Profile
Proposing “Fashions” That Become an Integral Partof All Aspects of Our Living Culture
The Onward Group has defined its business domain as“a world of fashion that gives refreshment and beauty toContents

people’s lives.” The corporate philosophy of the Onward
Group is to create new value and lifestyles by proposing

01

Financial Highlights

02

A Message to Our Shareholders

05	Strategy for the Apparel Business06	Domestic Apparel-Related Business08	Overseas Apparel-Related Businesses
11	Corporate Social Responsibility (CSR)
14

Corporate Governance

15

Board of Directors

15

Organization Chart

16

Consolidated Six-Year Summary“fashions” that become an integral part of our living culture and, thereby, contribute to the enrichment of life forall people. The Onward Group is constantly seeking toincrease customer satisfaction and aims to be a corporategroup that satisfies all its stakeholders.

17	Management’s Discussion and Analysis

A Leading Company in the Apparel Industry

20

The Onward Group comprises 103 companies in Japan

Consolidated Balance Sheets

22	Consolidated Statements of Operations
23	Consolidated Statements of Changes in
Net Assets
25	Consolidated Statements of Cash Flows27	Notes to Consolidated Financial
Statements
49	Report of Independent Auditors
50

Principal Subsidiaries

51

Corporate Data

Future business plans, targets, and related
numerical figures p­ re­sented in this annual
report are intended to give an accurate­picture of Onward’s future prospects.
However, no guarantee can be offered thatplans, targets, and other numerical figuresdescribed herein can be realized. The
achievement of stated targets is dependent
not only on the efforts of the Company but
also the conditions facing the industry as awhole, and we ask f­or under­standing in thisregard.

and the rest of the world.* Its principal businesses are
the planning, production, and sales of textile products,
including men’s and women’s fashions. The Group’s
activities also include services and resort businesses.
Since its establishment in 1947, Onward** has been
a top apparel manufacturer in Japan and has played aleading role in the fashion industry. In May 2005, the
JOSEPH Group and, in October 2008, the JIL SANDER
Group became consolidated subsidiaries of ONWARD
HOLDINGS CO., LTD. Through collaboration with the
GIBO’ CO. Group, Onward is positioned to implementa more-global strategy. Looking ahead, Onward will aim
for further global growth by working to achieve stable
growth in net sales and net income in its activities inJapan and by aggressively expanding its overseas business operations.
* As of February 28, 2010** In September 2007, the Onward Group made the transition to a holding company
structure to strengthen its competitiveness and implement a growth strategy. At thattime, the name of the Group’s core company, ONWARD KASHIYAMA CO., LTD.,
was changed to ONWARD HOLDINGS CO., LTD.

Financial Highlights

ONWARD HOLDINGS CO., LTD. and Subsidiaries
Years ended February 28, 2009 and 2010
		Millions of yen

Thousands of
U.S. dollars

2009

2010

2010

At year-end:
Total current assets
Total current liabilities
Short-term loans
Total shareholders’ equity¥ 98,946
92,36928,252
178,023¥100,680
90,92931,881
175,450$1,125,797
1,016,762
356,491
1,961,870

For the year:
Net sales
Operating income
Net income (loss)¥261,006
9,084(30,895)¥248,635
4,384
2,188

$2,780,219
49,022
24,466Yen

Per share:
Net income (loss)—basic
Cash dividends
ROE (%)
Operating income margin (%)

U.S. dollars¥(197.21)
30.0¥13.9724.00(17.6)
3.5

1.4
1.8

$0.16
0.27

Note: Yen amounts have been translated, for convenience only, at ¥89.43=US$1, the approximate exchange rate on February 28, 2010.

Net Sales

Net Income (Loss)

Total Shareholders’ Equity(Millions of yen)
Years ended February 28 or 29(Millions of yen)
Years ended February 28 or 29(Millions of yen)
At February 28 or 29

350,000

15,000240,000

12,000200,000

9,000

160,000

6,000

120,000

3,000

80,000040,000300,000
250,000
200,000
150,000
100,000
50,0000’06 ’07 ’08 ’09 ’10-60,000’06 ’07 ’08 ’09 ’10

0’06 ’07 ’08 ’09 ’10

ONWARD HOLDINGS CO., LTD.

01

A Message to Our Shareholders
apparel industry were difficult. Reasons for this included thegrowing need among consumers to maintain their lifestyles,
which led, in turn, to more-intense price competition among
apparel companies. In the Onward Group, we worked toincrease the efficiency of our operations and aggressively
pursued measures to strengthen our capabilities for developing and offering products that have the right balance of value
and price from the customers’ perspective. We also implemented policies with an eye to future growth, including­stepping up our M&A activities to expand the scope of theGroup’s business operations and making a full-scale entry
into the e-commerce market.

Implementing Brand-Leveraged Management
and Creating Brand Value
In Japan’s apparel market, while there is a trend toward lower-priced, so-called “fast fashion” apparel, high-quality apparel products that offer the right balance of value and price are

Takeshi Hirouchi

continuing to receive strong acceptance and support in the

Chairmanmarket. We believe that our mission is to enhance the valueof products and respond to the needs of Japan’s mature consumers who have well-developed sensitivities to fashion andare seeking high-quality products.

The Onward Group is aiming to increase
net sales and net income through stable
growth in its activities in Japan andaggressive expansion of its overseas
business operations.

The current fiscal year will be the final year of the Onward
Group’s Three-Year Medium-Term Management Plan (covering the period from the year ended February 2009 throughthe year ending February 2011). However, as a result of theeffects of major changes in the world economy following thecollapse of Lehman Brothers, we are not expecting to attain

Performance in Fiscal 2010

the plan’s numerical goals. Nevertheless, in the midst of aDuring the fiscal year ended February 28, 2010, consolidated

tough economic environment, many of the initiatives we

net sales amounted to ¥248,635 million, 4.7% lower than forundertook to attain new growth are beginning to take effect.

the previous fiscal year, and consolidated operating income

Going forward also, we will implement the policies of ourwas ¥4,384 million, 51.7% lower than for the prior year. The

Medium-Term Management Plan that call for us to create

Group reported consolidated net income of ¥2,188 million,

brand value by implementing Brand-Leveraged Management

which represented an improvement of ¥33,083 million from

and, thereby, strive to achieve stable growth in net sales andthe net loss reported in the previous fiscal year.

net income in Japan and aggressively expand our overseas

During the fiscal year under review, economic conditions
continued to be stagnant, and operating conditions in the02

Annual Report 2010

business operations.

Developing and Offering the Right Balance ofValue and Price from the Consumers’ Perspective
The Onward Group conducts its business activities under its
corporate philosophy of contributing to the enrichment oflifestyles by proposing fashions that become part of our living culture. To continue to be a leading company in our
industry, we believe that our mission is “to create good products” and aim for quality that always satisfies our customers.
Onward quality is a product of the time, effort, and concernthat go into the making of an excellent piece of apparel, commencing with active engagement in the creation of materials
in the product design stage. Making clothing that customers
really want to wear, that they will buy, and that they will besatisfied with is Onward’s core competence as a ­company.
For example, in developing our “AIR JACKET,” which welaunched full-scale in April 2010, we made the judgment that
consumers wanted a jacket that combined the feel of casual
wear with a tailor-made look. We drew on Onward’s original

Kentaro Mizuno

know-how, and, working in cooperation with material manu-

President

facturers and sewing plants, we crafted a completely new
jacket that did not exist previously in the market. We implemented a simultaneous promotional campaign across differ-over their full life cycles.” Based on this idea, in September

ent brand lines, and the “AIR JACKET” appealed strongly to

2009, ONWARD HOLDINGS began its Onward Green

consumers because it is fashionable, is easy to wear, and has

Campaign. Prior to the campaign, Onward created a systemother outstanding qualities.

for accepting in department stores the used Onward apparelWe cannot gain the support of customers unless we create
items that are differentiated from existing products and offer
something that no other company has offered before. We
intend to continue to develop such items that offer new value
because they are based on cutting-edge technology, embody
the latest fashions, and are made to the most-exacting­standards.

that customers have purchased in the past but no longer
need. Under this system, to the greatest extent possible, theitems collected are then recycled or arrangements are madefor their reuse.
During the fiscal year ended February 2010, we accepted
130,649 items of apparel from 25,608 customers, and 61% of
these were recycled and the remaining 39% were reused.

As an Apparel Manufacturer,
We Will Be Responsible for Our Products
over Their Full Life Cycles.

Items that were recycled were reprocessed to make 3,000

As part of the environmental management activities of theworld and used in Onward’s other environmental and com-

Onward Group, ONWARD KASHIYAMA, as the core compa-

munity-related activities. During fiscal 2011, ending February

ny in domestic business activities, believes that “as an apparel2011, we are planning to conduct this campaign twice andmanufacturer, we should be responsible for our products

expect to collect about 200,000 apparel items.

blankets and 54,500 pairs of work gloves. These blankets andgloves were then distributed to refugee camps around the

ONWARD HOLDINGS CO., LTD.

03

Looking to the Next 10 Years, Starting a Periodof New Growth

and the operating environment, we have set the cash

Fiscal 2011 will mark the start of a new period of growth forlower than in the previous fiscal year.

the Onward Group. Many of the policies and measures wehave implemented are expected to show results, and weshould see major business opportunities emerging.
A priority policy in our operations in Japan will be to
improve profitability and secure stable earnings. We will takeup the challenge of developing new distribution channels by
expanding aggressively into urban fashion shopping centers
and undertaking full-scale e-commerce business. At the sametime, in our overseas business activities, we will step up ourentry into Southeast Asia and will aim to increase the asset
value of companies we have acquired by expanding theirsales and income.
In Europe, which is the focus of our overseas businessactivities, we have been successful in developing a production platform for the JIL SANDER Group and the JOSEPHGroup that makes use of the GIBO’ CO. Group’s infrastructure. This production structure realizes powerful synergies
and will enable us to create a new business model. In June­dividend for the year at ¥24 per share, which is ¥6 per share

For the fiscal year ending February 2011, we are targeting
consolidated net sales of ¥250.0 billion, an increase of 0.5%
year on year; operating income of ¥6.6 billion, an increase of
50.5%; and net income of ¥3.5 billion, an increase of 60.0%.
Almost all major core brands are expected to show positive
growth in sales, and the Onward Group as a whole is expected to report an increase in income. In addition, we plan toresume capital investment, which we have been restraining,and have adopted a policy of making investments where necessary. Please note that we are scheduled to release a new
medium-term management plan during the current fiscal
year, which ends in February 2011.
The Onward Group will continue its drive to create andoffer a new affluence to its customers, implement measures
to increase efficiency and attain growth, and increase corporate value and shareholder value. We wish to express ourthanks to you, our shareholders, for your continued understanding and support.

2010, the JIL SANDER brand announced the JIL SANDER
NAVY lineup of casual luxury items, which is an extension toits main brand lineup. This will be an important strategic step

May 2010

for further developing the JIL SANDER business and will
make it possible to approach new customer segments
through offerings in new price ranges.
Along with these initiatives, we are preparing to split off

Takeshi Hirouchi
Chairmana portion of the existing International Operations Business
Department to form the Asian Business Group, which will
focus on expanding our business activities in Asia.

Kentaro Mizuno
President

Contributing to Enriched Lifestyles
Onward positions the allocation of a portion of profits toshareholders as one of its most-important priorities. Our basic
policy is to set a target dividend payout ratio of 35% or more
and to make stable and appropriate distributions of profits,
taking account of our performance. For the fiscal year ended
February 2010, after giving full consideration to performance

04

Annual Report 2010

Strategy for the Apparel Business
Becoming a Truly Global Corporation,
Leading the Fashion Industry

Domestic Apparel-Related Business
E Improve profitability and aim for stable profitability
E Take up the challenge of new distribution (throughurban fashion shopping centers, e-commerce, andother channels)

Overseas Apparel-Related BusinessE Improve the profitability of companies acquired
through M&A, expand sales, and develop business
operations in Southeast Asia

Net Sales(Actual in Fiscal 2010 and Plans for Fiscal 2011)
Actual in Fiscal 2010*

Plans for Fiscal 2011¥262.0 billion¥262.8 billion

Domestic¥216.5 billion¥216.7 billion

Overseas¥45.4 billion¥46.1 billion

Europe¥37.1 billion¥36.8 billion

Asia (excl. Japan)¥5.4 billion¥6.3 billion

Americas¥3.0 billion¥3.0 billion

Total*Simple total (before eliminations)

ONWARD HOLDINGS CO., LTD.

05

Domestic Apparel-Related Business

Creating Brands with Presence
and Offering Products with the
Right Balance of Value and Price
As Onward improves its profitability and works to increase earnings, it is making
necessary investments in businesses where new growth is anticipated. In addition,
we are taking up the challenge of new distribution by aggressively expanding ourstore network in urban fashion shopping centers, making full-scale entry into
­e-commerce, and implementing other measures.

price, drawing on our strong marketing capabilities and offer-

Department Storesing appealing customer services, and creating more-attractive
Drawing on the technological and marketing capabilities ofstore environments by relocating and expanding in prime

the Onward Group, we are working to create new value

locations.

across our brands.

Strengthening major core brands thoroughly andestablishing them as brands with an outstanding
presence

Differentiation through offering attractive­products and employing effective sales tactics
We must determine what consumers’ latent needs are and then“create value” by developing what is not available, rather thanFor our major core brands NIJYUSANKU, KUMIKYOKU, andsearch among what is already on the market. Our “AIRJIYUKU, we are implementing our “RAINBOW STRATEGY”

JACKET,” which we developed together with material manu-

and working to strengthen their brand value. Our aim is tofacturers and sewing plants, is a jacket that is light, like a car-strengthen these brands thoroughly and give them an out-

digan, and sales have been robust as we conducted marketing

standing presence from the customers’ perspective by

campaigns for these jackets across our seven men’s brand­focusing on three key themes. These are using our stronglines. Also, in our “ONWARD COLOR MUSEUM” campaign, we

merchandising capabilities to achieve a balance of value andturned department stores into art museums, and, with the key
words “wearing colors from around the world,” we developed
clothing, across men’s and women’s core brands, in attractive
colors drawn from the works of impressionist painters.

NIJYUSANKUJIYUKU06

Annual Report 2010KUMIKYOKU

iCBDeveloping new brand business through­collaboration with department stores

Development of New-Concept
Shopping Center Store

By combining the strong information and planning capabili-

We have developed a new business genre combining fashion

ties of Onward and department stores, we developed new

and lifestyles and will launch these stores simultaneously inbrands evolved from customers’ needs. The “ENTER-G” suits

Japan and China.

collection targeted at young businessmen was priced toappeal to the younger generation. On the other hand, our“RE-EARTH” casual brand for women in their 50s features

Active Approach to Urban Fashion
Shopping Centers

upmarket quality but is priced in the impulse-buying zone.

We are engaged in a drive to expand sales in urban fashion

Items, which are displayed in prime locations in the women’s

shopping centers that involves drawing on DNA from outside

floors of department stores, are on sale for about 70% of

Onward, including that of ISLAND. CO., LTD.’s “Grace­previous department store prices.

Continental” (acquired in December 2009) and CANDELA
INTERNATIONAL CO., LTD.’s “CROON A SONG,” while
maintaining the uniqueness of their brands as we develop
their activities further.

