02

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

03

For the YearNet sales
Operating income
Net income

At Year-End
Total assets
Total net assets
Free cash flow*¥ 242,402
10,954
3,529¥ 244,551
8,929
2,723

-0.9 %
22.7
29.6$ 3,004,487
135,768
43,743¥ 276,939
157,303
11,219¥ 281,643
158,7456,055-1.7 %-0.9
85.3$ 3,432,566
1,949,712
139,055¥ 22.52995.1124.00¥ 17.38
1,002.34
24.00

29.6 %-0.7---$ 0.2812.33
0.30

Per Share
Net income (EPS)(yen)Net assets (yen)Cash dividends (yen)

ONWARD

Onward Kashiyama

RatiosROE (%)
Operating margin(%)
SGA/Sales(%)

2.3 %
4.5
43.0

1.7 %
3.7
43.7

0.6 %
0.8
-0.7

2.3 %
4.5
43.0

17.1 %
3,993

16.0 %
3.910

1.1 %
2.1

17.1 %
3,993

Other Information
Overseas sales(%)
Number of full-time employees

Onward Kashiyama

18,628
ONWARD244,551
248,635
261,006
287,032

242,402

9,084

10,954
8,929

4,384

12,214
2,188

3,529
2,723

-30,895
ONWARD

ONWARD

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区の赤部分： PANTONE187C
TOYO 94
CF006722

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

23

Basic Philosophy

Our Promise

Onward Green Campaign

Environmental Concept

Basic Environmental Policy

Acquisition Of ISO14001

24

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

25

Our Basic Approach to Corporate Governance

Strengthening The Internal Control System

Execution and Supervision of Business Operations

Compliance Structure

General Meeting of Shareholders

Board of Corporate Auditors

Board of Directors

Compliance Committee

Representative Director,
Chairman and President

Strategy Council

European Operations

Onward Group Management Council

Risk Management Structure

European Business

Secretary Office,Corporate Communications

International
Operations

North American and Asian Operations

Finance & Auditing

North American Business

Human Resources,
General Affairs, Compliance

Asian BusinessCorporate Planning,
Investor Relations

Management & Control,International Operations

Sales Personnel Management

Advertising & Marketing,
New Business Development

Anti-Takeover Measures

Production

Logistics
E-commerce,
Environmental Management

Corporate
Planning

26

ONWARD HOLDINGS CO., LTD.

Investor
Relations

Finance andAccounting

Internal
Control

Compliance

Human
Resources

GeneralAffairs

Secretary
OfficeCorporate
Communications

ONWARD HOLDINGS CO., LTD.

27

Executive Overview

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

Thousands of
U.S. dollars

Millions of yen
2007

2008

2009

2010

2011

2012

2012

Total current assets¥135,197¥112,519¥ 98,946¥100,680¥ 95,545¥ 98,895$1,225,771

Total property, plantand equipment

94,85095,00890,17589,742

86,62382,9881,028,604

Total assets

347,936

309,092

296,283

292,569

281,643

276,9393,432,566

Total current liabilities

103,494

93,321

92,36990,92982,67784,091

1,042,283

Total shareholders’ equity

212,600

213,625

178,023

175,450

174,454

176,320

2,185,427

Total net assets

225,138

197,639

158,418

158,164

158,745

157,303

1,949,712

At Year-end:

For the Year:Net sales¥318,691¥287,032¥261,006¥248,635¥244,551¥242,402$3,004,487

Cost of sales

175,796

156,842

142,676

134,459

128,726

127,288

1,577,695

Selling, general andadministrative expenses

117,464

111,562

109,246

109,792

106,896

104,160

1,291,024

Operating income

25,431

18,628

9,084

4,384

8,929

10,954

135,768

Income taxes, current

14,409

9,780

4,639

4,016

5,555

7,528

93,308Net income (loss)

11,438

12,214(30,895)

2,188

2,723

3,529

43,743Yen

U.S. dollars

Per Share:
Net income (loss)—basic¥

Net assets

1,256.93

1,243.80

1,001.36

998.98

26.00

30.00

30.00

24.00

Cash dividends

70.5 ¥

76.5 ¥(197.2)¥13.9 ¥

17.3

¥

22.5

$0.28

1,002.34

995.11

12.3

24.00

24.00

0.30

Note: Yen amounts have been translated, for convenience only, at ¥80.68=US$1, the approximate exchange rate on February 29, 2012.

Net Sales and Operating Margin(Millions of yen, %)Total Assets, Total Shareholders’Equity, and Shareholders’Equity Ratio

Net Income (Loss) Per Shareand Cash Dividends Per Share(Yen)(Millions of yen, %)350,000

1080

350,000

280,000

8

280,000

210,000

6

210,000

140,000

4

140,000

70,0002

70,000

0

0

60

80

60

40
40

0

2008 2009 2010 2011 2012

Net sales (left scale)Operating margin (right scale)28

ONWARD HOLDINGS CO., LTD.

20
20

2008 2009 2010 2011 2012

Total assets (left scale)
Total shareholders’ equity (left scale)
Shareholders’ equity ratio (right scale)

0

0

-200

2008 2009 2010 2011 2012

Net income (loss) per share
Cash dividends per share

During the fiscal year ended February 29, 2012 (fiscal 2012), theJapanese economy achieved a sound recovery in the aftermath of
the Great East Japan Earthquake. However, prospects for theJapanese economy remained uncertain because of the persisting
unprecedented strength of the yen and concerns about a possible
slowdown of the world economy owing to the European sovereign
debt crisis.
In the apparel and fashion industries in Japan, consumer
confidence, which was undermined by the earthquake, recovered
faster than expected, supported by demand associated withreconstruction. Nevertheless, overall business conditions
continued to be challenging as deflationary pressure persisted.
In this business environment, the domestic business achieved
increases in both sales and profit in the second half of fiscal 2012
and a full-year profit increase, offsetting the impact of theearthquake. It was the result of Onward Kashiyama’s aggressive
merchandising and marketing initiatives and efficient costmanagement. The overseas business recorded increased sales
and profit in accordance with the plan, thanks to a great
improvement of profitability in Europe.
As a result, on a consolidated basis, net sales amounted to¥242,402 million, a decrease of 0.9% year on year, operating
income was ¥10,954 million, an increase of 22.7%, and net
income was ¥3,529 million, up 29.6%.

Results of Operations
Note: Figures of segments’ business results presented are before
elimination of intersegment transactions.

Net Sales
Sales of the apparel businesses decreased 0.8% year on year to¥230,021 million and sales of other businesses decreased 1.0% to¥21,572 million. As a result, consolidated net sales decreased¥2,149 million or 0.9% from the previous fiscal year to ¥242,402
million.

Costs, Expenses and Other Income
The ratio of cost of sales decreased 0.1 percentage points from
52.6% for the previous fiscal year to 52.5%. The gross profit
margin improved 0.1 percentage points from 47.4% for theprevious fiscal year to 47.5%. These improvements were
attributable to the recovery of domestic sales of full-price items
after the earthquake, reduction in royalty payments, and enhanced
production efficiency in Europe by utilizing the Group’s production
platform. Gross profit decreased ¥711 million or 0.6% from theprevious fiscal year to ¥115,114 million as a result of a decrease in
net sales.
The ratio of selling, general and administrative expenses to net
sales decreased 0.7 percentage points from 43.7% for theprevious fiscal year to 43.0%. This improvement was mainly
attributable to Onward Kashiyama’s efficient cost management. As
a result, the operating income margin increased 0.8 percentage
points from 3.7% for the previous fiscal year to 4.5%. Operating
income increased ¥2,025 million or 22.7% from the previous fiscal
year to ¥10,954 million.
With respect to other income (expenses), other income, net, of¥116 million was recorded compared with other expenses, net, of¥377 million for the previous fiscal year. Major items were a ¥887
million increase in the gain on sales of fixed assets, a ¥1,293
million decrease in the loss on write-down of investments insecurities, a loss on adjustment for changes of accounting
standard for asset retirement obligations amounting to ¥1,086
million, and a loss on reconstruction of ¥1,320 million.
Income before income taxes and minority interests increased¥2,518 million or 29.4% to ¥11,070 million. The effective tax rate
after the application of deferred tax accounting increased from
66.7% for the previous fiscal year to 67.3%, and income taxes
increased ¥1,743 million or 30.5% from ¥5,708 million for theprevious fiscal year to ¥7,451 million. As a result, net income
increased ¥806 million or 29.6% from the previous fiscal year to¥3,529 million.

Segment Information
Results of operations by reportable segment for the fiscal year
ended February 29, 2012, were as follows.

• Apparel Business
Regarding domestic business operations, in order to absorb the
impact of the earthquake , Onward Kashiyama engaged inaggressive merchandising and marketing initiatives for its core
brands in the second half, focusing on the strategic products under
the cross-brand plan and value-added cold-weather apparel. It also
implemented measures to boost sales, including effective sales
promotion. As a result, Onward Kashiyama achieved an increase inprofit. Results of operations of the Internet business, whosemarket is expanding, greatly exceeded the targets as Onward
Kashiyama and the Group’s other domestic brands broadened therange of brands and items, made improvements to the website,
and increased the number of registered customers. The domestic
apparel business as a whole recorded increased profit for the full
fiscal year.
Regarding overseas business, in Europe GIBO’ CO. Groupexperienced a substantial increase in profit as a result of improved
productivity and greater synergies with Jil Sander. Consequently,
although results in Asia were below the level of the previous fiscal
year, the overseas apparel business as a whole recorded higher
sales and profit.
As result, segment sales were ¥230,021 million, a decrease of
0.8% year on year, and operating income was ¥14,303 million, an
increase of 16.6%.

• Other BusinessAmong service-related businesses, Onward Creative Center,
which designs and constructs commercial facilities, reduced
losses thanks to the recovery of sales in the second half of the
fiscal year. In addition, ACROSS Transport which is engaged inlogistics and transport of apparel, recorded increases in both sales
and profit, which exceeded the targets, because it expanded its
customer base for logistics outsourcing. The resort business,
however, recorded lower sales and profit because of the plunge in
the number of customers from Japan owing to cancellations ofreservations following the earthquake.
As a result, segment sales were ¥21,572 million, a decrease of
1.0% year on year, and operating income was ¥131 million, an
increase of 219.5%.

ONWARD HOLDINGS CO., LTD.

29

Financial Position
Total assets amounted to ¥276,939 million at the end of fiscal
2012, having decreased ¥4,704 million from the end of theprevious fiscal year. Current assets increased ¥3,350 million,
mainly due to increases in cash and time deposits and inventories.
Fixed assets decreased ¥8,054 million because of decreases inproperty, plant and equipment and goodwill.
Total liabilities amounted to ¥119,636 million at the end of fiscal
2012, having decreased ¥3,262 million from the end of theprevious fiscal year. Current liabilities increased ¥1,414 million
owing to an increase in accrued income taxes and a provision forbuilding reconstruction-related losses despite a decrease in shortterm loans payable. Long-term liabilities decreased ¥4,676 million,
mainly due to a decrease in long-term loans payable.
Total net assets were ¥157,303 million at the end of fiscal 2012,
having decreased ¥1,442 million from the end of the previous
fiscal year. Total shareholders’ equity increased ¥1,866 million,
mainly attributable to an increase in retained earnings.
Accumulated other comprehensive income decreased ¥2,923
million, partly owing to a decrease in net revaluation loss of land.
As a result, the shareholders’ equity ratio increased 0.5
percentage points from 55.8% at the end of the previous fiscal
year to 56.3% at the end of the fiscal 2012 because shareholders’equity increased whereas total assets decreased.

