ANNUAL REPORT 2016
Year Ended February 29, 2016

Onward Holdings Co., Ltd.

JIL SANDER 2016 spring/summer billboard advertising campaign in Quai Voltaire, Paris

Prospects
In fiscal year 2016, we continued to face many challenges characterized by economic stagnancy and unstable market
conditions both in Japan and overseas. Amid such adversity, the Onward Group proceeded to reorganize assets andbusinesses to create foundations in preparation for the launch of the new medium-term management plan.
We then cut a fresh start in March 2016 on the path toward the acceleration of our Omni-channel retailingstrategy and our expansion in global markets, both representing business opportunities for future growth.
These two business opportunities will be central to our efforts to provide new value and services to realize higher
levels of customer satisfaction and thereby expand our customer base on a global scale.
We are also pushing forward with the development of a manufacturing platform that can provide a stable supply of
impeccable quality products. To this end, we have introduced the Onward-Approved Factory System and are promoting
CSR procurement to enhance partnerships with factories exhibiting excellence in realizing sustainable growth.
Priding ourselves on being a leading company in the apparel industry and valuing the strengths cultivated over
our almost 90-year history, we will pursue sustainable growth for both the Group and the apparel industry as awhole. Staying on this path, we will continue to tackle the challenges that lie between us and prospects three years
down the line.

Contents
02

Our History

34

06

Key Performance Trends

36	Environmental and Social Responsibility

07

The Year in Brief

40

08

Review of Operations

10

A Letter to Our Shareholders

44	Board of Directors, Audit & Supervisory Board Members,
and Executive Officers / Organization Chart

11

A Message from the President

45

Financial Section

14

Core Brands

88

Main Subsidiaries

22

Domestic Business

90

Corporate/Investor Information

28

Overseas Business

91

History

Our Network
Corporate Governance30	Special Feature: Onward-Approved
Factory System
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 numerical figures described herein will be realized.
The achievement of stated targets is dependent on not only the efforts of the Company but also the conditions facing the industry as a whole,
and we ask for understanding in this regard.

01

Our History

Our History

1927

1950s–1960s

1970s–1980s

Founding

Ready-Made Clothing Revolution

Overseas Expansion

Onward Kashiyama begins as Kashiyama
Trading, established in Osaka by its founderJunzo Kashiyama.

In the 1950s, Onward begins the production and sale of ready-made menswear.
Taking its cue from apparel manufacturing in the United States, the Company adopts
an assembly-line production system and introduces such advanced equipment as
Hoffman steam press machines. These efforts result in substantial improvements in
productivity and the quality of ready-made clothing. Along with this success, theCompany develops a business format for transactions between apparel companies anddepartment stores that is now widely used in 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 develops its global strategy and establishes subsidiaries in New York in 1972,
Paris in 1973, and Milan in 1974. By establishing local subsidiaries in three major
fashion cities in a short period of time, Onward succeeded in organizing the foundation of the overseas business, drawing on themost updated information on the global fashion
business. In 1977, after an interview with
up-and-coming designer Jean-Paul Gaultier, then24, the Company decides to sponsor his brandcreation. His first fashion show is held in Paris in1978 with the support of the Company.

3

3 Bus Stop store on Boulevard Saint-Germain in Paris

1

4 Onward Kashiyama’s U.S. offices
5Jean-Paul Gaultier’s debut Paris fashion show, 1978

1 Company founder Junzo Kashiyama
2 Grading machine modifies and4cuts basic sewing patterns

2

5

Net Sales¥ billion¥

350

1990s–2000

254 billion

Launch of Core Brands

300

250

200

150

6

100

7

6 Launches Kumikyoku, 1992

The womenswear business dramatically expandsin the 1990s with the launch of core brands, beginning with Kumikyoku in 1992 and followedby Nijyusanku in 1993, ICB in 1995, and Jiyuku
in 2000. The luxury brand boom driven by
Japan’s bubble economy comes to an end in the
1990s, and consumers start to look for more simple and practical clothing, and they are able tofind this style in Japanese brands. Department
stores begin expanding womenswear floor spaces
and emphasizing new brands from Japanese makers. Thanks to this trend, Onward Kashiyama’s
store numbers grow rapidly after the launch of
the new brands, and this impressive growthforms the foundations for future advancement.

7 Launches Nijyusanku, 1993

50

8 Launches ICB (International Concept

Brand), 1995

0

1927 1960

1970

1980

1990

2000

2010

2017

(Forecast)
8

02

03

Our History

2001–2010
Launch of Global Apparel Group
Maintaining its focus on the department store channel in the domestic market, Onward turns
its eyes abroad at the turn of the century. By accelerating global strategies, the Company
begins its advance into the Chinese market, establishes a manufacturing platform in Italy, andacquires prominent European brands JOSEPH in 2005 and JIL SANDER in 2008.
The transition to a holding company system is made in 2007. In the years that follow,
the Company continues to draw uniquely powerful brands under its umbrella in Japan aswell as overseas, acquiring pet fashion pioneer Creative Yoko in 2008 and Island, the maker of the trusted Grace Continental brand for discerning women, in 2009. It was at thistime that Onward truly makes a new start as a global apparel group that undertakes various types of fashion businesses all over the world.

10

9 Acquires Joseph Group, 2005

10 Acquires Jil Sander Group, 2008
11 Acquires Island Co., Ltd., 200911

9

2011–Today
Road to Ongoing Growth

12

13

04

06

Key Performance Trends

07

The Year in Brief

08

Review of Operations

10

A Letter to Our Shareholders

11

A Message from the President

14Core Brands

22

Domestic Business

28

Overseas Business30 	Special Feature: Onward-Approved

Factory System

After the global financial crisis of 2008, the landscape of the fashion business and subsequently the structure of the apparel supply chain undergo a drastic transformation. The
emergence of so-called fast fashion, the increase of production costs in Asia, the reorganization of domestic department stores, and the rise of e-commence can all be seen as indicators of this transformation.
Signaling its participation in the e-commerce field, the Onward Group cuts the ribbon
for Onward Crosset, its directly managed e-commerce website, in December 2009.
The Onward Members’ loyalty point card system, applicable to all Onward Kashiyama
brands, launches in 2014, expanding our customer base. The Omni-channel retailing strategy,
which forms an organic union between online stores and physical stores, also kicks off.
Seeking to tap into demand from inbound travelers to Japan and expand operations in
the Asian market, the Company partners with Laox, the operator of Japan’s largest networkof duty-free stores, to establish joint venture Onward J Bridge in 2015.
The Onward Group continues to increase its global competitiveness while tacklingchallenges on the road to ongoing growth in both domestic and overseas operations.
12 Nijyusanku GINZA store opened in Tokyo in 201113 Onward Crosset launched in 200905

Key Performance Trends

The Year in Brief

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

Net Sales¥ million

300,000

243,204

259,100

280,008

281,502¥

263,516

In the domestic business, we were unable to realize a recovery in sales
during the second half of the fiscal year as a result of low sales of winterclothing. In the overseas business, earnings improvement was pursued in
North America and Asia; however, operations in Europe continued to
face difficult conditions. Consequently, net sales decreased 6.4% year on
year, to ¥263.5 billion.

100,000

2012

2013

2014

2015

2016

Operating Income and Operating Margin¥ million / %12,00011,663

11,8196.0

10,200

8,000

3,778

4,000

1.4

2012

2013

Operating Income

2014

2015

2016

2.0

0

Operating Margin (right scale)

Net Income and ROE¥ million / %

6.0

6,000
4,503

4,659

4.0
2.4

0

2012

Net Income

The gross profit margin declined in the domestic business following
reduced sales of full-price items at Onward Kashiyama, stemming fromsales downturns in March 2015 and from November through to the endof the fiscal year. The overseas business, meanwhile, was able to secure
income in North America and Asia through business reorganizations
and store enhancements. However, income in Europe fell below targets
due to upfront investments conducted in certain brands. As a result,operating income was down 34.1%, to ¥3.8 billion.

¥

Onward Crosset
Is Renovated

Based on a new concept
combining womenswear,
shoes, books, and flowers
with a café, PENDULE
VIA BUS STOP was
opened in the Minami
Aoyama district of Tokyo.

Our directly managed
e-commerce website,
Onward Crosset, wasrenovated to feature newfunctions and services.

September

October

Onward Kashiyama

Onward Holdings

Nijyusanku AdvertisingCampaign Features
Work of RenownedPeter Lindbergh

Blankets Created from
Recycled Clothes Are
Donated to Vietnam

To celebrate the 23rd anniversary of the Nijyusanku
brand, an advertising campaign was launched featuring a collaboration between
renowned fashion photo­grapher Peter Lindberghand globe-trotting model
Mona Matsuoka.

4.3 billion +1.8% (YoY)

Net income increased 1.8%, to ¥4.3 billion, and return on equity (ROE)
was unchanged year on year at 2.4%.

2013

2014

2015

2016

Clothing items collected
through the Onward Green
Campaign were recycled
to create 2,000 blankets,
which were donated toVietnam through theJapanese Red Cross Society.

0

2016

ROE (right scale)

Total Net Assets and Shareholders’ Equity Ratio

Cash Dividends per Share and Payout Ratio¥ million / %¥/%185,315

80.0

40.00

60.0

30.00

100,000

40.0

20.00

50,000

20.0

10.00

0

0

157,303

165,372

175,029

172,337

150,000

0

Total Net Assets

06

Onward Kashiyama

PENDULE VIA BUS
STOP Opens

2.0

2,000

200,000

AugustOnward Global Fashion

3.8 billion – 34.1% (YoY)

Net Income

4,278

4,204

3,529

4,000

¥

April

Operating Income
4.0

5,732

0

2015

Net Sales

200,000

0263.5 billion – 6.4% (YoY)

54.2

2012

2013

2014

2015

Shareholders’ Equity Ratio (right scale)

2016

200.0
24.00

24.00

24.00

24.00

24.00
86.5

150.0
100.0
50.0

2012

Cash Dividends per Share

2013

2014

2015

Payout Ratio (right scale)

2016

0

February

February

Onward Kashiyama

Onward J Bridge

Operations Are
Relocated to Onward
Bay Park Building

First Onward J Bridge
Global Store Opens

Operations were relocatedto a new environment in the
recently completed Onward
Bay Park Building in
Shibaura, Tokyo. Serving as
the new central office forOnward Kashiyama, thisbuilding houses the company’s planning, production,and staffing departments aswell as the functions of its
Tokyo Office.

The first Onward J Bridge
duty-free store was opened
inside the Laox Daimaru
Shinsaibashi Store in Osaka.
This new-age global store
aims to offer one-stop
shopping for inboundtourists while transmitting
fashion steeped in Japanese
aesthetic taste.

07

Review of Operations

Review of Operations

Sales Breakdown
Sales by Business Segment
Other Business(Service / Resort)

Apparel Business Sales
by Clothing Type
Apparel Business

94.3%

5.7%

OthersSales by Geographic Segment
Men’s

17.9%

19.3%

Asia

Onward Kashiyama Salesby Channel
United States

2.6%

2.1%

EuropeChildren’s

15.1%

2.8%

Japan

80.2%

Other Japan

2.4%

New
Distribution
Channels*1

Others

14.9%

37.5%

13.1%
Department Stores

70.6%

53.3%

Core Brands*2

Main New
Distribution
Channel Brands

23.7%

Onward Kashiyama

60.1%

Others3.3%(of whiche-commerceequals 5.8%)

27.0%
Women’sSpecialty Stores

Onward Kashiyama Sales by Brand

Other Main
Department
Store Brands

34.5%*1. Channels other than department stores(including shopping centers, directly managed stores,
and e-commerce)*2. Nijyusanku, Kumikyoku, ICB, and Jiyuku

Main Subsidiaries
Japan

Overseas
Onward Kashiyama

Onward Luxury Group

Core brands

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

Core company of the Group engaged in the manufacture and sale of womenswear, menswear,
and children’s clothing, accessories, and other items

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

Nijyusanku, Kumikyoku, ICB, Jiyuku, Gotairiku, J.PRESS

Items / Core brands

Designer clothing, knitwear, bags, shoes, and other items
for luxury brands
JIL SANDER, JIL SANDER Navy

Onward Trading

Creative Yoko

Manufacture and sale of uniforms and sales
promotion goods

Manufacture and sale of pet-fashion
items, character accessories,
and other goods

Items

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

Core brands

PET PARADISE, Mother Garden

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

JOSEPH

Chacott

Manufacture and sale of balletand other dance wear, shoes,
and related goods
Core brands

IslandManufacture and sale of women’s
clothing and accessories
Core brandGrace Continental

Chacott, Freed of London

08

09

A Letter to Our Shareholders

A Message from the President

Provide a diverse sense of value andbroaden our customer base, confronting
challenges and exploiting opportunities
in Japan and overseas
In April 2016, the Onward Group unveiled its new medium-term management plan,
which covers the period leading up to fiscal year 2019. In this section, President Michinobu
Yasumoto gives an overview of this plan before discussing several of its specific strategies.

Takeshi Hirouchi
Representative Director, Chairman

Dear Shareholders,
In this modern world of technology, everything links through the Internet and the Internet of Things(IoT) has been called the fourth industrial revolution; IoT has the potential to impact all businesses
and industries, and the “border” between each industry will likely fade further.
Amid such great change, the apparel business continues to face a harsh operating environment.
In the domestic market, for example, we are witnessing an ongoing trend toward frugal purchasing
habits centered on middle-to-high-end womenswear in the so-called moderate zone.
Such factors have created a situation in which overcoming current challenges and grasping hold of
the successes that lie beyond will be more important than ever. In March 2015, Michinobu Yasumoto
became president and representative director of Onward Holdings, joining Onward Kashiyama
President Akinori Baba as a leader of management. With this new leadership, we are now poised
to tackle challenges focused on both physical stores and e-commerce.
Furthermore, April 2016 saw the launch of our new medium-term management plan, underwhich we will implement growth strategies guided by the basic policies of providing a diverse sense ofvalue and broadening our customer base. Among the measures described in the plan, we will accelerate
our Omni-channel retailing strategy, which combines the strengths of our e-commerce and store operations, and forge ahead with our expansion in global markets, with our eyes turned, in particular, tothe future growth of the Asian market. These measures will be advanced as we boost managerial efficiency in accordance with capital measures, thereby targeting improvements in corporate value andshareholder value.
I would like to express my gratitude to all our shareholders for their continuing support, cooperation, and trust.
August 2016

Takeshi Hirouchi
Representative Director, Chairman

10

Overview of Business Opportunities
and the Medium-Term Management Plan
In fiscal year 2019, we will target net sales of ¥280.0 billion,
operating income of ¥10.0 billion, and return on equity of 5%.

In fiscal year 2016, ended February 29, 2016, net sales and operating income both declined, amounting to ¥263.5 billion and ¥3.8
billion, respectively. The primary reason behind the decreases was
the significant structural changes that occurred in the operating
environment surrounding the apparel market. Looking ahead,
we can expect the operating environment to continue to feel theadverse impacts of a myriad of factors. These factors will include
the dwindling of our target customer group in conjunction withthe continued decline of Japan’s population as well as sluggish­consumption trends attributable to consumption tax hikes and therising price of durable goods. At the same time, customer values
and lifestyles are diversifying, and we have witnessed the amounts
consumers spend on physical goods decline as they allocate moreof their free income to Internet and other services. Structural­issues are compounding this difficult operating environment.
For example, faced with highly competitive markets, we are unable
to easily adjust product selling prices to reflect hikes in business
expenses, such as increases in production costs accompanying­economic growth in Asia.
Turning to a more positive topic, there are currently two
major opportunities that have been placed before the Onward
Group—namely, to accelerate its Omni-channel retailing strategy
and to expand in global markets. The new medium-term management plan was designed with the aim of ensuring the Group cantake hold of these opportunities. Accordingly, we have defined thebasic policies of this plan as to provide a diverse sense of value andto broaden our customer base.
The policy of provide a diverse sense of value signifies ourintent to increase the value of our fashion and apparel products,

Michinobu Yasumoto
Representative Director, President

which are our core competence, in addition to developing new
products and services in a wider range of fields centered aroundfashion. To broaden our customer base, meanwhile, we will
expand contact points with domestic customers in our various
sales channels, specifically increasing the amount of time andnumber of opportunities for contact with these customers. We will
pursue growth through such efforts as well as by broadening ourcustomer base overseas.
In short, the medium-term management plan will position
the acceleration of our Omni-channel retailing strategy and our
expansion in global markets as business opportunities and guide
us to growth through the basic policies of provide a diverse senseof value and broaden our customer base. Through these efforts,
we will target net sales of ¥280.0 billion and operating income of¥10.0 billion along with an operating margin of 3.6% in fiscal year
2019, three years from now. We will then work toward our targets
for fiscal year 2021, which are net sales of ¥300.0 billion, operating income of ¥15.0 billion, and an operating margin of 5.0%.

Business Opportunities and Performance Targets
By fiscal year 2019, we aim to grow sales from e-commerceand overseas operations to represent 12% and 24% of total
net sales, respectively.

To take advantage of the business opportunity created by the­acceleration of our Omni-channel retailing strategy, we aim to­expand sales in our e-commerce operations, which have high profitability and significant growth potential. Advances in informationand communication technologies, or ICT, have presented us witha greater range of opportunities to develop new customer contact
points that have never been seen before. The Group is currently
in the process of constructing diverse e-commerce platforms, ofwhich between 60% and 70% have been completed. With these11

A Message from the President

platforms, we will work to grow our e-commerce operations intoa business capable of generating net sales of about ¥36.0 billion
three years from now, with ¥31.0 billion in Japan and ¥5.0 billion
in overseas markets, such as China and other parts of Asia. By
achieving this growth, we anticipate that the portion of total net
sales attributable to e-commerce operations will increase from thecurrent 4% to 12% by fiscal year 2019. At present, there is a bit ofa disparity in e-commerce initiatives between specific brands andsubsidiaries. Nevertheless, we will endeavor to realize rapid expansion in our e-commerce operations through a two-pronged approach. This approach will entail, first, increasing the portion of
the Group that is engaged in e-commerce and, second, utilizing
the Group’s e-commerce platforms to advance the evolution ofcollaborations with various companies and industries to create
fresh, new e-businesses. With regard to brick-and-mortar stores,
we will move forward with selection and concentration measures
in Japan while increasing the number of stores overseas.
With regard to the business opportunity of expansion in­global markets, we will work to grow overseas sales from fiscal
year 2016’s ¥55.1 billion to ¥71.0 billion in fiscal year 2019. This
figure should result in overseas sales accounting for 24% of total
net sales.

Key Strategies Driven by Basic Policies
Provide a diverse sense of value: We will advance measuresemphasizing activities and services as well as products.

In seeking to provide a diverse sense of value, we will expand therange of offerings through which we supply value to customers.
For example, while continuing to increase the value of our apparelproducts, we will develop operations in a wide variety of fields inwhich we can expect synergies with the Group’s operations, suchas accessories and items that provide enrichment to people’s lives.
In increasing the value of apparel products, we will leverage
the Onward Group’s strengths in planning, development, andmanufacturing technologies. Specifically, steps will be taken to­expand high-value-added production in Europe; to bolster Madein Japan production of J∞QUALITY certified products; to collaborate with creators outside the Group; and to balance production
costs and quality. We will also work to expand operations in thelifestyle field, which includes accessories. To this end, we will­deploy a new jewelry brand through Onward Kashiyama and­otherwise augment our lineups of bags, jewelry, and other items.
In addition to enhancing our product lineups, we will alsoneed to refine strengths that lie outside our traditional domain,such as our ability to offer services and events that inspire emotions
within our customers. We recognize that today’s consumer market
is such that quality products are not enough to catch the eye ofour customers, let alone get them to purchase these products.
Based on this realization, we aim to evolve our stores to make time

12

spent shopping more fulfilling, a commodity in itself. Throughour Aurora Strategy, we will strive to make our stores more thanjust places where arrays of products are lined up on shelves, transforming them into places that can be enjoyed in and of themselves
and encouraging customers to spend time in them as a result.
Another issue needing to be addressed is the sluggish growthof sales at department stores outside major cities. Our answer tothis situation is the development of a new type of “omni-store.”
Faced with a decline in customer numbers in such areas, we havefound it becoming less feasible to allocate large quantities of products to department stores in these areas. However, not providing
stores with an ample supply of stock decreases the number of­opportunities customers have to encounter our products andtherefore could be seen as actively discouraging the purchase of
our products, which will no doubt lead to lost sales opportunities.
The omni-store concept we are using to address this issue entails
utilizing the information transmission capacities of e-commerce
and the convenience of our logistics functions. By combining
these strengths with the customer service we provide at our stores,
we are focusing on this approach with the hopes of expanding­contact points with customers away from major cities.
Another type of store aimed at making time spent itself acommodity can be seen in the Shirotan Friends Museum and Pet
Paradise DX stores developed by Creative Yoko. These multipurpose stores are oriented toward children and provide spaces inwhich families can enjoy not only shopping but also engaging
in fun activities together. We aim to develop more such storesin the future. Another area in which we are pursuing innovationis through customizable products and services. In this area, we
aim to utilize ICT to foster innovation the likes of which has­never been seen before in order to provide customized products
matched to individual customer needs at reasonable prices asmuch as possible.
Broaden our customer base: We will advance measures targeting

A Message from the President

the same inventory information, an achievement that has stimulated a rapid increase in sales of Onward products through various
websites, including those not associated with the Group. In the­future, our focus will remain on our own e-commerce sites, but
we will still engage in various collaborative ventures to accelerate
growth of our e-commerce operations. Another forward-looking
initiative is the development of a system for providing personal
concierge services. Rather than simply waiting for customers tovisit our stores, we will actively pursue “storeless” sales by cateringto the various needs of individual customers and corporate customers through such services. In this way, we aim to increase­business opportunities by sharing time with customers.
Meanwhile, measures to capture new customers will include
creating more contact points with potential customers by actively
using social networking sites and collaborating with affiliates andmembers of other industries. In attracting new customers overseas,
we will step up global advertising for core brands Nijyusanku and
JOSEPH and we will also be devoted to bolstering our range ofglobal flagship stores for these brands. However, as we realize that
there is a limit to the extent we can increase store numbers, wewill also advance our Omni-channel retailing strategy worldwide
through the deployment of global e-commerce sites. These measures will also be employed to tap into consumption demand frominbound tourists. In addition, mergers and acquisitions will be
used as an option for acquiring customers as was done throughthe April 2016 acquisition of Tiaclasse Inc., an apparel supplierthat develops brands exclusively through e-commerce. Despite­operating entirely online, Tiaclasse boasts a solid base of extremely
satisfied customers. By working with this company, we hope to­develop new businesses that leverage the Onward Group’s strengths.
As we move forward, our operations will remain centered on the
fashion and apparel field; however, we will also turn our eyes
­toward products in other fields.

both new and existing customers.