New framework for brand management
Department stores
Sales area creation, sales, sales analysis, and customer analysis

Information sharing
ONWARD KASHIYAMA
Planning, production, trend analysis, and distribution

New Distribution Channels(Other than Department Stores)

Aggressive Development of e-Commerce
We are developing our e-commerce activities by drawing

Onward is moving into high gear in the expansion of its

on synergies with real stores. In addition to ONWARD­fast-growing e-commerce business and the development of

KASHIYAMA’s directly operated net shop, Onward Group

locations in urban fashion shopping centers, where sales arecompanies are establishing virtual shops on highly popular

expanding principally to members of the younger generations.

net malls. We are aiming for Group sales of ¥2.5 billion.

Improvement in Profitabilityof Existing Core Brands
For anyFAM, a family brand, and anySiS, a brand for young
people, we are placing maximum emphasis on trendinessand value for price. We are also strengthening store management capabilities based on retail concepts.

ONWARD HOLDINGS CO., LTD.

07

Overseas Apparel-Related Businesses

Continuing a Growth
Strategy and Establishinga Global Presence
In Europe, which is the focus of Onward’s overseas business activities, we are working toincrease profitability and sales by moving forward with measures to strengthen our merchandising capabilities and improve efficiency in the three groups that joined the Onward
Group through acquisitions: the GIBO’ CO. Group, JOSEPH Group, and JIL SANDER Group.
In Asia, we are actively expanding production and sales, especially in the fast-growing
Chinese market, and proceeding with the development of our operations in Southeast Asia.

JIL SANDER Group

EuropeThe JIL SANDER Group is working to

Making Companies That Joined the Groupthrough Acquisitions Profitable andSeeking New Growth Paths

strengthen its management base andreturn to profitability as quickly as possible through a major increase in earnings.
Specific initiatives include taking stron-

GIBO’ CO. Groupger initiatives with the GIBO’ CO. Group

With its capabilities as a luxury apparel manufacturer, theand realizing group ­synergies. Other

GIBO’ CO. Group is aiming for stable sales in the lingeriemeasures are enforcing the inventory

market. At present, this group has nearly finished creating a

supervision and control of directly man-full-scale production system for the items in the JIL SANDER

aged stores, reviewing personnel sys-

brand line and is currently moving forward with initiatives totems, making more-efficient use ofdevelop production capabilities for other new major brands.

expenses, and increasing royalty reve-

In addition, the GIBO’ CO. Group is working to achieve

nues through expansion in the licensing

recovery in orders under its previously existing brand con-business. Moreover, the JIL SANDER

tracts and will continue to raise profitability by increasing

Group is conducting a review of its fran-group synergies and enhance production efficiency throughchise stores, strengthening these by area,

the more-appropriate assignment of personnel.

working to recover wholesale business,and structuring sales and production systems with a view to the world market.

Current Status of Group Synergies
GIBO’ CO. Group

GIBO’ CO.
(Apparel manufacturing
and sales)

JOSEPHJIL SANDER

08

Annual Report 2010—

CORPORATE(Apparel manufacturing
and sales)

ERIKA(Knitwear manufacturing)

—

—

RIS
(Shoe manufacturing
and sales)

PLANETA(Bag manufacturing)JOSEPH GroupThe JOSEPH Group is further stepping up the implementation of its new growth strategy. In the product area, the newcollection developed by the Paris design team is producing
clear results. Going forward, this group will strengthen its
merchandising capabilities by expanding its lineup of fashion
goods and further increase the attractiveness of its stores aswell as enhancing its brand equity by raising brand awareness through more exposure in magazines and newspapers.
In the retail outlet area, this group is implementing a range ofaggressive measures to raise sales, including the renovationof its freestanding flagship stores, expanding the area forwholesale business, and promoting its franchise business.

ONWARD HOLDINGS CO., LTD.

09

Asia

Aggressive Expansion of Japan Fashion
Goods from Onward to the Rest of Asia

Expansion in Number of Stores in the Rest of Asia
Actual in
Fiscal 2010

Planned for
Fiscal 2011

Increase(Decrease)

China

161

175

14

Hong Kong

8

7

(1)

South Korea

23

24

1

Taiwan57

63

6

ASEAN markets

3

10

7

Total

252

279

27

China
Onward is increasing the number of stores by launching flagship stores and opening other new stores. In existing outlets,
we are moving stores to better locations and expanding
them. In addition, we are creating an organizational structure
to provide for regional supervision (Shanghai, Beijing, andChongqing).

North America

Proceeding with Restructuringof North American Operations
J. PRESS
J. PRESS, INC., is working toward further business development through the strengthening of its flagship stores in New
York and the expansion of its e-commerce business.

Onward Group Companies
Newly Entering the Market
FREED OF LONDON LTD. and other companies in the
CHACOTT Group are expanding their operations and entering new businesses and are currently considering entry into
the wholesale business.

Southeast Asia
Onward is expanding its activities into Southeast Asia, which
will be a new area for business development for the Company.
In the ASEAN markets, we are opening new sales locations
and making preparation for new production centers.

10

Annual Report 2010

Corporate Social Responsibility (CSR)
The Onward Group has adopted“Thinking of the Earth. Clothing Its People.”as its environmental concept andconducts environmental management.
Onward Group’s Environmental Concept

Thinking of the Earth. Clothing Its People.

As the pace of movement in the world around us becomes
faster and faster, fashions and trends are changing at a bewildering pace. Also, recently, more and more apparel has
become available at low prices. We believe that many people

For example:(1) Onward always offers high-quality products that customers can enjoy for many years.
(2) To reduce the burden on the environment, Onward devel­

have sensed a growing trend toward apparel that the con-ops cutting-edge technologies, products, and services.

sumer is apparently expected “to use a few times and then(3) The Onward Green Campaign is conducted with thedispose of.”
Fashions that are both trendy and “disposable” are likely toobjective of creating a recycling system for apparel.
(4) Onward implements many initiatives aimed at environ-place a gradually increasing burden on the environment inmental preservation, including energy-saving measures

the years to come, and this may have a major impact on thein its business locations, introduction of eco-friendly

lives of peoples around the world. The role of fashion is to­vehicles, and the “TOSAYAMA ONWARD Rainbow Forest”

bring refreshment and beauty to people’s lives and, thereby,

forestland preservation activities in Japan’s Kochi

give them more opportunities to experience happiness.

­Prefecture.

Fashion must not be something that impairs or detracts fromthe virtually unlimited future of the Earth’s natural environment and the peoples of the world.

We are thinking of the future of the Earth, and it is precisely because we have a responsibility to the world to offer

The Onward Group, as one of the leading companies infashion­able apparel that brings refreshment and beauty to

the international apparel industry that offers fashion on thepeople’s lives that the Onward Group is thinking seriously

global stage, has corporate social responsibilities. These

about what it can do about preserving the natural environ-include owning up to the challenge of aiming to “achieve ament and is working to fulfill each of its responsibilities.

balance between the natural environment and the world’s
people” in its wide range of apparel and other products andin every aspect of its corporate activities.
ONWARD HOLDINGS CO., LTD.

11

Highlights of Environmental Activities
Onward Sponsors Exhibit at “Eco-Products 2009,”
Japan’s Largest Environment-Related Trade Fair
As part of its activities
to promote environ­mental management, theOnward Group presented its first exhibit in the
Eco-Products 2009 tradefair, which is Japan’slargest environmental
exhibition and was held in the Tokyo Big Site exhibit hallfrom Thursday, December 10 through Saturday, December
12. Onward’s environmental concept is “Thinking of the
Earth. Clothing Its People.” At the exhibition, the Onward
Group introduced its various environment-related initiatives
as an apparel corporation that is responsible for supplying awide range of fashion apparel and other products and aims
to promote “co-existence with the natural environment andthe peoples of the world.” Approximately 12,000 persons visited the Onward exhibition booth, including businesspeople,
representatives of national and regional governments, members of citizens’ groups, ­consumers, students in middle andhigh school, and other interested persons.

Development of Onward’s “BIO TECH SUIT,”
the Ultimate Ecological Suit That Can Be Recycled
to Nature
ONWARD KASHIYAMA has developed
the “BIO TECH SUIT,” which is today’s
last word in ecological suits and can be
returned to the soil. These eco-friendly
suits will be offered under the GOTAIRIKU
and J. PRESS menswear brands beginningin June 2010.
Looking like regular suits from the outside, not only do “BIO TECH SUITs” offer
a fashionable look, but also, because they
are made of only natural materials, whenreturned to nature, they can be biodegraded by bacteria and returned to the soil.
When these suits are no longer needed,
they can be buried in the ground, and,within one year, the oxygen contained in bacteria decomposes them into water and carbon dioxide. In addition, thesesuits do not contain any substances that have been identified
as harmful to human life, such as heavy metals, carcinogens,

12

Annual Report 2010

and allergy-causing ingredients. Therefore, they have received
the international “ECOTECHS Regulation 100” seal of approval
from the ECOTECHS International Joint Testing Organization.
In Japan at present, the recycling and reuse of textile products are not actively encouraged, and, when these products
are discarded by their owners, they are incinerated or disposed of in landfills. Based on the concept that “apparel manufacturers should take responsibility for recycling their own
products,” Onward now designs products with a view to recyclability in the natural environment.

Aiming to Develop a Recycling System for ApparelCompared to other products, recycling of textile products isbehind the times. At ONWARD KASHIYAMA, by encouraging
the recycling of apparel, we are intending to make the mosteffective use of the world’s limited resources. Also, as one of
our activities for preserving the Earth’s irreplaceable environment for future generations, we began our Onward Green
Campaign in 2009. Under this campaign, through department
stores, Onward collects the men’s, women’s, children’s, andsportswear items that it has manufactured and works to makethese items available for recycling and reuse. In addition,
Onward contributes to the natural environment by making
recycled thread and yarn from some of the used items, anduses these materials to make blankets and work gloves.

Development of Eco-Friendly Products
By introducing the appropriate materials, supplementarymaterials, and sewing techniques, ONWARD KASHIYAMA has
also developed suits that can be cleaned at home in washingmachines. When suits are washed at home, this not only
reduces water pollution caused by dry-cleaning fluids but
also helps to remove perspiCrude Oil
ration, food particles, andNaphthaother materials that are watersoluble but difficult to remove
with dry-cleaning fluids.
DMT
Also, ONWARD TRADING
Recycling
Polyesteris developing the market forCenterChips
uniforms made of chemicallyrecyclable materials. The aimof this initiative is to move
RecoveryFiberaway from the practice ofUniforms byusing disposable uniforms andOnwarddevelop a system that returns
used uniforms to the materials*1: N aphtha is highly flammable unrefined
stage and uses recycled polygasoline that is distilled from crude oil.
*2: D MT is a raw material for the manufacester fiber to make textile
ture of polyester with the same level ofquality
as refined petroleum.
products.
*1*2

Highlights of Activities Contributing to Society
Customer Counseling Office
ONWARD KASHIYAMA has established its Customer
Counseling Office to respond to the inquiries, requests foradvice, and complaints of its customers. The motto of thisoffice is “give clear, fair, and prompt responses” to all customers. In addition, Onward
analyzes the content and otheraspects of customer inquiries,
provides feedback within the
Company, and takes othersteps to make this information
useful in designing andimproving Onward products.

Implementation of Workplace Environment Audits
Onward works together with its partners’ sewing and otherplants in Japan and overseas to maintain and improve on
department store merchandise quality as well as increase productivity and supervision of product safety. Also, to maintainsecurity and safety in the work environment, Onward placesemphasis on whether production activities are being carriedout properly. At present, Onward conducts periodic monitoring on its own and through third-party organizations to eliminate forcible labortactics or having
employees work foroverly long hours and to
make improvements inthe workplace to ensure
the safety and wellbeing of employees.

Commencement of the Zero Garbage Project
Onward Group subsidiary CREATIVE YOKO CO., LTD., aspart of its project to reduce the volume of garbage from its
operations to zero, began to conduct cleanup campaigns in
April 2009 in the area around its headquarters in Nagano andinside its own premises on the
15th and 30th of each month.
This project began as part of
the “E-PROJECT,” which wasstarted autonomously by
employees interested in doing
their part in contributing tosociety. The objective of theZero Garbage Project is to have other companies, schools,
and others in the community take part in the cleanup activities. CREATIVE YOKO’s Tokyo Office, located in the
Omotesando district of Tokyo, also conducts similar activities
in its vicinity and works together with the Green Bird project.

Other Activities Contributing to Society
Donation of 3,000 Recycled Blankets
to Refugee Camps in Bangladesh and Elsewhere
In May 2010, ONWARD KASHIYAMA donated 3,000 blankets,
which were made from items accepted for recycling during
its Onward Green Campaign in 2009, to the Cokes Bazaar
refugee camp located in the Chittagong district in the southern part of Bangladesh and to a hospital serving the medical
needs of people in the same district. Based on informationfrom the United Nations High Commissioner for Refugees(UNHCR) database, priority was given to refugees in particularly weak social positions, 450 households headed by
women without a male breadwinner, and to medical facilities
experiencing shortages of medical equipment and other supplies as well as their surrounding communities. Recipients ofthese gifts at all facilities were delighted by their quality andcolors. Letters of thanks werereceived from the managers anddoctors of the hospitals receiving
the blankets and other persons
responsible, and a number ofnewspapers ran a­ rticles on the
distribution of the blankets.
In addition, on July 20,
ONWARD HOLDINGS received acertificate of appreciation fromthe representative office in Japanof UNHCR.

Support and Encouragement for Sports
ONWARD KASHIYAMA’s activities toencourage sporting activities include
providing the official team uniforms
for the Tohoku Rakuten Golden
Eagles, a professional baseball club,and the Nagoya Oceans, Japan’s first
professional futsal team. Onward also
contributes to the promotion of othersports as well, including the provision of gear for professional golfers.

ONWARD HOLDINGS CO., LTD.

13

Corporate Governance
Basic Approach to Corporate Governance
The Onward Group understands that responding promptly
to changes in the management environment and establishing­corporate governance systems that enhance soundness, fairness,transparency, and compliance are important management issues
related to increasing corporate value, or, in other words, shareholder value. We are working to establish bonds of trust withall stakeholders, especially our shareholders, and improve ourcorporate governance by strengthening the functions of our­management systems and those of the General Meeting of
Shareholders, Board of Directors, and Board of Auditors.

Framework for Business Execution
and Management Surveillance
Provisions to hold extraordinary meetings of the Board of
Directors whenever appropriate in light of urgent situations­constitute a framework that is able to respond to rapid changes
in the business environment. In addition, two outside directors
have been elected as part of efforts to strengthen the supervisory
functions of the Board of Directors.
To make clear the difference between management decisionmaking functions and the functions related to the conduct ofbusiness activities, the Company has introduced the Executive
Officer System. To handle decision-making functions for theGroup as a whole, the Company has formed the Group Strategic
Council and the Group Management Promotion Council, which
discuss important issues related to the management strategies
and management of each Group company and also take steps
to confirm operational execution situations.
In accordance with the audit policy task assignments determined by the Board of Auditors, each corporate auditor attends
such important meetings as those of the Board of Directors, theGroup Strategic Council, and the Group Management Promotion
Council while also reading documents related to other important
decisions and taking other measures to audit the conduct of
duties of the Directors.
Furthermore, advisory contracts have been concluded with anumber of lawyers, from whom legal advice is received.