Cash FlowsNet cash provided by operating activities amounted to ¥13,181
million, having increased ¥1,974 million from the previous fiscal
year. The main item was a ¥2,518 million increase in income
before income taxes and minority interests.
Net cash used in investing activities amounted to ¥1,962 million,
having decreased ¥3,190 million from the previous fiscal year,
mainly attributable to investment in sales floor equipment andacquisition of investments in securities, despite proceeds fromsale of land.
Net cash used in financing activities amounted to ¥7,449 million,
having decreased ¥1,823 million from the previous fiscal year. The
main item was repayment of loans payable and dividends paid.
As a result, cash and cash equivalents at the end of fiscal 2012amounted to ¥32,088 million, having increased ¥3,454 million fromthe end of the previous fiscal year.

Capital Expenditure
The Group executes capital investment on a continuous basis toenhance planning, production, sales, and logistics in order to meet
diverse needs.
Capital expenditure during fiscal 2012 amounted to ¥6,230
million and its breakdown by segment is as described below:
In the Apparel Businesses, capital expenditure totaled ¥5,247
million, most of which was invested for sales floors at department
stores and directly managed stores with the aim of strengthening
the sales structure.
In Other Businesses, the Group invested ¥896 million to
upgrade commercial facilities and to enhance operational
efficiency.

Profit Distribution Policy
Management of Onward Holdings regards the distribution of
profits to shareholders as one of its top priorities. The basic policyof the Company is to continue to pay stable dividends linked with
the Company’s business performance, with a target dividend
payout ratio of at least 35%.

30

ONWARD HOLDINGS CO., LTD.

Taking into consideration the Company’s business results forthe fiscal year under review and the future business environment,
the Company decided to pay a cash dividend of ¥24 per share forthe fiscal year under review, unchanged from the previous fiscal
year.
The Company intends to employ retained earnings flexibly forstrategic investments to establish a solid business structure and tostrengthen the Company’s financial position, taking into
consideration the need for funds.

Business Risks

Outlook for Fiscal Year to February 2013

(1) Risks associated with changes in consumer needs

Recovery of the Japanese economy is expected to remain fragile
because of the persistence of the strong yen and concerns about
the slowing of the world economy owing to the European
sovereign debt crisis. The outlook for personal consumption also
affords few grounds for optimism apart from demand associatedwith reconstruction from the earthquake, because of deeply rooted
consumer frugality in view of the poor prospects for personal
incomes.
In this economic environment, ONWARD will implement growthstrategies in accordance with the New Medium-Term Three-Year
Plan to achieve a new growth path based on “fashion.”
Regarding domestic business operations, ONWARD will work toachieve growth and improve the cost structure by shifting
personnel from existing businesses to new businesses andgrowing areas that ONWARD intends to develop and strengthen.
ONWARD will accelerate growth of its Internet business, whose
sales and profit are rising in line with the growth of the market, byenhancing the content, increasing the range of items and brands,
and increasing the number of registered customers. Moreover,
ONWARD will vigorously seek opportunities for M&A and, withcareful consideration, pursue M&A that will increase the growthpotential and from which synergies can be expected.
In overseas business, ONWARD will strive to advance to a
global growth phase by developing the European business as theGroup’s main source of profit. In North America, ONWARD will
establish a new design and development base in New York for
future business development, while taking steps to improve
profitability of existing businesses. Regarding production
operations in Asia, ONWARD will continue to focus on low-cost
production by starting production in more regions andstrengthening autonomous production systems. Regarding sales
operations in Asia, while increasing the size of existing stores toenhance sales efficiency, ONWARD will develop new stores andexpand wholesale to enhance growth potential.
For the fiscal year ending February 28, 2013, management
forecasts consolidated net sales of ¥266,600 million, an increaseof 10.0% year on year, operating income of ¥13,800 million, up
26.0%, and net income of ¥5,000 million, up 41.7%.
The forecast of business performance and other forward-looking
statements contained herein are based on information currently
available to management and certain assumptions thatmanagement believes to be reasonable. Therefore, actual results
may differ materially from those expressed or implied by suchstatements for various reasons.

described below. Recognizing the possibility of materialization ofpartners. For unexpected reasons, the relevant contract may becancelled or the terms and conditions of the relevant contract may
become unfavorable upon renewal. Such eventuality may have an
adverse impact on the Group’s business performance.

these risks, in its business operations the Group endeavors to(6) Risks associated with laws and regulations

prevent risks from materializing and to minimize the impact in the

In doing business, ONWARD pays careful attention to laws andregulations, including those concerning antitrust, treatment of
subcontractors, labeling, and consumer product safety, andenvironment- and recycling-related laws, and strives to ensurecompliance. The Onward Group Compliance Committee
spearheads the Group’s efforts to raise awareness about theimportance of ensuring legal compliance and internal control
procedures. Despite the implementation of such control systems,
an issue may arise as a result of illegal behavior of an employee ora business partner and may undermine the trust placed in
ONWARD by society and result in substantial cost burden, such as
payment of indemnities. Such eventuality may have an adverse
impact on the Group’s business performance.

Risks that may have an impact on ONWARD operations are

event that they materialize.
Forward-looking statements in this section are based on theGroup’s judgment as of May 29, 2012.

To precisely respond to consumer needs regarding fashion
products, ONWARD strives to develop original and competitive
products through the implementation of its Brand-Leveraged
Management policy. However, ONWARD may not be able to attainthe performance targets set in the business plan because of anumber of factors, including lackluster consumer spending as aresult of economic fluctuations, competition with other companies,
and sudden changes in fashion trends. Such eventuality may havean adverse impact on the Group’s business performance.

(2) Risks associated with weather conditions anddisasters
Since sales of ONWARD mainstay fashion products are
susceptible to influence by the weather, ONWARD has put inplace systems for planning and production with a short turnaroundcycle, and is strengthening those systems. However, unsettled
weather persisting for a prolonged period, such as cool weather inthe summer and warm weather in the winter, or a series oftyphoons may result in the loss of sales opportunities during peakseasons. Such developments may have an adverse impact on theGroup’s business performance.
In addition, unexpected occurrence of a natural disaster, such as
an earthquake and flooding, fire and accident, or outbreak of an
epidemic, such as a new strain of influenza, may compel
ONWARD to suspend its operations. Such eventuality may havean adverse impact on the Group’s business performance.

(3) Quality risk
ONWARD implements quality control of its products in accordancewith its established appropriate quality control standards. Despite
the implementation of such quality control systems, an incident
related to product liability may occur as a result of matters relating
to ONWARD or its business partner, which may undermine theimage of ONWARD and brand image and result in substantial costburden. Such eventuality may have an adverse impact on theGroup’s business performance.

(4) Risks associated with business partners
ONWARD has put in place internal systems for periodicallyassessing the operating conditions and the creditworthiness of its
business partners, and is strengthening those systems. However,
ONWARD may incur losses due to bad debts if a business partner
fails to fulfill its financial obligations or due to an unexpectedbankruptcy of a large retail complex. Such eventuality may have an
adverse impact on the Group’s business performance.

(7) Risks associated with information
ONWARD has thoroughly implemented measures to ensure
security of its information systems. Regarding treatment of
personal information, ONWARD has established the Guidelines
concerning the Personal Information Protection Law and strives toenhance awareness of all officers and employees. Although
ONWARD is strengthening information management systems, anissue may arise as a result of leakage of information due tounauthorized access to computer systems or criminal behavior andmay undermine the trust placed in ONWARD by society and resultin increased cost burden. Such eventuality may have an adverse
impact on the Group’s business performance.

(8) Risks associated with overseas business
operations
Overseas business operations are exposed to a range of risks,
including natural disaster, political turmoil, change in social andeconomic conditions, terrorism, war, fluctuations in foreign
currency exchange rates, lawsuits related to intellectual property,
and infectious disease. In the event that such risk materializes, it
may become difficult for the Company to continue its business
operations. Such eventuality may have an adverse impact on theGroup’s business performance.

(9) Risks associated with business/capital tie-ups
As part of its growth strategies, ONWARD invests in Japan andoverseas through M&A etc.
In the event that business performance and financial position
deteriorate owing to change in the business environment thatexceeds expectations, ONWARD may record a loss on impairmentof goodwill. Such eventuality may have an adverse impact on theGroup’s business performance.

(5) Risks associated with intellectual property
ONWARD owns trademarks and other intellectual property inJapan and overseas and strives to safeguard the rights to suchproperty in accordance with laws and regulations. However, in theevent of infringement of such rights by a third party, the image of
ONWARD and brand image may be undermined and ONWARD
product development may be impaired. Such eventuality may havean adverse impact on the Group’s business performance.
Moreover, ONWARD conducts licensed brand business by
securing rights to use intellectual property owned by its overseas

ONWARD HOLDINGS CO., LTD.

31

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2011 and February 29, 2012

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2011 and February 29, 2012ASSETS

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

Millions of yen
2011

2012

2012

¥ 30,939
25,39930,358
4,075
5,498
(724)

¥ 33,192
25,25731,445
3,821
5,567
(387)

$ 411,409
313,049
389,744
47,35569,012(4,798)95,54598,8951,225,771

Current assets:
Cash and time deposits (Notes 2.(17), 3 and 10)
Accounts and notes receivable (Note 3)Inventories (Note 2. (4))
Deferred tax assets (Note 12)
Other current assets
Less: Allowance for bad debt
Total current assets

LIABILITIES AND NET ASSETS

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

Millions of yen
2011

2012

2012

¥ 32,704
27,354
3,534
4,533
1,569
299
870
163
—
11,651¥ 33,238
26,427
3,439
5,700
1,266
267
514
202
1,320
11,718$ 411,975
327,557
42,62070,645
15,699
3,315
6,369
2,506
16,361
145,236

82,67784,091

1,042,283

367
22,298
5,942
3,468
119
8,027

90
19,640
3,966
4,123
140
7,586

1,116
243,436
49,16251,097
1,729
94,03140,22135,545440,571

122,898

119,636

1,482,854

30,08050,043
117,777

30,08050,043
119,524

372,827
620,268
1,481,460

Current liabilities:
Accounts and notes payable (Note 3)
Short-term loans payable (Notes 3 and 15)
Current portion of long-term loans payable (Notes 3 and 15)
Accrued income taxes
Accrued bonuses to employees
Accrued bonuses to directors
Allowance for sales returns
Provision for point program
Allowance for losses on reconstruction
Other current liabilities
Total current liabilities

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

76,28025,828(68,585)
33,523
53,10076,491
27,563(70,479)
33,57549,413

948,084
341,628(873,567)
416,145
612,459

86,62382,9881,028,604

Bonds (Note 15)
Long-term loans payable (Notes 3 and 15)
Deferred tax liabilities — revaluation of land (Notes 12 and 13)
Accrued retirement benefits (Note 8)
Accrued retirement benefits for directors and corporate auditors
Other
Total long-term liabilities
Total liabilities

