ANNUAL REPORT 2021
Fiscal Year Ended February 28, 2021

Onward Holdings Co., Ltd.

ANNUAL REPORT 2021
Fiscal Year Ended February 28, 2021

Onward Holdings Co., Ltd.

C ONTENTS

02

Onward at a Glance04	Top Message
06	Five Strategies Leading up to Fiscal 2030
–ONWARD VISION 2030–
14

Financial Results in Fiscal 202016	Sustainable Management Initiatives
	  Elimination of Wasteful Production
	  Recovery and Reuse of Products
	  Improvement of Traceability
24

Diversity Management Initiatives

26

Corporate Governance30

Our History

34

Financial Section

82

Our Network84	Board of Directors, Audit & Supervisory
Board Members, and Executive Officers
85	Corporate / Investor Information

Forward-Looking Statements
The information in this report is not a solicitation to purchase or sell
Onward Holdings stock. Opinions and forecasts stated herein represent the judgments of the Company at the time this report was published. Onward Holdings makes no guarantee regarding the accuracyof the information in this report and may make revisions without priornotice. Onward Holdings and the providers of this information
assume no responsibility whatsoever for any losses incurred in association with this information.

OMO store
ONWARD CROSSET STORE
LaLaport TOKYO-BAY

Onward Holdings Co., Ltd. Annual Report 20211

Onward at a Glance
The Onward Group is the apparel manufacturer and retailer that built the very foundations for the manufacture andApparelsale 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 apparelmarkets around the world. Our business model encompasses all stages of the apparel value chain, including planning,
design, production, and sales. The Onward Group also prides itself on its lineup of products and services thatinterconnect 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, gift catalogs, and others.

In fiscal 2020, net sales were impacted by the two state of emergency declarations issued in Japan as well as the prolonged lockdowns instituted
overseas in response to the global COVID-19 pandemic. Although requests to temporarily close stores resulted in a significant drop in sales throughphysical sales channels, higher sales were achieved in the Lifestyle Business segment and through e-commerce channels. As a result, overall net
sales decreased by 29.8% year on year.
Of domestic net sales, 29.1% were generated through department stores, 32.9% were achieved via e-commerce channels, and 38.0% can be
attributed to shopping centers and other channels. Going forward, efforts will target the enhancement of e-commerce sales channels as we employ
new sales methodologies in the Apparel Business segment and strengthen intra-Group synergies in the Lifestyle Business segment.

Net Sales

Operating Profit¥–21,230 million¥174,323 million (70.2% YoY)
Profit Attributable to Owners of Parent

Cash Dividends per Share¥–23,181 million¥12

Sales through Physical Sales Channels

Consolidated E-Commerce Sales¥132,739 million¥41,584 million

Sales Breakdown by Business Segment.

.

Apparel80.0 %(–2.7 points YoY)

E-Commerce 

32.9%

Shopping Centers
and Other Channels .

Department Stores

.



20.0%
(+2.7 points YoY)

Sales Breakdown by Sales Channel (Domestic E-Commerce Business Companies)

Lifestyle Lifestyle

29.1%

.

38.0%
2

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 20213

Top Message
Under this vision, the 10-year period leading up to fiscal 2030 has

The Onward Group will advance ONWARD VISION 2030
with the goals of evolving into a customer-centric company
and making the best use of employees’ diverse strengths.
President and CEO

Michinobu Yasumoto

Review of Fiscal 2020

ONWARD VISION 2030
Medium- to Long-Term Management Vision

In fiscal 2020, a consistently opaque operating environment was faced in
the global economy. This opaqueness was largely a result of the economic

In fiscal 2020, the COVID-19 pandemic dealt a devastating blow to therepercussions of the two state of emergency declarations issued in Japan

Onward Group’s domestic and overseas operations, the damages ofin response to the global COVID-19 pandemic as well as lockdowns andwhich likely surpassed anything we have experienced since our founding.

bans on international travel instituted in countries around the world.

The COVID-19 pandemic was not the only major development, as the

In this challenging operating environment, Onward Holdings tookmarkets in which the Onward Group operates have been undergoingsteps to curtail procurement and cut fixed costs. At the same time, we

major structural changes, such as the evolution of digital transformations,

moved ahead with the global business reforms that we have been

since even before the pandemic.

implementing since fiscal 2019, which involved withdrawing from unprof-

Amid these changes, the Onward Group decided to undertake

itable operations in Italy, abolishing underperforming brands, and closing

global business reforms to its operations in October 2019. As of April

stores that were not achieving profitability around the world.

2021, a large portion of those reforms had been completed as planned.

In the domestic apparel business, profit increased at companies

However, we also understand that this is a time of great upheaval, andincluding Onward Trading Co., Ltd., which conducts a business-to-that the operating environment is likely to continue to change going

business uniform business, and Tiaclasse Co., Ltd., whose main sales

forward. We recognize that this backdrop has created a need to show thechannel is e-commerce. We achieved progress in shifting to e-commercecourse the Onward Group will take in the future. ONWARD VISION 2030,

channels such as Onward Crosset, our directly-managed online store.

our medium- to long-term management vision for the period up to fiscal

However, due to the impact of the COVID-19 pandemic, sales

2030, was shaped based on this understanding.

decreased and operating losses were posted at companies including

To guide our actions over the decade leading up to fiscal 2030,

Onward Kashiyama Co., Ltd. As a result, sales decreased and operat-

we put forth the mission statement of “enriching and adding color to

ing loss was recorded for the domestic apparel business.

people’s lives while caring for the planet,” which represents our raison

In the overseas apparel business, despite the cost reduction ben-d’etre. This new statement adds to the management policy of “toefits of the global business reforms we have been conducting sinceenrich and add color to people’s lives,” which we have cherishedfiscal 2019, the impacts of the COVID-19 pandemic continued to besince our founding, the belief that we must also enrich and preserve

felt in Europe and the United States, resulting in a sales decline andthe color of the global environment in which we live. In other words,

operating loss for the overseas apparel business.

we have incorporated the perspective of sustainability, which is now

As a result, sales decreased and operating loss was posted for the
Apparel Business segment as a whole.
In the Lifestyle Business segment, both sales and profit increased at

crucial to corporate activities, into the new mission statement.
In addition, we look to fully utilize constantly evolving digitaltechnologies as we seek to enhance communication between custom-

Yamato Co., Ltd., which conducts a gift catalogue business, but sales

ers and Onward Group employees in a direct and two-way manner indecreased at companies including Onward Beach Resort Guam, Inc.,

order to co-create value for customers. This policy has shaped ourwhich operates a resort business in Guam, where a lockdown has con-goals of evolving into a customer-centric company and making the best

tinued since the second quarter of fiscal 2020.

use of employees’ diverse strengths.

As a result, both sales and profit decreased for the Lifestyle Businesssegment, although this segment was able to secure operating profit.