Strengthening Internal Control Systems
To substantially strengthen internal control systems, revisions incertain parts of the basic policy for designing and implementing
internal control systems were approved by the Company’s Boardof Directors in April 2008. The Company is now working toswiftly design internal control systems based on this revised policy and will conduct continuing reviews to make needed improve­ments to create efficient corporate systems in compliance withlegal regulations.

Compliance System
The Group has prepared its Compliance Regulations, which state
its basic compliance policy, and has formed the Onward Group14

Annual Report 2010

Compliance Committee. The Compliance Division, which has­primary responsibility for compliance matters, has prepared aCompliance Manual that takes the Onward Group Compliance
Regulations as a basis and works to promote the creation andimprovement of compliance systems for the Onward Group.
The Onward Group Compliance Committee works together with
the Compliance Division to implement appropriate activities
for training and increasing the awareness of compliance issues.
The committee and the division also work jointly to ensure theCompliance Manual is properly employed throughout the Groupand to verify the upgrading and improvement of compliance systems. In addition, the committee and the division have established an “Onward Group Whistle Line” hotline, which is basedon the Onward Group Internal Notification Regulations, and act
as the reception window for compliance matters.
The Internal Auditing Department has the responsibility forplanning for and structuring business process systems that ensure
operations in all departments are conducted appropriately andefficiently in compliance with relevant laws, the Articles ofIncorporation, regulations, manuals, internal orders, and otherdirectives. This department is also responsible for reporting to
the Board of Directors on these matters.

Risk Management Systems
The Group has designed and operates systems to improve its
risk management, as provided for in its Onward Group Risk
Management Regulations. The Compliance Division is in overallcharge of related matters, and its responsibilities include designing risk management systems, identifying issues to be addressed,
preparing plans for risk management systems, reporting to theBoard of Directors, and readying appropriate systems to deal
with risks that may impact the continuation of the Company’s
operations or have a major impact on its operations, including
the risk of natural disasters and information systems risk.
Moreover, as necessary, the Board of Directors works together
with outside specialists to strengthen the Company’s capabilities
for dealing with risk and establishing systems to prevent risk.

Matters Related to Corporate Takeovers
The General Meeting of Shareholders of May 2008 approved
the introduction of the “Policy for Responding to Large-Scale
Purchases of the Company’s Shares (TOB Defense Policy).” This
policy established rules to be followed by parties that makelarge-scale purchases of the Company’s shares. It also clarifies
specified cases where there is a possibility that purchasers of theCompany’s shares may incur damage as a result of defensive
actions taken by the Company and, by making appropriate disclosure, enables the Company to issue warnings to such purchasers whose behavior does not contribute to enhancing corporate
value and may be contrary to the common interests of the shareholders. Please note that, when the provisions of this policy areapplied, the policy calls for the formation of a committee thatis independent of the Board of Directors to eliminate arbitrary
judgments by the Board and for maximum compliance with therecommendations of this committee.

Board of Directors
Directors

Officers

Corporate Auditors

ChairmanManaging Directors

Executive Officers

Standing Corporate Auditors

Takeshi Hirouchi*

Masaaki Yoshizawa

Kenichi Iizuka

Akito Yamamoto

Minoru Tanaka

Eiji Touno

Hitoshi Aoyama

Hidenobu Tanaka

Jotaro Yabe**

Hachiro Honjou

Hirokazu Yoshizato

Katsuhiko Ohashi**

Yoshihide Nakamura

Michinobu Yasumoto

President
Kentaro Mizuno*

Outside Directors

Vice President
Kazuya Baba*

As of May 27, 2010
* Representative Director** Outside Auditor

Organization Chart(As of March 1, 2010)

General Meeting of Shareholders

Board of Corporate Auditors

Board of Directors

Representative Director, Chairman

Representative Director, PresidentGroup Strategy Committee(Onward Group Management Council)

Business Development Committee

Compliance Committee

Overseas Business Operations

Corporate
Planning
Division

Compliance
Division

IR Division

Finance andAccounting
DivisionInternal
Auditing
Division

GeneralAffairs
Division

Corporate
Communications
and Environmental
Management
Division

Human
Resources
Division

Secretariat
Division

ONWARD HOLDINGS CO., LTD.

15

Consolidated Six-Year Summary
ONWARD HOLDINGS CO., LTD. and Subsidiaries
Years ended February 28 or 29		Millions of yen

Thousands of
U.S. dollars

2005

2006

2007

2008

2009

2010

2010

¥150,969¥135,769¥135,197¥112,519¥ 98,946¥100,680$1,125,797

At year-end:
Total current assets
Total property, plantand equipment

96,394

99,68894,85095,00890,17589,742

1,003,489

Total assets

308,170

329,403347,936

309,092

296,283

292,569

3,271,486

Total current liabilities

79,02597,617

103,494

93,321

92,36990,9291,016,762

Total shareholders’ equity

202,377

201,599

212,600

213,625

178,023

175,450

1,961,870

Net sales¥271,273¥283,111¥318,691¥287,032¥261,006¥248,635$2,780,219

Cost of sales

146,447

152,043

175,796

156,842

142,676

134,459

1,503,511

administrative expenses

100,621106,360

117,464

111,562

109,246

109,792

1,227,686

Operating income

24,20524,70825,431

18,628

9,084

4,384

49,022

Income taxes, current

7,490

12,321

14,409

9,780

4,639

4,016

44,907

Net income (loss)

10,257

11,091

11,438

12,214(30,895)

2,188

24,466

For the year:

Selling, general andYen

U.S. dollars

Per share:
Net income (loss)—basic

¥58.1

¥63.8

¥70.5

¥76.5

¥(197.2)¥13.97$0.16

Cash dividends

22.0

24.0

26.0

30.0

30.0

24.00

0.27

Note: Yen amounts have been translated, for convenience only, at ¥89.43=US$1, the approximate exchange rate on February 28, 2010.

Net Sales and Operating Income
Margin(Millions of yen, %)Years ended February 28 or 29

Total Assets, Total Shareholders’Equity, and Shareholders’Equity Ratio(Millions of yen, %)At February 28 or 29

350,000

10

350,000

280,000

8

280,000

210,000

680

Net Income (Loss) Per Shareand Cash Dividends Per Share(Yen)
Years ended February 28 or 29
80

60
60

210,000

40
40

140,000

4

140,000

70,0002

70,000

0

0

20
20

0

’06 ’07 ’08 ’09 ’10 Net sales (left scale) Operating income margin (right scale)16

Annual Report 2010

0

’06 ’07 ’08 ’09 ’10

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

0

-200

’06 ’07 ’08 ’09 ’10

 Net income (loss) per sharem Cash dividends per share

Management’s Discussion and Analysis
Overview
During the fiscal year under review (ended February 28, 2010),
the Japanese economy operated amid persistently slack conditions in
the global economy. Although the Japanese government’s economic
countermeasures elicited signs of a limited recovery in domestic
demand, the deterioration of the domestic employment and income
environments and other factors caused sluggish conditions in theJapanese economy to persist.
In the apparel industry, a rise in consumer cautiousness and belttightening intensified price-based competition, and conditions in the
personal consumption environment became extremely harsh.
Amid this economic environment, the Onward Group moved
ahead with measures to increase management efficiency while also
proactively proceeding with measures aimed at strengthening its
planning and design, manufacturing, marketing, and other departments so that they can handle all processes, from product development through product presentation, with emphasis on providing theright balance of value and price from the perspective of consumers.
In addition, the Group emphasized measures—such as those toexpand its business scope by means of M&A transactions, enhance
its profitability by means of synergistic benefits, and establish a fullscale presence in the Internet market—that are designed to promote
future growth. These measures generated benefits reflected in theperformance figures explained below, although performance figures
for the fiscal year under review were generally below figures for the­previous year.
As a consequence of these factors, the Group reported net sales of¥248.6 billion, down 4.7% from the level in the previous fiscal year,
and operating income of ¥4.4 billion, down 51.7%. While a net lossof ¥30.9 billion was recorded for the previous fiscal year, the Group
was able to generate ¥2.2 billion of net income in the fiscal year
under review.

Results of Operations
Net Sales
Sales in the Group’s apparel business amounted to ¥234.2 billion,
down ¥11.2 billion, or 4.6%, from the previous fiscal year, and salesof service-related businesses decreased 8.9%, or ¥2.0 billion, to¥21.1 billion.
After the elimination of intersegment sales amounting to ¥6.8 billion, net sales for the Group were ¥248.6 billion, representing adecline of ¥12.4 billion, or 4.7%, from the previous year. The business activities of the Onward Group are divided into two principal
segments: namely, apparel and other textile product businesses andservice-related businesses.
• Apparel and Other Textile Product Businesses
Regarding operations in Japan, ONWARD KASHIYAMA concentrated
its focus on major core brands and proactively worked to relocateand expand its mainstay department store distribution channel withthe objective of developing optimal shop environments for presenting products that offer value that is recognized by consumers as wellas the right balance of value and price. Owing to these measures andconcurrent efforts to improve efficiency—such as steps to eliminate
inefficient brands and outlets and thorough store management—atrend of recovery was seen in sales of products of 23ku and othercore brands from the start of the latter half of the ­fiscal year underreview, and the gross profit ratio improved. With respect to othersubsidiaries, although measures to increase management efficiency
caused net sales levels to decrease, profitability increased. The performance of ISLAND. CO., LTD., which became a consolidated subsidiary on December 1, 2009, has been favorable, and that company
made a contribution to the Group’s overall profitability.
Overseas, a delay in the recovery of luxury markets caused two
European luxury brands—the JOSEPH Group and the JIL SANDER
Group—to record operating losses, although the JOSEPH Groupbegan the full-scale implementation of “merchandise measures” and“shop measures” within its new growth strategy during the latter halfof the fiscal year, and this enabled that group to augment its sales
and profit during the latter half.
The JIL SANDER Group proceeded with structural reforms andtherefore recorded considerable losses but made progress in improving its management constitution, while the GIBO’ CO. Group completed the preparation of systems designed to generate synergies. In
the Asia region, net sales decreased during the first half of the year
but showed a trend of recovery from the second half. In the North
America region, operations proceeded in accordance with plansand profitability improved.
As a result of these factors, sales of the apparel and other textile
product businesses declined 4.6%, to ¥234.2 billion, and operating
income decreased 49.1%, to ¥4.6 billion.
• Service-Related Businesses
Although the net sales of the Group’s services- and resort-related
businesses decreased during the fiscal year under review, efforts
to increase management efficiency led to an improvement in­performance.
Consequently, sales of this segment declined 8.9%, to ¥21.2 billion,
and an operating loss of ¥39 million was recorded, compared to an
operating loss of ¥120 million in the previous fiscal year.
The Onward Group’s performance by geographic region was asfollows.
• JapanRegarding operations in Japan, the Group’s core company—
ONWARD KASHIYAMA—moved ahead amid slack market conditions
with measures to increase management efficiency and was able torealize a trend of recovery during the latter half of the fiscal year,
although it recorded lower levels of sales and profit for the year asa whole. Other domestic subsidiaries also recorded levels of sales
below those in the previous year, but they were able to increase theiroperating income.
Thus, sales of this segment declined 9.6%, to ¥206.3 billion,
and operating income amounted to ¥9.3 billion, down 13.5% fromthe previous fiscal year.
• Europe
With respect to business in Europe, a delay in the recovery of luxury
markets decreased profitability, and this combined with a rise in onetime expenses associated with management structure reforms toincrease the magnitude of the operating loss recorded.
Sales of this segment surged 35.4%, to ¥36.4 billion, but the operating loss expanded to ¥4.2 billion, from ¥1.5 billion in the previous
fiscal year.
• Other
The performance of businesses in the United States, Asia, and otherregions was as follows.
Sales of this segment amounted to ¥7.8 billion, down 6.2% fromthe previous fiscal year, and an operating loss of ¥0.9 billion wasrecorded, compared to an operating loss of ¥0.6 billion in the previous ­fiscal year.
Cost of Sales; Selling, General and Administrative Expenses;
and Other Income (Expenses)
The consolidated cost of sales declined 5.8%, to ¥134.5 billion,
accompanying the decline in net sales. As the drop in net sales
exceeded the fall in the cost of sales, gross profit decreased 3.5%,
to ¥114.2 billion. However, the gross margin on net sales improved,rising 0.6 percentage point, to 45.9%, compared with 45.3% in
the previous fiscal year.
Selling, general and administrative (SG&A) expenses edged
upward 0.5%, or ¥0.5 billion, from the previous fiscal year, to ¥109.8
billion, owing to a rise of lease expenses within SG&A expenses.
Reflecting the decrease in net sales and slight rise in SG&A expenses,
the ratio of SG&A expenses to net sales increased 2.3 percentage
points, to 44.2%, versus 41.9% in the prior fiscal year. Although thegross margin on net sales improved, the ratio of operating income to

ONWARD HOLDINGS CO., LTD.

17

net sales decreased 1.7 percentage points, to 1.8%, compared with
3.5% in the previous fiscal year. Because of the substantial impact ofthe decline in net sales, operating income fell 51.7%, or ¥4.7 billion,to ¥4.4 billion.
Other income (expenses) amounted to income of ¥2.0 billion, an
improvement of ¥41.7 billion compared with the previous period,
when other income (expenses) amounted to expenses of ¥39.7 billion. This mainly reflects the lack of certain factors affecting otherincome (expenses) in the previous period—including the recognitionof ¥22.6 billion in valuation losses on investments in unconsolidated
subsidiaries and affiliates, ¥13.0 billion in impairment losses, including ¥11.6 billion in write-off on g
­ oodwill of a U.K. subsidiary, and a¥5.3 billion foreign currency exchange loss—as well as the recordingof ¥2.3 billion in gains on the sale of investment securities during the
fiscal year under review.
As a result of these factors, the Company reported income before
income taxes and minority interests of ¥6.4 billion, compared witha loss before income taxes and minority interests of ¥30.6 billion
for the previous fiscal year. Income taxes, inhabitants’ taxes, andenterprise taxes calculated based on assumptions including theassumption of a 40.7% effective tax rate amounted to ¥4.0 billion.
Consequently, the Group recorded ¥2.2 billion in net income, which
represents a ¥33.1 billion improvement compared with the ¥30.9 billion net loss of the previous fiscal year.