Investment to Support Key Strategies

A primary measure among initiatives to expand our existing­customer base is increasing the number of users of the Onward
Members’ loyalty point card system. In April 2016, we completedthe ­integration of the user base of our directly managed e-commerce
website Onward Crosset and the Onward Members users saved
at physical stores to create a database of 1.2 million customers.
Going forward, we will proceed with the consolidation of the customer bases of domestic Group companies while also encouraging
overseas customers to enroll in the Onward Members’ system. We
thereby aim to build a user base of 3.0 million customers over the
next three years. In addition, we began linking e-commerce inventory data in April 2016, which will be an important measure inpromoting our Omni-channel retailing strategy. As a result, we are
now able to provide customers using various e-commerce sites with

We will actively invest in implementing our personnel strategy
and ICT strategy.

Our personnel strategy will be an essential part of advancing thevarious measures described in the medium-term management
plan. We realize that, without globally competent human resourcesin areas ranging from product creation to sales and customer service, the Onward Group will be unable to grow on a global scale.
Based on that recognition, we proactively invest in human resources.
At the same time, our ICT strategy will be crucial to ensuringthat we are able to operate our business in an efficient manner that
ensures profitability. Specific areas of focus will include utilizing
cutting-edge ICT to establish more efficient and faster moving
supply chains and to create new business models.

Financial Strategy
We will institute various measures to improve return on equity.

We recognize that the distribution of profits to shareholders is oneof our top priorities. Our basic policy is to stably distribute appropriate dividends to shareholders based on the Company’s businessperformance, and we target a dividend payout ratio of 35% ormore. We also strive to mitigate financial risks through increased
total shareholders’ equity and flexible fund procurement andthereby maintain a consistent shareholders’ equity ratio.
Based on these policies, we have set a target of 5% for returnon equity in fiscal year 2019, which we will pursue while implementing such measures as the sale of shareholdings, effective useof existing assets, and the continued issuance of stable dividends
linked to business performance.

Strengthening of CSR Activities
We will strengthen CSR activities from the perspectives of
ecology, ethics, and diversity.

The Onward Group conducts environmental management inaccordance with its environmental concept of “Thinking of the
Earth. Clothing Its People.” We thus strive to coexist with the
Earth and people worldwide while growing our apparel and otherbusinesses. From the perspective of ecology, we are continuallyadvancing initiatives, including the Onward Green Campaign,forest preservation activities at the Tosayama Onward Rainbow
Forest, and clothing reuse activities through Onward Reuse Park.
In relation to ethics, we have instituted a factory certification system*, the goal of which is to improve worker benefits and work
environments at partner factories by thoroughly entrenching CSR
and QC guidelines that stipulate measures, including stringent legal compliance. Through this system, we hope to reinforce socially
responsible production activities. In promoting CSR activities
from the perspective of diversity, we actively provide opportunities
for female, differently abled, and non-Japanese employees while
seeking to create motivating work environments.
* For details, please refer to “Special Feature: Onward-Approved Factory System”
on pages 30 to 32.

August 2016

Michinobu Yasumoto
Representative Director, President

13Core Brands

LAUNCHED

1993
ANNUAL SALES¥26.8 billion
NUMBER OF STORESOver 200
Nijyusanku is the leading brand of Onward
Kashiyama. The core target of this brand is
working women in their 30s and 40s. The
brand is available in department stores acrossthe country as well as in its flagship store,
Nijyusanku GINZA, which was opened in
the Ginza district of Tokyo in 2011.

14

15

LAUNCHED

1992
ANNUAL SALES¥4.7 billion
NUMBER OF STORES

120
Gotairiku is Onward Kashiyama’s core men’s
brand. Based on the concept of providing a“gentlemanly wardrobe that represents Japan,”this brand primarily features suits aimed
at businessmen in their 40s. The brandcontinues to be promoted through theGotairiku Gonin Otoko campaign, whichfeatures a quintet of Kabuki actors
as spokesmen.

1617

LAUNCHED1973
ANNUAL SALES¥10.4 billion
NUMBER OF STORES

80
Founded by Ms. Jil Sander in Germany,JIL SANDER is a luxury brand that isfeatured periodically in Milan Fashion Week.
Onward Holdings acquired JIL SANDER in
2008. The casual line JIL SANDER Navy waslaunched in 2011. In 2014, Italian designer
Rodolfo Paglialunga was appointed thecreative director of JIL SANDER.

18

19

LAUNCHED1972
ANNUAL SALES¥18.6 billion
NUMBER OF STORES180
The JOSEPH brand grew from a small multibrand store owned by Joseph Ettedgui in
London. After the original label JOSEPH
was launched with the concept of“SLICK&CHIC,” Onward Holdings
acquired JOSEPH in 2005. The developmentof this brand in Japan is being undertaken by
Onward Kashiyama.

20

21

Domestic Business

Domestic Business
The domestic business is our mainstay business, generating 80.2% of consolidated net sales. Thisbusiness consists of 33 companies: core operating company Onward Kashiyama as well as otherdomestic subsidiaries that make fashion proposals in a wide range of fields.

Contribution to Total Sales

Net Sales by Domestic Business Segment

Overseas Business¥ million

19.8%

Domestic Business

80.2%

240,000

Other Domestic Subsidiaries
180,000
120,000
60,00033.6%¥ 75,159 million

Onward Kashiyama

66.4%¥ 148,332 million

0
2011
2012
2013
2014
2015
2016
Note: The figures shown reflect net sales prior to the elimination of internal transactions.

Onward Kashiyama
Business Overview
Onward Kashiyama is the Group’s core
operating company, generating 53%
of consolidated net sales. Onward
Kashiyama manufactures and sells womenswear, menswear, children’s clothing, andaccessories, and 71% of its sales comefrom its main sales channel, department
stores. Core womenswear brands
Nijyusanku, Kumikyoku, ICB, andJiyuku account for 38% of net sales.
Similarly, mainstay menswear brands
Gotairiku and Personal Order are postingsolid performances by capitalizing on
their high-quality suits.
Future growth strategies will include
reinforcing our e-commerce operations
centering on our directly managed
e-commerce website Onward Crosset.
In conjunction with these efforts, we will
accelerate our Omni-channel retailingstrategy* by integrating the inventory
information, customer management, andservice functions of our 3,000 physicalstores in Japan with online stores.
* Please refer to “A Message from the President”
on pages 11 to 13 for more information on our
Omni-channel retailing strategy.

Performance and Outlook
In fiscal year 2016, certain successes wereseen due to the benefits of enhanced sales
promotions of core brands, such as
Nijyusanku and Gotairiku, as well as
progress in our Omni-channel retailingstrategy linking inventory information for
physical and online stores.
However, performance suffered due
to lower March sales, which fell from theprevious year when sales were buoyed by
the demand rush preceding the consumption tax hike, as well as the adverse impactof the warm winter beginning inNovember.
In fiscal year 2017, we will strengthen
key brands, reinforce our e-commerce
operations, and proceed with the development of large-scale shops in key department stores. At the same time, we will
pursue improved profitability through theclosure of unprofitable stores.

Other Domestic
Subsidiaries
Business Overview
Other domestic subsidiaries leverage theproduct development and sales capabilities of the Onward Group to create newvalues and lifestyles by making fashion
proposals in a wide range of fields.

22

Chacott, a manufacturer and retailerof ballet and other dance wear, is working
to improve brand value and increase sales
by accelerating openings of new types of
directly managed stores. Meanwhile,
Island, which has Grace Continental as
its core brand, is providing fashion itemswith a distinctive aesthetic that is proving
immensely popular among women withrefined tastes. Creative Yoko is pursuingthe differentiation of its core pet fashion
business by opening large-scale storesdealing in products and services for pets.
At Onward Trading, a leading domestic manufacturer of uniforms and sales
promotion goods, the apparel expertisethat pervades the Group is used to provide uniforms to suit any environment
while striking the best balance between
style and usability.

Performance and Outlook
In fiscal year 2016, efforts to dispose of
unprofitable businesses were scaled backand investment in new business was lowered, enabling us to improve profitability
during the second half of the fiscal year.
However, income still fell below our­target due to low sales growth.
In fiscal year 2017, we will seek toboost profitability by expanding operations in growth fields and further reorganizing unprofitable businesses.

Nijyusanku GINZA

23

Domestic Business

Domestic Business

Our Value Chain

Onward Research and Development InstituteAs a leader in the apparel industry, the Onward Group is guided by a mission of continually
proposing fresh, high-value-added products to consumers.
To fulfill this mission, we take advantage of the fashion trend information acquired throughour global network and the technological capabilities of the Onward Research and Development
Institute. By merging these strengths, we create new products that excel from the perspectives offashion, technologies, and quality and propose new values and lifestyles.

Established in 1991, the Onward Research and Development Institute is theGroup’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 possiblelevel of quality control. For example, fabric is tested for elasticity, tear resistance, friction durability, risk of layer separation, seam burst reparability,
stretch recovery, and wrinkle resistance. The Onward Advanced Technology
Research Center works together with 16 leading companies from the apparel industry, including raw material suppliers, garment material suppliers,
and sewing machine manufacturers, to develop innovative new products.
The Professional Development Center is responsible for the training anddevelopment of human resources.

Product Flow (primarily used by Onward Kashiyama)

Planning
and Design

01 

02 

03 

04 

05 

06 

Research

Design andMaterial Selection

Sample Creation

Exhibition

Product Selection

Product Planning

1 Year Before Start of Sales

6–9 Months Before

5 Months Before

4 Months Before

3–5 Months Before

3 Months Before

Product development starts with ourdesigners and merchandisers actually
visiting fashion capitals around theworld to research the latest fashion
trends. They also attend fabric exhibitions in Japan, Europe, and theUnited States to seek out new, highquality fabrics.

Concept drawings are created, andthe design, materials, price range, andseasonal theme are decided based ona consideration of fashion trends, fabrics information, and other factors.

Samples are made based on concept
drawings created by designers to visualize how the design and the materials
will actually appear.

Buyers and press members are invited
to exhibitions displaying new products. Alterations are made to samples
based on feedback from buyers as well
as store managers.

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

Quality control teams ­inspect samples
to determine if any issues exist with thefabric or manufacturing processes tobe 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.

Planning and Production Teams
Onward Kashiyama has approximately 1,000 professionals in its planning and production control teams. With these strong teams in place,
the Company assigns merchandisers, designers, and patternmakers toeach brand or category. The production control teams take care ofother aspects of production, ranging from factory selection, technicalguidance, and fabric and other material sourcing to quality control.

Production Network

Production Areas
China

73%
Japan

14 %
ASEAN and other countries

13 %

24

Production

Of Onward Kashiyama’s products, 71% are manufactured in cooperation with trading companies or delegated to factories in Japan or overseas. Recently, however, we have been establishing our own production
network by strengthening partnerships with highly capable Japanese
factories and expanding our low-cost production and sourcing networks in China and Vietnam. Currently, about 73% of Onward
Kashiyama’s products are manufactured in China, 14% in Japan, and
13% in ASEAN and other countries. We are developing our procurement and production networks in the ASEAN region and reinforcing
production in Japan to ensure that we can always manufacture products in the most suitable location.

25

Domestic Business

Domestic Business

Our 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. The apparel company owns the inventory and some shop fixtures andprovides their own sales personnel. When a product is sold, it is thenconsidered to have been procured by the department store.
2. The apparel company pays an agreed percentage of its sales to thedepartment store as a tenant fee. Rent and other costs generally do not
apply. (Profit margins are linked to sales.)3. The apparel company records a sale as the amount of the wholesale
price of the item sold less the margin paid to the department store.

07 

08 

Production

Final Check

2 Months Before

1–2 Weeks Before

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

Finished products are delivered to
distribution warehouses. Stitchingand other product details are inspected once again before delivery.

Deliveryand Sales

09 

The Onward Group conducts its sales activities through a number of different sales channels.
As we move forward, we will advance our Omni-channel retailing strategy that merges the strengths
of both physical and online stores to further expand our customer base.

Department Stores
Department stores are Onward Kashiyama’s main sales channel,
accounting for 71% of its total sales. A diverse range of core andother brands are deployed through this channel.
We have been strategically relocating and redesigning ourshops while developing large-scale shops to maximize individual
shop sales and operational efficiency. Furthermore, sales representatives have recently been armed with tablets to enhance sales promotions and services linked to e-commerce operations as part of
our Omni-channel retailing strategy.

Delivery
Products are transported from distribution warehouses to stores basedon the instructions of sales managers and distributors.

10 
Sales

Products are sold at physical storesand online.

Nijyusanku Daimaru Sapporo Store

E-Commerce
Our directly managed e-commerce website, Onward Crosset,
forms the central pillar of our e-commerce operations, and we also
operate brand-specific online stores and list our products on
domestic and overseas online shopping sites.
Growth of the e-commerce channel is anticipated to outstripthat of other channels going forward. We therefore plan to bolster
communication and services through this channel to expand ourcustomer base.

Onward Members’ Loyalty Point Card System
Onward Members is a loyalty point card system that can be usedboth at Onward Kashiyama stores and on the Onward Crosset
directly managed e-commerce website.
Through this system, members not only receive points basedon purchase amounts, but they are also able to receive various
perks, including brand information distributed through email magazines and member-exclusive services.
In April 2016, this system had 1.2 million members. Aiming toincrease this number to 3.0 million by fiscal year 2019, we will seek
to expand our customer base on a Groupwide basis.

26

Directly Managed Stores

Train Station Complexes / Fashion Malls

Shopping Centers

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

We offer fashionable and trendy products throughthis sales channel, which is displaying impressive
growth in Japan.

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

27

Overseas Business

Overseas Business
JOSEPHThe overseas business consists of operations in Europe, Asia, and the United States and accounts
for 19.8% of consolidated net sales. Business scale expansion will be pursued centered on Europe,
where operations are the largest, as we strengthen our competitiveness in the global market.

Contribution to Total Sales
Overseas Business

19.8%

Net Sales by Overseas Business Segment

Domestic Business80.2%¥ million

80,00060,00040,000

United StatesAsia

13.3%¥ 7,334 million
Europe20,00010.4%¥ 5,738 million

76.3%¥ 41,978 million

0
2011
2012
2013
2014
2015
2016
Note: The figures shown reflect net sales prior to the elimination of internal transactions.

EuropeThe European business—our largest overseas business—primarily conducts the
manufacture and sale of high-end appareland accessories.
In 2014, the current form of Onward
Luxury Group, which merges Italian subsidiaries GIBO’Co Group and Jil SanderGroup, was established. In the long term,
we aim to merge Joseph Group in England
into Onward Luxury Group to unite theEuropean business under a single company
and generate synergies in order to develop
it into a fashion conglomerate with astrong presence in the European market.
By uniting our European business,
we will be able to exercise its strengths in
manufacturing as well as the strengths of
Jil Sander (brands) and Joseph (retail).
With this comprehensive range of functions, we will seek to become a uniquepresence in the European fashion industry.

Business Overview
Onward Luxury Group
Manufacture and Wholesale
Onward Luxury Group’s manufacturing
and wholesale divisions undertake theproduction of the principal items that are
indispensable to a designer brand line, including apparel as well as shoes, bags, andknitwear, and are constructing a manufacturing platform capable of providing theutmost levels of quality.
Apparel item production is conductedby leveraging the strengths of three sites
in Italy: Florence, where we are skilled at
tailored clothing, such as shoulder pieces;
Bergamo, which is home to our skilledcrafting functions for light fabric clothing; and Parma, where we create moreelaborate clothing items.
Furthermore, the manufacturing divisions are promoting synergies in productcreation while also utilizing Onward’s network of showrooms in Paris, Milan, andNew York to expand sales opportunities
and generate sales-field synergies.

OLG Erika Knitwear Factory28

JIL SANDER
We conduct the planning, manufacture,
and wholesale of the JIL SANDER
luxury menswear and womenswear collections and apparel and accessories fromJIL SANDER Navy, and we are developing stores on a worldwide basis.
Moreover, Rodolfo Paglialunga,
renowned for his work with Prada andVionnet, was named as the creative
director for JIL SANDER and beganlending his talents with the 2015 spring/summer collection. We will promote
JIL SANDER in the next chapter of its
development to further its growth as a
global brand.

JIL SANDER Paris store

Joseph undertakes the planning, manufacture, and sale of JOSEPH brand menswear
and womenswear collections and accessories and is also developing a network ofmulti-brand stores and JOSEPH brandstores centered on London.
In recent years, flagship stores in
London and Paris have been renovated toenhance brand recognition. To accelerate
the brand’s global growth, Joseph isincreasing accessory and menswear lineups while expanding operations in the
North American market and strengthening
e-commerce businesses.

Performance and Outlook
In fiscal year 2016, we strengthened operating foundations and secured stable earnings for production operations. However,the difficult operating environment placed
downward pressure on the retail andwholesale operations of Jil Sander, resulting in reduced profits.
In fiscal year 2017, we will undertake
investments aimed at increasing the recognition of the JIL SANDER brand while
enhancing inter-Group synergies that extend to new subsidiaries dealing in bags
and shoes.

JOSEPH 77 Fulham Road store

Asia

United States

Business Overview

Business Overview

In our Asian business, Nijyusanku, ICB,
rosebullet, and other major Onward
Kashiyama brands are sold in department
stores and shopping centers in China, including Hong Kong, Taiwan, South
Korea, Singapore, Thailand, Indonesia,
and Vietnam.
Furthermore, Asia is rising in importance as a production site. To supplement
existing partnerships with Chinese manufacturers that have high overall capacity,
we aim to expand our manufacturing
platform in ASEAN countries, such as
Vietnam. With our sights set on capitalalliances and the acquisition of production capacity, we are determined to build
a manufacturing platform in Asia withhigh profitability and quality as well as
superior material procurement capabilities
and fast delivery time.

U.S. operations comprise retail businesses
in the States as well as hotel and golfcourse management operations in Guam.
J.PRESS, acquired in 1986, is a wellloved brand among Ivy Leaguers. We currently have three directly managed storesin the United States. As part of recent
global strategies for European brands,
we have been strengthening sales of
JOSEPH in the United States.
As we move forward, we will expand
our U.S. operations as we conduct necessary investments from a medium-to-longterm perspective to grow retail businesses.

Performance and Outlook
In fiscal year 2016, we were able to improve
performance in North America and Asia
through streamlining business structuresand store networks.
In fiscal year 2017, we will continue
carrying out business reorganizations while
we expand e-commerce operations andexplore new markets to increase earnings.
29

Special FeatureSpecial Feature

Onward-Approved
Factory System
Environmental and social responsibilities are growing in significance for businesses worldwide.
Simultaneously, companies must navigate various risks related to issues that could arise in their business
operations, including pollution in the countries or regions from which they procure manufactured
products and human rights violations at production sites. Against this backdrop, CSR initiatives thatconsider the entire supply chain are becoming a crucial part of operations, particularly for companies
developing their businesses on a global scale. Onward Holdings is aware of this change and is therefore
committed to exercising its social responsibilities as a company involved in manufacturing. To facilitate
these efforts, Onward Holdings launched the Onward-Approved Factory System in 2015 and has
positioned the promotion of CSR procurement as a management policy.