To ensure that we can fulfill our mission statement of “enriching andadding color to people’s lives while caring for the planet,” ONWARD

As a result of these factors, consolidated net sales amounted to

VISION 2030 has defined five strategies: transform the Apparel Business¥174,323 million, a 29.8% year-on-year decrease; consolidated operating

segment’s business model, accelerate growth in the Lifestyle Businessloss amounted to ¥21,230 million, compared with operating loss ofsegment, strengthen business-to-business operations, evolve into a¥3,061 million in the previous fiscal year; consolidated recurring loss

company where diverse and unique personnel can exhibit their strengths,amounted to ¥20,174 million, compared with recurring loss of ¥3,835

and promote sustainable management that pursues coexistence with themillion in the previous fiscal year; and loss attributable to owners ofenvironment. We will steadily advance these strategies over the period ofparent amounted to ¥23,181 million, compared with loss attributable

ONWARD VISION 2030 with a dedication to accomplishing our goals.

to owners of parent of ¥52,135 million in the previous fiscal year.

4

Onward Holdings Co., Ltd. Annual Report 2021

One aspect of the third strategy—strengthen business-to-businessbeen divided into the first three years and the last seven years. The first

operations—will be growing the uniform business of Onward Trading

three years, during which we will likely have to endure the impacts of theCo., Ltd. At the same time, we look to develop new platform service

COVID-19 pandemic, have been positioned as a time for reconstructing

businesses that utilize the Onward Group’s production platform toand solidifying the operating foundations that will be utilized to pursue

provide original equipment and design manufacturing services for

growth after the pandemic has subsided. In fiscal 2023, the last of these

retailing and apparel companies outside of the Group.

first three years, we will target net sales of ¥200,000 million and operat-

The fourth strategy—evolve into a company where diverse anding profit of ¥7,000 million. Our policy for these three years will be tounique personnel can exhibit their strengths—will develop a crucial

build solid foundations by transforming the business model of thefoundation for the accomplishment of the targets of our medium- to

Apparel Business segment, rather than pursuing expansion in the scale oflong-term management vision. In other words, this strategy will focus

sales, while growing earnings centered on the Lifestyle Business seg-

on fostering workplace environments that allow, in particular, thement. Meanwhile, the latter seven years of the 10-year period have beenfemale employees who support the Onward Group to continue work-

positioned as a time for advancing full-fledged growth strategies in theing as long as they please while exercising their individuality.

post-COVID-19 world. We intend to grow the Lifestyle Business segment,

Furthermore, in terms of the fifth strategy—promote sustainable

which secured operating profit in fiscal 2020, despite the challenging

management that pursues coexistence with the environment—weoperating environment, to stand alongside the Apparel Business segment

recognize that the apparel industry has a significant degree of respon­as a core business by generating synergies with the Apparel Businesssibility toward the global environment, and that we must therefore

segment and broadening the scope of its business through mergers,

make dedicated efforts to contribute to the realization of a sustainableacquisitions, and other measures. Through this approach, we will target

society. These efforts will entail supplementing the recycling and reuse

net sales of ¥300,000 million and operating profit of ¥25,000 million ininitiatives we have advanced thus far with measures for eliminating the

fiscal 2030.

creation of unnecessary products through revisions in the productAt the same time, capital efficiency will be thoroughly emphasizedplanning and production phases. We are accelerating initiatives inin management. We project that the impacts of the COVID-19 pan-accordance with our mission statement of “enriching and adding

demic will continue to be felt up until fiscal 2023. We have therefore

color to people’s lives while caring for the planet.”

set a target of achieving return on equity (ROE) of 8% over the periodleading up to fiscal 2023. And we have put forth an ROE target of 10%
or more to be achieved by fiscal 2030.
To ensure progress in accordance with this roadmap, we believe it isnecessary for us to make a major revision to our business and manage-

In Closing

ment platforms over the next three years. The Group’s platforms currently
consist of our product planning, production, and distribution platform;

Going forward, we anticipate that widespread vaccination will help

our sales platform, which comprises online stores and the online merges

gradually alleviate the impacts of the global COVID-19 pandemic

with offline-style stores, or OMO stores; our marketing platform, which

and that society will in turn return to a state of relative normalcy.

includes the Onward Members’ loyalty point card system boasting 3.75

Accordingly, the Company is projecting year-on-year growth of 9% in

million members (as of May 31, 2021); and our management and finan-

net sales along with operating profit of ¥3,200 million in fiscal 2021.

cial management platform and our organizational and human resource

At the same time, we realize that irreversible structural changes

platform. To change into a customer-centric company, we will evolve

are progressing in the apparel industry served by the Onward Group.

these systems to create a management system for a new era.

We are therefore committed to transforming the Onward Group by

Alongside such organizational reforms, the aforementioned five
strategies will be advanced to further us toward our targets for fiscal 2030.
In regard to the first strategy—transform the Apparel Business segment’s business model—we will shift away from our conventional

marching ahead with the policies and strategies defined in
ONWARD VISION 2030 in the pursuit of sustainable improvements
to corporate value.
Everyone at the Onward Group is dedicated to carrying out ourapproach toward communicating with customers, which was focused on

new mission statement of “enriching and adding color to people’s

physical stores and mass-media venues, to adopt an approach utilizing

lives while caring for the planet.” We sincerely appreciate yourowned media and social media. We thereby aim to co-create value forsupport for the Onward Group as we advance on this quest.

customers through two-way communication with customers and to consequently maximize the value of our robust brand portfolio. In addition, we
are working to digitalize our supply chain while developing OMO storesthat combine the benefits of online stores with those of physical stores.

August 2021

Under the second strategy—accelerate growth in the LifestyleBusiness segment—we will concentrate the allocation of management
resources to the five businesses of this segment that are matched tochanges in consumer behavior. Specifically, these businesses are thewellness business, the beauty and cosmetics business, the pet andhome life business, the gourmet foods business, and the gifts business.

Michinobu Yasumoto

Through this approach, we will advance growth strategies positioning

President and CEO

the Lifestyle Business segment as a core segment for the postCOVID-19 world.

Onward Holdings Co., Ltd. Annual Report 20215

Five Strategies
Leading up to
Fiscal 2030
The Onward Group is targeting

ONWARD VISION 2030
The Onward Group’s Raison D’être
Mission Statement

1.
Transform the Apparel Business Segment’s Business Model
1 Transform Communication with Customers

Enriching and Adding
Color to People’s Lives while
Caring for the Planet

To achieve its goals of evolving into a customer-centric company and making thebest use of employees’ diverse strengths, the Onward Group realizes the need toaddress the fact it has grown into a vertically-divided organization over its nearly century-long history, effectively creating distance between customers and employees.
To reduce the distance, we will make full use of new and rapidly evolving tools,

net sales of ¥300.0 billion andsuch as owned media, social media, and live commerce, as venues for co-creating
value through direct and two-way communication between customers and Onward

operating profit of ¥25.0 billion in fiscal

Group employees.