Financial Position
At the end of the fiscal year, total assets amounted to ¥292.6 billion,
down ¥3.7 billion from the end of the previous fiscal year. Current
assets were up 1.8%, or ¥1.7 billion, to ¥100.7 billion, mainly because
cash and time deposits rose ¥10.9 billion, to ¥34.3 billion. Fixed
assets declined 2.8%, or ¥5.4 billion, to ¥191.9 billion. Tangible fixed
assets edged down just 0.5%, or ¥0.4 billion, to ¥89.7 billion. The
almost unchanged level of tangible fixed assets reflects the level ofcapital investments and depreciation expense, which were almost
equal at ¥5.7 billion each, and the limitation of impairment losses toonly ¥0.3 billion.
Total liabilities decreased 2.5%, or ¥3.5 billion, to ¥134.4 billion.
Current liabilities declined ¥1.4 billion, to ¥90.9 billion, and long-term
liabilities fell ¥2.0 billion, to ¥43.5 billion. Interest-bearing debt stoodat ¥58.4 billion at the end of the previous fiscal year and rose ¥1.9
billion, to ¥60.3 billion at the end of the fiscal year under review,
but the decrease in total liabilities reflected a ¥3.7 billion drop in
accounts and notes payable, which decreased from ¥39.6 billion to¥36.0 billion.
Shareholders’ equity declined 1.4%, or ¥2.6 billion, to ¥175.5 billion, reflecting a ¥2.6 billion decrease in retained earnings, to ¥118.8
billion. Total net assets, including minority interests in consolidated
subsidiaries, remained almost unchanged, edging down just 0.2%,
or ¥0.3 billion, to ¥158.2 billion. Consequentially, because of thedecrease in assets and almost unchanged level of net assets, theequity ratio rose 0.6 percentage point, from 52.9% to 53.5%.
Cash FlowsNet cash provided by operating activities amounted to ¥14.1 billion,¥3.2 billion higher than for the previous fiscal year. Income before
income taxes and minority interests improved ¥37.0 billion, and thiswas roughly offset by a ¥12.7 billion drop in impairment loss on
fixed assets and a ¥22.5 billion fall in valuation losses on investments
in unconsolidated subsidiaries and affiliates, while a ¥7.6 billion
decrease in income tax and other factors accounted for the rise in
net cash provided by operating activities.
Net cash used in investing activities was ¥26.0 billion, ¥40.9 billion
less than the previous fiscal year. Although net cash was used for theacquisition of stock in ISLAND and in sales facilities, the drop in net
cash used in investing activities reflected the proceeds from the saleof investments in securities, which amounted to ¥12.9 billion.

18

Annual Report 2010

Net cash used in financing activities amounted to ¥4.9 billion, compared with net cash provided by financing activities of ¥18.0 billion
in the previous fiscal year. While the cash inflow in the previous
year reflected ¥30.0 billion in proceeds from long-term debt andother factors, the ¥22.9 billion increase in net cash used during theperiod under review reflected such factors as ¥4.7 billion in dividends (paid by the parent company).
As a result of the aforementioned factors, the balance of cash andcash equivalents at the end of fiscal 2010 was ¥32.7 billion, ¥9.4 billion higher than at the end of fiscal 2009.

Policy on Distribution of Profits
The management of the Onward Group recognizes the distributionof a portion of profits to shareholders as one of its top priorities. The
basic policy of the Company is to set a target dividend payout ratioof 35% or more and strive to make stable distributions from profitsthat are appropriate in light of trends in the Company’s performance.
For the fiscal year under review, the Company has decided to paya cash dividend of ¥24 per share. Decisions regarding acquisitions oftreasury stock are to be made based on due consideration of funding
requirements and other factors. Retained earnings will be employed
in a flexible manner for strategic investments that build a solid business structure, strengthening the Company’s financial position, andother objectives while giving due consideration to maintaining­balanced demand for funds.

Outlook
Looking at trends going forward, some observers expect growthin overseas business to support a trend toward improvement in theperformance of Japanese companies centered on export-oriented
companies. In light of employment instability, income decreases,
and other concerns regarding the future, however, it appears that
additional time will be required to muster a recovery in personal
consumption. Accordingly, it is thought that harsh economic­conditions will continue.
Amid this kind of management environment, the Onward Group,in its domestic businesses, plans to take measures to improve its
profitability and profit while also making necessary investments
regarding businesses with new growth potential.
Specifically, regarding ONWARD KASHIYAMA, plans call for­focusing primarily on major core brands and striving to thoroughly
strengthen those brands based on consideration of the consumer perspective with respect to strong merchandising capabilities, solid marketing capabilities, and more attractive store environments, thereby
increasing the level of brand value. In new business development,
plans call for “value creation” measures across all brands throughsuch initiatives as those to leverage the Group’s technological powerand ­marketing power to impress consumers and provide high-valueadded merchandise in a captivating manner. In addition, plans for“collaboration” with department stores call for fusing the respective
fields of strength of ONWARD KASHIYAMA and such stores to begin
launching advanced new brands, and the debut of these new brands
began in spring 2010.
In addition, as an expansion strategy designed to make full use of
the Onward Group’s comprehensive range of capabilities, the Groupplans to move ahead with steps to establish a full-scale presence inthe rapidly expanding Internet market as well as in urban fashion
shopping centers that are expanding their youth-centered clientele.
Regarding overseas business, the Onward Group intends to get its
growth in the Europe region on track based on the structural reforms
implemented through the fiscal year under review and on the continued execution of far-sighted investments. Specifically, for the JOSEPHGroup, merchandise measures undertaken by a new creative teamand the benefits of renovating the flagship street-level store aresmoothly expanding sales, and plans call for promoting additional
growth strategies going forward that will enable the realization ofimproved profitability. The Group’s strengthened efforts regarding
the JIL SANDER Group and the GIBO’ CO. Group are leading to­initiatives that are strengthening and increasing the efficiency of­manufacturing systems, and this is expected to facilitate the promotion of new global strategies. In the Asia region, where considerable
market expansion is projected, the Group is advancing with a growthstrategy that calls for focusing on the same consumer market segments as in Japan and implementing organization strengthening­measures to expand the scope of business operations.
As a result of the implementation of these policies, the Onward
Group has prepared plans for the fiscal year ending February 28,
2011, calling for a 0.5% increase in net sales, to ¥250.0 billion; a50.6% rise in operating income, to ¥6.6 billion; and a 60.0% surge innet income, to ¥3.5 billion. (Please note that these plans for future
performance are judgments that are based on information available
at the time these figures were prepared, and they are subject to latentrisks and uncertainties. Therefore, if the factors that form the basis
for these forecasts differ from assumed conditions, actual performance may differ substantially from the target levels.)
Description of Business Risks
The businesses of the Onward Group may be influenced by a number of risks, which are described in the following paragraphs. Basedon its awareness of the possibility that these risks may emerge, theGroup conducts its business operations in a manner to avoid suchrisks and minimize their effects in the event they should emerge.
Please note that forward-looking statements contained in this section
are based on the Group’s judgments as of May 29, 2009.
(1) Risks Associated with Changes in Consumer Needs
To respond accurately to customer needs regarding the fashion products supplied by the Onward Group, the Group works to achieve
the originality and competitiveness of its products through the implementation of its Brand-Leveraged Management policy. However, theGroup may not be able to attain the performance targets in its business plans because of a number of factors, including stagnation in
consumer spending as a result of fluctuations in economic conditions, competition with other companies, and sudden changes infashion trends. This failure to meet targets may have an impact onGroup performance.
(2) Risks Associated with Weather Conditions
and Natural Disasters
Since sales of the Group’s core fashion products may vary becauseof weather conditions, the Group works to strengthen its systems forplanning and production on a short turnaround cycle. However, cool
weather in the summers and warm weather in the winters as well asother unexpected developments of this kind as well as a series oftyphoons may result in the loss of sales opportunities during peakseasons, and there is a possibility that such developments may havean impact on performance. In addition, unexpected natural disasters—such as earthquakes and floods, sudden fires and accidents,and such illegal activities as acts of terrorism—may make cessationof the Group’s operations unavoidable. Such circumstances may
have an impact on Group performance.
(3) Quality Risk
The Group has established “quality management standards” andworks to manage the quality of its products through the observanceof these standards. However, despite the establishment of systems for
quality management, incidents may occur related to product liability
as a result of matters relating to the Group and its business partners.
Such incidents may damage the Group’s brand image and result in
substantial expenses that may have an impact on Group performance.

­ bligations caused by a series of defaults during times of credito­instability and unexpected bankruptcies of large commercial facilities.
Such ­circumstances may have an impact on Group performance.
(5) Risks Associated with Intellectual Property
The Group owns trademarks and other intellectual property in Japanand overseas. The Group works to safeguard the rights to this property based on legal regulations, but the Group and its brand image
may be damaged and its capabilities for product development may
be impaired in the event of infringement of these rights by third parties. Accordingly, such circumstances may have an impact on Group
performance. In addition, the Group obtains rights to the use of
intellectual property owned by its alliance partners based overseas
and conducts business activities based on licensed brands. If therelated contracts are unexpectedly cancelled or if the terms of suchcontracts become unfavorable when they are renewed, then such­circumstances may have an impact on Group performance.
(6) Legal Risks
The Group conducts its business activities will full regard for laws
and regulations, including those related to antimonopoly policies,
the treatment of subcontractors, and labeling as well as laws concerning the natural environment and recycling. The Onward Group
Compliance Committee takes a central role in providing information
related to the importance of compliance with laws and regulations aswell as internal control procedures with the aim of ensuring propercompliance management. However, despite the establishment ofthese compliance systems, issues may arise as a result of the illegal
behavior of employees and the actions of business partners. Suchissues may impair the trust placed in the Group by society and resultin the payment of s­ ubstantial expenses for indemnities, etc. Such­circumstances may have an impact on the Group’s performance.
(7) Risks Associated with Information
The Group works to take all necessary measures and strengthenssystems for ensuring the security of information systems, and, as­provided for under the guidelines of Japan’s Personal Information
Protection Law, has prepared its Guidelines for the Personal
Information Protection Law. The Group has taken steps to ensure all
management and staff are aware of information security matters andstrengthened its systems for management and supervision of information. However, issues may arise if there are leakages of information
resulting from improper access to computer systems and criminal
activities. Such issues may impair the trust placed in the Groupby society and result in the payment of related expenses. Such­circumstances may have an impact on the Group’s performance.
(8) Risks Associated with Overseas Business Operations
The Group’s overseas operations may be exposed to a range of risks
resulting from natural disasters; political, social, and economic conditions; wars and terrorism; fluctuations in foreign currency exchange
rates; lawsuits related to intellectual property; and communicable­diseases. When such risks emerge, the Group may have difficultyin continuing its business operations. Such circumstances may havean impact on the Group’s performance.
(9) Risks Associated with Business/Capital Alliances
The Group’s growth strategy includes provisions for using M&A
transactions and similar methods in connection with domestic andoverseas investments. In the case that unexpectedly large changes inthe business environment were to cause deterioration in the Group’s
management and financial situations, there is a risk that the Groupmight have to record losses on the impairment of goodwill. Such circumstances may have an impact on the Group’s performance.

(4) Risks Associated with Business Partners
The Group has strengthened its internal systems for confirming theoperating conditions and the creditworthiness of its business partners. However, losses may occur as a result of non-payment of

ONWARD HOLDINGS CO., LTD.

19

Consolidated
Consolidated Balance
Balance Sheets
SheetsONWARD
ONWARD HOLDINGSHOLDINGS Co.,
Co., Ltd.
Ltd. andand Subsidiaries
Subsidiaries
February
February 28,
28, 2009
2009 andand 2010
2010

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

Millions
Millions ofof yenyen

ASSETSASSETS

2009
2009

2010
2010

2010
2010

Current
Current assets:
assets:¥¥ 23,415
23,415¥¥ 34,330
34,330$$ 383,876
383,876

Accounts
Accounts andand notes
notes receivable
receivable

26,421
26,42125,73125,731

287,722287,722

Inventories
Inventories (Note(Note 2.
2. (4))(4))

33,75833,75830,89430,894345,455
345,455

DeferredDeferred tax
tax assets
assets (Note(Note 10)
10)

3,914
3,914

4,239
4,239

47,40047,400Other
Other current
current assets
assetsCash
Cash andand timetime deposits
deposits (Notes(Notes 2.
2. (18)(18) andand 8.
8. (1))(1))

11,60011,600

6,348
6,348

70,98370,983

Less:
Less: Allowance
Allowance forfor badbad debt
debt

(162)
(162)

(862)
(862)

(9,639)(9,639)Total
Total current
current assets
assets

98,946
98,946100,680
100,680

1,125,797
1,125,797

Buildings
Buildings andand structures
structures

76,81876,81878,58978,589878,777
878,777

Other
Other depreciable
depreciable property
property

25,221
25,221

26,34026,340294,532
294,532(64,906)(64,906)(68,519)(68,519)(766,175)(766,175)

37,13337,13336,41036,410407,134
407,134

53,04253,04253,33253,332596,355
596,355

90,17590,17589,742
89,742

1,003,489
1,003,489

Goodwill
Goodwill

47,47547,47547,41847,418530,225
530,225

Other
Other

2,899
2,899

3,393
3,393

37,94037,94050,37450,37450,81150,811

568,165
568,165

Investments
Investments inin securities
securities (Note(Note 3)
3)

33,82533,82531,194
31,194

348,809348,809

Long-termLong-term loans
loans receivable
receivable

4,507
4,507

4,969
4,969

55,56355,563

Property,
Property, plant
plant andand equipment
equipment (Note(Note 5):
5):

Less:
Less: Accumulated
Accumulated depreciation
depreciation

Land
Land (Note(Note 11)
11)
Total
Total property,
property, plant
plant andand equipment
equipment

Intangible
Intangible assets,
assets, net:
net:

Total
Total intangible
intangible assets,
assets, net
net

Investments
Investments andand otherother assets:
assets:Long-termLong-term prepaid
prepaid expenses
expenses

1,271
1,271

881
881

9,851
9,851

DeferredDeferred tax
tax assets
assets (Note(Note 10)
10)

5,749
5,749

5,530
5,530

61,836
61,836Other
Other investments
investments

14,15914,15912,002
12,002

134,205
134,205(2,723)(2,723)(3,240)(3,240)(36,229)(36,229)56,78856,78851,336
51,336574,035
574,035¥296,283¥296,283¥292,569¥292,569$3,271,486$3,271,486

Less:
Less: Allowance
Allowance forfor badbad debt
debt
Total
Total investments
investments andand otherother assets
assets
Total
Total assets
assets20

Annual Report 2010

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

Millions of yen

LIABILITIES AND NET ASSETS

2009

2010

2010

Current liabilities:
Accounts and notes payable
Short-term loans (Note 13)
Current portion of long-term loans (Note 13)
Accrued income taxes
Accrued bonuses to employees
Allowance for sales returns
Provision for point program
Other current liabilities
Total current liabilities¥ 39,621
28,252
3,395
2,262
2,187
638
ʊ
16,01492,369¥ 35,961
31,881
3,817
4,086
1,569
545
126
12,94490,929$ 402,113
356,491
42,682
45,68917,545
6,094
1,409
144,739
1,016,762

Long-term liabilities:
Bonds (Note 13)
Long-term loans (Note 13)
Accrued retirement benefits (Note 7)
Accrued retirement benefits for directors and statutory auditors
Deferred tax liabilities̆revaluation of land (Notes 10 and 11)
Other
Total long-term liabilities
Total liabilitiesʊ
26,746
2,933
56
5,949
9,812
45,496
137,865518
24,054
3,273
123
5,949
9,559
43,476
134,405

5,792
268,970
36,598
1,376
66,521
106,888486,145
1,502,907

30,08050,043
121,41230,08050,043
118,817336,353
559,577
1,328,603(23,512)
178,023(23,490)
175,450(262,663)
1,961,870(6,930)(75)(11,075)(3,077)(21,157)(5,560)(42)(10,993)(2,355)(18,950)(62,172)(470)(122,923)(26,333)(211,898)

294

413

4,618

1,258

1,251

13,989158,418

158,164

1,768,579¥296,283¥292,569$3,271,486

Commitments and contingent liabilities (Note 12)
Net assets:
Shareholders’ equity:
Common stock:
Authorized̆400,000,000 shares
Issued̆172,921,669 shares at February 28, 2009 and 2010, respectively
Capital surplus
Retained earnings (Note 14)
Less: Treasury stock, at cost, 16,267,855 shares and 16,260,739 sharesat February 28, 2009 and 2010, respectively
Total shareholders’ equity
Valuation and translation adjustments:
Net unrealized losses on available-for-sale securities (Note 3)
Deferred losses on hedging instruments
Net revaluation loss of land (Note 11)
Foreign currency translation adjustment
Total valuation and translation adjustments
Stock acquisition rights
Minority interests in consolidated subsidiaries
Total net assets
Total liabilities and net assets

U.S. dollars
Yen

Per share:
Net assets per share¥1,001.36(Note 2. (21))¥998.98$11.17

See accompanying notes to consolidated financial statements.