Goal of the Onward-Approved
Factory System
The Onward-Approved Factory System was instituted with thegoal of developing a manufacturing platform that can continually
supply impeccable quality products.
We are well aware of how important safe and appropriate
work environments at production sites are to improving employee
retention rates and thereby securing manufacturing techniquesand ensuring stable product quality.
Through the Onward-Approved Factory System, we encourage
partner factories to reinforce their management systems for maintaining ethical working conditions (CSR) and securing necessary
quality control (QC). We thereby support factories exhibiting­excellence in achieving sustainable growth.

Audit Targets

Audit Methods

Audits conducted in accordance with the Onward-Approved
Factory System target sewing factories in China and theASEAN region.
We launched this system in 2015, and 29 overseas factories
contracted by Onward Kashiyama were audited by the end of
fiscal year 2016.
In the future, the scope of the Onward-Approved Factory
System will be extended to overseas joint venture factories, overseas factories contracted through trading companies, and overseas
production partners of domestic subsidiaries.

Audits related to CSR are conducted in accordance with Onward
Holdings’ proprietary Suppliers’ Code of Conduct, which is basedon the SA8000 international standard. Actual audits are entrusted
to external organizations, but representatives from Onward
Holdings are present when audits are conducted. We thereby
endeavor to help ensure appropriate auditing based on the current
business environment and to develop the understanding necessary
for us to exercise our responsibility as the order placer to support
factories in carrying out any improvements that need to be made.
Audits relating to QC are conducted directly by Onward
Holdings’ production team.

The results of audits and any compliance findings are compiled into audit reports, and the results of both CSR and QC
audits are provided to the factory.
If no compliance findings were discovered through the audit,
a certificate of approval is issued that is valid for two years.
If improvements are deemed necessary, feedback is supplied withregard to the areas requiring improvements and guidance foraction plans is provided by Onward Holdings. The factory is thenre-audited after a period of approximately one year.

Audit Procedure
11 Suppliers’ Code of Conduct Items

Audits Performed
Number of factories audited

Number of factories with no compliance findings

First audit

Re-audit

CSR

QC

Fiscal year 2016 (Actual)

29

—

8

11

Fiscal year 2017 (Plan)

36

11

—

—

A.	Legal compliance andmanagement
B. Juvenile workforces
C. Forced labor

G. Non-discrimination
H. Health and safety

Audits based on

J.	Sub-contractors andhomeworkers

E. Harassment and abuse

K. Environmental practices

ClearedOnward-Approved
Factory

Not cleared

Guidance foraction plans

CSR guidelines

I. Free association

D. Wages, allowances, and benefits
F. Work hours

Factory Audits

Audits based on
QC guidelines

Attempt to clear re-audit* Audits are conducted every two years, in principle, and the period during which certificates of approval
are valid is extended based on the number of audits cleared in the past.

30

31

Special Feature

Suppliers’ Code of Conduct Items (Created in Japanese, English, and Chinese languages)

A. Legal compliance and management

Business Partners of Onward shall comply with all local laws and regulations. Furthermore, Business
Partners shall comply with all legal requirements and respect the legal and moral rights of their employees.
At the same time, in order to comply with legal requirements, management systems for maintaining
respective documents have to be established.

B. Juvenile workforces

Business Partners of Onward shall not employ minors younger than the local legal minimum working age,or age 15. This code is applicable to all facilities of Business Partners.

C. Forced labor

Business Partners of Onward, in any part of their business, shall not associate with Business Partners who
utilize bonded labor or forced labor. Additionally, Onward will not associate with Business Partners who
violate the above.

D. Wages, allowances, and benefits

Business Partners of Onward shall comply with all laws and regulations on local wages, hours of work,and allowances. Fundamental policy on wages and allowances shall comply with local laws and standards,
while equally satisfying international requirements. Onward will not associate with any Business Partnerthat violates local laws and regulations or industry common practices.

E. Harassment and abuse

Business Partners of Onward shall not utilize any form of physical or psychological coercion or retribution to workers. Furthermore, Onward will not associate with Business Partners who violate the above.

F. Work hours

Business Partners of Onward shall comply with all legal requirements regarding work hour issues andabide by all local laws.

G. Non-discrimination

Business Partners of Onward shall not discriminate in employment or recruitment on the basis of age,nationality, race, ethnic origin, gender, religion, or any other factor. Business Partners of Onward will not
associate with their Business Partners who discriminate.

H. Health and safety

Business Partners of Onward shall provide a safe and healthy work environment for workers. Additionally,
they shall ensure not to expose workers to an unsanitary and hazardous workplace environment.

34

I. Free association

Business Partners of Onward shall guarantee the freedom of unions and workers who wish to join unionsin accordance with local requirements.

J. Sub-contractors and homeworkers

Business Partners of Onward shall disclose sub-contractors to Onward.

K. Environmental practices

Business Partners of Onward shall have basic awareness of environmental protection. Business shall be
conducted in accordance with local and internationally recognized environmental requirements.

Our Network36 	Environmental and Social

Responsibility

40

Corporate Governance44 	Board of Directors, Audit &Supervisory Board Members,
and Executive Officers /Organization Chart

A Message from the Onward-Approved Factory System Representative

As an apparel manufacturer, securing quality factories is a matterof the utmost importance.
Appropriate work environments provide an important foundation that makes it easier to retain highly skilled employees and help increase the number of factories possessing superior manufacturing techniques. To realize truesustainability for production sites and for apparel manufacturers, raising the number of such factories is crucial,and it was this belief that inspired us to introduce the Onward-Approved Factory System. Future initiatives withregard to this system will include examining the possibility for mutual verification of the audits conducted for other brands and by other companies. Through such initiatives, we will continue to reduce the burden placed on factories as we push forward with the construction of a production system that can continually provide customers
with products of impeccable quality.

32

Takashi Yamashita
CSR Procurement Director,
Onward Holdings Co., Ltd.

33

Our Network

Our Network

As of August 31, 2016

Europe

Asia

Japan

United States

England

China

Japan

U.S.A.

LondonShanghaiTokyo

New York		nJoseph Ltd.

		n

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

		n

		n

Freed of London Ltd.

		n

Shanghai Onward Fashion Co., Ltd.

		n

		n

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

		n

FranceDalianParisn n

		n Horloge Saint Benoit S.A.S.

Italy
Milan

Onward Fashion Trading (Dalian) Co., Ltd.

Taicangn nTaicang Onward High Fashion Co., Ltd.

Nantong	Nantong Haimeng Garments Co., Ltd.

		n

Onward Italia S.p.A.

n n

		n

 nward Luxury Group S.p.A.
O(JIL SANDER)

Hong Kong

Florence	Onward Kashiyama Hong Kong Ltd.

		n	Onward Holdings Co., Ltd.

		n

J. Press, Inc.

	Onward Kashiyama Co., Ltd.

		n

Onward U.S.A. L.L.C.

	Onward Trading Co., Ltd.
	Chacott Co., Ltd.

		n	Onward Global Fashion Co., Ltd.

		n	Creative Yoko Co., Ltd.

		n	Island Co., Ltd.
	Candela International Co., Ltd.

		n	J. Direction Co., Ltd.

		n	Birz Association Ltd.

		n	Intimates Co., Ltd.

		n

	Sakula Inc.

n

	O.P.S. Co., Ltd.

Appareln	Onward J Bridge Co., Ltd.

Other

n

	Onward Creative Center Co., Ltd.

Joint Venture FactorynCompany-Operated Factory

		n
		n
		n

Onward Luxury Group S.p.A. (Apparel)

Vietnam		n		 nFrassineti s.r.l.

Ho Chi Minh City

		n

		 n

Erika s.r.l.

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

		n	

Spain
Madrid		 n

Gallardo Dance S.L.

	Bien Co., Ltd.

		n	Showa (Vietnam) Co., Ltd.

		n	Yasuda (Vietnam) Co., Ltd.

		n

n n
n n

	Onward Resort & Golf Co., Ltd.
	O & K Co., Ltd.
	Tiaclasse Inc.
and 14 additional companies

		nSingapore
Singapore	Onward Kashiyama Singapore Pte. Ltd.

		n

Korea
Seoul

34

	Onward Life Design Network Co., Ltd.

	Onward Kashiyama Vietnam Ltd.

		n

		n

Onward Kashiyama Korea Co., Ltd.

		n

Chacott Korea Co., Ltd.

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

		n

		n

VeronaGuam

Number of Stores

3,960

in 27 countries and regions
The Onward Group engages in business activities through a network that is made up of
81 subsidiaries and 22 affiliates, for a total of 104 Group companies. The Group operates in
the four geographic segments of Japan, Europe, Asia, and the United States.

35

Environmental and Social Responsibility

Environmental and Social Responsibility

Basic Philosophy

Onward Green Campaign

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.

2,100,000

380,000

Items Collected

Customers That Donated

70% Recycled
30% Reused

Environmental Concept
Thinking of the Earth. Clothing Its People.
The world is evolving faster than ever with fashions and trends changing at a 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 ofclothing as trends change is slowly placing an increasing burden on the environment andmay one day significantly affect our lives. The original role of fashion was to enrich andcolor people’s lives while promoting and inspiring prosperity. Fashion should not besomething that takes away from our planet’s natural environment, nor should it detractfrom the infinite possibilities of our future.
Onward remains committed to taking on the challenge of achieving harmony withthe 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.

The Onward Green Campaign is designed tocreate an apparel life-cycle circulation system. In
comparison with other consumables, the recyclingof textile goods is relatively undeveloped. Onward
Kashiyama launched the Onward Green Campaign in 2009 withthe objective of encouraging the circulation of apparel to promote
the efficient utilization of limited resources and to ensure that our
precious environment still exists for future generations to enjoy.
Onward Kashiyama collects men’s, women’s, and children’s­clothing as well as sportswear and other items sold by Onward
Kashiyama at Onward Green Campaign collection booths indepartment stores.

These items are recycled and reused to the greatest extent possible with the aim of eliminating waste. Certain clothing items arerecycled through use as solid fuel. For other garments, we sort andcollect usable materials to create blankets, work gloves, and otherrecycled textile products that contribute to the organization’s environmental 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 39.

Recycling Process
Customers
Used items

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 life-cycle
circulation system.
4.	Implement various environmental conservation measures: enhance the energy
efficiency of offices, introduce low-emission vehicles, and participate in 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.

Donated at dedicated collection booths in department stores

Recycled and reused to the greatest extent possible with the aim of eliminating waste

Onward Recycling Partners
Disposal
Reuse

RecycleSold at Onward Reuse Park

Materials sorted and collected foruse in textile products

Proceeds

Blankets

Buttons and other non-reusable andunrecyclable articles disposed ofWork gloves

Solid fuelUsed in environmental and social contribution initiatives

36

37

Environmental and Social Responsibility

Environmental and Social Responsibility

Tie-Up with the Japanese Red Cross Society
Under the Onward Green Campaign, and utilizing the extensive
Red Cross network that reaches more than 185 countries throughout the world, Onward cooperates with the Japanese Red Cross
Society in distributing blankets and work gloves to areas that havebeen affected by, and are in the process of recovery from, a natural
disaster. Work gloves have also been donated domestically to individuals involved in forest preservation efforts in addition to being
distributed and utilized as a part of an awareness-building campaign.

Support Programs Using Recycled Blankets
1

Bangladesh

5

Refugee camp:

Impoverished area:of Chittagong, in southeastern Bangladesh, and toa hospital that provides medical care in the area

is periodically afflicted with severe snow damage(It is not uncommon for people living in impoverishedareas to share one blanket during this period.)

3,000
blankets
Donated to a refugee camp in the Cox’s Bazar district
First support program:May 2010

2

2,000
blankets
Donated to the area referred to locally as “dzud” that
Fifth support program:
September 2012

Kazakhstan

6

Impoverished area:

alized people, and communities in the city of Almaty

welfare facilities, where they are forced to face harsh
winters each year without sufficient protection
against the cold

Second support program:February 2011

4,000
blankets
Donated to senior citizens and children living in social
Sixth support program:
October 2013

3

9

Japan

Regions heavily impacted by the Great East
Japan Earthquake:

1,000
blankets
Donated to 31 community centers in Miyagi

Regions stricken by the Nepal earthquake:
Ninth support program:February 2016

Prefecture that were affected by the Great East Japan
Earthquake

4

2,000 blankets
7

MyanmarForest Preservation Initiatives at
Tosayama Onward Rainbow Forest

Onward Holdings opened
Onward Reuse Park in Tokyo
as a base for conveying theGroup’s environmental andsocial contribution initiatives.
In addition, Onward Reuse
Onward Reuse Park
Park sells used Onward
products at discounted prices, and the proceeds from these sales
are used to fund further environmental and social contribution
initiatives. This store was the first in the industry to employ sucha sales model.

In 2008, Onward entered into a
partnership agreement with thecity of Kochi and the Kochi
City Forestry Association andhas been participating in forest
preservation efforts at Tosayama
Onward Rainbow Forest, a forest 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.

KIBOU311 Participation in Cherry Tree
Planting Events

Bio Tech Jacket—Ecological-Wear That Returns
to the EarthKIBOU311 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 throughthis project are provided to LOOM NIPPON, which uses the donations in turn to fund cherry tree planting events.

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 means that it
will be broken down by natural bacteria andreturned to the soil after disposal.

4,000
blankets
Donated to impoverished individuals, special needs

2,000
blankets
Donated to a school and other facilities located in theschools, and children l­iving in orphanages in Myanmar

Receipt of Senken Award by Onward Green Campaign

Seventh support program:
October 2014

mountainous regions of Sichuan Province that wereaffected by the earthquake in 2008

8

VietnamImpoverished area:

4,000
blankets
Regions primarily in the northern mountain range
and central highlands

2
5

Eighth support program:
October 2015, April 2016
3

4

Onward Reuse Park—Used Onward Products
Offered at Discounted Prices

Impoverished area:

China

Regions heavily impacted by the 2008
Sichuan earthquake:

Fourth support program:March 2012

Nepal

Refugee camp:

3,300
blankets
Donated to refugees, orphans, other socially margin-

Third support program:
September 2011

Mongolia

Other Activities

In 2016, the Onward Green Campaign was presented with the 38th Senken Award.
Inaugurated to recognize companies, other organizations, and individuals that have madesignificant contributions to the development of businesses related to textiles, fashion, or
lifestyles, this award has been presented by the Senken Shimbun Company since 1978. The
honor was bestowed upon the Onward Group out of recognition of its efforts to position
environmental preservation as an important management policy and to act as a corporategroup that is considerate of both people and the environment. At the Onward Group, we
pride ourselves on the role we play in an industry directly related to lifestyles and culture.
We will continue to advance initiatives for achieving harmony with the Earth and its people.

6 9
1

7

8

38

39

Corporate Governance

Our Basic Approach to Corporate Governance
The Onward Group believes that responding promptly to changes in its business environment and ensuring a level of corporate
governance that enhances the health, fairness, transparency, andcompliance of its management and operations is one of its important responsibilities and central to increasing corporate andshareholder value.
In its basic management policy, the Onward Group has definedits business domain as “a world of fashion that gives refreshment
and beauty to people’s lives.” By offering fashion as an integral partof consumer culture, the Group creates new lifestyles and values
that contribute to the enrichment of life for all people. Moreover,
the Company believes that, in order to exercise this policy and­accomplish its objectives, it is vital that the Group builds andmaintains strong networks and relationships with customers andall other stakeholders it connects with in its corporate activities.

Directors and the Board of Directors
In order to further clarify the management responsibilities of
directors, to 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, the Company has
set the term of directors at one year. In addition, two of the sevenmember Board of Directors are appointed from outside theCompany and selected on the basis of their high level of independence. This initiative is aimed at reinforcing the supervisory function of the board.

Evaluation of the Effectiveness of the Board of Directors
The Company’s directors conduct annual self-evaluations to assess
the effectiveness and appropriateness of the Board of Directors’
management oversight function as well as the degree of accomplishment of their own duties. The results of these evaluations arereported to the Board of Directors. Based on these self-evaluations,
the Board of Directors analyzes and evaluates its overall effectiveness, disclosing information on the results.
1. Scope of evaluations• All directors and Audit & Supervisory Board members
2. Procedures for evaluations• Self-evaluation via questionnaire• Support for evaluations provided by external advisor
3. Overview of results of analysis and evaluation of Board of
Directors’ effectiveness in fiscal year 2016
• Board of Directors effectively exercising functions for establishing management strategies and targets, resolving management issues, and overseeing business execution in accordancewith Onward’s Corporate Governance Policy40• Current operation methods, agendas, and composition ofBoard of Directors appropriate; no issues requiring urgent
attention• Need to improve efficiency of operation by enhancing explanatory materials and other measures

Corporate GovernanceCorporate Governance Structure
General Meeting of Shareholders

Audit & Supervisory Board

Name

Reasons for Appointment as an Outside Director

Hachiro Honjo

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

Yoshihide Nakamura

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

Board of Directors

ReportReasons for the Appointment of Outside Directors

Supervise

ReportStanding Audit &Supervisory Board Members

ReportAudit

Outside Audit &Supervisory Board Members

Onward Group
Compliance
Committee

Internal Control
DivisionGroup Strategy Meeting

Coordinate

SuperviseGroup Companies

Audit

Accounting Auditor

Accounting Audit

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 &Supervisory Board members, two of whom are outside Audit &Supervisory Board members. Audit & Supervisory Board members
have also assigned staff to assist them in carrying out their duties
and to strengthen their supervisory function. Each member audits
and monitors the performance of directors; responsibilities include
reviewing the documentation of important decisions and attending important meetings, such as Board of Directors’ meetings,
Group financial account settlement meetings, and Group Business
Management Meetings, in accordance with audit policies and theroles delegated by the Audit & Supervisory Board. In addition, theInternal Control Division and 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 Directors and the Accounting Auditor on a regularbasis to share and exchange information and opinions. This initiative is also designed to ensure that a structure is in place that is
capable of conducting audits in an effective and lawful manner.
Moreover, the Audit & Supervisory Board receives reports fromeach member in accordance with audit policies and the roles delegated by the board. Deliberations are undertaken and resolutions
made based on this information as required.

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 of experience in government organizations and his deep insight tooversee 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 theCompany’s operations.

Business Execution Structure
The Onward Group has adopted a holding company structure thatallows the Company’s Board of Directors to engage in strategic
decision making and supervise operating companies. At the sametime, 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 Board of 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 businessenvironment.
Moreover, the Group has introduced an executive officer systemwith the aim of clarifying other management decision-making andbusiness execution functions. In order to facilitate agile decision
making as a corporate group, the Onward Group Strategy Meetingand the Group Business Management Meeting have been established. At these meetings, management strategies and the importantmanagement matters of operating companies are debated and thestate 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
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.
Total Amount of Compensation Paid by Type of Compensation(Millions of Yen)
Total Amount ofCompensation
Paid(Millions of Yen)

Basic
Compensation

Directors (excluding Outside
Directors)

395

214

99

64

16

6

Audit &
Supervisory Board
Members (excluding Outside Audit& Supervisory
Board Members)

36

36

—

—

—

2

Outside Officers

40

40

—

—

—

4

Officer Classification

BonusesCompensation
for Use in­Acquiring
Company Stock Stock Options

Number of
Eligible Officers

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 ofCompensation
Paid(Millions of Yen)

151

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

Filingcompany

BasicCompensation

85

Compensation for
Use in Acquiring
Company Stock Stock Options

Bonuses

39

20

6

41

Corporate GovernanceTraining of Directors, Audit & Supervisory Board
Members, and Executive Officers

Criteria for Independence of Outside Directors andOutside Audit & Supervisory Board Members

The Company offers venues for directors, Audit & Supervisory
Board members, and executive officers to acquire the knowledge
necessary for performing their duties along with opportunities forongoing self-study to ensure that they are able to fulfill their roles
and responsibilities. In addition, discussions are held with new
directors, Audit & Supervisory Board members, and executive
officers upon their appointment regarding the Company’s
management, business, and financial strategies; important relevant
matters; and issues faced by the Onward Group and their resolutions. Outside directors and outside Audit & Supervisory Board
members, meanwhile, are provided with explanations of theCompany’s business and organization structures when they areappointed, and necessary information pertaining to issues faced inbusiness activities and other matters is supplied regularly.

Candidates for positions as outside directors and outside Audit &Supervisory Board members will be judged to lack the necessary
independence if they meet any of the following criteria.

Policies for Cross-Shareholdings andExercise of Related Voting Rights
In addition to stocks held purely for investment purposes, theCompany will also hold shares of stocks in listed business partners
with the aim of maintaining and strengthening business relationships and thereby improving medium-to-long-term corporate
value. With regard to major cross-shareholdings, the Board of
Directors will conduct annual assessments of the meaningfulness
and economic rationality of these holdings from the perspectivesof shareholding risk limitation and capital efficiency with consideration paid to the Company’s growth potential and profitability
and to the reinforcement and maintenance of business relationships as well as other concerns. Our basic policy is to sell thoseholdings that are deemed to no longer be appropriate after gaining
the understanding of the business partner in question. In addition,
holdings that have been deemed appropriate may also be soldwhen necessitated by the market environment or by management
or financial strategies.
Furthermore, the Company strives to make the best possible
decision when exercising voting rights related to cross-shareholdings. We therefore determine how these rights will be exercised
based on a comprehensive evaluation of factors, including the
medium-to-long-term improvement of the corporate value of thebusiness partner in question and the medium-to-long-term expansion of economic benefits for the Company and Group companies.