2030. We aim to build a foundationfor our future growth throughthe advancement of these five strategies.

Desired Image of the Onward Group

Owned Media
Launch of ONWARD CROSSET MAG
Onward Kashiyama Co., Ltd., launched ONWARD CROSSET MAG on

Strategy

Evolving into a
Customer-Centric Company,
Making the Best Use of Employees’
Diverse Strengths

February 10, 2021. This new owned media venue integrates the prior information provision venues and customer contact points provided using paperand electronic media, respectively, to create connections by delivering
brand and product information alongside a diverse range of other content.
Each month, around 12 different pieces of content will be distributedwith specific targets through ONWARD CROSSET MAG, which will be linked
to our social media accounts to supply customers with information thatis of interest to them. Going forward, we will use owned media to expand
our contact points with and to optimize our approaches toward new and1.

Planning, Production, Distribution
Accelerate Growth in the Lifestyle

Online stores

L ife s tyle

Business Segment

Members

Customers

お客さま

2 Transform Product Planning, Production, and Distribution
The Onward Group is digitalizing its supply chain to better track production processes and promote data linkage to shorten delivery times,
optimize prices, and improve traceability.

Strengthen Business-to-Business
Operations
Organization/HR

OMO Stores
B2B

4.

A

el
ar

3.

consistent among physical and e-commerce venues.

Desired Image

Segment’s Business Modelpp2.

existing customers while directly delivering customer experiences that areTransform the Apparel Business

Management/
Financialmanagement

On January 20, 2021, Onward Holdings entered into a capital and business alliance with textile trading company SanMarino Co., Ltd.

Evolve into a Company Where
Diverse and Unique Personnel Can
Exhibit Their Strengths

Capital and Business Alliance with Textile Trading Company SanMarino
A textile trading company engaged in the planning of womenswear and original equipment manufacturing operations, SanMarino boasts

Stylists/Designers/Pattern makers/
Staff/Partners

wide-ranging information-gathering ability and material procurement capabilities and production networks in Asia and Europe. Onward has
built a long-term, trust-based relationship with SanMarino as a major business partner. Through this capital and business alliance, we aim tofurther strengthen and enhance our long-standing relationship with SanMarino and to advance planning and production system reforms. By

5.
6

Promote Sustainable Management
That Pursues Coexistence with theEnvironment

Onward Holdings Co., Ltd. Annual Report 2021

Achieve direct and two-way communication
between customers and employees toco-create value provided to customers

combining the management resources of both parties, including manufacturing expertise, technological capabilities, and global procurement
and production capacities, we will work to develop next-generation planning and production systems.

Onward Holdings Co., Ltd. Annual Report 20217

Five Strategies Leading up to Fiscal 2030

3 Transform Sales
Onward looks to develop new store types through online merges with offline-style stores (OMO stores) that combine the benefits of both conventional physical stores and the online stores that have been growing rapidly as of late.

2.
Accelerate Growth in the Lifestyle Business Segment

Opening of ONWARD CROSSET STOREs
Using New OMO Store Model in Saitama, Aichi,
and Chiba Prefectures
In April 2021, Onward Kashiyama began developing ONWARD CROSSET STOREs

The five businesses of the Onward Group’s Lifestyle Business segment have been performing well even amid the COVID-19 pandemic, and significant
effort will be dedicated to advancing growth strategies that position this segment as a core area of operations for the period after the pandemic.

1 Wellness Businessusing a new model that merges the benefits of both physical and online stores.
The stores combine the benefit of trying on and purchasing apparel items

Principal Company

Chacott Co., Ltd.

offered by physical stores with the wide selection that is a benefit of online stores.

Business Activities

Comprehensive business development including the sale of ballet/dance goods and cosmetics, and the opera-

Visitors to these stores can choose from items in the standard store inventorytion of ballet schools

or use our new “click and try” service to have items available online, from any
Onward Group brand, delivered to their desired store for them to try on andconsider purchasing. Another characteristic of these stores is that they offer a customization service through which customers input their height to create an avatar
that can be adorned with clothing items to enable customers to get a better ideaof how they look. We also provide personal styling services using digital technologies together with other services, making for a lineup of six unique services alongwith an assortment of non-apparel products that will grab customers’ attention
and encourage them to make a purchase.
Such features and services combine to make Onward’s first service-oriented

OMO store
ONWARD CROSSET STORE
LaLaport TOKYO-BAY

OMO store venues that are not limited to the conventional sale of products.

“From Closed to Open” Strategy for
Ramping Up Proposals Targeting
Everyday Life
Chacott is advancing branding activities based on its brand philosophyof “Make life beautiful from the inside out.” As part of these efforts,
Chacott is implementing its “From Closed to Open” strategy, which entails
ramping up proposals for the use of the assets it has fostered throughout
its history of serving dancers in everyday life situations. For example, thiscompany’s CHACOTT FOR PROFESSIONALS brand of professional-use
cosmetics, used by numerous professional artists when performing on

Feature of OMO Store

Physical StoresL imited store
inventories
L imited store hours andlocations ome customers feelS
annoyed by sales staff
and are unable to shopat their own paceSix Services of ONWARD CROSSET STOREs

stage, has been reinvented to form the Chacott COSMETICS line, which

1.

distributors across Japan on April 16, 2021. Chacott’s cosmetics are

OMO Stores an shop while
C
enjoying theatmosphere of stores an touch and try on
Citems an receive attentiveC
customer service bystylists
 an take purchasedC
products home right away

Operates 24/7,
all year roundCan purchase fromanywhereCan select products
from nearly the entire
inventory
Select a stylist you likeCan shop at your own
pace

Personal Styling

3.

Live Styling Broadcasts

L ead times until products make it to thecustomer

Customers can access the services of a stylist
online or at a physical store.

made in Japan with carefully selected ingredients to ensure safety andpeace of mind so that they can be used even on the delicate skin ofsmall children performing ballet. Moreover, they have gained high levelsof trust from professional artists with colors that retain their appeal evenunder the spotlight and with their resistance to sweat and other secretions. As such, many professionals have already deemed them to be theperfect makeup choice for their everyday lives.
Meanwhile, Chacott rebranded its fitness wear products as “balance

We introduce products via videos and couple
them with a feature that allows customers toeasily purchase the introduced products online
or have them delivered to a store to try on.

Customization
Customers can choose the sizes and colors ofapplicable products to have them customized
to match their body characteristics.

wear” with applications that go beyond exercise and relaxation, integrating
and reorganizing these products to form the Chacott Balance line. In thisline, we are developing a range of items that can be used in everyday
life settings outside of fitness. Such items include tulle skirts based on theconcept of using the materials of ballet wear and Ballet Skinny jeans thatstretch to allow freedom to raise one’s leg easily while also drawing thewearer’s attention to their pelvis to create a beautiful posture.
While continuing to develop the core ballet5.

Cannot try on items
 annot receiveC
customer service

Products of any Onward Group brand available through our ONWARD CROSSET online
store can be delivered to a store selected bycustomers so that they can try them on andmake a purchase.

2.