ONWARD HOLDINGS CO., LTD.

21

Consolidated Statements of Operations
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2009 and 2010

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

Millions of yen
2009

2010

2010

Net sales¥261,006¥248,635$2,780,219

Cost of sales

142,676

134,459

1,503,511

Gross profit

118,330

114,176

1,276,708

Selling, general and administrative expenses (Note 17)

109,246

109,792

1,227,686

9,084

4,384

49,022

Operating income
Other income (expenses):
Interest income

385

110

1,230

Dividend income

502

489

5,468

Interest expenses(535)(1,137)(12,714)

Royalty income

771

909

10,164Equity in earnings (losses) of investees

(256)

117

1,308

(5,313)(643)(7,190)Foreign currency exchange loss
Loss on derivatives

ʊ

(398)

(4,450)Gain on sale of investments in securities, net (Note 3)

857

2,326

26,009Loss on write-down of investments in securities (Note 3)(22,646)(146)(1,633)

Provision for allowance for bad debt

(1,338)(512)(5,725)(1,129)Loss on disposal of property, net
Impairment losses on fixed assets (Note 6)
Other, net
Income (loss) before income taxes and minority interests

(190)

(101)

(12,998)(294)(3,287)

1,081

1,286

14,380(30,596)

6,390

71,453

4,639

4,016

44,907

Income taxes:
Current (Note 2. (10))
Deferred (Note 10)
Income (loss) before minority interests
Minority interests in subsidiaries
Net income (loss)(4,603)

158

1,767

(30,632)

2,216

24,779

(263)

(28)

(313)

¥ (30,895)¥ 2,188$

24,466

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

Yen

Per share (Notes 14 ,15 and 17):
Net income (loss)̆basic
Diluted net income per share
Cash dividends
See accompanying notes to consolidated financial statements.

22

Annual Report 2010¥(197.21)¥13.97

$0.16

ʊ

13.91

0.16

30.00

24.00

0.27

Consolidated Statements of Changes in Net Assets
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2009 and 2010
Millions of yen
Shareholders’ equity

Balance as at February 29, 2008:
Cash dividends
Net loss
Purchase of treasury stock
Reissuance of treasury stock
Net changes other than shareholders’ equity
Total changes during the year
Balance as at February 28, 2009
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of net revaluation loss of land
Net changes other than shareholders’ equity
Total changes during the year
Balance as at February 28, 2010

Number ofshares ofcommon stock(thousands)

172,922̆̆̆̆̆̆172,922
̆
̆
̆
̆
̆
̆
̆
172,922

Commonstock¥30,080̆̆̆̆̆̆30,080
̆
̆
̆
̆
̆
̆
̆
¥30,080

Capitalsurplus¥50,044
̆
̆
̆
(1)
̆
(1)
50,043
̆
̆
̆
̆
̆
̆
̆
¥50,043

Retainedearnings(Note 14)

¥157,016(4,700)(30,895)
̆
(9)
̆
(35,604)
121,412(4,700)
2,188
̆
(1)
(82)
̆
(2,595)¥118,817

Treasurystock¥(23,515)
̆
̆
(29)
32
̆
3
(23,512)
̆
̆
(7)
29
̆
̆
22
¥(23,490)

Total¥213,625(4,700)(30,895)(29)22
̆
(35,602)
178,023(4,700)
2,188
(7)
28
(82)
̆
(2,573)¥175,450

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

Shareholders’ equity

Balance as at February 28, 2009:
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of net revaluation loss of land
Net changes other than shareholders’ equity
Total changes during the year
Balance as at February 28, 2010

Commonstock$336,353
̆
̆
̆
̆
̆
̆
̆
$336,353

Capitalsurplus$559,577
̆
̆
̆
̆
̆
̆
̆
$559,577

Retainedearnings(Note 14)

Treasury
stock

Total

$1,357,620 $(262,909) $1,990,641(52,555)(52,555)
̆
24,466
24,466
̆
(78)
(78)
̆
(11)
324
313
(917)
(917)
̆
̆
̆
̆
(29,017)
246(28,771)$1,328,603 $(262,663) $1,961,870

See accompanying notes to consolidated financial statements.

(Continued)

ONWARD HOLDINGS CO., LTD.

23

Millions of yen
Valuation and translation adjustments

Balance as at February 29, 2008:
Cash dividends
Net loss
Purchase of treasury stock
Reissuance of treasury stock
Net changes other than shareholders’ equity
Total changes during the year
Balance as at February 28, 2009
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of net revaluation loss of land
Net changes other than shareholders’ equity
Total changes during the year
Balance as at February 28, 2010

Net unrealized
losses onavailable-for- sale Deferred losses Net revaluation Foreign currency
securities
on hedging
loss of landtranslation(Note 3)
instruments(Note 11)adjustment¥(5,887)ʊʊʊʊ
(1,043)(1,043)(6,930)
̆
̆
̆
̆
̆
1,370
1,370
¥(5,560)

¥(17)
ʊ
ʊ
ʊ
ʊ
(58)
(58)
(75)
̆
̆
̆
̆
̆
33
33
¥(42)

¥(11,075)
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
(11,075)
̆
̆
̆
̆
̆
82
82
¥(10,993)¥(1,789)ʊʊʊʊ
(1,288)(1,288)(3,077)
̆
̆
̆
̆
̆
722
722
¥(2,355)

Total¥(18,768)ʊʊʊʊ
(2,389)(2,389)(21,157)
̆
̆
̆
̆
̆
2,207
2,207
¥(18,950)

Minority interests
Stock acquisition in consolidated
rightssubsidiaries

¥135
ʊ
ʊ
ʊ
ʊ
159
159
294
̆
̆
̆
̆
̆
119
119
¥413

Total net
assets¥2,647 ¥197,639
ʊ(4,700)ʊ
(30,895)
ʊ
(29)
ʊ
22
(1,389)(3,619)(1,389)(39,221)
1,258
158,418(4,700)
̆
2,188
̆
(7)
̆
28
̆
(82)
̆
(7)
2,319
(7)
(254)
¥1,251 ¥158,164

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

Valuation and translation adjustments

Balance as at February 28, 2009:
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of net revaluation loss of land
Net changes other than shareholders’ equity
Total changes during the year
Balance as at February 28, 2010
See accompanying notes to consolidated financial statements.

24

Annual Report 2010

Net unrealized
losses onavailable-for- sale Deferred losses Net revaluation Foreign currency
securities
on hedging
loss of landtranslation
instruments(Note 11)adjustment(Note 3)$(77,491)
̆̆̆̆̆15,31915,319$(62,172)

Total$(839) $(123,840) $(34,406) $(236,576)
̆
̆
̆
̆
̆
̆
̆
̆
̆
̆
̆
̆
̆
̆
̆
̆
̆
̆
̆
̆
369
917
8,073
24,678
369
917
8,073
24,678$(470) $(122,923) $(26,333) $(211,898)

Minority interests
Stock acquisition in consolidated
rightssubsidiaries$3,287
̆
̆
̆
̆
̆
1,331
1,331
$4,618

Total net
assets$14,067 $1,771,419(52,555)
̆
24,466
̆
(78)
̆
313
̆
(917)
̆
(78)
25,931(78)(2,840)$13,989 $1,768,579

Consolidated Statements of Cash Flows
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2009 and 2010

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

Millions of yen

Cash flows from operating activities:
Income (loss) before income taxes and minority interests
Adjustments to reconcile income (loss) before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization
Impairment loss on fixed assets
Net amortization of goodwill on consolidation
Increase in provision for allowance for bad debt
Decrease (Increase) in provision for accrued retirement benefits
Interest and dividend income
Interest expense
Equity in (earnings) losses of investees
Loss on disposal of property, net
Gain on sale of investments in securities, net
Loss on write-down of investments in securities
Valuation losses on investments
in unconsolidated subsidiaries and affiliates
Decrease in trade receivables
Decrease in inventories
Decrease in trade payables
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Refunded income taxes
Net cash provided by operating activities
Cash flows from investing activities:
Increase in time deposits
Decrease in time deposits
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Acquisition of investments in securities
Proceeds from sale of investments in securities
Payments for long-term prepaid expenses
Payments for security deposits
Proceeds from security deposits
Payment for acquisition of consolidated subsidiaries resulting ina change in the scope of consolidation (Note 8. (2))
Acquisition of minority interests in consolidated subsidiaries
Other, net
Net cash used in investing activities

2009

2010

2010

¥(30,596)¥ 6,390$ 71,453

5,986
12,998
2,400
1,690
(590)
(887)
535
256
190
(857)
22,645

5,747
294
3,403
929
781
(599)
1,137
(117)
101
(2,326)
146

64,263
3,287
38,052
10,388
8,733(6,698)12,714(1,308)1,129(26,009)
1,633

260
3,602
776
(4,844)
3,411
16,975
1,375(439)(9,987)
2,915
10,839

126
2,015
3,711
(4,499)(2,575)
14,664624(1,241)(2,294)2,305
14,0581,409
22,532
41,496(50,308)(28,794)
163,972
6,978(13,877)(25,651)
25,774
157,196

(164)
2,164
(2,848)55(3,399)
974
(875)
(536)
584

(443)
891
(2,976)8(7,128)12,858
(553)
(421)
835

(4,954)
9,963(33,277)
90(79,705)
143,777(6,184)(4,708)9,337(33,335)(2,336)(26,121)(3,105)(465)(40,950)

̆
(761)
(26)

̆
(8,509)(291)(Continued)

ONWARD HOLDINGS CO., LTD.

25

Millions of yen

Cash flows from financing activities:
Increase (decrease) short-term loans
Proceeds from long-term debt
Repayments of long-term debt
Acquisition of treasury stock
Dividends paid by the parent company
Dividends paid to minority stockholders
Other, net
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 8. (1))
See accompanying notes to consolidated financial statements.

26

Annual Report 2010

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

2009

2010

2010

(7,139)30,000ʊ(29)(4,700)
(177)

3,703
334
(3,816)(7)(4,700)(94)

41,406
3,735(42,670)(78)(52,555)(1,051)

17
17,972(1,310)(13,449)
36,775¥ 23,326(310)(4,890)211
9,353
23,326¥32,679(3,467)(54,680)
2,359
104,584
260,830$365,414

Notes to Consolidated Financial Statements
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2009 and 2010

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 ofJapan (the “Corporation Law”) and the Financial Instruments and Exchange Law and in conformity with accounting principles andpractices generally accepted in Japan, which are different in certain respects from the application and disclosure requirements ofInternational Financial Reporting Standards.
Previously, the Company was allowed to use the financial statements of its foreign subsidiaries which had been prepared inconformity with the financial accounting standards of the countries of their domicile. From the year ended February 28, 2010, theCompany adopted “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial
Statements” (ASBJ Practical Issues Task Force (PITF) No. 18, May 17, 2006). This PITF requires that for the preparation of
consolidated financial statements, the accounting policies and procedures applied to a parent company and its subsidiaries for
similar transactions and events under similar circumstances should be unified, in principle, and financial statements prepared byforeign subsidiaries in accordance with IFRSs or the generally accepted accounting principles in the United States (U.S. GAAP)
tentatively may be used for the consolidation process; however, the items listed in the PITF should be adjusted in the consolidation
process so that net income is accounted for in accordance with Japan GAAP unless they are not material. The Company madenecessary modifications to the consolidated financial statements according to the PITF. The effect of the change on operating income
and income before income taxes and minority interests was immaterial.
Certain items presented in the consolidated financial statements submitted to the Director of the Kanto Finance Bureau in Japan
have been reclassified for the convenience of readers outside Japan.
The accompanying consolidated financial statements are not intended to present the consolidated financial position, results 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 80 subsidiaries as at February 28, 2010 (82 as at February 28, 2009). The accompanying consolidated financial
statements include the accounts of the Company and 68 of its subsidiaries (70 for 2009). 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 28
February 28
February 28
February 28
February 28
February 28
November 30
November 30
November 30
November 30
November 30
December 31
December 31
February 28
February 28
February 28
February 28
February 28
February 28
December 31
December 31

The shares of Island Co., Ltd. were acquired during the year ended February 28, 2010; therefore, Island Co., Ltd. became aconsolidated subsidiary of the Company.

ONWARD HOLDINGS CO., LTD.

27

In the Jil Sander AG Group, Jil Sander Austria GMBH was established and Jil Sander Taiwan was liquidated. In the Joseph Group,
Joseph Tricot SARL merged with Joseph London EURL. Creative Yoko Co., Ltd. merged with CREATIVE YOKO Co., Ltd. and Mrs.
YOKO’s Garden.
The financial statements of the aforementioned subsidiaries with fiscal year-ends of December 31 or November 30 have beenused for consolidation. All material transactions that occurred in the periods from such fiscal year-ends and February 28, theCompany’s fiscal year-end, have been adjusted.
The remaining 12 subsidiaries (12 for 2009) 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,account balances and unrealized profits among the Companies have been entirely eliminated, and the portion attributable to minority
interests is credited/charged thereto.
The assets and liabilities of newly acquired subsidiaries are measured at fair value at the time of acquisition, 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-year periods.
(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 (19companies for 2009) are accounted for by the equity method for the year ended February 28, 2010.
The Company did not apply the equity method to 11 unconsolidated subsidiaries (12 in 2009) and 1 affiliate (4 in 2009) as at
February 28, 2010, as the effect on net income or retained earnings of their consolidated financial statements are not material
individually or in the aggregate.
The Company applied the equity method by using the November 30 financial statements of Gailyglen Ltd., which has a fiscal
year-end of November 30. Also, the December 31 financial statements of 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
the selling price less additional estimated manufacturing costs and estimated direct selling expenses, determined principally by theaverage method. For the year ended February 28, 2010, the recorded write-downs were ¥11,593 million ($129,632 thousand).
Inventories were previously stated at cost, cost being determined generally by the last purchase invoice price method.
Merchandise and finished goods held at retail stores are measured using the retail cost method. Up to February 28, 2009, when the
net realizable value of certain classes of inventories (consisting primarily of seasonal merchandise which remains unsold after theend of such seasons) is substantially less than the carrying value (cost), and the decline in value is not expected to be recovered in
the near future, appropriate write-downs are recorded on such inventory items. The amount of write-down is determined based on
the experience of sales of merchandise similar to those unsold items during the last three years. For the year ended February 28,
2009, the recorded write-downs were ¥8,662 million.
From the year ended February 28, 2010, the Company adopted “Accounting Standard for Measurement of Inventories” (ASBJ
Statement No. 9, July 5, 2006), and inventories held for sale in the ordinary course of business are measured at the lower of cost or
net selling value, which is defined as the selling price less additional estimated manufacturing costs and estimated direct selling
expenses, determined principally by the average method. The change did not have a material impact on the Companies’ results ofoperations.
(5) Investments in Securities
Debt securities and equity securities classified as available-for-sale securities whose fair values are readily determinable are carriedat the fair values prevailing at the fiscal year-end date with unrealized gains or losses included as a component of net assets, net of
applicable taxes.

