Jil
Sander Group, is expected to experiencea ¥1,422 million improvement in operating income, compared with the operating
loss recorded in the fiscal year under review when combining the results of its
predecessors. Meanwhile, operating income for Joseph will rise ¥169 million.
Onward Luxury Group is forecast
to see increased orders for GIBO’s
licensed brands. At the same time, retail
operations will be strengthened withthe opening of directly managed JIL
SANDER Navy stores in Europe andNorth America. In addition, we plan toboost efficiency by integrating management, product planning, and showroom
functions. Furthermore, designer-related
costs for JIL SANDER products are
forecast to decline, and the gross profit
margin for these products is therefore
expected to improve during the second
half of fiscal year 2015. Meanwhile, thegross profit margin is expected to
improve for Joseph following higher
sales of full-priced items. In addition,
Joseph will strengthen e-commence
sales and expand retail operations inNorth America.

Asia

Sales in Asia are forecast to decrease
15.2% year on year, to ¥7,377 million, andoperating income will total ¥68 million,
compared with the operating loss of¥224 million recorded in fiscal year 2014.
In China, we will close unprofitable
stores, while improving the profitabilityof existing stores through the revision oftransaction conditions. In the ASEAN
region, we will develop manufacturingbases with the aim of lowering production costs.

2014-2015 Autumn/Winter JIL SANDER Navy

United States

In the United States, sales are forecast
to decrease 7.1% year on year, to ¥4,788
million, and operating loss is expected tototal ¥132 million, compared with operating loss of ¥482 million in the previous
fiscal year.
In North American brand businesses, we will continue to invest in the reorganization of the ICB and J.PRESS
businesses as was done in fiscal year
2014.
In the resort business (Guam), weare aiming to attract tourists from Asiaand the United States and will make inroads into the local market. In this manner, we hope to offset the impacts of the
anticipated decline in tourism fromJapan due to yen depreciation.

JOSEPH Madison Avenue store

2014-2015 Autumn/Winter ICB runway show, in
New York09

Onward at a Glance
Sales Breakdown
Sales by Business Segment

Apparel Business
Sales by Clothing Type

Other Business(service / resort)

OthersApparel Business

93.9%

6.1%

Sales by Geographic
Segment
Men’s

15.9%

19.4%

Children’s

Asia

North America

2.9%

1.7%

Europe

2.6%

16.3%

Japan

79.1%

Other Japan

25.1%

Onward Kashiyama

Women’s

62.1%

Onward Kashiyama
Sales by Channel
Specialty Stores

2.2%

54.0%

Onward Kashiyama
Sales by Brand
Others

1.8%

OthersCore Brands*2

Main New
Distribution
ChannelBrandsOther Main
Department
Store Brands

27.0%

35.8%

New
Distribution
Channels*1

20.9%(of whiche-commerceequals 3.4%)

Department Store

75.1%

13.0%

24.2%

*1. C
 hannels other than department stores (including shopping centers, directly managed stores, and e-commerce)*2. Nijyusanku, Kumikyoku, ICB, and Jiyuku

This is who we areMain Subsidiaries
Japan
Company NameCore BusinessCore Brands / Items

Onward Kashiyama

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

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

Manufacture and sale of uniforms and sales promotion goods

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

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

Chacott, Freed of LondonnCreative Yoko

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

PET PARADISE, Mother GardennIslandManufacture and sale of women’s clothing and accessories

Grace ContinentalnOverseas
Company Name
n

n

10

Core BusinessCore Brands / Items

 nward Luxury
O
Group

OEM, production, and wholesale of European and U.S. brands

Designer clothing, knitwear, bags, shoes,etc., for luxury brands

Manufacture and sale of luxury men’s and women’s clothing and accessories

JIL SANDER, JIL SANDER Navy

JosephManufacture and sale of men’s and women’s clothing andaccessories as well as the operation of multi-brand stores

JOSEPH11

Launched

1993

Annual Sales¥27.3 billion
Number of StoresOver 200
12

Nijyusanku is the leading brand of Onward Kashiyama. The core target
market of the brand is working women in their 30s and 40s. The brandis available in department stores across the country, and the flagshipstore, Nijyusanku GINZA, was opened in 2011 in the Ginza district ofTokyo.

Launched

1992

Annual Sales¥11.5 billion
Number of StoresOver 150 stores

Kumikyoku is the second-largest brand of Onward Kashiyama. Basedon the concept of “standard clothing that does not stand still,” thebrand is targeted toward working women aged around 30 years old.
The brand is available in department stores across the country.

13

Launched

1995

Annual Sales¥9.1 billion
Number of Stores

100 stores
14

One of Onward Kashiyama’s original brands, ICB is an international
concept brand that targets sophisticated, urban working women in their30s. The brand was relaunched in the U.S. market in 2012 with the ICB
NY Collection, designed by Prabal Gurung.

Launched

2000

Annual Sales¥9.3 billion
Number of Stores

160 stores

Jiyuku is one of the original Onward Kashiyama brands with a coretarget market of active women aged between 35 and 45 years old. Jiyuku
offers modern clothing, perfect for any occasion, and most of thebrand’s stores are located in department stores.

15

Launched

1972

Annual Sales¥11.8 billion
Number of Stores

130 stores
16

The JOSEPH brand grew from a multi-brand store owned by Joseph
Ettedgui, in London. The original label JOSEPH was launched under
the concept of “SLICK&CHIC,” and the brand was acquired by
Onward in 2005. The JOSEPH brand made its first appearance atLondon Fashion Week in the Autumn/Winter 2014 show.

Launched

1973

Annual Sales¥13.5 billion
Number of Stores

100 stores

Founded by Ms. Jil Sander in Germany, JIL SANDER is a luxury
brand that was acquired by Onward in 2008 and is featured in Milan
Fashion Week. The new casual line JIL SANDER Navy was launchedin 2011. In 2014, the brand named Italian designer Rodolfo Paglialunga
as its new creative director.

17Our History
1950s–1960s

1970s–1980s

1990s–2000

2000–Today

Onward begins production and sales of ready-made menswear
in the 1950s. Taking its cue from apparel manufacturing in the
United States, the Company adopts an assembly-line methodand Hoffman steam press machines, and these efforts result in
substantial improvements in productivity and the quality ofready-made clothing. Together with this success, the Company
develops a business format for transactions between apparelcompanies and department stores, which is now widely usedin the business operations of department stores. In the 1960s,
driven by Japan’s economic expansion, Onward grows rapidly
to become a leading menswear manufacturer in Japan.

In keeping a step ahead of other Japanese apparel manufacturers, during the 1970s Onward establishes subsidiaries in New
York (1972), Paris (1973), and Milan (1974). By establishing local subsidiaries in three major fashion cities over such a shortperiod of time, Onward succeeded in creating the foundations
for its overseas business, enabling it to collect the most updated
information on global fashion trends. In 1977, after an interview with up-and-coming designer Jean-Paul Gaultier, then24, the Company decides to sponsor his brand creation. His
first fashion show is held in Paris in 1978 with the support of
the Company.

The womenswear business expands dramatically in 1990s withthe launch of core brands, starting with Kumikyoku in 1992 andfollowed by Nijyusanku, ICB, and Jiyuku. The luxury brandboom driven by Japan’s bubble economy comes to an end in the
1990s, and consumers start to look for more simple and practical clothing. They are able to find this style in Japanese brands.
Department stores begin expanding womenswear floor spaces
and emphasizing new brands from Japanese makers. Thanks tothis trend, Onward Kashiyama’s store numbers grow rapidly
after the new brand’s launch, and this impressive growth will
form the foundations for future advancement.

After the turn of the century, Onward accelerates its international business. Major advancements include its entry into theChinese market and the establishment of production platforms in Europe. The transition to a holding company system
is made in 2007. At the same time, the Company successfully
draws strong global brands under the Group’s umbrella,acquiring JOSEPH in 2005 and JIL SANDER in 2008. In
2011, Akinori Baba becomes president of Onward Kashiyama,
and this change in leadership at the Group’s core company
signifies the start of our next growth phase. By increasing its
global competitiveness, Onward is aggressively pursuing
growth in both domestic and overseas operations.

Ready-Made Clothing
Revolution

Overseas
Expansion

Launch ofCore Brands

To the Next
Growth Phase

400,000

Net Sales¥ 290.7 billion

1927
Founding¥ billion
30,000

Onward Kashiyama begins as Kashiyama
Trading, established in Osaka by thefounder, Junzo Kashiyama.

1927

1960

20,00010,000

1970

1980

1990

2000

4

2010

8

10

9

11

2015

0

(Forecast)

1

2

3

5

6

1 Company founder Junzo Kashiyama 2 Grading machine modifies and cuts basic sewing patterns 3 Jean-Paul Gaultier’s debut Paris fashion
show, 1978 4 Jean-Paul Gaultier 5 Onward Kashiyama’s U.S. offices 6 Bus Stop store on Boulevard Saint-Germain, in Paris

18

7
7
10

12

Launches Kumikyoku brand, 1992 8 Launches Nijyusanku brand, 1993 9 Launches ICB (International Concept Brand), 1995
Acquires Joseph Group, 2005 11 Acquires Jil Sander Group, 2008 12 Jil Sander’s new creative director, Rodolfo Paglialunga

19Our BusinessOnward Research and Development InstituteEstablished in 1991, the Onward Research and Development
Institute is the Group’s proprietary center for comprehensive
research on new manufacturing technologies and product developments. The Technology Development Center carries out
numerous tests and trials to achieve the highest possible levelof quality control. For example, fabric is tested for elasticity, tearresistance, friction durability, stretch recovery, and wrinkle resistance. The Onward Advanced Technology Research Center
works together with 11 leading companies from the apparel industry, including raw material suppliers and garment material
suppliers, to develop new products. The Professional
Development Center is responsible for training and humanresource development.

—JapanValue Chain

Product Flow (primarily used by Onward Kashiyama)

6–9

4Months Before

Exhibition

Product Planning

Buyers, press members,
and store managers areinvited to exhibitions
displaying new products.
Alterations are made tosamples based on feedback
from buyers and store
managers.

Quality control teams inspect samples to determine if
any issues exist with the fabric or manufacturing processes to be used. At the same time, production control teams
decide which factories will be used for mass production
as well as establish production schedules and order ancillary materials.

5

Research

20

Months Before

Concept drawings are
created, and the design,materials, price range, andseasonal theme are decided
based on a considerationof fashion trends, fabrics
information, and otherfactors.

Year Before
Start of Sales

Product development
starts with our designers
and merchandisers actually
visiting fashion capitals
around the world to research the latest fashion
trends. They also attend
fabric exhibitions to seekout new, high-quality
fabrics.

3

DesignPlanning and Design
1Months Before

Months Before

SampleCreation©Première Vision

Samples are made basedon concept drawings created by designers to visualize
how the design and thematerials will actuallyappear.

3–5

Production
2

Months Before

1–2Months Before

Weeks Before

Selection

Production

Final Check

From among the samples,the items to be commercialized are selected, andproduction numbers are
decided through coordination with sales teams.

Products are manufactured
while production control
teams and factories monitor
delivery schedules and production processes.

Finished products are delivered to distribution warehouses. Stitching and otherproduct details are inspected once again before
delivery.

Planning and Production Teams

Production Network

Onward Kashiyama has approximately 600 professionals in its
planning and production control teams. With these strong
teams in place, the Company assigns designers, patternmakers,
and merchandisers to each brand. The production control teams
take care of other aspects of production, ranging from factory
selection, technical guidance, and fabric and other material
sourcing to quality control.

Of Onward Kashiyama’s products, 79% are manufactured in cooperation with trading companies or delegated to factories inJapan or overseas. Recently, however, we have been establishing
our own production network by strengthening partnerships withhighly capable Japanese factories and expanding our low-cost
production and sourcing network in China and Vietnam.
Currently, about 72% of Onward Kashiyama’s products are manufactured in China, with 15% made in Japan, and 13% is produced in the ASEAN and other countries. We are expanding
procurement and production in the ASEAN region to ensurethat we can always manufacture products in the most suitablelocation.

Production Areas
China

72%

Japan

15%

ASEAN and other countries

13%

21

Our Business—Japan

Sales Channels
Department Store Transactions
The majority of transactions between department stores andapparel manufacturers are made under the consignment system,a transaction scheme indigenous to Japan with the following
characteristics.
1

 e apparel company owns the inventory and some store fixturesThand provides their own sales personnel. When a product is sold, itis then considered to have been procured by the department store.

2

 e apparel company pays an agreed percentage of its sales to theThdepartment store as a tenant fee. Rent and other costs generally do
not apply.

3

 e apparel company records a sale as the amount of the wholesaleTh
price of the item sold less the margin paid to the department store.

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

Department Stores

Nijyusanku

Department stores are Onward Kashiyama’s main sales channel,
with over 3,000 shops nationwide. Our Nijyusanku brand is thelargest department store brand by revenue in Japan—sold in
more than 200 such shops. We have been strategically relocating and redesigning our shops to maximize individual shop sales
and operational efficiency.
Kumikyoku

Delivery

Sales

1

Sales

Week Before

Delivery

New Distribution Channels
The term “new distribution channels” as used by the Onward Group refers to retail channels other than department stores. These channels are a key focus, even though they only account for 21% of Onward Kashiyama’s sales. We aim to expand the number of the storesin the following shopping areas.

Products are sold at stores and online.

Products are transported
from warehouses to storesbased on the instructionsof sales managers anddistributors.

Directly Managed Stores

Train Station Complexes / Fashion Malls

Shopping Centers

E-Commerce

These brand flagship stores double as brand billboards for our cutting-edge products.

We offer fashionable and trendy products through this sales channel, which is among
the fastest growing in Japan.

In-house Transportation
Domestic subsidiary Across Transport specializes in the apparellogistics and transportation business. The company offers a totallogistics service program that includes warehouse management,
transportation, and other logistics functions designed especiallyfor apparel products and accessories. These services are provided
for Onward Kashiyama and other domestic brands.

These centers serve as a sales channel for Onward Kashiyama’s brands, such as
any FAM, any SiS, and the new SHARE PARK.

22

We conduct e-commerce sales of Group brands through our directly managed e-commerce website Onward Crosset and other domestic and overseas online shopping sites.

23

Our Business—Overseas

EuropeEstablished Onward
Luxury GroupOur European business consists of three major subsidiaries:
GIBO’Co, Jil Sander, and Joseph. In March 2014, we merged
the GIBO’Co and the Jil Sander Group to establish Onward
Luxury Group. As we progress into the future, we will merge
the Joseph Group into Onward Luxury Group and pursue improved managerial efficiency and higher profitability by reorganizing and integrating European operations.
JIL SANDER Taipei store

Jil Sander
Jil Sander offers the luxury menswear and womenswear and accessories from the JIL SANDER and JIL SANDER Navy brands andundertakes manufacturing. Jil Sander has approximately 100 stores
mainly in Europe, the United States, and Asia and wholesales
throughout the world. Going forward, Jil Sander will accelerate thedevelopment of its JIL SANDER Navy brand, primarily through directly managed stores, while expanding its network of sales locationsin the Middle East and Asia.

Asia
Expanding rosebullet as
a Strategic Brand in Asia
Beginning with the establishment of its first subsidiary inShanghai in 1995, the Onward Group has continued to advanceits Asian operations. Today, we are operating 266 stores for 12
brands, including Onward Kashiyama’s core brands, in department stores and directly managed stores in China, Hong Kong,
Korea, Taiwan, Singapore, Thailand, and Vietnam.
In recent years, rosebullet has been winning popularity
among young women and has been positioned as a strategic
brand. We are accelerating large-scale store openings in shopping
centers and fashion malls in China and other Asian countries.
Furthermore, Asia is rising in importance as a production
site. To supplement existing partnerships with Chinese manufacturers, we aim to expand our manufacturing platform in
ASEAN countries, such as Vietnam. With its sights set on capital alliances and the acquisition of manufacturing capacity, theOnward Group is determined to build a profitable manufacturing platform in Asia with high-quality output, superior material
procurement capabilities, and fast delivery time.