Commitments and contingent liabilities (Note 14)
Net assets:

Intangible assets, net:
Goodwill
Other
Total intangible assets, net

43,732
3,014

40,794
2,701

505,627
33,47946,74643,495539,106

Shareholders’ equity:
Common stock:
Authorized — 400,000,000 shares
Issued — 172,921,669 shares at February 28, 2011
and February 29, 2012, respectively
Capital surplus
Retained earnings (Note 16)
Less: Treasury stock, at cost, 16,238,791 shares and 16,162,243 sharesat February 28, 2011 and February 29, 2012, respectively
Total shareholders’ equity(23,446)(23,327)(289,128)

174,454

176,320

2,185,427(2,838)(5)(11,004)(3,558)(3,792)
10(12,503)(4,043)(47,005)122(154,965)(50,108)(17,405)(20,328)(251,956)

532

653

8,099

1,164

658

8,142

158,745

157,303

1,949,712¥281,643¥276,939$3,432,566

Accumulated other comprehensive income:Investments and other assets:
Investments in securities (Notes 3 and 4)
Long-term loans receivable
Long-term prepaid expenses
Deferred tax assets (Note 12)
Other investments
Less: Allowance for bad debt

34,592
4,839
751
5,628
9,274
(2,355)35,179
5,029
743
4,495
8,916
(2,801)

436,032
62,3269,217
55,717
110,513(34,720)

Total investments and other assets

52,72951,561

639,085¥281,643¥276,939$3,432,566

Total assets

Net unrealized losses on available-for-sale securities (Note 4)
Deferred losses on hedging instruments
Net revaluation loss of land (Note 13)
Foreign currency translation adjustments
Total accumulated other comprehensive income
Stock acquisition rights
Minority interests in consolidated subsidiaries
Total net assets
Total liabilities and net assets

Net assets per share

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

Yen

Per share:¥1,002.34¥995.11$12.33

See accompanying notes to consolidated financial statements.

32

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

33

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2011 and February 29, 2012

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2011 and February 29, 2012

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

Millions of yen

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses (Note 19)
Operating income

2011

2012

2012

¥244,551
128,726
115,825
106,896
8,929¥242,402
127,288
115,114104,160
10,954$3,004,487
1,577,695
1,426,792
1,291,024
135,768

Other income (expenses):
Interest income
Dividend income
Land and house rent received
Interest expenses
Royalty income
Equity in earnings of investees
Foreign currency exchange loss
Loss on derivatives
Gain on sale of investments in securities, net (Note 4)
Loss on write-down of investments in securities (Note 4)
Provision for allowance for bad debt
Gain on disposal of fixed assets, net
Impairment loss on fixed assets (Note 7)
Loss on adjustment for changes of accounting standard for
asset retirement obligations
Loss on reconstruction
Other, net
Income before income taxes and minority interests

113
373
974
(808)
836
499
(702)
(282)
—
(1,322)
—
49
(937)

110
388
595
(651)
802
715
(182)
—
14
(29)
(350)
936
(352)

1,356
4,813
7,369
(8,066)
9,945
8,863(2,250)—173(363)(4,337)
11,605(4,361)

—
—
830
8,552

(1,086)(1,320)526
11,070(13,465)(16,361)
6,522
137,211

5,555
153

7,528
(77)

93,308(956)

Income before minority interests

2,844

3,619

44,859Minority interests in subsidiaries
Net income(121)¥ 2,723(90)¥ 3,529

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

Millions of yen
2011

Income before minority interests
Other comprehensive income
Net unrealized losses on available-for-sale securities
Deferred gains on hedging instruments
Foreign currency translation adjustments
Share of other comprehensive income of associates
accounted for using the equity method
Total other comprehensive income (Notes 9)
Comprehensive income (Notes 9)
Comprehensive income attributable to:
Owners of the parent
Minority interests

2012

2012

—

¥3,619$44,859

—
—
—

(920)
15
(447)

(11,405)192(5,542)

—
—
—

(87)
(1,439)¥2,180(1,081)(17,836)$27,023——¥2,10575$26,094929

See accompanying notes to consolidated financial statements.

Income taxes:
Current (Note 2. (10))
Deferred (Note 12)$(1,116)43,743
U.S. dollars(Note 2. (22))

Yen

Per share (Notes 16, 17 and 19):
Net income — basic
Diluted net income per share
Cash dividends¥17.3817.28
24.00¥22.52
22.35
24.00

$0.28
0.28
0.30

See accompanying notes to consolidated financial statements.

34

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

35

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2011 and February 29, 2012

Millions of yen

Millions of yen

Accumulated other comprehensive income

Shareholders’ equity
Number ofshares ofcommon stock(thousands)

Commonstock

Retainedearnings(Note 16)

CapitalsurplusTreasury
stock

Total

172,922¥30,080¥50,043¥118,817¥(23,490)¥175,450

Cash dividends

—

—

—

(3,760)—(3,760)Net income

—

—

—

2,723

—

2,723

Purchase of treasury stock

—

—

—

—

(30)

(30)

Reissuance of treasury stock

—

—

—

(16)

74

58

Reversal of net revaluation loss of land
Increase in retained earnings resulting frommerger of non-consolidated subsidiaries
Net changes other than shareholders’ equity

—

—

—

11

—

11

—
—

—
—

—
—

2
—

—
—

2
—

Balance as at February 28, 2010

Total changes during the year
Balance as at February 28, 2011

—

—

—

(1,040)44(996)

172,92230,08050,043

117,777(23,446)

174,454

Cash dividends

—

—

—

(3,760)—(3,760)Net income

—

—

—

3,529

—

3,529

Purchase of treasury stock

—

—

—

—

(2)

(2)

Reissuance of treasury stock

—

—

—

(83)

121

38

Reversal of net revaluation loss of land

—

—

—

2,061

—

2,061

Net changes other than shareholders’ equity

—

—

—

—

—

—

Total changes during the year
Balance as at February 29, 2012

Net unrealized
losses onavailable-for- sale Deferred losses
securities
on hedging(Note 4)
instruments

—

—

—

1,747

119

1,866

172,922¥30,080¥50,043¥119,524¥(23,327)¥176,320

Minority interests
Stock acquisition in consolidated
subsidiaries
rights

Total

Total net
assets¥(5,560)¥(42)¥(10,993)¥(2,355)¥(18,950)¥413¥1,251¥158,164

Cash dividends

—

—

—

—

—

—

—

(3,760)Net income

—

—

—

—

—

—

—

2,723

Purchase of treasury stock

—

—

—

—

—

—

—

(30)

Reissuance of treasury stock

—

—

—

—

—

—

—

58

Reversal of net revaluation loss of land
Increase in retained earnings resulting frommerger of non-consolidated subsidiaries
Net changes other than shareholders’ equity

—

—

—

—

—

—

—

11

—
2,722

—
37

—
(11)

—
(1,203)

—
1,545

—
119

—
(87)

2
1,577

2,722

37

(11)

(1,203)

1,545

119

(87)

581

(2,838)(5)(11,004)(3,558)(17,405)

532

1,164

158,745

Balance as at February 28, 2010

Total changes during the year
Balance as at February 28, 2011
Cash dividends

—

—

—

—

—

—

—

(3,760)Net income

—

—

—

—

—

—

—

3,529

Purchase of treasury stock

—

—

—

—

—

—

—

(2)

Reissuance of treasury stock

—

—

—

—

—

—

—

38

Reversal of net revaluation loss of land

—

—

—

—

—

—

—

2,061

Net changes other than shareholders’ equity

(954)

15

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

121

(506)

(3,308)

Total changes during the year
Balance as at February 29, 2012

(954)

15

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

121

(506)

(1,442)¥(3,792)¥ 10¥(12,503)¥(4,043)¥(20,328)

¥653

¥658

¥157,303

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

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

Shareholders’ equity

Balance as at February 28, 2011

Net revaluation Foreign currency
loss of landtranslation(Note 13)adjustments

Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings(Note 16)

Treasurystock$372,827$620,268$1,459,803$(290,603)$2,162,295

Net unrealized
losses onavailable-for- sale Deferred losses
securities
on hedging(Note 4)
instruments

Total

Net revaluation Foreign currency
loss of landtranslation(Note 13)adjustments

Minority interests
Stock acquisition in consolidated
subsidiaries
rights

Total

Total net
assetsCash dividends——(46,609)—(46,609)

Net income——

43,743—43,743Purchase of treasury stock

—

—

—

(27)

Reissuance of treasury stock——(1,024)

Reversal of net revaluation loss of land——

25,547

Net changes other than shareholders’ equity

—

—

—

—

—

Reversal of net revaluation loss of land

—

—

—

—

—

—

—

25,547——21,657

1,475

23,132

Net changes other than shareholders’ equity(11,831)192(18,578)(6,011)(36,228)

1,502(6,278)(41,004)$372,827$620,268$1,481,460$(289,128)$2,185,427

Total changes during the year
Balance as at February 29, 2012$(35,174)$ (70)$(136,387)$(44,097)$(215,728)$6,597$14,420$1,967,584

Cash dividends

—

—

—

—

—

—

—

(46,609)(27)

Net income

—

—

—

—

—

—

—

43,743

1,502

478

Purchase of treasury stock

—

—

—

—

—

—

—

(27)

—

25,547

Reissuance of treasury stock

—

—

—

—

—

—

—

478

See accompanying notes to consolidated financial statements.

Balance as at February 28, 2011

Total changes during the year
Balance as at February 29, 2012

(11,831)192(18,578)(6,011)(36,228)

1,502(6,278)(17,872)$(47,005)$122$(154,965)$(50,108)$(251,956)$8,099$ 8,142$1,949,712

See accompanying notes to consolidated financial statements.

(Continued)

36

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

37

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2011 and February 29, 2012

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

Millions of yen
2011

2012

2012

¥ 8,552¥11,070$137,211

5,642
937
3,638
(439)
431
(486)
808
(500)
(49)
—
1,322
(589)
(315)
(2,429)(1,545)
14,978693(770)(4,819)1,125
11,207

5,478
352
3,665
138
686
(498)
651
(715)
(936)
(13)
29
(188)
(1,444)761(1,187)
17,849746(674)(5,973)
1,233
13,181

67,8994,361
45,4201,709
8,505(6,169)8,066(8,863)(11,604)(156)
363(2,326)(17,901)
9,429(14,709)221,235
9,241(8,360)(74,031)
15,286
163,371

(318)
1,652
(3,090)113(1,837)
14
(773)
(754)
761

(1,021)
2,243(4,163)
4,754(1,138)
14
(642)
(510)
800

(12,650)
27,798(51,604)
58,920(14,107)181(7,953)(6,316)
9,917—(1,396)(17,308)(920)(5,152)(903)(1,962)(11,194)(24,316)

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization
Impairment loss on fixed assets
Net amortization of goodwill on consolidation(Decrease) Increase in provision for allowance for bad debt
Decrease in provision for accrued retirement benefits
Interest and dividend income
Interest expense
Equity in earnings of investees
Gain on disposal of fixed assets, net
Gain on sale of investments in securities, net
Loss on write-down of investments in securities
Increase in trade receivables
Increase in inventories(Decrease) Increase in trade payables
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Refunded income taxes
Net cash provided by operating activities

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

Millions of yen
2011

2012

2012

(2,984)2,080(4,118)(9)(3,760)(29)(453)(9,272)(829)(4,046)(330)
833(3,586)(2)(3,760)(55)(549)(7,449)
(316)
3,454

(4,086)
10,328(44,454)(27)(46,609)(677)(6,806)(92,331)(3,914)42,8101
32,679¥28,634—
28,634¥32,088—354,908$397,718

Cash flows from financing activities:
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Acquisition of treasury stock
Dividends paid by the parent company
Dividends paid to minority shareholders
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease (increase) in cash and cash equivalents
Increase in cash and cash equivalents resulting from merger with
non-consolidated subsidiaries
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 10)
See accompanying notes to consolidated financial statements.