28

Annual Report 2010

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 realizablevalue and the impairment loss is charged to income. Realized gains and losses are determined using the moving-average method
and are reflected in income.
(6) Derivative Transactions
All derivatives are stated at fair value, and changes in fair value are included in income for the period in which 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 aredeferred as a component of net assets, net of applicable taxes. The gains or losses on the hedging instruments are included in net
income in the same period during which the gains and losses on the hedge items or transactions are recognized. For foreignexchange forward contracts, if they meet conditions for hedge accounting, the difference between the contract rate and spot rate at
the date of the contract is recognized over the period from the contract date to the settlement date.
The derivatives designated as hedging instruments are principally foreign exchange forward contracts. The related hedged items
are trade accounts payable and trade accounts receivable denominated in foreign currencies and scheduled transactions.
The Company has a policy of utilizing hedging instruments in order to reduce the exposure to the risk of foreign currency exchange
rate fluctuation.
(8) Property, Plant and Equipment
The Company and its domestic consolidated subsidiaries provide depreciation by the declining-balance method at rates based on
the estimated useful lives of assets which are prescribed by Japanese income tax regulations, except for certain buildings (other than
improvements) acquired on and after April 1998, which are depreciated by the straight-line method pursuant to an amendment toJapanese income tax law.
Effective March 1, 2008, property, plant and equipment acquired on or before March 31, 2007 which were depreciated to theallowable limit (95% of the acquisition cost) in a particular business year can be further depreciated down to ¥1 evenly over five
years starting from the following business year in connection with the revision to the Japanese Corporation Tax Law. The change did
not have a material impact on the Companies’ results of operations.
Overseas consolidated subsidiaries provide depreciation by the straight-line method.
(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, andthe effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes theenactment 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 bad debt is provided for estimated losses on known bad debt and those on doubtful accounts using the historical
write-off ratio at the balance sheet date.
(12) Allowances for Sales Returns
An allowance for sales returns is provided for the estimated losses on sales returns calculated under the Japanese tax regulations.
(13) Retirement Benefits

ONWARD HOLDINGS CO., LTD.

29

Accrued retirement benefits are provided for at the present value of the projected benefit obligation less the estimated fair value ofplan assets and deferred gains or losses at the balance sheet date. Unrecognized prior service costs are amortized and charged or
credited to income on a straight-line basis over 5 to 10 years, which is within the related employees’ average remaining service years.
Unrecognized actuarial 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
in accordance with the internal rules of the Company and certain consolidated subsidiaries.
(14) Provision for Loss on Guarantee Obligations
The provision for loss on guarantee obligations was provided for the estimated losses on the Company’s obligations to pay for theguaranteed debts of subsidiaries. In estimating the provision, the Company considers the financial condition and other applicablefactors of each of the subsidiaries.
(15) 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 anamount considered appropriate to cover possible utilization of the point during and after the next fiscal year.
(16) Accounting for Leases
Previously, finance leases, except for those where the legal title of the underlying property is transferred from the lessor to the lessee
at the end of the lease term, are accounted for similarly to operating leases. On March 30, 2007, the ASBJ issued ASBJ Statement
No.13, “Accounting Standard for Lease Transactions,” which revised the former accounting standard for lease transactions issued onJune 17, 1993, and ASBJ Guidance No.16, “Guidance on Accounting Standard for Lease Transactions,” which revised the former
guidance issued on January 18, 1994. From the year ended February 28, 2010, the Company adopted the revised accounting
standards. The revised accounting standards require that all finance lease transactions shall be capitalized. Leased assets related tofinance 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 the leasetransactions is prior to the initial fiscal year in which these new accounting standards apply, the Company and its domestic
consolidated subsidiaries have continued to recognize lease payments as expenses. The change did not have a material impact on
the Companies’ results of operations.
(17) Accounting for Japanese Consumption Taxes
The Japanese consumption taxes withheld upon sale of goods and services and the consumption taxes paid by the Companies on
the purchase of goods and services are not included in the accompanying consolidated statements of operations.
(18) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits which can bewithdrawn on demand, and short-term investments which are readily convertible into cash or with an original maturity of three months
or less, which represent insignificant risk of changes in value.
(19) 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
the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash
flows from the continued use and eventual disposition of the asset or the net selling price at disposition.
(20) Directors’ Bonuses
Under the standard of directors’ bonuses, directors’ bonuses are accounted for as an expense as incurred, instead of being
accounted for as an appropriation of retained earnings upon approval at a general meeting of shareholders.

30

Annual Report 2010

(21) United States Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of ¥89.43=US$1, the rate ofexchange as of February 28, 2010, has been used in translation. The inclusion of such amounts is not intended to imply thatJapanese yen have been or could be readily converted, realized or settled in U.S. dollars at that rate or any other rate.
(22) Reclassifications
Certain reclassifications have been made to the prior year’s consolidated financial statements to conform with the presentation used
for the year ended February 28, 2010.
3. Investments in Securities(1) Information as of and for the Year Ended February 28, 2010(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2010 are summarized as follows:
Millions of yen
Acquisition
cost

Thousands of U.S. dollars

Fair value
Unrealized gain(carrying value)(loss)

Acquisition
cost

Fair value
Unrealized gain(carrying value)(loss)

Securities with unrealized gains:
Equity securities¥ 8,173¥ 9,309¥ 1,136$ 91,390$ 104,093

Other

55

63

8

615

704

$ 12,703
89

Total

8,228

9,372

1,144

92,005

104,797

12,792(54,266)

Securities with unrealized losses:
Equity securities

18,74013,887(4,853)

209,549

155,283

Other

271

224

(47)

3,030

2,505

(525)

Total

19,011

14,111(4,900)212,579

157,788(54,791)¥ 27,239¥ 23,483¥ (3,756)$304,584$ 262,585$(41,999)

Total

Losses on impairment of available-for-sale securities recognized to reflect declines in market value considered to be other than
temporary were ¥146 million ($1,633 thousand) for the year ended February 28, 2010.
(b) Available-for-sale securities sold during the year ended February 28, 2010:
Proceeds from sale of securities

Millions of yen

Thousands of
U.S. dollars¥12,858$143,777

Gross realized gain on sale of securities

2,361

26,401Gross realized loss on sale of securities

34

380

(c) Major securities which were not stated at fair value as of February 28, 2010:
Millions of yen

Thousands of
U.S. dollars¥338$3,779Available-for-sale securities:
Non-marketable equity securities(d) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2010 was ¥7,372
million ($82,433 thousand).

ONWARD HOLDINGS CO., LTD.

31

(2) Information as of and for the Year Ended February 28, 2009(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2009 are summarized as follows:
Millions of yen
Acquisition
cost

Fair value
Unrealized gain(carrying value)(loss)

Securities with unrealized gains:
Equity securities936¥ 1,230

Other

¥

8

10

¥ 294
2

Total

944

1,240

296
(5,159)Securities with unrealized losses:
Equity securities

29,69424,535

Other

282

209

(73)

Total

29,976

24,744(5,232)¥ 30,920¥ 25,984¥(4,936)

Total

Losses on impairment of available-for-sale securities recognized to reflect declines in market value considered to be other than
temporary were ¥22,646 million for the year ended February 28, 2009.
(b) Available-for-sale securities sold during the year ended February 28, 2009:
Millions of yen

Proceeds from sale of securities¥ 8

Gross realized gain on sale of securities

̆

Gross realized loss on sale of securities

5(c) Major securities which were not stated at fair value as of February 28, 2009:
Millions of yen

Available-for-sale securities:
Non-marketable equity securities¥341(d) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2009 was ¥7,500
million.
4. Derivative Transactions
Derivatives are used in order to hedge foreign exchange market risk on the transactions which occur in the normal course ofbusiness. Derivatives are not used for speculative purposes or for highly leveraged transactions. Derivatives are executed withfinancial institutions with high credit ratings, and the Company does not anticipate significant losses due to the credit risks of its
counterparties.

32

Annual Report 2010

The contract or notional amounts and fair value of derivative financial instruments held as of February 28, 2010 are summarized asfollows:
Millions of yen
Contract or notionalamounts

Valuation
gain (loss)

Fair value

Forward exchange contracts:
To buy foreign currency:
U.S. dollar¥ 2,744¥ 2,452¥ (292)To sell foreign currency:
U.S. dollar

446

441

5

Yen

223

223

(0)

3,403

(214)

(214)

Currency swap agreement:
U.S. dollar received for Japanese yen
Currency option contracts:
Buy: U.S. dollar call

3,016

178

178

Sell: U.S. dollar put

3,876

(701)

(701)

Buy: Euro dollar call

817

14

14

Sell: Euro dollar put

570

(67)

(67)

¥15,095¥ 2,326¥(1,077)

¥ 300

¥

¥

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

4

905

(20)

4
(20)

100

(4)

(4)

¥ 1,305¥ (20)¥ (20)

Thousands of U.S. dollars
Contract or notionalamounts

Valuation
gain (loss)

Fair value

Forward exchange contracts:
To buy foreign currency:
U.S. dollar$ 30,683$ 27,418$ (3,265)

To sell foreign currency:
U.S. dollar

4,987

4,931

56

Yen

2,494

2,494

(0)

38,052(2,393)(2,393)Currency swap agreement:
U.S. dollar received for Japanese yen
Currency option contracts:
Buy: U.S. dollar call

33,725

1,990

1,990

Sell: U.S. dollar put

43,341(7,839)(7,839)Buy: Euro dollar call

9,135

157

157

Sell: Euro dollar put

6,374

(749)

(749)

$168,791$ 26,009$(12,043)

Variable rate received for fixed rate

$ 3,354$$

Variable rate received for variable rate

10,120Interest rate swap agreement:

Fixed rate received for variable rate

45
(224)

45
(224)

1,118

(45)

(45)

$ 14,592$ (224)$ (224)

ONWARD HOLDINGS CO., LTD.

33

The contract or notional amounts and fair value of derivative financial instruments held as of February 28, 2009 are summarized asfollows:
Millions of yen
Contract or notionalamounts

Valuation
gain (loss)

Fair value

Forward exchange contracts:
To buy foreign currency:
U.S. dollarEuro¥ 3,495¥ 3,348¥ (147)

189

139

(50)

3,872

(5)

(5)

Currency swap agreement:
U.S. dollar received for Japanese yen
Currency option contracts:
Euro call / U.S. dollar put

(28)

(28)

Buy: U.S. dollar call

US$ 3,885 thousand
1,996

169

169

Sell: U.S. dollar put

1,996

(296)

(296)
¥ (357)

Interest rate swap agreement:
Variable rate received for fixed rate

¥ 300

¥ (12)¥ (12)¥ (12)

5. Property, Plant and Equipment
The Japanese tax regulations allow a company to defer capital gains on the sale of qualified real property, if the company intends tooffset 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, 2009 and 2010 were reduced by ¥8,290 million and ¥8,232 million ($92,050
thousand), respectively, representing accumulated deferred gains from eligible sales.
6. Impairment Losses on Fixed Assets
For the years ended February 28, 2009 and 2010, the Company reviewed its long-lived assets for impairment and, as a result,recognized an impairment loss as follows:
February 28, 2010
Thousands ofLocation

Usage

Tokyo metropolitan area and other

Business assets

Kanagawa Prefecture

United States

34

Annual Report 2010

Idle assets

Business assets

Description

Millions of yen

U.S. dollars

Buildings and structures

¥ 50

$ 559

Other

200

2,236

Buildings and structures

15

168

Land

17

190

Other

12

134

Buildings and structures

ʊ

ʊ

Other

1

11

February 28, 2009
Location

Usage

Description

Millions of yen

U.K.

Goodwill

GoodwillTokyo metropolitan area and other

Business assets

Buildings and structures

492

Other

626

Buildings and structures

72

Other

111

Buildings and structures

64

Other

41

Kanagawa Prefecture

Idle assets

United States

Business assets¥11,592

The long-lived assets are basically grouped by brand, and assets for lease and idle assets are grouped individually by each item.
The Company has recognized a loss on impairment on assets for lease and idle assets due to a significant decline in their market
value, and on business assets due to a continuous loss generated from their operating activities, by reducing their carrying amount to
the respective net realizable value of each asset.
Impairment loss on long-lived assets for the years ended February 28, 2009 and 2010 consisted of the following:
Millions of yen
February 28,
2009

Buildings and structures¥

February 28,
2010

Thousands of
U.S. dollars
February 28,
2010

628

¥ 64

$ 715

ʊ

17

190

Goodwill

11,592

ʊ

ʊ

Other

778

213

2,382

¥12,998¥294$3,287

Land

Total

The net realizable value for these assets is based on their net selling price or their value in use. The net selling price is estimatedby using their appraisal value or reasonable estimated price based on actual transactions. The value in use is calculated bydiscounting the future cash flow with 5.0% discount rates for both the years ended February 28, 2009 and 2010.
7. Retirement Plan and Retirement Benefits
The Company and its 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 (“Welfare
Benefit Plan”), tax qualified pension plans and plans for lump-sum retirement benefits.
The reserve for retirement benefits as of February 28, 2009 and 2010 is analyzed as follows:
Thousands of
U.S. dollars

Millions of yen
February 28,
2009

February 28,
2010

February 28,
2010

Projected benefit obligations¥(35,820)¥(37,507)$(419,401)

Plan assets (including employee retirement benefit fund)

22,84325,463284,726

Funded status(12,977)(12,044)(134,675)

Unrecognized prior service costs

(107)

(72)

(805)

Unrecognized actuarial differences

10,748

9,014

100,794(2,336)(3,102)(34,686)

597

171

1,912

¥ (2,933)¥ (3,273)$ (36,598)

Subtotal
Prepaid pension costAccrued retirement benefits

ONWARD HOLDINGS CO., LTD.