42

1. Positions at companies at which a person involved in operationof the Company serves as a corporate officer
The individual must not be a person involved in operation at acompany at which a person involved in operation of the Company
serves as a corporate officer.
2. Material business relationships
The individual must not be a major customer or a person involvedin operation of a major customer of the Company or a major supplier or a person involved in operation of a major supplier of theCompany.
3. The Company’s Accounting Auditor
The individual must not be affiliated with the Accounting Auditor
that performs audits of the Company based on the Companies Act
or the Financial Instruments and Exchange Act.
4. External specialists
The individual must not be a specialist receiving large amounts ofmonetary payments or other financial assets from the Company
that are separate from compensation received for services as adirector or an Audit & Supervisory Board member. (Specialists
include lawyers, accountants, tax accountants, patent attorneys,
judicial clerks, and consultants. If the financial assets in question
are received by a company, an association, or other entity, the individual must not be affiliated with that entity.)
5. Donation recipients
The individual must not receive large donations from theCompany. (If the donations in question are received by a company, an association, or other entity, the individual must not be a
person involved in operation of that entity.)

Corporate Governance

7. Past relationships
The individual must not have been applicable under items 1. to 5.
during the past five years.
8. Relationships of kinship
The individual must not be a close relative of someone that is
applicable under items 1. to 7. (excluding cases in which therelationship in question is nonmaterial).

Compliance Structure
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. Furthermore, by enhancing its corporate
governance systems, the Company aims to earn high levels of trust
among its customers and shareholders and from society as a whole.
In specific terms, the Group published the Compliance Manual toclearly outline the direction of compliance activities and define
standards for adhering to ethical concerns and social norms. The
Onward Group Compliance Committee takes the lead in conducting continuing educational activities, including in-house training,as a part of efforts to ensure widespread awareness and understanding.
In addition, the Company has established a factory certification
system as part of its supply chain management initiatives with theaim of improving work environments at partner factories.

Risk Management StructureInteraction with Shareholders
The Company conducts various investor relations (IR) activities,
and the Investor Relations Division has been established as a dedicated body for ensuring the functionality of these activities. Thisdivision maintains close coordination with Corporate Planning,
Accounting, Legal Affairs, and other relevant divisions. It also
relays the input and requests solicited through IR activities to the
Executive Management Council and the Board of Directors foruse in discussions of measures for improving corporate value.
1. Periodic briefings for analysts and institutional investors
The officer responsible for IR information disclosure plays a central role in holding periodic briefings for analysts and institutional
investors at which we explain our financial results and businessstrategies.
2. Provision of IR materials on corporate website
An extensive amount of information is disclosed through Onward
Holdings’ corporate website. Please refer to this website for information on various topics.
• A Message from Management
http://www.onward-hd.co.jp/site/english/ir/message.html• Financial Data
http://www.onward-hd.co.jp/site/english/ir/financ.html• Information on Shares and Shareholders
http://www.onward-hd.co.jp/site/english/ir/stocks.html

The Onward Risk Management Regulations were established withthe purpose of guiding the development of the Company’s risk
management structure. The Compliance Division is responsible
for the development of the risk management structure, the identification of issues, and the development of risk management relatedplans. The division reports to the Board of Directors and works toestablish 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.

6. Major shareholders
The individual must not possess direct or indirect holdings equating to 10% or more of the total voting rights of the Company or
be a person involved in operation of an entity that possesses suchholdings.

43

Board of Directors, Audit &Supervisory Board Members, and Executive Officers
As of September 1, 2016

Board of Directors

Audit & Supervisory
Board Members

Executive Officers

Representative Director, Chairman

Standing Audit & Supervisory
Board Members

Senior Managing Executive Officer

Executive Officers

Michio Ohsawa

Izumi Sugita

Takeshi Hirouchi
Representative Director, President

Michinobu Yasumoto

Hitoshi Aoyama

Managing Executive Officers

Kenichi Iizuka
Outside Audit & Supervisory
Board Members

Senior Managing Director

Masaaki Yoshizawa

Jotaro Yabe

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

Yasuo Yokoyama

Tsunenori Suzuki

Tomohiko Sakamoto

Hirokazu Yoshizato

Osamu Miwa

Eihachiro Umemiya

Takashi Sudo
Masanori Shozu

Katsuaki Ohashi

Yoshihiro Higuchi
Takehiro Shiraishi

Akinori Baba

Hikosaburo Seike

Financial Section

Masatsugu Miyoshi

Director

Masahiko Yoshikawa

Hisayuki Ichinose
Outside Directors

Hachiro Honjo
Yoshihide Nakamura

Organization Chart
As of September 1, 2016

General Meeting of Shareholders
Board of Directors

Audit & Supervisory Board

Representative Director, Chairman

46

Six-Year Financial Summary

48

Management’s Discussion and Analysis

51

Operating Risks

52

Consolidated Balance Sheets

54

Consolidated Statements of Operations

55

Consolidated Statements of Comprehensive Income

56

Consolidated Statements of Changes in Net Assets

58

Consolidated Statements of Cash Flows60

Notes to Consolidated Financial Statements

87

Independent Auditor’s Report

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

Representative Director, President

Strategy Council

International Business

Executive Management Council

European and North American Operations
Asian Operations

Corporate Planning, Legal Affairs, Compliance

Planning and Production
Distribution Channel Development

Finance, Accounting

Administration

Marketing, Advertising

Secretary Office, Corporate Communications,
Human Resources, General Affairs

Omni-channel Retailing, Logistics
New Business Development

Hiroshima Region

44

Sendai Region

Sapporo Region

Nagoya Region

Fukuoka Region

Osaka Region

Tokyo Region45Six-Year Financial Summary

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
2011

FOR THE YEAR
Net sales
Cost of sales
Selling, general andadministrative expenses
Operating income
Ordinary income
Income taxes, current
Net income
CASH FLOWSC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

2012

2013

2014

2015

2016

Net Sales¥ million

2016

300,000¥245,387
128,877¥243,204
127,382¥259,100
133,983¥280,008
149,270¥281,502
152,438¥263,516
144,063$2,319,275
1,267,940

106,896
9,614
10,497
5,555
2,723

104,160
11,663
13,3307,528
3,529

113,298
11,81913,405
7,398
4,503

120,538
10,20012,211
3,112
4,659

123,332
5,732
7,162
5,033
4,204

115,675
3,778
5,504
8,680
4,278

1,018,084
33,251
48,45076,39537,652

11,207

13,181

10,13813,362

16,491

3,632

31,971(5,152)(1,962)(10,683)(14,301)(15,657)

1,783

15,687(9,272)
6,055
5,405
5,642

(7,449)
11,2196,230
5,478(7,848)
(545)

2,122
(939)

8,949
5,721

757
834

16,7506,801

26,884
7,219(6,357)
5,415
15,955
7,799(55,951)
47,658140,425
68,64530,93995,54533,192
98,89524,677
100,320

27,376110,349

31,123
117,052

29,407
121,469

258,822
1,069,079

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

109,658
340,854
109,619
179,880
185,315

106,695
313,454
106,110
176,264
172,337

939,052
2,758,794
933,901
1,551,346
1,516,788

Yen

U.S. dollars*¥   17.38
1,002.34
24.00
138.1

¥ 22.52995.11
24.00
106.6¥   28.71
1,043.64
24.00
83.6

¥   29.69
1,102.99
24.00
80.8

¥   26.78
1,166.89
24.00
89.6

¥   28.27
1,101.21
24.00
86.5

$0.25
9.69
0.21

RATIOSROE (%)ROA (%)
Operating margin (%)
Gross profit margin (%)
SG&A expenses / Net sales (%)
Shareholders’ equity ratio (%)

1.7
1.0
3.9
47.5
43.6
55.8

2.3
1.3
4.8
47.6
42.8
56.3

2.8
1.6
4.6
48.3
43.7
57.1

2.8
1.6
3.6
46.7
43.0
55.2

2.4
1.3
2.0
45.8
43.8
53.8

2.4
1.3
1.4
45.3
43.9
54.2

—
—
—
—
—
—

3,993

5,208

5,224

4,973

5,119

281,502¥ million / %263,516

12,00011,663100,000

4,000

0

2011

2012

2013

2014

2015

0

2016

4.6

2.0

2011

2012

2013

4.0

5,732

3.6

2014

3,778

2015

2016

2.4

2.4

1.3

1.3

2015

2016

0

Operating Margin (right scale)

%

4,503

5,000

4,659

4,204

4.0

4,278

3,529

4,000

3.0

2,723

2.0

2,000

2.8

2.8

1.6

1.6

2013

2014

2.3
1.7
1.0

1.3

1.0

1,000

2011

2012

2013

2014

2015

0

2011

ROE

ROA

2016

2012

Total Assets

Total Net Assets and Shareholders’ Equity Ratio¥ million¥ million / %400,000
300,000

2.0

1.4

ROE and ROA¥ million

3,000

6.0

10,2003.9

Operating Income

Net Income

11,819

9,614
4.8

8,000

281,643

276,939

286,779

313,431

340,854200,000
313,454
150,000

158,745

157,303

165,372

55.8

56.3

57.1

175,02955.2

185,31553.8

172,337
54.2

80.0
60.0

200,000

100,000

40.0

100,000

50,000

20.0

0

2011

2012

2013

2014

2015

0

2016

2011

Total Net Assets

Capital Expenditures

2013

2014

2015

2016

0

Shareholders’ Equity Ratio (right scale)¥/%

26,88430,00020,0000

2012

Cash Dividends per Share and Payout Ratio¥ million

10,0003,910

243,204

280,008

1

PER SHARE INFORMATION
Net income (EPS)
Net assets
Cash dividends
Payout ratio (%)

OTHER INFORMATION
Number of full-time
employees

245,387

259,100

200,000

0

AT YEAR-END
Cash and deposits
Total current assetsTotal property, plantand equipment
Total assets
Total current liabilities
Total shareholders’ equity
Total net assets

Operating Income and Operating Margin

5,405

2011

2012

160.0

138.1
106.6

60.00

16,750

6,230

80.00

15,955
40.00

8,949

24.00

24.00

83.6

80.8

24.00

24.00

89.6

86.5

24.00

24.00

20.00

2013

2014

2015

2016

0

120.0
80.0
40.0

2011

2012

Cash Dividends per Share

2013

2014

2015

2016

0

Payout Ratio (right scale)*1. Yen amounts have been translated, for convenience only, at ¥113.62=US$1, the approximate exchange rate on February 29, 2016.
*2. Free cash flow = Cash flows from operating activities + Cash flows from investing activities

46

47

Management’s Discussion and Analysis

Overview of Operating Results
In fiscal year 2016, ended February 29, 2016, the domestic economy experienced a gentle recovery supported by economic stimulus measuresinstituted by the Japanese government and monetary easing policies implemented by the Bank of Japan. Overseas, however, conditions were sluggish
in China and other economies, and geopolitical risks plagued the Middle
East and Europe. An overall sense of opaqueness lingered as a result.
In the domestic apparel and fashion industries, luxury items and demand
from inbound tourists supported performance but overall store sales faceddifficult conditions, owing to frugal consumer behavior and the adverse
impact of a warm winter on sales of winter clothing.
In this operating environment, the Onward Group proceeded withthe reinforcement of its core businesses as well as growth businesses. We
also continued to be proactive in the development of new businesses for
future growth.
Performance suffered from lower March sales, which fell from theprevious year when sales were buoyed by the demand rush preceding theconsumption tax hike, as well as the adverse impact of the warm winterbeginning in November, which placed downward pressure on sales. We
were unable to counterbalance the heavy weight of these negative factors
despite our efforts to bolster promotions for mainstay brands and to deploy
our Omni-channel retailing strategy, which aims to improve customer
satisfaction by integrating the management of inventories for brick-andmortar stores and directly managed e-commerce website Onward Crosset.
Overseas, attempts to improve earnings in the European business were
delayed, leading to poor performance. Meanwhile, earnings grew in our
North American and Asian businesses.

Net Sales
Sales in the Apparel Business decreased 6.0% year on year, to ¥248,468
million, while sales in the Other Business declined 12.5%, to ¥15,048
million. As a result, consolidated net sales were down 6.4% comparedwith the previous fiscal year, to ¥263,516 million.

Management’s Discussion and Analysis

The gross profit margin declined 0.5 percentage points, from 45.8% in
fiscal year 2015 to 45.3% in fiscal year 2016. This outcome was primarily aresult of the decrease in March sales due to the rebound from high figuresin the previous year, which were buoyed by the demand rush preceding theconsumption tax hike, and downward pressure placed on sales of full-priceitems by the warm winter that began in November.

Segment Information

Operating Income

Domestic BusinessSelling, general and administrative (SG&A) expenses decreased 6.2% year
on year, to ¥115,675 million. The ratio of SG&A expenses to net sales was
43.9%, a 0.1-percentage-point increase from 43.8% in the previous fiscal
year. These results were largely attributable to higher depreciation andamortization stemming from reforms to IT systems. In addition, the operating margin contracted, from 2.0% to 1.4%, following the decline in the
gross profit margin. As a result, operating income decreased ¥1,954 million,to ¥3,778 million.

At core operating subsidiary Onward Kashiyama, the e-commerce businessposted strong performance in line with plans and global brands, such as
JOSEPH and TOCCA, continued to sell well. However, costs rose in conjunction with yen depreciation and clothing sales struggled in department
stores and other major distribution channels. As a result, both sales andprofits were down.

Other Income (Expenses)
Other income, net, amounted to ¥3,353 million, compared with ¥3,663
million in the fiscal previous year. Other expenses included impairment
loss on fixed assets of ¥14,051 million, up ¥12,391 million year on year.
However, expenses were offset by other income, including gain on sale ofinvestments in securities, net, of ¥8,812 million, an increase of ¥3,449
million; gain on sales or disposal of fixed assets, net, of ¥5,393 million,up ¥4,953 million; and gain on sale of investments in unconsolidated
subsidiaries of ¥1,929 million.

Income before Income Taxes andMinority Interests and Net Income
Income before income taxes and minority interests was ¥7,131 million, adecrease of ¥2,264 million, or 24.1%, year on year. Income taxes dropped¥2,304 million, or 44.5%, to ¥2,868 million, from ¥5,172 million in theprevious fiscal year. Due to these factors, net income was ¥4,278 million,
an increase of ¥74 million, or 1.8%, from the previous fiscal year.

Outlook for the Fiscal Year Ending
February 28, 2017

Apparel BusinessIn fiscal year 2016, sales in the Apparel Business segment declined 6.0%
year on year, to ¥248,468 million, while operating income was down
36.8%, to ¥5,558 million.

Overseas Business
In Europe, we strengthened operating foundations and secured stable earnings for production operations, but performance suffered in brand businesses due to delays in our response to demand fluctuations that resulted
from external factors. We were able to improve performance in North
America and Asia, however, through streamlining business structures andstore networks.

Other BusinessIn fiscal year 2016, sales in the Other Business segment decreased 12.5%
compared with the previous fiscal year, to ¥15,048 million, and operating
income increased 61.5%, to ¥629 million.
In our service-related businesses, selectively concentrated efforts led toreduced sales but higher profits. Our resort business performed favorably,
also posting higher profits despite lower sales.

For fiscal year 2017, ending February 28, 2017, we at the Onward Group
forecast that consolidated net sales will decrease 3.6%, to ¥254,000 million,
while operating income will grow 19.1% year on year, to ¥4,500 million.
Amid the continuation of the quantitative and qualitative easing policies of the Bank of Japan, the domestic economy will not be able to cast off
the shackles of deflation. One factor behind this outlook is a strong senseof wariness about the direction of the global economy, itself a product of
the slowdown in the Chinese economy.
In the domestic apparel and fashion industries, progress in globalization and the trend toward selection and concentration of business activities
will serve as a backdrop for ongoing difficult conditions characterized by
fierce competition. In this operating environment, the Onward Group willseek to improve product value and enhance customer service in its corebusinesses with the aim of steadily improving profitability. At the sametime, we will develop new business fields with a promising outlook for growth.

Domestic BusinessIn our domestic operations, we will focus on improving the margins
of existing core operations at Onward Kashiyama and other important
subsidiaries and on expanding operations in new business fields.

Overseas Business
Overseas, we will heighten our growth potential by utilizing our manufacturing platform in Europe to globalize our operations while strategically
expanding our Asian business.

Gross Profit
Cost of sales decreased 5.5%, to ¥144,063 million, and gross profit was¥119,453 million, down ¥9,611 million compared with the previous fiscal year.

Net Sales¥ million

300,000

243,204

259,100

280,008

281,502

263,516

Operating Income and Net Income

Segment Sales¥ million¥ million

12,00011,663

11,819300,000

10,20010,0008,000

200,000

6,000
4,000

100,000

3,529

4,503

4,659

5,732
4,204

200,000
4,278
3,778

15,694

14,870228,335

243,406

16,997

17,201

263,011

264,301

2014

2015

15,048248,468

100,000

2,000
0

2012

2013

2014

2015

2016

0

2012

Operating Income

48

2013
Net Income

2014

2015

2016

0

2012

Apparel Business

2013

2016

Other Business49

Operating Risks

Management’s Discussion and Analysis

Financial Position

Cash Flows from Financing Activities

Assets
As of February 29, 2016, total assets decreased ¥27,400 million from theprevious fiscal year-end, to ¥313,454 million. Total current assets rose
¥4,417 million, mainly from increases in deferred tax assets and othercurrent assets. Fixed assets contracted ¥31,817 million, largely reflecting
decreases in property, plant and equipment and goodwill.

Liabilities
Total liabilities as of February 29, 2016, were down ¥14,422 million fromthe previous fiscal year-end, to ¥141,117 million. Total current liabilities
declined ¥3,509 million, mainly attributable to a decrease in accounts andnotes payable. Total long-term liabilities declined ¥10,913 million, largely
due to a decrease in long-term loans payable.

Net Assets
As of February 29, 2016, total net assets were down ¥12,978 million fromthe previous fiscal year-end, to ¥172,337 million. Total shareholders’ equity
decreased ¥3,616 million due to lower retained earnings. Total accumulated
other comprehensive income declined ¥9,919 million, mainly becauseof a decrease in net unrealized gain on available-for-sale securities.

Cash FlowsNet cash provided by operating activities for fiscal year 2016 was ¥3,632
million (¥16,491 million in the previous fiscal year), mainly from income
before income taxes and minority interests, a decrease in trade payables,
and income taxes paid.

Cash Flows from Investing Activities
Net cash provided by investing activities for fiscal year 2016 totaled ¥1,783
million (compared with net cash used in investing activities of ¥15,657 million in the previous fiscal year), mainly due to investments in sales facilities
and the sale of real estate.

Total Assets and Total Net Assets

276,939
157,303286,779
165,372

313,431

340,854

18,000313,4540

175,029

185,315

172,33750

0–9,0002012

2013

Total Net Assets

13,181

10,13813,3629,000

100,000

Total Assets

At Onward Holdings, we recognize that the distribution of profits to shareholders is one of our top priorities. Our basic policy is to distribute regularand stable dividends to shareholders based on our business performance,
and we target a dividend payout ratio of at least 35%. For fiscal year 2016,
we decided to distribute a cash dividend of ¥24.00 per share.
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.

¥ million

400,000

200,000

We at the Onward Group undertake capital expenditures on a continuous
basis to upgrade and expand our planning, production, sales, and logistics
structures and systems. Our Group’s capital expenditures are the wellspringthat enables us to address the diverse needs of our customers. In fiscal year
2016, our capital expenditures totaled ¥15,955 million. The details of
expenditures by segment are as follows.
In the Apparel Business segment, capital expenditures amounted to¥14,575 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 Business segment,
we invested ¥741 million to upgrade commercial facilities and enhance
operational efficiency.

Cash Flows¥ million

2014

2015

2016

–18,0002013

Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities

2014

Weather Conditions and Disasters

757

3,632
1,783

–6,357–15,657

2015

2016

secure rights to use intellectual property owned by our overseas partners.
For unexpected reasons, the relevant contracts may be canceled or theterms and conditions may become unfavorable upon renewal. Such an outcome may have an adverse impact on our Group’s business performance.

Legal Procedures and ComplianceIn doing business, the Onward Group pays careful attention 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 the payment of indemnities. Such an eventuality may have an adverse impact on
our Group’s business performance.

Sales of our Group’s mainstay fashion products may be affected by the weather.
Consequently, we as a Group have put in place and continue to strengthen
our systems for planning and production for a quick turnaround cycle.
However, unseasonal weather over a prolonged period, such as cool weather inthe summer or warm weather in the winter, or a series of typhoons may resultin the loss of sales opportunities during peak seasons. Such developments
may have an adverse impact on our Group’s 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, such as a newstrain of influenza, may compel us at the Onward Group to suspend ourbusiness operations. Such an occurrence may have an adverse impact on
our Group’s business performance.

