ANNUAL REPORT 2018Year Ended February 28, 2018

Onward Holdings Co., Ltd.

ANNUAL REPORT 2018Year Ended February 28, 2018

Onward Holdings Co., Ltd.

ONWARD ADS BRANDLAUNCH PARTY 2018 in Tokyo

Contents
02

Onward at a Glance

34

Overseas Business

04

A Letter to Our Shareholders

36

Our Network

05

A Message from the President

38

Onward-Approved Factory System

08

Our History

40

Environmental and Social Responsibility

12Core Brands

44

Corporate Governance16

Our Business in Japan18

Special Feature48	Board of Directors, Audit & Supervisory Board Members,
and Executive Officers / Company Organization

19 Onward Crosset
22 KASHIYAMA the Smart Tailor
26 Advanced Down System
28

Our Value Chain

31

Our Sales Channels

Onward Holdings Co., Ltd. Annual Report 201849

Financial Section

90

Main Subsidiaries

92

Corporate / Investor Information

93

History

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

01

Onward Holdings Co., Ltd. Annual Report 2018

Onward at a Glance(Fiscal year ended February 28, 2018)

The Onward Group is the apparel manufacturer and retailer that built the very foundations for the
manufacture and sale of ready-made clothing in Japan. Today, we continue to be recognized as a leading
company in the industry specializing in high-value-added products with outstanding quality, and we are
more than able to compete in apparel markets around the world. Our business model encompasses allstages of the apparel value chain, including planning, design, production, and sales. The Onward Groupalso prides itself on its lineup of products and services that interconnect with various areas of people’s lives.
This fashion-oriented lineup includes men’s, women’s, and children’s clothing and accessories as well as
uniforms, dance wear, pet-fashion items, and others.

Financial Figures
Net Sales¥ million

300,000

280,008

Sales Breakdown

1927

By Clothing Type in
the Apparel Business

Men’s

Others19.1%

100,000(–0.7% YoY)

4,530 people

Women’s

57.0%

3,127 stores

2.1%

the OnwardApproved Factory
System(See pages 38–39 for details)

Onward Holdings Co., Ltd. Annual Report 201802Groupwidebasis

OnwardKashiyama

75%

85%

6.0

10,2002014

2015

Operating Profit

5,167

4,204

3,778

0

2016

2017

2.1

2.0

2018

0

8.3%

(+22.9% YoY)

Operating Margin (right scale)

5,367
4,204

4,744

4,278

6.0

¥ 5,367 million

4.0

2,000

2.0

0

2014

2015

2016

Profit Attributable to Owners of Parent

2017

2018

Physical Storesand Others

91.7%¥ million / %185,315(+13.1% YoY)

0

ROE (right scale)

Total Net Assets and Shareholders’Equity Ratio
E-Commerce¥ 5,167 million

4.0

5,732

3.3

By Sales Channel

Factory auditing through

12,000

4,000

77.8%

I tem collection forrecycling and reuse via

The ratio of sales conducted
through directly operated
online stores2018¥ million / %

4,659

Japan

(See pages 41–42 for details)

2017

6,000

17.5%

Onward Green
Campaign

2016¥ million / %Asia

EuropeMain CSR Activities

2015

Profit Attributable to Owners of Parent and ROE

North America

2.6%

in 25 countries and regions

2014

4,000

2.8%

By Geographic
Region243,075¥ 243,075 million

8,000Children’s

Number of Stores

244,901

Operating Profit and Operating Margin

21.1%

Number of Employees

263,516200,000

0

Founding

281,502

Cash Dividends per Share andPayout Ratio
¥/%

80.0

40.00

60.0

30.00

100,000

40.0

20.00

50,000

20.0

10.00

0

0

200,000

175,029

172,337

165,670

168,153

150,000

0

Total Net Assets

59.2

2014

2015

2016

2017

Shareholders’ Equity Ratio (right scale)

2018

200.0
24.00

24.00

24.00

24.00

24.00

150.0
100.0

63.7

2014

Cash Dividends per Share

03

2015

2016

2017

2018

50.0
0

Payout Ratio (right scale)

Onward Holdings Co., Ltd. Annual Report 2018

A Letter to Our Shareholders

A Message from the President

With a clear view of its operating­environment, Onward will heighten its
profitability through growth strategies
that are in step with technologicaladvancements and market changes.
Takeshi Hirouchi

Michinobu Yasumoto

Representative Director, Chairman

Representative Director, President

Dear Shareholders,
In the latter part of 2017, apparel sales at department stores climbed above the previous year’s ­levels,

The operating environment for the apparel industry continues to transform as the aging ofJapan’s population and the decline in the birth rate shrink the overall population and because
consumer values grow more diverse. Faced with this reality, the Onward Group will maximize
the brand value and customer base it has cultivated to date in order to advance growthstrategies and structural reforms aimed at future growth. I would like to take this opportunity
to talk about our business results in fiscal year 2018 and to explain the measures that we will
implement going forward.

indicating an increased willingness to spend among the middle class. This trend brought with it
hope for an escape from deflation.
Looking ahead, it will be crucial for the current tailwind blowing through the economy to betied to a substantive recovery in consumption.
The fashion business has entered into a period of great transformation characterized by the
rapid development of AI and IoT technologies. At the same time, the diversification of customer
needs is placing increased importance on the ability for apparel manufacturers and retailers to satisfy the ­individual needs of customers.
Given these circumstances, the Onward Group has turned its attention to the increasing
demand for customization and personalization. We prepared for this trend with the launch of our
new KASHIYAMA the Smart Tailor brand in fall 2017. Under this brand in the menswear field,
which was the point of departure for the Onward Group’s apparel business, we provide high-­
quality, made-to-order suits at affordable prices within short delivery times.
Moving forward, we will muster the collective strength of the Onward Group to develop
KASHIYAMA the Smart Tailor into a global flagship brand for our Omni-channel retailing strategy.
We are committed to further enhancing the craft we have honed thus far in our capacity asa lifestyle culture enterprise embodying the apparel industry of the future.
I would like to express my gratitude to all our shareholders for their continuing support,­cooperation, and trust.
August 2018

Review of Fiscal Year 2018
Even in the midst of a challenging operating environment,
we succeeded in increasing full-year profit through growthstrategies and structural reforms.

In fiscal year 2018, net sales decreased 0.7% year on year, to ¥243.1­billion, which was 1.6% higher than the target, while operating profit
increased 22.9%, to ¥5.2 billion, and profit attributable to owners ofparent rose 13.1%, to ¥5.4 billion. Net sales were affected by a sales
reduction of ¥8.2 billion stemming from efforts to reorganize underperforming brands and stores as one part of the structural reforms
kicked off in 2017 as well as a ¥3.8 billion increase resulting from foreign exchange rate fluctuations. If these factors are excluded, net sales
were up ¥2.6 billion. Profit benefited from e-commerce and othergrowth strategies as well as from the aforementioned structural reforms,
which drove increases in all profit figures.
On the topic of structural reforms, the drastic revision of ourinventory management system proved to be greatly beneficial for theCompany. For years, Onward Kashiyama had employed a system inwhich regional branches were responsible for ordering products frombrand business divisions, managing their inventories, and holding
bargain sales and otherwise ensuring that no products go unsold. To
address this situation, we have begun integrating inventory control

through organizational reforms. A goal of these reforms will be to shareinventory data between physical and e-commerce stores in order toprevent lost sales opportunities and thereby strengthen e-commerce,
which is a focus of our growth strategies.
In the overseas business, the operating environment for the apparelindustry is undergoing substantial change, as indicated by such developments as the rapid progress of the digitalization trend. We still needtime to address this change, and operating profit decreased ¥1.3 billion
in Europe, ¥0.4 billion in Asia, and ¥0.1 billion in the United States as
we have not yet furnished a response. Overall, operating profit were
down ¥1.8 billion year on year in the overseas business. We plan toaddress this situation with drastic business reforms going forward.
The European business—our largest overseas business—comprises
manufacturing divisions dealing in luxury brands as well as branddivisions, such as JIL SANDER and JOSEPH. Our manufacturing
divisions boast a manufacturing platform steeped in masterful manufacturing techniques. Reforms in these divisions will thus be implemented through a detailed approach looking carefully at each andevery factory in this platform to determine how they can be adapted tobetter meet market needs. We will improve profitability in our manufacturing divisions via this approach. As for brands, we enhanced theJIL SANDER creative team from 2018 spring / summer collection.
The products announced by this new team have won strong praise

Takeshi Hirouchi
Representative Director, Chairman

Onward Holdings Co., Ltd. Annual Report 201804

05

Onward Holdings Co., Ltd. Annual Report 2018

A Message from the President

from the fashion market. The biggest challenge going forward in thisarea will be accelerating business strategies by delivering these appealing
items to a wide range of markets.
The overseas business is a linchpin in the Onward Group’s overall
growth strategies. We will therefore be taking swift action as we revise
human resource management practices and governance systems toquickly improve the profitability of this business.

Acceleration of E-Commerce Operations
Onward will pursue growth by enhancing its directly operated
e-commerce website and collecting and utilizing customer data.

In fiscal year 2018, sales from the Onward Group’s e-commerce
operations rose to ¥20.3 billion, a 37% year-on-year increase. This
impressive performance was in part a result of measures to enhance
Onward Crosset, our directly operated e-commerce website. These
measures included the integration of physical and online store
inventories, which allowed for more efficient inventory control andthus led to a reduction in lost sales opportunities; the expansion of
our lineup of pre-order and online-exclusive items; the enhancementof sales promotion campaigns linked with the so-called Premium
Friday*1; and the effective utilization of online bargain sales.
Moreover, these measures enable us to increase our online marketing
expertise on a daily basis, which in turn heightens the effectivenessof our efforts.
The ratio of total e-commerce sales conducted through directly
operated online stores in fiscal year 2018 was 75% on a Groupwide
basis and 85% when looking at Onward Kashiyama alone. This highportion of sales attributable to directly operated online stores is a
result of our focus on our own e-commerce operations over the past
decade. Rather than relying on e-commerce platform holders outside of the Group, the Onward Group has sought to attract customers and perform sales on its own, collecting sales records and otherdata through this process. The customer data we have accumulated
while performing sales through directly operated online stores
will be a powerful asset for accelerating future marketing strategies
for our e-commerce operations. At the same time, the number ofcustomers of the Onward Members’ loyalty point card system, inwhich we manage the customer bases at physical stores and their

Onward Holdings Co., Ltd. Annual Report 201806

e-commerce equivalents in an integrated manner, rose 28% year
on year, climbing above 2 million. We plan to continue growing
customer numbers at this pace in the future, targeting 3 million,
5 million, and eventually more customers. However, the goal of thisgrowth is not just to acquire more customers. We plan to analyze
the massive amounts of customer information as big data for use
in product development and sales promotions to help the Onward
Group provide even better products and services. Through these
efforts, we aim to claim a leading position in the apparel industry.
With this goal in mind, we will be accelerating our e-commerce­initiatives, which will include concentrated investments and humanresource development, in fiscal year 2019 and beyond.

with in-store inventories and to implement workstyle reforms.
In our overseas production operations, we are developing a onestop procurement system in Chinese customs areas while utilizing
our logistics centers to shorten delivery times and reduce costs
through improved procurement efficiency. We plan to introduce asimilar scheme in Vietnam during the first half of fiscal year 2020.

*1 P remium Friday: A consumption stimulus campaign promoted by the Ministry of
Economy, Trade and Industry, Keidanren (Japan Business Federation), and other economic organizations that entails encouraging companies to end their workday at 3 p.m.
on the last Friday of each month.

We aim to develop new businesses with the potential toPromotion of Logistics Reforms
We are promoting logistics efficiency while also bolsteringin-house capabilities.

In March 2018, Onward Kashiyama consolidated its logistics network, reducing the number of locations from 11 to four and transitioning from the prior structure, which entailed management of
inventories by regional branch, to a structure based on centralized
control by brand business divisions. This move reduced the amountof warehousing work that needed to be performed by regional
branches. In addition, we consolidated our e-commerce warehousesin August 2018, thereby integrating inventories for physical storesand e-commerce operations. On this front, we will continue efforts
to prevent the loss of possible sales opportunities while accelerating
our shift toward Omni-channel retailing.
In conjunction with these structural reforms, we finishedattaching RFID tags to all of our products, which entailed thedeployment of around 17 million tags. Such a comprehensive andwidespread introduction of an RFID system*2 is an unprecedentedfeat in the industry. We have also installed RFID reader gates at all
warehouses, improving efficiency with regard to logistics functions
such as the storage, retrieval, and return of products. Looking ahead,
we hope to utilize RFID systems to reduce the workload associated*2 R
 FID (radio frequency identification) systems: Systems that automatically read identification information recorded in IC tags through wireless communication and which areused for supply chain management in the retail industry, production management in the
manufacturing industry, and traceability in the distribution industry

Development of New Businesses
become future core businesses by leveraging the technologicalprowess we have developed to date.

We, of course, are dedicated to enhancing existing brands andonline marketing strategies. At the same time, however, we plan todevelop new businesses with the potential to form future earnings
pillars. One recent topic is the made-to-order suit business operated under our KASHIYAMA the Smart Tailor brand.
In this business, we coordinate the factory operations of
Kashiyama (Dalian) Co., Ltd., which converted to a wholly owned
subsidiary in August 2016, located in Dalian, China, by utilizing
an advanced IT system for receiving orders directly from customers to deliver made-to-order suits to customers after a week. Madeto-order products are garnering attention as customers’ values
grow more diverse, and we therefore believe that this business has
significant potential to grow. After full-fledged operation of the
Dalian factory commences in fiscal year 2019, the Onward Groupwill engage in a concerted to develop the made-to-order suit business into a core business in the future.

and issue ongoing, consistent, and appropriate shareholder returns
all while maintaining a stable financial base.
Over the past two years, we have been able to reduce the negative amount of net cash by around ¥20.0 billion, and return on
equity, or ROE, in fiscal year 2018 was 3.3%, a year-on-year
improvement of 0.5 percentage point. Boosting operating profit
will be part of our efforts to improve ROE. We will also continue
to examine such options as selling investments in securities, liquidating assets, and acquiring and canceling treasury stock. Our initial
target for ROE is 5%, which we aim to realize as soon as possible,
after which we will seek to raise ROE to 8%. Treasury stock acquisitions were an option we used in the past, and we will position
them as important aspects of shareholder returns. Accordingly,
we will continue to flexibly conduct acquisitions based on thorough consideration of the future uses of such stocks as well as
holding ratios and market capitalization.
Going forward, the Onward Group stands committed to
improving corporate value through the provision of high-quality
products and services, among other initiatives. I hope we can lookforward to your ongoing support as we advance on this quest.
August 2018

Michinobu Yasumoto
Representative Director, President

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

The basic financial strategy of the Onward Group is to conduct
aggressive up-front growth investments to increase future earnings

07

Onward Holdings Co., Ltd. Annual Report 2018

Our History

1927

91st

The Onward Group is currently
in its 91st year since its
founding in 1927.
In this new decade of growthleading up to the 100th
anniversary of
our founding, we are still
looking onward to the future as
we move forward.

1950 S
1960 S
Ready-Made
Clothing Revolution

Company founder Junzo Kashiyama

Founding

1970 SIn the 1950s, Onward begins the production
and sale of ready-made menswear. Taking
its cue from apparel manufacturing in the
United States, the Company adopts anassembly-line production system andintroduces such advanced equipment as
Hoffman steam press machines. These
efforts result in substantial improvements
in productivity and the quality ofready-made clothing. Along with this success,the Company develops a business format
for transactions between apparel companies
and department stores that is now widelyused in the business operations ofdepartment stores. In the 1960s, driven
by Japan’s economic expansion, Onward
grows rapidly to become a leading
menswear manufacturer in Japan.

1980 S
Overseas Expansion
In keeping a step ahead of other Japaneseapparel manufacturers, during the 1970s
Onward develops its global strategy andestablishes subsidiaries in New York in
1972, Paris in 1973, and Milan in 1974.
By establishing local subsidiaries in threemajor fashion cities in a short period oftime, Onward succeeded in organizing thefoundation of the overseas business, drawing
on the most updated information on the
global fashion business. In 1977, after aninterview with up-and-coming designer
Jean-Paul Gaultier, then 24, the Company
decides to sponsor his brand creation. His
first fashion show is held in Paris in 1978
with the support of the Company.

Bus Stop store on Boulevard Saint-Germain in Paris

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

Grading machine modifies and cuts basic sewing patterns

Onward Kashiyama’s U.S. office

Jean-Paul Gaultier’s debut Paris fashion show, 1978

Events Seen in Each Era
1920s

1940s

Roaring Twenties–
World War II• Westernization of women’s clothing trends (after the Great Kanto
Earthquake in 1923–)• Great Depression originating in
the United States (1929)• World War II (1939–1945)

Onward Holdings Co., Ltd. Annual Report 2018

08

1950s

1960s

Post-war reconstruction–
Japanese economic miracle

1970s

Pivot of change–
Japanese asset price bubble• Start of mass-production boom (1950s–)• Oil crisis (1973)• Ready-made clothing revolution for men’s
and women’s clothing (1960s–)• Plaza Accord (1985)• Economic boom surrounding
Summer Olympics in Tokyo (1962–1964)• Japan ranked No. 2 in the world for grossnational product (1968)

1980s• Enactment of Act on Securing, Etc. of Equal Opportunity andTreatment between Men and Women in Employment (1986)• Emergence of prominent Japanese designers• Spread of luxury fashion

09

Onward Holdings Co., Ltd. Annual Report 2018

Our History

1990 S

2001

2000

2011

2010

Launch ofCore Brands

Launch of Global
Apparel GroupThe womenswear business dramatically expands in the 1990s with the launch of core
brands, beginning with Kumikyoku in
1992 and followed by Nijyusanku in 1993,
ICB in 1995, and Jiyuku in 2000. The luxury brand boom driven by Japan’s bubble
economy comes to an end in the 1990s,
and consumers start to look for more simple and practical clothing, and they areable to find this style in Japanese brands.

Maintaining its focus on the department
store channel in the domestic market,
Onward turns its eyes abroad at the beginning of the century. By accelerating global
strategies, the Company begins its advanceinto the Chinese market, establishes a manufacturing platform in Italy, and acquires
prominent European brands JOSEPH in2005 and JIL SANDER in 2008.

Today
The transition to a holding company
system is made in 2007. In the years that
follow, the Company continues to draw
uniquely powerful brands under its umbrella in Japan as well as overseas, acquiring
pet fashion pioneer Creative Yoko in 2008
and Island, the maker of the trusted Grace
Continental brand for discerning women,in 2009. It was at this time that Onward
truly makes a new start as a global apparelgroup that undertakes various types offashion businesses all over the world.

Launches Nijyusanku, 1993

Department stores begin expanding womenswear floor spaces and emphasizing new
brands from Japanese makers. Thanks tothis trend, Onward Kashiyama’s store
numbers grow rapidly after the launch of
the new brands, and this impressive growthforms the foundations for futureadvancement.

Acquires Joseph Group, 2005

Road to Ongoing
GrowthAfter the global financial crisis of 2008,
the landscape of the fashion business and,
subsequently, the structure of the apparel
supply chain undergo a drastic transformation. The emergence of so-called fast
fashion, the increase of production costs in
Asia, the reorganization of domestic department stores, and the rise of e-­commerce
can all be seen as indicators of thistransformation.
Signaling its participation in the ecommerce field, the Onward Group cuts
the ribbon for Onward Crosset, its directly managed e-commerce website, in
December 2009.
The Onward Members’ loyalty point
card system, applicable to all Onward
Group brands, launches in 2014.
Through this and other initiatives, theOnward Group proceeds to expand its

customer base while accelerating its
Omni-channel retailing strategy, whichmerges the strengths of online storesand physical stores. The evolution of
the Omni-channel retailing strategy leads
to the start of KASHIYAMA the Smart
Tailor, a brand offered based on a new
business model in which made-to-ordersuits are ­offered at physical stores, throughvisits to a customer’s office or home, andon e-­commerce sites.
The Onward Group continues to­increase its global competitiveness whiletackling challenges on the road to ongoinggrowth in both domestic and overseas
operations.