ICB Shanghai store

UnitedStatesErika knitwear factory

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

rosebullet Edit Tokyo store, in Singapore

J.PRESS New Haven store

Pursuing Further Growth
in Retail Businesses
U.S. operations include retail businesses in North America as
well as hotels and golf course management in Guam.
J.PRESS, acquired in 1986, is a well-loved brand among Ivy
Leaguers, with four directly managed stores in North America. In
2013, we launched the new J.PRESS York Street line targetingthe youth market, and we are currently selling this brand throughdirectly managed stores as well as shops in department stores.
In 2012, a project to relaunch the ICB brand in North
America began with the appointment of up-and-coming New
York-based designer Prabal Gurung as chief designer. The new
ICB NY Collection is now available through retail, wholesale,and e-commerce sales channels.
Going forward, looking to expand retail operations in the
United States, we will conduct investments from a mediumterm perspective while steadily advancing business expansion
measures.

JOSEPH Saint-Germain store

JosephWith its base in London, Joseph manages 130 stores inmajor cities throughout the world. In recent years, flagship stores in London and Paris have been renovated toenhance JOSEPH’s brand appeal. To strengthen the
global competitiveness of this brand, Joseph is improving
its product mix by enhancing accessory and menswear
lineups, while exploring new markets in Europe,
North America, Asia, and the Middle East and also
strengthening e-commerce operations.

2014-2015 Autumn/Winter ICB runway show, in New York

24

25

Our Network
England

China

Japan

LondonShanghaiTokyo

Joseph Ltd.
n Freed of London Ltd.
nFranceParis

		n Horloge Saint Benoit S.A.S.

Caen

 nward Fashion Trading (China)
OCo., Ltd.
n Onward Fashion Trading (Shanghai)Co., Ltd.
n	Shanghai Across Apparel Processing
Co., Ltd.
n

DalianOnward Fashion Trading (Dalian)Co., Ltd.

n n 		 Attitude Diffusion S.A.
n

Taicangn n aicang Onward High Fashion
TCo., Ltd.

Nantong

Europe	Nantong Haimeng Garments Co., Ltd.

n nHong Kongn

Number of Stores

4,300 storesin 21 countries and regions

	Onward Holdings Co., Ltd.
	Onward Kashiyama Co., Ltd.
n	Onward Trading Co., Ltd.
n	Chacott Co., Ltd.
n	Bus Stop Co., Ltd.
n	Creative Yoko Co., Ltd.
n	Island Co., Ltd.
n	Birz Association Ltd.
n	Charles & Keith Japan Co., Ltd.
n	Onward Global Fashion Co., Ltd.
n	Intimates Co., Ltd.
n	Sakula Inc.
n	Booklet Co., Ltd.
n	Onward Creative Center Co., Ltd.
n	Onward Life Design Network Inc.
n	Across Transport Co., Ltd.,and 19 additional companiesnn

The Onward Group engages in business activities through a network that is made up of 81 subsidiaries and 23 affiliates, for a total of 105 Group companies. The Group operates in the four
geographic segments of Japan, Europe, Asia, and the United States.

	Onward Kashiyama Hong Kong Ltd.

Japan
United States
Italy

Vietnam

Milan

Ho Chi Minh City

Onward Italia S.p.A.
n Onward Luxury Group S.p.A.
( JIL SANDER)nFlorence

 nward Luxury Group S.p.A. (Apparel)On Frassineti s.r.l.

nVeronanErika s.r.l.

Venicen

Onward Luxury Group S.p.A. (Shoes)

Spain
MadridnGallardo Dance S.L.

	Onward Kashiyama Vietnam Ltd.
n n	Yasuda (Vietnam) Co., Ltd.
n n	Showa (Vietnam) Co., Ltd.
n

Hanoi
n

Vina Birz Co., Ltd.

Singapore

U.S.A.

Asia

New York

J. Press, Inc.
Onward Retail L.L.C.
n Freed U.S.A. Inc.
n
n

Guam

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

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

Korea
Seoul
n
n

 nward Kashiyama Korea Co., Ltd.
O
Chacott Korea Co., Ltd.

ApparelOthern Joint Venture Factory
n
n

26

27

Environmental and Social Responsibility

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

Onward Green Campaign

1,290,000

240,000

Customers That DonatedItems Collected

Environmental Concept
Thinking of the Earth. Clothing Its People.
The world is evolving faster than ever with fashions and trends changing ata brisk pace. In recent years, we have seen an increase in products touting low
prices, and perhaps many of us feel, more than before, that clothing is becoming disposable. The disposal of clothing as trends change is slowly placing an
increasing burden on the environment and may one day significantly affectour lives. The original role of fashion was to enrich and color people’s lives

The Onward Green Campaign is designed tocreate an apparel life-cycle circulation system. In
comparison with other consumables, the recycling of textile goods is relatively undeveloped.
Onward Kashiyama launched the Onward Green Campaign in2009 with the objective of encouraging the circulation of apparel to promote the efficient utilization of limited resources and toensure that our precious environment still exists for future generations to enjoy. Onward Kashiyama collects men’s, women’s,
and children’s clothing as well as sportswear and other items
sold by Onward Kashiyama at Onward Green Campaign collection booths in department stores.

These items are recycled and reused to the greatest extent
possible with the aim of eliminating waste. Certain items are recycled through use as solid fuel. For other garments, we sort andcollect usable materials to create blankets, work gloves, and other recycled textile products that contribute to the organization’senvironmental and social contribution initiatives. In addition, a
portion of collected clothing items are sold at Onward Reuse
Park, and the proceeds from these sales are used to fund environmental and social contribution initiatives.

>>> For details regarding Onward Reuse Park, please refer to page 31.

while promoting and inspiring prosperity. Fashion should not be somethingthat takes away from our planet’s natural environment, nor should it detractfrom the infinite possibilities of our future.

Recycling Process

Customers

Onward remains committed to taking on the challenge of achieving harmo-

Used items

ny with the planet and its people through its corporate activities and a range of

products that include fashion items, as it carries out its role as a leading organization of the apparel industry that delivers fashion on a global scale.

Donated at a dedicated collection booths in department stores
Recycled and reused to the greatest extent possible with the aim of eliminating waste

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

28

Onward Recycling Partners
Reuse

Sold at Onward Reuse Park

Proceeds

RecycleMaterials sorted and collected
for use in textile products

Blankets

Disposal

Buttons and other non-reusable
and unrecyclable articles
disposed ofWork gloves

Solid fuelUsed in environmental and social contribution initiatives

29

Other Activities
Tie-Up with the Japanese Red Cross Society
Under the Onward Green Campaign, and utilizing the extensive Red Cross network that reaches 186 countries throughout
the world, Onward cooperates with the Japanese Red Cross
Society in distributing blankets and work gloves to areas thathave been affected by, and are in the process of recovery from,

Onward Reuse Park—Used Onward Products Offered at Discounted Prices

a natural disaster. Work gloves have also been donated domestically to individuals involved in forest preservation efforts inaddition to being distributed and utilized as a part of anawareness-building campaign.

Refugee camp:

Impoverished area:

Onward Holdings opened Onward Reuse Park in Tokyo as base for conveying the Group’s
environmental and social contribution initiatives. In addition, Onward Reuse Park sells
used Onward products at discounted prices, and the proceeds from these sales are used tofund further environmental and social contribution initiatives. This store was the first in theindustry to employ this model.
With three floors and floor space of approximately 380 square meters, Onward Reuse
Park features a lineup of used men’s, women’s, and children’s clothing and other items, allsold at discounted prices. All proceeds from sales at this store are used to fund the Group’s
environmental and social contribution initiatives. Also, the hangers, chairs, counters, andstationery used in this store are made from thinned wood from Kochi Prefecture, while
shopping bags are created from aged rice. In this manner, Onward Reuse Park is a truly
eco-friendly store.

Donated to refugees, orphans, othersocially marginalized people, andcommunities in the city of Almaty

Donated to senior citizens and children living in social welfare facilities,
where they are forced to face harsh
winters each year without sufficient
protection against the cold

KIBOU311 Participation in Cherry Tree
Planting Event

Support Program Using Recycled Blankets
1

Kazakhstan

43,300 blankets
Second support program:February 20111

4,000 blankets
Sixth support program:
October 2013

2
5

3

7

4
6

2

4,000 blankets

Seventh support program: October 2014

Mongolia

6

Bangladesh

Refugee camp:

Donated to the area referred to locally as “dzud” that is periodically afflicted with severe snow damage (It is notuncommon for people living in impoverished areas to share one blanket
during this period.)

Donated to a refugee camp in the
Cox’s Bazar district of Chittagong, insoutheastern Bangladesh, and to a
hospital that provides medical care in
the areas

3,000 blankets
First support program:May 2010

China

7

Regions heavily impacted by
the 2008 Sichuan earthquake:
Donated to a school and other facilities located in the mountainous regions of Sichuan Province that wereaffected by the earthquake in 2008

Japan

Regions heavily impacted by
the Great East Japan
Earthquake:

2,000 blankets

30

Impoverished area:

Impoverished area:

3

Fourth support program:March 2012

Myanmar52,000 blankets
Fifth support program:
September 2012

Nepal

Third support program:
September 2011

1,000 blankets

Donated to 31 community centers in
Miyagi Prefecture that were affectedby the Great East Japan Earthquake

The third annual KIBOU311 cherry tree
planting event was held in the town of
Minamisanriku, in Miyagi Prefecture, during fiscal year 2014. Onward Kashiyama has
participated in this event for three consecutive years, a tradition that began in 2012.
KIBOU311 is a Great East Japan
Earthquake relief project promoted on a
global scale by DORMEUIL, a French manufacturer of luxury
men’s apparel. Donations collected through this project are provided to LOOM NIPPON, which uses these donations in turnto fund cherry tree planting events.

Reduced Environmental Footprint
through Low-Emission Vehicles
Across Transport is conducting a number of initiatives to reduce its environmental footprint. These activities include
the optimization of vehicle allocationand transport routes; promotion of andeducation regarding environmentally friendly driving throughthe use of digital tachographs; promotion of the cessation of vehicle idling; and the introduction of CNG vehicles, hybrid vehicles, and other low-emission vehicles.

Onward Reuse Park

The Bio Tech Jacket—Ecological-Wear
That Returns to the Earth
Since 2010, Onward Kashiyama has beenoffering the Bio Tech Jacket, an ecologicalproduct that returns to the earth. This item
is highly fashionable and yet is made of
only biodegradable materials, which meansthat it will be broken down by natural bacteria and returned to the soil after disposal.

Forest Preservation Initiatives at
Tosayama Onward Rainbow Forest
In 2008, Onward entered into a partnership agreement with thecity of Kochi and the Kochi City
Forestry Association and has been participating in forest preservation efforts at
Tosayama Onward Rainbow Forest, aforest approximately 45 hectares in sizethat is located in Kochi Prefecture. With the cooperation of local communities, we are conducting a forest regeneration program that includes forest thinning twice a year.

31

Corporate Governance

Our Basic Approach to
Corporate Governance
The Onward Group believes that responding promptly tochanges in its business environment and ensuring a level of corporate governance that enhances the health, fairness, transparency, and compliance of its management and operations is oneof its important responsibilities and integral to increasing corporate and shareholder value. On this basis, every effort is being
made to build trusting relationships with all stakeholders, including shareholders, and to strengthen the Group’s management
systems as well as the effectiveness of the Annual General
Meeting, the Board of Directors, and the Audit & Supervisory
Board. In this manner, the Onward Group is working diligently
to bolster its corporate governance.

Directors and the Board of Directors
In order to further clarify the management responsibilities of
directors, increase the ability and opportunity to gain the confidence of shareholders, and to put in place an optimal and agile
management framework that is capable of responding to changes in the business environment in a timely manner, theCompany has set the term of directors at one year. In addition,
two of the seven-member Board of Directors are appointed
from outside the Company and selected on the basis of theirhigh level of independence. This initiative is aimed at reinforcing the supervisory function of the Board.

Reasons for the Appointmentof Outside Directors
Name

Reasons for Appointment as an Outside Director

Hachiro Honjo

We are expecting Mr. Honjo to use his business andmanagement experience as a corporate officer to enhance the Company’s management, based on his broad
perspective, free from the industry to which theCompany belongs.

Yoshihide Nakamura

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

Audit & Supervisory Board Members
and the Audit & Supervisory Board
The Company has adopted an Audit & Supervisory Board
structure, under which the Company has appointed four audit
and supervisory board members, two of whom are outside audit
and supervisory board members. Audit and supervisory board
members have also assigned staff to assist them in carrying out
their duties and to strengthen their supervisory function. Eachmember audits and monitors the performance of directors; their32

responsibilities include reviewing documentation of important
decisions and attending important meetings, such as the Boardof Directors’ meetings, Group financial account settlement
meetings, and Group Business Management meetings, in accordance with audit policies and the roles delegated by the Audit& Supervisory Board. In addition, the Internal Control Divisionand each department are under periodic monitoring in an effort
to establish an effective and lawful corporate structure.
The Audit & Supervisory Board meets with the Representative
Director and the Accounting Auditor on a regular basis to shareand exchange information and opinions. This initiative is also
designed to ensure that a structure is in place that is capable ofconducting audits in an effective and lawful manner. Moreover,
the Audit & Supervisory Board receives reports from eachmember in accordance with audit policies and the roles delegated by the Board. Deliberations are undertaken and resolutions
made based on this information as required.

Corporate Governance Structure
General Meeting of Shareholders

Audit & Supervisory Board
Board of Directors

ReportSupervise

Onward Group
Compliance
Committee

Standing Audit &Supervisory Board Members

ReportReportAudit

Internal Control
DivisionGroup Strategy Meeting

Outside Audit &Supervisory Board Members

Coordinate

Group Companies

Supervise

Audit

Accounting Audit

Accounting Auditor

Reasons for the Appointment of Outside
Audit & Supervisory Board Members
Name

Reasons for Appointment as an Outside
Audit & Supervisory Board Member

Jotaro Yabe

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

Katsuaki Ohashi

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

Business Execution Structure
The Onward Group has adopted a holding company structurethat allows the Company’s Board of Directors to engage in strategic decision making and supervise operating companies. At
the same time, the Group has separated the supervisory and execution functions in order to clarify the responsibilities and authority of each operating company and to facilitate accelerated
strategic decision making.
When matters that require urgent attention arise, the Boardof Directors convenes as necessary. In this manner, the Onward
Group has a system in place that ensures a swift and appropriate
response to rapid changes in the business environment.
Moreover, the Group has introduced an executive officer
system with the aim of clarifying other management decisionmaking and business execution functions. In order to facilitateagile decision making as a corporate group, the Onward Group
Strategy Meeting and Group Business Management Meeting
have been established. This is where management strategies andthe important management matters of operating companies aredebated and where the state of operations is reviewed.
The Onward Group also has advisory contracts with a number of attorneys to receive legal advice.