Information Security

Product Liability

Overseas Business Operations

We at the Onward Group adhere to strict quality control of our products
in accordance with established quality control standards. Despite theimplementation 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 Group and brands,
leading to a substantial cost burden. Such an outcome may have an adverse
impact on our Group’s business performance.

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

Business Partners

Business and Capital Tie-ups

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 resultof an unexpected bankruptcy of a large retail complex. Such an occurrence
may have an adverse impact on our Group’s business performance as well.

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 a change inthe business environment that exceeds expectations, we may record a loss
on impairment of goodwill. Such an occurrence may have an adverse
impact on our Group’s business performance.

Intellectual Property–1,962–7,449–7,848–10,683–14,301

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, our performance targets in our business plan may be challenging at times due to anumber of external factors, such as sluggish consumer spending as a resultof fluctuations in economic conditions, increased competition, and suddenchanges in fashion trends. Falling short of our targets may have an impact
on our Group’s performance.

16,491

2,122

2012

Risks that may have an impact on our Group’s operations are outlined asfollows. After determining the potential for these risks to materialize, we at
the Onward Group will implement measures designed to mitigate theserisks 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.

Changes in Consumer Needs

Capital Expenditures

Profit Distribution Policy

Cash Flows from Operating Activities

300,000

Net cash used in financing activities for fiscal year 2016 amounted to¥6,357 million (compared with net cash provided by financing activitiesof ¥757 million in the previous fiscal year), owing mainly to changes inborrowings, dividends paid, and acquisition of treasury stock.
As a result, cash and cash equivalents as of February 29, 2016, moved
down ¥1,488 million, to ¥28,330 million.

We at the Onward Group have implemented comprehensive measures
aimed at ensuring the security of our information systems. Regarding thetreatment 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 unauthorizedaccess in our Group’s computer systems or criminal behavior that may
undermine the trust placed in us by society, leading to an increased costburden. Such an occurrence may have an adverse impact on our Group’sbusiness performance.

We at the Onward Group own trademarks and other intellectual properties
in Japan and overseas. We strive to safeguard the rights relating to suchproperty in accordance with laws and regulations. However, in the eventof an infringement of such rights by a third party, both the image of ourGroup and brand image may be undermined, resulting in impairment of
our Group’s product development activities. Such an occurrence may havean adverse impact on our Group’s business performance.
Moreover, we at the Onward Group are actively engaged in licensed
brand business activities. In undertaking these activities, we as a Group51

Consolidated Balance Sheets

Consolidated Balance Sheets

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2015 and February 29, 2016

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

Millions of yen

ASSETS

2015

2016

2016

¥ 31,123¥ 29,407$  258,822

Current assets:
Cash and deposits (Notes 3 and 9)
Accounts and notes receivable (Note 3)

30,79327,819244,838

Inventories (Note 2. (4))

43,862

42,770376,433

Deferred tax assets (Note 11)

4,066

4,705

41,406

Other current assets

8,132

17,603

154,933

(924)

(835)

(7,353)

117,052

121,469

1,069,079

Less: Allowance for bad debt
Total current assets

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

Millions of yen

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

2015

2016

2016

¥ 40,341¥ 34,971$  307,786

Short-term loans payable (Notes 3 and 13)

42,40445,326398,930

Current portion of long-term loans payable (Notes 3 and 13)

3,250

3,828

33,696

Accrued income taxes

3,178

5,911

52,026

Accrued bonuses to employees

1,155

1,002

8,816

Accrued bonuses to directors

166

185

1,626

Allowance for sales returns

405

303

2,669

Provision for point program
Other current liabilities (Notes 11 and 13)
Total current liabilities

331

436

3,833

18,38914,148

124,519

109,619

106,110

933,901
141,050

Long-term liabilities:

Property, plant and equipment:

Long-term loans payable (Notes 3 and 13)

20,97916,026

Buildings and structures

82,22082,715727,997

Deferred tax liabilities—revaluation of land (Notes 11 and 12)

3,209

2,818

24,802

Leased assets

8,804

8,020

70,589Net defined benefit liability (Note 7)

4,126

4,180

36,790

5,892

5,195

45,720

142

150

1,323

11,572

6,638

58,420

Other depreciable property
Less: Accumulated depreciation
Land (Note 12)
Total property, plant and equipment

35,74734,188300,896

Lease obligations (Note 13)(79,148)(76,266)(671,239)

Accrued retirement benefits for directors and corporate auditors
Other long-term liabilities (Note 11)

47,62348,657428,243

62,03558,038510,809109,658

106,695

939,052

Total long-term liabilities
Total liabilities

45,92035,007308,105

155,539

141,117

1,242,006

Net assets:
Shareholders’ equity (Note 14):
Common stock:
Authorized—400,000,000 shares

Intangible assets, net:

Issued—172,921,669 shares and 167,921,669 shares at February 28, 2015 andFebruary 29, 2016, respectively

Goodwill

26,56915,652

137,758

Other

7,487

7,785

68,51630,08030,080264,739

Capital surplus

50,04350,043

440,444

34,05623,437206,274Retained earnings

122,590

114,1811,004,939

Total intangible assets, net

Less: Treasury stock, at cost, 15,846,086 shares and 13,767,509 sharesat February 28, 2015 and February 29, 2016, respectively(22,833)(18,040)(158,776)

179,880

176,264

1,551,346

11,207

1,118

9,841

147

(303)

(2,666)

Net revaluation loss on land (Note 12)(13,871)(10,126)(89,120)

Foreign currency translation adjustments

5,139

3,777

33,245Remeasurements of defined benefit plans (Note 7)

788

(975)

(8,584)

Total accumulated other comprehensive income

3,410(6,509)(57,284)

Total shareholders’ equity
Investments and other assets:
Investments in securities (Notes 3 and 4)

Accumulated other comprehensive income:
54,16233,922

298,560

Net unrealized gain on available-for-sale securities (Note 4)
Deferred gain (loss) on hedging instruments

Long-term loans receivable

2,294

2,276

20,035Long-term prepaid expenses

1,119

661

5,816

Net defined benefit asset (Note 7)

3,267

1,417

12,473

Deferred tax assets (Note 11)

1,168

11,166

98,277

Other investments

18,726

13,086

115,171

(648)

(675)

(5,943)80,08861,853544,389¥340,854¥313,454$2,758,794

Less: Allowance for bad debt
Total investments and other assets
Total assets

Stock acquisition rights

871

844

7,428

1,154

1,738

15,298

Total net assets

185,315

172,337

1,516,788

Total liabilities and net assets¥340,854¥313,454$2,758,794

Minority interests in consolidated subsidiaries

Per share:
Net assets per share

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

Yen¥1,166.89¥1,101.21$9.69

See accompanying notes to consolidated financial statements.

52

53

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2015 and February 29, 2016

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2015 and February 29, 2016

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

Millions of yen

Net sales

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

Millions of yen

2015

2016

2016

¥281,502¥263,516$2,319,275

Income before minority interests
Other comprehensive income:

2015

2016

2016

¥ 4,223¥    4,263$    37,518

6,096(9,875)(86,915)

Cost of sales

152,438

144,063

1,267,940

Gross profit

129,064

119,453

1,051,335

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

Selling, general and administrative expenses

123,332

115,675

1,018,084

Deferred gain (loss) on hedging instruments

180

(450)

(3,961)

5,732

3,778

33,251

Net revaluation gain on land

—

294

2,583

2,546

(1,442)(12,688)

Remeasurements of defined benefit plans, net of tax—(1,764)(15,523)

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

225

(155)

(1,360)		 Total other comprehensive income (Note 8)

9,047(13,392)(117,864)¥13,270¥ (9,129)$ (80,346)¥13,176¥ (9,093)$ (80,027)

94

(36)

(319)

Operating income

Foreign currency translation adjustments
Other income (expenses):
Interest income

97

108

955

Dividend income

463

464

4,087

Land and house rent received

890

1,296

11,407

Interest expenses

(583)

(546)

(4,807)

Equity in earnings (losses) of investees

(147)

43

376

Foreign currency exchange gain

397

49

432

Rent expenses

(215)

(734)

(6,464)Gain on sale of investments in securities, net (Note 4)

5,363

8,812

77,560Gain on sales or disposal of fixed assets, net

440

5,393

47,463Gain on sale of investments in unconsolidated subsidiaries

—

1,929

16,981

Impairment loss on fixed assets (Note 6)(1,660)(14,051)(123,671)

Special retirement expenses(1,901)

—

—

519

590

5,190

9,395

7,131

62,760Current

5,033

8,680

76,395

Deferred139(5,812)(51,153)

4,223

4,263

37,518

(19)

15

134

¥  4,204¥  4,278$   37,652

Other, net
Income before income taxes and minority interests

Comprehensive income

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

Income taxes (Note 11):

Income before minority interests

Minority interests in income of consolidated subsidiaries
Net income

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

Yen

Per share (Notes 14, 15 and 17):
Basic net income per share¥26.78¥28.27$0.25

Diluted net income per share

26.48

27.96

0.25

Cash dividends per share

24.00

24.00

0.21

See accompanying notes to consolidated financial statements.

54

55

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Changes in Net Assets

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2015 and February 29, 2016

Millions of yen

Millions of yen

Shareholders’ equity (Note 14)

Accumulated other comprehensive income

Number ofshares ofcommon stock(thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

172,922¥30,080¥50,043¥121,008¥(23,053)¥178,078

Cash dividends

—

—

—

(3,766)—(3,766)

Net income

—

—

—

4,204

—

4,204

Purchase of treasury stock

—

—

—

—

(4)

(4)

Reissuance of treasury stock

—

—

—

(141)

224

83

Reversal of revaluation of land

—

—

—

1,368

—

1,368

Change of scope of consolidation

—

—

—

(83)

—

(83)

Net changes other thanshareholders’ equity

—

—

—

—

—

—

Total changes during the year

—

—

—

1,582

220

1,802

Balance as at February 28, 2015

172,92230,08050,043

122,590(22,833)

179,880

Cumulative effects of changes inaccounting policies

—

—

—

285

—

285

Restated balance—

30,08050,043

122,875(22,833)

180,165

Cash dividends

—

—

—

(3,770)—(3,770)Net income

—

—

—

4,278

—

4,278

Purchase of treasury stock

—

—

—

—

(2,294)(2,294)

Balance as at March 1, 2014

Reissuance of treasury stock

—

—

—

(83)

127

44

Retirement of treasury stock(5,000)——(6,960)6,960—

Reversal of revaluation of land

—

—

—

(2,159)—(2,159)Net changes other thanshareholders’ equity

—

—

—

—

—

—

(5,000)——(8,694)

4,793(3,901)

167,922¥30,080¥50,043¥114,181¥(18,040)¥176,264

Total changes during the year
Balance as at February 29, 2016

Balance as at March 1, 2014

Net unrealized
gain onDeferredavailable-for-sale gain (loss)
securities
on hedging(Note 4)
instruments

Net
revaluation
loss on land
(Note 12)Remeasurements
Foreignof definedcurrency
benefit planstranslation(Note 7)
adjustments

Restated balance¥ (33)¥(12,503)¥ 2,550¥    —¥(4,981)¥823¥1,109¥175,029

—

—

—

—

—

—

—

—

(3,766)

Net income

—

—

—

—

—

—

—

—

4,204

Purchase of treasury stock

—

—

—

—

—

—

—

—

(4)

Reissuance of treasury stock

—

—

—

—

—

—

—

—

83

Reversal of revaluation of land

—

—

—

—

—

—

—

—

1,368

Change of scope of consolidation

—

—

—

—

—

—

—

—

(83)

6,202

180

(1,368)

2,589

788

8,391

48

45

8,484

6,202

180

(1,368)

2,589

788

8,391

48

45

10,286

11,207

147(13,871)

5,139

788

3,410

871

1,154

185,315

—

—

—

—

—

—

—

—

285

Restated balance

11,207

147(13,871)

5,139

788

3,410

871

1,154

185,600

Cash dividends

—

—

—

—

—

—

—

—

(3,770)Net income

—

—

—

—

—

—

—

—

4,278

Purchase of treasury stock

—

—

—

—

—

—

—

—

(2,294)

Reissuance of treasury stock

—

—

—

—

—

—

—

—

44

Retirement of treasury stock

—

—

—

—

—

—

—

—

—

Reversal of revaluation of land

—

—

—

—

—

—

—

—

(2,159)(10,089)

(450)

3,745

(1,362)(1,763)(9,919)(27)

584(9,362)(10,089)

(450)

3,745

(1,362)(1,763)(9,919)(27)

584(13,263)¥   1,118¥(303)¥(10,126)¥ 3,777¥   (975)¥(6,509)¥844¥1,738¥172,337

Total

Stock
acquisitionrightsMinority
interests inconsolidated
subsidiaries

Total
net assets$  6,939$ 30,016$7,669$10,155$1,631,008

Net changes other thanshareholders’ equity
Total changes during the year
Balance as at February 28, 2015
Cumulative effects of changes inaccounting policies

Net changes other thanshareholders’ equity
Total changes during the year
Balance as at February 29, 2016

Thousands of U.S. dollars (Note 2. (22))
Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

$264,739$440,444$1,078,943$(200,958)$1,583,168

—

—

2,511

—

2,511

264,739

440,444

1,081,454(200,958)

1,585,679

Cash dividends——(33,179)—(33,179)

Net income——

37,652—37,652

Purchase of treasury stock

—

—

—

(20,189)(20,189)

Reissuance of treasury stock

—

—

(730)

1,119

389

Retirement of treasury stock——(61,252)

61,252—

Reversal of revaluation of land——

(19,006)—(19,006)

Net changes other thanshareholders’ equity
Total changes during the year
Balance as at February 29, 2016
See accompanying notes to consolidated financial statements.

—

—

—

Total
net assets¥   5,005

Shareholders’ equity (Note 14)

Cumulative effects of changes inaccounting policies

Minority
interests inconsolidated
subsidiaries

Cash dividends

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

Balance as at February 28, 2015

Total

Stock
acquisitionrights————(76,515)

42,182(34,333)$264,739$440,444$1,004,939$(158,776)$1,551,346

Net unrealized
gain onDeferredavailable-for-sale gain (loss)
securities
on hedging(Note 4)
instruments

Balance as at February 28, 2015

$ 98,634

Cumulative effects of changes inaccounting policiesNet
revaluation
loss on land
(Note 12)Remeasurements
Foreignof definedcurrency
benefit planstranslation(Note 7)
adjustments$ 1,295 $(122,083) $ 45,231

—

—

—

—

—

—

—

—

2,511

Restated balance

98,634

1,295(122,083)

45,231

6,939

30,016

7,669

10,155

1,633,519

Cash dividends

—

—

—

—

—

—

—

—

(33,179)

Net income

—

—

—

—

—

—

—

—

37,652

Purchase of treasury stock

—

—

—

—

—

—

—

—

(20,189)

Reissuance of treasury stock

—

—

—

—

—

—

—

—

389

Retirement of treasury stock

—

—

—

—

—

—

—

—

—

Reversal of revaluation of land

—

—

—

—

—

—

—

—

(19,006)(88,793)(3,961)

32,963(11,986)(15,523)(87,300)

(241)

5,143

(82,398)(88,793)(3,961)

32,963(11,986)(15,523)(87,300)

(241)

5,143

(116,731)$   9,841$(2,666) $ (89,120) $ 33,245 $ (8,584) $(57,284)$7,428$15,298$1,516,788

Net changes other thanshareholders’ equity
Total changes during the year
Balance as at February 29, 2016

See accompanying notes to consolidated financial statements.

56

57

Consolidated Statements of Cash Flows

Consolidated Statements of Cash Flows

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2015 and February 29, 2016

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

Millions of yen
2015

2016

Income before income taxes and minority interests

Millions of yen

2016

Cash flows from operating activities:

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

2015

2016

2016

4,225

37,184

Cash flows from financing activities:¥  9,395¥  7,131$  62,760

Net increase (decrease) in short-term loans payable(875)

Adjustments to reconcile income before income taxes

Proceeds from long-term loans payable

10,000——and minority interests to net cash provided by operating activities:

Repayments of long-term loans payable(3,358)(3,437)(30,248)

Depreciation and amortization

7,219

7,799

68,645Acquisition of treasury stock

Impairment loss on fixed assets

1,660

14,051

123,671

Dividends paid by the parent company

Net amortization of goodwill on consolidation

3,327

3,027

26,638

Increase (decrease) in allowance for bad debt

(2,064)

(15)

(128)

Dividends paid to minority shareholders
Other, net(4)(2,294)(20,189)(3,766)(3,770)(33,179)

(83)

(101)

(886)

(1,157)(980)(8,633)(55,951)(Increase) decrease in net defined benefit asset

—

2,363

20,796

Net cash provided by (used in) financing activities

757(6,357)

Increase (decrease) in net defined benefit liability

(934)

181

1,597

Effect of exchange rate changes on cash and cash equivalents

835

(546)

(4,807)

Interest and dividend income

(560)

(573)

(5,042)

Net increase (decrease) in cash and cash equivalents

2,426(1,488)(13,100)

Interest expenses

583

546

4,807

Increase (decrease) in cash and cash equivalents resulting from change of scope of consolidation

161

—

—

Equity in (earnings) losses of investees

147

(43)

(376)

Cash and cash equivalents at beginning of year

27,231

29,818262,439

Cash and cash equivalents at end of year (Note 9)¥ 29,818¥ 28,330$ 249,339(Gain) loss on sales or disposal of fixed assets, net(440)(5,393)(47,463)(Gain) loss on sale of investments in securities, net(5,363)(8,812)(77,560)(Increase) decrease in trade receivables(1,450)1,694

14,908(Increase) decrease in inventories(1,948)

400

3,523

Increase (decrease) in trade payables

1,175(4,672)(41,122)

Other, net

7,231(10,034)(88,324)

Subtotal

17,9787,650

67,330Interest and dividends received

687

625

5,506

Interest paid

(600)

(526)

(4,631)

Income taxes paid

(2,595)(4,356)(38,334)

Refunded income taxes

1,021

239

2,100

16,491

3,632

31,971

Increase in time deposits(1,168)(308)(2,711)

Decrease in time deposits

16

533

4,692

Net cash provided by operating activities

See accompanying notes to consolidated financial statements.

Cash flows from investing activities:(22,182)(12,140)(106,844)

Proceeds from sale of property, plant and equipment

Acquisition of property, plant and equipment

2,806

15,576

137,086

Acquisition of investments in securities(543)(5,522)(48,604)

10,17016,739147,323

Proceeds from sale of investments in securities

(586)

(429)

(3,771)

Payments for security deposits

Payments for long-term prepaid expenses(1,394)(538)(4,738)Proceeds from security deposits

1,317

925

8,145

Purchase of investments in subsidiaries resulting in change in scope of consolidation(205)(4,263)(37,520)—(7,163)(63,048)(3,888)(1,627)(14,323)(15,657)

1,783

15,687

Payments for sale of investments in subsidiaries resulting in change in scope of consolidation
Other, net
Net cash provided by (used in) investing activities

58

59

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2015 and February 29, 2016

1. Basis of Presentation of the Consolidated Financial Statements(3) Investments in Unconsolidated Subsidiaries and Affiliates

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 C­ ompanies Act of Japan (the “CompaniesAct”) and the Financial Instruments and Exchange Act 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-General of the Kanto Local 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 andcash flows of the Company and its consolidated subsidiaries in accordance with accounting principles and practices generally accepted in countries
and jurisdictions other than Japan.

(4) Inventories

2. Summary of Significant Accounting Policies

Inventories held for sale in the ordinary course of business are measured at the lower of cost or net selling value, which is defined as the selling
price less additional estimated manufacturing costs and estimated direct selling expenses, determined principally by the specific identification
method. Write-downs recorded for the years ended February 28, 2015 and February 29, 2016 were ¥11,466 million and ¥11,016 million($96,956 thousand), respectively.

(1) Scope of Consolidation(5) Investments in Securities

The Company had 81 subsidiaries as at February 29, 2016 (81 as at February 28, 2015). The accompanying consolidated financial statements
include the accounts of the Company and 72 of its subsidiaries (72 for 2015). Major consolidated subsidiaries are listed below (the Company
and its consolidated subsidiaries are collectively referred to as the “Companies”):
Name of subsidiary

Equity ownership percentage

Closing date

Onward KASHIYAMA Co., Ltd.

100.0%

February 28

Onward Trading Co., Ltd.

100.0

February 28

Chacott Co., Ltd.

100.0

February 28

Creative Yoko Co., Ltd.

100.0

February 28

Island Co., Ltd.

100.0

February 28

Onward Global Fashion Co., Ltd.

100.0

February 28

Birz Association Ltd.

100.0

February 28

Onward Luxury Group S.p.A.

100.0

November 30
November 30

Project Sloane Ltd.

100.0

Joseph Ltd.

100.0

November 30

Onward Fashion Trading (China) Co., Ltd.

100.0

December 31

J. Press, Inc.

100.0

December 31

Onward Creative Center Co., Ltd.