Opens Nijyusanku Ginza store, 2011

Acquires Island Co., Ltd., 2009
Launches Kumikyoku, 1992

Launches Onward Crosset, 2009
Acquires Jil Sander Group, 2008
KASHIYAMA the Smart Tailor from 2017

1990s

Bubble collapse–Post-b­­­­­­­­­­­­ubble recession

2001• Release of Windows 95 (1995)

2000s

Global information era• Rapid spread of the Internet among the general public• Lehman Brothers bankruptcy andglobal financial crisis (2008)• Diversification of retail channels and emergenceof specialty retailers selling private label apparel• Mass consolidation and reorganizationof Japanese department stores

2010s

2011

Fourth industrial revolution (Industry 4.0)
• Great East Japan Earthquake (2011)• Annual inbound visitors to Japanexceed 20 million (2016)Today• Burgeoning of fast fashion

Onward Holdings Co., Ltd. Annual Report 201810

11

Onward Holdings Co., Ltd. Annual Report 2018

Core Brands

LAUNCHEDLAUNCHED

1993

1973

ANNUAL SALESANNUAL SALES¥28.0 billion¥9.6 billion

NUMBER OF STORESNUMBER OF STORESOver 200
Nijyusanku is the leading brand of Onward Kashiyama. With working women in their 30s and 40s
as its core target, the brand is based on the concept of creating a “Japanese women’s standard.” Itthus seeks to capture the hearts of customers of all ages with its timeless and simple designs, whichmake for elegant and comfortable clothing that can be enjoyed by all. The brand’s flagship store,
Nijyusanku GINZA, was opened in the Ginza district of Tokyo in April 2011.

LAUNCHED

1992
ANNUAL SALES¥4.6 billion
NUMBER OF STORES

109

Founded by Ms. Jil Sander in Germany in 1973, JIL SANDER is a luxury brand that is featured periodically in Milan Fashion Week. Onward Holdings acquired JIL SANDER in 2008. The casualline JIL SANDER Navy was launched in 2011. Lucie and Luke Meier have been the creative directors of JIL SANDER since the 2018 spring/summer collection.

55

LAUNCHED

1972
ANNUAL SALES¥15.6 billion
NUMBER OF STORES

154

Gotairiku is Onward Kashiyama’s core men’s brand. Based on the concept of providing a “gentlemanly wardrobe for the businessmen that represent Japan,” this brand primarily features suits aimed
at businessmen in their 40s.

The JOSEPH brand grew from a small multi-brand store owned by Joseph Ettedgui in London.
After the original label JOSEPH was launched with the concept of “SLICK&CHIC,” Onward
Holdings acquired JOSEPH in 2005. The development of this brand in Japan is being undertaken
by Onward Kashiyama.

12

13

Onward Holdings Co., Ltd. Annual Report 2018

Onward Holdings Co., Ltd. Annual Report 2018

The window display of Nijyusanku GINZA, the flagship store of the core brand Nijyusanku

Onward Holdings Co., Ltd. Annual Report 201814

15

Onward Holdings Co., Ltd. Annual Report 2018

Our Business in JapanThe domestic business is our mainstay business, generating 77.8% of consolidated net sales.
This business consists of 31 companies: core operating company Onward Kashiyama as well as otherdomestic subsidiaries that make fashion proposals in a wide range of fields.

Other Domestic
Subsidiaries
Business Overview

Contribution to Total Sales

Net Sales by Domestic Business Segment

Overseas Business¥ million

22.2%

Domestic Business

77.8%

240,000
180,000
120,000
60,000Other Domestic Subsidiaries

29.0%¥ 56,968 million

Onward Kashiyama

71.0%¥ 139,438 million

0

2013
2014
2015
2016
2017
2018
Note: The figures shown reflect net sales prior to the elimination of internal transactions.

Onward Kashiyama
Business Overview
Onward Kashiyama is the Group’s core
operating company, generating 55% ofconsolidated net sales.
Engaged in planning, production,
sales, and other activities related to delivering clothing of impeccable quality,
Onward Kashiyama supplies womenswear, menswear, children’s clothing, andaccessories from private brands as well as
licensed brands.
Our products are distributed throughdepartment stores, our main sales channel
and an area of strength, and we are also
stepping up distribution through thegrowing venue of e-commerce.
Future initiatives will be aimed at establishing operating foundations that aresuited to the impending era of Omnichannel retailing. We will accomplish thisobjective by integrating the functions of

ICB Izutsuya Kokura Store

Onward Holdings Co., Ltd. Annual Report 2018

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

Main Domestic Subsidiaries
Chacott, a manufacturer and retailer ofballet and other dance wear, is capitalizing
on its high recognition as a manufacturer
to broaden the scope of its business into

physical and online stores while boosting
efficiency through logistics reforms andenhancing our product development
capabilities as a manufacturer.

Performance and Outlook
In fiscal year 2018, the gross profit marginrose on the back of a strong performancein key and core brands. This performance
was driven by the enhancement of product strategies to be more compatible with
Omni-channel retailing, prevention oflost sales opportunities through more efficient inventory management, and growthin e-commerce sales.
At the same time, we moved ahead
with structural reforms, reducing costs
and thereby securing higher profits ona full-year basis.
In fiscal year 2019, we will seek tofurther improve efficiency by instituting
logistics reforms to integrate managementof inventories for physical stores ande-commerce operations and by utilizing
RFID systems. This fiscal year will also see
the launch of the Advanced System
Project, which will take advantage of proprietarily developed technologies to increase sales of full-priced items.

Shirotan, the main character of Creative Yoko

yoga, healthcare, cosmetics, and other new
fields. Meanwhile, Island, which has Grace

Grace Continental, the core brand of Island

Continental as its core brand, is providing
fashion items with a distinctive aesthetic
that is proving immensely popular among
women with refined tastes. Creative Yoko
offers a lineup of products for pets as wellas an assortment of character goods andtoys. This company seeks to expand its
network of unique, large-scale integrated
pet stores while also strengthening its
character merchandise business. At
Onward Trading, a leading domestic manufacturer of uniforms and sales promotion
goods, the apparel expertise and productplanning excellence cultivated by theGroup are used to provide uniforms tosuit any environment while striking thebest balance between style and usability.

The uniform business of Onward Trading

Performance and Outlook
In fiscal year 2018, profitability improved
due to stable performance among main
domestic subsidiaries, the abolition of unprofitable subsidiaries, and contributions
from a newly consolidated cosmetics business subsidiary.
In fiscal year 2019, we anticipate increased earnings from luxury brand businesses, which had been subject to businessreorganizations leading up to fiscal year
2018. We will also pursue growth in highpotential fields.

Dance Cube Kachidoki of Chacott16

17

Onward Holdings Co., Ltd. Annual Report 2018

1

SPECIAL FEATURE

1

Onward Crosset

P. 19

Onward Crosset

SPECIAL FEATURE
Accelerated digitalization and globalization
are transforming the apparel supply chain,
and apparel companies are thus required toaddress these trends by quickly responding
to customer demand and to diversity.
At the Onward Group, we are utilizing
new technologies and networks to evolve
our supply chain management so that we
can more swiftly incorporate customer
desires into our products and services. At thesame time, we are leveraging our strengths as
an apparel manufacturer to continuously
offer customers “something new,” by which
we refer to high-quality and high-valueadded products that set us apart from ourcompetitors.
In this special feature, we will look at
three initiatives that will shape the Onwardof the future.

P. 22

2

KASHIYAMA
the Smart Tailor

Photographs of featured products taken at a photography studio that was relocated to an
Onward Kashiyama office in July 2018

3

O

P. 26

Advanced Down System
Onward’s Latest Product Innovation

Onward Holdings Co., Ltd. Annual Report 201818

nward Crosset is our largest directly
operated online shopping site. This sitefeatures a lineup of 103 brands, including key
brands from Onward Kashiyama and otherdomestic Group companies as well as selectproducts from outside partners.
Onward Crosset was launched in December
2009 with a lineup of eight women’s brands from
Onward Kashiyama.– 1 (Please see Transition of
Onward Crosset and Related Functions on page 21)
We then proceeded to expand this site’s lineup ofbrands and products to include menswear, children’s
clothing, accessories, sportswear, and large- andsmall-size items. In 2016, we started further
enhancing this site’s lineup by incorporating core
brands from domestic Group companies, such as
Island and Creative Yoko, and selections fromoutside partners.– 2
In fiscal year 2018, sales through Onward Crosset
increased 39% year on year and accounted for 85%
of Onward Kashiyama’s e-commerce sales and 64%of the overall e-commerce sales of the Group, respec­tively. In addition, this site boasted 16,020,000
visits over the year, a lineup of 500,000 items, and230,000 purchases from customers, indicating its
continuously high potential for growth.
19

Onward Holdings Co., Ltd. Annual Report 2018

1

Transition of Onward Crosset andRelated Functions

SPECIAL FEATURE

Onward Crosset

Improvement of Customer
Management and Acceleration of
Omni-Channel Retailing Strategies
The vast majority of customers who use Onward Crosset areenrolled in the Onward Members loyalty point card program.
In April 2016, we integrated customer data from Onward
Crosset with that of the Onward Members program to form acustomer base that is shared between both our physical ande-commerce shopping venues.– 3
The integration of customer information and point
services makes it possible to provide comprehensive accessto Onward Members services through both e-commerceand physical stores, which in turn helps accelerate our
Omni-channel retailing strategies. This benefit is indicatedby the fact that approximately 40% of customers who madepurchases through Onward Crosset in fiscal year 2018
also bought items at physical stores.

Increased Speed and Efficiency Realized through Evolution of
Fulfillment Functions
In 2015, Onward Crosset was transitioned to a proprietary e-commerce platform, improving the accuracy of fulfillment functions,
including inventory management, shipping, photographing, measuring, and customer support.– 4
The site was further transformed in July 2018, when we transferred Onward Crosset’s photography and product measurement
studio, sample warehouse, and customer support center to an Onward Kashiyama office.– 5 This move was followed by the­i ntegration of e-commerce warehouse functions into the Narashino Logistics Center, our principal distribution base, in August of thesame year. – 6
Through the transition and reconstruction of our fulfillment function system, we will pursue increased speed and efficiency ininventory allocation and in the restocking of strong-selling items by integrating e-commerce and physical store inventories. This
move is also designed to ensure that we are able to provide high-quality product information and customer support.

1
D ecember 2009
Launch of Onward Crosset with lineup ofeight Onward Kashiyama women’s brands
using EC operation support system of
START TODAY CO., LTD. (currently
ZOZO, Inc.)(Expansion of lineup of brands and products)
September 2014
Start of Onward Members program
9
March 2015
Launch of Onward SHOP BLOG
(currently staff-recommended outfit page)
4
August 2015
Transition to proprietary e-commerce­p latform
Commencement of sharing of information(inventory data, product images, etc.) with affiliated online shopping sites
2
March 2016
Start of offering brands of domestic Group
companies and outside partners

April 2016
Launch of My Shop Registration system
3
April 2016
Integration of physical store and e-commercesite customer data into Onward Members
program5
July 2018
Transference of photography and measurement studio and customer support functions
to Onward Kashiyama officeEnhancement of Online Products
and Services Lineups
We are taking steps to enhance our product lineup by bolstering our range of advance reservation and online-exclusive
items. Other new initiatives have included a partnership withSTRIPE INTERNATIONAL INC. that was commenced in
September 2018. Through this partnership, Onward and
STRIPE will offer products on each other’s e-commerce sites
and engage in joint online sales promotions.– 7
Furthermore, the official Onward smartphone application
was upgraded in November 2018.– 8 The new application
features Onward Members verification and point management functions for increased convenience. We are also able toprovide users with customized information, including news,
event information, and staff-recommended outfits,– 9 basedon their individual needs.

6
August 2018
Integration of e-commerce warehouse functions into the Narashino Logistics Centerand commencement of integration of
e-commerce site and physical store inventories
7
September 2018
Commencement of mutual offering ofproducts on e-commerce sites with STRIPE
INTERNATIONAL INC.
8
November 2018
Upgrading of official Onward smartphone
application
Featured products measured using digital tape measurer.
Measurements are then instantly digitized and made available
for viewing through tablets.
Onward Holdings Co., Ltd. Annual Report 201820

21

Onward Holdings Co., Ltd. Annual Report 2018

2

SPECIAL FEATURE

KASHIYAMA
the Smart Tailor

T

he advancement of digital technologies istransforming the supply chain for madeto-order clothing in terms of price, delivery time,
convenience, and various other factors, giving riseto never-before-seen trends. In addition to low
prices and quick deliveries, advanced technologies
make it possible to provide new experiences tocustomers, suchas tablet-based customer services and online
purchases. These new shopping experiences attract
customers from younger generations and otheruntapped demographics and are therefore
anticipated to create a new growth field.
The Onward Group is a pioneer in the field of
made-to-order menswear. Our history as amenswear manufacturer spans more than 60 years,
and we created the first easily operable

made-to-order clothing system using computeraided design in Japan.
Summoning our strengths in this field,
we launched KASHIYAMA the Smart Tailor,a new made-to-order brand matched to theimpending era of Omni-channel retailing,in November 2017.
We will combine the knowledge andmanufacturing techniques we have accumulated
thus far with new technologies and the production
platform of our factory in Dalian, China, to growthis brand into a core, next-generation business.

About KASHIYAMA
the Smart Tailor
KASHIYAMA the Smart Tailor is the Onward Group’s new
brand of made-to-order clothing sold directly to customers.
Its mainstay made-to-order suits are available at prices starting from ¥30,000 and can be delivered in as little as a week.
The Group’s numerous experienced fitters can take customer measurements at stores or showrooms and can evenvisit customers to perform measurements at their home orbusiness.

After taking measurements when placing one’s first order,
additional orders can be placed entirely through the Internet.
We therefore expect that this brand will see strong growth as acore element of our Omni-channel retailing strategies.
In August 2018, we also began offering men’s shirts andwomen’s suits through KASHIYAMA the Smart Tailor, andwe have plans to further expand the range of products offeredunder this brand. For example, we intend to launch new linesof stretchable, easy-care business-casual clothing in February
2019 and to release whole-garment knitwear and women’s
made-to-order shoes in the near future.

Four Services to Provide Onward Quality

Delivery inas little as a week

1 Week¥30,000

Made-to-order suits
starting from ¥30,000

OnlineSubsequent purchases
able to be made online

OnwardQuality
Fitters dispatchedto take measurements
at desired location

Fitter
Dispatch

High-Quality Made-to-Order
Suits Realized Thanks toExperienced Fitters

Around 80% of the fitters supporting the KASHIYAMA
the Smart Tailor scheme have careers spanning over 20
years, and each fitter performs approximately 300 measurements a year.
When measuring customers, these fitters go the extra
step to account for the unique characteristics of each individual’s body. In addition, they act based on their“Bespoken” philosophy, conversing with customers tolearn of their concerns and desires and thereby realize theideal style and fit to match every customer.

Interior of KASHIYAMA the Smart Tailor Osaka Honmachi store,
the flagship store of the brandOnward Holdings Co., Ltd. Annual Report 201822

23

Onward Holdings Co., Ltd. Annual Report 2018

2

SPECIAL FEATURE

KASHIYAMA the Smart Tailor

Strengths of KASHIYAMA
the Smart Tailor

Capitalizing on the resources the Onward
Group has cultivated over its long history, we
have established a supply chain management
system that allows anyone to enjoy high-quality
made-to-order products.

Delivery to Customers
Directly from Factories Made
Possible by PACK-RUNNER

High-Quality Suits Delivered in as Little as One Week after Measurement
On average, made-to-order suits require three weeks to be delivered. However, we have made it possible to deliver suits in as little
as one week by utilizing factory innovations. By manufacturing suits entirely at our own factories, we are able to avoid unnecessary inspections. The utilization of IT, meanwhile, helps minimize time losses in various situations. The process of producing suits
is performed without interruption, allowing us to eliminate inefficiencies to realize new pinnacles of quality and speed.

The PACK-RUNNER system utilizes specialized compression packages.
This packing system has traditionally been used forbusiness-to-business applications, for example, to deliverproducts from garment factories to manufacturers. We
have adapted this system for business-to-consumer applications to make it possible for products to be delivered
directly to customers from factories. Finished products
are enclosed in compression packages, after which air is
extracted and moisture is drained from the fibers to lower
humidity levels before sealing. These precautions protect
suits from damage and wrinkles during transportation,
allowing for deliveries to be made while maintaining
quality. If a suit is hung on a hanger after unsealing, it
will return to its original shape, with no displacement, inabout an hour as the fibers gradually absorb moisturefrom the air.

One-Week Delivery, IT Innovations at Both Ends of Process
Scheme for KASHIYAMA the Smart Tailor

Preparation on

Production of suit insame Day

Massive reduction in timeneeded for order-processing
procedure through introduction of unprecedented datatransmission systemabout

4 daysTransformation of the production system from the traditional
assembly line system optimized
for mass production into the
speed-oriented line system, tocreate individual suits throughone complete process

Delivery within

3 days

Large reduction in delivery
time realized by shipping suits
directly from factory using theoriginal PACK-RUNNER
compression packages, anindustry first (Please see thenext page.)

About

1

week

Development of a Smart Factory
The ability to deliver products to customers in as little as a week isunderpinned by the advanced production technologies and effective
production management at Kashiyama (Dalian) Co., Ltd. ourdirectly operated factory in Dalian, China.
In addition, we plan to commence operations at our second factory in Dalian in 2019. This factory will be developed as a revolutionary smart factory that marries production technologies with IT.
The new factory will pursue an unprecedented level of productivity through increased use of IT and mechanization, including
automated hanger systems for all processes as well as automated systems adjusting patterns, cutting cloth, and setting parts.

Standard Made-to-Order Suit Production and Distribution Scheme

Preparation inabout

4 days

Production of suitwithin about

7 daysProcessing of orders as part ofproduction management,
inputting of measurement
data, procurement of fabric,
etc.

Onward Holdings Co., Ltd. Annual Report 2018

Delivery within
about

10 daysTransportation from factory to domestic warehouse, delivery to store byintermediary courier,inspection and re-pressing, turnover to customer

24

About 3 weeks

25

Onward Holdings Co., Ltd. Annual Report 2018

3

SPECIAL FEATURE

Advanced Down System—
Onward’s Latest
Product InnovationThe Onward Group seeks to create innovations by leveraging its technological and productdevelopment capabilities.
The Advanced System Project, launched in June 2018, is aimed at commercializing theinnovations born out of the Group’s proprietary development technologies. We plan to expand thebusiness in Japan as well as in the global market.

Exhibition held in June 2018

ADS-Innovative down material
originated Onward
The first product developed through the Advanced System
Project is the Advanced Down System (ADS), which is used
to create stitch-less, highly functional down materials.
ADS employs a new structure patented by Onward
Kashiyama to replace stretched quilted structures with specialized tape, making for stitch-less materials that trap all
down feathers inside.
Moreover, the seamless structure allows for air to circulate
within clothing, realizing a lighter and more comfortable feel,
while the large amount of air contained inside the feathers
ensures warmth, despite its thinness. ADS also allows forincreased freedom of design and fashion. We will improve therecognition of ADS so that it can take advantage of the wide
range of functional yet fashionable down clothing madepossible by these features as well as utilize a unique branding
approach.
For the 2018 autumn/winter season, we will release twolines of ADS products, a standard line comprising core
Onward Group brands and a new-generation line featuring
unique designs created through collaboration with internaland external designers. These lines will be available at existing
physical and online stores as well as at pop-up shops and specialty stores.
Looking ahead, we plan to develop a collaboration line of
ADS products that borrows the talents of prominent designers and creators while accelerating efforts to attract new customers and develop sales channels for these products anddeploy them on the global market.

Onward Kashiyama’s Proprietary Structure Using
Specialized Tape (Patented)
Unique structure circulates air within clothingn Down feathers incorporate large quantities of air, making for alighter and more comfortable feeln Higher amount of air contained in feathers allows for thinnerjackets that trap heatn 

No stitches requiring holes allows for increased freedom of designn Lack of seams contributes to astoundingly light jacketsn 

Z tapeAdhesive tape
Adhesive tape
Mesh
Air

Down feathers

Advertising campaign for 2018 autumn/winter ADS collection

Onward Holdings Co., Ltd. Annual Report 201826

27

Onward Holdings Co., Ltd. Annual Report 2018

Our Value Chain
As a leader in the apparel industry, the Onward Group is guided by a mission ofcontinuously proposing fresh, high-value-added products to consumers.
To fulfill this mission, we take advantage of fashion trend information by utilizing
our global network, the technological capabilities granted by our production teams,
and the quality control management of the Onward Quality Center.
By merging these strengths, we create new products that excel from the perspectives of fashion,technologies, and quality and propose new values and lifestyles.