Directors and Audit & Supervisory
Board Members Compensation

Compliance Structure

Compensation paid to directors, excluding outside directors,
comprises a basic compensation component, bonuses, and stock
options.
The total amounts of compensation paid by officer classification,
the total amounts of compensation paid by type of compensation, and details of the number of eligible officers are presented
as follows.
OfficerClassification

Total Amount ofCompensation
Paid(Millions of Yen)

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

Bonus

Stock Options

Number of Eligible
Officers

Directors(excluding outside directors)

406

234

106

66

5

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

36

36

—

—

3

Outside Officers

40

40

—

—

4

Payments of compensation to persons that exceed ¥100
million are disclosed on an individual basis and are presented
as follows.
Total amount of consolidated compensation by officer
Name (By Officer
Classification)

Takeshi Hirouchi(Director)

Total Amount ofConsolidated
Compensation
Paid (Millions of
Yen)

163

Total Amount of Consolidated Compensation Paid by
Type of Compensation (Millions of Yen)
Company
Classification

Filing company

Basic Compensation Bonus

94

Stock Options

42

26

Recognizing that society as a whole is placing greater emphasis
on efforts aimed at upgrading and expanding compliance structures, the Onward Group has positioned compliance as an important issue for management. In specific terms, the Grouppublished the Compliance Manual to clearly outline the direction of compliance activities, taking into consideration ethicalconcerns and social norms. Established by the Board of
Directors, the Onward Group Compliance Committee takes thelead in conducting continuing educational activities, including
in-house training, as a part of efforts to ensure widespread awareness and understanding. Moreover, the Compliance Division has
been positioned to oversee compliance, with energies channeledtoward building and promoting an Onward Group compliancestructure that is underpinned by the Compliance Manual, whichis in turn based on the Onward Compliance Regulations.

Risk Management Structure
The risk management structure has been developed and is operated in line with the Onward Risk Management Regulations.
The Compliance Division is responsible for the development ofa risk management structure, the identification of issues, and thedevelopment of risk management related plans. The division reports to the Board of Directors and works to establish an effective structure to address natural disaster risk, information
systems risk, and other risks that may severely impact the continuation of business. Additionally, the Board of Directors
works in cooperation with external specialists as the situation
requires in order to respond appropriately to such risks.

33

Board of Directors, Audit & Supervisory Board
Members, and Executive Officers
As of September 1, 2014

Board of Directors

Audit & Supervisory
Board Members

Executive Officers

Representative Director
Chairman and President

Standing Audit & Supervisory
Board Members

Senior Managing Executive Officer

Executive Officers

Takeshi Hirouchi

Hitoshi Aoyama
Kenichiro Tamai

Hiroshi IshidaKazuyuki Suematsu
Tomohiko Sakamoto
Osamu Miwa
Takashi Sudo
Masanori Shozu
Keiko Ueno
Masahiko Yamashita

Senior Managing Director

Masaaki Yoshizawa

Outside Audit & Supervisory
Board Members

Directors

Jotaro Yabe
Katsuaki Ohashi

Akinori Baba
Representative Director, President,
Onward Kashiyama Co., Ltd.

Managing Executive Officers

Kenichi Iizuka
Michio Ohsawa
Hidenobu Tanaka
Hirokazu Yoshizato
Eihachiro Umemiya
Hisayuki Ichinose

Hiroaki Yamada

Financial Section

Director, Vice President,
Onward Kashiyama Co., Ltd.

Michinobu Yasumoto

Contents

Outside Directors

Hachiro Honjo
Yoshihide Nakamura

Organization Chart
As of September 1, 2014

General Meeting of Shareholders
Audit and Supervisory Board

Board of Directors

Compliance Committee

Representative Director, Chairman and President
Apparel Business I

Executive Management Council

Apparel Business II

Corporate Planning, Information Systems and Environmental Management

Resort Management

Secretary Office and Corporate Communications

Global Fashion Business

Finance and Auditing

Six-Year Financial Summary

38

Management’s Discussion and Analysis

41

Operating Risks

42

Consolidated Balance Sheets

44

Consolidated Statements of Operations

45

Consolidated Statements of Comprehensive Income

46

Consolidated Statements of Changes in Net Assets

48

Consolidated Statements of Cash Flows

50

Notes to Consolidated Financial Statements

73

Independent Auditor’s Report

Note: In the financial section, reporting is based on the Annual Securities Report (Yukashoken-Houkokusho) that is
filed with the Financial Services Agency (FSA). As a result, information is presented in accordance with thereportable segments Apparel Business and Other Business.

Strategy Council

Legal Affairs and Investor Relations

36

European Operations

Administration

North American Operations

Human Resources, Sales Personnel Management and Compliance

Asian Operations

General Affairs

Advertising and New Business Development
Omni-channel Retailing
Production
Logistics

Hiroshima Region

34

Sendai Region

Sapporo Region

Nagoya Region

Fukuoka Region

Osaka Region

Kanto Region

Tokyo Region35Six-Year Financial Summary
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28 and 29

Thousands of
U.S. dollars*1

Millions of yen

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

Per share information
Net income (EPS)
Net assets
Cash dividends
Payout ratio (%)
RatiosROE (%)ROA (%)
Operating margin (%)
Gross profit margin (%)
SGA / Sales (%)
Shareholders’ equity ratio (%)

2009

2010

2011

2012

2013

2014

2014

¥261,006
142,676¥248,635
134,459¥244,551
128,726¥242,402
127,288¥258,370
133,879¥279,073
149,113$2,737,620
1,462,754

109,246
9,084
6,285
4,639
(30,895)

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

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

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

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

120,538
9,422
12,211
3,112
4,659

1,182,435
92,431
119,790
30,52245,703

10,83914,058

11,207

13,181

10,13813,362131,072(40,950)(26)(5,152)(1,962)(10,683)(14,301)(140,288)

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

2,122
(939)

20,812(9,216)

4,178
5,986

5,794
5,747

5,405
5,642

6,230
5,478

8,949
5,721

16,7506,801

164,31366,714

Net Sales¥ million
300,000

261,006 248,635 244,551

242,402258,370279,073¥ million/%
12,0009,084

200,000

8,000

100,000

34,330100,680

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

27,376110,349

268,549
1,082,491

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

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

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

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

102,879
313,431101,010
178,078
175,029

1,009,210
3,074,657
990,874
1,746,888
1,716,981

Yen

U.S. dollars*1¥ (197.21)
1,001.36
30.00—¥  13.97
998.9824.00
171.9¥   17.38
1,002.34
24.00
138.1

¥  22.52
995.11
24.00
106.6¥   28.71
1,043.64
24.00
83.6

¥   29.69
1,102.99
24.00
80.8

$ 0.29
10.82
0.24
—

(17.6)(10.4)
3.5
45.3
41.9
52.9

1.4
0.7
1.8
45.9
44.2
53.5

1.7
1.0
3.7
47.4
43.7
55.8

2.3
1.3
4.5
47.5
43.0
56.3

2.8
1.6
4.3
48.2
43.9
57.1

2.8
1.6
3.4
46.6
43.2
55.2

—
—
—
—
—
—

3.5

0

4,000

2009

2010

2011

2012

2013

2014

0

2009

2010

4,008

3,910

3,993

5,208

5,224

6

9,422
3.4

4

Net Income (Loss)

ROE and ROA¥ million
20,000

%

2,188

2,723

3,529

4,503

2013

2014

2.3

2.8

2.8

0.7

1.3

1.6

1.6

–17.6
2009
2010

2011

2012

2013

2014

–10.4

–40,000

2012

1.7
1.0

1.4
0

–20,000

2011

0

10

4,659

0

2

Operating Margin (right scale)–10–30,895
2009

2010

2011

2012

2013

2014

–20

ROA

Total Assets

Total Net Assets and Shareholders’ Equity Ratio¥ million
400,000¥ million/%
200,000

300,000

296,283 292,569 281,643 276,939 286,779 313,431

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

150,000

52.9

53.5

55.8

56.3

57.1

175,029

80
60

55.2

200,000

100,000

40

100,000

50,000

20

0

2009

2010

2011

2012

2013

2014

0

2009

Total Net Assets

Capital Expenditures
16,75015,000

8,949
4,178
2009

5,794

5,405

2012

2013

2014

¥/%
80.00

171.9

40.00

6,230

200.0

138.1
106.6
30.00

24.00

24.00

24.00

150.0

83.6
24.00

80.8
24.00

20.00

2010

2011

0

Shareholders’ Equity Ratio (right scale)

60.00

10,0002011

Cash Dividends per Share and Payout Ratio¥ million
20,000

5,000

2010

2012

2013

2014

0

100.0
50.0

2009

2010

Cash Dividends per Share

2,473

10,954 11,193
4.5
4.3

1.8

Operating Income

ROE

23,41598,946

8,929
3.7
4,384

0

Other informationNumber of full-time
employees

Operating Income and Operating Margin

2011

2012

2013

2014

0

Payout Ratio (right scale)—*1. Yen amounts have been translated, for convenience only, at ¥101.94=US$1, the approximate exchange rate on February 28, 2014.
*2. Free cash flow = Cash flows from operating activities + Cash flows from investing activities

36

37

Management’s Discussion and Analysis

Overview of Operating Results

Gross Profit

In fiscal year 2014, ended February 28, 2014, the domestic economy
showed signs of a modest recovery. The economic stimulus measures instituted by the Japanese government and the Bank of Japan led to yen
depreciation and stock price improvements, and these positive changes
drove an improvement in corporate earnings and consumer spending.
However, the future of the domestic economy remained uncertain, largely due to the threat of a downturn in the global economy that resulted
from the prolonged sovereign debt crisis in Europe and an economic
slowdown in emerging countries.
In the domestic apparel and fashion industries, sales of luxury items
and other high-value-added products were strong, thanks to improved
consumer confidence and increased values of personal assets that
stemmed from the higher stock prices. Nevertheless, the operating environment grew difficult in October 2013 and has persisted as a result of
the decision to raise the consumption tax, which adversely affected consumer confidence, and harsh weather conditions, such as typhoons. Thisdifficulty persisted thereafter.
Against this background, we at the Onward Group concentrated ourstrategies in businesses both at home and abroad. In the domestic business, we aggressively pushed for earnings improvement centered on
Onward Kashiyama’s mainstay businesses and core brands.
In the overseas business, we established Onward Luxury Group
S.p.A. by merging the GIBO’Co Group and the Jil Sander Group, of
Italy. In Asia, though the economic recovery was slower than we expected, profit levels remained the same in existing businesses. At the sametime, we worked to develop new production networks in the ASEAN
region. In North America, we continued to invest in merchandising andbrand development to facilitate future business expansion.

Net Sales

While cost of sales grew 11.4%, to ¥149,113 million, we achieved grossprofit of ¥129,960 million, an increase of ¥5,469 million compared withthe previous fiscal year. This rise was largely attributable to growth in net
sales. The gross profit margin declined 1.6 percentage points, from 48.2%
in fiscal year 2013 to 46.6% in fiscal year 2014. This decline was mainly
due to a temporary rise in costs of sales for domestic subsidiaries due tothe rapid depreciation of the yen and loss on write-down of inventories
that resulted from failure to meet second-half sales targets.

Operating Income
Selling, general and administrative (SG&A) expenses grew 6.4% year on
year, to ¥120,538 million. The ratio of SG&A expenses to net sales was
43.2%, down 0.7 percentage point from 43.9% in the previous fiscal year.
At Onward Kashiyama, we were successful in curtailing SG&A expenses by adjusting costs in conjunction with second-half sales. Regardless,the operating income margin contracted, from 4.3% to 3.4%, following
a decline in the gross profit margin. As a result, operating income
decreased ¥1,770 million, to ¥9,422 million.

Other Income (Expenses)
Other income, net, amounted to ¥53 million, compared with other expenses, net, of ¥3,444 million in the previous year. Other expenses wererecorded in the forms of loss on sales or disposal of fixed assets, net, of¥1,318 million, and loss from dissolution of corporate pension fund of¥1,264 million. Also, the gain on transition of retirement benefit plan of¥1,951 million recorded in fiscal year 2013 was absent in fiscal year 2014,
adversely impacting other income. Nonetheless, impairment loss on
fixed assets decreased, from ¥6,919 million to ¥323 million, buoying
other income together with the recording of gain on sale of investments
in securities, net, of ¥891 million.

Segment Information
Apparel BusinessIn fiscal 2014, sales in the Apparel Business segment grew 8.0% year on
year, to ¥262,076 million, while operating income decreased 19.7%, to¥11,634 million.

Domestic Business
At Onward Kashiyama, sales of core brands grew favorably throughout
the first half of the fiscal year, and a recovery was evident in menswear.
However, conditions took a downturn during the second half of the fiscal year due to harsh weather conditions and a trend toward thriftiness.
Despite this setback, in the e-commerce business, sales targets were exceeded by both Onward Kashiyama and other domestic subsidiaries.

Overseas Business
In Europe, the Joseph Group enjoyed a notable improvement in performance, while the GIBO’Co Group was able to grow sales and build astable earnings base. Profit declined for the Jil Sander Group, but thisdecrease was due to upfront investments for business expansion. We
were able to secure a certain level of sales in Asia and North America;
however, income was down in these areas as a result of investments for
expanding operations as well as instability in global economic, political,
and other conditions.

Other BusinessIn fiscal year 2014, sales in the Other Business segment increased 8.3%
compared with the previous fiscal year, to ¥16,997 million, and operating
income decreased 13.0%, to ¥290 million.
In our service-related businesses, sales exceeded targets for both
Onward Creative Center, which designs and constructs commercial
facilities, and Across Transport, which provides apparel logistics andtransportation services. Nevertheless, income was down year on year
following a rise in costs.
Our resort business performed favorably, posting higher sales andprofits.

Sales in the Apparel Business increased 8.0% year on year, to ¥262,076
million, while sales in the Other Business climbed 8.3%, to ¥16,997 million. As a result, consolidated net sales grew ¥20,703 million, or 8.0%,
compared with the previous fiscal year, to ¥279,073 million.

Income before Income Taxes andMinority Interests and Net Income

Net Sales

Operating Income and Net Income

Segment Sales¥ million
12,000¥ million
300,000¥ million
300,000

248,635

244,551

242,402258,370279,073

Income before income taxes and minority interests was ¥9,475 million, an
increase of ¥1,726 million, or 22.3%, year on year. Income taxes climbed¥1,593 million, or 50.0%, to ¥4,782 million, from ¥3,189 million recordedin the previous fiscal year. Due to these factors, net income was ¥4,659
million, a gain of ¥156 million, or 3.5%, from the previous fiscal year.

10,954

9,422

8,929

10,000200,000

11,193

6,000
4,000

14,454

14,813

234,181

14,870229,738

15,694

227,532

For fiscal year 2015, ending February 28, 2015, we at the Onward Group
forecast that operating income will grow 30.5% year on year, to ¥12,300
million, supported by a 4.2% gain in consolidated net sales, to ¥290,700
million.
While the domestic economy is displaying a modest recovery, theoutlook remains unclear. Reasons for this uncertainty include the consumption tax hike that was instituted in April 2014 and the instability
in the global economy resulting from political unrest.
Under these circumstances, we will concentrate our investments inmainstay businesses and core brands to build a business structure that
ensures sustainable growth in profits. In new businesses, we will promotebusiness development in fields and markets that have significant growthpotential.

Domestic BusinessOnward Kashiyama and other domestic apparel subsidiaries will work tofurther improve their products, services, and store environments to attract more customers. By taking advantage of our synergies in domestic
businesses, we will focus on expanding profits in new business fields.

Overseas Business
In Europe, we will boost profitability by expanding our production
capacity and brand business. Through organizational reforms, we will
improve management efficiency by unifying business management andproduct functions. In Asia and North America, we will conduct investments as necessary from a medium-term standpoint to increase ourgrowth potential.

16,997

242,676

262,076

200,000

8,000

100,000

Outlook for the Fiscal Year Ending
February 28, 2015

4,384
2,188

2,723

3,529

4,503

4,659
100,000

2,000
0

2010

2011

2012

2013

2014

0

2010

Operating Income

38

2011
Net Income

2012

2013

2014

0

2010

Apparel Business

2011

2012

2013

2014

Other Business

39

Operating Risks

Financial Position

Cash Flows from Financing Activities

Assets
As of February 28, 2014, total assets increased ¥26,652 million from theprevious fiscal year-end, to ¥313,431 million. Total current assets grew
¥10,029 million, mainly from gains in cash and time deposits, accounts
and notes receivable, and inventories. Fixed assets expanded ¥16,623
million, largely owing to rises in buildings and structures on the back of
capital expenditure as well as increases in lease assets and in investments
in securities, which was a reflection of higher market values ofstockholdings.