100.0

February 28

Excel Co., Ltd.

100.0

February 28

Onward Resort & Golf Co., Ltd.

100.0

February 28

Onward Life Design Network Co.,Ltd.

100.0

February 28

Onward Beach Resort Guam, Inc.

100.0

December 31

Onward Mangilao Guam, Inc.

100.0

December 31

During the year ended February 29, 2016, all the shares in Booklet Co., Ltd., which had been a consolidated subsidiary of the Company, weretransferred, Montenapoleone LLC. was liquidated, and Bus Stop Co., Ltd. was absorbed into Onward Global Fashion Co., Ltd.; therefore, thesecompanies were removed from the scope of consolidation.
Onward J Bridge Co., Ltd. was newly established, and shares in Freeland S.R.L. were acquired; therefore, these companies and subsidiaries ofFreeland S.R.L., Ypsilon S.R.L., Nadhour S.a.r.l., and Dauphin S.a.r.l., became consolidated subsidiaries of the Company.
Although Land S.R.L. was newly established and became a consolidated subsidiary of the Company, it was removed from the scope of consolidation as it was absorbed into Freeland S.R.L. Jil Sander Paris S.a.r.l. was absorbed into Onward Luxury Group S.a.r.l., and it was decided that all
the shares in Across Transport Co., Ltd., which had been a consolidated subsidiary of the Company, would be transferred; therefore, these companies were removed from the scope of consolidation.
The financial statements of the aforementioned subsidiaries with the fiscal year-end of December 31 or November 30 have been used for­consolidation. Significant adjustments considered necessary between the fiscal year-ends and the Company’s closing date have been madefor consolidation.
The remaining nine subsidiaries (nine for 2015) 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.

(2) Consolidation and Elimination

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

60

Investments in unconsolidated subsidiaries and affiliates are accounted for by the equity method. A total of 17 companies (18 companies for 2015)
are accounted for by the equity method for the year ended February 29, 2016.
The Company did not apply the equity method to Onward Italia S.p.A. and others as the effect on net income and retained earnings of theirconsolidated financial statements are not material individually or in the aggregate.
Although the fiscal year-end of Gailyglen Ltd. is November 30, its financial statements for the fiscal year-end have been used. Also, the fiscal
year-end of Daidoh Limited is March 31, and its financial statements prepared on a basis similar to that for the year-end closing as of December 31
have been used for consolidation purposes.

Debt securities and equity securities classified as available-for-sale securities whose fair values are readily determinable are carried at the fair values
prevailing at the fiscal year-end date with unrealized gains or losses included as a component of net assets, net of applicable taxes. Available-for-salesecurities whose fair values cannot readily be determined are stated at cost.
In cases where any decline in the fair value of a security is assessed to be other than temporary, the cost of the security is reduced to the net
realizable value, and the impairment loss is charged to income. Realized gains and losses are determined using the moving-average method and arereflected 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 thatare designated as “hedging instruments” (see “(7) Hedge Accounting” below).

(7) Hedge Accounting

Gains or losses arising from changes in the fair values of derivatives designated as “hedging instruments” are deferred as a component of net assets,
net of applicable taxes. The gains or losses on the hedging instruments are included in net income in the period during which the gains and losseson the hedged items or transactions are recognized. For forward exchange contracts, if they meet conditions for the 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 forward exchange contracts. The related hedged items are trade accounts­payable 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 estimateduseful lives of assets which are prescribed by Japanese income tax regulations, except for certain buildings (other than facilities attached to buildings) acquired on and after April 1, 1998, which are depreciated by the straight-line method pursuant to an amendment to Japanese income tax act.
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 to 10 years) by the straight-line method.

(10) Income Taxes

The accounting standards for income taxes require that deferred income taxes be accounted for under the asset 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 theamount that is realizable.

(11) Allowance for Bad Debt

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 Companies designate certain accounts as highly doubtful accounts and provide a specific allowance forthese accounts based on the management’s detailed credit analysis. Other than these accounts, the Companies provide an allowance for doubtful
accounts based on their historical average charge-off ratio.

61

Notes to Consolidated Financial Statements(12) Allowance for Sales Returns(23) Reclassifications(13) Retirement Benefits(Changes in Presentation Method)“Bonds,” which was set down separately under “Long-term liabilities” for the year ended February 28, 2015, have been included in “Other­long-term liabilities” from the year ended February 29, 2016 since significance of the amount has decreased. To reflect this change in themethod of ­presentation, the amounts in the consolidated balance sheet as of February 28, 2015 have been reclassified.
As a result, ¥100 million of “bonds” and ¥11,472 million of “Other current liabilities” under “Long-term liabilities” in the consolidated balance
sheet as of February 28, 2015 have been reclassified to ¥11,572 million of “Other long-term liabilities.”“Rent expenses,” which was included in “Other, net” under “Other income (expenses)” for the year ended February 28, 2015, have been set
down separately from the year ended February 29, 2016 since significance of the amount has increased. To reflect this change in the method of­presentation, the amounts in the consolidated statement of operations for the year ended February 28, 2015 have been reclassified.
As a result, ¥304 million of “Other, net” has been reclassified to ¥(215) million of “Rent expenses” and ¥519 million of “Other, net.”

Certain domestic consolidated subsidiaries provide for estimated losses based on the actual percentage of sales return in prior years and grossprofit margin.

To calculate projected benefit obligations, the Companies adopt the benefit formula basis for the method of attributing the projected benefits
to periods.
Unrecognized prior service costs are amortized and charged or credited to income on a straight-line basis over five to 10 years, which are within
the related employees’ average remaining service years. Unrecognized actuarial differences are amortized on a straight-line basis over five to 10 years,
which are within the related employees’ average remaining service years, from the year following the one in which they arise.
To provide for retirement benefits for directors and corporate auditors, certain domestic consolidated subsidiaries recognize accrued retirement
benefits in an amount required at the balance sheet dates in accordance with their internal rules.

(14) Provision for Point Program

Certain reclassifications have been made to the prior year’s consolidated financial statements to conform with the presentation used for the year
ended February 29, 2016.

The provision for point program is provided for future costs arising from the utilization of points that customers of certain domestic consolidated
subsidiaries have earned under the point service program which is for sales promotions. They reserve an amount considered appropriate to coverpossible utilization of the points during and after the next fiscal year.

(24) Goodwill(15) Accounting for Leases(25) Changes in Accounting Policies

Leased assets related to finance lease transactions that do not transfer ownership are depreciated on a straight-line basis, over the lease periods as
their useful lives with no residual value.

(16) Accounting for Japanese Consumption Taxes

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

(17) Application of Consolidated Taxation System

The Company and its certain domestic consolidated subsidiaries apply the consolidated taxation system.

(18) 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 highly liquid and readily convertible into cash, with an original maturity of three months or lessand insignificant risk of changes in value.

(19) 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 circumstancesindicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying amount of anasset or asset group exceeds the sum of the undiscounted future cash flows expected to be generated from the continued use and eventual disposition of the asset or asset group. The impairment loss is 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 priceat disposition.

(20) Accrued Bonuses to Employees

Accrued bonuses to employees are recognized for the estimated amount to provide for payment of bonuses to employees after the fiscal year-end,
based on services provided by them during the period.

(21) Accrued Bonuses to Directors

The Company and its certain domestic consolidated subsidiaries recognize accrued bonuses to directors in an estimated amount to provide for payment of bonuses to their directors.

(22) United States Dollar Amounts

Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of ¥113.62 = US$1, the rate of exchange as ofFebruary 29, 2016, has been used in translation. The inclusion of such amounts is not intended to imply that Japanese yen have been or could bereadily converted, realized or settled in U.S. dollars at that rate or any other rate.

62

Notes to Consolidated Financial Statements

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

The Company has applied provisions in the main clause of Section 35 of the “Accounting Standard for Retirement Benefits” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 26, May 17, 2012; the “Accounting Standard”) and the main clause of Section 67 of the “Guidanceon Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25, March 26, 2015) from the year ended February 29, 2016. Accordingly,
the Company has reviewed the calculation methods of projected benefit obligations and service costs and has changed the method of attributing
projected benefits to periods from the straight-line basis to the benefit formula basis and the method for determining the discount rate from theone based on the average period up to the estimated timing of benefit payment to a single weighted average discount rate reflecting the estimatedtiming and amount of benefit payment.
In accordance with the transitional provisions prescribed in Section 37 of the Accounting Standard, the effects of the changes in the calculation
methods of projected benefit obligations and service costs have been added to or deducted from retained earnings as of the beginning of the year
ended February 29, 2016.
As a result, as of the beginning of the year ended February 29, 2016, net defined benefit asset, net defined benefit liability, and retained­earnings increased by ¥513 million ($4,518 thousand), ¥92 million ($809 thousand), and ¥285 million ($2,511 thousand), respectively. The impact
on operating income and income before income taxes and minority interests for the year ended February 29, 2016 is immaterial.

3. Financial Instruments
1. Matters pertaining to the status of financial instruments(1) Policy on financial instruments
The Companies invest their funds in short-term deposits and meet their financing needs through bank loans. The Companies utilize derivatives tohedge various risks as described in detail below and do not enter into derivatives for trading or speculative purposes.
(2) Financial instruments and risks
Accounts and notes receivable are exposed to credit risk of customers. Operating receivables denominated in foreign currencies, being subject torisks associated with changes in the foreign currency exchange rates, are hedged by forward exchange contracts.
Investments in securities mainly comprise stocks of companies with which the Companies have business alliances and are exposed to risks­associated with fluctuations of their market prices.
Accounts and notes payable are due within one year. Operating payables denominated in foreign currencies, being subject to risks associatedwith changes in foreign currency exchange rates, are hedged by forward exchange contracts. The purpose for loans is for working capital (mainly
short-term) and funds for capital investment (long-term). A portion of long-term loans payable are subject to interest rate risk.
Regarding derivatives, forward exchange contracts, interest rate swaps, and currency options are used to hedge the foreign exchange rate
­fluctuation risk associated with the operating receivables and payables.
(3) Risk management for financial instruments(a) Management of credit risk (risk of default by customers and counterparties)
For credit risk of customers associated with accounts and notes receivable, in accordance with the credit management regulations, the Companies
monitor the status of their main customers and counterparties on a periodical basis and manage due dates and outstanding balances by customer
while working to early identify and mitigate any concerns about collection due to deterioration of financial conditions and other reasons.
For derivative transactions, to mitigate the credit risk, the Companies conduct transactions only with highly-rated financial institutions.

63

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(b) Management of market risk (risk of fluctuations in foreign exchange rates, interest rates and others)
The Companies hedge risk associated with changes in the foreign currency exchange rates arising from receivables and payables denominated inforeign currencies mainly by forward exchange contracts.
For investments in securities, the Companies periodically perceive the fair values and financial conditions of the issuers and continuously evaluate whether the securities should be maintained taking into account relationships with their business partners.
For derivatives, the Companies conduct transactions only for their actual requirements in accordance with internal management rules andmonthly review transaction balances, valuation gain or loss, and other conditions.

Thousands of U.S. dollars
February 29, 2016

Book value

Fair value

Difference(a) Cash and deposits$ 258,822$ 258,822$     —

244,838

244,838—

Available-for-sale securities

215,516

215,516—

Investments in unconsolidated subsidiaries and affiliates

76,79431,706(45,088)—(b) Accounts and notes receivable(c) Investments in securities:(c) Management of liquidity risk related to fund procurement (risk that the Companies may not be able to meet their obligations on scheduled
due dates)
In order to manage liquidity risk, the Companies timely prepare and update a schedule of cash receipts and disbursements and maintain sufficientliquidity on hand.

(d) Accounts and notes payable(307,786)(307,786)(e) Short-term loans payable(398,930)(398,930)—(f ) Long-term loans payable (including current portion of long-term loans payable)(174,746)(175,091)

345(3,976)(3,976)—(4) Supplementary explanation of fair values 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, fair value is­reasonably estimated. Since various variable assumptions are reflected in estimating the fair value, different assumptions could result in different
fair values.

Notes:
1. Fair value measurement of financial instruments and matters related to securities and derivatives(a) Cash and deposits and (b) Accounts and notes receivable
Since these items are settled in a short period of time, their book values approximate fair values.
(c) Investments in securities
The fair value of equity securities is based on the quoted market price.
(d) Accounts and notes payable and (e) Short-term loans payable
Since these items are settled in a short period of time, their book values approximate fair values.
(f ) Long-term loans payable	The fair values of fixed interest rate long-term loans payable are measured as present values obtained by discounting the total amount of principal andinterest at the interest rate which is assumed if any similar loan is newly made. Variable interest rate long-term loans payable are deemed to reflect market
interest rates in a short period of time, so the book value is used as fair value.
(g) Derivative transactions
The fair value is calculated on the basis of the price quoted by the financial institutions.

2. Matters related to fair values of financial instruments
The following are the consolidated balance sheet amounts and fair values and differences between them as of February 28, 2015 and February
29, 2016.
Millions of yen
February 28, 2015

Book value

Fair value

Difference(a) Cash and deposits¥ 31,123¥ 31,123¥    —

30,79330,793—Available-for-sale securities

44,39044,390—Investments in unconsolidated subsidiaries and affiliates

8,970

4,264

(4,706)(d) Accounts and notes payable(40,341)(40,341)—(e) Short-term loans payable(42,404)(42,404)—(f ) Long-term loans payable (including current portion of long-term loans payable)(24,229)(24,468)

239

230

230

—

(b) Accounts and notes receivable(c) Investments in securities:(g) Derivative transactions

Millions of yen(g) Derivative transactions

2. Book values of financial instruments deemed extremely difficult to determine their fair values as of February 28, 2015 and February 29, 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen
Classification

2015

2016

2016

¥802

¥710

$6,249Investments in securities:
Unlisted equity securities

The fair values of these items are not included in “(c) Investments in securities” because their market prices are not available and fair values are
deemed extremely difficult to determine.

February 29, 2016

Book value

Fair value

Difference(a) Cash and deposits¥ 29,407¥ 29,407¥    —

27,81927,819—

3. The redemption schedules for monetary receivables and marketable securities with maturities as of February 28, 2015 and February 29, 2016 are
as follows:

24,48724,487—

February 28, 2015

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits¥31,123

¥—

¥—

¥ —

30,793———(b) Accounts and notes receivable(c) Investments in securities:
Available-for-sale securities
Investments in unconsolidated subsidiaries and affiliates

Millions of yen

8,725

3,602

(5,123)(d) Accounts and notes payable(34,971)(34,971)—

Accounts and notes receivable(e) Short-term loans payable(45,326)(45,326)—

Marketable securities and investments in securities:(f ) Long-term loans payable (including current portion of long-term loans payable)(19,855)(19,894)

39

(452)

(452)

—

(g) Derivative transactions

Available-for-sale securities with maturities

—

—

—

350

¥61,916

¥—

¥—

¥350

February 29, 2016

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits¥29,407

¥—

¥—

¥—

Accounts and notes receivable

27,819———  TotalMillions of yen

Marketable securities and investments in securities:
Available-for-sale securities with maturities  Total

64

—

—

—

—

¥57,226

¥—

¥—

¥—

65

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(b) Available-for-sale securities sold during the year ended February 29, 2016:

Thousands of U.S. dollars
February 29, 2016

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits$258,822

$—

$—

$—

Accounts and notes receivable

244,838———

Marketable securities and investments in securities:
Available-for-sale securities with maturities  Total

—

—

—

—

$503,660

$—

$—

$—

Millions of yen

Thousands of
U.S. dollars

Proceeds from sale of securities¥18,985$167,093

Realized gain on sale of securities

8,888

78,226

Realized loss on sale of securities——(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 29, 2016 was ¥9,099 million($80,085 thousand).

4. Expected repayment amounts of long-term loans payable subsequent to the balance sheet date
See Note 13. “Short-Term Loans Payable and Long-Term Loans Payable.”(d) Amounts of “acquisition cost” in the above table represent book values after the recognition of an impairment loss. For the year ended February
29, 2016, the Companies recognized loss on valuation of investments in securities of ¥8 million ($68 thousand) as an impairment loss.

4. Investments in Securities
5. Derivative Transactions(1) Information as of and for the Year Ended February 28, 2015(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2015 are summarized as follows:
Millions of yen
Carrying
value

Acquisition
cost

Unrealized
gain (loss)

Securities with unrealized gain:
Equity securities¥43,268¥23,898¥19,370

Other

355

133

222

Total

43,62324,031

19,592

Securities with unrealized loss:
Equity securities

767

910

Other

—

—

—

Total

767

910

(143)

¥44,390¥24,941¥19,449  TotalThe contract or notional amounts and fair values of derivative financial instruments held as of February 28, 2015 and February 29, 2016 are­summarized as follows:(1) Derivative transactions to which hedge accounting was not applied:
Millions of yen
Contract ornotional amount

Fair value

Valuation
gain (loss)   Variable rate receive / variable rate pay

¥300

¥   0

¥   0

   Fixed rate receive / variable rate pay

100

(0)

(0)

¥400

¥   0

¥   0

February 28, 2015

Interest rate swap agreements:(143)

Note: N on-marketable equity securities of ¥336 million are not included in the above table because there were no quoted market prices available and it isextremely difficult to determine the fair value.

Millions of yen
February 29, 2016

Contract ornotional amount

Fair value

Valuation
gain (loss)

¥100

¥(1)

¥(1)

¥100

¥(1)

¥(1)

Interest rate swap agreements:   Fixed rate receive / variable rate pay(b) Available-for-sale securities sold during the year ended February 28, 2015:
Millions of yen

Proceeds from sale of securities¥10,170

Realized gain on sale of securities

5,363

Realized loss on sale of securities—

Thousands of U.S. dollars
February 29, 2016   Fixed rate receive / variable rate pay(2) Information as of and for the Year Ended February 29, 2016

Thousands of U.S. dollars

$(7)

$(7)

$880

$(7)

$(7)

Hedged item

Contract ornotional amount

Fair value   U.S. dollar

Accounts payable¥4,660¥265   EuroAccounts payable

1,475

(37)

   PoundAccounts payable

382   Chinese yuan

Accounts payable

183

(0)

February 28, 2015

Carrying
value

Acquisition
cost

Unrealized
gain (loss)

Carrying
value

Acquisition
cost

Unrealized
gain (loss)¥22,536¥18,190¥4,346$198,348$160,099$38,249

Other

3

2

1

24

12

12

Total

22,53918,192

4,347

198,372

160,11138,261

1,948

2,373

(425)

17,14520,882(3,737)

—

—

—

—

—

—

Securities with unrealized loss:
Other

$880

Millions of yen

Securities with unrealized gain:

Equity securities

Valuation
gain (loss)(2) Derivative transactions to which hedge accounting was applied:(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 29, 2016 are summarized as follows:

Equity securities

Fair value

Interest rate swap agreements:(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2015 was ¥9,435 million.

Millions of yen

Contract ornotional amount

Total

1,948

2,373

(425)

17,14520,882(3,737)  Total¥24,487¥20,565¥3,922$215,517$180,993$34,524

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

Accounts receivable

1(0)¥6,357¥230

Note: N on-marketable equity securities of ¥336 million ($2,959 thousand) are not included in the above table because there were no quoted market prices
available and it is extremely difficult to determine the fair value.

66

67

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

The impairment loss on long-lived assets for the years ended February 28, 2015 and February 29, 2016 consisted of the following:

Millions of yen
February 29, 2016

Contract ornotional amount

Hedged item

Forward exchange contracts:
Buildings and structures   To buy foreign currency:

Thousands of
U.S. dollars

Millions of yen

Fair value
2015

2016

2016

¥  739¥ 1,275$ 11,220   U.S. dollar

Accounts payable¥ 7,009¥(285)

Other intangible assets

31

457

4,027

   EuroAccounts payable

3,116

(96)

Other

78

560

4,930

12

16

140

   PoundAccounts payable

64

(7)

Land

   Chinese yuan

Accounts payable

96

(1)

Goodwill

800

11,743103,354   Singapore dollar

Accounts payable

83

(3)

  Total¥1,660¥14,051$123,671

Currency options:  To buy foreign currency:   Call:    U.S. dollar

Accounts payable414

1  To sell foreign currency:   Put:    U.S. dollar

Accounts receivable

666

(60)

¥11,448¥(451)For the year ended February 28, 2015, based on the result of future cash flow analysis that the recoverable amount of goodwill on Birz
­ ssociation Ltd., which is a consolidated subsidiary of the Company, was less than the carrying amount, the Company recognized impairment lossAof ¥800 million on the remaining unamortized portion of the goodwill. For the year ended February 29, 2016, based on the result of future cash
flow ­analysis that the recoverable amount of goodwill on Onward Luxury Group S.p.A., which is a consolidated subsidiary of the Company, andtwo other consolidated subsidiaries of the Company was less than the carrying amount, the Company recognized an impairment loss of ¥11,743
million ($103,354 thousand) on the remaining unamortized portion of the goodwill.
The recoverable amount of these assets is based on their net selling price or their value in use. The net selling price is estimated by using theirestimated disposal price. The value in use is calculated by discounting the future cash flows at discount rates of 5.5% and 5.1% for the years ended
February 28, 2015 and February 29, 2016, respectively.