Production Network

Production Areas

Of Onward Kashiyama’s products, 69% are manufactured in cooperation
with trading companies or delegated to factories in Japan or overseas.
Recently, however, we have been expanding our own production
network by strengthening partnerships with highly capable Japanese
factories and expanding our low-cost production and sourcing networks
in China and ASEAN region. Currently, about 68% of Onward
Kashiyama’s products are manufactured in China, 13% in Japan, and
19% in the ASEAN region. We are developing our procurement and production networks in the ASEAN region and reinforcing high quality production in Japan to ensure that we can always manufacture products in themost suitable location.

China

68 %
Japan

13 %
ASEAN region

19 %Product Flow (primarily used by Onward Kashiyama)

Planning and Design

1

2

3

Research

Design and Material Selection

Sample Creation

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

Concept drawings are created, and the design,materials, price range, and seasonal theme
are decided based on a consideration of fashion
trends, fabric information, and other factors.

From among the samples, the items to becommercialized are selected, and production volume is decided.

4Internal and External
Exhibitions
Internal exhibitions are held for brand representatives to share information on products and receive input.

5

6

From among the samples, the items to becommercialized are selected, and production
volume is decided through coordination
with sales teams.

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

Product Selection

Product Planning

When new technologies or products aredeveloped, exhibitions and events are held
for members of the press and other influential individuals to promote these new
innovations.

Planning and Production Teams

Onward Quality Center

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

The Onward Group established the Onward Quality Center in March 2017.
The Onward Quality Center offers quality control guidance and proxy services
in the four areas of quality control management, quality merchandising, test
analyses, and factory audits and repairs (or product repair) that are steeped in
the Group’s quality control expertise and insight. These services are made available to apparel manufacturers, trading companies, factories, and other entities
engaged in textile and fashion business both inside and outside of the Group.
Moreover, the Onward Quality Center will seek to share and promote theuse of Japan’s quality control techniques, which are known for a level of attention
to detail not found anywhere else in the world, throughout the entire industry. We hope that this undertaking will lead to the creation of stronger frameworks for providing consumers with safe, reliable, and high-value products.

Onward Holdings Co., Ltd. Annual Report 2018

Production

28

29

Onward Holdings Co., Ltd. Annual Report 2018

Our Sales Channels

Our Value Chain

Department Store Transactions
The majority of transactions between department stores and apparel
manufacturers are made under the consignment system, a transaction
scheme indigenous to Japan with the following characteristics.
1. The apparel company owns the inventory and some shop fixtures andprovides their own sales personnel. When a product is sold, it is thenconsidered to have been procured by the department store.
2. The apparel company pays an agreed percentage of its sales to thedepartment store as a tenant fee. Rent and other costs generally do
not apply. (Profit margins are linked to sales.)3. The apparel company records a sale as the amount of the wholesale
price of the item sold less the margin paid to the department store.

7

Delivery and Sales

8

9

Production

Final Check

Delivery

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

Finished products are delivered to distribution
warehouses. Stitching and other productdetails are inspected once again before delivery.

Products are transported from distribution
warehouses to stores based on the instructions of distributors.

10

Sales

Products are sold at physical storesand online.

The Onward Group conducts its sales activities through a number of different sales channels.
As we move forward, we will advance our Omni-channel retailing strategy that merges
the strengths of both physical and online stores to further expand our customer base.
Department Stores
Department stores are the main sales channel of Onward
Kashiyama, accounting for 69% of its total sales in fiscal year 2018.
A diverse range of core and other brands are deployed through thischannel. In addition to enhancing existing stores, we are pursuing
improvements in the sales of individual stores and in operational
efficiency through strategic store openings and closures.
Recently, we have been promoting an Omni-channel retailingstrategy as we step up sales promotions coordinated with online venues and augment services. Specific efforts on this front haveincluded utilizing the Group’s Onward Members loyalty point card
system and posting staff-recommended outfits on our website.

E-Commerce
E-commerce boasts the highest growth potential among the
Onward Group’s sales channels.
We operate Onward Crosset and brand-specific online stores
and also list our products on domestic and overseas online shoppingsites. Sales through directly operated e-commerce sites have been
growing, and these sales accounted for 75% of the Group’s total
e-commerce sales and 85% of Onward Kashiyama’s e-commerce
sales in fiscal year 2018.The Onward Group has also begun offering
online sales of made-to-order products through KASHIYAMA the
Smart Tailor, a scheme launched in 2017.
Looking ahead, we will bolster the lineup of products and services that are available through online venues in order to boost
e-commerce sales.

Onward Members’ Loyalty Point Card System
Onward Members is a loyalty point card system that can be used at applicable Group stores, on the Onward Crosset directly managed e-commerce website, and on certain other directly managed websites. Through this system,
Onward Members users not only accumulate points based on purchaseamounts, but they are also able to receive various perks, including brand information on new products and events and member-exclusive services.
In November 2018, Onward’s official smartphone application was upgraded to increase convenience and contact points with customers. These newfeatures have contributed to an expanded user base.

Onward Holdings Co., Ltd. Annual Report 201830

Directly Managed Standalone Stores

Outlets

Shopping Centers

These brand flagship stores double as brandbillboards.

We are expanding our network of outlet stores,
which include single-brand stores as well as multibrand stores that feature selections matched to thecharacteristics of their area.

Whether in suburban shopping malls or urban
department stores that have been converted into
shopping centers, the forms of shopping centers are
growing more diverse as unique centers are developed in response to diversifying consumer needs.
In stores located in shopping centers, theOnward Group arranges brand, product, and service lineups based on the characteristics of therespective regions and customers.

31

Onward Holdings Co., Ltd. Annual Report 2018

Time Passing is a three-minute short film directed by Wim Wenders featuring the 2018 fall/winter JIL SANDER collection.
This collaborative project started with an advertising campaign for the 2018 spring/summer collection, and the film hasreceived many awards, such as being named Best Fashion Film in the 2018 Fashion Film Festival Milano.

Onward Holdings Co., Ltd. Annual Report 201832

33

Onward Holdings Co., Ltd. Annual Report 2018

Overseas Business
The overseas business consists of operations in Europe, Asia, and the United States and accounts for 22.2%
of consolidated net sales. Business scale expansion will be pursued centered on Europe, where operations
are the largest, as we strengthen our competitiveness in the global market.

Contribution to Total Sales
Overseas Business

22.2%

Net Sales by Overseas Business Segment

Domestic Business77.8%¥ million

80,00060,00040,000

United StatesAsia

11.8%¥ 6,599 million
Europe20,000

9.4%¥ 5,244 million

78.8%¥ 44,041 million

0

2013
2014
2015
2016
2017
2018
Note: The figures shown reflect net sales prior to the elimination of internal transactions.

EuropeThe European business—our largest overseas business—primarily conducts the
manufacture and sale of high-end appareland accessories.
By generating synergies in the European
business, we will be able to ­leverage thestrength of our manufacturing platform
in Italy as well as the strengths of thebrand business of JIL SANDER and theretail business of JOSEPH. With thiscomprehensive range of functions, we willseek to become a unique presence in theEuropean fashion industry.

Business Overview

JIL SANDER
We conduct the planning, manufacture,
and wholesale of the JIL SANDER luxury
menswear and womenswear collections
and accessories and of the apparel and accessories from JIL SANDER Navy, and weare developing stores on a worldwide basis.

Onward Luxury Group
Manufacturing
Onward Luxury Group’s manufacturing
divisions undertake the production of theprincipal items that are indispensable to a
designer brand line, including apparel aswell as shoes, bags, knitwear, and sneakers. Moreover, these divisions are constructing a manufacturing platform
capable of providing the utmost levels of
quality. In addition to the production ofGroup brands, manufacturing divisions
conduct OEM and contract manufacturing and wholesale of outside brand products based on licensing agreements.
In March 2016, we acquired Moreau
Paris, a luxury leather goods and luggage
brand. We seek to generate even higher
levels of synergies within the Group as we
strengthen our fashion accessory businessgoing forward.

JOSEPH
Joseph undertakes the planning, manufacture, and sale of JOSEPH brand menswear and womenswear collections andaccessories and is also developing a network of multi-brand stores and JOSEPH
brand stores centered on London.
We will be more proactively communicating the message of the JOSEPH
brand at storefronts while also expanding
e-commerce sales of this brand’s products
going forward.
To accelerate the brand’s global
growth, Joseph is boosting planning andmanufacturing efficiency and reinforcing
its digital strategy.

Nijyusanku store located in Jiu-Guang department store

Asia

United States

In our Asian business, Nijyusanku, ICB,
Nijyusanku GOLF, and other Onward
Group's brands are sold in department
stores and shopping centers in China—
including Hong Kong—South Korea,
Singapore, and Vietnam. In recent years,
we have been working to expand our network of sales channels by forming franchise contracts and strengthening
e-commerce businesses.
Furthermore, Asia is an incredibly
important production site. To ensure reliable production capabilities in China,
which is central to our Asian manufacturing platform, we are expanding the platform through capital alliances while
stepping up collaboration with prominent
partners. In addition, we have converted
our menswear factory in Dalian, which is
now Kashiyama (Dalian) Co., Ltd., into awholly owned subsidiary.
We are also improving efficiency andspeed along the entire supply chain
through logistics reforms, the establishment of a one-stop procurement system,and the use of RFID tags.

U.S. operations comprise retail businesses in
the United States as well as hotel and golfcourse management operations in Guam.
J.PRESS, acquired in 1986, is a wellloved brand among Ivy Leaguers. We currently have three directly managed stores in
the United States, including the location in
the Yale Club in New York City opened in
October 2017. This new flagship store will
drive efforts to attract new customers.
As we move forward, we will conduct
necessary investments from a medium-tolong-term perspective to expand our U.S.
operations as we seek to grow the market
for our products.

35

Onward Holdings Co., Ltd. Annual Report 2018

JIL SANDER Berlin store

OLG Shoes Division

Onward Holdings Co., Ltd. Annual Report 2018

Lucie and Luke Meier have been
named as the new creative directors of
JIL SANDER, and this brand has been
taking advantage of their talents since
2018 spring/summer collection.
We will promote this new JIL SANDER
to further its growth as a global brand.

34

Performance and Outlook
In fiscal year 2018, revenues were up in
Europe and Asia due to beneficial foreignexchange rates and growth in new
businesses.
Profits, however, were down following
alterations in contracts in manufacturing divisions as well as a persistently stagnant luxury market for the European business andvolatile consumption trends in China.
In fiscal year 2019, our goals for theEuropean business will be to grow JIL
SANDER sales while instituting structuralreforms.
At the same time, we will fortify our
manufacturing platform in Asia.

Our Network(As of August 31, 2018)

Europe

Asia

Japan

United States

England

China

Japan

U.S.A.

LondonShanghaiTokyo

New York		nJoseph Ltd.

		n

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

		n

		n

Freed of London Ltd.

		n

Shanghai Onward Fashion Co., Ltd.

		n

		n

Horloge Saint Benoit UK Ltd.

		n

Onward Trading (Shanghai) Co., Ltd.

		n

DalianFrance		n

ParisTaicang		n La Maison Moreau S.A.S.

n n

		n Horloge Saint Benoit S.A.S.

	Onward Kashiyama Hong Kong Ltd.

		n

Milan
		n

Vietnam

Onward Italia S.p.A.

Ho Chi Minh City nward Luxury Group S.p.A.
O(JIL SANDER)

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

		 nFrassineti s.r.l.

		 nFreeland s.r.l.

		 n

Korea
Seoul
		n

Onward Kashiyama Korea Co., Ltd.

		n Chacott Korea Co., Ltd.

	Onward Global Fashion Co., Ltd.

		n

Spain
MadridCalifornia
		n Innovate Organics, Inc.

	Intimates Co., Ltd.

Guam	Onward Personal Style Co., Ltd.

		n	Onward Beach Resort Guam, Inc.

	Onward J Bridge Co., Ltd.

		n	Onward Golf Resort Guam, Inc.

	Mulberry Japan Co., Ltd.

		n	Onward Mangilao Guam, Inc.

		n
		n
		n
		n

		 Chacott Co., Ltd.
n

		n Kokobuy Inc.
	Onward Creative Center Co., Ltd.

n	Bien Co., Ltd.

Pure Holding Companyn	Onward Resort & Golf Co., Ltd.

Apparel-Related Businessn	O & K Co., Ltd.

Lifestyle-Related Businessn	Onward Life Design Network Co., Ltd.

Lifestyle-Related (service) Businessn

Lifestyle-Related (resort) Businessn

Joint Venture Factory

		n
n

		n

Osaka
	Tiaclasse Inc.

		n

NaganoNumber of Stores		n Creative Yoko Co., Ltd.

3,127

Saga
		n

Onward Luxury Group S.p.A. (Shoes)		n	General Clothing Co., Ltd.

in 25 countries and regions
The Onward Group engages in business activities through a network that is made up of
84 subsidiaries and 23 affiliates, for a total of 108 Group companies. The Group operates in
the four geographic segments of Japan, Europe, Asia, and the United States.

		n Gallardo Dance S.L.

Onward Holdings Co., Ltd. Annual Report 2018	Island Co., Ltd.

		n

		n

	Yasuda (Vietnam) Co., Ltd.

VeniceOnward U.S.A. L.L.C.

	Onward Trading Co., Ltd.

	Showa (Vietnam) Co., Ltd.

n nErika s.r.l.

J. Press, Inc.

		n

		n

n n

Verona		n	Onward Kashiyama Co., Ltd.

	Onward Kashiyama Vietnam Ltd.

		n

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

Hong Kong

Italy
		n

Kashiyama (Dalian) Co., Ltd.

	Onward Holdings Co., Ltd.

36

37

Onward Holdings Co., Ltd. Annual Report 2018

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

Audit Targets
In fiscal year 2015, the Onward Group introduced the OnwardApproved Factory System, which is used when performing auditsof sewing factories in China and the ASEAN region.
To receive certification under the Onward-Approved Factory
System, factories must pass CSR and quality control audits

conducted by the Onward Quality Center. The Company will not
immediately cease transactions with a factory should it not pass theseaudits. Rather, discussions will be held with the factory in questionand support will be offered in identifying issues and determining
priorities in order to provide opportunities for gradual improvement.

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

A. Legal compliance and management

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

B. Juvenile workforces

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

C. Forced labor

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

D. Wages, allowances, and benefits

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

E. Harassment and abuse

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

F. Work hours

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

G. Non-discrimination

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

H. Health and safety

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

I. Free association

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

J. Sub-contractors and homeworkers

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

K. Environmental practices

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

Audits Performed
Number of factories audited

Number of factories that passed compliance audit

Fiscal year 2015–2017 (Actual)

110

87

Fiscal year 2018 (Plan)

110

86 (Expected)

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

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

Audit Procedure
11 Suppliers’ Code of Conduct Items
A.	Legal compliance andmanagement
B. Juvenile workforces
C. Forced labor

Factory Audits

G. Non-discrimination
H. Health and safety
I. Free association

D. Wages, allowances, and benefits

J.	Sub-contractors andhomeworkers

E. Harassment and abuse

K. Environmental practices

Audits based on
CSR guidelines

Cleared

Audits based on
QC guidelines

Not cleared

Onward-Approved
Factory

Guidance foraction plans

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

Onward Holdings Co., Ltd. Annual Report 2018

38

39

Onward Holdings Co., Ltd. Annual Report 2018

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

Environmental Concept
Thinking of the Earth. Clothing Its People.
The world is evolving faster than ever with fashions and trends changing at a brisk pace.
In recent years, we have seen an increase in products touting low prices, and perhaps
many of us feel, more than before, that clothing is becoming disposable. The disposal ofclothing as trends change is slowly placing an increasing burden on the environment andmay one day significantly affect our lives. The original role of fashion was to enrich andcolor people’s lives while promoting and inspiring prosperity. Fashion should not besomething that takes away from our planet’s natural environment, nor should it detractfrom the infinite possibilities of our future.
Onward remains committed to taking on the challenge of achieving harmony withthe planet and its people through its corporate activities and a range of products that
include fashion items, as it carries out its role as a leading organization of the apparelindustry that delivers fashion on a global scale.

Onward Green Campaign

3,455,575

613,263

Items Collected

Customers Who Donated

76% Recycled
24% Reused
Note : The figures above represent totals since 2009.

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

These items are recycled and reused to the greatest extent possible with the aim of eliminating waste. Certain clothing items arerecycled through use as solid fuel. For other garments, we sort andcollect usable materials to create blankets, work gloves, and otherrecycled textile products that contribute to the organization’s environmental and social contribution initiatives. In addition, a portion of collected clothing items are sold at Onward Reuse Park,*
and the proceeds from these sales are used to fund environmental
and social contribution initiatives.
* For details regarding Onward Reuse Park, please refer to page 43.

Recycling Process
Customers
Used items

Donated at dedicated collection booths in department stores

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

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

Onward Recycling Partners
Disposal
Reuse

RecycleSold at Onward Reuse Park

Materials sorted and collected foruse in textile products

Proceeds

Blankets

Buttons and other non-reusable andunrecyclable articles disposed ofWork gloves

Solid fuelUsed in environmental and social contribution initiatives

Onward Holdings Co., Ltd. Annual Report 201840

41

Onward Holdings Co., Ltd. Annual Report 2018

Environmental and Social Responsibility

Other Activities

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

Support Programs Using Recycled Blankets
1

Bangladesh

5

Mongolia

8

Vietnam

Refugee camp:

Impoverished area:

Impoverished area:

Donated to a refugee
camp in the Cox’s Bazar
district of Chittagong,
in southeastern Bangladesh,and to a hospital thatprovides medical carein the area

Donated to the area
referred to locally as “dzud”
that is periodically afflictedwith severe snow damage(It is not uncommon forpeople living in impoverished areas to share one
blanket during this period.)

Regions primarily in thenorthern mountain range
and central highlands

3,000 blankets

2

2,000 blankets

First support program:May 2010

Kazakhstan

6

4,000 blankets
Onward Reuse Park

Nepal

9

Refugee camp:

Impoverished area:

Donated to refugees,
orphans, other sociallymarginalized people, andcommunities in the cityof Almaty

Donated to senior citizens
and children living insocial welfare facilities,
where they are forced to
face harsh winters eachyear without sufficient
protection against the cold

3,300 blankets

3

Japan

7

4

Myanmar10

Donated to impoverishedindividuals, orphanages,
and medical facilities inIndonesia in October
2017

Donated to impoverishedindividuals, special needs
schools, and children­living in orphanages
in Myanmar

Third support program:
September 2011

Seventh support program:
October 201411

Regions heavily
impacted by the2008 Sichuan
earthquake:

2

3

9 6

2,000 blankets

11

1

7
8

Fourth support program:March 2012

10

42

India

4,000 blankets

5

4

Onward Holdings Co., Ltd. Annual Report 2018

Indonesia

4,000 blankets

China

Donated to a school andother facilities located in
the mountainous regionsof Sichuan Province thatwere affected by theearthquake in 2008

Ninth support program:February 2016

Sixth support program:
October 2013

4,000 blankets

1,000 blankets

Donated to 31 community
centers in Miyagi Prefecturethat were affected by
the Great East Japan
Earthquake

2,000 blankets

Impoverished area:

Regions heavily
impacted by
the Great East
Japan Earthquake:

Nepal

Regions strickenby the Nepal
earthquake:

4,000 blankets

Second support program:February 2011

Eighth support program:
October 2015, April 2016

Fifth support program:
September 2012

To be donated to impoverishedindividuals in India in
November 2018

Onward Reuse Park—A Base for Conveying Our­Environmental and Social Contribution Initiatives
Onward Holdings opened Onward Reuse Park in Kichijoji,
Tokyo, in March 2014 as a base for conveying the Group’s environmental and social contribution initiatives directly to consumers. Onward Reuse Park sells used products from Onward Groupbrands at discounted prices, and the proceeds from these sales areused to fund further environmental and social contribution initiatives. In this manner, this shop creates a proprietary circular economy that encompasses everything from the sale of apparel items tocollection and recycle and reuse.
The Onward Group also implements other initiatives to create
accessible opportunities for customers to become more ecologically active. For example, we hold workshops at which customers canenjoy crafting using old clothing and sell accessories made fromused apparel items through cooperation with recycling artists or
fashion schools located nearby Onward Reuse Park. Furthermore,
the Onward Reuse Park online store was opened in August 2017 toprovide a wider range of options for utilizing collected clothing.

Seven Consecutive Years of Participation in
KIBOU311 Cherry Tree Planting Events for Great
East Japan Earthquake Relief
KIBOU311 is a Great East Japan
Earthquake relief project promoted
on a global scale by DORMEUIL, a
French manufacturer of luxury men’s
apparel. Donations collected throughthis project are provided to LOOM NIPPON, which uses the donations in turn to fund cherry tree planting events.