Cash flows from investing activities:
Increase in time deposits
Decrease in time deposits
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Acquisition of investments in securities
Proceeds from sale of investments in securities
Payments for long-term prepaid expenses
Payments for security deposits
Proceeds from security deposits
Payment for additional acquisition of shares of
consolidated subsidiaries
Other, net
Net cash used in investing activities(Continued)

38

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

39

ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2011 and February 29, 2012

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

2. Summary of Significant Accounting Policies(1) Scope of Consolidation
The Company had 76 subsidiaries as at February 29, 2012 (75 as at February 28, 2011). The accompanying consolidated financial
statements include the accounts of the Company and 65 of its subsidiaries (64 for 2011). Major consolidated subsidiaries are listed below(the Company and the consolidated subsidiaries are collectively referred to as the “Companies”):
Name of subsidiary

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

Equity ownership percentage

Closing date

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

February 29
February 29
February 29
February 29
February 29
February 29
November 30
November 30
November 30
November 30
November 30
December 31
December 31
February 29
February 29
February 29
February 29
February 29
February 29
December 31
December 31

ONWARD KASHIYAMA VIETNAM LTD., SHANGHAI ONWARD CLOTHING CO., LTD. and Grace Continental Korea Co., Ltd. were
established during the year ended February 29, 2012; therefore, ONWARD KASHIYAMA VIETNAM LTD., SHANGHAI ONWARD
CLOTHING CO., LTD. and Grace Continental Korea Co., Ltd. became consolidated subsidiaries of the Company.
In the Jil Sander AG Group, Jil Sander Fashion GmbH was liquidated and removed from the scope of consolidation became an
unconsolidated subsidiary of the Company. Also, in the Gibo’ Co. Group, Gibo’ Co. S.p.A. merged with CORPORATE s.r.l.
The financial statements of the aforementioned subsidiaries with fiscal year-ends of December 31 or November 30 have been used forconsolidation. All material transactions that occurred in the periods from such fiscal year-ends and February 29, the Company’s fiscal yearend, have been adjusted.
The remaining 11 subsidiaries (11 for 2011) 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 theCompanies.

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

40

ONWARD HOLDINGS CO., LTD.

(3) Investments in Unconsolidated Subsidiaries and Affiliates
Investments in unconsolidated subsidiaries and affiliates are accounted for by the equity method. A total of 20 companies (20 companies
for 2011) are accounted for by the equity method for the year ended February 29, 2012.
The Company did not apply the equity method to 10 unconsolidated subsidiaries (10 in 2011) and 1 affiliate (1 in 2011) as at February
29, 2012, as the effect on net income or retained earnings of their consolidated financial statements are not material individually or in theaggregate.
The Company applied the equity method by using the November 30 financial statements of Gailyglen Ltd., which has a fiscal year-end of
November 30. Also, the December 31 financial statements of Daido Limited, which has a fiscal year-end of March 31, prepared on a basis
similar to that for year-end closing, were used for consolidation purposes.
(4) Inventories
Inventories held for sale in the ordinary course of business are measured at the lower of cost or net selling value, which is defined as theselling price less additional estimated manufacturing costs and estimated direct selling expenses, determined principally by the specificidentification method. For the year ended February 29, 2012, the recorded write-downs were ¥9,494 million ($117,678 thousand). For theyear ended February 28, 2011, the recorded write-downs were ¥10,307 million.
(5) Investments in Securities
Debt securities and equity securities classified as available-for-sale securities whose fair values are readily determinable are carried at thefair values prevailing at the fiscal year-end date with unrealized gains or losses included as a component of net assets, net of applicabletaxes. Available-for-sale securities whose fair values cannot readily be determined are stated principally at cost.
In cases where declines in the fair values of individual securities are assessed to be other than temporary, the cost of the security is
reduced to net realizable value and the impairment loss is charged to income. Realized gains and losses are determined using the movingaverage method and are reflected in income.
(6) Derivative Transactions
All derivatives are stated at fair value, and changes in fair value are included in income for the period in which they arise, except forderivatives that are designated as “hedging instruments” (see “(7) Hedge Accounting” below).
(7) Hedge Accounting
All gains or losses arising from changes in the fair values of the derivatives are designated as “hedging instruments,” which are deferred
as a component of net assets, net of applicable taxes. The gains or losses on the hedging instruments are included in net income inthe same period during which the gains and losses on the hedge items or transactions are recognized. For foreign exchange forward
contracts, if they meet conditions for hedge accounting, the difference between the contract rate and spot rate at the date of the contract
is recognized over the period from the contract date to the settlement date.
The derivatives designated as hedging instruments are principally foreign exchange forward contracts. The related hedged items aretrade accounts payable and trade accounts receivable denominated in foreign currencies and scheduled transactions.
The Company has a policy of utilizing hedging instruments in order to reduce the exposure to the risk of foreign currency exchange rate
fluctuation.
(8) Property, Plant and Equipment
The Company and its domestic consolidated subsidiaries provide depreciation by the declining-balance method at rates based on theestimated useful lives of assets which are prescribed by Japanese income tax regulations, except for certain buildings (other than
improvements) acquired on and after April 1998, which are depreciated by the straight-line method pursuant to an amendment to Japaneseincome tax law.
Overseas consolidated subsidiaries provide depreciation by the straight-line method.
The useful lives of property, plant and equipment are summarized as follows:
Buildings and structures
3 to 50 years
Other
2 to 20 years(9) Amortization
Intangible assets and long-term prepaid expenses are amortized by the straight-line method.
Software costs for internal use are amortized over their expected useful lives (five years) by the straight-line method.
(10) Income Taxes
The accounting standards for income taxes require that deferred income taxes be accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in thefinancial 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

ONWARD HOLDINGS CO., LTD.

41

on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A
valuation allowance is provided to reduce deferred tax assets to the amount that is realizable.

(11) Allowances for Bad Debt
An allowance for doubtful accounts, including trade notes and accounts receivable and certain investments and other assets, is provided
against probable future losses on collection. The Company and subsidiaries designate certain accounts as highly doubtful accounts andprovide a specific allowance for these accounts based on the management’s detailed credit analysis. Other than these accounts, theCompany provides an allowance for doubtful accounts based on the Company’s historical average charge-off ratio.
(12) Allowances for Sales Returns
An allowance for sales returns is provided for the estimated losses based on the actual percentage of sales return in prior years and grossprofit margin.
(13) Retirement Benefits
Accrued retirement benefits are provided for at the present value of the projected benefit obligation less the estimated fair value of plan
assets and deferred gains or losses at the balance sheet date. Unrecognized prior service costs are amortized and charged or credited toincome on a straight-line basis over 5 to 10 years, which is within the related employees’ average remaining service years. Unrecognizedactuarial differences are amortized on a straight-line basis over 5 to 10 years, which is within the related employees’ average remaining
service years, from the year following the one in which they arise.
Accrued retirement benefits for directors and statutory auditors are provided for at the amount required at the balance sheet dates inaccordance with the internal rules of the Company and certain consolidated subsidiaries.
(14) Provision for Point Program
The provision for point program was provided for the future cost generating from the utilization of points that customers of certain
consolidated subsidiaries have earned under the point service program which is for sales promotions. The Company reserves an amountconsidered appropriate to cover possible utilization of the points during and after the next fiscal year.
(15) Accounting for Leases
Leased assets related to finance lease transactions without title transfer are depreciated on a straight-line basis, over the lease periods
as their useful lives and no residual value. Regarding finance leases transactions without title transfer for which the starting date for thelease transactions is prior to February 28, 2009, the Company and its domestic consolidated subsidiaries have continued to recognize lease
payments as expenses.

(21) Allowances for Losses on Reconstruction
An allowance is provided for the estimated losses to be incurred with the reconstruction of the Head Office building of the Company.
The Company resolved to build a new Head Office building on the current Head Office premises (Nihonbashi, Chuo-ku, Tokyo) at
its Board of Directors’ meeting held on October 7, 2011. Based on this resolution, an allowance for losses on reconstruction has beenrecorded based on the estimated losses to be incurred from the rebuilding of the Head Office building.
(22) United States Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of ¥80.68=US$1, the rate ofexchange as of February 29, 2012, has been used in translation. The inclusion of such amounts is not intended to imply that Japanese yen
have been or could be readily converted, realized or settled in U.S. dollars at that rate or any other rate.
(23) Reclassifications
Certain reclassifications have been made to the prior year’s consolidated financial statements to conform with the presentation used forthe year ended February 29, 2012.
(24) Goodwill
Goodwill is evaluated on an individual basis and amortized on a straight-line basis within 20 years.
(25) Asset Retirement Obligations
The Company adopted “Accounting Standard for Asset Retirement Obligations” (ASBJ Statement No. 18, March 31, 2008) and “Guidanceon Accounting Standard for Asset Retirement Obligations” (ASBJ Guidance No. 21, March 31, 2008) from the year ended February 29,
2012.
Due to the application of this new standard, operating income was decreased by ¥30 million ($371 thousand), ordinary income wasdecreased by ¥43 million ($539 thousand), and income before income taxes and minority interests was decreased by ¥1,130 million($14,003 thousand). Additionally, the amount of change in asset retirement obligations due to the application of the accounting standards
was ¥1,682 million ($20,844 thousand) for the year ended February 29, 2012.
(26) Business Combinations
The Company adopted “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, December 26, 2008), “AccountingStandard for Consolidated Financial Statements” (ASBJ Statement No. 22, December 26, 2008), “Accounting Standard for Equity Methodof Accounting for Investments” (ASBJ Statement No. 16, December 26, 2008) and “Guidance on Accounting Standard for Business
Combinations and Business Divestitures” (ASBJ Guidance No. 10, December 26, 2008) from the year ended February 29, 2012. Major
accounting changes under the revised accounting standards are as follows.

(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 thepurchase of goods and services are not included in the accompanying consolidated statements of operations.
(17) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits which can bewithdrawn on demand, and short-term investments which are readily convertible into cash or with an original maturity of three months or
less, which represent insignificant risk of changes in value.
(18) Impairment of Long-Lived Assets
The standard of impairment of long-lived assets requires that fixed assets be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss would berecognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to begenerated from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as theamount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows fromthe continued use and eventual disposition of the asset or the net selling price at disposition.
(19) Accrued Bonuses to Employees
Allowance for bonuses to employees are provided by the estimated amounts, which are obligated to pay to employees after the fiscal
year-end, based on services provided during the current period.
(20) Directors’ Bonuses
Under the standard of directors’ bonuses, directors’ bonuses are accounted for as an expense as incurred, instead of being accounted foras an appropriation of retained earnings upon approval at a general meeting of shareholders.