Thousands of U.S. dollars
February 29, 2016

Hedged item

Contract ornotional amount

Fair value

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

Accounts payable$ 61,689$(2,511)   EuroAccounts payable

27,421(837)   PoundAccounts payable

559

(65)

   Chinese yuan

Accounts payable

847

(11)

   Singapore dollar

Accounts payable

730

(22)

Accounts payable

3,648

7

Accounts receivable

5,862

(530)

$100,756$(3,969)

Currency options:  To buy foreign currency:   Call:    U.S. dollar  To sell foreign currency:

7. Retirement Plan and Retirement Benefits
The Company and its certain subsidiaries have adopted funded and unfunded defined benefit retirement plans as well as defined contribution
retirement plans to provide for retirement benefits to their employees.
Under the defined benefit corporate pension plans, all of which are funded, the Company and its certain subsidiaries grant lump-sum­payments or pensions to their employees based on the salary levels and service periods. Retirement benefit trusts have been established in certain
defined benefit corporate pension plans.
Under the lump-sum retirement payment plans, of which some are funded, the Company and its subsidiaries grant lump-sum payments totheir employees as retirement benefits, based on the salary levels and service periods. Retirement benefit trusts have been established in certain
lump-sum retirement payment plans.
Under the lump-sum retirement payment plans for certain consolidated subsidiaries, net defined benefit liability and net periodic pension
expenses are calculated by using the simplified method.
A. Defined benefit plans(i) Changes in projected benefit obligations   Put:    U.S. dollar

Balance at beginning of year
Cumulative effects of changes in accounting policies

For the years ended February 28, 2015 and February 29, 2016, the Companies reviewed its long-lived assets for impairment and, as a result,­recognized an impairment loss as follows:
February 28, 2015
Location

Usage

Description

Tokyo metropolitan area and other

Business assets

Buildings and structures
Other

121

—

—

Goodwill

¥800

2016

$145,682(421)(3,709)16,131

141,973

Service cost

979

1,436

12,637

Interest cost

233

40

349

Actuarial differences

(764)

660

5,807

(2,714)(1,629)(14,336)

227

(432)

(3,793)¥16,552¥16,206$142,637

Benefits paid
Balance at end of year

¥739

2016

¥16,552—

Other

Millions of yen

2015¥18,591
18,591

Restated balance

6. Impairment Loss on Fixed Assets

Thousands of
U.S. dollars

Millions of yen

February 29, 2016
Location

Tokyo metropolitan area and other
—

Usage

Business assets—

Description

Buildings and structures

Millions of yen

Thousands of
U.S. dollars¥ 1,275$ 11,220

Other

1,033

9,096

Goodwill¥11,743$103,354

The long-lived assets are basically grouped by brand, and assets for lease and idle assets are grouped individually by each item. The Companies
have 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 values to the respective recoverable amounts.

68

69

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(ii) Changes in plan assets
Thousands of
U.S. dollars

Millions of yen
2015

2016

2016

¥13,859¥15,693$138,118

235

232

2,046

2,026

(1,984)(17,460)

Employer contributions

293

271

2,381

Benefits paid

(720)

(558)

(4,910)—(211)(1,856)¥15,693¥13,443$118,319

Balance at beginning of year
Expected return on plan assets
Actuarial differences

Other
Balance at end of year(iii) Reconciliation from projected benefit obligations and plan assets to net defined benefit asset and liability recognized in the consolidated­balance sheets
Thousands of
U.S. dollars

Millions of yen(vii) Plan assets(a) Percentage by major category of plans assets is as follows:
2015

2016

Life insurance company general accounts

40%

43%

Equity securities

51%

47%

Debt securities

2%

2%

Short-term funds

7%

8%

100%

100%

Total

Total plan assets include retirement benefit trusts established for defined benefit corporate pension plans and lump-sum retirement payment plans of
54% and 51% for the years ended February 28, 2015 and February 29, 2016, respectively.
(b) Determination of long-term expected rate of return on plan assets
In determining long-term expected rate of return on plan assets, the Companies consider the current and projected asset allocations, as well as current andfuture long-term rate of returns from various assets constituting plan assets.

(viii) Basis for calculation of actuarial assumptions

2015

2016

2016

Funded projected benefit obligations¥  15,786¥   15,392$   135,468

Discount rate

Plan assets(15,693)(13,443)(118,319)

Long-term expected rate of return on plan assets

93

1,949

17,149Unfunded projected benefit obligations

766

814

7,168

Net amount of liability and asset recognized in the consolidated balance sheets

859

2,763

24,317

Net defined benefit liability

4,126

4,180

36,790Net defined benefit asset(3,267)(1,417)(12,473)¥       859¥     2,763$     24,317

Net amount of liability and asset recognized in the consolidated balance sheets

2015

2016

2016

Service cost¥  979¥1,436$12,637

Interest cost

233

40

349

Expected return on plan assets

(235)

(232)

(2,046)

Amortization of unrecognized actuarial differences

228

28

250

Amortization of unrecognized prior service costs

(54)

(54)

(472)

(14)

(9)

(73)

¥1,137¥1,209$10,645(v) Remeasurements of defined benefit plans in other comprehensive income
Breakdown of items recognized as remeasurements of defined benefit plans (before tax effect) in other comprehensive income is as follows:
Thousands of
U.S. dollars

Millions of yen
2015

2016

2016

Prior service costs¥—¥   (54)$   (471)

Actuarial differences—(2,615)(23,018)

Total

¥—

¥(2,669)$(23,489)(vi) Remeasurements of defined benefit plans in accumulated other comprehensive income
Breakdown of items recognized as remeasurements of defined benefit plans (before tax effect) in accumulated other comprehensive income isas follows:
Thousands of
U.S. dollars

Millions of yen

Unrecognized prior service costs
Unrecognized actuarial differences
Total

1.1% to 1.8%

8. Notes to Consolidated Statements of Comprehensive Income

2015

2016

2016

Amount arising during the year

¥15,211¥ (5,978)$ (52,618)

Reclassification adjustment for gain and loss

(5,787)(9,548)(84,033)

Amount before income tax effect

9,424(15,526)(136,651)

Income tax effect(3,328)

5,651

49,736

6,096(9,875)(86,915)

Amount arising during the year

229

(443)

(3,896)

Reclassification adjustment for gain and loss

44

(229)

(2,018)Amount before income tax effect

273

(672)

(5,914)

Income tax effect

(93)

222

1,953

180

(450)

(3,961)

—

294

2,583

—

294

2,583

2,546

(1,442)(12,688)

2,546(1,442)(12,688)

Amount arising during the year—

(2,644)(23,267)

Reclassification adjustment for gain and loss

—

(25)

(222)

Amount before income tax effect—(2,669)(23,489)

Income tax effect

—

905

7,966

—

(1,764)(15,523)

225

(155)

(1,360)

225

(155)

(1,360)¥ 9,047¥(13,392)$(117,864)

Net unrealized gain (loss) on available-for-sale securities:  TotalDeferred gain (loss) on hedging instruments:  Total
Revaluation gain on land:
Income tax effect  TotalForeign currency translation adjustments:
Amount arising during the year  TotalRemeasurements of defined benefit plans:

2015

2016

2016

¥  320¥   266$  2,343  TotalShare of other comprehensive income of associates accounted for using the equity-method:909(1,706)(15,015)¥1,229¥(1,440)$(12,672)

Thousands of
U.S. dollars

Millions of yen

Amount arising during the year  Total    Total other comprehensive income

70

1.2% to 2.1%

B. Defined contribution plans
The amounts to be paid by the Companies to the defined contribution pension plans for the years ended February 28, 2015 and February 29, 2016
were ¥434 million and ¥402 million ($3,538 thousand), respectively.

Thousands of
U.S. dollars

Millions of yen

Net periodic pension expenses

2016

0.3% to 0.7%

Other comprehensive income for the years ended February 28, 2015 and February 29, 2016 consisted of the following:(iv) Net periodic pension expenses and their breakdown

Other

2015

1.5%

71

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

9. Notes to Consolidated Statements of Cash FlowsThe reconciliation of the difference between the statutory tax rate and the effective tax rate for the years ended February 28, 2015 and February
29, 2016 is as follows:

Cash and cash equivalents at February 28, 2015 and February 29, 2016 consisted of the following:%Thousands of
U.S. dollars

Millions of yen
2015

2016

2016

Cash and deposits¥31,123¥29,407$258,822

Time deposits with maturities of more than three months(1,305)(1,077)(9,483)

Cash and cash equivalents¥29,818¥28,330$249,339

10. Lease Transactions(Lessee)Finance lease transactions
Finance lease transactions that do not transfer ownership
1. Leased assets
Leased assets are primarily comprised of logistic facilities (“buildings and structures”).

11. Income Taxes
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities as at February 28, 2015 andFebruary 29, 2016 consisted of the following elements:
Thousands of
U.S. dollars

Millions of yen
2015

2016

2016

Deferred tax assets:¥   2,473¥   2,273$   20,003

Loss on write-down of investments in unconsolidated subsidiaries

130

7,718

67,932

Accrued bonuses to employees

412

331

2,914

Net defined benefit liability

3,082

2,866

25,224

Accrued retirement benefits for directors and corporate auditors

55

68

601

Allowance for bad debt

372

352

3,098

Tax loss carry forwards

10,625

10,38091,360

Impairment loss on fixed assets

6,193

6,251

55,012

432

111

980

Investments in securities
Other

6,069

5,401

47,529  Subtotal

29,84335,751

314,653

Less: Valuation allowance(18,298)(17,484)(153,885)    Total deferred tax assets

11,545

18,267

160,768

Deferred tax liabilities:
Gain on securities contributed to employee retirement benefit trusts
Net defined benefit asset
Provision for deferred capital gain on real property for tax purposes
Net unrealized gain on available-for-sale securities
Other

72

(113)

(82)

(723)

(1,164)(505)(4,443)

(17)

(47)

(415)

(6,914)(1,264)(11,125)

(709)

(509)

(4,476)    Total deferred tax liabilities(8,917)(2,407)(21,182)    Net deferred tax assets¥   2,628¥ 15,860$ 139,586

2016

38.0

35.6

Reconciliation:
Permanently non-deductible expenses (entertainment expenses, etc.)

2.5

2.7

Permanently non-taxable income (dividends received, etc.)

(1.6)

(1.4)

Per capita inhabitant tax

3.7

5.1

Amortization of goodwill

12.5

14.0

Impairment loss on goodwill

3.2

58.7

Changes in valuation allowance

11.1(115.3)

Consolidation adjustments to gain or loss on sale of investments in consolidated subsidiaries

—

16.8

Differences in statutory tax rate

(9.2)

18.0

Other

(5.1)

6.0

55.1

40.2

   Effective tax rate

2. Depreciation method for leased assets
The depreciation method for leased assets is as described in “2. Summary of Significant Accounting Policies, (15) Accounting for Leases.”

Loss on write-down of inventories

Statutory tax rate

2015

(Adjustments to deferred tax assets and liabilities due to change in income tax rates, etc.)
On March 31, 2015, the “Act for Partial Revision of the Income Tax Act, etc.” (Act No. 9 of 2015) and “Act for Partial Revision of the Local Tax
Act, etc.” (Act No. 2 of 2015) were promulgated, and the income tax rate is reduced from the fiscal years beginning on or after April 1, 2015.
Accordingly, the statutory tax rates applied to the calculation of deferred tax assets and liabilities are lowered from 35.6%, which was applied totemporary differences expected to be settled in the fiscal years beginning on or after March 1, 2015, to 33.1% for temporary differences expected to
be settled in the fiscal year beginning on March 1, 2016, and to 32.3% for temporary differences expected to be settled in the fiscal years beginningon or after March 1, 2017.
The effect of these changes in tax rates is immaterial.
(Change in income tax rates, etc. after the closing date of consolidated accounts)
On March 31, 2016, the “Act for Partial Revision of the Income Tax Act, etc.” (Act No. 15 of 2016) and “Act for Partial Revision, etc. of the Local
Tax Act, etc.” (Act No. 13 of 2016) were promulgated, and the income tax rate is reduced from the fiscal years beginning on or after April 1, 2016.
Accordingly, the statutory tax rates applied to the calculation of deferred tax assets and liabilities are lowered from 32.3%, which was applied totemporary differences expected to be settled in the fiscal years beginning on or after March 1, 2017, to 30.9% for temporary differences expected to
be settled in the fiscal years beginning on March 1, 2017 and 2018, and to 30.6% for temporary differences expected to be settled in the fiscal years
beginning on or after March 1, 2019.
The effect of these changes in tax rates is immaterial.

12. Revaluation of Land
The Companies revaluated their own land for business use in accordance with the “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 ofdeferred taxes, are reported as net revaluation loss on land in net assets.
Pursuant to Article 2-4 of the “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 the “Land-holding Tax Act” (Act 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 the method established and publishedby the Commissioner of National Tax Agency.
The difference between the market value of land subject to the revaluation and the book value as at February 28, 2015 and February 29, 2016was ¥1,774 million and ¥910 million ($8,013 thousand), respectively.

73

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

13. Short-Term Loans Payable and Long-Term Loans Payable

14. Shareholders’ Equity

Short-term loans payable at February 28, 2015 and February 29, 2016 represented loans, principally from banks. The weighted-average interest rateon these loans was 0.7% in 2015 and 2016.

Under the Companies Act, 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 the issue price of new shares as­additional paid-in capital.
The Companies Act provides that an amount equal to 10% of distributions from retained earnings paid by the company and its Japanese­subsidiaries be appropriated as a legal reserve. No further appropriations are required when the total amount of the additional paid-in capitaland the legal reserve equals 25% of their respective stated capital. The Companies Act also provides that additional paid-in capital and the legal
reserve are available for appropriations by resolution of a shareholders’ meeting. 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, 2015 and February 29, 2016 represent dividends paid out during
those years. The amount available for dividends is based on the amount recorded in the Company’s non-consolidated books of account in accordance with the Companies Act.

Long-term loans payable at February 28, 2015 and February 29, 2016 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Unsecured loans, principally from banks, maturing in installments through 2019

2015

2016

2016

¥24,229¥19,854$174,746

3,250

3,828

33,696¥20,979¥16,026$141,050

Less current portion with weighted-average interest rate of 0.7% at February 29, 2016
Long-term loans payable, less current portion with weighted-average interest rateof 0.5% at February 29, 2016

Lease obligations at February 28, 2015 and February 29, 2016 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Dividends to be paid after the balance sheet date, which were approved by the General Meeting of Shareholders held on May 26, 2016, areas follows:(a) Total dividends:

2015

2016

2016

(b) Source of dividends:¥6,835¥5,877$51,726(c) Cash dividends per common share:

943

682

6,006

¥5,892¥5,195$45,720

Millions of yen

Thousands of
U.S. dollars

2018¥13,026$114,643

2019

3,000

26,406

2020

0

1

2021

—

—

Lease obligations
Less current portion of lease obligations

The aggregate annual maturities of long-term loans payable after February 28, 2017 are as follows:Year ending February 28 or 29:¥3,700 million ($32,562 thousand)
Retained earnings¥24 ($0.21)(d) Date to determine which shareholders receive the dividends:

February 29, 2016(e) Effective date:

May 27, 201615. 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, 2015 and February 29, 2016 is
as follows:
Thousands of
U.S. dollars

Millions of yen

The aggregate annual maturities of lease obligations after February 28, 2017 are as follows:
Millions of yen

Thousands of
U.S. dollars

Year ending February 28 or 29:

Less: Components not pertaining to common shareholders

2016$37,652———¥4,278$37,652

157,006

151,343

1,729

1,689

¥620

$5,461

Average outstanding shares of common stock (thousand shares)

533

4,690

Effect of dilutive stock options (thousand shares)

2020

334

2,943

2021

280

2,465

16. Related-Party Transactions
Thousands of
U.S. dollars

Millions of yen

Less current portion

2016¥4,278¥4,2042019

0.39% in 2015 and 2016 unsecured yen bonds issued by a subsidiary, due 20182015

¥4,204

Net income pertaining to common stock

2018

Bonds at February 28, 2015 and February 29, 2016 are summarized as follows:

2015

2016

2016

¥150

¥100

50

50

440

¥100

¥ 50

$440

$880

The aggregate annual maturities of bonds after February 28, 2017 are as follows:
Millions of yen

Thousands of
U.S. dollars

2018

¥ 50

$440

2019

—

—

2020

—

—

2021

—

—

Year ending February 28 or 29:

74

Net income

Year ended February 28, 2015

The Company leased land from Takeshi Hirouchi, Representative Director and Chairman 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 determinedby the average market prices.

Year ended February 29, 2016

The Company leased land from Takeshi Hirouchi, Representative Director and Chairman of ONWARD HOLDINGS Co., Ltd., during the year,
and the rental fee was ¥7 million ($64 thousand). Also, Mr. Hirouchi paid a rental fee of ¥16 million ($143 thousand) to the Company for ahouse. The rental fees were determined by the average market prices.
Onward Global Fashion Co., Ltd., a consolidated subsidiary of the Company, sold goods to BOLS 1987 Co., Ltd., over which Hitoshi­Futamura, Representative Director, President of Onward Global Fashion Co., Ltd., has 100% of voting rights directly, during the year. The­transaction amount was ¥13 million ($117 thousand), and the balance of relevant accounts receivable as of February 29, 2016 was ¥2 million($14 thousand). Prices and other terms and conditions were determined by reference to market prices or general terms and conditions.

75Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

17. Stock Options

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:2013 stock option plan (No. 14)

The cost recognized for the stock options for the years ended February 28, 2015 and February 29, 2016 was ¥131 million and ¥16 million ($142
thousand), respectively, which is included in selling, general and administrative expenses.

Under the 2014 stock option plan (No. 16), stock options were granted to five directors of the Company on June 20, 2014. They are exercisable in
the period from June 21, 2014 to June 20, 2044. 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.
The number of stock options granted by type of shares is 122,900 shares of common stock.
A summary of price information for the stock option plan is as follows:
Fair value at the grant date:

Outstanding at February 28, 2015
Granted2014 Stock Option Plan (No. 16)

Exercise price:

Non-vested (shares):—

Vested8,900

Outstanding at February 29, 2016

98,100

Vested (shares):
Outstanding at February 28, 2015
Vested8,900¥526 ($4.63)

Exercised—

Outstanding at February 29, 20162014 stock option plan (No. 16)

Non-vested (shares):122,900

Granted—Forfeited—

Vested—122,900

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

Under the 2014 stock option plan (No. 15), stock options were granted to 12 executive officers of the Company and five directors and nine executive officers of the Company’s subsidiary on March 20, 2014. They are exercisable in the period from March 21, 2014 to February 29, 2044. 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 officers of the Company, or directors or executive officers of the Company’s subsidiary.
The number of stock options granted by type of shares is 146,100 shares of common stock.
A summary of price information for the stock option plan is as follows:
Fair value at the grant date: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 and six directors and nine 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 five-year period starting a year after they lose their positions as executive officers of the Company, or directors or executive officers of the Company’s subsidiary.
The number of stock options granted by type of shares is 151,300 shares of common stock.
A summary of price information for the stock option plan is as follows:
Fair value at the grant date:2013 stock option plan (No. 13)

Non-vested (shares):
Outstanding at February 28, 2015¥466 ($4.10)

Forfeited

140,000

Outstanding at February 29, 2016

126,600

VestedForfeited—

Forfeited

Vested—Outstanding at February 29, 2016

140,000

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

2013 Stock Option Plan (No. 14)

Under the 2013 stock option plan (No. 14), stock options were granted to five 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 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.
The number of stock options granted by 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 date:¥1 ($0.01)—

Vested (shares):

Exercised

Outstanding at February 29, 2016—
13,800—Granted140,400

VestedOutstanding at February 28, 2015

Non-vested (shares):¥1 ($0.01)¥572 ($5.03)

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:

Granted2014 stock option plan (No. 15)

76

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

¥1 ($0.01)

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:

Outstanding at February 28, 2015

—
8,900

Exercise price:2014 Stock Option Plan (No. 15)

Exercise price:—¥1 ($0.01)

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:

Outstanding at February 29, 2016—

Forfeited

Forfeited

Outstanding at February 28, 2015

107,000—
13,800——13,800The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

2012 Stock Option Plan (No. 12)

Under the 2012 stock option plan (No. 12), stock options were granted to five directors of the Company on June 20, 2012. They are exercisable in
the period from June 21, 2012 to June 20, 2042. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
The number of stock options granted by 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 date:¥1 ($0.01)¥458 ($4.03)¥629 ($5.54)

77

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:2012 stock option plan (No. 12)

Non-vested (shares):
Outstanding at February 28, 20152011 stock option plan (No. 10)

Non-vested (shares):141,400

Outstanding at February 28, 2015

Granted—GrantedForfeited—

Forfeited

Vested11,800

Outstanding at February 29, 2016

129,600

Vested (shares):
Outstanding at February 28, 2015
Vested—10,000

Outstanding at February 29, 2016

69,400

Vested (shares):—11,800

Outstanding at February 28, 2015

65,400

Vested10,0009,600—

Exercised

Forfeited—

Forfeited

11,800

Outstanding at February 29, 2016—
65,800The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