Forest Preservation Initiatives at
Tosayama Onward Rainbow Forest
In 2008, Onward entered into a partnership agreement with both the city ofKochi and the Kochi City Forestry
Association and has been participating inforest preservation efforts at Tosayama
Onward Rainbow Forest, a forest approximately 80 hectares in sizethat is located in Kochi Prefecture. With the cooperation of local
communities, we are conducting a forest regeneration program that
includes forest thinning performed by Group employees twice a year.
43

Onward Holdings Co., Ltd. Annual Report 2018

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

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

Evaluation of the Effectiveness of the Board of Directors
The Company’s directors conduct annual self-evaluations to assess
the effectiveness and appropriateness of the Board of Directors’
management oversight function as well as the degree of accomplishment of their own duties. The results of these evaluations arereported to the Board of Directors. Based on these self-evaluations,
the Board of Directors analyzes and evaluates its overall effectiveness, disclosing information on the results.
1. Scope of evaluations• All directors and Audit & Supervisory Board members
2. Procedures for evaluations• Self-evaluation via questionnaire• Support for evaluations provided by external advisor
3. Overview of results of analysis and evaluation of Board of
Directors’ effectiveness in fiscal year 2018
• Board of Directors effectively exercising functions for establishing management strategies and targets, resolving management issues, and overseeing business execution in accordancewith Onward’s Corporate Governance Policy

Onward Holdings Co., Ltd. Annual Report 201844

• Current operation methods, agendas, and composition of Boardof Directors appropriate; no issues requiring urgent attention• Further improvements to the effectiveness of the Board of
Directors will require more efficient operation and more­extensive provision of information to outside directors andoutside Audit & Supervisory Board members

Corporate Governance Structure
General Meeting of Shareholders

Audit & Supervisory Board

Reasons for the Appointment of Outside Directors
Name

Reasons for Appointment as an Outside Director

Yoshihide Nakamura

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

Akira Kawamoto

SuperviseStanding Audit &Supervisory Board Members

ReportReportAudit

Outside Audit &Supervisory Board Members

Onward Group
Compliance
Committee

Internal Control
Division

Onward Group Strategy Meeting

We are expecting Mr. Kawamoto to use his extensive experience gained while working for the government for many
years and diverse academic knowledge and insight to enhance the Company’s management.

Audit & Supervisory Board Members
and the Audit & Supervisory Board
The Company has adopted an Audit & Supervisory Board structure, under which the Company has appointed four Audit &Supervisory Board members, two of whom are outside Audit &Supervisory Board members. Audit & Supervisory Board members
have also assigned staff to assist them in carrying out their duties
and to strengthen their supervisory function. Each member audits
and monitors the performance of directors; responsibilities include
reviewing the documentation of important decisions and attending important meetings, such as Board of Directors’ meetings,
Group financial account settlement meetings, and GrowthOriented Management Committee, in accordance with audit policies and the roles delegated by the Audit & Supervisory Board. In
addition, the Internal Control Division and each department areunder periodic monitoring in an effort to establish an effective andlawful corporate structure. The Audit & Supervisory Board meetswith the Representative Directors and the Accounting Auditor ona regular basis to share and exchange information and opinions.
This initiative is also designed to ensure that a structure is in placethat is capable of conducting audits in an effective and lawfulmanner. Moreover, the Audit & Supervisory Board receives reports
from each member in accordance with audit policies and the rolesdelegated by the board. Deliberations are undertaken and resolutions are made based on this information as required.

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

Board of Directors

ReportReasons for Appointment as an
Outside Audit & Supervisory Board Member

Jotaro Yabe

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

Katsuaki Ohashi

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

Coordinate

SuperviseGroup Companies

Audit

Business Execution Structure
The Onward Group has adopted a holding company structure thatallows the Company’s Board of Directors to engage in strategic
decision-making and supervise operating companies. At the sametime, the Group has separated the supervisory and execution functions in order to clarify the responsibilities and authority of each
operating company and to facilitate accelerated strategic decisionmaking. When matters that require urgent attention arise, theBoard of Directors convenes as necessary. In this manner, theOnward Group has a system in place that ensures a swift andappropriate response to rapid changes in the business environment.
Moreover, the Group has introduced an executive officer systemwith the aim of clarifying other management decision-making andbusiness execution functions. In order to facilitate agile decisionmaking as a corporate group, the Onward Group Strategy Meetingand the Growth-Oriented Management Committee have been established. At these meetings, management strategies and the important management matters of operating companies are debated andthe state of operations is reviewed. The Onward Group also has advisory contracts with a number of attorneys to receive legal advice.

Accounting Auditor

Accounting Audit

Directors’ and Audit & Supervisory
Board Members’ Compensation
Compensation paid to directors, excluding outside directors, comprises a basic compensation component, bonuses, and compensation
for use in acquiring company stock.
The total amounts of compensation paid by officer classification, the total amounts of compensation paid by type of compensation, and details on the number of eligible officers are presented
as follows.
Total Amount of Compensation Paid by Type ofCompensation (Millions of yen)

Officer Classification

Total Amount ofCompensation Paid
(Millions of yen)

Basic
Compensation

BonusesCompensation for
Use in Acquiring
Company Stock

Numberof Eligible
Officers

Directors (excluding
Outside Directors)

408

210

118

80

5

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

36

36

—

—

2

Outside Officers

40

40

—

—

4

Payments of compensation to persons who exceed ¥100 ­million
are disclosed on an individual basis and are presented as follows.
Total Amount of Consolidated Compensation by Officer
Total Amount of Compensation Paid by Type ofCompensation (Millions of yen)
Name
(By Officer Classification)

Total Amount ofCompensation Paid
(Millions of yen)Takeshi Hirouchi(Director)

160

45

Company
Classification

Basic
Compensation

BonusesCompensation for
Use in Acquiring
Company Stock

Filingcompany

85

47

27

Onward Holdings Co., Ltd. Annual Report 2018

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

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

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

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

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

Onward Holdings Co., Ltd. Annual Report 201846

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

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

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

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

The Onward Risk Management Regulations were established withthe purpose of guiding the development of the Company’s risk
management structure. The Compliance Division is responsible forthe development of the risk management structure, the identification of issues, and the development of risk-management-relatedplans. The division reports to the Board of Directors and works
to establish an effective structure to address natural disaster risk,
information system risk, and other risks that may severely impact
the continuation of business. Additionally, the Board of Directors
works in cooperation with external specialists as the situation
requires in order to respond appropriately to such risks.

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

47

Onward Holdings Co., Ltd. Annual Report 2018

Board of Directors, Audit & Supervisory
Board Members, and Executive Officers
As of October 1, 2018

Board of Directors

Audit & Supervisory
Board Members

Executive Officers

Representative Director, Chairman

Standing Audit & Supervisory
Board Members

Senior Managing Executive Officer

Executive Officers

Tsunenori Suzuki

Hironobu Mitta

Takeshi Hirouchi

Hitoshi Aoyama

Director, Vice Chairman

Managing Executive Officers

Hirokazu Yoshizato

Masaaki Yoshizawa
Representative Director, President

Michinobu Yasumoto

Outside Audit & Supervisory
Board Members

Jotaro Yabe
Katsuaki Ohashi

Senior Managing Director

Hisayuki Ichinose

Masanori Shozu

Masahiko Yoshikawa

Keiko Ueno

Takeshi Egashira

Masatsugu Miyoshi

Yoshihiro Higuchi

Hidekazu Imamura

Akihiko Murata

Koji Watanabe

Takehiro Shiraishi

Osamu Sato

Financial Section

Daisuke Ikeda

Michio Osawa
Outside Directors

Yoshihide Nakamura
Akira Kawamoto

Company Organization
As of September 1, 2018

General Meeting of Shareholders
Board of Directors

Audit & Supervisory Board

Representative Director, Chairman
Representative Director, PresidentInternational Operations
Special Missions

Onward Group Strategy Meeting
The President’s OfficeInternational
Operations

Corporate Planning, Legal Affairs

50

Six-Year Financial Summary

52

Management’s Discussion and Analysis

55

Operating Risks

56

Consolidated Balance Sheets

58

Consolidated Statements of Operations

59

Consolidated Statements of Comprehensive Income

60

Consolidated Statements of Changes in Net Assets

62

Consolidated Statements of Cash Flows

64

Notes to Consolidated Financial Statements

89

Independent Auditor’s Report

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

European Operations
North American Operations

Asian Administrations
Asian Operations

Korean Operations
Chinese Operations
Hong Kong-ASEAN Operations

Finance, Accounting
Production & Quality Control
Secretary Office, Corporate Communications,
Human Resources

Administrative
Division

Distribution Channel Development
Creation & Marketing

General Affairs

Digital Transformation
Logistics

Chugoku-Shikoku
RegionTohoku-Kitakanto
RegionOnward Holdings Co., Ltd. Annual Report 2018

Hokkaido Region

48

Tokai-Hokuriku
RegionKyushu-Okinawa
RegionKinki Region

Tokyo Region

49

Onward Holdings Co., Ltd. Annual Report 2018

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

Thousands of
U.S. dollars*1

Millions of yen
2013

FOR THE YEAR
Net sales
Cost of sales
Selling, general andadministrative expenses
Operating profit
Ordinary profit
Income taxes, current
Profit attributable toowners of parent
CASH FLOWSCash flows fromoperating activities
Cash flows frominvesting activities
Cash flows fromfinancing activities
Free cash flow*2

2014

2015

2016

2017

2018

Net Sales¥ million

2018

300,000¥259,100
133,983¥280,008
149,270¥281,502
152,438¥263,516
144,063¥244,901
131,638¥243,075
129,499$2,263,904
1,206,099

113,298
11,81913,405
7,398

120,538
10,20012,211
3,112

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

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

109,059
4,204
5,577
1,534

108,409
5,167
5,929
3,305

1,009,681
48,12355,21130,783

4,503

4,659

4,204

4,278

4,744

5,367

49,984

10,13813,362

16,491

3,632

6,844

13,228123,201(10,683)(14,301)(15,657)

1,783

25,271(7,300)Operating Profit and Operating Margin(67,985)(7,848)
(545)

2,122
(939)

757
834

(6,357)
5,415(32,856)
32,115(6,593)
5,928(61,407)
55,216

8,949
5,721

16,7506,801

26,884
7,219

15,955
7,799

10,5996,663

12,058
6,335

112,30358,998259,100

280,008

281,502¥ million / %263,516

244,901

243,075

12,000200,000

8,000

100,000

0

2013

2014

2015

2016

2017

0

2018

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

24,677
100,320

27,376110,349

31,123
117,052

29,407
121,469

26,097
103,573

26,335
105,977

245,273
987,031

86,862286,779
100,740
177,142
165,372

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

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

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

92,269273,227
85,684
169,027
165,670

93,714
278,134
86,384
168,342
168,153872,8172,590,425
804,548
1,567,867
1,566,107

Yen

PER SHARE INFORMATION
Basic earnings per share (EPS)
Net assets
Cash dividends
Payout ratio (%)

U.S. dollars*1¥   29.69
1,102.99
24.00
80.8

¥   26.78
1,166.89
24.00
89.6

¥   28.27
1,101.21
24.00
86.5

¥   31.47
1,116.47
24.00
74.0

¥   36.97
1,155.04
24.00
63.7

5,000

4,503

4,659

2.8
1.6
3.6
46.7
43.0
55.2

2.4
1.3
2.0
45.8
43.8
53.8

2.4
1.3
1.4
45.3
43.9
54.2

2.8
1.6
1.7
46.2
44.5
59.8

3.3
1.9
2.1
46.7
44.6
59.2

—
—
—
—
—
—

OTHER INFORMATION
Number of full-time employees

5,208

5,224

4,973

5,119

4,456

4,530

—

2014

4,204

4,278

4,204
1.7

1.4

2016

2017

5,167
2.1

2.0

2018

0

Operating Margin (right scale)

3.3
2.8

2.8

1.6

1.6

0

2013

2014

ROE

ROA

3.0

4,000
3,000

2.0

2.4

2.4

1.3

1.3

2015

2016

2.8
1.6

1.9

1.0

1,000
0

2015

3,778

4.0

4,744

2013

2014

2015

2016

2017

2018

2017

2018

Total Assets

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

286,779

313,431

340,854200,000
313,454273,227

278,134

150,000

175,029

165,372
57.1

55.2

185,31553.8

172,33754.2

165,670

168,153

59.8

59.2

80.0
60.0

200,000

100,000

40.0

100,000

50,000

20.0

2013

2014

2015

2016

2017

0

2018

2013

2014

Total Net Assets

Capital Expenditures
2.8
1.6
4.6
48.3
43.7
57.1

2.0

2013

4.0

5,732

%

5,367

6,000

$ 0.34
10.76
0.22
—

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

3.6

ROE and ROA¥ million0¥   28.71
1,043.64
24.00
83.6

4.6

Operating Profit

Profit Attributable to Owners of Parent

6.0

10,200

4,000

2,000

Capital expenditures
Depreciation and amortization

11,819

2017

2018

0

Shareholders’ Equity Ratio (right scale)¥/%

26,88430,00020,0000

2016

Cash Dividends per Share and Payout Ratio¥ million

10,0002015

16,750

60.00

2013

80.8

24.00

24.00

89.6

86.5

40.00

15,955
10,599

8,949

120.0
83.6

12,058

24.00

24.00

74.0
24.00

63.7

20.00

2014

2015

2016

2017

2018

0

80.0

24.00
40.0

2013

2014

Cash Dividends per Share

2015

2016

2017

2018

0

Payout Ratio (right scale)*1. Yen amounts have been translated, for convenience only, at ¥107.37=US$1, the rate of exchange as of February 28, 2018.
*2. Free cash flow=Cash flows from operating activities + Cash flows from investing activities

Onward Holdings Co., Ltd. Annual Report 2018

50

51

Onward Holdings Co., Ltd. Annual Report 2018

Management’s Discussion and Analysis

Overview of Operating Results

Gross Profit

In fiscal year 2018, ended February 28, 2018, the domestic economy
underwent a gradual recovery due to strong corporate earnings supported
by government economic stimulus measures and fiscal measures. However,
the outlook remained opaque as a result of rising uncertainty in the UnitedStates, Europe, and East Asia.
In the domestic apparel and fashion industries, despite signs of recovery, including brisk demand for seasonal items stimulated by temperature
trends, the tendency toward thriftiness with regard to clothing among
consumers remained strong, once again making for a challenging
environment.
In this operating environment, the Onward Group moved forwardwith the implementation of its medium-term management plan during
its second year. Based on this plan, we sought to steadily raise profits byheightening the value of products in core brands and improving customer
service. We also advanced selection and concentration measures that
included reinforcing our e-commerce operations and other businesses
from which we can expect high margins and strong growth.

Net Sales
Sales in the Apparel Business decreased 0.4% year on year, to ¥236,882
million, while sales in the Other Business declined 11.1%, to ¥6,193 million. The main reason behind the lower sales in the Other Business was adrop in revenues in our resort business as a result of a situation that caused
concern for the Guam area. As a result, consolidated net sales were down
0.7% compared with the previous fiscal year, to ¥243,075 million.

Net Sales¥ million

300,000

280,008

281,502

263,516

244,901

243,075

The gross profit margin increased 0.5 percentage point, from 46.2%
in fiscal year 2017 to 46.7% in fiscal year 2018. However, gross profit
decreased ¥314 million, to ¥113,577 million.

Operating Income
The ratio of selling, general and administrative (SG&A) expenses to net
sales rose 0.1 percentage point, from 44.5% to 44.6%. Operating profit,
meanwhile, increased ¥963 million year on year, to ¥5,167 million, following the rise in the gross profit margin.

Other Income (Expenses)
Other income, net, amounted to ¥4,862 million, compared with ¥6,776
million in the previous fiscal year. Other income was recorded in the formsof gain on sales or disposal of fixed assets, net, of ¥3,645 million and gainon sale of investments in securities, net, of ¥1,711 million. In otherexpenses, business restructuring expenses decreased from ¥2,085 million in
fiscal year 2017 to ¥394 million in fiscal year 2018 and impairment loss on
fixed assets decreased from ¥1,659 million in fiscal year 2017 to ¥1,202
million in fiscal year 2018.

Profit before Income Taxes and Profit Attributable to
Owners of Parent
Profit before income taxes was ¥10,029 million, a decrease of ¥951 million
year on year.
Profit attributable to owners of parent increased ¥623 million, to¥5,367 million, from the previous fiscal year.

Apparel Business

For fiscal year 2019, ending February 28, 2019, the Onward Group forecasts that consolidated net sales will increase 2.2%, to ¥248,500 million,
and operating profit will grow 39.3% year on year, to ¥7,200 million.
In the apparel and fashion industries, progress in globalization and thetrend toward digitalization will serve as a backdrop for the difficult conditions characterized by fierce competition. In this operating environment,
the Onward Group will seek to improve product value and enhance customer service in its core businesses with the aim of steadily improving
profitability. At the same time, we will develop new businesses with apromising outlook for growth.

In fiscal year 2018, sales in the Apparel Business segment declined 0.4%
year on year, to ¥236,882 million, while operating profit was up 31.1%, to¥7,162 million.

Domestic BusinessAt core operating subsidiary Onward Kashiyama, the growth of core
brands, such as Nijyusanku, Jiyuku, JOSEPH, TOCCA, and any SiS,
contributed to a year-on-year increase in sales of overall existing brands.
Although sales at Onward Kashiyama were down, we were able to achieve
an increase in profit due to improved profitability attributable to businessrestructuring expenses as well as enhanced sales promotions for core brands
and continued efforts to strengthen e-commerce operations. Looking atother Group companies, principal subsidiaries such as Island Co., Ltd.,
posted increases in sales and profit. As a result, overall sales in the domestic
business were down while operating profit was up.

Overseas Business
Sales rose as the yen depreciated in comparison to the euro, the British
pound, and other major currencies. However, profits were down due toalterations in contracts in European manufacturing divisions as well as
adverse consumption trends pertaining to luxury brands.

Other BusinessIn fiscal year 2018, sales in the Other Business segment decreased 11.1%
year on year, to ¥6,193 million, and operating profit was down 10.6%, to¥398 million. A situation causing concern for the Guam area impacted
our resort business, resulting in overall decreases in sales and profit for the
Other Business segment.

Segment Sales¥ million¥ million

12,000300,000

10,20010,000

6,000

4,659

5,732
4,204

4,000

100,000

Outlook for the Fiscal Year Ending February 28, 2019

Operating Profit and Profit Attributable to Owners of Parent

8,000

200,000

Segment Information

4,278
3,778

4,744
4,204

2016

2017

5,367
5,167

16,997

17,201

263,011

264,301

2014

2015

15,048

6,967

248,468

6,193

237,934

236,882

2016

2017

2018

Domestic BusinessIn the domestic business, we will seek to grow our operations by diversifying the value we provide, expanding our customer base, and evolving inline with the times.
Our focus in existing brands will be to improve the value of products
centered on apparel from the perspective of customers in order to increase
profitability. At the same time, we will grow operations in non-apparelfields, such as bags and cosmetics.
In addition, we have launched KASHIYAMA the Smart Tailor, a new
brand that we anticipate will come to represent a core, next-generation
business that is compatible with mass customization. We are also forging
ahead with our Omni-channel retailing strategy, which entails expanding
our offerings of experiences and services, as part of our efforts to realize
higher levels of satisfaction and convenience for the customer.

Overseas Business
In Europe, we aim to realize higher profitability by cementing our frameworks for generating synergies between the manufacturing platform of
Onward Luxury Group and the brands of JOSEPH and JIL SANDER.
Meanwhile, in Asia we will move ahead with selection and concentration measures in existing business while advancing growth strategies that
respond flexibly to market changes through means such as expanding
Internet-based businesses and developing new sales channels.
Initiatives in North America will include developing operating structures and carrying out the investments deemed necessary from a mediumterm perspective, such as those in the J.PRESS store in Yale Club in New
York City. At the same time, we will implement initiatives for growing ourbusiness.