42

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

43

3. Financial Instruments
1. Matters pertaining to the status of financial instruments(1) Policy on financial instruments
The Company and its subsidiaries invest their funds in short-term deposits and meet their financing needs through bank loans. The
Company and its subsidiaries utilize derivatives to hedge various risks as described in detail below and do not enter into derivatives for
trading or speculative purposes.
(2) Financial instruments and risks
Accounts and notes receivable are exposed to credit risk of customers. Trade receivables denominated in foreign currencies, being subject
to risks associated with changes in the foreign currency exchange rates, are hedged by forward exchange contracts.
Investment securities mainly comprise stocks of companies with which the Company and its subsidiaries have business alliances andare exposed to risks associated with fluctuations of their market prices.
Accounts and notes payable are due within one year. Trade payables denominated in foreign currencies, being subject to risks
associated with changes in foreign currency exchange rates, are hedged by forward exchange contracts, currency swaps, and currency
option trading. The purpose for loans is for working capital (mainly short-term) and funds of capital investment (long-term). Interest-rate
swaps are used to fix interest expenses for interest rate risk of a portion of long-term loans payable.
Regarding derivatives, forward foreign exchange contracts, currency swap, and currency option trading are used to hedge the foreignexchange rate fluctuation risk associated with the operating receivables and payables, and interest rate swap is used to mitigate theinterest rate risk for loans payable.
(3) Risk management for financial instruments(a) Monitoring of credit risk (the default risk for customers and counterparties)
In accordance with the internal policies of the Company and its consolidated subsidiaries for managing credit risk arising from notes andaccounts receivable, the Company and its subsidiaries monitor creditworthiness of their main customers and counterparties on a periodicalbasis and monitor due dates and outstanding balances by individual customers. Additionally, as means to mitigate credit risks, derivativetransactions are only conducted with high-credit worthy financial institutions as counterparties.
(b) Monitoring of market risk (the risk arising from fluctuations in foreign exchange rates, interest rates and others)
The Company and its consolidated subsidiaries hedge risks associated with changes in the foreign currency exchange rates, arising fromtrade receivable and payable denominated in foreign currencies mainly by forward exchange contracts. Additionally, interest rate swap
contracts are used to mitigate the risks associated with fluctuations in the interest payments on the long-term loans payable.
For investment securities, the Company and its consolidated subsidiaries periodically review their fair values and the financial positionof the issuers. Additionally, the Company and its consolidated subsidiaries continuously evaluate whether securities should be maintained
taking into account their fair values and relationships with the issues.
In derivative transactions, the division in charge of each derivative transaction follows the internal management policies within the actual
demand. Additionally, the Company and its consolidated subsidiaries monthly review transactions balance and the valuation gain (loss).
(c) Monitoring of liquidity risk related to fund procurement (the risk that the Company and its consolidated subsidiaries may not be able tomeet their obligations on scheduled due dates)
In order to manage liquidity risk, the Company and its consolidated subsidiaries timely prepare and update the cash flow plans based upon
the report and maintain fund liquidity.
(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price if available. When no quoted market price is available, fair value
is reasonably estimated. Since various variable assumptions are reflected in estimating the fair value, different assumptions could result indifferent fair values.

2. Matters related to fair values of financial instruments
The following are the consolidated balance sheet amounts, the fair values and the differences between them as of February 29, 2012 andFebruary 28, 2011 (the closing dates of the consolidated account).
February 29, 2012

Book value

Millions of yen
Fair value

Difference(a) Cash and time deposits(b) Accounts and notes receivable(c) Investment in securities
Available-for-sale securities
Investment to affiliates(d) Accounts and notes payable(e) Short-term loans payable(f) Long-term loans payable (Cover current portion of long-term loans payable)(g) Derivative transactions¥33,192
25,257¥33,192
25,257¥——25,923
8,464(33,238)(26,427)(23,079)(990)

25,923
5,411(33,238)(26,427)(23,169)(990)—(3,053)——90—

February 29, 2012

Book value

Thousands of U.S. dollars
Fair value(a) Cash and time deposits(b) Accounts and notes receivable(c) Investment in securities
Available-for-sale securities
Investment to affiliates(d) Accounts and notes payable(e) Short-term loans payable(f) Long-term loans payable (Cover current portion of long-term loans payable)(g) Derivative transactions

Difference$411,409
313,049$411,409
313,049$——321,310
104,903(411,975)(327,557)(286,056)(12,265)

321,31067,070(411,975)(327,557)(287,168)(12,265)—(37,833)
—
—
1,112
—

February 28, 2011

Book value

Millions of yen
Fair value

Difference(a) Cash and time deposits(b) Accounts and notes receivable(c) Investment in securities
Available-for-sale securities
Investment to affiliates(d) Accounts and notes payable(e) Short-term loans payable(f) Long-term loans payable (Cover current portion of long-term loans payable)(g) Derivative transactions¥30,939
25,399¥30,939
25,399¥——26,782
7,041(32,704)(27,354)(25,832)(1,469)26,782
5,240(32,704)(27,354)(25,838)(1,469)—(1,801)——
6—Notes:
1. Fair value measurement of financial instruments, including securities and derivatives(a) Cash and time deposits and (b) Accounts and notes receivable
Since these items are settled in a short period of time, their book value approximates fair value.
(c) Investment in securities
The fair value of equity securities is calculated by the quoted market price.
(d) Accounts and notes payable and (e) Short-term loans payable
Since these items are settled in a short period of time, their book value approximates fair value.
(f) Long-term loans payable
The fair values of long-term loans payable are measured as present values obtained by discounting the total amount of principal and interest at theestimated interest rate if similar loans payable were newly made. Of long-term loans payable that have a variable interest rate, the book value is used asfair value, as they are deemed to reflect market interest rates within a short time.
(g) Derivative transactions
The fair value is calculated on the basis of the price quoted by the financial institutions.
2. Book values of financial instruments deemed extremely difficult to determine their fair value as of February 28, 2011 and February 29, 2012 are as
follows:
Millions of yen
Classification

Investment securities
Unlisted equity securities

February 28, 2011

¥769

February 29, 2012

¥792

Thousands of U.S. dollars
February 29, 2012

$9,819The fair values of these items are not included in (c) “Investment in securities” because their market prices are not available and whose fair values are
deemed extremely difficult to determine.

44

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

45

3. The redemption schedule for monetary receivables and marketable securities with maturities as of February 29, 2012 and February 28, 2011 is asfollows:

Due within 1 year

February 29, 2012

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

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

February 28, 2011

¥—
1

¥—
—

¥—
—

—
¥58,448

58
¥59

—
¥—

600
¥600

Thousands of U.S. dollars
1 to 5 years
5 to 10 years

Over 10 years$411,409
313,042

$—
7

$—
—

$—
—

—
$724,451

728
$735

—
$—

7,437
$7,437

Millions of yen
1 to 5 years
5 to 10 years

Over 10 years

Due within 1 year

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

Over 10 years¥33,192
25,256

Due within 1 year

February 29, 2012

Millions of yen
1 to 5 years
5 to 10 years¥30,939
25,399

¥—
1

¥—
—

¥ —
—

—
¥56,338

58
¥59

—
¥—

600
¥600

4. Expected repayment amounts of long-term loans payable subsequent to the balance sheet date See Note 14. “Short-Term Loans payable and LongTerm Loans payable.”(1) Information as of and for the Year Ended February 29, 2012(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 29, 2012 are summarized as follows:
Carrying
value

Millions of yen
Acquisition cost

Unrealized gain (loss)¥12,356
42
12,398¥ 9,99435
10,029¥2,3627
2,369

14,165218
14,383¥26,781

17,468291
17,759¥27,788(3,303)(73)(3,376)¥(1,007)

Securities with unrealized gains:
Equity securities
Other
Total
Securities with unrealized losses:
Equity securities
Other
Total
Total

Note: Non-Marketable equity securities of ¥337 million are not included in the above table because there were no quoted market prices available and they
are extremely difficult to determine the fair value.

(b) Available-for-sale securities sold during the year ended February 28, 2011:
Millions of yen

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

¥14
—
—

(c) Losses on impairment of available-for-sale securities recognized to reflect declines in market value considered to be other than
temporary were ¥1,321 million for the year ended February 28, 2011.

Millions of yen
Acquisition
cost

Unrealized
gain (loss)

Carrying
value

Thousands of U.S. dollars
Acquisitioncost

5. Derivative Transactions
The contract or notional amounts and fair value of derivative financial instruments held as of February 29, 2012 and February 28, 2011 aresummarized as follows:(1) Derivative transactions not subject to hedge accounting:Unrealized
gain (loss)
February 29, 2012

¥ 8,561
148,575¥ 7,059
13
7,072¥1,5021
1,503$106,107175
106,282$ 87,492
163
87,655$18,615
12
18,627

17,080268
17,348¥25,923

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

211,704
3,324
215,028$321,310

253,384
3,873
257,257$344,912(41,680)(549)(42,229)$(23,602)

Note: Non-Marketable equity securities of ¥338 million ($4,192 thousand) are not included in the above table because there were no quoted market prices
available and they are extremely difficult to determine the fair value.

Forward exchange contracts:
To buy foreign currency:
U.S. dollar
To sell foreign currency:
U.S. dollar
Currency swap agreements:
U.S. dollars received for Japanese yen
Currency option contracts:
Buy: U.S. dollar call
Sell: U.S. dollar put
Buy: Euro dollar call
Sell: Euro dollar put(b) Available-for-sale securities sold during the year ended February 29, 2012:
Millions of yen

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

Carrying value(d) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2011 was ¥7,473 million.

4. Investments in Securities

Securities with unrealized gains:
Equity securities
Other
Total
Securities with unrealized losses:
Equity securities
Other
Total
Total

(2) Information as of and for the Year Ended February 28, 2011(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2011 are summarized as follows:

¥15
14
1

Thousands of U.S. dollars

$180
173
17

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

Contract or notional amounts

Millions of yen
Fair value

Valuation gain (loss)¥2,744¥ (354)¥ (354)

38

(1)

(1)

1,361

(173)

(173)

2,253
2,782
102
205
¥9,485

67
(538)
2
(17)
¥(1,014)

67
(538)
2
(17)
¥(1,014)

¥ 300
79
100
¥ 479

¥

¥

¥

4
(1)
(0)
3

¥

4
(1)
(0)
3

(c) Losses on impairment of available-for-sale securities recognized to reflect declines in market value considered to be other than
temporary were ¥29 million ($363 thousand) for the year ended February 29, 2012.
(d) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 29, 2012 was ¥8,918 million($110,530 thousand).