35

The net periodic pension expenses for the years ended February 28, 2009 and 2010 were as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost

2009

2010

2010

¥1,445¥1,593$17,813Interest cost

646

644

7,201

Expected return on plan assets

(450)

(144)

(1,610)

Amortization of unrecognized prior service costs

(41)

(35)

(392)

Amortization of unrecognized actuarial differences

455

1,318

14,738¥2,055¥3,376$37,750

Net periodic pension expenses

Actuarial assumptions used in the calculation of the aforementioned information were as follows:
Method of attributing the projected benefits to periods of service

As of February 28, 2009

As of February 28, 2010

Straight-line basis

Straight-line basis

Discount rate

1.5~2.0%

1.5%

Expected rate of return on plan assets

0.3~2.4%

0.2~1.5%

Amortization of unrecognized prior service costs

5~10 years

5~10 years

Amortization of unrecognized actuarial differences

5~10 years

5~10 years

8. Notes to Consolidated Statements of Cash Flows(1) Cash and cash equivalents at February 28, 2009 and 2010 consisted of the following:
Millions of yen
February 28,
February 28,
2009
2010

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

Thousands of
U.S. dollars
February 28,
  
2010

¥23,415¥34,330(89)(1,651)(18,462)¥23,326¥32,679$365,414$383,876(2) Payment for acquisition of consolidated subsidiaries resulting in a change in the scope of consolidation
For the year ended February 28, 2010, due to the acquisition of shares of the below company, the below company was newly
consolidated. The assets and liabilities of the company at the time of initial consolidation, additional cash paid for the acquisition,
cash and cash equivalents held by the subsidiary and net payment for acquisition of the subsidiary was as follows:(Island Co., Ltd.)
Millions of yen

Thousands of
U.S. dollars

Current assets¥2,745$30,694

Fixed assets

801

8,957

Goodwill on consolidation

3,389

37,896

Current liabilities(1,974)(22,073)

Long-term liabilities(1,801)(20,139)

Cash paid for acquisition of the subsidiary

3,160

35,335

Cash and cash equivalents held by the subsidiary(824)(9,214)¥2,336$26,121

Payment for acquisition of the subsidiary36

Annual Report 2010

For the year ended February 28, 2009, due to the acquisition of shares of the below companies, the below companies were newly
consolidated. The assets and liabilities of the companies at the time of initial consolidation, additional cash paid for the acquisition,
cash and cash equivalents held by the subsidiaries and net payment for acquisition of the subsidiaries were as follows:(Creative Yoko Co., Ltd.)
Millions of yen

Current assets¥3,048Fixed assets

3,588

Goodwill on consolidation

4,210

Current liabilities(2,819)Long-term liabilities(345)

Minority interests in the subsidiary
Revaluation gain of land
Cash paid for acquisition of the subsidiary
Cash and cash equivalents held by the subsidiary
Payment for acquisition of the subsidiary

5
(83)
7,604
(933)
¥6,671(Violine S.à r.l.)Millions of yen

Current assets¥ 8,210

Fixed assets

19,814

Goodwill on consolidation

17,146

Current liabilities(7,684)Long-term liabilities(10,178)

Cash paid for acquisition of the subsidiary

27,308Cash and cash equivalents held by the subsidiary
Payment for acquisition of the subsidiary(699)¥26,609(Corporate S.r.l.)Millions of yen

Current assets¥224

Fixed assets

113

Goodwill on consolidation

49

Current liabilities(282)

Long-term liabilities(49)

Cash paid for acquisition of the subsidiary55

Cash and cash equivalents held by the subsidiary
Payment for acquisition of the subsidiary

(0)
¥ 55

9. 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, 2009 and 2010 are as follows:

ONWARD HOLDINGS CO., LTD.

37

(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, 2009 and 2010 are summarized as follows:
Millions of yen
February 28,
2009

Acquisition costThousands of U.S. dollars
February 28,2010

Tools,
furniture,and fixtures¥ 2,375

Other
¥880

Total

Tools, furniture,and fixtures¥ 3,255(1,386)

(445)

(145)

ʊ

¥ 844

¥435

Accumulated depreciation
Accumulated impairment loss
Net book value

February 28,
2010

Tools, furniture,and fixtures$19,311

Other$7,615

Total$26,926(1,601)(13,239)(4,663)(17,902)(145)(1,622)

ʊ(1,622)¥ 662$ 4,450$2,952$ 7,402¥ 1,727

Other
¥681

Total
¥ 2,408(1,831)(1,184)

(417)

(145)

(145)

ʊ

¥ 1,279

¥ 398

¥264

The scheduled maturities of future lease payments on such lease contracts as of February 28, 2009 and 2010 are as follows:
Millions of yen

Thousands of
U.S. dollars

February 28, February 28,
 20092010

February 28,
2010

Scheduled maturities of future leases:
Due within one year

¥ 659

¥389

Due over one year

765

418

4,674

¥1,424¥807$9,024$4,350The balance of accumulated impairment losses of leased assets as of February 28, 2009 is as follows:
Millions ofyen

Impairment losses of leased assets¥17

Lease expenses, reversal of impairment loss of leased assets, depreciation and impairment loss for the years ended February 28,
2009 and 2010 are as follows:

Lease expenses for the year

Millions of yen

Thousands of
U.S. dollars

February 28, February 28,
2009
2010

February 28,
2010

¥738

¥637

Reversal of impairment loss of leased assets

14

17

190

Depreciation

738

637

7,123

$7,123

The Companies’ operating lease contracts:
The scheduled maturities of future lease payments on operating lease contracts as of February 28, 2010 are as follows:
Millions of yen

Thousands of
U.S. dollars

Due within one year

¥ 94

$1,051

Due over one year

243

2,717

¥337

$3,768

Scheduled maturities of future leases:

38

Annual Report 2010

(Lessor)
The scheduled maturities of future lease income on such lease contracts as of February 28, 2009 and 2010 are as follows:
Millions of yen

Thousands of
U.S. dollars

February 28, February 28,
2009
2010

February 28,
2010

Due within one year

¥ 81

¥ 63

Due over one year

112

56

626

¥193

¥119

$1,331$ 705

10. Income Taxes
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as at February
28, 2009 and 2010 consisted of the following elements:
Thousands of
U.S. dollars

Millions of yen
February 28,
2009

February 28,
2010

February 28,
2010

Deferred tax assets:¥ 2,262¥ 2,648$ 29,610

Evaluation loss on investments in unconsolidated subsidiaries

Valuation loss on inventories

192

177

1,979

Accrued bonuses to employees

891

645

7,212

3,129

3,489

39,014

Accrued retirement benefits
Accrued retirement benefits for directors and auditors

56

64

716

Allowance for bad debt

690

1,310

14,648Tax loss carryforwards

18,266

11,872

132,752

Impairment loss

6,635

5,993

67,013

Investments in securities

1,535

747

8,353

16

4

45

2,917

4,097

45,812Net unrealized gains on available-for-sale securities
Other
Subtotal

36,58931,046347,154(25,195)(19,325)(216,091)

11,394

11,721

131,063

Gain on securities contributed to an employee retirement benefit trust

(699)

(699)

(7,816)

Provision for deferred capital gains on real property for tax purposes

(21)

(21)

(235)

Business tax refundable

(17)

ʊ

ʊ

Other

(999)

(1,590)(17,779)

Less: Valuation allowance
Total deferred tax assets
Deferred tax liabilities:

Total deferred tax liabilities(1,736)(2,310)(25,830)

Net deferred tax assets¥ 9,658¥ 9,411$105,233

The reconciliation of the difference between the statutory tax rate and the effective tax rate for the year ended February 28, 2010 is
as follows:%
Statutory tax rate

40.7

Reconciliation:
Non-deductible items (entertainment expenses, etc.)

4.3

Income not credited for tax purposes (dividends received, etc.)(1.5)

Goodwill amortization

14.1

Other
Effective tax rate

7.7
65.3

The reconciliation for the year ended February 28, 2009 was omitted because a loss before income taxes and minority interests
was recorded.

ONWARD HOLDINGS CO., LTD.

39

11. Revaluation of Land
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 28, 2010, the net accumulated revaluation loss amounted to ¥10,993 million ($122,923 thousand), which ispresented as a separate component of net assets as “Net revaluation loss of land.” Related deferred tax liabilities of ¥5,949 million($66,521 thousand) is recognized.
As of February 28, 2009, the net accumulated revaluation loss amounted to ¥11,075 million, which is presented as a separate
component of net assets as “Net revaluation loss of land.” Related deferred tax liabilities of ¥5,949 million is recognized.
12. 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, 2009 and 2010 aggregated to ¥89 million and ¥48 million ($537 thousand), respectively.
13. Short-Term Loans and Long-Term Debt
Short-term loans at February 28, 2009 and 2010 represented loans, principally from banks. The weighted-average interest rate onthese loans was 1.2% in 2009 and 1.5% in 2010.
Long-term loans at February 28, 2009 and 2010 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen
February 28,
2009

February 28,
2010

February 28,
2010

Unsecured loans, principally from banks, maturing in installments through2014 with weighted average interest of 1.2% at February 28, 2010¥

ʊ¥27,871$311,652

Loans, principally from banks, maturing in installments through 2013 withweighted average interest of 1.4% at February 28, 2009, partially securedby mortgage of time deposits, lease deposits, buildings and land

30,141ʊʊLess current portion

3,395

3,817

42,682¥26,746¥24,054$268,970

Lease obligations at February 28, 2010 are summarized as follows:
Millions of yen
Lease obligations¥585

Less current portion of lease obligations

161

1,800

¥424

$4,741$6,541

The aggregate annual maturities of long-term loans after February 28, 2011 are as follows:
Millions of yen

Thousands of
U.S. dollars$ 40,713

Year ending February 28 or 29:

40

Thousands of
U.S. dollars

2012¥ 3,641

2013

3,534

39,517

2014

16,869188,628

2015

10

112

Annual Report 2010

The aggregate annual maturities of lease obligations after February 28, 2011 are as follows:
Millions of yen

Thousands of
U.S. dollars

2012

¥ 155

$ 1,733

2013

193

2,158

2014

62

693

2015

14

157

Year ending February 28 or 29:

Bonds at February 28, 2009 and 2010 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen
February 28,
2009

February 28,
2010

February 28,
2010

0.80% unsecured yen bonds issued by a subsidiary, due 2010

¥ʊ

¥ 20

$ 224

1.73% unsecured yen bonds issued by a subsidiary, due 2012

ʊ

150

1,677

1.08% unsecured yen bonds issued by a subsidiary, due 2011

ʊ

75

839

0.56% unsecured yen bonds issued by a subsidiary, due 2013

ʊ

70

783

0.82% unsecured yen bonds issued by a subsidiary, due 2012

ʊ

100

1,118

0.72% unsecured yen bonds issued by a subsidiary, due 2012

ʊ

100

1,118

0.90% unsecured yen bonds issued by a subsidiary, due 2014

ʊ

200

2,236
89

0.79% unsecured yen bonds issued by a subsidiary, due 201024

8

1.23% unsecured yen bonds issued by a subsidiary, due 2009

150

ʊ

ʊ

174

723

8,084

Less current portion

166

205

2,292

¥ 8

¥518

$5,792

The aggregate annual maturities of bonds after February 28, 2011 are as follows:
Millions of yen

Thousands of
U.S. dollars

Year ending February 28 or 29:
2012

¥ 205

$ 2,292

2013

151

1,688

2014

277

3,097

2015

50

559

2016

40

447

14. Shareholders’ Equity
Under the Corporation Law, the entire amount of the issue price of shares is required to be designated as a stated common stock
account, although a company in Japan may, by resolution of its Board of Directors, account for an amount not exceeding 50% of theissue price of new shares as additional paid-in capital.
The Corporation Law 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 also provides that
additional paid-in capital and the legal reserve are available for appropriations by a resolution of the shareholders. Balances of thelegal reserve are included in retained earnings in the accompanying consolidated balance sheets.
Cash dividends charged to retained earnings for the years ended February 28, 2010 and 2009 represent dividends paid out during
those years. The amount available for dividends is based on the amount recorded in the Company’s non-consolidated books ofaccount in accordance with the Corporation Law.

ONWARD HOLDINGS CO., LTD.

41

Dividends to be paid after the balance sheet date, which were approved by the general meeting of shareholders held on May 27,
2010, are as follows:(a) Total dividends¥3,760 million ($42,044 thousand)(b) Source of dividends

Retained earnings(c) Cash dividends per common share¥24 ($0.27)(d) Date to determine which shareholders receive the dividends

February 28, 2010(e) Effective date

May 28, 2010

15. Per Share Information
Net income (loss) 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 ofoperations 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 (loss) per share for the years ended February 28, 2009 and 2010 is
as follows:
Thousands of
U.S. dollars

Millions of yen

Net income (loss)
Less: Components not pertaining to common shareholders

2009

2010

2010

¥(30,895)¥ 2,188$ 24,466̆̆̆Net income (loss) pertaining to common stock¥(30,895)¥ 2,188$ 24,466

Average outstanding shares of common stock (thousand shares)

156,659

156,655

156,655

̆

628

628

Effect of dilutive stock options (thousand shares)

16. Related-Party Transactions
Year Ended February 28, 2010
The Company leased land from Takeshi Hirouchi, Chairman and CEO of ONWARD HOLDINGS Co., Ltd., during the year and therental fee was ¥7 million ($78 thousand). Also, Mr. Hirouchi paid a rental fee of ¥16 million ($179 thousand) to the Company for ahouse. The rental fees were determined by the average market prices.
Year Ended February 28, 2009
The Company leased land from Mr. 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
the average market prices.
17. Stock Options
The cost recognized for the stock options for the years ended February 28, 2010 and 2009 was ¥164 million ($1,834 thousand) and¥145 million, respectively, which is included in selling, general and administrative expenses.
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 theexercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions
as directors of the Company.
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

42

Annual Report 2010

¥1 ($0.01)¥432 ($4.83)
155,000 sharesA summary of the scale and movement of the stock option plan for the year ended February 28, 2010 is as follows:2009 stock option plan(No. 6)
Non-vested:
Outstanding at February 28, 2009ʊGranted

155,000

Forfeitedʊ

Vestedʊ

Outstanding at February 28, 2010

155,000

The fair value of the 2009 stock options (No. 6) was estimated using the Black-Scholes option-valuation model with the following
assumptions:
Expected volatility
Expected lives

32.873%
6 years and 10 months

Expected dividend¥30 per share

Risk-free interest rate

1.0478%The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it
is difficult to estimate forfeiture in the future.
2009 Stock Option Plan (No. 5)
Under the 2009 stock option plan (No. 5), stock options were granted to 11 directors and 19 executive officers of the Company’s
subsidiary on March 18, 2009. They are exercisable in the period from March 19, 2009 to February 28, 2039. The terms of theoptions include certain limitations on the exercisability under which grantees can exercise their options during a five-year period
starting a year after they lose their positions as directors or executive officers of the Company’s subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price¥1 ($0.01)

Fair value at the grant date¥362 ($4.05)

Number of stock options granted

268,900 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2010 is as follows:2009 stock option plan(No. 5)
Non-vested:
Outstanding at February 28, 2009ʊGranted268,900

Forfeited

4,300

VestedOutstanding at February 28, 2010

ʊ
264,600

The fair value of the 2009 stock options (No. 5) was estimated using the Black-Scholes option-valuation model with the following
assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

34.842%
9 years and 11 months¥30 per share
1.3003%The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it
is difficult to estimate forfeiture in the future.

ONWARD HOLDINGS CO., LTD.

43

2008 Stock Option Plan (No. 4)
Under the 2008 stock option plan (No. 4), stock options were granted to 12 directors and 21 executive officers of the Company’s
subsidiary on June 20, 2008. They are exercisable in the period from June 21, 2008 to February 28, 2038. The terms of the options
include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting ayear after they lose their positions as directors or executive officers of the Company’s subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price¥1 ($0.01)

Fair value at the grant date

¥905 ($10.12)

Number of stock options granted

91,100 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2010 is as follows:2008 stock option plan(No. 4)
Non-vested:
Outstanding at February 28, 2009

91,100Grantedʊ

Forfeitedʊ

Vestedʊ

Outstanding at February 28, 2010

91,1002008 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 theexercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions
as directors of the Company.
A summary of information for the stock option plan is as follows:
Exercise price¥1 ($0.01)

Fair value at the grant date

¥944 ($10.56)

Number of stock options granted

70,000 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2010 is as follows:2008 stock option plan(No. 3)
Non-vested:
Outstanding at February 28, 2009ʊForfeited

1,200

VestedOutstanding at February 28, 2009

44

70,000GrantedAnnual Report 2010

ʊ
68,8002007 Stock Option Plan (No. 2)
Under the 2007 stock option plan (No. 2), stock options were granted to 5 directors and 2 corporate auditors of the Company on July20, 2007. They are exercisable in the period from July 21, 2007 to July 20, 2037. 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 corporate auditors.
A summary of information for the stock option plan is as follows:
Exercise price¥1 ($0.01)

Average stock price on the date the option was exercised¥605 ($6.77)

Fair value at the grant date

¥1,284 ($14.36)

Number of stock options granted

40,000 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2010 is as follows:2007 stock option plan(No. 2)
Non-vested:
Outstanding at February 29, 2009
GrantedForfeited

40,000ʊʊ

Vested

16,700

Outstanding at February 28, 2010

23,300

Vested:Outstanding at February 29, 2009ʊ

Vested

16,700Exercised

1,500

Forfeitedʊ

Outstanding at February 28, 2010

15,200The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it
is difficult to estimate forfeiture in the future.
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
June 20, 2006. They are exercisable in the period from July 1, 2006 to June 30, 2036. The terms of the options include certain
limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after theylose 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)¥579 ($6.47)¥1,541 ($17.23)
63,000 shares

ONWARD HOLDINGS CO., LTD.