200,000

100,000

2,000
0

2014

2015

2016

2017

2018

0

2014

Operating Profit

Onward Holdings Co., Ltd. Annual Report 2018

52

2015

Profit Attributable to Owners of Parent

2018

0

Apparel Business

Other Business53

Onward Holdings Co., Ltd. Annual Report 2018

Operating Risks

Management’s Discussion and Analysis

Financial Position

Cash Flows from Financing Activities

AssetsTotal assets on February 28, 2018, stood at ¥278,134 million, up ¥4,907
million from the previous fiscal year-end. Total current assets increased¥2,405 million, mainly from increases in cash and deposits and inventories.
Fixed assets were up ¥2,502 million, largely reflecting an increase in buildings and structures following capital expenditures and a rise in investments
in securities stemming from higher market values for stocks held by theCompany.

Liabilities
Total liabilities as of February 28, 2018, were up ¥2,424 million from theprevious fiscal year-end, to ¥109,981 million. Total current liabilities rose¥700 million, mainly attributable to an increase in accounts and notes
payable. Total long-term liabilities were up ¥1,724 million, largely due toan increase in long-term loans payable.

Net Assets
On February 28, 2018, total net assets were up ¥2,483 million from theprevious fiscal year-end, to ¥168,153 million. Total shareholders’ equity
decreased ¥685 million following the acquisition of treasury stock, whichcounteracted the increase in retained earnings. Total accumulated othercomprehensive income increased ¥1,941 million, mainly because of an
upward adjustment associated with net unrealized gain on available-for-sale­securities, which itself was a result of higher market values for stocks heldby the Company, and more beneficial foreign currency translation
adjustments.

Cash Flows
Cash Flows from Operating Activities
Net cash provided by operating activities for fiscal year 2018 was ¥13,228
million (¥6,844 million in the previous fiscal year), mainly from profit
before income taxes, depreciation and amortization, and income taxes paid.

Cash Flows from Investing Activities
Net cash used in investing activities for fiscal year 2018 totaled ¥7,300­million (net cash provided by investing activities of ¥25,271 million in
the previous fiscal year), mainly due to investments in sales facilities and­business assets.

Net cash used in financing activities for fiscal year 2018 amounted to¥6,593 million (¥32,856 million in the previous fiscal year), owing mainly
to changes in borrowings, dividends paid, and acquisition of treasury stock.
As a result, cash and cash equivalents as of February 28, 2018,
decreased ¥374 million, to ¥25,650 million.

Capital Expenditures
We at the Onward Group undertake capital expenditures on a continuous
basis to upgrade and expand our planning, production, sales, and logistics
structures and systems. Our capital expenditures are the wellspring thatenables us to address the diverse needs of our customers.
In fiscal year 2018, our capital expenditures totaled ¥12,058 million.
The details of expenditures by segment are as follows.
In the Apparel Business segment, capital expenditures amounted to¥8,877 million, the majority of which was channeled to sales floors at
department stores and directly managed stores with the aim of strengthening the Group’s sales structure and network.
In the Other Business segment, we invested ¥457 million to upgrade
commercial facilities and enhance operational efficiency.

Profit Distribution Policy
At Onward Holdings, we recognize that the distribution of profits toshareholders is one of our top priorities. Our basic policy is to distribute
regular and stable dividends to shareholders based on our business performance, and we target a dividend payout ratio of 35% or more.
A single dividend payment is issued each year and is decided via
approval at the General Meeting of Shareholders. For fiscal year 2018, we
resolved to distribute a cash dividend of ¥24 per share, the same level as infiscal year 2017, based on a comprehensive evaluation of this year’s performance and our outlook for the operating environment.
Additionally, we intend to utilize our retained earnings flexibly andadopt a balanced approach to meet our funding requirements. Based on
this policy, our retained earnings will be used for strategic investments tobuild a solid business foundation and strengthen our financial position as
and when we consider appropriate.

Total Assets and Total Net Assets

Cash Flows¥ million¥ million

400,000
313,431

340,854300,000
200,000

175,029

185,315

172,337

273,227
165,670

278,134
168,153

20,00010,00025,271–20,000

100,000

13,362

16,491

2,122

Total Assets

2014

2015

2016

2017

2018

Total Net Assets

Onward Holdings Co., Ltd. Annual Report 2018

–40,000–15,657

2014

2015

–32,856

Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities54–7,300 –6,593–6,357–14,301–30,000
0

13,2286,844
757 3,632 1,783

0–10,000

Information Security

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

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

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

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

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

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

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

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

Disasters
The Onward Group has established disaster response handbooks andpolicies. Regardless, the occurrence of a natural disaster, such as an earthquake, a flood, or a fire; an accident; or an outbreak of an epidemic, suchas a new strain of influenza, may compel the Onward Group to suspend its
business operations. Such an occurrence may have an adverse impact on
our Group’s business performance.

Legal Procedures and Compliance

30,000313,454

Changes in Consumer Needs

2016

2017

2018

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

55

Onward Holdings Co., Ltd. Annual Report 2018

Consolidated Balance Sheets
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2017 and 2018

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

Millions of yen

ASSETS

2017

2018

2018

¥ 26,097¥ 26,335$  245,273

Current assets:
		 Cash and deposits (Notes 3 and 10)
		 Accounts and notes receivable (Note 3)

26,00825,057233,373

		 Inventories (Note 2. (4))

40,21742,980400,295

		 Deferred tax assets (Note 12)

3,271

4,130

38,466

		 Other current assets

8,477

7,827

72,890			 Less: Allowance for bad debt

(497)

(351)

(3,266)

103,573

105,978

987,031

				Total current assets

Property, plant and equipment:

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

Millions of yen

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

2017

2018

2018

$  168,196¥ 13,961¥ 18,059

		 Electronically recorded obligations—operating (Note 3)

17,94814,873

138,519

		 Short-term loans payable (Notes 3 and 13)

23,531

29,533275,055

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

13,8355,800

54,022

		 Accrued income taxes

19,415

1,096

2,085

		 Accrued bonuses to employees

967

1,052

9,795

		 Accrued bonuses to directors

182

196

1,829

		 Allowance for sales returns

304

272

2,531

		 Provision for point program

575

736

6,859

		 Other current liabilities (Notes 12 and 13)

13,285

13,778

128,327

				Total current liabilities

85,68486,384

804,548

Long-term liabilities:

		 Buildings and structures

79,84880,950753,931

		 Long-term loans payable (Notes 3 and 13)

3,418

6,819

63,507

		Leased assets

8,354

8,428

78,496

		 Deferred tax liabilities—revaluation of land (Note 12)

2,675

2,259

21,043		 Other depreciable property

34,24134,363320,044

		 Net defined benefit liability (Note 8)

3,988

4,141

38,568

		 Lease obligations (Note 13)

4,870

4,384

40,834

167

188

1,749

			Less: Accumulated depreciation(76,362)(77,032)(717,443)

46,081

46,709435,028

		Land46,18847,005437,789				 Total property, plant and equipment

92,26993,714

872,817

		 Accrued retirement benefits for directors and corporate auditors
		 Other long-term liabilities (Note 12)

6,755

5,806

54,069

				Total long-term liabilities

21,873

23,597219,770					Total liabilities

107,557

109,981

1,024,318

Net assets:
		 Shareholders’ equity (Note 14):
			Common stock:

Intangible assets, net:
		Goodwill

18,523

16,228151,142		Other

7,282

8,284

77,154

				Total intangible assets, net

25,80524,512

228,296

Investments and other assets:

				Authorized—400,000,000 shares				 Issued—167,921,669 shares at February 28, 2017 and 2018, respectively

30,08030,080280,150

			Capital surplus

50,04350,043

466,082			Retained earnings

113,072

115,799

1,078,501

			 Less: Treasury stock, at cost, 21,609,228 shares and 25,406,796 sharesat February 28, 2017 and 2018, respectively(24,168)(27,580)(256,866)

				Total shareholders’ equity

169,027

168,342

1,567,867
11,833

		 Accumulated other comprehensive income:		 Investments in securities (Notes 3 and 4)

26,234

		 Long-term loans receivable

2,225

		 Long-term prepaid expenses

30,491
1,888

283,978

			 Net unrealized gain on available-for-sale securities (Note 4)

323

1,271

17,587

			 Deferred gain (loss) on hedging instruments

57

(74)

(689)

			 Net revaluation loss on land

(6,923)(7,865)(73,247)
19,536

580

360

3,357

		 Net defined benefit asset (Note 8)

3,177

3,847

35,832

		 Deferred tax assets (Note 12)

8,593

6,971

64,925		Other investments

11,333

10,634

99,029

(562)

(261)

(2,427)

		 Stock acquisition rights

780

730

6,796

		Non-controlling interests

1,537

2,814

26,204

				Total net assets

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

51,58053,930502,281¥273,227¥278,134$2,590,425

			 Foreign currency translation adjustments

528

2,097

			 Remeasurements of defined benefit plans (Note 8)

341

838

7,807

				 Total accumulated other comprehensive income(5,674)(3,733)(34,760)

Total liabilities and net assets

Per share:
		 Net assets per share

165,670

168,153

1,566,107¥273,227¥278,134$2,590,425
U.S. dollars(Note 2. (21))

Yen¥1,116.47¥1,155.04$10.76

See accompanying notes to consolidated financial statements.

Onward Holdings Co., Ltd. Annual Report 2018

56

57

Onward Holdings Co., Ltd. Annual Report 2018

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2017 and 2018

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2017 and 2018

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

Millions of yen

Net sales

2017

2018

2018

¥244,901¥243,075$2,263,904

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

Millions of yen

Profit

2017

2018

2018

¥ 4,740¥6,788$63,221

Cost of sales

131,638

129,498

1,206,099

Gross profit

113,263

113,577

1,057,805

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

(593)

750

6,988

Selling, general and administrative expenses

109,059

108,410

1,009,682

		 Deferred gain (loss) on hedging instruments

360

(131)

(1,223)

4,204

5,167

48,123

		 Net revaluation gain on land

143

—

—

		 Foreign currency translation adjustments(3,098)

1,427

13,287

		 Remeasurements of defined benefit plans, net of tax

1,316

497

4,632

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

(361)

335

3,120

Operating profit

Other income (expenses):
		Interest income

47

		Dividend income

48

448

Other comprehensive income:			 Total other comprehensive income (Note 9)

289

252

2,351

		 Land and house rent received

1,121

1,231

11,468

		Interest expenses

(400)

(318)

(2,962)

		 Equity in losses of investees

(316)

(775)

(7,220)		 Foreign currency exchange gain (loss)

535

(82)

(766)

			 Owners of the parent

		Compensation income

—

763

7,104

			Non-controlling interests

(420)

(467)

(4,353)

See accompanying notes to consolidated financial statements.

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

3,007

1,711

15,933

		 Gain on sales or disposal of fixed assets, net

6,859

3,645

33,948

—

664

6,183

		 Impairment loss on fixed assets (Note 6)(1,659)(1,202)(11,198)

		 Business restructuring expenses (Note 7)(2,085)(394)(3,670)		 Loss on liquidation of subsidiaries and affiliates

(458)

(289)

(2,696)

		Other, net

256

75

717

10,98010,02993,410		Current

1,534

3,305

30,783

		Deferred

4,706

(64)

(594)

Profit

4,740

6,788

63,2214(1,421)(13,237)¥  4,744¥  5,367$   49,984

		 Gain on liquidation of subsidiaries and affiliates

Profit before income taxes

Comprehensive income(2,233)

2,878

26,804¥ 2,507¥9,666$90,025¥ 2,520¥8,249$76,831

(13)

1,417

13,194

		 Comprehensive income attributable to:

Income taxes (Note 12):

(Profit) loss attributable to non-controlling interests
Profit attributable to owners of parent

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

Yen

Per share (Notes 14, 15 and 17):
		 Basic earnings per share¥31.47¥36.97$0.34

		 Diluted earnings per share

31.15

36.61

0.34

		 Cash dividends per share

24.00

24.00

0.22

See accompanying notes to consolidated financial statements.

Onward Holdings Co., Ltd. Annual Report 2018

58

59

Onward Holdings Co., Ltd. Annual Report 2018

Consolidated Statements of Changes in Net Assets
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2017 and 2018

Millions of yen

Millions of yen

Shareholders’ equity (Note 14)

Accumulated other comprehensive income

Number ofshares ofcommon stock(thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

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

		Cash dividends

—

—

—

(3,700)—(3,700)		 Profit attributable to owners of parent

—

—

—

4,744

—

4,744

		 Purchase of treasury stock

—

—

—

—

(6,299)(6,299)

		 Reissuance of treasury stock

—

—

—

(106)

171

65

		 Reversal of revaluation of land

—

—

—

(2,047)—(2,047)

		 Net changes other than shareholders’ equity

—

—

—

—

—

—

Balance as at March 1, 2016

			 Total changes during the year

—

—

—

(1,109)(6,128)(7,237)

167,92230,08050,043113,072(24,168)

169,027

		Cash dividends

—

—

—

(3,511)—(3,511)		 Profit attributable to owners of parent

—

—

—

5,367

—

5,367

		 Purchase of treasury stock

—

—

—

—

(3,532)(3,532)

		 Reissuance of treasury stock

—

—

—

(70)

120

50

		 Reversal of revaluation of land

—

—

—

941

—

		 Net changes other than shareholders’ equity

—

—

—

—

			 Total changes during the year

—

—

—

2,727

167,922¥30,080¥50,043¥115,799¥(27,580)¥168,342

Balance as at February 28, 2017

Balance as at February 28, 2018

Stockacquisitionrights

Noncontrollinginterests

Total net
assets¥1,118¥(303)¥(10,126)¥ 3,777¥  (975)¥(6,509)¥844¥1,738¥172,337

		Cash dividends

—

—

—

—

—

—

—

—

(3,700)		 Profit attributable to ownersof parent

—

—

—

—

—

—

—

—

4,744

		 Purchase of treasury stock

—

—

—

—

—

—

—

—

(6,299)

		 Reissuance of treasury stock

—

—

—

—

—

—

—

—

65

		 Reversal of revaluation of land

—

—

—

—

—

—

—

—

(2,047)

		 Net changes other thanshareholders’ equity

(795)

360

3,203

(3,249)

1,316

835

(64)

(201)

570

			 Total changes during the year

(795)

360

3,203

(3,249)

1,316

835

(64)

(201)

(6,667)

Balance as at February 28, 201757

(6,923)528

341(5,674)

780

1,537

165,670

—

—

—

—

—

—

—

(3,511)

941

		 Profit attributable to ownersof parent

—

—

—

—

—

—

—

—

5,367

—

—

		 Purchase of treasury stock

—

—

—

—

—

—

—

—

(3,532)(3,412)(685)

		 Reissuance of treasury stock

—

—

—

—

—

—

—

—

50

		 Reversal of revaluation of land

—

—

—

—

—

—

—

—

941

		 Net changes other thanshareholders’ equity

948

(131)

(942)

1,569

497

1,941

(50)

1,277

3,168

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

$280,150$466,082$1,053,103$(225,087)$1,574,248——(32,705)—(32,705)

		 Profit attributable to owners of parent——

49,984—49,984———(32,893)(32,893)

		 Reissuance of treasury stock

—

—

(647)

1,114

467

		 Reversal of revaluation of land

—

—

8,766

—

8,766

		 Net changes other than shareholders’ equity

—

—

—

—

—

			 Total changes during the year——

25,398(31,779)(6,381)$280,150$466,082$1,078,501$(256,866)$1,567,867

See accompanying notes to consolidated financial statements.

Total

—

		 Purchase of treasury stock

Balance as at February 28, 2018

Remeasurements
Foreignof definedcurrency
benefit planstranslation(Note 8)adjustments

323

Shareholders’ equity (Note 14)

		Cash dividends

Balance as at March 1, 2016

Net
revaluation
loss on land		Cash dividends

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

Balance as at February 28, 2017

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

			 Total changes during the year

948

(131)

(942)

1,569

497

1,941

(50)

1,277

2,483

Balance as at February 28, 2018

¥1,271¥ (74)¥ (7,865)¥ 2,097¥  838¥(3,733)¥730¥2,814¥168,153

Total

Stock
acquisitionrights

Noncontrollinginterests

Total net
assets$3,176$(52,842)$7,262$14,318$1,542,986

Thousands of U.S. dollars (Note 2. (21))
Accumulated other comprehensive income
Net unrealized
Deferredgain onavailable-for-sale gain (loss)
on hedging
securities(Note 4)
instruments

Balance as at February 28, 2017

Net
revaluation
loss on landRemeasurements
Foreignof definedcurrency
benefit planstranslation(Note 8)adjustments$ 3,011$  533$(64,483) $ 4,921

		Cash dividends

—

—

—

—

—

—

—

—

(32,705)

		 Profit attributable to ownersof parent

—

—

—

—

—

—

—

—

49,984

		 Purchase of treasury stock

—

—

—

—

—

—

—

—

(32,893)

		 Reissuance of treasury stock

—

—

—

—

—

—

—

—

467

		 Reversal of revaluation of land

—

—

—

—

—

—

—

—

8,766

		 Net changes other thanshareholders’ equity

8,822(1,222)(8,764)

14,615

4,631

18,082(466)

11,886

29,502

			 Total changes during the year

8,822

(1,222)(8,764)

14,615

4,631

18,082(466)

11,88623,121

Balance as at February 28, 2018$11,833$  (689)$(73,247) $19,536$7,807$(34,760)$6,796$26,204$1,566,107

See accompanying notes to consolidated financial statements.

Onward Holdings Co., Ltd. Annual Report 2018

60

61

Onward Holdings Co., Ltd. Annual Report 2018

Consolidated Statements of Cash Flows
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2017 and 2018

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

Millions of yen
2017

2018

Millions of yen

2018

2017

Cash flows from operating activities:

Thousands of
U.S. dollars(Note 2. (21))
2018

2018

6,004

55,919Cash flows from financing activities:

		 Profit before income taxes¥10,980¥10,029$ 93,410

		 Adjustments to reconcile profit before income taxes
to net cash provided by operating activities:
			Depreciation and amortization

6,663

6,335

58,998

			 Impairment loss on fixed assets

1,659

1,202

11,198

			 Net amortization of goodwill on consolidation

2,132

2,563

23,874

			 Increase (decrease) in allowance for bad debt

(395)

(462)

(4,311)

			 (Increase) decrease in net defined benefit asset(1,760)(670)(6,246)

			 Increase (decrease) in net defined benefit liability

(151)

98

916

			 Interest and dividend income

(336)

(300)

(2,799)

			Interest expenses

400

318

2,962

			 Equity in (earnings) losses of investees

316

775

7,220

			 (Gain) loss on sales or disposal of fixed assets, net(6,859)(3,645)(33,945)			 (Gain) loss on sale of investments in securities, net(3,007)(1,711)(15,933)

			 (Increase) decrease in trade receivables

912

1,648

15,351

			 (Increase) decrease in inventories

1,247(1,980)(18,439)

			 Increase (decrease) in trade payables(2,538)

921

8,580

			Other, net

4,696(1,830)(17,048)

				Subtotal

123,788

13,95913,291

		 Interest and dividends received

433

376

3,501

		Interest paid

(428)

(323)

(3,011)(7,125)(1,961)(18,261)

		 Income taxes paid
		 Refunded income taxes				 Net cash provided by (used in) operating activities

5

1,845

17,184

6,844

13,228123,201

(5)

(640)

(5,965)

		 Net increase (decrease) in short-term loans payable(19,267)

		 Proceeds from long-term loans payable383

20,000186,272

		 Repayments of long-term loans payable(3,028)(24,570)(228,831)

		 Acquisition of treasury stock(6,299)(3,532)(32,893)		 Dividends paid by the parent company(3,700)(3,511)(32,705)

		 Dividends paid to non-controlling interests

(95)

(196)

(1,825)		Other, net

(850)

(788)

(7,344)(61,407)				 Net cash provided by (used in) financing activities(32,856)(6,593)

Effect of exchange rate changes on cash and cash equivalents(1,565)

291

2,711

Net increase (decrease) in cash and cash equivalents(2,306)(374)(3,480)Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 10)28,33026,024242,373¥ 26,024¥ 25,650$ 238,893

See accompanying notes to consolidated financial statements.