Liabilities
Total liabilities as of February 28, 2014, expanded ¥16,995 million fromthe previous fiscal year-end, to ¥138,402 million. Despite a decrease inaccrued income taxes, total current liabilities grew ¥270 million, mainly
attributable to an increase in accounts and notes payable. Total longterm liabilities rose ¥16,725 million, due to an increase in long-termloans payable.

Net Assets
As of February 28, 2014, total net assets increased ¥9,657 million fromthe previous fiscal year-end, to ¥175,029 million. Total shareholders’ equity rose ¥936 million, reflecting growth in retained earnings.
Accumulated other comprehensive income expanded ¥8,440 million,
mainly attributable to a rise in net unrealized gains on available-for-salesecurities given the improvement in market values of our stockholdings
as well as more beneficial foreign currency translation adjustments.

Cash Flows
Cash Flows from Operating Activities
Net cash provided by operating activities for fiscal year 2014 grew ¥3,224
million from the previous fiscal year, to ¥13,362 million, mainly due to anincrease in income before income taxes and minority interests of ¥1,726
million.

Cash Flows from Investing Activities
Net cash used in investing activities for fiscal year 2014 totaled ¥14,301
million, an increase of ¥3,618 million from the previous fiscal year, mainly due to investments in sales facilities.

Net cash provided by financing activities for fiscal year 2014 amounted
to ¥2,122 million, compared with net cash used in financing activities of¥7,848 million in fiscal year 2013, following changes in borrowings anddividends paid.
Cash and cash equivalents as of February 28, 2014, moved up ¥2,686
million, to ¥27,231 million.

Capital Expenditures
We at the Onward Group undertake capital expenditures on a continuous basis to upgrade and expand our planning, production, sales, andlogistics structures and systems. Our Group’s capital expenditures are
the wellspring that enables us to address the diverse needs of our customers. In fiscal year 2014, our capital expenditures totaled ¥16,750
million.
In the Apparel Business segment, capital expenditures amounted to¥10,066 million, the majority of which was channeled to sales floors at
department stores and directly managed stores with the aim of strengthening the Group’s sales structure and systems. In the Other Businesssegment, we at the Onward Group invested ¥879 million to upgrade
commercial facilities and enhance operational efficiency.

Profit Distribution Policy
At Onward Holdings, we recognize that the distribution of profits toshareholders is one of our top priorities. Our basic policy is to distribute
regular and stable dividends to shareholders based on our business performance, and we target a dividend payout ratio of at least 35%. Taking
into consideration our business results and the future outlook for theGroup’s operating environment, we decided to distribute a cash dividendof ¥24.00 per share for fiscal year 2014, the same payout as in the previous fiscal year.
Treasury stock acquisitions will be conducted based on funding
requirements. Additionally, we intend to utilize our retained earnings
flexibly and adopt a balanced approach to meet our funding requirements. Based on this policy, our retained earnings will be used for strategic investments to build a solid business foundation and strengthen our
financial position as and when we consider appropriate.

Total Assets and Total Net Assets

Cash Flows¥ million
400,000¥ million
18,000300,000

292,569

281,643

276,939

286,779

14,058313,431

11,207

13,181

10,13813,362

9,000

2,122
200,000

158,164

158,745

157,303

165,372

175,029

100,000
0

Total Assets

40

0–9,0002010

2011

Total Net Assets

2012

2013

2014

–18,000–26–4,890 –5,152–9,272

2010

2011–7,449Cash Flows from Operating Activities
Cash Flows from Financing Activities

Moreover, we at the Onward Group are actively engaged in licensed
brand business activities. In undertaking these activities, we as a Groupsecure rights to use intellectual property owned by our overseas partners.
For unexpected reasons, the relevant contracts may be cancelled or theterms and conditions may become unfavorable upon renewal. Such an
outcome may have an adverse impact on our Group’s businessperformance.

Changes in Consumer Needs

Legal Procedures and Compliance

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

In doing business, the Onward Group pays careful attention to laws andregulations—including those concerning antitrust, the treatment of subcontractors, labeling, consumer product safety, and environment- andrecycling-related laws—and strives to ensure compliance. The Onward
Group Compliance Committee spearheads the Group’s efforts to raiseawareness about the importance of ensuring legal compliance and maintaining internal control procedures. Despite the implementation of suchcontrol systems, an issue may arise as a result of the illegal acts of an employee or a business partner and may undermine the trust placed in the
Company by society, leading to a substantial cost burden, such as thepayment of indemnities. Such an eventuality may have an adverse impact on our Group’s business performance.

Weather Conditions and Disasters
Sales of our Group’s mainstay fashion products may be affected by theweather. Consequently, we as a Group have put in place and continue tostrengthen our systems for planning and production for a quick turnaround cycle. However, unseasonal weather over a prolonged period,
such as cool weather in the summer or warm weather in the winter, or aseries of typhoons may result in the loss of sales opportunities during
peak seasons. Such developments may have an adverse impact on ourGroup’s business performance.
In addition, the occurrence of a natural disaster, such as an earthquake, a flood, a fire or an accident, or an outbreak of an epidemic, suchas a new strain of influenza, may compel us at the Onward Group tosuspend our business operations. Such an occurrence may have an
adverse impact on our Group’s business performance.

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

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

Intellectual Property–1,962

2012

Risks that may have an impact on our Group’s operations are outlined asfollows. After determining the potential for these risks to materialize, weat the Onward Group will implement measures designed to mitigate
these risks or to minimize their impact.
Forward-looking statements in this section are based on the Group’s
judgments in light of information available at the time this report was
prepared.

–7,848–10,683–14,301

2013

2014

Cash Flows from Investing Activities

We at the Onward Group own trademarks and other intellectual properties in Japan and overseas. We strive to safeguard the rights relating tosuch property in accordance with laws and regulations. However, in theevent of an infringement of such rights by a third party, both the imageof our Group and brand image may be undermined, resulting in impairment of our Group’s product development activities. Such an occurrence
may have an adverse impact on our Group’s business performance.

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

Overseas Business Operations
Our overseas business operations of the Onward Group are exposed to arange of risks, including natural disasters, political turmoil, changes insocial and economic conditions, terrorism, war, fluctuations in foreign
currency exchange rates, lawsuits related to intellectual property, andinfectious diseases. In the event that such a risk materializes, it may
become difficult for us to continue our business operations in the affected
region. Such an occurrence may have an adverse impact on our Group’sbusiness performance.

Business and Capital Tie-ups
As a part of our growth strategies, we at the Onward Group undertake avariety of investments in Japan and internationally through a broad
spectrum of vehicles, including M&A transactions. In the event of deterioration in business performance and financial position owing to achange in the business environment that exceeds expectations, we may
record a loss on impairment of goodwill. Such an occurrence may havean adverse impact on our Group’s business performance.

41

Consolidated Balance Sheets
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2013 and February 28, 2014

AssetsThousands of
U.S. dollars(Note 2. (21))

Millions of yen
2013

2014

2014

Current liabilities:

Current assets:
Cash and time deposits (Notes 3 and 10)¥ 24,677¥ 27,376$  268,549

Accounts and notes receivable (Note 3)

25,86428,251

277,133

Inventories (Note 2. (4))

34,476

40,680399,062

Deferred tax assets (Note 12)

7,932

5,109

50,115

Other current assets

7,823

9,568

93,864

(452)

(635)

(6,232)

100,320

110,349

1,082,491

Less: Allowance for bad debt
Total current assets

LIABILITIES AND NET ASSETS
Accounts and notes payable (Note 3)

Short-term loans payable (Notes 3 and 15)

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

Accrued bonuses to employees
Accrued bonuses to directors
Allowance for sales returns

Provision for point program

Other current liabilities (Note 15)
Total current liabilities

Long-term liabilities:
Bonds (Note 15)

Property, plant and equipment (Note 6):
Buildings and structures

78,57280,723

791,864

Leased assets

2,360

8,073

79,196

Other depreciable property

28,43833,089324,590(72,570)(75,328)(738,946)

36,80046,557456,704

50,06256,322552,506

86,862

102,879

1,009,210

Less: Accumulated depreciation
Land (Note 13)
Total property, plant and equipment

Thousands of
U.S. dollars(Note 2. (21))

Millions of yen
2013

2014

2014

¥ 33,513¥ 38,306$   375,768

18,9673,132

30,726

28,614

41,8254,830

956

410,287

9,375

1,290

1,286

12,618

528

497

4,875

252

186

249

264

12,497

14,558100,740

101,010

250

150

1,829

2,590

142,806

990,874
1,471

Long-term loans payable (Notes 3 and 15)

1,324

13,902

136,370

Accrued retirement benefits (Note 8)

3,058

3,421

33,557

Deferred tax liabilities—revaluation of land (Notes 12 and 13)
Lease obligations (Note 15)

Accrued retirement benefits for directors and corporate auditors
Other

Total long-term liabilities
Total liabilities

Commitments and contingent liabilities (Note 14)

3,966

3,966

1,063

5,981

153

137

10,853

9,835

20,66737,39238,90958,675

1,342

96,478366,802

121,407

138,402

1,357,676

30,08030,080295,072

120,165

121,008

1,187,045

Net assets:

Shareholders’ equity (Note 16):
Common stock:

Intangible assets, net:
Goodwill

32,77029,741

291,748

Other

2,688

4,536

44,49235,45834,277336,240

Total intangible assets, net

42,73049,162482,261Long-term loans receivable

5,276

5,446

53,427Long-term prepaid expenses

1,212

1,182

11,598Deferred tax assets (Note 12)

3,601

3,079

30,208Other investments

13,862

10,02998,376(2,542)(2,972)(29,154)

64,13965,926

646,716¥286,779¥313,431$3,074,657

Total assets

Capital surplus

Retained earnings

Total shareholders’ equity

Investments in securities (Notes 3 and 4)

Total investments and other assets

Issued—172,921,669 shares at February 28, 2013 and February 28, 2014,
respectively

Less: Treasury stock, at cost, 16,046,184 shares and 15,988,357 sharesat February 28, 2013 and February 28, 2014, respectively

Investments and other assets:

Less: Allowance for bad debt

Authorized—400,000,000 shares

Accumulated other comprehensive income:Net unrealized gain on available-for-sale securities (Note 4)
Deferred gain (loss) on hedging instruments
Net revaluation loss of land (Note 13)

Foreign currency translation adjustments

Total accumulated other comprehensive income

Stock acquisition rights

Minority interests in consolidated subsidiaries
Total net assets

Total liabilities and net assets
Per share :Net assets per share

50,04350,043(23,146)(23,053)

490,909(226,138)

177,142

178,078

1,746,888

1,532

5,005

49,092(12,503)(12,503)(122,646)(13,421)(4,981)(48,865)34(33)(2,484)

2,550

724

823

927

1,109

165,372

175,029¥ 286,779¥ 313,431

25,016

8,078

10,8801,716,981$3,074,657
U.S. dollars(Note 2. (21))

Yen¥1,043.64(327)¥1,102.99$10.82

See accompanying notes to consolidated financial statements.

42

43

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2013 and February 28, 2014

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2013 and February 28, 2014

Thousands of
U.S. dollars(Note 2. (21))

Millions of yen

Millions of yen

2013

2014

2014

Net sales¥258,370¥279,073$2,737,620

Income before minority interests

Cost of sales

133,879

149,113

1,462,754

Other comprehensive income

Gross profit

124,491

129,960

1,274,866

Net unrealized gain on available-for-sale securities

Selling, general and administrative expenses

113,298

120,538

1,182,435

Deferred gain (loss) on hedging instruments

Operating income

11,193

9,422

92,431

Foreign currency translation adjustments
Share of other comprehensive income of associates
accounted for using the equity method

Other income (expenses):
Interest income

119

139

1,362

Dividend income

417

440

4,315

Land and house rent received

623

717

7,036

Interest expenses

(636)

(575)

(5,637)

Royalty income

730

935

9,170

Royalty payment

(104)

(157)

(1,541)Equity in earnings (losses) of investees

251

(29)

(284)

Foreign currency exchange gain (loss)

(238)

465

4,561

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

—

891

8,743

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

(415)

—

—

Loss on sales or disposal of fixed assets, net(106)(1,318)(12,933)

Impairment loss on fixed assets (Note 7)(6,919)(323)(3,164)Gain on transition of retirement benefit plan

1,951

—

—

Loss from dissolution of corporate pension fund—

(1,264)(12,399)

Other, net

883

132

1,283

7,749

9,475

92,943Current

7,398

3,112

30,522

Deferred(4,209)1,670

16,384

Income before minority interests

4,560

4,693

46,037

Minority interests in subsidiaries

(57)

(34)

(334)

4,659

$   45,703

Income before income taxes and minority interests

Thousands of
U.S. dollars(Note 2. (21))

Total other comprehensive income (Note 9)Comprehensive income

2013

2014

2014

¥ 4,560¥ 4,693$ 46,037

4,954

3,389

33,246

24

(67)

(663)

1,599

4,768

46,772

387

451

4,427

6,964

8,541

83,782¥11,524¥13,234$129,819¥11,411¥13,098$128,488

113

136

1,331

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

Income taxes (Note 12):Net income

¥

4,503

Per share (Notes 16, 17 and 19):¥

U.S. dollars(Note 2. (21))

Yen

Net income—basic¥28.71¥29.69$0.29

Diluted net income per share

28.46

29.40

0.29

Cash dividends

24.00

24.00

0.24

See accompanying notes to consolidated financial statements.

44

45

Consolidated Statements of Changes in Net Assets
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2013 and February 28, 2014

Millions of yen

Millions of yen

Shareholders’ equity
Number ofshares ofcommon stock(thousands)

Balance as at March 1, 2012
Cash dividends
Net income

Purchase of treasury stock

Reissuance of treasury stock

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

Balance as at February 28, 2013
Cash dividends
Net income

Purchase of treasury stock

Reissuance of treasury stock

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

Balance as at February 28, 2014

Accumulated other comprehensive income

Retainedearnings(Note 16)

Treasurystock

Commonstock

Capitalsurplus172,922¥30,080¥50,043¥119,524¥(23,327)¥176,320

—

—

—

4,503

—

4,503

—

—

—

—

—

172,922

—

—

—

—

—

—

172,922

—

—

—

—

—

—

—

30,080——¥30,080

(3)

(3)

84

—

641

181

822

—

—

—

—

(3,762)

184

—

—

—

(100)

50,043

—

Total

—

—

—

(3,762)—

120,165(3,765)—(23,146)
—

4,659

—

—

(7)

—

177,142(3,765)
4,659

(7)

—

(51)

100

49

—

843

93

936

—

¥50,043—¥121,008

Net unrealized
gain (loss) on Deferred gain
Foreignavailable-for(loss)
Net revaluation currency
sale securities on hedging
loss of landtranslation(Note 4)
instruments(Note 13)adjustments—¥(23,053)—¥178,078

Balance as at March 1, 2012
Cash dividends
Net income

Purchase of treasury stock

Reissuance of treasury stock

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

Balance as at February 28, 2013
Cash dividends
Net income

Purchase of treasury stock

Reissuance of treasury stock

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

Balance as at February 28, 2014¥(3,792)¥ 10¥(12,503)

—

—

—

—
—
—

5,324
5,324

1,532

—
—
—

24

¥ 5,005

—

—

—

—

(67)

Net income

Purchase of treasury stock

Reissuance of treasury stock

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

Balance as at February 28, 2014

See accompanying notes to consolidated financial statements.