4.
 annot touch productsCor feel the atmosphereof stores

Click and Try

was made available for sale at directly operated stores and other

Repair and Maintenance
ONWARD CROSSET STOREs partner with
Onward repair centers to offer renovation
and repair services for clothing items.

2021S/S Ballet Wear
Chacott’s ballet wear has been developed based on the input of
leading ballerinas (photograph features Shoko Nakamura).

business it has fostered since
its founding, Chacott will use
its ballet expertise to serve
the general market and thereby

6.

Onward Green Campaign

stimulate interest in stage

As part of Onward’s environmental management
efforts, the Onward Green Campaign entails
promoting the reuse and recycling of clothing
items customers no longer need with the aimof eliminating waste. The proceeds from resold
items are used to fund environmental andsocial contribution activities.

performances and culture tocreate a new virtuous cycle
driving its business.
Chacott COSMETICS

Online Store

8

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 20219

Five Strategies Leading up to Fiscal 2030

Beauty & Cosmetics Business

2

4

Gourmet Foods Business

Principal Company

KOKOBUY Co., Ltd.

Principal Company

Onward Digital Lab Co., Ltd.

Business Activities

Development of product, an organic haircare and skincare brandBusiness Activities

Operation of Onward Marche, an e-commerce site for high-quality gourmet foods for refined tastes

Onward Marche (https://marche.onward.co.jp/, in Japanese only) is a high-quality gourmet food e-commerce website aimed at individuals with refined
tastes who want to enjoy food in a similar manner to fashion.

Launch of product
Botanical Hold Gel, First
Specialized Hairstyling
Offering in product Line

New product Line
Hair Wax Using Neroli
Oil to Produce a Pleasing
Aroma

On June 18, 2021, we introduced into our

A new hair wax made using Neroli essential oil

product line of organic and wildcrafted a

was introduced into the product line of organic

new hairstyling gel made completely fromand wildcrafted on December 25, 2020.

This website is a gateway to the new world of gourmet foods offered by Onward, a constant provider of new value and lifestyles in the world of fashion.
Onward’s buyers travel across Japan to talk to producers in search of exquisite culinary masterpieces, choosing only the best based on sight and taste.
Like an artist painting a canvas, the rich assortment of gourmet foods available at the Onward Marche market enriches and adds color to people’s lives.

Onward Marche Award 2020 Program

natural ingredients. With an ideal level ofMade using only natural ingredients, thishold, this gel lets users style their hair fororganic hair wax can be used for a variety of

the Onward Marche gourmet food e-commerce website for proposing

both formal and more casual occasions withpurposes, ranging from hairstyling to moistur-enriching lifestyles through food, Onward Holdings announced the winners

complete freedom to go for looks ranging

izing one’s hair, skin, lips, nails, and entire body.

in the Onward Marche Award 2020 program on December 7, 2020.

from rough to cool. We also recommend a

It is even safe for the delicate skin of babies.

stylish look that gives the image of wet hair.

Available in compact, portable sizes forwere selected from among the top 100 items ranked based on sales

This package is accented by a refreshingconvenient transportation, this gel has you

and popularity in 2020. In addition, three items presented with awards

lime scent that is perfect for people ofcovered for hairstyling and other care needs

for the second consecutive year were entered into the Onward Marche

all genders.

away from home.

To commemorate the fourth anniversary of the November 2016 launch of

In the program, one grand prix winner and nine category winners

Onward Marche Award 2020hall of fame.

product hairstyling gel (top)product Neroli hair wax (bottom)

Pet & Home Life Business3

5Gifts Business

Principal Company

Creative Yoko Co., Ltd.

Principal Company

Yamato Co., Ltd.

Business ActivitiesD evelopment of comfort goods and pet-related products

Business Activities

Development of gift solutions featuring gift catalogs

Debut of Hinami Lifestyle Brand
Creative Yoko’s Hinami lifestyle brand debuted for sale on online shopping sites

Further Enhancement of Gift Services throughDirectly Operated E-Commerce Websites

on March 5, 2021, with a lineup centered on masks and hygiene products. The

The changes in gift purchasing styles arising in response to the COVID-19 pandemic

COVID-19 pandemic caused many to adopt new lifestyles to prevent the spreadof the virus while also giving rise to increased hygiene awareness and otherwisetransforming our lives. In response to this trend, we developed the Hinami brandbased on the theme of what we can do now to better serve our precious
customers and their families. “Hinami” is a portmanteau of the Japanese words
for “day” and “ordinary.” This name is symbolic of the brand’s focus on every day
and on everyday habits, aiming to propose products that make those nonextraordinary slices of life in our busy everyday lives more comfortable, convenient, and fulfilling. The brand’s logo represents the passage of time in our
Hinami lifestyle brand products

everyday lives with a sun and moon motif. Hinami brand products include
antibacterial, antiviral reversible masks that employ the CLEANSE® antibacterial,
antiviral fiber-processing technology of Kurabo Industries Ltd.; Moist Mask Mist,an aroma spray for masks made using botanical extracts; Moist Hand Mist andMoist Hand Gel that allow users an easy, waterless option to wash and sanitize
their hands; Nano Face Mist that can be used whenever one feels that their skinis too dry; and other mask and hygiene products.

10

Onward Holdings Co., Ltd. Annual Report 2021

have driven growth in purchases via e-commerce.
Amid this trend, the brand catalogue gifts of Yamato Co., Ltd., a company strength,were well received by consumers, resulting in increased sales of these items throughdirectly operated e-commerce websites. Taking advantage of this opportunity, we
evolved the services of our directly operated e-commerce websites to make Japan’s gift
culture feel more convenient and accessible.
Product-related initiatives by Yamato have included the development of online
catalogs offering gifts matched to contemporary needs that can be sent through social
media. In terms of content, on December 18, 2020, this company launched “antina
wedding,” a special corner focused on scenes and items related to weddings. Popular
wedding-related gifts include those presented at receptions, confections, items that
culturally represent blessings, and gifts given to close relatives or friends as thanks forcongratulatory gifts. The “antina wedding” corner helps alleviate the concerns of couples getting married who may desire to give such gifts.
Yamato will continue to propose new forms of gifts going forward with an emphasis on digital spaces.

Onward Holdings Co., Ltd. Annual Report 202111

Five Strategies Leading up to Fiscal 2030

4.
Evolve into a Company Where
Diverse and Unique Personnel
Can Exhibit Their Strengths
It is expected that the value sought by customers will become morediverse and unique going forward, and responding to this need fordiverse and unique value will require Onward to evolve into a company
where diverse and unique personnel can exhibit their strengths.
To this end, we must train in-house personnel who will spearheadchange while ramping up the recruitment of personnel externally inorder to promote organizational and human resource platform reform.
Based on this policy, Onward will seek to “Promote the activities ofdiverse personnel”, “Diversify workstyles”, “Achieve a flat organization”,“Transfer authority to the front lines”, “Offer multiple career paths andfocus on personnel development”, and “Provide fair, multifaceted
evaluations and performance-based compensation”.
KASHIYAMA DALIAN (smart factory)

5.