45

A summary of the scale and movement of the Company’s stock option plan for the year ended February 28, 2010 is as follows:
2006 stock option plan(No. 1)
Non-vested:
Outstanding at February 29, 2008

36,500Grantedʊ

Forfeitedʊ

Vested16,500

Outstanding at February 28, 2010

20,000

Vested:Outstanding at February 28, 2009

23,500

Vested16,500Exercised

16,500Forfeitedʊ

Outstanding at February 28, 2010

23,500The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it
is difficult to estimate forfeiture in the future.
18. Segment Information(1) Industry Segment Information
The Company and its consolidated subsidiaries operate principally in two industrial segments, “Apparel” and “Other.”
The Apparel Division produces and sells a wide range of women’s and men’s clothing, including dresses, suits, shirts, skirts,
sweaters, trousers and casual wear.
The Other Division operates logistics, sports facilities, resort facilities, etc.
Segment information classified by industry segment of the Companies for the year ended February 28, 2010 is as follows:
Millions of yen

For the year ended February 28, 2010
Industry segment
Apparel

Other

Total

Sales to outside customers
Intersegment sales¥ 234,181
21¥14,454
6,743¥ 248,635
6,764

Total
Costs and expenses

234,202229,645

21,197
21,236

255,399
250,881

Operating income (loss)¥

AssetsDepreciation and amortization¥ 201,278¥ 4,735

4,557

¥

(39)

¥

¥31,753
¥ 699

¥

4,518

ʊ
(6,764)¥ 248,635
ʊ

(6,764)(6,630)248,635
244,251¥¥ 233,031¥ 5,434

Consolidated
total

(134)

¥

4,384

¥ 59,538¥
313¥ 292,569¥ 5,747

Impairment loss

¥

251

¥

ʊ

¥

251

¥

43

¥

294

Capital expenditures

¥

4,777

¥

438

¥

5,215

¥

579

¥

5,794

Thousands of U.S. dollars

For the year ended February 28, 2010

Industry segment
ApparelSales to outside customers
Intersegment sales

Other$ 2,618,595 $ 161,624

Total
Costs and expenses

46

Elimination ofintersegment sales

Total
$

2,780,219$

ʊConsolidated
total$

2,780,219

235

75,39975,634(75,634)

ʊ

2,618,830

237,023

2,855,853(75,634)

2,780,219

2,567,874

237,459

2,805,333

Operating income (loss)$

AssetsDepreciation and amortization$ 2,250,676 $ 355,060$

2,605,736$

52,947 $7,816$

Impairment loss$

2,806 $

ʊ$

Capital expenditures$

53,416 $4,898$

Annual Report 2010

Elimination ofintersegment sales

50,956 $(436) $

50,520(74,136)$

2,731,197(1,498)$49,022$ 665,750$

3,271,486

60,763

$

3,500

$

64,263

2,806

$

481

$

3,287

58,314

$

6,474

$

64,788

The management expenses in Elimination of intersegment sales as of February 28, 2010 were ¥3,703 million ($41,407 thousand)and the assets used for management activity as of February 28, 2010 were ¥186,048 million ($2,080,376 thousand).
Segment information classified by industry segment of the Companies for the year ended February 28, 2009 is as follows:
For the year ended February 28, 2009

Millions of yen
Industry segment
Apparel

Other

Total

Sales to outside customers
Intersegment sales¥ 245,422
11¥15,584
7,676¥ 261,006
7,687

Total
Costs and expenses

245,433
236,479

23,26023,380268,693259,859

Elimination ofintersegment sales

¥

8,834

¥

Consolidated
totalʊ
(7,687)¥ 261,006(7,687)(7,937)

261,006
251,922

̆

Operating income (loss)

¥

8,954

¥ (120)¥AssetsDepreciation and amortization¥ 202,727¥ 4,946¥32,496¥ 730¥ 235,223¥ 5,676¥ 61,060
¥
310

250

¥

¥ 296,283¥ 5,986

9,084

Impairment loss

¥ 12,738¥77¥ 12,815¥

183¥ 12,998

Capital expenditures

¥

¥

404

¥

¥

169

¥

3,605

4,009

4,178

The management expenses transferred to Elimination of intersegment sales as of February 28, 2009 were ¥3,836 million and theassets used for management activity as of February 28, 2009 were ¥191,306 million.

(2) Geographic Segment Information
The major countries or regions in the respective divisions are as follows:
Europe: United Kingdom, Italy, France and Germany
Other: U.S.A., China and South Korea
Segment information classified by geographic segment of the Company for the year ended February 28, 2010 is as follows:
Millions of yen

For the year ended February 28, 2010
Geographic segment

Sales to outside customers
Intersegment sales

Japan

Europe

Other

Total

¥ 204,889
1,434¥ 36,056
345¥ 7,69097¥ 248,635
1,876

206,323
197,023

36,401
40,574

7,787
8,689

250,511
246,286

Total
Costs and expenses
Operating income (loss)¥

Assets¥ 152,818

9,300

¥

(4,173)¥ 66,241¥(902)¥ 13,812

¥

¥

4,225

¥

¥ 232,871

Consolidated
totalʊ
(1,876)¥ 248,635
ʊ

(1,876)(2,035)

248,635
244,251

159

¥

4,384

¥ 59,698¥ 292,569

Elimination ofintersegment sales

Consolidated
total

Thousands of U.S. dollars

For the year ended February 28, 2010

Geographic segment

Japan
Sales to outside customers
Intersegment sales

Elimination ofintersegment sales

Europe$ 2,291,054 $ 403,176 $16,035
3,857

Total
Costs and expenses

2,307,089
2,203,097

407,033
453,695

Other

Total

85,989 $ 2,780,219
1,085
20,97787,074
97,1602,801,196
2,753,952(10,086) $$ʊ(20,977)$ 2,780,219
ʊ(20,977)(22,755)

2,780,219
2,731,197

Operating income (loss)$

47,244$

1,778

Assets$ 1,708,800 $ 740,702 $ 154,445 $ 2,603,947$

667,539

103,992 $ (46,662) $$49,022$ 3,271,486

The management expenses in Elimination of intersegment sales as of February 28, 2010 were ¥3,703 million ($41,407 thousand)and the assets used for management activity as of February 28, 2010 were ¥186,048 million ($2,080,376 thousand).

ONWARD HOLDINGS CO., LTD.

47

Segment information classified by geographic segment of the Company for the year ended February 28, 2009 is as follows:
For the year ended February 28, 2009

Millions of yen
Geographic segment

Sales to outside customers
Intersegment sales
Total
Costs and expenses

Elimination ofintersegment sales

Japan

Europe

Other

Total

¥ 226,449
1,834¥ 26,330
546¥ 8,22775¥ 261,006
2,455

228,283
217,529

26,87628,400

8,302
8,866

263,461
254,795

Operating income (loss)¥ 10,754¥

Assets¥ 150,554¥ 69,777(1,524)¥(564)¥ 14,715¥

8,666¥ 235,046¥¥

Consolidated
totalʊ
(2,455)¥ 261,006
ʊ

(2,455)(2,873)

261,006
251,922418¥¥ 61,237

9,084¥ 296,283

The management expenses transferred to Elimination of intersegment sales as of February 28, 2009 were ¥3,836 million and theassets used for management activity as of February 28, 2009 were ¥191,306 million.
(3) Overseas Sales
The major countries or regions in the respective divisions are as follows:
Europe: United Kingdom, Italy, France and Germany
Other: U.S.A., China and South Korea
The overseas sales are sales except for sales to the Japan area of the Company and its consolidated subsidiaries.
Segment information classified as overseas sales of the Company for the year ended February 28, 2010 is as follows:
Millions of yen

For the year ended February 28, 2010

Overseas sales

Overseas sales
Consolidated sales
Percentage of overseas sales against consolidated sales

Europe

Other

Total

¥ 24,220¥ 16,725¥ 40,945
248,635

9.7%

6.7%

16.5%

Thousands of U.S. dollars

For the year ended February 28, 2010

Overseas sales

Overseas sales
Consolidated sales
Percentage of overseas sales against consolidated sales

Europe

Other

Total

$ 270,826$ 187,018$ 457,844
2,780,219

9.7%

6.7%

16.5%

Segment information classified as overseas sales of the Company for the year ended February 28, 2009 is as follows:
For the year ended February 28, 2009

Millions of yen
Overseas sales

Overseas sales
Consolidated sales
Percentage of overseas sales against consolidated sales

48

Annual Report 2010

Europe

Other

Total

¥ 18,530¥ 14,945¥ 33,475
261,006

7.1%

5.7%

12.8%

ONWARD HOLDINGS CO., LTD.

49

Principal Subsidiaries
Overseas Subsidiaries
J. PRESS, INC.
262 York Street,
New Haven, CT 06511, U.S.A.
Tel: (1) 203-772-1310

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

ONWARD KASHIYAMAHONG KONG LTD.
Units 1208-9, Lippo Sun Plaza,
28 Canton Road, T.S.T.,
Kowloon, Hong Kong,
People’s Republic of China
Tel: (852) 2721-7068

ONWARD BEACH RESORT GUAM, INC.
445 Governor Carlos G. Camacho Road,
Tamuning, Guam 96911, U.S.A.
Tel: (1) 671-647-7777

GIBO’ CO. S.p.A.
Via Cassia 69, Tavarnuzza,
50029 Firenze, Italy
Tel: (39) 055-237-2020
ONWARD ITALIA S.p.A.
Via Della Spiga 9, 20121 Milano, Italy
Tel: (39) 02-783-667
SHANGHAI ONWARD
FASHION CO., LTD.
5F Jinjiang Dickson Center,#400 Changle Road, Shanghai,
People’s Republic of China
Tel: (86) 21-6466-6466
ONWARD FASHION TRADING(China) CO., LTD.
5F Jinjiang Dickson Center,#400 Changle Road, Shanghai,
People’s Republic of China
Tel: (86) 21-6472-3660
ONWARD Kashiyama
Korea Co., Ltd.
GF, Hwankyoung B/D,
1-118, Jang Chung-Dong, Chung-ku,
Seoul 100-391, Republic of Korea
Tel: (82) 2-548-5841
ONWARD Kashiyama
SINGAPORE PTE. Co., Ltd.
1 Scotts Road, #23-12 Shaw Centre,
Singapore 228208, Republic of Singapore
Tel: (65) 6838-0690

50

Domestic Subsidiaries

Annual Report 2010

ONWARD Golf RESORT GUAM, INC.
#825, Route 4A, Talofofo,
Guam 96915, U.S.A.
Tel: (1) 671-789-5555
Freed of London Ltd.
94, St. Martin’s Lane,
London WC2N 4AT, U.K.
Tel: (44) 20-7240-0432
Joseph Ltd.
Unit 11, 50 Carnwath Road,
London SW6 3JX, U.K.
Tel: (44) 20-7736-2522
Jil sander S.p.A.
Piazza Castello 1,
20121 Milano, Italy
Tel: (39) 02-806913. 1
IRIS S.p.A.
Via Pampagnina 42,
Fisso D’Artico,
30032 Venezia, Italy
Tel: (39) 041-5169911
ERIKA s.r.l.
Via Boschi, 42/bis,
37060 MACCARI (Verona), Italy
Tel: (39) 0442-56666
Frassineti s.r.l.
Via E. Fermi 7, Loc. Scopeti - Rufina,
50068 Firenze, Italy
Tel: (39) 055-839-7385
corporate s.r.l.
Via Robuschi, 3 43100 Parma, Italy
Tel: (39) 0521-292-961

Apparel and Textile
Products
onward kashiyama Co., Ltd.
onward trading Co., Ltd.
Chacott Co., Ltd.
CREATIVE YOKO Co., Ltd.
BUS STOP Co., Ltd.
ISLAND. CO., LTD.
Donna Karan Japan K.K.
FUSION Co., Ltd.
candela international co., ltd.
j. direction co., ltd.
O.P. S. co., ltd.

Services
Across Transport Co., Ltd.
Onward Life Design
Network Co., Ltd.
Onward Creative Center Co., Ltd.
bien co., ltd.
EXCEL CO., LTD.
BOOKLET Corp.

Resorts
O & K Co., Ltd.
ONWARD RESORT & golf CO., LTD.

As of February 28, 2010

Corporate Data
(As of February 28, 2010)

Head Office	10-5, Nihonbashi 3-chome,

Major Shareholders

Chuo-ku, Tokyo 103-8239, Japan

Tel: (81) 3-3272-2317
Fax: (81) 3-3272-2314
URL: http://www.onward-hd.co.jp/
Established

September 1947

Paid-in Capital¥30,079 million

Common Stock	Authorized—400,000,000 shares
Issued—172,921,669 shares
Number of Shareholders

11,130Kashiyama Scholarship Foundation

5.5%

Japan Trustee Services Bank, Ltd. (Trust account)

5.2

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

4.5

Nippon Life Insurance Company

3.9

The Bank of New York Treaty JASDEC Account

3.7

Isetan Company, Limited

3.1

The Dai-ichi Mutual Life Insurance Company

2.6

MARUI GROUP CO., LTD.

2.1

SUMITOMO MITSUI BANKING CORPORATION

1.8

Japan Trustee Services Bank, Ltd. (Trust account 4G)

1.8

Note:	The Company holds 16,260 treasury shares but has been excluded fromthe list of major shareholders.

Stock Listings	Tokyo, Osaka, and Nagoyastock exchanges

Distribution of Ownership among Shareholders

Transfer Agent	Mitsubishi UFJ Trust& Banking Co., Ltd.

(On a number of shares basis)

4-5, Marunouchi 1-chome,

Other Japanese corporations
22.1%

Chiyoda-ku, Tokyo 100-8212, Japan

Japanese financial institutions
33.9%

Foreign institutions and others
20.0%

Number of Employees

Japanese securities companies
0.9%Japanese individuals and others
23.1%

4,008 (As of the end of February 2010)(Consolidated)

Percentage ofTotal Shares Issued

Stock Price Movement
15,000(Thousands of shares)

(Yen)

1,800
1,500

12,000

1,200
9,000
900
6,000
600
3,000

0

300

May
2009

June

July

Aug.

Sept.

Oct.

Nov.

Dec.

Jan.
2010

Feb.

Mar.

Apr.

May

June

0

 Trading Volume (left scale) ONWARD HOLDINGS’ Stock Price (Closing) (right scale)

ONWARD HOLDINGS CO., LTD.

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