CapitalsurplusRetainedearnings(Note 16)

Treasury
stock

Total

$295,072$490,909$1,178,780$(227,055)$1,737,706——

45,703—45,703————$295,072

—

—

—

—

—

$490,909(36,934)
—

(504)
—

8,265

$1,187,045

—
—
—

1,559
—
—
—

—
—

(3,762)
(3)

84

269

7,247

(13,421)724

927

165,372

—

—

—

4,659

71

—

—

—

—

—

8,440

¥(33) ¥(12,503)¥ 2,550¥ (4,981)

5,034

4,503

—

71

5,034

—

—

—

6,907

—

(67)

—
—

—

(2,484)—¥157,303

—

8,440

269
—
—
—

8,069

(3,765)
(7)

49

99

182

8,721

¥823

¥1,109¥175,029

99

182

9,657

Accumulated other comprehensive income

Common
stock

—

—

¥ 658

Thousands of U.S. dollars (Note 2. (21))

Shareholders’ equity

Cash dividends—(12,503)

Thousands of U.S. dollars (Note 2. (21))

Balance as at February 28, 2013—

Total net
assets

¥653
—

—

34

—

3,473

—

—

6,907

—
3,473

—

—

1,559

—

—

—

¥(4,043) ¥(20,328)

—

24

—
—

—

Total

Minority
Stockinterests
acquisition in consolidated
rightssubsidiaries

—

(72)

989

—

917

$(226,138)(36,934)
(72)

485

—

9,182

$1,746,888

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

Balance as at February 28, 2013
Cash dividends$15,027—

Total$ 336 $(122,646) $(24,367) $(131,650)
—

—

—

—

Minority
Stockinterests
acquisition in consolidated
rightssubsidiaries$7,105—$ 9,092 $1,622,253—

Net income

—

—

—

—

—

—

—

Reissuance of treasury stock

—

—

—

—

—

—

—

Purchase of treasury stock

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

Balance as at February 28, 2014

—

—

—

—

(663)

82,785973$49,092$(327) $(122,646) $ 25,016 $ (48,865)$8,078(663)—

49,383—34,06534,065——49,38382,785973

Total net
assets

—
1,788
1,788

(36,934)
45,703(72)

485

85,546
94,728$10,880 $1,716,981

See accompanying notes to consolidated financial statements.

46

47

Consolidated Statements of Cash Flows
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2013 and February 28, 2014

Thousands of
U.S. dollars(Note 2. (21))

Millions of yen
2013

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

Impairment loss on fixed assets

Net amortization of goodwill on consolidation

Increase (decrease) in provision for allowance for bad debt

Increase (decrease) in provision for accrued retirement benefits

Interest and dividend income
Interest expenses

Equity in (earnings) losses of investees(Gain) loss on sales or disposal of fixed assets, net(Gain) loss on sale of investments in securities, net
Loss on write-down of investments in securities(Increase) decrease in trade receivables(Increase) decrease in inventories

Increase (decrease) in trade payables

Other, net¥ 7,749

5,721

6,919

3,938

(285)

(5,419)
(536)
636

(251)

¥ 9,475

6,801
323

3,313
515

1,944

(579)
575
29

2013

$ 92,943

66,714
3,164

32,501
5,053

19,073(5,677)
5,637
284

106

1,318

12,933

415

—

—

—

455

(891)
(325)

(8,743)(3,188)(2,094)(4,025)(39,486)894(3,047)(29,889)

(655)

2,515

17,941

175,992

Interest paid

(647)

(593)

(5,819)

Income taxes paid

Refunded income taxes

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

812(6,283)(61,635)

10,13813,362131,072

(68)

(32)

(315)

(6,411)(13,678)(134,175)

1,087

23

(994)

1,485

35

694

(125)

(1,001)(1,333)(13,080)

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

(13)

(126)

Other, net(1,497)

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

769

(16)

(10,683)

1,275—(2,521)(14,301)

103,036

Repayments of long-term loans payable(5,038)(19,015)(186,528)

Dividends paid by the parent company(3,762)(3,765)(36,934)

(828)

(891)

(8,740)Acquisition of treasury stock

Dividends paid to minority shareholders
Other, net

Net cash provided by (used in) financing activities

(3)

(54)

15,354(7)(58)

150,617

(72)

(567)

(7,848)2,122

20,812

Net increase (decrease) in cash and cash equivalents(7,543)

2,669

26,176

Cash and cash equivalents at beginning of year

32,088

Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents resulting from change ofscope of consolidation
Cash and cash equivalents at end of year (Note 10)

850—¥24,545

1,486

17

24,545¥27,231

14,580170

240,779$267,125

See accompanying notes to consolidated financial statements.

(1,231)

Payments for security deposits

Proceeds from security deposits

10,504

2,205

6,809

22,252

(871)

(368)

Proceeds from long-term loans payable

344

2,268

(635)

2014

14,567—

Payments for long-term prepaid expenses

Increase (decrease) in short-term loans payable

2014

7,967

(9,289)
1,712

Cash flows from financing activities:

24,673

17,593769

Millions of yen

2014

SubtotalInterest and dividends received

48

2014

Thousands of
U.S. dollars(Note 2. (21))(8,540)12,506—(24,732)(140,288)

49

Notes to Consolidated Financial Statements
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2013 and February 28, 2014

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

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

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

The Company had 81 subsidiaries as at February 28, 2014 (86 as at February 28, 2013). The accompanying consolidated financial statements include the accounts of the Company and 69 of its subsidiaries (73 for 2013). Major consolidated subsidiaries are listed below (theCompany and the consolidated subsidiaries are collectively referred to as the “Companies”):
Name of subsidiary

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

Equity ownership percentage

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

Closing dateFebruary 28
February 28
February 28
February 28
February 28
February 28
February 28
November 30
November 30
November 30
November 30
December 31
December 31
February 28
February 28
February 28
February 28
February 28
February 28
December 31
December 31

MONTE NAPOLEONE LLC. was acquired during the year ended February 28, 2014; therefore, it became a consolidated subsidiary of the Company.
Onward KASHIYAMA Co., Ltd. merged with Donna Karan Japan K.K. and Birz Association Co., Ltd. merged with Naima Co.,
Ltd. and Birth Village Co., Ltd.
Also, Gibo’ Co. S.p.A. merged with Iris S.p.A. and changed its name to Onward Luxury Group S.p.A.
Onward Fashion Trading (Shanghai) Co., Ltd., which was the Company’s unconsolidated subsidiary in the previous year, has been included in the scope of consolidation from the year ended February 28, 2014, since its importance has increased.
Grace Continental Korea Co., Ltd. and O.K.N. Amsterdam B.V. were liquidated and removed from the scope of consolidation.
The financial statements of the aforementioned subsidiaries with fiscal year-ends of December 31 or November 30 have been used forconsolidation. Significant adjustments considered necessary due to different closing date from February 28 have been made withconsolidation.
The remaining 12 subsidiaries (13 for 2013) were not consolidated because their total assets, net sales, net income and retained earnings were not material individually or in the aggregate compared with those of the consolidated financial statements of the Companies.

For the purposes of preparing the consolidated financial statements of the Companies, all significant intercompany transactions, 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 newly acquired subsidiaries are measured at fair value at the time of acquisition, and the differences between the cost of investments in the consolidated subsidiaries and the equity in their net assets at fair value are accounted for as goodwill,
which is amortized on a straight-line basis within 20 years.

(3) Investments in Unconsolidated Subsidiaries and Affiliates

Investments in unconsolidated subsidiaries and affiliates are accounted for by the equity method. A total of 19 companies (19 companies
for 2013) are accounted for by the equity method for the year ended February 28, 2014.
The Company did not apply the equity method to Onward Italia S.p.A. and others as the effect on net income or retained earnings oftheir consolidated financial statements are not material individually or in the aggregate.
The Company applied the equity method by using the November 30 financial statements of Gailyglen Ltd., which has a fiscal yearend of November 30. Also, the December 31 financial statements of Daidoh Limited, which has a fiscal year-end of March 31, preparedon a basis similar to that for year-end closing, were used for consolidation purposes.

(4) Inventories

Inventories held for sale in the ordinary course of business are measured at the lower of cost or net selling value, which is defined as theselling price less additional estimated manufacturing costs and estimated direct selling expenses, determined principally by the specificidentification method. For the year ended February 28, 2014, the recorded write-downs were ¥12,247 million ($120,141 thousand). For theyear ended February 28, 2013, the recorded write-downs were ¥10,769 million.

(5) Investments in Securities

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

(6) Derivative Transactions

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

(7) Hedge Accounting

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

(8) Property, Plant and Equipment

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

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

50

51

(10) Income Taxes

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

(11) Allowances for Bad Debt

Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of ¥101.94=US$1, the rate of exchange as of February 28, 2014, 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.

(22) Reclassifications

Certain reclassifications have been made to the prior year’s consolidated financial statements to conform with the presentation used forthe year ended February 28, 2014.

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

(23) Goodwill(12) Allowances for Sales Returns

As a result of revision of the Corporation Tax Act in Japan, the Company and its domestic consolidated subsidiaries changed their depreciation method for property, plant and equipment acquired on or after March 1, 2013 to the method stipulated under the revised
Corporation Tax Act from the fiscal year ended February 28, 2014.
The effect of this change on operating income and income before income taxes and minority interests for the current fiscal year was
immaterial.

An allowance for sales returns is provided for the estimated losses based on the actual percentage of sales return in prior years and grossprofit margin.

(13) Retirement Benefits

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

(14) Provision for Point Program

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

(15) Accounting for Leases

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

(24) Change of accounting policies which is difficult to distinguish from change in accounting
estimates(25) Unapplied Accounting Standards“Accounting Standard for Retirement Benefits” (Accounting Standards Board of Japan (hereinafter “ASBJ”) Statement No. 26, May 17,2012) and “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25, May 17, 2012)(1) Overview
Accounting standard for retirement benefits has been revised from the viewpoint of improvements to financial reporting and international convergence, mainly focusing on (a) how unrecognized actuarial differences and unrecognized prior service costs should be accounted
for, (b) how retirement benefit obligations and service costs should be determined and (c) enhancement of disclosures.
(2) Date of adoption
The Company will adopt the accounting standards effective from the fiscal year ending February 28, 2015. However, the Company will
adopt the amendments to the method for calculating projected benefit obligations and service costs from the beginning of the fiscal year
ending February 29, 2016.

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

(3) The effect of adopting the accounting standards
The effect is under evaluation at the time consolidated financial statements were prepared.

(16) Accounting for Japanese Consumption Taxes

1. Matters pertaining to the status of financial instruments(1) Policy on financial instruments
The Company and its subsidiaries invest their funds in short-term deposits and meet their financing needs through bank loans. The
Company and its subsidiaries utilize derivatives to hedge various risks as described in detail below and do not enter into derivatives for
trading or speculative purposes.

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

(17) Cash and Cash Equivalents

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

(18) Impairment of Long-Lived Assets

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

(19) Accrued Bonuses to Employees

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

(20) Directors’ Bonuses

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

52(21) United States Dollar Amounts

3. Financial Instruments(2) Financial instruments and risks
Accounts and notes receivable are exposed to credit risk of customers. Trade receivables denominated in foreign currencies, being subject
to risks associated with changes in the foreign currency exchange rates, are hedged by forward exchange contracts.
Investment securities mainly comprise stocks of companies with which the Company and its subsidiaries have business alliances andare exposed to risks associated with fluctuations of their market prices.
Accounts and notes payable are due within one year. Trade payables denominated in foreign currencies, being subject to risks associated with changes in foreign currency exchange rates, are hedged by forward exchange contracts, and currency option trading. The purpose for loans is for working capital (mainly short-term) and funds of capital investment (long-term). Interest-rate swaps are used to fix
interest expenses for interest rate risk of a portion of long-term loans payable.
Regarding derivatives, forward foreign exchange contracts, and currency option trading are used to hedge the foreign exchange rate
fluctuation risk associated with the operating receivables and payables, and interest rate swap is used to mitigate the interest rate risk forloans payable.
(3) Risk management for financial instruments(a) Monitoring of credit risk (the default risk for customers and counterparties)
In accordance with the internal policies of the Company and its consolidated subsidiaries for managing credit risk arising from notes andaccounts receivable, the Company and its subsidiaries monitor creditworthiness of their main customers and counterparties on a periodical basis and monitor due dates and outstanding balances by individual customers. Additionally, as means to mitigate credit risks, derivative transactions are only conducted with high-credit worthy financial institutions as counterparties.

53

(b) Monitoring of market risk (the risk arising from fluctuations in foreign exchange rates, interest rates and others)
The Company and its consolidated subsidiaries hedge risks associated with changes in the foreign currency exchange rates, arising fromtrade receivable and payable denominated in foreign currencies mainly by forward exchange contracts. Additionally, interest rate swap
contracts are used to mitigate the risks associated with fluctuations in the interest payments on the long-term loans payable.
For investment securities, the Company and its consolidated subsidiaries periodically review their fair values and the financial position of the issuers. Additionally, the Company and its consolidated subsidiaries continuously evaluate whether securities should be maintained taking into account their fair values and relationships with the issues.
In derivative transactions, the division in charge of each derivative transaction follows the internal management policies within theactual demand. Additionally, the Company and its consolidated subsidiaries monthly review transactions balance and the valuation gain
(loss).

(c) Investment in securities
The fair value of equity securities is calculated by the quoted market price.

(c) Monitoring of liquidity risk related to fund procurement (the risk that the Company and its consolidated subsidiaries may not be able
to meet their obligations on scheduled due dates)
In order to manage liquidity risk, the Company and its consolidated subsidiaries timely prepare and update the cash flow plans based
upon the report and maintain fund liquidity.

(g) Derivative transactions
The fair value is calculated on the basis of the price quoted by the financial institutions.

(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price if available. When no quoted market price is available, fairvalue is reasonably estimated. Since various variable assumptions are reflected in estimating the fair value, different assumptions could result in different fair values.
2. Matters related to fair values of financial instruments
The following are the consolidated balance sheet amounts, the fair values and the differences between them as of February 28, 2014 andFebruary 28, 2013 (the closing dates of the consolidated account).
February 28, 2014(a) Cash and time deposits(b) Accounts and notes receivable(c) Investment in securities
Available-for-sale securities
Investment to affiliates(d) Accounts and notes payable(e) Short-term loans payable(f ) Long-term loans payable (Cover current portion of long-term loans payable)(g) Derivative transactions

February 28, 2014(a) Cash and time deposits(b) Accounts and notes receivable(c) Investment in securities
Available-for-sale securities
Investment to affiliates(d) Accounts and notes payable(e) Short-term loans payable(f ) Long-term loans payable (Cover current portion of long-term loans payable)(g) Derivative transactions

February 28, 2013(a) Cash and time deposits(b) Accounts and notes receivable(c) Investment in securities
Available-for-sale securities
Investment to affiliates(d) Accounts and notes payable(e) Short-term loans payable(f ) Long-term loans payable (Cover current portion of long-term loans payable)(g) Derivative transactions

Millions of yen

Book value

Fair value¥ 27,376
28,251¥ 27,376
28,251

39,322
9,024(38,306)(41,825)(17,034)(41)

Book value385,734
88,526(375,768)(410,287)(167,096)(402)

Book value¥ 24,677
25,86433,0998,852(33,513)(28,614)(20,291)
37¥

39,322
5,001(38,306)(41,825)(17,206)(41)

Thousands of U.S. dollars$ 268,549
277,133

Difference

Fair value$ 268,549
277,133
385,734
49,056(375,768)(410,287)(168,782)(402)

Millions of yen
Fair value¥ 24,677
25,86433,0995,092(33,513)(28,614)(20,409)
37

$

—
—

—
—

—
(39,470)
—
—
1,686
—

Difference¥(f ) Long-term loans payable	The fair values of long-term loans payable are measured as present values obtained by discounting the total amount of principal and interest at theestimated interest rate if similar loans payable were newly made. Of long-term loans payable that have a variable interest rate, the book value is usedas fair value, as they are deemed to reflect market interest rates within a short time.