3.
Strengthen Business-to-Business Operations
Business-to-business operations have been robust even amid the COVID-19 pandemic. We position them as stable growth businesses in the
post-COVID era, while targeting net sales of ¥60.0 billion in fiscal 2030, which is projected to represent 20% of consolidated net sales.

Promote Sustainable
Management That
Pursues Coexistence with
the Environment
The Onward Group realizes that promoting sustainable managementthat pursues coexistence with the environment is a social responsibility

Onward Trading Co., Ltd., a major group company, will further

Platform Services Businesses(for retailers and apparelcorporate clients)

develop uniform and sales promotion businesses.

In our platform services businesses, we look to make our

Product Services Businesses(for general corporate clients)

Based on its apparel business, Onward Trading proposes
solutions to the branding and promotion issues faced bygeneral corporate clients in their respective fields.
Directly soliciting client requests, various internal departments at Onward Trading team up to address customer issues
and respond to unmet needs. Moreover, this company develops designs, patterns, and materials in-house to ensure thatall proposals are completely original. Onward Trading alsooffers robust post-delivery support for tasks including inventory management, operating, cleaning, and re-ordering.
Leveraging the strengths of the Onward Group, Onward
Trading provides high-level responses to the various needsof corporate clients.

production platform available for use by parties outside of
the Onward Group to create a platform by sharing productplanning, production, distribution information sharing anddata-linking across the supply chain. We thereby aim todevelop a new business model incorporating services powered by Internet of Things technologies, in order to provide
original equipment and design manufacturing (OEM/ODM)
services for retailers, apparel corporate clients, and otherbusinesses.
Kashiyama (Dalian) Co., Ltd., a central component ofthese businesses, boasts a world-leading smart factory in thesewing field. The functions of this smart factory will be utilized
to drive the growth of the Kashiyama brand and to expand
into new business areas outside of the Group.

shared by all companies.
The Group has long placed sustainability at the heart of its management based on this belief, and we are advancing various initiatives
in pursuit of sustainability. One such example would be the Onward
Green Campaign, which was launched in 2009 with the aim of preserving our precious environment for future generations.
Another initiative with environmental benefits is our KASHIYAMA
brand, which uses a made-to-order model that eliminates wastefulproduction. The expansion of this brand will thus contribute to theenvironmental preservation aspect of sustainable management.
Furthermore, the Japan Apparel Quality Center was established in
March 2017, with the aim of applying the quality control expertise andinsight the Group has cultivated over the course of its history to factory
audits throughout the apparel industry. Factory audits by the Japan
Apparel Quality Center employ CSR audit guidelines based on global
standards as well as its own proprietary quality control audit guidelines.
At the beginning of fiscal 2021, ending February 28, 2022, a
dedicated organization was established within Onward Holdings topromote full-fledged sustainable management throughout the Onward
Group. This organization will be used to accelerate sustainable management initiatives going forward.

12

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202113

Financial Results in Fiscal 2020
During the fiscal year under review, the Japanese economy remained in a situation where its outlook was unclear, due
to the impact of events stemming from the global spread of COVID-19, such as the state of emergency declarations inJapan, which were issued twice, lockdowns in various countries, and negative influence on economic activities due tobans on overseas travel.
In this harsh management environment, the Company strived to curtail purchasing and reduce fixed expenses, whilesteadily implementing measures such as the withdrawal from the Italy business, which had been an unprofitable business,
discontinuation of unprofitable brands, and closing of unprofitable stores in Japan and overseas, as part of the global
business reforms that have been conducted since the previous fiscal year.
E-commerce sales grew significantly, increasing by 26% year-on-year, mainly through Onward Crosset, the Group’s
official online shopping site, and the Lifestyle Business segment also trended strongly. However, the consolidated performance
was seriously affected by factors such as a significant decrease in sales at physical stores including department stores andApparel Businessshopping centers, which are located mainly in metropolitan areas, and temporary closures due to lockdowns overseas.
As a result of the above, consolidated net sales amounted to ¥174,323 million (a 29.8% decrease year on year), consolidated
operating loss came to ¥21,230 million (operating loss of ¥3,061 million in the previous fiscal year), consolidated ordinary
loss stood at ¥20,174 million (ordinary loss of ¥3,835 million in the previous fiscal year), and loss attributable to owners of

The Apparel Business segment, which operates the principal business of the Onward Group, comprises 51 operating companies andgenerates 80% of the Company’s consolidated net sales. This segment primarily performs the planning, production, and sale of textile
products. The operations of this segment are divided into the domestic apparel business, which includes core operating company Onward
Kashiyama, Co., Ltd., and the overseas apparel business, a global business developed in regions such as Europe, Asia, and North America.

parent amounted to ¥23,181 million (loss attributable to owners of parent of ¥52,135 million in the previous fiscal year).

Segment Information
The Onward Group’s reportable segments are components for which separate financial information is available and regular evaluationby the Board of Directors is performed to decide how management resources are allocated and to assess performance.

Domestic Apparel Business

Overseas Apparel Business

The domestic apparel business is our mainstay business,

The overseas apparel business consists of operations

generating 59.5% of consolidated net sales, and its opera-

mainly in Europe, Asia, and North America—wheretions encompass the planning, production, and sale of

we develop brands and conduct planning and production

high-quality apparel items in the mid-to-high price range.

activities—and accounts for 20.5% of consolidated

This business also carries out the production and whole-

net sales.

sale of corporate uniforms and sales promotional goods.
In the domestic business, profit increased at compa-

The Group engages in the Apparel Business (planning, production, and sale of textile products, including men’s and women’s
clothing) and the Lifestyle Business in Japan and overseas.

Information on Net Sales, Profit or Loss by Reportable Segment

Higher profitability is being pursued through global
business reforms in Europe and Asia. As one facet ofnies including Onward Trading Co., Ltd., which conducts athese reforms, we withdrew from unprofitable operations

B2B uniform business, and Tiaclasse Co., Ltd., whose mainin Italy.

sales channel is e-commerce. Despite making progress inIn the overseas business, despite cost reduction

shifting to e-commerce sales channels such as Onward

effects of the global business reforms which have been

Crosset, a directly-managed online store, net sales

conducted since the previous fiscal year, the impact ofthrough physical sales channels decreased due to the

COVID-19 continued in Europe and the U.S., causing profit

impact of COVID-19, causing profit decreases and operat-

decreases and operating losses for the overseas business.

ing losses at companies including Onward Kashiyama Co.,
Ltd. As a result, the domestic apparel business recorded a

For Fiscal 2020 (from March 1, 2020 to February 28, 2021)

(Millions of yen)loss in fiscal 2020.

Apparel Business
Adjustments

AmountRecorded in
Consolidated
Financial
Statements

174,323−

174,323

2,013

4,750

(4,750)−142,158

36,914179,073(4,750)174,323

pet and home life business; the gourmet foods business; and the gifts business. In these businesses, we capitalize on the Onward Group’s(20,165)147(20,017)(1,213)(21,230)

product development and sales capabilities to create new value and lifestyles with fashionable proposals in a wide variety of fields.