Cash flows from investing activities:
		 Increase in time deposits
		 Decrease in time deposits

1,005

29

271

		 Acquisition of property, plant and equipment(8,626)(9,459)(88,096)

		 Proceeds from sale of property, plant and equipment

21,764

6,392

59,538

		 Acquisition of investments in securities(4,205)(6,302)(58,696)

		 Proceeds from sale of investments in securities

14,471

4,864

45,309

		 Payments for long-term prepaid expenses

(183)

(256)

(2,388)

		 Payments for security deposits

(419)

(301)

(2,806)

		 Proceeds from security deposits

1,377

1,121

10,438

		 Purchase of investments in subsidiaries resulting in change in scope of consolidation(5,116)——

		 Payments for sale of investments in subsidiaries resulting in change in scope of consolidation

(12)

—

—

		 Proceeds from sale of investments in subsidiaries resulting in change in scope of consolidation

6,058

—

—

		Other, net(838)(2,748)(25,590)

25,271(7,300)(67,985)				 Net cash provided by (used in) investing activities

Onward Holdings Co., Ltd. Annual Report 2018

62

63

Onward Holdings Co., Ltd. Annual Report 2018

Notes to Consolidated Financial Statements
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2017 and 2018

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

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

Investments in unconsolidated subsidiaries and affiliates are accounted for by the equity method. A total of 25 companies (18 companies for 2017)
were accounted for by the equity method for the year ended February 28, 2018.
The Company did not apply the equity method to Onward Italia S.p.A. and others as the effect on net income and retained earnings of theconsolidated financial statements are not material individually or in the aggregate.
Although the fiscal year-end of Gailyglen Ltd. is November 30, its financial statements for the fiscal year-end have been used. Also, the fiscal
year-end of Daidoh Limited is March 31, and its financial statements prepared on a basis similar to that for the year-end closing as of December 31
have been used for consolidation purposes.

(4) Inventories

2. Summary of Significant Accounting Policies

Inventories held for sale in the ordinary course of business are measured at the lower of cost or net selling value, which is defined as the selling
price less additional estimated manufacturing costs and estimated direct selling expenses, determined principally by the specific identification
method. Write-downs recorded for the years ended February 28, 2017 and 2018 were ¥10,002 million and ¥10,136 million ($94,398 thousand),
respectively.

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

The Company had 84 subsidiaries as at February 28, 2018 (83 as at February 28, 2017). The accompanying consolidated financial statements
include the accounts of the Company and 71 of its subsidiaries (74 for 2017). Major consolidated subsidiaries are listed below (the Company andits consolidated subsidiaries are collectively referred to as the “Companies”):
Name of subsidiary

Equity ownership percentage

Closing date

Onward Kashiyama Co., Ltd.

100.0%

February 28

Onward Trading Co., Ltd.

100.0

February 28

Chacott Co., Ltd.

100.0

February 28

Creative Yoko Co., Ltd.

100.0

February 28

Island Co., Ltd.

100.0

February 28

Onward Global Fashion Co., Ltd.

100.0

February 28

Onward Luxury Group S.p.A.

100.0

November 30

Joseph Ltd.

100.0

November 30
December 31

Onward Fashion Trading (China) Co., Ltd.

100.0

J. Press, Inc.

100.0

December 31

Onward Creative Center Co., Ltd.

100.0

February 28

Excel Co., Ltd.

100.0

February 28

Onward Resort & Golf Co., Ltd.

100.0

February 28

Onward Life Design Network Co., Ltd.

100.0

February 28

Onward Beach Resort Guam, Inc.

100.0

December 31

Onward Mangilao Guam, Inc.

100.0

December 31

During the year ended February 28, 2018, ONWARD LUXURY GROUP UK Ltd. was newly established, and shares in HORLOGE SAINTBENOIT UK LTD. were acquired; therefore, these companies became consolidated subsidiaries of the Company.
CHARLES & KEITH JAPAN CO., LTD., J. DIRECTION CO., LTD., Candela International Co., Ltd., Dauphin S.a.r.l. and Pretty Yoko
Ltd. were liquidated; therefore, these companies were removed from the scope of consolidation.
The financial statements of the aforementioned subsidiaries with the fiscal year-end of December 31 or November 30 have been used for consolidation. The fiscal year-end of KOKOBUY Inc. is September 30, and its financial statements prepared on a basis similar to that for the year-end
closing as of December 31 have been used for consolidation purposes. Significant adjustments considered necessary between the fiscal year-ends
and the Company’s closing date have been made for consolidation.
The remaining seven subsidiaries (nine for 2017) were not consolidated because their total assets, net sales, net income and retained earnings
were not material individually or in the aggregate compared with those of the consolidated financial statements of the Companies.

(2) Consolidation and Elimination

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

Onward Holdings Co., Ltd. Annual Report 2018

64

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

(6) Derivative Transactions

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

(7) Hedge Accounting

Gains or losses arising from changes in the fair values of derivatives designated as “hedging instruments” are deferred as a component of net assets,
net of applicable taxes. The gains or losses on the hedging instruments are included in profit in the period during which the gains and losses on thehedged items or transactions are recognized. For forward exchange contracts, if they meet conditions for the hedge accounting, the difference
between the contract rate and spot rate at the date of the contract is recognized over the period from the contract date to the settlement date.
The derivatives designated as hedging instruments are principally forward exchange contracts. The related hedged items are trade 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 exposure to the risk of foreign currency exchange rate fluctuation.

(8) Property, Plant and Equipment

The Company and its domestic consolidated subsidiaries provide depreciation by the declining-balance method at rates based on the estimateduseful lives of assets which are prescribed by Japanese income tax regulations, except for certain buildings (other than facilities attached tobuildings) acquired on and after April 1, 1998 and facilities attached to buildings and structures acquired on and after April 1, 2016, which are
depreciated by the straight-line method pursuant to an amendment to the Japanese income tax act.
Overseas consolidated subsidiaries provide depreciation by the straight-line method.
The useful lives of property, plant and equipment are summarized as follows:
Buildings and structures
3 to 50 years
Other
2 to 20 years(9) Intangible Assets and Long-Term Prepaid Expenses

Intangible assets and long-term prepaid expenses are amortized by the straight-line method. Software costs for internal use are amortized over their
expected useful lives (five to 10 years) by the straight-line method.

(10) Income Taxes

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

65

Onward Holdings Co., Ltd. Annual Report 2018

Notes to Consolidated Financial Statements(11) Allowance for Bad Debt

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

(12) Allowance for Sales Returns

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

(13) Retirement Benefits

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

(14) Provision for Point Program

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

(15) Accounting for Japanese Consumption Taxes

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

(16) Application of Consolidated Taxation System

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

(17) Cash and Cash Equivalents

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

(18) Impairment of Long-Lived Assets

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

(19) Accrued Bonuses to Employees

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

(20) Accrued Bonuses to Directors

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

(22) Goodwill

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

(23) Additional Information

The Companies adopted the “Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (Accounting Standards Board of Japan
Guidance No. 26, March 28, 2016) from the beginning of the year ended February 28, 2018.

3. Financial Instruments
1. Matters pertaining to the status of financial instruments(1) Policy on financial instruments
The Companies invest their funds in short-term deposits and meet their financing needs through bank loans. The Companies utilize derivatives tohedge various risks as described in detail below and do not enter into derivatives for trading or speculative purposes.
(2) Financial instruments and risks
Accounts and notes receivable are exposed to credit risk of customers. Operating receivables denominated in foreign currencies, being subject torisk associated with changes in the foreign currency exchange rates, are hedged by forward exchange contracts.
Investments in securities mainly comprise stocks of companies with which the Companies have business alliances and are exposed to risk associated with fluctuations of their market prices.
Accounts and notes payable and electronically recorded obligations—operating are due within one year. Operating payables denominated inforeign currencies, being subject to risk associated with changes in the foreign currency exchange rates, are hedged by forward exchange contracts.
The purpose for loans is for working capital (mainly short-term) and funds for capital investment (long-term). A portion of long-term loans payable is subject to interest rate risk.
Regarding derivatives, forward exchange contracts, interest rate swaps, and currency options are used to hedge the foreign exchange rate fluctuation risk associated with the operating receivables and payables.
(3) Risk management for financial instruments(a) Management of credit risk (risk of default by customers and counterparties)
For credit risk of customers associated with accounts and notes receivable, in accordance with the credit management regulations, the Companies
monitor the status of their main customers and counterparties on a periodical basis and manage due dates and outstanding balances by customer
while working to early identify and mitigate any concerns about collection due to deterioration of financial conditions and other reasons. For
derivative transactions, to mitigate the credit risk, the Companies conduct transactions only with highly-rated financial institutions.
(b) Management of market risk (risk of fluctuations in foreign exchange rates, interest rates and others)
The Companies hedge risk associated with changes in the foreign currency exchange rates arising from receivables and payables denominated inforeign currencies mainly by forward exchange contracts.
For investments in securities, the Companies periodically perceive the fair values and financial conditions of the issuers and continuously evaluate whether the securities should be maintained taking into account relationships with their business partners.
For derivatives, the Companies conduct transactions only for their actual requirements in accordance with internal management rules andmonthly review transaction balances, valuation gain or loss, and other conditions.
(c) Management of liquidity risk related to fund procurement (risk that the Companies may not be able to meet their obligations on scheduled due dates)
In order to manage liquidity risk, the Companies timely prepare and update a schedule of cash receipts and disbursements and maintain sufficientliquidity on hand.
(4) Supplementary explanation of fair values of financial instruments
The fair value of financial instruments is based on their quoted market price if available. When no quoted market price is available, fair value isreasonably estimated. Since various variable assumptions are reflected in estimating the fair value, different assumptions could result in different
fair values.

(21) U.S. Dollar Amounts

Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of ¥107.37=US$1, the rate of exchange as ofFebruary 28, 2018, has been used in translation. The inclusion of such amounts is not intended to imply that Japanese yen have been or could bereadily converted, realized or settled in U.S. dollars at that rate or any other rate.

Onward Holdings Co., Ltd. Annual Report 2018

66

67

Onward Holdings Co., Ltd. Annual Report 2018

Notes to Consolidated Financial Statements

2. Matters related to fair values of financial instruments
The following are the consolidated balance sheet amounts and fair values and differences between them as of February 28, 2017 and 2018.

2. Book values of financial instruments deemed extremely difficult to determine their fair values as of February 28, 2017 and 2018 are as follows:

February 28, 2017

Book value

Fair value

Difference(a) Cash and deposits¥ 26,097¥ 26,097¥    —

26,00826,008—

17,686

17,686—(b) Accounts and notes receivable(c) Investments in securities:
Available-for-sale securities
Investments in unconsolidated subsidiaries and affiliates

7,965

3,534

(4,431)(d) Accounts and notes payable(13,961)(13,961)—(e) Electronically recorded obligations—operating(17,948)(17,948)—(f ) Short-term loans payable(23,531)(23,531)—(g) Long-term loans payable (including current portion of long-term loans payable)(17,253)(17,273)

20

136

136

—

(h) Derivative transactions

Classification

2017

2018

2018

¥583

¥1,315$12,245

Investments in securities:
Unlisted equity securities

The fair values of these items are not included in “(c) Investments in securities” because their market prices are not available and fair values are deemed
extremely difficult to determine.
3. The redemption schedules for monetary receivables and marketable securities with maturities as of February 28, 2017 and 2018 are as follows:
Millions of yen
February 28, 2017

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits¥26,097

¥—

¥—

¥—

Accounts and notes receivable

26,008———

		Total¥52,105

¥—

¥—

¥—

February 28, 2018

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits¥26,335

¥—

¥—

¥—

Accounts and notes receivable

25,057———

		Total¥51,392

¥—

¥—

¥—

February 28, 2018

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits$245,273

$—

$—

$—

Accounts and notes receivable

233,373———

		Total$478,646

$—

$—

$—

Millions of yen
February 28, 2018

Book value

Fair value

Difference(a) Cash and deposits¥ 26,335¥ 26,335¥    —

25,05725,057—(b) Accounts and notes receivable(c) Investments in securities:
Available-for-sale securities

20,792

20,792—

Investments in unconsolidated subsidiaries and affiliates

8,384

3,848

(4,536)(d) Accounts and notes payable(18,059)(18,059)—(e) Electronically recorded obligations—operating(14,873)(14,873)—(f ) Short-term loans payable(29,533)(29,533)—(g) Long-term loans payable (including current portion of long-term loans payable)(12,619)(12,635)

16

(103)

(103)

—

(h) Derivative transactions

February 28, 2018

Book value

Fair value

Difference(a) Cash and deposits$ 245,273$ 245,273$    —

233,373

233,373—

Available-for-sale securities

193,652

193,652—

Investments in unconsolidated subsidiaries and affiliates

78,08135,839(42,242)(c) Investments in securities:(d) Accounts and notes payable(168,196)(168,196)—(e) Electronically recorded obligations—operating(138,519)(138,519)—(f ) Short-term loans payable(275,055)(275,055)—(g) Long-term loans payable (including current portion of long-term loans payable)(117,529)(117,679)

150

(963)

(963)

—

(h) Derivative transactions

Millions of yen

Thousands of U.S. dollars

4. Expected repayment amounts of long-term loans payable subsequent to the balance sheet date
See Note 13. “Short-Term Loans Payable and Long-Term Loans Payable.”Thousands of U.S. dollars(b) Accounts and notes receivableThousands of
U.S. dollars

Millions of yen

Millions of yen

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

4. Investments in Securities(1) Information as of and for the Year Ended February 28, 2017(a) Available-for-sale securities with readily determinable fair value
Investments in securities whose fair values were readily determinable at February 28, 2017 are summarized as follows:
Millions of yen
Carrying
value

Acquisition
cost

Unrealized
gain (loss)¥13,881¥10,534¥3,3473

1

2

13,884

10,535

3,349
(375)

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

3,802

4,177

Other

—

—

—

Subtotal

3,802

4,177

(375)

		Total¥17,686¥14,712¥2,974

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

(b) Available-for-sale securities sold during the year ended February 28, 2017
Millions of yen

Proceeds from sale of securities¥13,390

Realized gain on sale of securities

3,007

Realized loss on sale of securities—(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2017 was ¥8,211 million.
Onward Holdings Co., Ltd. Annual Report 2018

68

69

Onward Holdings Co., Ltd. Annual Report 2018

Notes to Consolidated Financial Statements(2) Information as of and for the Year Ended February 28, 2018

Millions of yen(a) Available-for-sale securities with readily determinable fair value
Investments in securities whose fair values were readily determinable at February 28, 2018 are summarized as follows:
Millions of yen
Carrying
value

Acquisition
cost

Carrying
value

Acquisition
cost

Unrealized
gain (loss)

Securities with unrealized gain:
Equity securities¥17,746

Other
Subtotal¥13,007¥4,739$165,275

Contract ornotional amount

Fair value

			U.S. dollar

Accounts payable¥4,233¥(102)

			EuroAccounts payable

2,199

3

			PoundAccounts payable

17

(0)

			Chinese yuan

Accounts payable

Forward exchange contracts:

Thousands of U.S. dollars
Unrealized
gain (loss)

Hedged item

February 28, 2018

$121,140$44,135

3

1

2

27

12

15

17,74913,008

4,741

165,302

121,152

44,150		 To buy foreign currency:

Securities with unrealized loss:
Equity securities

3,044

3,728

(684)

28,35034,722(6,372)

Other

—

—

—

—

—

—

Subtotal

3,044

3,728

(684)

28,35034,722(6,372)

		Total¥20,793¥16,736¥4,057$193,652$155,874$37,778

Note: Non-marketable equity securities of ¥336 million ($3,131 thousand) are not included in the above table because there were no quoted market prices
available and it is extremely difficult to determine the fair value.

(b) Available-for-sale securities sold during the year ended February 28, 2018
Millions of yen

Thousands of
U.S. dollars

Proceeds from sale of securities¥4,458$41,525

Realized gain on sale of securities

1,715

15,977

Realized loss on sale of securities

(5)

(45)

(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2018 was ¥9,362 million($87,196 thousand).

140

(4)

¥6,589¥(103)

Thousands of U.S. dollars
Hedged item

Contract ornotional amount

Fair value

			U.S. dollar

Accounts payable$39,427$(948)

			EuroAccounts payable

20,47624

			PoundAccounts payable

159

(3)

			Chinese yuan

Accounts payable

1,308

(36)

$61,370$(963)

February 28, 2018

Forward exchange contracts:		 To buy foreign currency:

6. Impairment Loss on Fixed Assets
For the years ended February 28, 2017 and 2018, the Companies reviewed its long-lived assets for impairment and, as a result, recognized an
impairment loss as follows:
February 28, 2017
Location

5. Derivative Transactions

Tokyo metropolitan area and other

Fair value

Location

Valuation
gain (loss)

Forward exchange contracts:

Tokyo metropolitan area and other—To buy foreign currency:
		U.S. dollar¥1,138		Euro¥44¥1,375
625

¥44

1,169

(2)

(2)

¥2,307¥42¥42

Millions of yen

Thousands of
U.S. dollars

Buildings and structures¥484$4,505

Other

556

5,184

Goodwill

162

1,509

Usage

Business assets—

Description

The long-lived assets are basically grouped by brand, and assets for lease and idle assets are grouped individually by each item. The Companies
have recognized a loss on impairment on assets for lease and idle assets due to a significant decline in their market value and on business assets due
to a continuous loss generated from their operating activities by reducing their book values to the respective recoverable amounts.
The impairment loss on long-lived assets for the years ended February 28, 2017 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen(2) Derivative transactions to which hedge accounting was applied
Millions of yen
February 28, 2017

Millions of yen

February 28, 2018

Millions of yen
Contract ornotional amount

Description

Buildings and structures
Other

The contract or notional amounts and fair values of derivative financial instruments held as of February 28, 2017 and 2018 are summarized
as follows:(1) Derivative transactions to which hedge accounting was not applied

February 28, 2017

Usage

Business assets

Hedged item

Contract ornotional amount

Fair value

Forward exchange contracts:

2017

2018

2018

Buildings and structures¥1,375¥  484$ 4,505

Other intangible assets

205

339

3,158

Other

420

168

1,570

Land

—

49

456

Accounts payable¥2,422¥95

Goodwill

—

162

1,509

			EuroAccounts payable

567

(0)

		Total¥2,000¥1,202$11,198

			PoundAccounts payable

21

(1)

			Chinese yuan

Accounts payable

43

(0)

¥3,053¥94

		 To buy foreign currency:
			U.S. dollar

Onward Holdings Co., Ltd. Annual Report 201870

For the year ended February 28, 2017, ¥341 million of the above amount was recorded as business restructuring expenses. For the year ended
February 28, 2018, Tiaclasse Inc., a consolidated subsidiary of the Company, recognized an impairment loss of ¥162 million ($1,509 thousand) on
the unamortized balance of goodwill as a result of consideration of its recoverability based on cash flow projections.
The recoverable amount of these assets is based on their net selling price or their value in use. The net selling price is estimated by using theirestimated disposal price. The value in use is calculated by discounting the future cash flows at discount rates of 5.0% and 5.3% for the years ended
February 28, 2017 and 2018, respectively.

71

Onward Holdings Co., Ltd. Annual Report 2018

Notes to Consolidated Financial Statements

7. Business Restructuring Expenses(iii) Reconciliation from projected benefit obligations and plan assets to net defined benefit asset and liability recognized in the consolidatedbalance sheets

Business restructuring expenses for the years ended February 28, 2017 and 2018 consisted of the following:
Millions of yen
2017

2018

2018

Expenses in relation to elimination of unprofitable brands¥  564¥ —$   —Expenses in relation to withdrawal from unprofitable stores

662

320

2,979

859

74

691

¥2,085¥394$3,670Business portfolio restructuring:

Retirement expenses resulting from logistics and organization restructuring, etc.
		Total

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

2017

2018

2018

¥16,206¥14,982$139,534

Service cost

1,076

1,013

9,433

Interest cost

41

39

365

Balance at beginning of year

Actuarial differences
Benefits paid
Other
Balance at end of year

(168)

5

44

(2,018)(1,783)(16,602)

(155)

124

1,151

¥14,982¥14,380$133,925(ii) Changes in plan assets
Thousands of
U.S. dollars

Millions of yen

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

2018

2018

¥ 14,339¥ 13,633$ 126,968

Plan assets(14,171)(14,086)(131,189)

168

(453)

(4,221)

Unfunded projected benefit obligations

643

747

6,957

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

811

294

2,736

Net defined benefit liability

3,988

4,141

38,568Net defined benefit asset(3,177)(3,847)(35,832)

Net amount of liability and asset recognized in the consolidated balance sheets¥   811¥   294$   2,736(iv) Net periodic pension expenses and their breakdown
Thousands of
U.S. dollars

Millions of yen

Service cost
Interest cost

2017

2018

2018

¥1,076¥1,013$ 9,433

41

39

365

Expected return on plan assets

(231)

(222)

(2,068)

Amortization of unrecognized actuarial differences

763

568

5,289

Amortization of unrecognized prior service costs

(50)

(47)

(438)

Other

(118)

(64)

(593)

¥1,481¥1,287$11,988(v) Remeasurements of defined benefit plans in other comprehensive income
Breakdown of items recognized as remeasurements of defined benefit plans (before tax effect) in other comprehensive income is as follows:
Thousands of
U.S. dollars

Millions of yen

Prior service costs

2017

2018

2018

¥  (51)¥ (47)$ (437)

Actuarial differences

1,982

764

7,113

Total

¥1,931¥717$6,676(vi) Remeasurements of defined benefit plans in accumulated other comprehensive income
Breakdown of items recognized as remeasurements of defined benefit plans (before tax effect) in accumulated other comprehensive income isas follows:
Thousands of
U.S. dollars

Millions of yen

2017

2018

2018

¥13,443¥14,171$131,980

231

222

2,068

Unrecognized actuarial differences

276

1,040

9,684

1,050

200

1,868

Total

¥491

¥1,208$11,253

Employer contributions

293

310

2,886

Benefits paid

(846)

(817)

(7,613)¥14,171¥14,086$131,189

Balance at end of year

2017

Funded projected benefit obligations

Net periodic pension expenses

Millions of yen

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Unrecognized prior service costs

2017

2018

2018

¥215

¥  168$ 1,569(vii) Plan assets(a) Percentage by major category of plans assets is as follows:
2017

2018

Life insurance company general accounts

40%

37%

Equity securities

49%

52%

Debt securities

2%

2%

Short-term funds

9%

9%

100%

100%

Total

Total plan assets include retirement benefit trusts established for defined benefit corporate pension plans and lump-sum retirement payment plansof 55% and 58% for the years ended February 28, 2017 and 2018, respectively.