2. Book values of financial instruments deemed extremely difficult to determine their fair value as of February 28, 2013 and February 28, 2014 are as follows:
Millions of yen

Classification

Investments in securities
Unlisted equity securities

Thousands of
U.S. dollars

February 28, 2013

February 28, 2014

February 28, 2014

¥779

¥816

$8,001

The fair values of these items are not included in (c) “Investment in securities” because their market prices are not available and whose fair values are
deemed extremely difficult to determine.
3. The redemption schedule for monetary receivables and marketable securities with maturities as of February 28, 2014 and February 28, 2013 is as follows:
February 28, 2014—
(4,023)——172—

Difference(d) Accounts and notes payable and (e) Short-term loans payable
Since these items are settled in a short period of time, their book value approximates fair value.

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

February 28, 2014

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

February 28, 2013

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

Due within 1 year

¥27,376
28,251

57¥55,684

Due within 1 year

$268,549
277,133557$546,239

Due within 1 year

¥ 24,677
25,863—¥ 50,540

Millions of yen

1 to 5 years¥——

5 to 10 years

¥—
—

—
¥—

$—
—

5 to 10 years

$—
—

—
$—

—
$—

Millions of yen

1 to 5 years

¥—
1

58
¥59

¥ —
—

—
¥—

Thousands of U.S. dollars

1 to 5 years

Over 10 years

5 to 10 years

¥—
—

—
¥—

500
¥500

Over 10 years

$

—
—

4,905
$4,905

Over 10 years

¥ —
—
600
¥600

4. Expected repayment amounts of long-term loans payable subsequent to the balance sheet date
See Note 15. “Short-Term Loans payable and Long-Term Loans payable.”———(3,760)——118—

Notes:
1. Fair value measurement of financial instruments, including securities and derivatives(a) Cash and time deposits and (b) Accounts and notes receivable
Since these items are settled in a short period of time, their book value approximates fair value.

54

55

4. Investments in Securities

5. Derivative Transactions(1) Information as of and for the Year Ended February 28, 2014

The contract or notional amounts and fair value of derivative financial instruments held as of February 28, 2014 and February 28, 2013 aresummarized as follows:(1) Derivative transactions not subject to hedge accounting:(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2014 are summarized as follows:

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

Carrying
value

Millions of yen
Acquisition
cost

Unrealized
gain (loss)

Carrying
value

Thousands of U.S. dollars
Acquisition
cost

Unrealized
gain (loss)¥31,905422
32,327¥21,645226
21,871¥10,260
196
10,456$312,980
4,134
317,114$212,333
2,212
214,545$100,647
1,922
102,569

6,995
—
6,995
¥39,322

7,426
—
7,426
¥29,297

(431)
—
(431)
¥10,025

68,620—68,620$385,734

72,848—72,848$287,393(4,228)—(4,228)$ 98,341

February 28, 2014

Currency option contracts:
Buy: U.S. dollar call
Sell: U.S. dollar put
Interest rate swap agreements:
Variable rate received for variable rate
Variable rate received for fixed rate
Fixed rate received for variable rate

Note: Non-Marketable equity securities of ¥336 million ($3,300 thousand) are not included in the above table because there were no quoted market
prices available and they are extremely difficult to determine the fair value.

Millions of yen

Proceeds from sale of securities
Realized gain on sale of securities
Realized loss on sale of securities¥2,268891—

Thousands of
U.S. dollars$22,252
8,473—(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2014 was ¥9,504 million($93,227 thousand).

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

Carrying
value

Millions of yen

Currency option contracts:
Buy: U.S. dollar call
Sell: U.S. dollar put
Interest rate swap agreements:
Variable rate received for variable rate
Variable rate received for fixed rate
Fixed rate received for variable rate

February 28, 2013

Acquisition
cost

Unrealized
gain (loss)¥25,786
254
26,040¥20,149
194
20,343¥5,637
60
5,697

6,934
125
7,059
¥33,099

7,918
131
8,049
¥28,392

(984)
(6)
(990)
¥4,707

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

(b) Available-for-sale securities sold during the year ended February 28, 2013:
Not applicable(c) Losses on impairment of available-for-sale securities recognized to reflect declines in market value considered to be other than temporary were ¥415 million for the year ended February 28, 2013.
(d) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2013 was ¥9,293 million.

56

Fair value

Currency option contracts:
Buy: U.S. dollar call
Sell: U.S. dollar put
Buy: Euro call
Sell: Euro put
Interest rate swap agreements:
Variable rate received for variable rate
Variable rate received for fixed rate
Fixed rate received for variable rate

¥5
(5)
¥(0)

¥5
(5)
¥(0)

¥300
3
100
¥403

¥2
(0)
1
¥3

¥2
(0)
1
¥3

Contract or notionalamounts

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

Fair value

Valuation
gain (loss)

$ 950
2,074
$3,024

$46
(47)
$ (1)

$46
(47)
$ (1)

$2,94332
981$3,956

$26
(0)
8
$34

$26
(0)
8
$34

Contract or notionalamounts

Millions of yen
Fair value

Valuation
gain (loss)

¥ 312
680
68
137
¥1,197

¥  5
(68)
4
(2)
¥(61)

¥  5
(68)
4
(2)
¥(61)

¥ 300
57
100
¥ 457

¥  4
(0)
1
¥  5

¥  4
(0)
1
¥  5

(2) Derivative transactions processed by hedge accounting:February 28, 2014

Valuation
gain (loss)

¥ 97
211
¥308

(2) Information as of and for the Year Ended February 28, 2013(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2013 are summarized as follows:

Millions of yen

Thousands of U.S. dollars

February 28, 2014(b) Available-for-sale securities sold during the year ended February 28, 2014:

Contract or notionalamounts

Millions of yen
Hedged Items

Contract or notionalamounts

Fair value

Accounts payable
Accounts payable
Accounts payable
Accounts payable¥2,249
2,509
121
126

¥(31)
(20)
4
(1)

Accounts receivable

140¥5,145

4
¥(44)

57

Thousands of U.S. dollars
February 28, 2014

Hedged Items

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

Contract or notionalamounts

Fair value

Accounts payable
Accounts payable
Accounts payable
Accounts payable$22,064
24,6101,192
1,234$(307)
(196)
38
(10)

Accounts receivable

1,374$50,47440$(435)The net realizable value for these assets is based on their net selling price or their value in use. The net selling price is estimated by using their estimated disposal price. The value in use is calculated by discounting the future cash flow with 4.6% and 5.1% discount rates forthe years ended February 28, 2013 and February 28, 2014, respectively.

8. Retirement Plan and Retirement Benefits
The Company and its certain subsidiaries have defined benefit pension plan and plans for lump-sum retirement benefits as defined benefit retirement plans, as well as defined contribution pension plans as defined contribution retirement plans.
The corporate pension fund, which the Company and its certain subsidiaries have adopted, were dissolved on February 27, 2014, by
the approval of dissolution obtained from the Minister of Health, Labour and Welfare. As a result of this dissolution, loss from dissolution of corporate pension fund of ¥1,264 million ($12,399 thousand) was recognized in other expenses.
The reserve for retirement benefits as of February 28, 2013 and February 28, 2014 is analyzed as follows:

Millions of yen
February 28, 2013

Hedged Items

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

Contract or notionalamounts

Fair value

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

¥27
64
0
0

Accounts receivable578¥3,721

2¥93

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

February 28, 2013¥(28,122)
25,801(2,321)
(427)
4,042
1,294
4,352
¥ (3,058)

The Japanese tax regulations allow a company to defer capital gains on the sale of qualified real property, if the company intends to offset
such gains against the cost of newly acquired fixed assets. When such accounting is followed, the cost of the new fixed assets is reduced
to the extent of the deferred capital gains, thereby affecting related depreciation charges and accumulated depreciation.
Property, plant and equipment at February 28, 2013 and February 28, 2014 were reduced by ¥8,079 million and ¥8,035 million($78,825 thousand), respectively, representing accumulated deferred gains from eligible sales.

7. Impairment Loss on Fixed Assets

February 28, 2014

Tokyo metropolitan area and otherFebruary 28, 2013

Location

Tokyo metropolitan area and other

Usage

Business assets

Usage

Business assets

Description

Millions of yen

Buildings and structures
Other

¥211
112

Description

Thousands of
U.S. dollars$2,069
1,095

Millions of yen

Buildings and structures
Other intangible assets
Other
Goodwill¥

Millions of yen

February 28, 2013

¥

79
1
135
6,704
¥6,919February 28, 2014

¥211
—
112
—
¥323

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

Millions of yen$(182,377)
135,952(46,425)(3,640)20,661(29,404)
4,153$ (33,557)¥1,495
515
(207)
(57)
949
55
¥2,750Thousands of
U.S. dollars

2014

2014

¥1,301
381
(182)
(54)
269
464
¥2,179As of February 28, 2013

Straight-line basis
1.5%
0.2~1.5%
5~10 years
5~10 years$12,766
3,733(1,787)
(526)
2,637
4,551
$21,374

As of February 28, 2014

Straight-line basis
1.5%
0.0~1.5%
5~10 years
5~10 years

9. Notes to Consolidated Statements of Comprehensive Income
Millions of yen

Thousands of
U.S. dollars

February 28, 2014

$2,069—1,095—$3,164

Based on the result of future cash flow analysis that the recoverable amount of goodwill on Project Sloane Ltd., which is the considered subsidiary of the Company was less than the carrying amount, the Company recognized impairment loss of ¥6,704 million on theremaining unamortized portion of the goodwill for the year ended February 28, 2013.

58

February 28, 2014¥(18,592)
13,859(4,733)(371)
2,106(2,998)423¥ (3,421)

Other Comprehensive income for the years ended February 28, 2013 and February 28, 2014 consisted of the following:

79
1
135
6,704

The long-lived assets are basically grouped by brand, and assets for lease and idle assets are grouped individually by each item. The
Company has recognized a loss on impairment on assets for lease and idle assets due to a significant decline in their market value, and on
business assets due to a continuous loss generated from their operating activities, by reducing their book value to the respective net realizable value of each asset.
The impairment loss on long-lived assets for the years ended February 28, 2013 and February 28, 2014 consisted of the following:

Buildings and structures
Other intangible assets
Other
Goodwill
Total

2013

Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized prior service costs
Amortization of unrecognized actuarial differences
Contributions paid to the defined contribution pension plans
Net periodic pension expenses
Actuarial assumptions used in the calculation of the aforementioned information are as follows:

For the years ended February 28, 2014 and February 28, 2013, the Company reviewed its long-lived assets for impairment and, as a result,recognized an impairment loss as follows:

February 28, 2014

The net periodic pension expenses for the years ended February 28, 2013 and February 28, 2014 are as follows:

6. Property, Plant and Equipment

Location

Thousands of
U.S. dollars

Millions of yen

Net unrealized gain on available-for-sales securities:
Amount arising during the year
Reclassification adjustment for gain and loss
Amount before income tax effect
Income tax effect
Total
Deferred gain (loss) on hedging instruments:
Amount arising during the year
Reclassification adjustment for gain and loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments:
Amount arising during the year
Total
Share of other comprehensive income of associates accounted for using the equity-method:Amount arising during the year
Total
Total other comprehensive income

Thousands of
U.S. dollars

February 28, 2013

February 28, 2014

February 28, 2014

¥ 6,196415
6,611(1,657)
4,954¥ 6,302(984)
5,318(1,929)3,389$ 61,819(9,651)
52,168(18,922)
33,246

70
(22)
48
(24)
24

(44)
(70)
(114)
47
(67)

(436)
(687)
(1,123)
460
(663)

1,599
1,599

4,768
4,768

46,772
46,772387
387¥ 6,964451
451¥ 8,541

4,427
4,427
$ 83,782

5910. Notes to Consolidated Statements of Cash Flows

12. Income Taxes

Cash and cash equivalents at February 28, 2013 and February 28, 2014 consisted of the following:
Millions of yen

February 28, 2013

Cash and time deposits
Time deposits with maturities of more than three months
Cash and cash equivalents¥24,677(132)¥24,545

February 28, 2014

¥27,376(145)¥27,231

Thousands of
U.S. dollars

February 28, 2014

$268,549(1,424)$267,125

11. Lease Transactions
Certain finance lease contracts that are not deemed to transfer the ownership of the leased assets to lessees are accounted for as operatingleases, which is still permitted by Japanese accounting principles. Certain key information on such lease contracts of the Companies forthe years ended February 28, 2013 and February 28, 2014 are as follows:(Lessee)
Assumed data as to acquisition cost, accumulated depreciation, accumulated impairment loss and net book value of the leased assets,
which included the portion of interest thereon, as of February 28, 2013 and February 28, 2014 are summarized as follows:
February 28, 2013

Acquisition cost
Accumulated depreciation
Net book value

Tools,
furniture,and fixtures

¥ 353
(334)
¥ 19

Other

¥ 258
(242)
¥ 16

Millions of yen

Total

¥ 611
(576)
¥ 35

Thousands of U.S. dollars

February 28, 2014

Tools,
furniture,and fixtures

¥ 157
(157)
¥ 0

Other

¥ 108
(106)
¥ 2

Total

¥ 265
(263)
¥ 2

February 28, 2014
Tools,
furniture,and fixtures
Other
Total

$ 1,539(1,537)$    2$ 1,058(1,040)$   18$ 2,597(2,577)$   20The scheduled maturities of future lease payments on such lease contracts as of February 28, 2013 and February 28, 2014 are as follows:
Millions of yen

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

Thousands of
U.S. dollars

February 28, 2013

February 28, 2014

February 28, 2014

¥32
3
¥35

¥2
—
¥2

$20
—
$20

Lease expenses, reversal of impairment loss of leased assets, depreciation and impairment loss for the years ended February 28, 2013 andFebruary 28, 2014 are as follows:
Millions of yen

Lease expenses for the year
Depreciation

February 28, 2013

¥145
145

February 28, 2014¥32
32

Thousands of
U.S. dollars

February 28, 2014

$309
309

The Companies’ operating lease contracts:
The scheduled maturities of future lease payments on operating lease contracts as of February 28, 2013 and February 28, 2014 are as
follows:
Millions of yen

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

60

Thousands of
U.S. dollars

February 28, 2013

February 28, 2014

February 28, 2014

¥64
27
¥91

¥27
—
¥27

$262
—
$262

(Lessor)
Disclosure is omitted because it is immaterial as of February 29, 2013 and February 28, 2014.