46

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

47

February 29, 2012

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

Contract or notional amounts

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

Valuation gain (loss)$ 34,004$ (4,385)$ (4,385)

474

(9)

(9)

16,867(2,152)(2,152)

27,92834,482
1,270
2,539$117,564

829(6,665)23(211)$(12,570)

829(6,665)23(211)$(12,570)

$

$

$

3,718
982
1,240
5,940

$

February 28, 2011

Thousands of U.S. dollars
Fair value

Contract or notional amounts

53
(12)
(7)
34

$

Millions of yen
Fair value

53
(12)
(7)
34

$

Valuation gain (loss)

February 28, 2011

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

¥ (422)(68)¥ (422)
(68)

572

(8)

(8)

2,347

(307)

(307)

2,622
3,358
148
296
¥14,443

94
(718)
3
(27)
¥(1,453)

94
(718)
3
(27)
¥(1,453)

¥

¥

¥

¥

300
536
100
936

¥

4
(7)
(4)
(7)

¥

4
(7)
(4)
(7)

Accounts payable
Accounts payable
Accounts payable

Millions of yen
Contract or notional amounts

¥189
758
13
¥960

7. Impairment Loss on Fixed Assets
For the years ended February 28, 2011 and February 29, 2012, the Company reviewed its long-lived assets for impairment and, as a result,recognized an impairment loss as follows:
February 29, 2012
Location

Usage

Business assets

Description

Millions of yen

Buildings and structures
Other intangible assets
Other

¥200
1
150

February 29, 2012

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

February 29, 2012

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

48

ONWARD HOLDINGS CO., LTD.

Hedged Items

Fair value

Accounts payable
Accounts payable
Accounts payable

¥ 695
1,355
72

¥ 33
3
6

Accounts receivable682¥2,804(20)¥ 22

Thousands of U.S. dollars
Contract or notional amounts

Fair value

Accounts payable
Accounts payable
Accounts payable$ 8,615
16,791
900

$ 413
32
71

Accounts receivable

8,451$34,757

(246)
$ 270

Hedged Items

Thousands of U.S. dollars$2,48418
1,860

February 28, 2011
Location

Usage

Tokyo metropolitan area and other

Business assets

Osaka Prefecture

Lease assets

Description

Millions of yen

Buildings and structures
Other intangible assets
Other
Land

¥264
426
230
17

The long-lived assets are basically grouped by brand, and assets for lease and idle assets are grouped individually by each item. The
Company has recognized a loss on impairment on assets for lease and idle assets due to a significant decline in their market value, andon business assets due to a continuous loss generated from their operating activities, by reducing their book value to the respective net
realizable value of each asset.
The impairment loss on long-lived assets for the years ended February 28, 2011 and February 29, 2012 consisted of the following:
February 28, 2011

Millions of yen
Contract or notional amounts

¥(7)
(2)
0
¥(9)

The Japanese tax regulations allow a company to defer capital gains on the sale of qualified real property, if the company intends to offset
such gains against the cost of newly acquired fixed assets. When such accounting is followed, the cost of the new fixed assets is reduced
to the extent of the deferred capital gains, thereby affecting related depreciation charges and accumulated depreciation.
Property, plant and equipment at February 28, 2011 and February 29, 2012 were reduced by ¥8,178 million and ¥8,127 million ($100,731
thousand), respectively, representing accumulated deferred gains from eligible sales.

Millions of yen(2) Derivative transactions processed by hedge accounting:Fair value

6. Property, Plant and Equipment

Tokyo metropolitan area and other¥ 3,276
1,824

Hedged Items

Buildings and structures
Other intangible assets
Other
Land
Total

¥264
426
230
17
¥937

February 29, 2012

¥200
2
150
—
¥352

Thousands of U.S. dollars
February 29, 2012

$2,48318
1,860—$4,361

The net realizable value for these assets is based on their net selling price or their value in use. The net selling price is estimated by using theirestimated disposal price. The value in use is calculated by discounting the future cash flow with 6.5% and 6.8% discount rates for the years ended
February 28, 2011 and February 29, 2012, respectively.

ONWARD HOLDINGS CO., LTD.

49

8. Retirement Plan and Retirement Benefits

10. Notes to Consolidated Statements of Cash Flows

The Company and its certain subsidiaries have defined benefit retirement plans covering substantially all employees. Defined benefit
retirement plans include a plan which is governed by the regulations of the Japanese Welfare Pension Insurance Law, tax-qualified pension
plans and plans for lump-sum retirement benefits.
The reserve for retirement benefits as of February 28, 2011 and February 29, 2012 is analyzed as follows:

Cash and cash equivalents at February 28, 2011 and February 29, 2012 consisted of the following:

Millions of yen

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

February 28, 2011

February 29, 2012

Thousands of U.S. dollars
February 29, 2012¥(37,616)
26,295(11,321)(38)
7,907(3,452)16¥ (3,468)¥(36,940)
25,642(11,298)
(451)
7,638
(4,111)12¥ (4,123)$(457,860)
317,823(140,037)(5,588)94,670(50,955)
142$ (51,097)

The net periodic pension expenses for the years ended February 28, 2011 and February 29, 2012 were as follows:
Millions of yen

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

2011

2012

¥1,611
509
(173)
(35)
1,242
¥3,154¥1,524
524
(160)
(57)
1,273
¥3,104

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

February 29, 2012

Thousands of U.S. dollars
February 29, 2012

¥30,939(2,305)¥28,634¥33,192(1,104)¥32,088$411,409(13,691)$397,718

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

11. Lease Transactions
Certain finance lease contracts that are not deemed to transfer the ownership of the leased assets to lessees are accounted for as
operating leases, which is still permitted by Japanese accounting principles. Certain key information on such lease contracts of theCompanies for the years ended February 28, 2011 and February 29, 2012 are as follows:(Lessee)
Assumed data as to acquisition cost, accumulated depreciation, accumulated impairment loss and net book value of the leased assets,
which included the portion of interest thereon, as of February 28, 2011 and February 29, 2012 are summarized as follows:
Millions of yen
Tools,
furniture,and fixtures

Other

Total

Tools,
furniture,and fixtures

Other

Total

Thousands of U.S. dollars
February 29, 2012
Tools,
furniture,and fixtures
Other
Total

¥ 889
(636)
(145)
¥ 108

¥ 528
(376)
—
¥ 152

¥ 1,417(1,012)
(145)
¥ 260

¥ 606
(505)
—
¥ 101

¥ 487
(389)
—
¥ 98

¥1,093
(894)
—
¥ 199

$ 7,508(6,262)—$ 1,246

February 28, 2011

Acquisition cost
Accumulated depreciation
Accumulated impairment loss
Net book value

February 29, 2012

$ 6,034(4,815)—$ 1,219$ 13,542(11,077)—$ 2,465

The scheduled maturities of future lease payments on such lease contracts as of February 28, 2011 and February 29, 2012 are as follows:

As of February 28, 2011

As of February 29, 2012

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

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

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

Millions of yen

Thousands of U.S. dollars
2012$18,892
6,497(1,990)(704)
15,773$38,468

February 28, 2011

9. Notes to Consolidated Statements of Comprehensive Income

Millions of yen
February 28, 2011

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

February 29, 2012

¥227
178
¥405

¥151
48
¥199

Thousands of U.S. dollars
February 29, 2012

$1,866599$2,465

Lease expenses, reversal of impairment loss of leased assets, depreciation and impairment loss for the years ended February 28, 2011
and February 29, 2012 are as follows:(1) Comprehensive income for the year ended February 28, 2011 consisted of the following:
Millions of yen

Comprehensive income attributable to:
Owners of the parent
Minority interests
Total

Millions of yen¥4,278704,348(2) Other comprehensive income for the year ended February 28, 2011 consisted of the following:
Millions of yen

Net unrealized gains on available-for-sale securities
Deferred gains on hedging instruments
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted for using the equity method
Total¥2,76736(1,190)
(109)
1,504

(Additional information)
The Company adopted the “Accounting Standard for Presentation of Comprehensive Income” (ASBJ Statement No. 25, June 30, 2010).
However, the amounts of “Accumulated other comprehensive income” and “Total accumulated other comprehensive income” for priorfiscal year are presented for the amounts of “Valuation and Translation Adjustments” and “Total Valuation and Translation Adjustments.”

February 28, 2011

Lease expenses for the year
Depreciation

February 29, 2012

¥380
380

¥212
212

Millions of yen
February 28, 2011

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

February 29, 2012

¥102
171
¥273

¥ 80
91
¥171

Thousands of U.S. dollars
February 29, 2012

$ 991
1,124
$2,115(Lessor)
The scheduled maturities of future lease income on such lease contracts as of February 28, 2011 and February 29, 2012 are as follows:
Millions of yen

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

ONWARD HOLDINGS CO., LTD.

$2,633
2,633

The Companies’ operating lease contracts:
The scheduled maturities of future lease payments on operating lease contracts as of February 28, 2011 and February 29, 2012 are as
follows:

February 28, 201150

Thousands of U.S. dollars
February 29, 2012

¥33
23
¥56

February 29, 2012

¥20
3
¥23

Thousands of U.S. dollars
February 29, 2012

$252
33
$285

ONWARD HOLDINGS CO., LTD.

51

12. Income Taxes

13. Revaluation of Land

The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities as at February 28,
2011 and February 29, 2012 consisted of the following elements:

On February 28, 2002, the Company revaluated its land for business use at market value as a result of the application of the Land
Revaluation Law, which permits a one-time revaluation of land for business use.
As of February 29, 2012, the net accumulated revaluation loss amounted to ¥12,503 million ($154,965 thousand), which is presented asa separate component of net assets as “Net revaluation loss of land.” Related deferred tax liabilities of ¥3,966 million ($49,162 thousand)is recognized.
As of February 28, 2011, the net accumulated revaluation loss amounted to ¥11,004 million, which is presented as a separate
component of net assets as “Net revaluation loss of land.” Related deferred tax liabilities of ¥5,942 million is recognized.
The difference between the market value of land subject to the revaluation and the book value was ¥2,660 million ($32,965 thousand) as
at February 29, 2012.

Millions of yen
February 29, 2012

Thousands of U.S. dollars
February 29, 2012

2,201
173
647
3,664
57
1,087
10,187
7,257
742
38
3,688
29,741(18,804)
10,937¥2,015
141
515
3,494
54
1,040
8,519
6,372
397
694
4,880
28,121(18,473)
9,648$24,980
1,745
6,390
43,311667
12,885105,592
78,976
4,923
8,599
60,482
348,550(228,961)
119,589

(161)

(141)

(1,753)(20)(1,335)(1,516)¥ 9,421(18)(1,386)(1,545)¥8,103(219)(17,178)(19,150)$100,439

February 28, 2011

Deferred tax assets:
Valuation loss on inventories
Evaluation loss on investments in unconsolidated subsidiaries
Accrued bonuses to employees
Accrued retirement benefits
Accrued retirement benefits for directors and corporate auditors
Allowance for bad debt
Tax loss carryforwards
Impairment loss
Investments in securities
Net unrealized gains on available-for-sale securities
Other
Subtotal
Less: Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Gain on securities contributed to an employee retirement
benefit trust
Provision for deferred capital gains on real property fortax purposes
Other
Total deferred tax liabilities
Net deferred tax assets¥

14. Commitments and Contingent Liabilities
The Company was contingently liable as a guarantor for certain affiliates’ bank loans. The outstanding balance of such bank loans
guaranteed as at February 28, 2011 and February 29, 2012 aggregated to ¥23 million and ¥22 million ($272 thousand), respectively.