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

2012 Stock Option Plan (No. 11)

2011 Stock Option Plan (No. 9)

Under the 2012 stock option plan (No. 11), stock options were granted to one executive officer of the Company and nine 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 termsof the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period startinga year after they lose their positions as executive officers of the Company, or directors or executive officers of the Company’s subsidiary.
The number of stock options granted by 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:¥1 ($0.01)

Under the 2011 stock option plan (No. 9), stock options were granted to one executive officer of the Company and 12 directors and 18 executive­officers of the Company’s subsidiary on March 18, 2011. They are exercisable in the period from March 19, 2011 to February 28, 2041. The termsof the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period startinga year after they lose their positions as executive officers of the Company, or directors or executive officers of the Company’s subsidiary.
The number of stock options granted by 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:¥1 ($0.01)

Average stock price on the date the option was exercised:¥756 ($6.65)

Average stock price on the date the option was exercised:¥802 ($7.06)

Fair value at the grant date:¥444 ($3.91)

Fair value at the grant date:¥444 ($3.91)

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:2012 stock option plan (No. 11)

Non-vested (shares):
Outstanding at February 28, 20152011 stock option plan (No. 9)

Non-vested (shares):142,400

Outstanding at February 28, 2015

Granted—GrantedForfeited—

Forfeited

Vested

18,700

Outstanding at February 29, 2016

123,700

Vested (shares):115,800——

Vested16,100

Outstanding at February 29, 2016

99,700

Vested (shares):

Outstanding at February 28, 2015

50,800

Outstanding at February 28, 2015

51,300

Vested

18,700

Vested16,100Exercised

8,200

Exercised

5,700

Forfeited—

Forfeited

Outstanding at February 29, 2016

61,300

Outstanding at February 29, 2016—
61,700The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

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

2011 Stock Option Plan (No. 10)2010 Stock Option Plan (No. 8)

Under the 2011 stock option plan (No. 10), stock options were granted to five 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.
The number of stock options granted by type of shares is 144,800 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price:

78—

VestedExercised
Outstanding at February 29, 2016

79,400¥1 ($0.01)

Average stock price on the date the option was exercised:¥731 ($6.43)

Fair value at the grant date:¥510 ($4.49)

Under the 2010 stock option plan (No. 8), stock options were granted to five 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.
The number of stock options granted by 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:¥1 ($0.01)

Average stock price on the date the option was exercised:¥731 ($6.43)

Fair value at the grant date:¥613 ($5.40)

79Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:2009 stock option plan (No. 6)

2010 stock option plan (No. 8)

Non-vested (shares):Non-vested (shares):
Outstanding at February 28, 2015

52,300

Outstanding at February 28, 2015—

Granted—Forfeited—

Forfeited—

Vested—VestedOutstanding at February 29, 2016

52,300

Vested (shares):
Outstanding at February 28, 2015

19,700

Vested—Exercised

4,000

Forfeited—

Outstanding at February 29, 2016

15,700The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

2010 Stock Option Plan (No. 7)

Under the 2010 stock option plan (No. 7), stock options were granted to eight directors and 22 executive officers of the Company’s subsidiary on
March 19, 2010. They are exercisable in the period from March 20, 2010 to February 29, 2040. The terms of the options include certain limitations
on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as­directors or executive officers of the Company’s subsidiary.
The number of stock options granted by 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:¥1 ($0.01)

Outstanding at February 29, 20162009 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 subsidiaryon March 18, 2009. They are exercisable in the period from March 19, 2009 to February 28, 2039. The terms of the options include certain­limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their­positions as directors or executive officers of the Company’s subsidiary.
The number of stock options granted by 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:¥713 ($6.28)

Fair value at the grant date:¥362 ($3.19)

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:2009 stock option plan (No. 5)

Non-vested (shares):Average stock price on the date the option was exercised:¥719 ($6.33)

Outstanding at February 28, 2015¥475 ($4.18)

Granted2010 stock option plan (No. 7)¥1 ($0.01)

Average stock price on the date the option was exercised:

Fair value at the grant date:

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:—
72,000The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

Forfeited

100,300——

Vested15,900

Outstanding at February 29, 2016

84,400

Vested (shares):Non-vested (shares):

Outstanding at February 28, 2015

50,900Granted—

Vested15,900Forfeited—

Exercised

34,000

Vested

17,600Forfeited

Outstanding at February 29, 2016

76,400

Outstanding at February 29, 2016

Outstanding at February 28, 2015

94,000

Vested (shares):
Outstanding at February 28, 2015

52,300

Vested

17,600Exercised

17,500Forfeited—

Outstanding at February 29, 2016

52,400The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

2009 Stock Option Plan (No. 6)

Under the 2009 stock option plan (No. 6), stock options were granted to five 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.
The number of stock options granted by 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:
Fair value at the grant date:80

72,000Granted—32,800The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

2008 Stock Option Plan (No. 4)

Under the 2008 stock option plan (No. 4), stock options were granted to 12 directors and 21 executive officers of 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 they lose their positions as directors
or executive officers of the Company’s subsidiary.
The number of stock options granted by 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:¥1 ($0.01)

Average stock price on the date the option was exercised:¥709 ($6.24)

Fair value at the grant date:¥905 ($7.97)¥1 ($0.01)¥432 ($3.80)

81

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:2008 stock option plan (No. 4)

Non-vested (shares):
Outstanding at February 28, 20152007 stock option plan (No. 2)

Non-vested (shares):28,300

Outstanding at February 28, 2015

16,600Granted—Granted—Forfeited—

Forfeited—

Vested5,000

VestedOutstanding at February 29, 2016

23,300

Outstanding at February 29, 2016

Vested (shares):—16,600

Vested (shares):

Outstanding at February 28, 2015

10,000

Outstanding at February 28, 2015

Vested5,000

Vested—Exercised

6,600

Exercised

1,500

—

Forfeited—

Outstanding at February 29, 2016—

Forfeited
Outstanding at February 29, 2016

8,400

1,500

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

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

2008 Stock Option Plan (No. 3)

2006 Stock Option Plan (No. 1)

Under the 2008 stock option plan (No. 3), stock options were granted to five 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.
The number of stock options granted by type of shares is 70,000 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price:
Fair value at the grant date:¥1 ($0.01)¥944 ($8.31)

Under the 2006 stock option plan (No. 1), stock options were granted to 12 directors and two corporate auditors of the Company on June 20,
2006. They are exercisable in the period from July 1, 2006 to June 30, 2036. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors or corporate auditors of the Company.
The number of stock options granted by 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:

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:¥1 ($0.01)¥796 ($7.01)¥1,541 ($13.56)

2008 stock option plan (No. 3)

A summary of the scale and movement of the stock option plan for the year ended February 29, 2016 is as follows:

Non-vested (shares):
Outstanding at February 28, 2015

Non-vested (shares):

Granted—Forfeited—

Outstanding at February 28, 2015

Vested—Granted—32,000Forfeited—

Outstanding at February 29, 2016

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

Under the 2007 stock option plan (No. 2), stock options were granted to five directors and two 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 of the Company.
The number of stock options granted by 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:

VestedOutstanding at February 29, 2016

¥1 ($0.01)

14,500—14,500

Vested (shares):
Outstanding at February 28, 20152007 Stock Option Plan (No. 2)822006 stock option plan (No. 1)

32,0001,000

Vested—Exercised

1,000

Forfeited—

Outstanding at February 29, 2016—

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

¥796 ($7.01)¥1,284 ($11.30)

83Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

18. Segment Information

Millions of yen
Apparel(1) Summary of reportable segments
The Companies’ reportable segments are components for which separate financial information is available and regular evaluation by the Board of
Directors is performed to decide how management resources are allocated and to assess performance.
The principal business of the Companies is the apparel business (planning, production and sales of textile products, including men’s and­women’s clothing). Additionally, the Companies also operate service and resort businesses.
The reportable segments of the Companies 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. The “Other Business” operates
the logistics, sports facilities and resort facilities businesses.
(2) Method of calculating net 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 “2. Summary of Significant
Accounting Policies.”
Income by reportable segment refers to operating income. Intersegment sales and transfers are based on market values.

Asia/North
America

Total

Other

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers¥201,824¥39,682¥6,962¥248,468¥15,048¥263,516¥    —¥263,516

Intersegment sales or transfers

1,362

1,952

492

3,806

6,300

10,106(10,106)—¥203,186¥41,634¥7,454¥252,274¥21,348¥273,622¥(10,106)¥263,516

Total
Segment income (loss)¥  7,010¥  (697)¥ (755)¥  5,558¥   629¥  6,187¥ (2,409)¥  3,778

Segment assets¥148,688¥38,669¥4,481¥191,838¥26,562¥218,400¥ 95,054¥313,454

Depreciation and amortization (Note 2)¥  4,722¥ 1,035¥  547¥  6,304¥   993¥  7,297¥    502¥  7,799

Investments in equity-method affiliates

8,726

73

—

8,799

—

8,799

—

8,799

Increases in property, plant and equipment,
and intangible assets (Note 2)

12,501

1,824

250

14,575741

15,316639

15,955For the year ended February 29, 2016

Japan

EuropeAsia/North
America

Total

Other

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers$1,776,304$349,251$61,275$2,186,830$132,445$2,319,275$      —

$2,319,275

Intersegment sales or transfers

11,984

17,1794,334

33,49755,45088,947(88,947)—$1,788,288$366,430$65,609$2,220,327$187,895$2,408,222

Segment income (loss)$   61,695$  (6,138)$ (6,644) $   48,913$  5,540$   54,453$  (21,202) $   33,251

Segment assets$1,308,646$340,340$39,440$1,688,426$233,776$1,922,202$836,592$2,758,794

Depreciation and amortization (Note 2)$   41,564$  9,109$ 4,814$   55,487$  8,741$   64,228$  4,417$   68,645

Investments in equity-method affiliates

76,794644—

77,438—77,438—77,438

Increases in property, plant and equipment,
and intangible assets (Note 2)

110,024

16,0552,196

128,275

6,526

134,801

5,624

140,425

Total

Apparel84

EuropeThousands of U.S. dollars

Millions of yen

For the year ended February 28, 2015

Japan

EuropeAsia/North
America

Total

Other

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers¥211,019¥45,338¥  7,944¥264,301¥17,201¥281,502¥      —

¥281,502

Intersegment sales or transfers

1,343

2,485

611

4,439

8,090

12,529(12,529)—¥212,362¥47,823¥  8,555¥268,740¥25,291¥294,031¥ (12,529)¥281,502

Segment income (loss)¥ 10,573¥    62¥(1,838)¥  8,797¥   390¥  9,187¥  (3,455)¥  5,732

Segment assets¥151,869¥38,028¥  5,725¥195,622¥36,307¥231,929¥108,925¥340,854

Depreciation and amortization (Note 2)¥  4,158¥ 1,104¥     484¥  5,746¥ 1,072¥  6,818¥    401¥  7,219

Investments in equity-method affiliates

8,970

73

—

9,043

—

9,043

—

9,043

Increases in property, plant and equipment,
and intangible assets (Note 2)

10,140841

520

11,501778

12,27914,60526,884(Notes)Japan

Apparel(3) Information on net sales, profit or loss, assets, liabilities and other items by reportable segment for the years ended February 28, 2015 andFebruary 29, 2016 is as follows:

Total

For the year ended February 29, 2016

1. Adjustments consist of the following:(1)	The adjustment amount for segment income (loss) of ¥(3,455) million includes amortization of goodwill of ¥(3,327) million, elimination ofintersegment transactions of ¥3,859 million, and corporate expenses not allocated to reportable segments of ¥(3,987) million. Corporate
expenses are mainly general administrative expenses that are not attributable to reportable segments.
(2)	The adjustment amount for segment assets of ¥108,925 million includes the unamortized balance of goodwill of ¥26,569 million, eliminationof intersegment transactions of ¥(134,150) million, and corporate assets not allocated to reportable segments of ¥216,506 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 statement of operations.

(Notes)$  (88,947) $2,319,275

1. Adjustments consist of the following:(1)	The adjustment amount for segment income (loss) of ¥(2,409) million ($(21,202) thousand) includes amortization of goodwill of ¥(3,027)
million ($(26,638) thousand), elimination of intersegment transactions of ¥4,266 million ($37,548 thousand), and corporate expenses notallocated to reportable segments of ¥(3,648) million ($(32,112) thousand). Corporate expenses are mainly general administrative expenses thatare not attributable to reportable segments.
(2)	The adjustment amount for segment assets of ¥95,054 million ($836,592 thousand) includes the unamortized balance of goodwill of ¥15,652
million ($137,758 thousand), elimination of intersegment transactions of ¥(117,485) million ($(1,034,017) thousand), and corporate assets notallocated to reportable segments of ¥196,887 million ($1,732,851 thousand). Corporate assets are mainly assets held by the Company, a pureholding company.
2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses(furniture and fixtures).
3. Segment income (loss) coincides with the amount of operating income in the consolidated statement of operations.

85

Independent Auditor’s Report

Notes to Consolidated Financial Statements(4) Segment information by geographical area for the years ended February 28, 2015 and February 29, 2016 is as follows:(a) Sales
For the year ended February 28, 2015

Millions of yen

Japan

Europe

Other

Total

¥223,620¥29,213¥28,669¥281,502

For the year ended February 29, 2016

Millions of yen

Japan

Europe

Other

Total

¥212,199¥26,187¥25,130¥263,516

For the year ended February 29, 2016

Thousands of U.S. dollars

Japan

Europe

Other

Total

$1,867,623$230,477$221,175$2,319,275(b) Property, plant and equipment
For the year ended February 28, 2015

Millions of yen

Japan

Europe

Other

Total

¥89,448¥8,843¥11,367¥109,658

For the year ended February 29, 2016

Millions of yen

Japan

Europe

Other

Total

¥87,385¥8,324¥10,986¥106,695

For the year ended February 29, 2016

Thousands of U.S. dollars

Japan

Europe

Other

Total

$769,096$73,263$96,693$939,052(5) Segment information on impairment losses on property, plant and equipment by reportable segment for the years ended February 28, 2015 andFebruary 29, 2016 is as follows:
Millions of yen
Apparel
For the year ended February 28, 2015

Impairment loss

Japan

¥632

EuropeAsia/North
America

Total

Other

Unallocatedamounts andelimination

¥—

¥216

¥848

¥12

¥800

Total

¥14,051

Total¥1,660Millions of yen
Apparel
For the year ended February 29, 2016

Japan

EuropeAsia/North
America

Impairment loss

¥1,720

¥—

¥288

Total

Other

Unallocatedamounts andelimination¥2,008¥—¥12,043

Total$123,671

Thousands of U.S. dollars
Apparel
For the year ended February 29, 2016

Impairment loss

86

Japan

EuropeAsia/North
America$15,138$—$2,540

Total

Other

Unallocatedamounts andelimination$17,678$—$105,993

87

Main Subsidiaries

Main Subsidiaries

As of August 31, 2016

Japan
Onward Kashiyama Co., Ltd.
3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1020

Onward Trading Co., Ltd.
2-10-10 Iidabashi, Chiyoda-ku, Tokyo 102-8115, Japan
Tel: (81) 3-5266-1333

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

Onward Global Fashion Co., Ltd.
4th Floor, 313 Minami-Aoyama Building,
3-13-18 Minami-Aoyama,
Minato-ku, Tokyo 107-0062, Japan
Tel: (81) 3-6406-0350

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

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

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

J. Direction Co., Ltd.
Onden Imaizumi Building, 5-7-4 Jingumae,
Shibuya-ku, Tokyo 150-0001, Japan
Tel: (81) 3-6712-6981

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

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

Sakula Inc.
2nd Floor, No. 2 Daigai Building, 1-11-3 Jinnan,
Shibuya-ku, Tokyo 150-0041, Japan
Tel: (81) 3-3464-8972

Onward Resort & Golf Co., Ltd.
3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1130

Onward Creative Center Co., Ltd.
3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1140

Onward Life Design Network Co., Ltd.
3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1133

Bien Co., Ltd.
3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1120

O.P.S. Co., Ltd.
3-14-21 Kaigan, Minato-ku, Tokyo 108-8439, Japan
Tel: (81) 3-5476-6131

Onward J Bridge Co., Ltd.
3-14-21 Kaigan, Minato-ku, Tokyo 108-8439, Japan
Tel: (81) 3-5476-5370

Tiaclasse Inc.
Senri Asahi Hankyu Building, 1-5-3 Shinsenri Higashimachi,
Toyonaka-shi, Osaka 560-0082, Japan
Tel: (81) 6-6873-5566

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.
35 Rydal Street,
Leicester LE2 7DY, U.K.
Tel: (44) 116-254-8010

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

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

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

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

3rd Floor, 8 Crosby Street,
New York, NY10013, U.S.A.
Tel: (1) 212-997-3600

Onward U.S.A. L.L.C.
3rd Floor, 8 Crosby Street,
New York, NY10013, 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

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

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.
Songsan B/D, Seochojungang-ro 61, Seocho-gu,
Seoul, 06651, Republic of Korea
Tel: (82) 2-548-5841

Onward Kashiyama
Singapore Pte. Ltd.
150 Orchard Road, #07-18 Orchard Plaza,
Singapore 238841
Tel: (65) 6838-0690

Onward Kashiyama Vietnam Ltd.
10th Floor, 60 Nguyen Dinh Chieu Street,
District 1, Ho Chi Minh City, Vietnam
Tel: (84) 8-3911-8857

O & K Co., Ltd.
3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1130

88

89

Corporate/Investor Information

History

As of February 29, 2016

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 second sections of Tokyo, Osaka, and Nagoya stock exchanges.

1962

April

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

September 1947

1964

July

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

Capital¥30,080 million

1966

September

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

Common Stock

Authorized— 400,000,000 shares
Issued—167,921,669 shares

1972

July

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

September

Established Onward Kashiyama U.S.A. INC.

Head Office

Established10-5, Nihonbashi 3-chome, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1020
Fax: (81) 3-4512-1021
URL: http://www.onward-hd.co.jp/site/english/

Note: The total number of issued and outstanding shares included 13,767,509 shares of treasury stock.

1973

February

Established Onward Kashiyama France S.A.

Number of Shareholders

10,952

1974

February

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

Stock Exchange Listings

Tokyo, Nagoya

1986

October

Acquired J. Press, Inc.

1988

February

Established Onward Kashiyama Hong Kong Ltd.

Transfer Agent

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

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

1989

DecemberEstablished Onward Kashiyama U.K. Ltd.

Number of Employees(Consolidated)

5,119

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 (%)

8,710

5.6

Japan Trustee Services Bank, Ltd. (Trust account)

7,186

4.6

Japan Trustee Service Bank, Ltd. (Trust account9)

6,102

3.9

Isetan Mitsukoshi, Ltd.

5,001

3.2

Nippon Life Insurance Company

4,671

3.0

BNYML-NON TREATY ACCOUNT

4,664

3.0

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

4,569

2.9

The Dai-ichi Mutual Life Insurance Company Ltd.

4,200

2.7

Onward Holdings Customers’ Shareholding Association

4,149

2.6

MARUI GROUP CO., LTD.

3,417

2.2

Notes:
1.	The Company holds 13,767,509 shares of treasury stock. Treasury stock is not included in the above
Major Shareholders information.
2. Percentage of total shares issued is calculated after deducting 13,767,509 shares of treasury stock.

Distribution of Ownershipamong Shareholders(On a number of shares basis)

Japanese individuals
and others

Japanesefinancial
institutions

22.7%

30.8%

Foreigninstitutions
and others

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 holding company structure through corporate restructuring under new company name,
Onward Holdings Co., Ltd.

Japanese
securities
companies

21.5%

0.1%

Other Japanese
corporations

24.9%

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

Note: Japanese individuals and others data ­include treasury stock.

2008

Stock Price¥

Trading Volume
Thousand Shares

1,200

100,000

Acquired Creative Yoko Co., Ltd.

DecemberAcquired controlling interest in Island Co., Ltd.

2010

June

Established Onward Kashiyama Singapore Pte. Ltd.

2011

AugustEstablished Onward Kashiyama Vietnam Ltd.

2012

April

Acquired controlling interest in 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.

NovemberCompleted Onward Park Building (Head Office building in Nihonbashi district of Tokyo).

MarchMichinobu Yasumoto became president and representative director.

September

Established Onward J Bridge Co., Ltd. (a joint venture company with Laox Co., Ltd.).

2013
50,000600

2014

25,000300

90

October

2009

75,000900

2014/3Acquired Corporate s.r.l.

Acquired Jil Sander A.G.

Stock Price Range and Trading Volume0

October

2015/3

2016/3

2015

0

91

Onward Holdings Co., Ltd.
Head Office:10-5, Nihonbashi 3-chome, Chuo-ku,
Tokyo 103-8239, Japan
Tel: (81) 3-4512-1020
http://www.onward-hd.co.jp/site/english/

Printed in Japan