Total

Lifestyle Business(Domestic)(Overseas) Net sales to outside
customers

103,648

35,774

139,422

34,901 Intersegment sales
or transfers

1,407

1,329

2,736

     Total

105,055

37,103

Segment profit (loss)(13,667)(6,497)Total

Net sales

Lifestyle Business
The Lifestyle Business segment comprises 23 operating companies and generates 20% of the Company’s consolidated net sales. This
segment consists of five businesses—the wellness business, which develops ballet/dance goods; the beauty and cosmetics business; theIn fiscal 2020, both sales and profit increased at Yamato Co., Ltd., which conducts a gift catalog business, but sales decreased at(Note)
The adjustment amount for segment profit (loss) of (1,213) million yen includes amortization of goodwill of (786) million yen, elimination of intersegment transactions of 3,639 million yen, andcorporate expenses not allocated to reportable segments of (4,065) million yen. Corporate expenses are mainly general and administrative expenses that are not attributable to reportable segments.

14

year-on-year decrease in net sales coupled with operating

Onward Holdings Co., Ltd. Annual Report 2021

companies including Onward Beach Resort Guam, Inc., which conducts a resort business in Guam, where a lockdown has continued
since the second quarter. As a result, both sales and profit decreased for the Lifestyle Business segment, despite securing operating profit.

Onward Holdings Co., Ltd. Annual Report 202115

P.XX

Special Feature 1

Sustainable
Management Initiatives

Elimination of Wasteful Production

P.18

Enriching and adding color to people’s lives
while caring for the planet
The world of today is plagued with various global environmental andsocial issues, and we are therefore pressed to take actions specifically forcontributing to the realization of a sustainable society.
The Onward Group realizes that sustainable management is an
important theme that forms the foundation for its corporate activities.
Accordingly, we will continue to practice management that pursues

Recovery and Reuse of Products

coexistence with the environment based on our mission statement of“enriching and adding color to people’s lives while caring for the planet.”

P.20

Elimination of wastefulproduction(Expansion of made-to-orderproduction)

Main initiatives
towardsustainable
management
Recovery andReuse of Products

Improvement of Traceability
Improvement oftraceability

P.22

16

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202117

Special Feature 1 Sustainable Management Initiatives

Elimination ofWasteful Production

Elimination of Wasteful Production

Recovery and Reuse of Products

Improvement of Traceability

Expansion of Made-to-Order Businesses
The Onward Group is expanding made-to-order businesses in which it
swiftly delivers clothing items carefully crafted to fit customers perfectly

2

based on their orders. Combining cutting-edge technologies with seasoned
made-by-hand craftsmanship, the smart factories used for our KASHIYAMA
brand eliminate wasteful production.

High-Efficiency Distribution System
In our made-to-order businesses, we eliminate unnecessary
warehouses by shipping products directly to customers fromfactories.
PACK-RUNNER compression packages are used to deliver
items in a sealed and compressed state to help substantiallysave space in logistics vehicles.
We have also stopped using the plastic hangers employedwhen the KASHIYAMA brand was first launched, instead
replacing them with patented simplified hangers that custom(From top)

ers assemble by using parts of the lid from the box in which

PACK-RUNNER

their product was shipped. This approach helps cut back on

Simple hanger assembled with the lid parts ofa shipping box

plastic use while making packaging smaller.

Miniaturization of packing box

3

Other Environmental and Workstyle Initiatives
The Onward Group is advancing paperless process initiatives to conserve paper resources. For example, we haveabolished paper order slips, instead choosing to process orders via tablets and send order information in data form.
Similarly, we transitioned from paper to digital customer records.

Fabric automation management

Management by RFID* and hanger system* RFID is an automatic recognition technology that uses radio waves to read andwrite information on IC tags without contact.

Sewing of customized orders quickly and carefullyWe have also replaced certain lighting fixtures with LED lighting to conserve energy.
These efforts have helped to receive CSR and QC, or quality control, certification from the Japan Apparel Quality Center.

Smart Factories(Operation of Kashiyama Dalian)

1

Drastic Reforms to All Manufacturing
Processes to Eliminate Wasteful
Production
Smart factories link data from orders with computer-aided
manufacturing processes and use automatic cutting machines
to cut cloth more precisely and thereby reduce the portionsof cloth that cannot be used. In addition, these factories
utilize automatic ordering systems for incidental items(buttons, lining, etc.) to ensure appropriate inventory levels.
Moreover, we manage products with radio frequency identification tags and hanger systems while using tablets forprocess management to swiftly produce items customized
based on customers’ requests.
LED lighting on the sewing line18Onward Holdings Co., Ltd. Annual Report 2021

Cafeteria, a place for employees to relax

Onward Holdings Co., Ltd. Annual Report 202119

Special Feature 1 Sustainable Management Initiatives

Recovery and Reuse of
Products

Elimination of Wasteful Production

Recovery and Reuse of Products

Establishment of Apparel Circulation System

Improvement of Traceability

COLUMN

Recognizing its responsibility as a leader in the apparel industry, the Onward
Group is promoting an apparel circulation system to use resources as effectively
as possible. As trends are changing at a dizzying speed, we aim to contribute to
the environment and to society by promoting the reuse and recycling of apparel

Launch of New Direct-to-Consumer Brand ONWARD DD

items in order to prevent such items from being disposed as they go out of style.

New Brand Available on ONWARD Design Diversity E-Commerce Website for Direct-toConsumer Brands Focused on Addressing Social Issues
Onward Digital Lab Co., Ltd., the company responsible for the Group’s digital strategies, has launched ONWARD Design Diversity, an e-commerce
website for direct-to-consumer brands. ONWARD Design Diversity is based on a completely new concept: each brand it offers is focused on addressing
a specific social issue.

Onward Green Campaign

Among these brands is the new ONWARD DD brand, which is focused on addressing the supply glut that is a chronic issue of the apparel industry.
Inspired by the concept of clothing that is not based on trends, the brand’s sustainability-minded solution for addressing the aforementioned issue is tooffer apparel items that are not disposed as they go out of style.

As one facet of its environmental management initiatives, the Onward Group is advancing

The goal of this brand is to completely free itself from trends in order to deliver value that will remain consistent for years to come. In other words,

the Onward Green Campaign to promote an apparel circulation system in which we collect

ONWARD DD looks to create clothing that proposes a new cycle, as opposed to simply making new clothes. As the items offered through the ONWARD

used Onward Group apparel items from customers so that they can be reused or recycled

DD brand will not be subject to simple clearance sales, they will be offered at more affordable prices from day one.

to the greatest degree possible.
Since 2009, the Onward Green Campaign has been held twice a year (in spring andfall) in conjunction with department stores and shopping centers that endorse the aimsof this program. Moreover, department stores and directly managed stand-alone stores,
excluding some stores, began collecting clothing items on a year-round basis in fall 2020.
Certain clothing items are recycled by harvesting the thread thereof for use in new
textile goods. This thread is used to create blankets and work gloves, and the blankets aresupplied to disaster victims and delivered to developing countries around the world withthe cooperation of the Japanese Red Cross Society. Other items are recycled through use
as RPF, or refuse derived paper and plastics densified fuel, which is utilized as an alternative source of energy. In addition, collected clothing items that can still be worn are reusedby being sold at the Onward Reuse Park environment-themed shop at discounted prices—which has a physical venue in Kichijoji, Tokyo, and an e-commerce venue—with all proceeds used to fund environmental and social contribution initiatives.