15. Short-Term Loans payable and Long-Term Loans payable
Short-term loans payable at February 28, 2011 and February 29, 2012 represented loans, principally from banks. The weighted-averageinterest rate on these loans was 1.2% in 2011 and 1.3% in 2012.
Long-term loans payable at February 28, 2011 and February 29, 2012 are summarized as follows:
Millions of yen

Unsecured loans, principally from banks, maturing in installments through2016 with weighted average interest of 1.1% at February 29, 2012
Less current portion

The reconciliation of the difference between the statutory tax rate and the effective tax rate for the years ended February 28, 2011 andFebruary 29, 2012 is as follows:
2011

ONWARD HOLDINGS CO., LTD.

Thousands of U.S. dollars
February 29, 2012

¥25,832
3,534¥22,298¥23,079
3,439¥19,640$286,056
42,620$243,436

February 28, 2011

February 29, 2012

Thousands of U.S. dollars
February 29, 2012

¥1,016304¥ 712¥1,332458¥ 874$16,512
5,680$10,832

2012

40.7

40.7

3.9
(1.0)
12.3
—
10.9
66.8

3.2
(1.4)
9.6
5.5
9.7
67.3

Following the promulgation of the “Act for Partial Amendment of the Income Tax Act, etc. for the Purpose of Creating a Taxation System
Responding to Changes in Economic and Social Structures” (Act No. 114, 2011) and the “Act on Special Measures for Securing Financial
Resources Necessary to Implement Measures for Reconstruction following the Great East Japan Earthquake” (Act No. 117, 2011) on
December 2, 2011, the corporate income tax rate will be lowered and special restoration corporation tax will be imposed from the fiscal
years beginning on and after April 1, 2012. In conjunction with these changes, the effective statutory tax rate used to measure deferred
tax assets and deferred tax liabilities will change for the temporary differences expected to be resolved from the fiscal year beginning on
March 1, 2013 to the fiscal year beginning on March 1, 2015, and for the temporary differences expected to be resolved from the fiscal
year beginning on March 1, 2016, from the former 40.7% to 38.0% and 35.6%, respectively. As a result of the changes in the statutory
tax rate, deferred tax assets (less the amount of deferred tax liabilities) has decreased by ¥612 million ($7,591 thousand), and the income
taxes-deferred (debit) has increased by ¥612 million ($7,591 thousand). In addition, deferred tax liabilities related to revaluation of land has
decreased by ¥562 million ($6,970 thousand), and net revaluation loss of land has increased by the same amount.

52

February 29, 2012

Lease obligations at February 28, 2011 and February 29, 2012 are summarized as follows:%

Statutory tax rate
Reconciliation:
Non-deductible items (entertainment expenses, etc.)
Income not credited for tax purposes (dividends received, etc.)
Goodwill and amortization
Effect of tax rate changes
Other
Effective tax rate

February 28, 2011

Millions of yen

Lease obligations
Less current portion of lease obligations

The aggregate annual maturities of long-term loans payable after February 28, 2013 are as follows:Year ending February 28 or 29:
2014
2015
2016
2017

Millions of yen

Thousands of U.S. dollars¥18,91695
112
517$234,462
1,176
1,394
6,404

Millions of yen

Thousands of U.S. dollars

The aggregate annual maturities of lease obligations after February 28, 2013 are as follows:Year ending February 28 or 29:
2014
2015
2016
2017

¥417
277
145
33

$5,171
3,435
1,793
408

ONWARD HOLDINGS CO., LTD.

53

18. Related-Party Transactions

Bonds at February 28, 2011 and February 29, 2012 are summarized as follows:
Millions of yen
February 28, 2011

1.73% unsecured yen bonds issued by a subsidiary, due 2012
1.08% unsecured yen bonds issued by a subsidiary, due 2011
0.56% unsecured yen bonds issued by a subsidiary, due 2013
0.82% unsecured yen bonds issued by a subsidiary, due 2012
0.72% unsecured yen bonds issued by a subsidiary, due 2012
0.90% unsecured yen bonds issued by a subsidiary, due 2014
Less current portion

February 29, 2012

¥150
25
50
67
66
160
518
151
¥367

¥150
—
30
34
33
120
367
277
¥ 90

Thousands of U.S. dollars
February 29, 2012

$1,859
—
372
421
412
1,487
4,551
3,436
$1,115

Millions of yen

Year ending February 28 or 29:
2014
2015
2016
2017

¥50
40
—
—

Thousands of U.S. dollars

$620
496
—
—

16. Shareholders’ Equity
Under the Corporation Law of Japan, the entire amount of the issue price of shares is required to be designated as a stated common stock
account, although a company in Japan may, by resolution of its Board of Directors, account for an amount not exceeding 50% of the issue
price of new shares as additional paid-in capital.
The Corporation Law of Japan provides that an amount equal to 10% of distributions from retained earnings paid by the Company
and its Japanese subsidiaries be appropriated as a legal reserve. No further appropriations are required when the total amount of theadditional paid-in capital and the legal reserve equals 25% of their respective stated capital. The Corporation Law of Japan also provides
that additional paid-in capital and the legal reserve are available for appropriations by a resolution of the shareholders. Balances of the legal
reserve are included in retained earnings in the accompanying consolidated balance sheets.
Cash dividends charged to retained earnings for the years ended February 28, 2011 and February 29, 2012 represent dividends paidout during those years. The amount available for dividends is based on the amount recorded in the Company’s non-consolidated books ofaccount in accordance with the Corporation Law of Japan.
Dividends to be paid after the balance sheet date, which were approved by the general meeting of shareholders held on May 24, 2012,
are as follows:(a) Total dividends(b) Source of dividends(c) Cash dividends per common share(d) Date to determine which shareholders receive the dividends(e) Effective date

¥3,762 million ($46,631 thousand)
Retained earnings¥24 ($0.30)
February 29, 2012
May 25, 2012

17. Per Share Information
Net income per share of common stock is computed based upon the weighted-average number of shares of common stock outstanding
during each year. Cash dividends per share shown for each year in the accompanying consolidated statements of operations represent
dividends declared as applicable to the respective years rather than those paid during the years.
The basis for the calculation of basic and diluted net income per share for the years ended February 28, 2011 and February 29, 2012 isas follows:
Millions of yen

54

ONWARD HOLDINGS CO., LTD.

Year Ended February 28, 2011
The Company leased land from Takeshi Hirouchi, Chairman and CEO of ONWARD HOLDINGS Co., Ltd., during the year and the rental
fee was ¥7 million. Also, Mr. Hirouchi paid a rental fee of ¥16 million to the Company for a house. The rental fees were determined by theaverage market prices.

19. Stock Options

The aggregate annual maturities of bonds after February 28, 2013 are as follows:

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

Year Ended February 29, 2012
The Company leased land from Takeshi Hirouchi, Representative Director, Chairman and President of ONWARD HOLDINGS Co., Ltd.,during the year and the rental fee was ¥7 million ($90 thousand). Also, Mr. Hirouchi paid a rental fee of ¥16 million ($202 thousand) to theCompany for a house. The rental fees were determined by the average market prices.

2011

2012

¥2,723—¥2,723
156,680892¥3,529—¥3,529156,715
1,178

Thousands of U.S. dollars
2012$43,743—$43,743

The cost recognized for the stock options for the years ended February 28, 2011 and February 29, 2012 was ¥162 million and ¥162 million($2,007 thousand), respectively, which is included in selling, general and administrative expenses.

2011 Stock Option Plan (No. 10)
Under the 2011 stock option plan (No. 10), stock options were granted to 5 directors of the Company on June 20, 2011. They are
exercisable in the period from June 21, 2011 to June 20, 2041. The terms of the options include certain limitations on the exercisability
under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors of theCompany.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥510 ($6.32)
144,800 shares

A summary of the scale and movement of the stock option plan for the year ended February 29, 2012 is as follows:2011 stock option plan (No. 10)

Non-vested:
Outstanding at February 28, 2011
GrantedForfeited
VestedOutstanding at February 29, 2012—
144,800——
144,800

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

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

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

2011 Stock Option Plan (No. 9)
Under the 2011 stock option plan (No. 9), stock options were granted to 1 executive officer of the Company, 12 directors and 18 executive
officers of the Company’s subsidiary on March 18, 2011. They are exercisable in the period from March 19, 2011 to February 28, 2041.
The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year
period starting a year after they lose their positions as executive officer of the Company, directors or executive officers of the Company’s
subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥604 ($7.49)¥444 ($5.50)
199,900 shares

ONWARD HOLDINGS CO., LTD.

55

A summary of the scale and movement of the stock option plan for the year ended February 29, 2012 is as follows:2011 stock option plan (No. 9)

Non-vested:
Outstanding at February 28, 2011
GrantedForfeited
VestedOutstanding at February 29, 2012
Vested:Outstanding at February 28, 2011
VestedExercised
Forfeited
Outstanding at February 29, 2012—
199,900
9,300
9,100
181,500
—
9,100
9,100
—
—

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

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

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

2010 Stock Option Plan (No. 8)
Under the 2010 stock option plan (No. 8), stock options were granted to 5 directors of the Company on June 18, 2010. They are
exercisable in the period from June 19, 2010 to June 18, 2040. The terms of the options include certain limitations on the exercisability
under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors of theCompany.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥613 ($7.60)
115,800 shares

A summary of the scale and movement of the stock option plan for the year ended February 29, 2012 is as follows:2010 stock option plan (No. 8)

Non-vested:
Outstanding at February 28, 2011
GrantedForfeited
VestedOutstanding at February 29, 2012

113,100———
113,100

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

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

2010 Stock Option Plan (No. 7)
Under the 2010 stock option plan (No. 7), stock options were granted to 8 directors and 22 executive officers of the Company’s subsidiaryon March 19, 2010. They are exercisable in the period from March 20, 2010 to February 29, 2040. The terms of the options include certain
limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose theirpositions as directors or executive officers of the Company’s subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥604 ($7.49)¥475 ($5.89)
194,600 shares

A summary of the scale and movement of the stock option plan for the year ended February 29, 2012 is as follows:2010 stock option plan (No. 7)

Non-vested:
Outstanding at February 28, 2011
GrantedForfeited
VestedOutstanding at February 29, 2012
Vested:Outstanding at February 28, 2011
VestedExercised
Forfeited
Outstanding at February 29, 2012

191,700——
10,200181,500—
10,200
9,200
—
1,000

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

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

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

2009 Stock Option Plan (No. 6)
Under the 2009 stock option plan (No. 6), stock options were granted to 5 directors of the Company on June 19, 2009. They are
exercisable in the period from June 20, 2009 to June 19, 2039. The terms of the options include certain limitations on the exercisability
under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors of theCompany.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥432 ($5.35)
155,000 shares

A summary of the scale and movement of the stock option plan for the year ended February 29, 2012 is as follows:2009 stock option plan (No. 6)

Non-vested:
Outstanding at February 28, 2011
GrantedForfeited
VestedOutstanding at February 29, 2012

155,000———
155,000

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

56

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

57

2009 Stock Option Plan (No. 5)
Under the 2009 stock option plan (No. 5), stock options were granted to 11 directors and 19 executive officers of the Company’s subsidiaryon March 18, 2009. They are exercisable in the period from March 19, 2009 to February 28, 2039. The terms of the options include certain
limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose theirpositions as directors or executive officers of the Company’s subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥598 ($7.41)¥362 ($4.49)
268,900 shares2008 Stock Option Plan (No. 3)
Under the 2008 stock option plan (No. 3), stock options were granted to 5 directors of the Company on June 20, 2008. They are
exercisable in the period from June 21, 2008 to June 20, 2038. The terms of the options include certain limitations on the exercisability
under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors of theCompany.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥944 ($11.70)
70,000 shares

A summary of the scale and movement of the stock option plan for the year ended February 29, 2012 is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 29, 2012 is as follows:2008 stock option plan (No. 3)
2009 stock option plan (No. 5)

Non-vested:
Outstanding at February 28, 2011
GrantedForfeited
VestedOutstanding at February 29, 2012
Vested:Outstanding at February 28, 2011
VestedExercised
Forfeited
Outstanding at February 29, 2012

256,900——
59,600
197,300
3,000
59,60047,800—14,800The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it isdifficult to estimate forfeiture in the future.