The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities as at February 28,
2013 and February 28, 2014 consisted of the following elements:
Thousands of
U.S. dollars

Millions of yen

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

February 28, 2013

February 28, 2014

February 28, 2014

¥ 2,127
192
490
3,698
58
937
12,518
6,284
433
1
5,381
32,119(16,544)
15,575¥ 2,697
184
490
2,620
53
2,400
10,256
6,023
432
37
5,382
30,574(19,071)
11,503$ 26,453
1,803
4,809
25,704516
23,546100,604
59,0844,242
360
52,796299,917(187,083)
112,834(1,653)(141)(18)(1,657)(1,451)(4,920)¥ 10,655

—
(126)
(18)
(3,585)(597)(4,326)¥ 7,177—(1,238)(168)(35,180)(5,850)(42,436)$ 70,398

The reconciliation of the difference between the statutory tax rate and the effective tax rate for the years ended February 28, 2013 andFebruary 28, 2014 is as follows:
Statutory tax rate
Reconciliation:
Permanently non-deductible expenses (entertainment expenses, etc.)
Income not taxable for tax purposes (dividends received, etc.)
Amortization of goodwill
Other
Effective tax rate

2013

%

—
—
—
—
—
—

2014

38.0
2.6
(1.5)
12.3
(0.9)
50.5

The reconciliation of the difference between the statutory tax rate and the effective tax rate for the year ended February 28, 2013 has notbeen disclosed because such a difference is immaterial.
(Change in tax rates after the closing dates of the consolidated accounts)
On March 31, 2014, “Partial Amendment of the Income Tax Act” (Act No.10 of 2014) was promulgated, according to which the Special
Reconstruction Corporation Tax will no longer be imposed from the consolidated fiscal years beginning on or after April 1, 2014.
Accordingly, for temporary differences expected to be reversed in the fiscal year beginning on March 1, 2015, the statutory tax rates applied to the calculation of deferred tax assets and liabilities, will be lowered from 38.0% to 35.6%.
The effect of adopting the revised statutory tax rates for the fiscal year ended February 28, 2014 will be immaterial.
(Application of consolidated taxation system)
The Company and its certain subsidiaries applied consolidated taxation system from the fiscal year ended February 28, 2014.

13. Revaluation of Land
The Company revaluated its own land for business use in accordance with “Act on Revaluation of Land” (Act No. 34, promulgated on
March 31, 1998) and “Act for Partial Revision of Act on Revaluation of Land” (amended on March 31, 2001). The income taxes corresponding to the net unrealized gain are reported in long-term liabilities as deferred tax liabilities-revaluation of land and the net unrealized gain, net of deferred taxes, are reported as net revaluation loss of land in net assets.
Pursuant to Article 2-4 of “Order for Enforcement of Act on Revaluation of Land” (the “Order”; Cabinet Order No. 119, promulgated on March 31, 1998), in order to calculate the land value for a basis of determining the taxable amount subject to land value tax prescribed by Article 16 of “Land Value Tax Law” (Law No. 69 of 1991), in addition to conducting appropriate adjustments for land shape of
the assessment, certain lands are determined by the assessed value of the fixed assets stipulated in Article 2-3 of the Order, based on themethod established and published by the Director General of National Tax Agency.
The difference between the market value of land subject to the revaluation and the book value as at February 28, 2013 and 2014 was¥3,467 million and ¥3,460 million ($33,943 thousand), respectively.

6114. Commitments and Contingent Liabilities

16. Shareholders’ Equity

The Company was contingently liable as a guarantor for certain affiliates’ bank loans. The outstanding balance of such bank loans guaranteed as at February 28, 2013 and February 28, 2014 aggregated to ¥39 million and ¥46 million ($455 thousand), respectively.

Under the Corporation Law of Japan, the entire amount of the issue price of shares is required to be designated as a stated common
stock account, although a company in Japan may, by resolution of its Board of Directors, account for an amount not exceeding 50% of theissue price of new shares as additional paid-in capital.
The Corporation Law of Japan provides that an amount equal to 10% of distributions from retained earnings paid by the Company
and its Japanese subsidiaries be appropriated as a legal reserve. No further appropriations are required when the total amount of the additional paid-in capital and the legal reserve equals 25% of their respective stated capital. The Corporation Law of Japan also provides that
additional paid-in capital and the legal reserve are available for appropriations by a resolution of the shareholders. Balances of the legal
reserve are included in retained earnings in the accompanying consolidated balance sheets.
Cash dividends charged to retained earnings for the years ended February 28, 2013 and February 28, 2014 represent dividends paidout during those years. The amount available for dividends is based on the amount recorded in the Company’s non-consolidated books ofaccount in accordance with the Corporation Law of Japan.

15. Short-Term Loans payable and Long-Term Loans payable
Short-term loans payable at February 28, 2013 and February 28, 2014 represented loans, principally from banks. The weighted-average interest rate on these loans was 0.8% in 2013 and 2014.
Long-term loans payable at February 28, 2013 and February 28, 2014 are summarized as follows:
Millions of yen

Unsecured loans, principally from banks, maturing in installments through 2018
Less current portion with weighted average interest of 0.8% at February 28, 2014
Long-term loans payable, less current portion with weighted average interest of 1.0% at
February 28, 2014

February 28, 2013¥20,291
18,967

February 28, 2014

¥17,034
3,132¥ 1,324¥13,902

Lease obligations at February 28, 2013 and February 28, 2014 are summarized as follows:
Millions of yen

Lease obligations
Less current portion of lease obligations

February 28, 2013

¥1,648585¥1,063February 28, 2014

¥6,862881¥5,981

The aggregate annual maturities of long-term loans payable after February 28, 2015 are as follows:
Millions of yen

Year ending February 28 or 29:
2016
2017
2018
2019

¥3,164
3,178
4,558
3,002

The aggregate annual maturities of lease obligations after February 28, 2015 are as follows:
Millions of yen

Year ending February 28 or 29:
2016
2017
2018
2019

¥724
572
412
316

Bonds at February 28, 2013 and February 28, 2014 are summarized as follows:
Millions of yen

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

February 28, 2013

¥ 10
80
250
20
20
33
413
163
¥250

February 28, 2014

¥ —
40
200
—
10
—
250
100
¥150

The aggregate annual maturities of bonds after February 28, 2015 are as follows:Year ending February 28 or 29:
2016
2017
2018
2019

Millions of yen

¥50
50
50
—

Thousands of
U.S. dollars

February 28, 2014

$167,096
30,726$136,370
Thousands of
U.S. dollars

February 28, 2014

$67,316
8,641$58,675

Thousands of
U.S. dollars$31,034
31,17744,71729,442Thousands of
U.S. dollars$ 7,101
5,608
4,046
3,100
Thousands of
U.S. dollars

February 28, 2014

$

—
392
1,962
—
98
—
2,452
981
$1,471Thousands of
U.S. dollars

$490
490
491
—

Dividends to be paid after the balance sheet date, which were approved by the general meeting of shareholders held on May 22, 2014,
are as follows:(a) Total dividends(b) Source of dividends(c) Cash dividends per common share(d) Date to determine which shareholders receive the dividends(e) Effective date

17. Per Share Information
Net income per share of common stock is computed based upon the weighted-average number of shares of common stock outstanding
during each year. Cash dividends per share shown for each year in the accompanying consolidated statements of operations represent
dividends declared as applicable to the respective years rather than those paid during the years.
The basis for the calculation of basic and diluted net income per share for the years ended February 28, 2013 and February 28, 2014 is asfollows:

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

2013

¥

Millions of yen

4,503—¥ 4,503
156,836
1,390

2014

¥

4,659
—
¥ 4,659
156,904
1,581

Thousands of
U.S. dollars
2014$45,703—$45,703

18. Related-Party Transactions
Year Ended February 28, 2014

The Company leased land from Takeshi Hirouchi, Representative Director, Chairman and President of ONWARD HOLDINGS Co.,
Ltd., during the year and the rental fee was ¥7 million ($71 thousand). Also, Mr. Hirouchi paid a rental fee of ¥16 million ($160 thousand) to the Company for a house. The rental fees were determined by the average market prices.

Year Ended February 28, 2013

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

19. Stock Options
The cost recognized for the stock options for the years ended February 28, 2013 and February 28, 2014 was ¥171 million and ¥149 million($1,457 thousand), respectively, which is included in selling, general and administrative expenses.

2013 Stock Option Plan (No. 14)

Under the 2013 stock option plan (No. 14), stock options were granted to 5 directors of the Company on June 20, 2013. They are exercisable in the period from June 21, 2013 to June 20, 2043. The terms of the options include certain limitations on the exercisability underwhich grantees can exercise their options during a five-year period starting a year after they lose their positions as directors of theCompany.
Number of stock options granted by the type of shares is 107,000 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Fair value at the grant date62

¥3,766 million ($36,947 thousand)
Retained earnings¥24 ($0.24)
February 28, 2014
May 23, 2014

¥1 ($0.01)¥629 ($6.17)

63

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:
Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 20142013 stock option plan (No. 14)—
107,000——
107,000

The fair value of the 2013 stock options (No. 14) was estimated using the Black-Scholes option-valuation model with the following
assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

32.64%
7 years and 4 months¥24 per share
0.588%The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it isdifficult to estimate forfeiture in the future.

2013 Stock Option Plan (No. 13)

Under the 2013 stock option plan (No. 13), stock options were granted to 14 executive officers of the Company, 6 directors and 9 executive officers of the Company’s subsidiary on March 18, 2013. They are exercisable in the period from March 19, 2013 to February 28, 2043.
The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a fiveyear period starting a year after they lose their positions as executive officer of the Company, directors or executive officers of theCompany’s subsidiary.
Number of stock options granted by the type of shares is 151,300 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Fair value at the grant date

¥1 ($0.01)¥572 ($5.61)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:
Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 20142013 stock option plan (No. 13)—
151,300
8,100—
143,200

The fair value of the 2013 stock options (No. 13) was estimated using the Black-Scholes option-valuation model with the following
assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

31.46%
9 years and 0 months¥24 per share
0.524%

Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 20142012 stock option plan (No. 12)

141,400———
141,400

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

2012 Stock Option Plan (No. 11)

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

¥1 ($0.01)¥444 ($4.36)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:
Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 2014
Vested:Outstanding at February 28, 2013
VestedExercised
Forfeited
Outstanding at February 28, 20142012 stock option plan (No. 11)

197,300——
23,300174,000—
23,300——23,300The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it isdifficult to estimate forfeiture in the future.

2011 Stock Option Plan (No. 10)

Under the 2011 stock option plan (No. 10), stock options were granted to 5 directors of the Company on June 20, 2011. They are exercisable
in the period from June 21, 2011 to June 20, 2041. The terms of the options include certain limitations on the exercisability under which
grantees can exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
Number of stock options granted by the type of shares is 144,800 shares of common stock.
A summary of price information for the stock option plan is as follows:

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

Exercise price
Fair value at the grant date2012 Stock Option Plan (No. 12)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:

Under the 2012 stock option plan (No. 12), stock options were granted to 5 directors of the Company on June 20, 2012. They are exercisable in the period from June 21, 2012 to June 20, 2042. The terms of the options include certain limitations on the exercisability underwhich grantees can exercise their options during a five-year period starting a year after they lose their positions as directors of theCompany.
Number of stock options granted by the type of shares is 141,400 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Fair value at the grant date64

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:¥1 ($0.01)¥458 ($4.49)

Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 2014
Vested:Outstanding at February 28, 2013
VestedExercised
Forfeited
Outstanding at February 28, 2014

¥1 ($0.01)¥510 ($5.00)

2011 stock option plan (No. 10)

144,800——
65,40079,400—65,400——65,40065

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

2011 Stock Option Plan (No. 9)

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

¥1 ($0.01)¥893 ($8.76)¥444 ($4.36)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:
Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 2014
Vested:Outstanding at February 28, 2013
VestedExercised
Forfeited
Outstanding at February 28, 20142011 stock option plan (No. 9)

181,500——
38,200143,300—
38,2007,200—
31,000The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it isdifficult to estimate forfeiture in the future.

2010 Stock Option Plan (No. 8)

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

¥1 ($0.01)¥613 ($6.01)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:
Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 2014
Vested:Outstanding at February 28, 2013
VestedExercised
Forfeited
Outstanding at February 28, 20142010 stock option plan (No. 8)

104,800——
52,50052,300—52,500——52,5002010 Stock Option Plan (No. 7)

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

¥1 ($0.01)¥893 ($8.76)¥475 ($4.66)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:
Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 2014
Vested:Outstanding at February 28, 2013
VestedExercised
Forfeited
Outstanding at February 28, 20142010 stock option plan (No. 7)

152,500——
37,600114,900
9,400
37,6007,800—
39,200The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it isdifficult to estimate forfeiture in the future.

2009 Stock Option Plan (No. 6)

Under the 2009 stock option plan (No. 6), stock options were granted to 5 directors of the Company on June 19, 2009. They are exercisable
in the period from June 20, 2009 to June 19, 2039. The terms of the options include certain limitations on the exercisability under which
grantees can exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
Number of stock options granted by the type of shares is 155,000 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

¥1 ($0.01)¥696 ($6.83)¥432 ($4.24)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:
Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 2014
Vested:Outstanding at February 28, 2013
VestedExercised
Forfeited
Outstanding at February 28, 20142009 stock option plan (No. 6)

141,500——
69,50072,000—69,50012,300—57,200The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it isdifficult to estimate forfeiture in the future.

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

66

67

2009 Stock Option Plan (No. 5)

Under the 2009 stock option plan (No. 5), stock options were granted to 11 directors and 19 executive officers of the Company’s subsidiary on March 18, 2009. They are exercisable in the period from March 19, 2009 to February 28, 2039. The terms of the options include
certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after theylose their positions as directors or executive officers of the Company’s subsidiary.
Number of stock options granted by the type of shares is 268,900 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

¥1 ($0.01)¥857 ($8.41)¥362 ($3.55)

2009 stock option plan (No. 5)

165,100——
37,500127,600
7,800
37,50010,500—34,800The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it isdifficult to estimate forfeiture in the future.

2008 Stock Option Plan (No. 4)

Under the 2008 stock option plan (No. 4), stock options were granted to 12 directors and 21 executive officers of the Company’s subsidiary on June 20, 2008. They are exercisable in the period from June 21, 2008 to February 28, 2038. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after theylose their positions as directors or executive officers of the Company’s subsidiary.
Number of stock options granted by the type of shares is 91,100 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

¥1 ($0.01)¥862 ($8.46)¥905 ($8.88)

2008 stock option plan (No. 4)

44,900——10,00034,9001,600
10,000
3,200
—
8,400

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

68

Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

¥1 ($0.01)¥736 ($7.22)¥944 ($9.26)

Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 2014
Vested:Outstanding at February 28, 2013
VestedExercised
Forfeited
Outstanding at February 28, 20142008 stock option plan (No. 3)

65,000——33,00032,000—33,00013,000—20,000The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it isdifficult to estimate forfeiture in the future.