Apparel Circulation System

Product Reuse and Recycle Results

Reuse

Production

Resale of clothing

Planning and production of clothing

Recycling
Donation of recycled blankets, etc.

ApparelCirculation
SystemSale

Number of Customers Who Donated 997 thousand
Number of Items Collected 5.29 million (approximately 1,322 tons)

Reuse

20%

Recycle80%

Disposal

0%

Sale of Clothing

Sorting

Collection

Classification of clothing

Collection of clothing

Blankets

Work gloves

37,800685,440 pairs

Solid fuelapproximately

872 tons(Totals from fiscal 2009 to fiscal 2020)

20

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202121

Special Feature 1 Sustainable Management Initiatives

Elimination of Wasteful Production

Improvement ofTraceability

Recovery and Reuse of Products

Improvement of Traceability

Onward-Approved Factory System
Society’s expectations for companies to exercise social responsibility arerising, expanding the scope of risks that could present problems in business
operations. These risks include environmental pollution in countries andregions from which products are procured as well as human rights violations
at factories. The Onward Group seeks to combat these risks through the
Onward-Approved Factory System launched in fiscal 2015. Ongoing factory
audits are conducted through this system. Should a need for improvement
be found, the applicable factory will be provided with a list of issues to be
remedied along with guidance for implementing improvements. By implementing this system, we will build a robust and reliable supply chain while practicing
CSR procurement to contribute to the sustainable growth of society.

Goal of the Onward-Approved Factory System
The Onward-Approved Factory System was instituted with the goal of developing a manufacturing platform that can continuously supply

Suppliers’ Code of Conduct Items

impeccable-quality products. The Onward Group is well aware of how important safe and appropriate work environments at production
sites are to improving employee retention rates and is thereby securing manufacturing techniques and ensuring stable product quality.
Through the Onward-Approved Factory System, we encourage partner factories to reinforce their management systems with regard
to corporate social responsibility (CSR) and to quality control (QC). We therefore support factories exhibiting excellence in achieving

A.	Legal compliance andmanagement

sustainable growth.

Audit Targets

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.

In fiscal 2015, the Onward Group introduced the Onward-Approved Factory System, which is used when performing audits of sewing
factories. To receive certification under the Onward-Approved Factory System, factories must pass CSR and quality control audits conducted by the Japan Apparel Quality Center.

Audits Performed
2015–2020 (Actual)

Number of factories audited

Number of factories that passed compliance audits

441

396

Business Partners of Onward shall comply with all relevant local laws and regulations.
Furthermore, Business Partners shall comply with all relevant 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 beestablished.

D.	Wages, allowances, andbenefits

Note:
Audits were not conducted in fiscal 2020 due to the global COVID-19 pandemic.
Audit plans will be commenced in fiscal 2021 after the restrictions on traveling to the applicable countries have been lifted.

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 withlocal 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 and abide by all local laws.

G. Non-discrimination

Business Partners of Onward shall not discriminate in employment or recruitment on the basisof age, nationality, race, color, gender, religion, or any other factor. Onward will not associatewith Business Partners who partake in any form of discrimination.

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.

action plans is provided by the Japan Apparel Quality Center. The factory is then re-audited after a period of one year.

I.

Business Partners of Onward shall guarantee the freedom of unions and workers who wish tojoin unions in accordance with local requirements.

Industry-Wide InitiativesJ.	
Sub-contractors andAudit Methods
Audits related to CSR are conducted in accordance with Onward Holdings’ proprietary Suppliers’ Code of Conduct, which is based oninternational standards. Actual audits are entrusted to local audit firms, but representatives from the Japan Apparel Quality Center arealways 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 to exercise 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 Japan Apparel 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 serious compliance findings are discovered through the audit, a certificate of approval is issued that is valid
for two years.
If improvements are deemed necessary, feedback is supplied with regard to the areas requiring improvements and guidance forFree association

homeworkers

The Japan Apparel Quality Center provides its audit requirements and decision criteria to the Japan Apparel-Fashion Industry Council, adomestic apparel industry organization, so that its accumulated factory audit expertise can be utilized throughout the industry. The Japan
Apparel Quality Center also offers advisory and audit proxy services for use by apparel and textile trading companies.

22

Onward Holdings Co., Ltd. Annual Report 2021

K. Environmental practices

Business Partners of Onward shall require all entities to which they outsource some or all of theduties with which they have been entrusted to comply with the Suppliers’ Code of Conduct and shallinform Onward of such outsourcing.
Business Partners of Onward shall have basic awareness of environmental protection. Businessshall be conducted in accordance with local and internationally recognized environmental
practices.

Onward Holdings Co., Ltd. Annual Report 202123

Special Feature 2

Diversity Management Initiatives

Establishment of Action Plan for Onward Kashiyama
Onward Kashiyama Co., Ltd., has established and is implementing an action plan based on the recognition of the following issues. Thisaction plan is designed to guide efforts to foster an environment in which diverse employees can feel motivated in their work and deliver

Evolution into a Company Where Diverse andUnique Personnel Can Exhibit Their Strengths

their best performance while maintaining a good work–life balance.

Workstyle Reforms
Issues at Onward Kashiyama
Plan Period: March 1, 2020–February 29, 2024

To evolve into a customer-centric company and make the best use of its employees’ diverse strengths, Onward is endeavoring to train in-house personnel who will
spearhead change while ramping up the recruitment of personnel externally in order to promote organizational and human resource platform reform. We thereby
aim to become a company where diverse and unique personnel can exhibit their strengths.

Empowerment of Female Employees

IssueLong working hours in specific

Issue

1

divisions, for specific positions,2and during specific periods

Unable to acquire
long periods of leave

Issue

3

Lack of childcare leaveacquisition by male employees

The apparel business requires fresh ideas and innovative value propositions. We believe that such ideas and propositions are best
­created when all employees respect and accept the differences between individuals and are able to exercise their skills to the fullest.

Initiatives

We have established the Diversity Promotion Section within our human resource division in order to foster a workplace environment
in which all employees can feel motivated and deliver their best performance. This section is responsible for revising prior work processes and implementing ongoing workstyle reforms for the purpose of improving productivity.

Ratio of Female Employees

Ratio of Female Managers(Section Manager and Above)

April 2016–
Perform internal meetings and business negotiations during
working hours





24.2%

.