Onward Holdings Co., Ltd. Annual Report 2018

72

73

Onward Holdings Co., Ltd. Annual Report 2018

Notes to Consolidated Financial Statements(b) Determination of long-term expected rate of return on plan assets
In determining long-term expected rate of return on plan assets, the Companies consider the current and projected asset allocations, as well as current and future long-term rate of returns from various assets constituting plan assets.
(viii) Basis for calculation of actuarial assumptions
2017

2018

Discount rate

0.3% to 0.7%

0.3% to 0.7%

Long-term expected rate of return on plan assets

1.4% to 2.6%

0.7% to 2.4%

B. Defined contribution plans
The amounts to be paid by the Companies to the defined contribution pension plans for the years ended February 28, 2017 and 2018 were ¥386
million and ¥350 million ($3,260 thousand), respectively.

11. Lease Transactions(Lessee)Finance lease transactions
Finance lease transactions that do not transfer ownership
1. Leased assets
Leased assets are primarily comprised of logistic facilities (“buildings and structures”).
2. Depreciation method for leased assets
The Companies have adopted a method where leased assets are depreciated on a straight-line basis over the lease periods as their useful lives withno residual value.

12. Income Taxes
9. Notes to Consolidated Statements of Comprehensive Income

The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities as at February 28, 2017 and2018 consisted of the following elements:

Other comprehensive income for the years ended February 28, 2017 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2017

2018

2018

Amount arising during the year

¥ 2,384¥ 2,869$ 26,722

Reclassification adjustment for gain and loss

(3,332)(1,788)(16,648)

(948)

1,081

10,074

Income tax effect

355

(331)

(3,086)

(593)

750

6,988

Amount arising during the year

84

(103)

(957)

Reclassification adjustment for gain and loss

442

(83)

(780)

Amount before income tax effect

526

(186)

(1,737)

Income tax effect

(166)

55

514

360

(131)

(1,223)

143

—

—

143

—

—

		TotalDeferred gain (loss) on hedging instruments:

		Total
Revaluation gain on land:
Income tax effect		TotalForeign currency translation adjustments:
Amount arising during the year
Reclassification adjustment for gain and loss		Total(3,117)

1,464

13,633

19

(37)

(346)

(3,098)

1,427

13,287

Remeasurements of defined benefit plans:
Amount arising during the year
Reclassification adjustment for gain and loss

1,219

196

1,825

712

521

4,851

Amount before income tax effect

1,931

717

6,676

Income tax effect

(615)

(220)

(2,044)

1,316

497

4,632

		TotalShare of other comprehensive income of associates accounted for using the equity method:Amount arising during the year(361)

		Total			 Total other comprehensive income

335

3,120

(361)

335

3,120

¥(2,233)¥ 2,878$ 26,804

10. Notes to Consolidated Statements of Cash Flows
Cash and cash equivalents at February 28 2017 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Cash and deposits
Time deposits with maturities of more than three months
Cash and cash equivalents
Onward Holdings Co., Ltd. Annual Report 2018

74

2017

2018

2018

Deferred tax assets:

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

Amount before income tax effectThousands of
U.S. dollars

Millions of yen

2017

2018

2018

¥26,097¥26,335$245,273

(73)

(685)

(6,380)¥26,024¥25,650$238,893

Loss on write-down of inventories¥  2,133¥  2,167$  20,185

Loss on write-down of investments in unconsolidated subsidiaries

191

1,718

15,997

Accrued bonuses to employees

299

325

3,030

Net defined benefit liability

2,685

2,708

25,219Accrued retirement benefits for directors and corporate auditors

72

78

731

Allowance for bad debt

2,897

1,457

13,573Tax loss carry forwards

14,39911,080103,197

Impairment loss on fixed assets

6,141

4,699

43,768

25

25

235

4,108

3,641

33,904

Investments in securities
Other

32,95027,898259,839

Less: Valuation allowance(18,407)(13,738)(127,954)

			 Total deferred tax assets

14,543

14,160131,885

		Subtotal

Deferred tax liabilities:
Gain on securities contributed to employee retirement benefit trusts

(56)

(56)

(524)

Net defined benefit asset(973)(1,178)(10,972)

Provision for deferred capital gain on real property for tax purposes

(39)

(38)

(358)

Net unrealized gain on available-for-sale securities(909)(1,240)(11,551)

(718)

(547)

(5,089)

			 Total deferred tax liabilities

Other(2,695)(3,059)(28,494)

				Net deferred tax assets¥ 11,848¥ 11,101$ 103,391

The reconciliation of the difference between the statutory tax rate and the effective tax rate is as follows:
%
2017

2018

33.1

—

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

1.7—

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

(0.2)

—

Per capita inhabitant tax

2.3—

Amortization of goodwill

6.1—

Changes in valuation allowance

(0.1)

—

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

(0.8)

—

Effects due to liquidation of consolidated subsidiaries

7.9—

Differences in statutory tax rate

3.6

—

Other

3.2

—

56.8

—

Statutory tax rate
Reconciliation:

		 Effective tax rate

Note: The details for the year ended February 28, 2018 are omitted as the difference between the statutory tax rate and the effective tax rate is 5% or less of the statutory
tax rate.

75

Onward Holdings Co., Ltd. Annual Report 2018

Notes to Consolidated Financial Statements

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

14. Shareholders’ Equity

Short-term loans payable at February 28, 2017 and 2018 represented loans, principally from banks. The weighted-average interest rate on theseloans was 0.8% and 0.9% in 2017 and 2018, respectively.

Under the Companies Act, the entire amount of the issue price of shares is required to be designated as a stated common stock account, although a
company in Japan may, by resolution of its Board of Directors, account for an amount not exceeding 50% of the issue price of new shares as additional paid-in capital.
The Companies Act provides that an amount equal to 10% of distributions from retained earnings paid by the company and its Japanese subsidiaries be appropriated as a legal reserve. No further appropriations are required when the total amount of the additional paid-in capital and thelegal reserve equals 25% of their respective stated capital. The Companies Act also provides that the additional paid-in capital and the legal reserve
are available for appropriations by resolution of a shareholder meeting. Balances of the legal reserve are included in retained earnings in the accompanying consolidated balance sheets.
Cash dividends charged to retained earnings for the years ended February 28, 2017 and 2018 represent dividends paid out during those years.
The amount available for dividends is based on the amount recorded in the Company’s non-consolidated books of account in accordance with theCompanies Act.

Long-term loans payable at February 28, 2017 and 2018 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen
2017

2018

2018

Unsecured loans, principally from banks, maturing in installments through 2022

¥17,253¥12,619$117,529Less current portion with weighted-average interest rate of 0.5% at February 28, 2017and 2018

13,8355,800

54,022

Long-term loans payable, less current portion, with weighted-average interest rate of 0.6% at
February 28, 2017 and 0.3% at February 28, 2018

¥ 3,418¥ 6,819$ 63,507

Dividends to be paid after the balance sheet date, which were approved by the General Meeting of Shareholders held on May 24, 2018, areas follows:

Lease obligations at February 28, 2017 and 2018 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Lease obligations

2017

2018

2018

¥5,576¥5,052$47,056

Less current portion of lease obligations

706

668

6,222

¥4,870¥4,384$40,834

Millions of yen

Thousands of
U.S. dollars

2020¥2,107$19,617

2021

2,106

19,617

2022

2,106

19,617

2023

500

4,656

The aggregate annual maturities of long-term loans payable after February 28, 2019 are as follows:Year ending February 28 or 29:(a) Total dividends:¥3,420 million ($31,856 thousand)(b) Source of dividends:

Retained earnings(c) Cash dividends per common share:¥24 ($0.22)(d) Date to determine which shareholders receive the dividends:

February 28, 2018(e) Effective date:

May 25, 201815. Per Share Information
Earnings per share of common stock is computed based upon the weighted-average number of shares of common stock outstanding during eachyear. Cash dividends per share shown for each year in the accompanying consolidated statements of operations represent dividends declared as
applicable to the respective years rather than those paid during the years.
The basis for the calculation of basic and diluted earnings per share for the years ended February 28, 2017 and 2018 is as follows:

Profit attributable to owners of parent

The aggregate annual maturities of lease obligations after February 28, 2019 are as follows:
Millions of yen

Thousands of
U.S. dollars

Year ending February 28 or 29:
2020

¥469

$4,370

2021

402

3,740

2022

331

3,079

2023

289

2,692

Thousands of
U.S. dollars

Millions of yen

Less: Components not pertaining to common shareholders

2017

2018

2018

¥4,744¥5,367$49,984———

Profit pertaining to common shareholders¥4,744¥5,367$49,984

Average outstanding shares of common stock (thousand shares)

150,758

145,154

1,532

1,448

Effect of dilutive stock options (thousand shares)

16. Related-Party Transactions
Year Ended February 28, 2017

Bonds at February 28, 2017 and 2018 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen
2017

2018

0.39% in 2017 and 2018 unsecured yen bonds issued by a subsidiary, due 2018

¥50

¥—

2018

$—

Less current portion

50

—

—

—

—

—

The Company leased land from Takeshi Hirouchi, Representative Director and Chairman of ONWARD HOLDINGS Co., Ltd., during the
fiscal 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.
Onward Global Fashion Co., Ltd., a consolidated subsidiary of the Company, sold goods to BOLS 1987 Co., Ltd., over which
Hitoshi Futamura, Representative Director, President of Onward Global Fashion Co., Ltd., has 100% of voting rights directly, during the fiscal
year. The transaction amount was ¥46 million, and the balance of relevant accounts receivable as of February 28, 2017 was ¥12 million. Prices andother terms and conditions were determined by reference to market prices or general terms and conditions.

Year Ended February 28, 2018

The Company leased land from Takeshi Hirouchi, Representative Director and Chairman of ONWARD HOLDINGS Co., Ltd., during the
fiscal year, and the rental fee was ¥7 million ($67 thousand). Also, Mr. Hirouchi paid a rental fee of ¥16 million ($152 thousand) to the Company
for a house. The rental fees were determined by the average market prices.
Onward Global Fashion Co., Ltd., a consolidated subsidiary of the Company, sold goods to BOLS 1987 Co., Ltd., over which
Hitoshi Futamura, Representative Director, President of Onward Global Fashion Co., Ltd., has 100% of voting rights directly, during the fiscal year.
The transaction amount was ¥57 million ($531 thousand), and the balance of relevant accounts receivable as of February 28, 2018 was ¥9 million($83 thousand). Prices and other terms and conditions were determined by reference to market prices or general terms and conditions.

Onward Holdings Co., Ltd. Annual Report 2018

76

77

Onward Holdings Co., Ltd. Annual Report 2018

Notes to Consolidated Financial Statements

17. Stock Options

2013 Stock Option Plan (No. 14)

The cost recognized for the stock options for the years ended February 28, 2017 and 2018 was nil.

2014 Stock Option Plan (No. 16)

Under the 2014 stock option plan (No. 16), stock options were granted to five directors of the Company on June 20, 2014. They are exercisable in
the period from June 21, 2014 to June 20, 2044. The terms of the options include certain limitations on the exercisability under which grantees
can exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
The number of stock options granted by type of shares is 122,900 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Fair value at the grant date:¥526 ($4.90)

2014 stock option plan (No. 16)

Non-vested (shares):122,900

Granted—Forfeited—

Vested19,200

Outstanding at February 28, 2018

103,700

Vested (shares):
Outstanding at February 28, 2017—

Vested19,200Exercised—

Forfeited—

Outstanding at February 28, 201819,200The 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.

2014 Stock Option Plan (No. 15)

Under the 2014 stock option plan (No. 15), stock options were granted to 12 executive officers of the Company and five directors and nine executive officers of the Company’s subsidiary on March 20, 2014. They are exercisable in the period from March 21, 2014 to February 29, 2044. The
terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as executive officers of the Company, or directors or executive officers of the Company’s subsidiary.
The number of stock options granted by type of shares is 146,100 shares of common stock.
A summary of price information for the stock option plan is as follows:		 Exercise price:¥1 ($0.01)

		 Fair value at the grant date:¥466 ($4.34)

2014 stock option plan (No. 15)

Non-vested (shares):128,100

Granted—Forfeited—

Vested

28,700

Outstanding at February 28, 2018

99,400

Vested (shares):
Outstanding at February 28, 2017

11,900

Vested

28,700Exercised—

Forfeited—

Outstanding at February 28, 2018

¥1 ($0.01)

		 Fair value at the grant date:¥629 ($5.86)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:2013 stock option plan (No. 14)

Non-vested (shares):98,100Granted——Forfeited
Vested16,000

Outstanding at February 28, 201882,100

Vested (shares):
Outstanding at February 28, 2017

8,900

Vested16,000Exercised—

Forfeited—

Outstanding at February 28, 2018

24,900The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

2013 Stock Option Plan (No. 13)

Under the 2013 stock option plan (No. 13), stock options were granted to 14 executive officers of the Company and six directors and nine executive officers of the Company’s subsidiary on March 18, 2013. They are exercisable in the period from March 19, 2013 to February 28, 2043. The
terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as executive officers of the Company, or directors or executive officers of the Company’s subsidiary.
The number of stock options granted by type of shares is 151,300 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Fair value at the grant date:¥572 ($5.33)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:2013 stock option plan (No. 13)

Non-vested (shares):
Outstanding at February 28, 2017

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:

Outstanding at February 28, 2017

		Exercise price:

Outstanding at February 28, 2017

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:

Outstanding at February 28, 2017

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

116,600

Granted—Forfeited—

Vested28,000

Outstanding at February 28, 2018

88,600

Vested (shares):
Outstanding at February 28, 2017

23,800

Vested28,000Exercised—

Forfeited—

Outstanding at February 28, 2018

51,800The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

40,600The 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. Annual Report 2018

78

79

Onward Holdings Co., Ltd. Annual Report 2018

Notes to Consolidated Financial Statements

2012 Stock Option Plan (No. 12)

Under the 2012 stock option plan (No. 12), stock options were granted to five directors of the Company on June 20, 2012. They are exercisable in
the period from June 21, 2012 to June 20, 2042. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
The number of stock options granted by type of shares is 141,400 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Fair value at the grant date:¥458 ($4.27)

2011 Stock Option Plan (No. 10)

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

		 Average stock price on the date the option was exercised:¥927 ($8.63)

		 Fair value at the grant date:¥510 ($4.75)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:2012 stock option plan (No. 12)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:

Non-vested (shares):2011 stock option plan (No. 10)

Outstanding at February 28, 2017

129,600

Non-vested (shares):

Granted—Outstanding at February 28, 2017

Forfeited—

Granted—

Vested21,100Forfeited—

Outstanding at February 28, 2018

108,500

VestedVested (shares):69,400—

Outstanding at February 28, 2018

Outstanding at February 28, 2017

11,800

Vested21,100

Vested (shares):
Outstanding at February 28, 2017

Exercised—

VestedForfeited—

Exercised32,900Forfeited

Outstanding at February 28, 2018

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

2012 Stock Option Plan (No. 11)

Under the 2012 stock option plan (No. 11), stock options were granted to one executive officer of the Company and nine directors and 18 executive
officers of the Company’s subsidiary on March 19, 2012. They are exercisable in the period from March 20, 2012 to February 28, 2042. The termsof the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting ayear after they lose their positions as executive officers of the Company, or directors or executive officers of the Company’s subsidiary.
The number of stock options granted by type of shares is 234,700 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

69,40044,500—32,500—

Outstanding at February 28, 2018

12,000The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

2011 Stock Option Plan (No. 9)

Under the 2011 stock option plan (No. 9), stock options were granted to one executive officer of the Company and 12 directors and 18 executive
officers of the Company’s subsidiary on March 18, 2011. They are exercisable in the period from March 19, 2011 to February 28, 2041. The terms of
the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year
after they lose their positions as executive officers of the Company, or directors or executive officers of the Company’s subsidiary.
The number of stock options granted by type of shares is 199,900 shares of common stock.
A summary of price information for the stock option plan is as follows:		 Average stock price on the date the option was exercised:¥878 ($8.18)

		Exercise price:		 Fair value at the grant date:¥444 ($4.14)

		 Average stock price on the date the option was exercised:¥904 ($8.42)

		 Fair value at the grant date:¥444 ($4.14)¥1 ($0.01)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:2012 stock option plan (No. 11)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:

Non-vested (shares):2011 stock option plan (No. 9)

Outstanding at February 28, 2017

110,600

Non-vested (shares):

Granted—Outstanding at February 28, 2017

Forfeited—

Granted

Vested37,700Forfeited

Outstanding at February 28, 2018

72,900

Vested32,400

Outstanding at February 28, 2018

56,000

Outstanding at February 28, 2017

74,400

Vested (shares):

Vested37,700

Outstanding at February 28, 2017

46,400Exercised18,600

Vested32,400Forfeited—

Exercised

21,10093,500Forfeited

Vested (shares):

Outstanding at February 28, 2018

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. Annual Report 201880

88,400———

Outstanding at February 28, 201857,700The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

81

Onward Holdings Co., Ltd. Annual Report 2018

Notes to Consolidated Financial Statements

2010 Stock Option Plan (No. 8)

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

		 Fair value at the grant date:¥613 ($5.71)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:2009 Stock Option Plan (No. 6)

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

		 Fair value at the grant date:¥432 ($4.02)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:2009 stock option plan (No. 6)

2010 stock option plan (No. 8)

Non-vested (shares):Non-vested (shares):
Outstanding at February 28, 201752,300

Outstanding at February 28, 2017

72,000Granted—Granted—Forfeited—

Forfeited—

Vested—VestedOutstanding at February 28, 201852,300—

Outstanding at February 28, 2018

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

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.