2007 Stock Option Plan (No. 2)

Under the 2007 stock option plan (No. 2), stock options were granted to 5 directors and 2 corporate auditors of the Company on July 20,
2007. They are exercisable in the period from July 21, 2007 to July 20, 2037. The terms of the options include certain limitations on theexercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors or corporate auditors.
Number of stock options granted by the type of shares is 40,000 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

¥1 ($0.01)¥795 ($7.80)¥1,284 ($12.60)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:
Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 2014
Vested:Outstanding at February 28, 2013
VestedExercised
Forfeited
Outstanding at February 28, 2014

Under the 2008 stock option plan (No. 3), stock options were granted to 5 directors of the Company on June 20, 2008. They are exercisable
in the period from June 21, 2008 to June 20, 2038. The terms of the options include certain limitations on the exercisability under which
grantees can exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
Number of stock options granted by the type of shares is 70,000 shares of common stock.
A summary of price information for the stock option plan is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:
Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 2014
Vested:Outstanding at February 28, 2013
VestedExercised
Forfeited
Outstanding at February 28, 20142008 Stock Option Plan (No. 3)

Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 2014
Vested:Outstanding at February 28, 2013
VestedExercised
Forfeited
Outstanding at February 28, 20142007 stock option plan (No. 2)

23,300——5,200
18,100
—
5,200
5,200
—
—

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

69

2006 Stock Option Plan (No. 1)

Under the 2006 stock option plan (No. 1), stock options were granted to 12 directors and 2 corporate auditors of the Company on June20, 2006. They are exercisable in the period from July 1, 2006 to June 30, 2036. The terms of the options include certain limitations on theexercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors or corporate auditors.
Number of stock options granted by the type of shares is 63,000 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

¥1 ($0.01)¥758 ($7.44)¥1,541 ($15.12)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2014 is as follows:
Non-vested:
Outstanding at February 28, 2013
GrantedForfeited
VestedOutstanding at February 28, 2014
Vested:Outstanding at February 28, 2013
VestedExercised
Forfeited
Outstanding at February 28, 2014

2006 stock option plan (No. 1)

20,000——4,500
15,500
3,000
4,500
7,500
—
—

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

20. Segment Information(1) Summary of reportable segments
The Onward Group’s reportable segments are components for which separate financial information is available and regular evaluation by
the Board of Directors is being performed to decide how management resources are allocated and to assess performance.
The principal business of the Onward Group is the apparel business (planning, production and sales of textile products, including
men’s and women’s clothing). Additionally, the Onward Group also operates service and resort businesses.
The reportable segments of the Onward Group comprise the “Apparel Business”, which has been divided geographically into three
categories, “Japan,” “Europe,” and “Asia/North America”, and “Other Business.”
The “Apparel Business ( Japan)” operates the apparel business in Japan; the “Apparel Business (Europe)” operates the apparel business
in Europe; and the “Apparel Business (Asia/North America)” operates the apparel business in Asia and North America. “Other Business”
operates the logistics, sports facilities and resort facilities businesses.
(2) Method of calculating sales, profit or loss, assets, liabilities and other items by reportable segment
Accounting methods for reportable segments are mostly the same as the accounting methods described in “Basis of Presentation of theConsolidated Financial Statements.”
Income by reportable segment refers to operating income. Intersegment sales and transfers are based on market values.
(3) Information on sales, profit or loss, assets, liabilities and other items by reportable segment for the years ended February 28, 2014 andFebruary 28, 2013 are as follows:
Millions of yen

Apparel
For the year ended February 28, 2014

Sale to outside customers
Intersegment sales
Total
Segment income (loss)
Segment assets
Depreciation and amortization (Note 2)
Investments in equity-method affiliates
Increases in property, plant and equipment,
and intangible assets (Note 2)Japan¥208,095
1,438¥209,533¥ 13,877¥142,327¥ 3,9109,024
13,471

Europe¥45,524
601¥46,125¥ (1,235)¥35,557¥ 1,069
91

Asia/North
America¥ 8,457441¥ 8,898¥ (1,008)¥ 6,038
¥ 466
—

1,156

762

Sale to outside customers
Intersegment sales
Total
Segment income (loss)
Segment assets
Depreciation and amortization (Note 2)
Investments in equity-method affiliates
Increases in property, plant and equipment,
and intangible assets (Note 2)(Notes)70

Japan

Europe$2,041,347
14,108$2,055,455$ 136,132$1,396,184$ 38,354
88,527$446,575
5,896$452,471$ (12,111)$348,802$ 10,486
890

132,145

11,340

Other

Total

¥262,076
2,480¥264,556¥ 11,634¥183,922¥ 5,445
9,115¥16,9978,354¥25,351¥ 290¥27,756¥ 959—¥279,073
10,834¥289,907¥ 11,924¥211,678¥ 6,404
9,115

15,3891,270

16,659Adjustments Consolidated(Note 1)
total (Note 3)¥—(10,834)¥ (10,834)¥  (2,502)¥101,753¥
397—¥279,073—¥279,073¥ 9,422¥313,431¥ 6,801
9,115

5,805

22,464

Thousands of U.S. dollars

Apparel
For the year ended February 28, 2014

Total

Asia/North
America

Total$82,962 $2,570,884
4,324
24,328$87,286 $2,595,212$ (9,891) $ 114,130$59,235 $1,804,221$ 4,571 $ 53,411—
89,417
7,475

150,960

Other

Total

$166,736
81,955$248,691$ 2,842$272,275$ 9,406—$2,737,620
106,283$2,843,903$ 116,972$2,076,496$ 62,817
89,417

12,464

163,424

Adjustments Consolidated(Note 1)
total (Note 3)$  — $2,737,620(106,283)—$(106,283) $2,737,620$ (24,541) $ 92,431$  998,161 $3,074,657$    3,897 $ 66,714—
89,41756,942

220,366

1. Adjustments consist of the following:(1)	The adjustment amount for segment income (loss) of ¥(2,502) million ($(24,541) thousand) includes amortization of goodwill of ¥(3,313)
million ($(32,501) thousand), elimination of intersegment sales of ¥3,984 million ($39,080 thousand), and corporate expenses not allocated to reportable segments of ¥(3,173) million ($(31,120) thousand). Corporate expenses are mainly general administrative expenses not allocated to reportable segments.
(2)	The adjustment amount for segment assets of ¥101,753 million ($998,161 thousand) includes the unamortized balance of goodwill of¥29,741 million ($291,748 thousand), elimination of intersegment sales of ¥(130,059) million ($(1,275,836) thousand), and corporate assets
not allocated to reportable segments of ¥202,071 million ($1,982,249 thousand). Corporate assets are mainly assets held by the Company,a pure holding company.
2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses(furniture and fixtures).
3. Segment income (loss) coincides with the amount of operating income in the Consolidated statements of Operations.

71

Independent Auditor’s Report

Millions of yen

Apparel
For the year ended February 28, 2013

Sale to outside customers
Intersegment sales
Total
Segment income (loss)
Segment assets
Depreciation and amortization (Note 2)
Investments in equity-method affiliates
Increases in property, plant and equipment,
and intangible assets (Note 2)(Notes)Japan¥202,353
1,714¥204,067¥ 15,499¥135,336¥ 3,5498,852

Europe¥33,215426¥33,641¥ (438)¥25,905
¥ 726
13

4,224

Asia/North
America

Other

Total

Total

¥7,108403¥7,511¥ (572)¥5,911¥ 284—¥242,676
2,543¥245,219¥ 14,489¥167,152¥ 4,559
8,865¥15,694
7,792¥23,486¥ 333¥32,440¥ 796
16¥258,370
10,335¥268,705¥ 14,822¥199,592¥ 5,355
8,881

587

6,258

825

7,083

1,447

Adjustments Consolidated(Note 1)
total (Note 3)¥  —(10,335)¥(10,335)¥ (3,629)¥  87,187¥   366—¥258,370—¥258,370¥ 11,193¥286,779¥ 5,721
8,881

1,866

8,949

1. Adjustments consist of the following:(1)	The adjustment amount for segment income (loss) of ¥(3,629) million includes amortization of goodwill of ¥(3,938) million, eliminationof intersegment sales of ¥3,869 million, and corporate expenses not allocated to reportable segments of ¥(3,560) million. Corporate expenses are mainly general administrative expenses not allocated to reportable segments.
(2)	The adjustment amount for segment assets of ¥87,187 million includes the unamortized balance of goodwill of ¥32,770 million, elimination of intersegment sales of ¥(139,931) million, and corporate assets not allocated to reportable segments of ¥194,348 million. Corporate
assets are mainly assets held by the Company, a pure holding company.
2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses(furniture and fixtures).
3. Segment income (loss) coincides with the amount of operating income in the Consolidated statements of Operations.

(4) Segment information by geographical areas for the year ended February 28, 2014 and February 28, 2013 are as follows:(a) Sales
For the year ended February 28, 2014
Japan

¥225,057

For the year ended February 28, 2014
Japan

$2,207,743
For the year ended February 28, 2013
Japan

¥218,018

EuropeJapan¥83,440

For the year ended February 28, 2014
Japan

$818,518

For the year ended February 28, 2013
Japan

¥70,915

Other¥26,086

EuropeEuropeThousands of U.S. dollars

Millions of yen$ 2,737,620

Other

Total

Other

Total

¥21,539

Millions of yen¥258,370¥10,073

Thousands of U.S. dollars¥102,879

Other$91,880

EuropeTotal$273,981¥9,366

Europe¥279,073

Other¥18,813

EuropeTotal¥27,930$255,896(b) Property, plant and equipment
For the year ended February 28, 2014

Millions of yen

Total$98,812

Millions of yen$1,009,210

Other¥7,664

Total¥8,283¥86,862(5) Segment information on impairment losses on property, plant and equipment by reportable segment for the year ended February 28,
2014 and February 28, 2013 are as follows:
Millions of yen

Apparel
For the year ended February 28, 2014

Impairment loss

Japan

¥251

Europe¥—Asia/North
America¥51

For the year ended February 28, 2014

Japan

$2,463

Europe$—Asia/North
America$503

For the year ended February 28, 2013

72

Japan

¥172

Europe

¥—

Other

Other

Elimination ofintersegment
amounts

Other

Elimination ofintersegment
amounts

¥21

¥—

Total

¥323

Total

$2,966

$198

$—

Total

$3,164

Millions of yen

ApparelImpairment loss

¥302

Thousands of U.S. dollars

ApparelImpairment loss

Total

Elimination ofintersegment
amounts

Asia/North
America

¥42

Total

¥214

¥—

¥6,705

Total¥6,91973

Main Subsidiaries

Japan
Onward Kashiyama Co., Ltd.

Sakula Inc.

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

8-1 Nishinokyo Ikenouchi-cho,
Nakagyo-ku, Kyoto City, Kyoto 604-8375, Japan
Tel: (81) 75-384-0988

Onward Trading Co., Ltd.

Across Transport Co., Ltd.

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

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

Chacott Co., Ltd.

O & K Co., Ltd.

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

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

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

Charles & Keith Japan Co., Ltd.
4-31-10 Jingumae, Shibuya-ku,
Tokyo 150-0001, Japan
Tel: (81) 3-5785-1873

Onward Resort & Golf Co., Ltd.
Toda Building, 1-7-1 Kyobashi, Chuo-ku,
Tokyo 104-8329, Japan
Tel: (81) 3-4512-1130

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

Onward Global Fashion Co., Ltd.

Booklet Co., Ltd.

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

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

Creative Yoko Co., Ltd.

Onward Life Design Network Inc.

667-16 Takada, Nagano City,
Nagano 381-8545, Japan
Tel: (81) 26-226-2001

Toda Building, 1-7-1 Kyobashi, Chuo-ku,
Tokyo 104-8329, Japan
Tel: (81) 3-4512-1133

Island Co., Ltd.

Bien Co., Ltd.

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

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

Candela International Co., Ltd.

O.P.S. Co., Ltd.

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

3-11-6 Kaigan, Minato-ku, Tokyo 108-8439, Japan
Tel: (81) 3-5476-6131

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

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

Intimates Co., Ltd.
6F VORT Aobadai Building, 3-10-9 Aobadai,
Meguro-ku, Tokyo 153-0042, Japan
Tel: (81) 3-5428-6611

74

Overseas
EuropeAsia

United States

Onward Italia S.p.A.

Onward Fashion Trading(China) Co., Ltd.

J. Press, Inc.

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

Onward Luxury Group S.p.A.
Via Cassia 69, 50029 Tavarnuzze, Firenze, Italy
Tel: (39) 055-237-2020

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

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

Horloge Saint Benoit S.A.S.
22, Rue Saint Benoit, 75006 Paris, France
Tel: (33) 1-4544-1118

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

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

Taicang Onward HighFashion Co., Ltd.
28 Group of Taixi Village, Shaxi Town, Taicang City,
Jiangsu Province, People’s Republic of China
Tel: (86) 512-5325-4297

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

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

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

Onward Golf Resort Guam, Inc.
825 Route 4A, Talofofo, Guam 96915, U.S.A.
Tel: (1) 671-789-5555

Onward Kashiyama
Hong Kong Ltd.
Unit 1208-9, Lippo Sun Plaza,
28 Canton Road, Tsim Sha Tsui, Kowloon,
Hong Kong, People’s Republic of China
Tel: (852) 2367-2055

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

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

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

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

Shanghai Across Apparel
Processing Co., Ltd.
Building 6, No. 258, Jinglian Road, Minhang,
Shanghai, People’s Republic of China
Tel: (86) 21-6434-3099

75

Corporate/Investor Information

History

As of February 28, 2014

Head Office

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

1927

February

Junzo Kashiyama established Kashiyama Trading.

1947

September

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

1960

October

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

1962

April

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

Established

September 1947
¥30,079 million

1964

July

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

Capital

1966

September

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

Common Stock

Authorized—400,000,000 shares
Issued—172,921,669 shares

1972

July

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

September

Established Onward Kashiyama U.S.A. INC.

Note: The total number of issued and outstanding shares included 15,988,000 shares of treasury stock.

Number of
Shareholders

12,386

Stock Exchange
Listings

Tokyo, Nagoya

Transfer Agent
Number of Employees(Consolidated)

1973

February

Established Onward Kashiyama France S.A.

1974

February

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

1986

October

Acquired J. Press, Inc.

1988

February

Established Onward Kashiyama Hong Kong Ltd.

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

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

1989

DecemberEstablished Onward Kashiyama U.K. Ltd.

5,224

1990

January

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

Major Shareholders

Kashiyama Scholarship Foundation

Number of
Shares Held(Thousands)

Percentage ofTotal Shares
Issued (%)

5,727

3.6

8,710

Nippon Life Insurance Company
Isetan Mitsukoshi, Ltd.

5,001

Northern Trust Co. AVFC Account Non Treaty

4,228

5.5

2.6

Japan Trustee Services Bank, Ltd. (Trust account)

4,168

2.6

JAPAN RE FIDELITY

3,586

2.2

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

3,448

MARUI GROUP CO., LTD.

3,417

Notes:
1.	The Company holds 15,988,000 shares of treasury stock. Treasury stock is not included in the above Major
Shareholders information.
2. Percentage of total shares issued are calculated after deducting 15,988,000 shares of treasury stock.

Japanese individuals
and others
26.4%

Japanesefinancial
institutions
26.5%

2.6

4,200
3,730

(On a number of shares basis)

3.1

The Dai-ichi Mutual Life Insurance Company Ltd.
Onward Holdings Customers’ Shareholding Association

Distribution of Ownershipamong Shareholders

2.3
2.1
2.1

Foreigninstitutions
and others
22.2%Japanese
securities
companies
0.9%

Other Japanese
corporations
24.0%

July

Acquired Chacott Co., Ltd.

1991

February

Launched Onward Research and Development Institute.

1992

May

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

1994

May

Established Bus Stop Co., Ltd.

1995

June

Established Shanghai Onward Fashion Co., Ltd.

1997

June

Established Onward Kashiyama Korea Co., Ltd.

2004

January

Acquired Erika s.r.l.

2005

May

Acquired Project Sloane Ltd. ( Joseph Group).

July

Acquired Iris S.p.A.

2006

October

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

2007

April

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

May

Acquired Frassineti s.r.l.

June

Established J. Direction Co., Ltd.

September

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

Note: J apanese individuals and others data include
treasury stock.

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

Stock Price Range and Trading Volume

2008

Stock Price
Yen

Trading Volume
Thousand Shares

100,000

1,200

75,000

900

600

50,000300

076

25,0002012/3

2013/3

2014/3October

Acquired Corporate s.r.l.

October

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

2009

DecemberAcquired a controlling interest in Island Co., Ltd.

2010

June

Established Onward Kashiyama Singapore Pte. Ltd.

2011

AugustEstablished Onward Kashiyama Vietnam Ltd.

2012

April

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

May

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

DecemberEstablished Charles & Keith Japan Co., Ltd.

February

Acquired Sakula Inc.

June

Established Onward Luxury Group S.p.A.

March

Established Onward Global Fashion Co., Ltd.

2013
2014

0

77

Onward Holdings Co., LTD.

Head Office:Toda Building, 7-1, Kyobashi 1-chome,
Chuo-ku, Tokyo 104-8329, Japan
Tel: +81-3-4512-1020

http://www.onward-hd.co.jp/

Printed in Japan

Annual Report 2014

ONWARD HOLDINGS CO., LTD.

Annual Report 2014
Year Ended February 28, 2014

Onward Holdings Co., LTD.