2008 Stock Option Plan (No. 4)
Under the 2008 stock option plan (No. 4), stock options were granted to 12 directors and 21 executive officers of the Company’s subsidiaryon 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 theirpositions as directors or executive officers of the Company’s subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥598 ($7.41)¥905 ($11.22)
91,100 shares

Non-vested:
Outstanding at February 28, 2011
GrantedForfeited
VestedOutstanding at February 29, 2012
Vested:Outstanding at February 28, 2011
VestedExercised
Forfeited
Outstanding at February 29, 20122007 Stock Option Plan (No. 2)
Under the 2007 stock option plan (No. 2), stock options were granted to 5 directors and 2 corporate auditors of the Company on July 20,
2007. They are exercisable in the period from July 21, 2007 to July 20, 2037. The terms of the options include certain limitations on theexercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as
directors or corporate auditors.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted

67,100——17,20049,9005,000
17,20010,300—11,900The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it isdifficult to estimate forfeiture in the future.

ONWARD HOLDINGS CO., LTD.

¥1 ($0.01)¥1,284 ($15.91)
40,000 shares

A summary of the scale and movement of the stock option plan for the year ended February 29, 2012 is as follows:2007 stock option plan (No. 2)

2008 stock option plan (No. 4)

58

3,800
—
—
—
3,800

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

A summary of the scale and movement of the stock option plan for the year ended February 29, 2012 is as follows:
Non-vested:
Outstanding at February 28, 2011
GrantedForfeited
VestedOutstanding at February 29, 2012
Vested:Outstanding at February 28, 2011
VestedExercised
Forfeited
Outstanding at February 29, 2012

65,000———65,000Non-vested:
Outstanding at February 28, 2011
GrantedForfeited
VestedOutstanding at February 29, 2012
Vested:Outstanding at February 28, 2011
VestedExercised
Forfeited
Outstanding at February 29, 2012

23,300———23,300
4,700
—
—
—
4,700

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

ONWARD HOLDINGS CO., LTD.

59

2006 Stock Option Plan (No. 1)
Under the 2006 stock option plan (No. 1), stock options were granted to 12 directors and 2 corporate auditors of the Company on June20, 2006. They are exercisable in the period from July 1, 2006 to June 30, 2036. The terms of the options include certain limitations on
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.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥613 ($7.60)¥1,541 ($19.10)
63,000 shares

A summary of the scale and movement of the stock option plan for the year ended February 29, 2012 is as follows:
2006 stock option plan (No. 1)

Non-vested:
Outstanding at February 28, 2011
GrantedForfeited
VestedOutstanding at February 29, 2012
Vested:Outstanding at February 28, 2011
VestedExercised
Forfeited
Outstanding at February 29, 2012

20,000———20,00020,500—1,000—
19,500The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it isdifficult to estimate forfeiture in the future.

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

(3) Information on sales, profit or loss, assets, liabilities and other items by reportable segment for the years ended February 29, 2012 andFebruary 28, 2011 are as follows:
Millions of yen

For the year ended
February 29, 2012
Japan

Sale to outside customers
Intersegment sales
Total
Segment income
Segment assets
Depreciation and amortization (Note 2)
Investments in equity-method affiliates
Capital expenditures (Note 2)¥189,112
1,880¥190,992¥ 13,271¥127,481¥ 3,500
8,464
3,699

¥31,879397¥32,276¥ 944¥23,550
¥ 759
12
1,209

¥6,541
212¥6,753¥ 88¥4,249
¥ 204
—
339

Total

¥227,532
2,489¥230,021¥ 14,303¥155,280¥ 4,463
8,476
5,247

Other

¥14,8706,702¥21,572¥ 131¥30,574
¥ 604
10
896

Total

¥242,402
9,191¥251,593¥ 14,434¥185,854¥ 5,067
8,486
6,143

Adjustments(Note 1)

Consolidated
total(Note 3)

¥—(9,191)¥(9,191)¥(3,480)¥91,085¥ 411—
87¥242,402—¥242,402¥ 10,954¥276,939¥ 5,478
8,486
6,230

Thousands of U.S. dollars

For the year ended
February 29, 2012
Japan

Sale to outside customers
Intersegment sales
Total
Segment income
Segment assets
Depreciation and amortization (Note 2)
Investments in equity-method affiliates
Capital expenditures (Note 2)

ApparelAsia/North
EuropeAmerica$2,343,979
23,303$2,367,282$ 164,482$1,580,084$ 43,383
104,90345,843

ApparelAsia/North
EuropeAmerica$395,130
4,920$400,050$ 11,704$291,894$ 9,404152
14,989$81,071
2,622$83,693$ 1,089$52,659$ 2,533
—
4,199

Total

Other

Total

Adjustments(Note 1)

Consolidated
total(Note 3)$2,820,180
30,845$2,851,025$ 177,275$1,924,637$ 55,320
105,055
65,031$184,307
83,074$267,381$ 1,629$378,960$ 7,482
126
11,112$3,004,487
113,919$3,118,406$ 178,904$2,303,597$ 62,802
105,181
76,143$—(113,919)$(113,919)$(43,136)$1,128,969$5,097—
1,080$3,004,487—$3,004,487$ 135,768$3,432,566$ 67,899
105,181
77,223(Notes) 1. Adjustments consist of the following:(1)	The adjustment amount for segment income of ¥(3,480) million includes amortization of goodwill of ¥(3,664) million, elimination ofintersegment sales of ¥3,847 million, and corporate expenses not allocated to reportable segments of ¥(3,663) million. Corporate expenses
are mainly general administrative expenses not allocated to reportable segments.
(2)	The adjustment amount for segment assets of ¥ 91,085 million includes the unamortized balance of goodwill of ¥40,794 million, eliminationof intersegment sales of ¥(133,464) million, and corporate assets not allocated to reportable segments of ¥183,755 million. Corporate assets
are mainly assets held by the Company, a 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 coincides with the amount of operating income in the Consolidated Statements of Operations.
Millions of yen

For the year ended
February 28, 2011
Japan

Sale to outside customers
Intersegment sales
Total
Segment income
Segment assets
Depreciation and amortization (Note 2)
Investments in equity-method affiliates
Capital expenditures (Note 2)¥193,480
1,690¥195,170¥ 11,911¥123,870¥ 3,495
7,041
3,247

ApparelAsia/North
EuropeAmerica¥30,360
353¥30,713¥ 128¥21,914
¥ 866
17
705

¥5,899186¥6,084¥ 228¥3,786
¥ 182
—
318

Total

¥229,739
2,229¥231,967¥ 12,267¥149,570¥ 4,543
7,058
4,270

Other

¥14,812
6,982¥21,794¥41¥30,295
¥ 552
8
626

Total

¥244,551
9,211¥253,761¥ 12,308¥179,865¥ 5,095
7,066
4,896

Adjustments(Note 1)

Consolidated
total(Note 3)

¥—
(9,210)¥(9,210)¥(3,380)¥101,777
¥547
—
512

¥244,551—¥244,551¥ 8,929¥281,642¥ 5,642
7,066
5,408

(Notes) 1. Adjustments consist of the following:(1)	The adjustment amount for segment income of ¥(3,380) million includes amortization of goodwill of ¥(3,638) million, elimination ofintersegment sales of ¥3,976 million, and corporate expenses not allocated to reportable segments of ¥(3,719) million. Corporate expenses
are mainly general administrative expenses not allocated to reportable segments.
(2)	The adjustment amount for segment assets of ¥ 101,777 million includes the unamortized balance of goodwill of ¥43,732 million, eliminationof intersegment sales of ¥(131,528) million, and corporate assets not allocated to reportable segments of ¥189,574 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 coincides with the amount of operating income in the Consolidated Statements of Operations.

(Additional information)
Effective from the year ended February 29, 2012, the Company has adopted the “Accounting Standard for Disclosures about Segmentsof an Enterprise and Related Information” (ASBJ Statement No. 17, March 27, 2009) and the “Guidance on Accounting Standard forDisclosures about Segments of an Enterprise and Related Information” (ASBJ Guidance No. 20, March 21, 2008).

60

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

61

(4) Segment information by geographical areas for the year ended February 29, 2012 is as follows:(a) Sales
Millions of yen
Japan

Europe

Other

Total

¥204,656¥19,635¥18,111¥242,402

Japan

Europe

Other

Total

$2,536,633$243,372$224,482$3,004,487

Thousands of U.S. dollars(b) Property, plant and equipment
Millions of yen
Japan

EuropeOther¥68,753¥6,777¥7,458

Total

Japan

Europe

Other

Total

$852,168$84,003$92,433$1,028,604¥82,988

Thousands of U.S. dollars(5) Segment information on impairment losses on property, plant and equipment by reportable segment for the year ended February 29,
2012 is as follows:
Millions of yen
ApparelJapan

Impairment loss

¥351

Asia/North
America

Europe

¥—

¥1

Total

¥352

Other

¥—

Elimination ofintersegment
amounts

¥—

Total

¥352

Thousands of U.S. dollars
ApparelJapan

Impairment loss

62

ONWARD HOLDINGS CO., LTD.

$4,349Europe$—Asia/North
America

$12

Total

$4,361Other$—

Elimination ofintersegment
amounts$—

Total$4,361

ONWARD HOLDINGS CO., LTD.

63

Percentage ofTotal Shares Issued

64

ONWARD HOLDINGS CO., LTD.

Kashiyama Scholarship Foundation

5.5 %Japan Trustee Services Bank, Ltd. (Trust account)

4.3 %The Master Trust Bank of Japan, Ltd. (Trust account)

4.2 %Nippon Life Insurance Company

3.9 %Isetan Mitsukoshi, Ltd.

3.1 %The Dai-ichi Mutual Life Insurance Company Ltd.

2.6 %Japan Trustee Services Bank, Ltd. (Trust account nine)

2.6 %MARUI GROUP CO., LTD.

2.1 %HSBC BANK PLC - CLIENTS UK TAX TREATY

1.9 %Onward Holdings Customers’ Shareholding Association

1.9 %ONWARD HOLDINGS CO., LTD.

65

66

ONWARD HOLDINGS CO., LTD.

ONWARD HOLDINGS CO., LTD.

67