2010 Stock Option Plan (No. 7)

2009 Stock Option Plan (No. 5)

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

Under the 2009 stock option plan (No. 5), stock options were granted to 11 directors and 19 executive officers of the Company’s subsidiary on
March 18, 2009. They are exercisable in the period from March 19, 2009 to February 28, 2039. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as
directors or executive officers of the Company’s subsidiary.
The number of stock options granted by type of shares is 268,900 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:		Exercise price:¥1 ($0.01)¥1 ($0.01)

		 Average stock price on the date the option was exercised:¥896 ($8.34)

		 Average stock price on the date the option was exercised:¥829 ($7.72)

		 Fair value at the grant date:¥475 ($4.42)

		 Fair value at the grant date:¥362 ($3.37)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:2009 stock option plan (No. 5)2010 stock option plan (No. 7)

Non-vested (shares):Non-vested (shares):
Outstanding at February 28, 2017

68,600

Outstanding at February 28, 2017

Granted—GrantedForfeited—

Forfeited

Vested24,500

Outstanding at February 28, 2018

44,10069,100——

Vested27,100

Outstanding at February 28, 2018

42,000

Vested (shares):

Vested (shares):
Outstanding at February 28, 201716,200

Outstanding at February 28, 2017

26,100

Vested24,500

Vested27,100Exercised

3,900

Exercised

21,400Forfeited—

Forfeited

Outstanding at February 28, 2018

36,800The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

Onward Holdings Co., Ltd. Annual Report 201882—

Outstanding at February 28, 2018

31,800The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

83

Onward Holdings Co., Ltd. Annual Report 2018

Notes to Consolidated Financial Statements

2008 Stock Option Plan (No. 4)

Under the 2008 stock option plan (No. 4), stock options were granted to 12 directors and 21 executive officers of the Company’s subsidiary on
June 20, 2008. They are exercisable in the period from June 21, 2008 to February 28, 2038. The terms of the options include certain limitations on
the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors
or executive officers of the Company’s subsidiary.
The number of stock options granted by type of shares is 91,100 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Average stock price on the date the option was exercised:¥790 ($7.36)

		 Fair value at the grant date:¥905 ($8.43)

2007 Stock Option Plan (No. 2)

Under the 2007 stock option plan (No. 2), stock options were granted to five directors and two corporate auditors of the Company on July 20,
2007. They are exercisable in the period from July 21, 2007 to July 20, 2037. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors or corporate auditors of the Company.
The number of stock options granted by type of shares is 40,000 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Fair value at the grant date:¥1,284 ($11.96)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:
A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:2007 stock option plan (No. 2)
2008 stock option plan (No. 4)

Non-vested (shares):
Outstanding at February 28, 2017

Non-vested (shares):16,60020,100Granted—Granted—Forfeited—

Forfeited—

VestedVested8,700

Outstanding at February 28, 2018

11,400

Outstanding at February 28, 2017

Vested (shares):
Outstanding at February 28, 2017

8,200

Vested8,700

Exercised

6,900

Forfeited—

Outstanding at February 28, 2018

10,000The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

Under the 2008 stock option plan (No. 3), stock options were granted to five directors of the Company on June 20, 2008. They are exercisable in
the period from June 21, 2008 to June 20, 2038. The terms of the options include certain limitations on the exercisability under which grantees
can exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
The number of stock options granted by type of shares is 70,000 shares of common stock.
A summary of price information for the stock option plan is as follows:¥1 ($0.01)

		 Fair value at the grant date:¥944 ($8.79)

2008 stock option plan (No. 3)

Non-vested (shares):32,000Granted—Forfeited—

Vested—Outstanding at February 28, 2018

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.

2006 Stock Option Plan (No. 1)

Under the 2006 stock option plan (No. 1), stock options were granted to 12 directors and two corporate auditors of the Company on June 20,
2006. They are exercisable in the period from July 1, 2006 to June 30, 2036. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors or corporate auditors of the Company.
The number of stock options granted by type of shares is 63,000 shares of common stock.
A summary of price information for the stock option plan is as follows:¥1 ($0.01)

		 Fair value at the grant date:¥1,541 ($14.35)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:
2006 stock option plan (No. 1)

Non-vested (shares):
Outstanding at February 28, 2017

14,500Granted—Forfeited—

VestedA summary of the scale and movement of the stock option plan for the year ended February 28, 2018 is as follows:

Outstanding at February 28, 2017

16,600		Exercise price:2008 Stock Option Plan (No. 3)

		Exercise price:—

Outstanding at February 28, 2018—

Outstanding at February 28, 2018

14,500The 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.

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

Onward Holdings Co., Ltd. Annual Report 201884

85

Onward Holdings Co., Ltd. Annual Report 2018

Notes to Consolidated Financial Statements

18. Segment Information

Thousands of U.S. dollars
Apparel(1) Summary of reportable segments
The Companies’ reportable segments are components for which separate financial information is available and regular evaluation by the Board of
Directors is performed to decide how management resources are allocated and to assess performance.
The principal business of the Companies is the apparel business (planning, production and sales of textile products, including men’s and women’s clothing). Additionally, the Companies also operate service and resort businesses.
The reportable segments of the Companies comprise the “Apparel Business,” which has been divided geographically into three categories,“Japan,” “Europe,” and “Asia/North America,” and “Other Business.”
The “Apparel Business (Japan)” operates the apparel business in Japan; the “Apparel Business (Europe)” operates the apparel business in
Europe; and the “Apparel Business (Asia/North America)” operates the apparel business in Asia and North America. The “Other Business” operates
the sports facilities and resort facilities businesses.
(2) Method of calculating net sales, profit or loss, assets, liabilities and other items by reportable segment
Accounting methods for reportable segments are mostly the same as the accounting methods described in “2. Summary of Significant
Accounting Policies.”
Profit by reportable segment refers to operating profit. Intersegment sales and transfers are based on market values.

Millions of yen
Apparel
For the year ended February 28, 2017

Japan

EuropeAsia/North
America

Total

Other

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers¥193,462¥38,591¥5,881¥237,934¥ 6,967¥244,901¥    —¥244,901Intersegment sales or transfers

1,266

1,969

609

3,844

2,865

6,709

(6,709)—¥194,728¥40,560¥6,490¥241,778¥ 9,832¥251,610¥ (6,709)¥244,901¥  6,378¥      (459)¥ (458)¥  5,461¥   445¥  5,906¥ (1,702)¥  4,204

Segment profit (loss)
Segment assets¥140,208¥32,670¥5,312¥178,190¥26,248¥204,438¥68,789¥273,227

Depreciation and amortization (Note 2)¥  4,523¥   946¥  128¥  5,597¥   636¥  6,233¥   430¥  6,663

Investments in equity-method affiliates

7,965

81

—

8,046

—

8,046

—

8,046

Increases in property, plant and equipment,
and intangible assets (Note 2)

7,766

1,383

171

9,320

622

9,942

657

10,599Notes:

Japan

EuropeAsia/North
America

Total

Other

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers$1,765,189$387,775$53,258$2,206,222$ 57,682$2,263,904$     —

$2,263,904

Intersegment sales or transfers

11,517

19,475

10,84941,841

24,67066,511(66,511)—$1,776,706$407,250$64,107$2,248,063$ 82,352$2,330,415

Total

1. Adjustments consist of the following:(1)	The adjustment amount for segment profit (loss) of ¥(1,702) million includes amortization of goodwill of ¥(2,132) million, elimination ofintersegment transactions of ¥4,263 million, and corporate expenses not allocated to reportable segments of ¥(3,833) million. Corporate
expenses are mainly general administrative expenses that are not attributable to reportable segments.
(2)	The adjustment amount for segment assets of ¥68,789 million includes the unamortized balance of goodwill of ¥18,523 million, elimination ofintersegment transactions of ¥(123,515) million, and corporate assets not allocated to reportable segments of ¥173,781 million. Corporate assets
are mainly assets held by the Company, a pure holding company.
2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses (furniture and fixtures).
3. Segment profit (loss) coincides with the amount of operating profit in the consolidated statement of operations.

$   (66,511) $2,263,904

Segment profit (loss)$   92,967$    (17,218)$    (9,043)$   66,706$  3,705$   70,411$   (22,288) $   48,123

Segment assets$1,303,937$387,720$55,190$1,746,847$232,864$1,979,711$610,714$2,590,425

Depreciation and amortization (Note 2)$   36,740$ 10,633$ 1,450$   48,823$  5,928$   54,751$  4,247$   58,998

Investments in equity-method affiliates

78,081

7,845—

85,926—85,926—85,926

Increases in property, plant and equipment,
and intangible assets (Note 2)

55,902

21,713

5,065

82,6804,263

86,94325,362

112,305

Notes:(3) Information on net sales, profit or loss, assets, liabilities and other items by reportable segment for the years ended February 28, 2017 and2018 is as follows:

Total

For the year ended February 28, 2018

1. Adjustments consist of the following:(1)	The adjustment amount for segment profit (loss) of ¥(2,393) million ($(22,288) thousand) includes amortization of goodwill of ¥(2,563) million ($(23,874) thousand), elimination of intersegment transactions of ¥4,546 million ($42,344 thousand), and corporate expenses not allocatedto reportable segments of ¥(4,376) million ($(40,758) thousand). Corporate expenses are mainly general administrative expenses that are not
attributable to reportable segments.
(2)	The adjustment amount for segment assets of ¥65,572 million ($610,714 thousand) includes the unamortized balance of goodwill of ¥16,228
million ($151,142 thousand), elimination of intersegment transactions of ¥(121,941) million ($(1,135,704) thousand), and corporate assets notallocated to reportable segments of ¥171,285 million ($1,595,276 thousand). Corporate assets are mainly assets held by the Company, a pureholding company.
2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses (furniture and fixtures).
3. Segment profit (loss) coincides with the amount of operating profit in the consolidated statement of operations.

(4) Segment information by geographical area for the years ended February 28, 2017 and 2018 is as follows:(a) Sales
For the year ended February 28, 2017

Millions of yen

Japan

Europe

Other

Total

¥195,147¥29,912¥19,842¥244,901

For the year ended February 28, 2018

Millions of yen

Japan

Europe

Other

Total

190,497¥33,394¥19,185¥243,075

For the year ended February 28, 2018

Thousands of U.S. dollars

Japan

Europe

Other

Total

$1,774,206$311,016$178,682$2,263,904

Millions of yen
Apparel
For the year ended February 28, 2018

Japan

EuropeAsia/North
America

Total

Other

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers¥189,528¥41,636¥5,718¥236,882¥ 6,193¥243,075¥    —¥243,075

Intersegment sales or transfers

1,237

2,090

1,165

4,492

2,649

7,141

(7,141)—¥190,765¥43,726¥6,883¥241,374¥ 8,842¥250,216¥ (7,141)¥243,075

Total
Segment profit (loss)¥  9,982¥    (1,849)¥     (971)¥  7,162¥   398¥  7,560¥ (2,393)¥  5,167

Segment assets¥140,004¥41,629¥5,926¥187,559¥25,003¥212,562¥65,572¥278,134

Depreciation and amortization (Note 2)¥  3,945¥ 1,141¥      156¥  5,242¥   637¥  5,879¥   456¥  6,335

Investments in equity-method affiliates

8,384

842

—

9,226

—

9,226

—

9,226

Increases in property, plant and equipment,
and intangible assets (Note 2)

6,002

2,331

544

8,877

458

9,335

2,723

12,058Onward Holdings Co., Ltd. Annual Report 201886

87

Onward Holdings Co., Ltd. Annual Report 2018

Independent Auditor’s Report

Notes to Consolidated Financial Statements(b) Property, plant and equipment
For the year ended February 28, 2017

Millions of yen

Japan

Europe

Other

Total

¥73,940¥7,618¥10,711¥92,269

For the year ended February 28, 2018

Millions of yen

Japan

Europe

Other

Total

¥75,348¥8,168¥10,198¥93,714

For the year ended February 28, 2018

Thousands of U.S. dollars

Japan

Europe

Other

Total

$701,761$76,072$94,983$872,817(5) Segment information on impairment losses on property, plant and equipment by reportable segment for the years ended February 28, 2017 and2018 is as follows:
Millions of yen
Apparel
For the year ended February 28, 2017

Japan

EuropeAsia/North
America

Impairment loss

¥1,638

¥—

¥21

Total

Other

Unallocatedamounts andelimination¥1,659

¥—

¥—

Total

¥1,659Millions of yen
Apparel
For the year ended February 28, 2018

Japan

Impairment loss

¥371

EuropeAsia/North
America

Total

Other

Unallocatedamounts andelimination

¥—

¥620

¥991

¥—

¥211

Total

$11,198

Total¥1,202Thousands of U.S. dollars
Apparel
For the year ended February 28, 2018

Japan

EuropeAsia/North
America

Impairment loss

$3,455$—$5,778Onward Holdings Co., Ltd. Annual Report 2018

88

Total

Other

Unallocatedamounts andelimination$9,233$—$1,96589

Onward Holdings Co., Ltd. Annual Report 2018

Main Subsidiaries
As of August 31, 2018

Japan

Overseas

Onward Kashiyama Co., Ltd.

Onward Creative Center Co., Ltd.

3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1020

3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1140

Onward Trading Co., Ltd.

Bien Co., Ltd.

2-10-10 Iidabashi, Chiyoda-ku, Tokyo 102-8115, Japan
Tel: (81) 3-5266-1333

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

Island Co., Ltd.

Onward Resort & Golf Co., Ltd.

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

3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1130

Onward Global Fashion Co., Ltd.
3-26-8 Sendagaya, Shibuya-ku, Tokyo 151-0051, Japan
Tel: (81) 3-5770-5370

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

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

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

EuropeAsia

United States

Onward Italia S.p.A.

Onward Fashion Trading(China) Co., Ltd.

J. Press, Inc.

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

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

Erika s.r.l.
Via Boschi n. 42bis 37060,
Maccacari di Gazzo Veronese - (VR), Italy
Tel: (39) 0442-56666

Frassineti s.r.l.
Via Enrico Fermi, 7 50068 Rufina Firenze, Italy
Tel: (39) 055- 839-7385

Freeland s.r.l.
Via G. da Verrazzano 4/6/8, 50054, Fucecchio Firenze, Italy
Tel: (39) 057-124-4337

Onward Personal Style Co., Ltd.
3-9-32 Kaigan, Minato-ku, Tokyo 108-8439, Japan
Tel: (81) 3-5476-6131

Joseph Ltd.

Onward J Bridge Co., Ltd.

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

3-9-32 Kaigan, Minato-ku, Tokyo 108-8439, Japan
Tel: (81) 3-5476-5370

Freed of London Ltd.

Tiaclasse Inc.

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

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

Horloge Saint Benoit UK Ltd.

Mulberry Japan Co., Ltd.

190 Strand, 5 Arundel Street, London WC2R 3DX, U.K.
Tel: (44) 20-3915-6976

3-26-8 Sendagaya, Shibuya-ku, Tokyo 151-0051, Japan
Tel: (81) 3-5770-5380

Chacott Co., Ltd.
1-20-8 Jinnan, Shibuya-ku, Tokyo 150-0041, Japan
Tel: (81) 3-3476-1411

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

13th Floor, Onward Building,
No. 1238, Danba Road, Putuo District,
Shanghai 200333, People’s Republic of China
Tel: (86) 21-6466-6466

8W 38th Street Suite 200,
New York, NY 10018, U.S.A.
Tel: (1) 212-997-3600

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

Onward Trading(Shanghai) Co., Ltd.

Onward Golf Resort Guam, Inc.

14th Floor, Onward Building,
No. 1238, Danba Road, Putuo District,
Shanghai 200333, People’s Republic of China
Tel: (86) 21-6271-3535

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

Kashiyama (Dalian) Co., Ltd.
North Tie Shan Xi Rd., Dalian Economic and TechnicalDevelopment Zone, Dalian 116601,
People’s Republic of China
Tel: (86) 411-8761-2098

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

Onward Kashiyama Korea Co., Ltd.

La Maison Moreau S.A.S.
14 Rue de Savoie, 75006 Paris, France
Tel: (33) 9-7265-3633

Onward Kashiyama Vietnam Ltd.

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

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

Shanghai Onward Fashion Co., Ltd.

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

Horloge Saint Benoit S.A.S.

8W 38th Street Suite 200,
New York, NY 10018, U.S.A.
Tel: (1) 212-997-3600

12th Floor, Onward Building,
No. 1238, Danba Road, Putuo District,
Shanghai 200333, People’s Republic of China
Tel: (86) 21-6472-3660

10th Floor, 60 Nguyen Dinh Chieu Street,
Da Kao Ward, District 1, Ho Chi Minh City, Vietnam
Tel: (84) 28-3911-8857

Kokobuy Inc.
6th Floor, Daikanyama Front, 16-2 Daikanyamacho,
Shibuya-ku, Tokyo 150-0034, Japan
Tel: (81) 3-6696-3547

Onward Holdings Co., Ltd. Annual Report 201890

91

Onward Holdings Co., Ltd. Annual Report 2018

Corporate / Investor Information

History

As of February 28, 2018

Head Office10-5, Nihonbashi 3-chome, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1020
Fax: (81) 3-4512-1021
URL: http://www.onward-hd.co.jp/site/english/

Established

September 1947

Capital¥30,080 million

Common Stock

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

1927

February

Junzo Kashiyama established Kashiyama Trading.

1947

September

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

1960

October

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

1962

April

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

1964

July

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

1966

September

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

1972

July

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

September

Established Onward Kashiyama U.S.A. INC.

1973

February

Established Onward Kashiyama France S.A.

Note: The total number of issued and outstanding shares included 25,406,796 shares of treasury stock.

1974

February

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

Number of Shareholders

10,7781986

October

Acquired J. Press, Inc.

1988

February

Established Onward Kashiyama Hong Kong Ltd.

Stock Exchange Listings

Tokyo, Nagoya

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

Transfer Agent

Mitsubishi UFJ Trust & Banking Co., Ltd.
1-1, Nikkocho, Fuchu, Tokyo 182-0044, Japan

Number of Employees(Consolidated)

4,530

Major Shareholders

Distribution of Ownershipamong Shareholders

1989

DecemberEstablished Onward Kashiyama U.K. Ltd.

1990

January

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

July

Acquired Chacott Co., Ltd.

1991

February

Launched Onward Research and Development Institute.

1992

May

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

1994

May

Established Bus Stop Co., Ltd.

1995

June

Established Shanghai Onward Fashion Co., Ltd.

1997

June

Established Onward Kashiyama Korea Co., Ltd.

2004

January

Acquired Erika s.r.l.

2005

May

Acquired Project Sloane Ltd. (Joseph Group).

Number of
Shares Held(Thousands)

Percentage ofTotal Shares
Issued (%)

Kashiyama Scholarship Foundation

8,710

6.1

Japan Trustee Services Bank, Ltd. (Trust account 9)

6,249

4.3

July

Acquired Iris S.p.A.

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

5,830

4.0

2006

October

Acquired Mangilao Golf Club (currently Onward Mangilao Guam, Inc.).

BNYMSANV AS AGENT/CLIENTS LUX UCITS NON TREATY 1

5,396

3.7

2007

April

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

Japan Trustee Services Bank, Ltd. (Trust account)

4,898

3.4

May

Acquired Frassineti s.r.l.

Nippon Life Insurance Company

4,671

3.2

Onward Holdings Customers’ Shareholding Association

4,662

3.2

The Dai-ichi Mutual Life Insurance Company, Ltd.

4,200

2.9

State Street London Care of State Street Bank and Trust,
Boston SSBTC A/C UK London Branch Clients - United Kingdom

3,097

2.1

Sumitomo Mitsui Banking Corporation

2,931

2.0

Notes:
1.	The Company holds 25,406,796 shares of treasury stock. Treasury stock is not included in the above
Major Shareholders information.
2. The percentage of total shares issued is calculated after deducting 25,406,796 shares of treasury stock.

(On a number of shares basis)

Japanese individuals
and others

Japanesefinancial
institutions

27.1%

29.2%

Foreigninstitutions
and others

Japanese
securities
companies

21.7%

2009

DecemberAcquired controlling interest in Island Co., Ltd.

2010

June

Established Onward Kashiyama Singapore Pte. Ltd.

2011

AugustEstablished Onward Kashiyama Vietnam Ltd.

2012

April

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

May

Established Onward Trading (Shanghai) Co., Ltd.

DecemberEstablished Charles & Keith Japan Co., Ltd.

February

Acquired Sakula Inc.

June

Established Onward Luxury Group S.p.A.

March

Established Onward Global Fashion Co., Ltd.

NovemberCompleted Onward Park Building (head office in Nihonbashi district of Tokyo).

Acquired Jil Sander A.G.

100,000

2013

75,000

900

2014

2015
50,000600

2016

25,000

300

2017

92

Acquired Creative Yoko Co., Ltd.

Note: Data regarding Japanese individuals and others­includes treasury stock.

1,200

Onward Holdings Co., Ltd. Annual Report 2018

Acquired Corporate s.r.l.

October

Trading Volume
Thousand Shares2017/3October2008

Stock Price¥

2016/3

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

20.2%

Stock Price Range and Trading Volume0

Established J. Direction Co., Ltd.

September

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

1.8%

Other Japanese
corporations

June

2018/3

0

2018

March

Michinobu Yasumoto became president and representative director.

September

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

March

Acquired La Maison Moreau S.A.S.

April

Acquired Tiaclasse Inc.

AugustConverted Onward Kaisei (Dalian) Co., Ltd. (currently Kashiyama (Dalian) Co., Ltd.), into a wholly owned subsidiary through acquisition of stock.

January

Acquired Kokobuy Inc. and Innovate Organics, Inc.

DecemberAcquired Mulberry Japan Co., Ltd. (a joint venture company with Mulberry Group plc).

March

Acquired General Clothing Co., Ltd.

93

Onward Holdings Co., Ltd. Annual Report 2018

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