54.2%

.

.

79.9%









Ratio of Female AssistantManagers

Cultivation of Time Management Mind-set

Turn off lights and computers at 8 p.m.
Provide notice of monthly overtime hours by division

March 2019–
The Diversity Promotion Section alerts applicable individuals
and supervisors when overtime hours exceed the legal limit.

(As of February 28, 2021: Onward Kashiyama)

Message

Visualization of Work Progress
January 2019–
Require submission of reports at start and end of work
­processes through in-house tools

Promotion of Diversity

March 2020–
Visualizing of schedules with new internal tools
Arrange explanatory forums on new internal tools at allWorkstyles in Times of Great Upheaval

domestic offices
Offer use manuals on Company intranet

Onward launched the Work Style Design Project in 2019 with the goal of revising workstyles and work practices in order to facilitate bettermove away from conventional workstyles, such as designers and sales personnel in urban centers. This consulting produced clear benefits,
including reductions in overtime hours and increases in the number of days of paid leave acquired. In addition, training programs aimed atchanging the awareness of leaders were implemented to create an organization that takes the initiative to change from leaders.
A major part of our workstyle reform initiatives are Kaeru Kaigi meetings. With a name that plays on the Japanese words for “change” and“go home,” these meetings are held on a weekly basis to encourage employees to change how they work, go home early, and improve theirlives, among other aims. Kaeru Kaigi meetings go beyond simply facilitating reports on work progress to promote self-driven processes of trial
and error by all members for the purpose of transforming workstyles and achieving their goals for work. Most important, these meetings aim
to be enjoyable for all attendees. For this reason, we are promoting Kaeru Kaigi meetings on a Companywide basis while ensuring that thesemeetings have an atmosphere conducive to voicing frank opinions regardless of rank or career history.
We are committed to guaranteeing that our work–life balance initiatives do not end with flowery words. Therefore, we will continue topromote the Work Style Design Project to develop a comfortable working environment for employees and help them achieve their goals.

24

Onward Holdings Co., Ltd. Annual Report 2021

Male Employees
February 2020–
Distribute messages from the president

June 2020–
Raise awareness among management members regarding
need to encourage object employees to take childcare
leave acquisition

System Reforms for Developing ­Comfortable
Workplace Environment
March 2020–
Change upper limit for by-hour leave from three days to fiveAllow for leave to be taken in the middle of shifts
Introduce teleworking system on trial basis
Offer mobile and working from home options on trial basis

March 2021–
Introduce full-fledged teleworking system
Examine and revise system period, etc., based on trials
and introduce on full-fledged basis

work–life balances.
As part of this project, we conducted workstyle consulting with regard to positions for which it was previously thought to be difficult toPromotion of Childcare Leave Acquisition by

Revision of Workstyles through Work ­Process Reforms

Promote digitalization to run meetings more efficiently
Reduce travel time by conducting meetings online
Share meeting materials via the internet

June 2019–
Implementation of Work Style Design ProjectDevelop model teams with the cooperation of external
consultant
Provide training to reform leadersArrange courses for cultivating internal consultants
Perform public relations activities on Work Style Design Project

Requirement of Acquisition of
10 Consecutive Days of Leave
May 2020–
Revise systems to allow for 121 holidays a year
Require employees to acquire 10 consecutive days of leave(or five consecutive days on two occasions)

Onward Holdings Co., Ltd. Annual Report 202125

Corporate GovernanceCorporate Governance Structure
General Meeting of Shareholders

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 gover-

Audit & Supervisory Board

nance that enhances the health, fairness, transparency, and compliance 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 defined its business domain as “a world of fashion that gives refreshment andbeauty to people’s lives.” By offering fashion as an integral part of 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 and accomplish

Consultation

its objectives, it is vital for it to build and maintain strong networks and relationships with customers and all other stakeholders it con-

ReportOnward Group
Compliance
Committee

nects with in its corporate activities.

ReportReportReportReasons for the Appointment of Outside Directors

In order to further clarify the management responsibilities of direc-

Name

Reasons for Appointment as an Outside Director

Akira Kawamoto

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 theCompany’s management.

Yoshie Komuro

We are expecting Ms. Komuro to use her specialized insight asa manager and the experience and insight that she gained on
expert panels as part of government-affiliated councils to enhance the Company’s management.

tors, to increase opportunities to gain the confidence of shareholders, and to put in place an optimal and flexible management
framework that is capable of responding to changes in the businessenvironment in a timely manner, the Company has set the term of
directors at one year. In addition, three of the seven members of theBoard of Directors (six men and one woman) are appointed fromoutside the Company and selected on the basis of their high levelof independence. This initiative is aimed at reinforcing the supervisory function of the Board.

Kenji Chishiki

We are expecting Mr. Chishiki to use his specialized insight as amanager and his wide-ranging insight related to finance, accounting, legal affairs, etc. to enhance the Company’s management.

Onward Group Strategy Meeting

Supervision

Ryu Umezu

In fiscal 2020, the Board of Directors met 11 times, and two
separate meetings were held in the form of document
correspondence.

Evaluation of the Effectiveness of the Board of
Directors
The Company’s directors conduct annual self-evaluations toassess the effectiveness and appropriateness of the Board of
Directors’ management oversight function as well as the degreeof accomplishment of their own duties. The results of theseevaluations are reported to the Board of Directors. Based onthese self-evaluations, the Board of Directors analyzes and evaluates its overall effectiveness, disclosing an overview of theresults.
1. S
 cope of evaluations• All directors and Audit & Supervisory Board members
2. P rocedures for evaluations• Self-evaluation via questionnaire

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
outside Audit & Supervisory Board members. Staff has also been
assigned to assist Audit & Supervisory Board members in carryingout their duties and to strengthen their supervisory function. Eachmember 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 budget committee meetings, in accordance with audit policies
and the roles established by the Audit & Supervisory Board. In
addition, the Internal Control Office and business departments
conduct periodic monitoring in an effort to establish an effective
and lawful corporate structure.
The Audit & Supervisory Board meets with the representative• Support for evaluations provided by external advisor

directors and the accounting auditor on a regular basis to share andexchange information and opinions. This initiative is also designed
in an effective and lawful manner. Moreover, the Audit & Supervisory

lishing management strategies and targets, resolving man-

Board receives reports from each member in accordance with audit

agement issues, and overseeing business execution inpolicies and the roles. Deliberations are undertaken and resolutions

accordance with Onward’s Corporate Governance Policy

are made based on this information as required. In fiscal 2020, themethods of Board of Directors generally appropriate• Ongoing examination of indicators used in business strategies, methods for monitoring operational execution, and26

to ensure a structure is in place that is capable of conducting audits• Board of Directors effectively exercising functions for estab-• Current composition, discussion quality, and operation

Mitsuyo Kusano

Reasons for Appointment as an
Outside Audit & Supervisory Board Member
We are expecting Mr. Umezu to use his wealth of knowledge,
insight, and specialties from his experience as an attorney, particularly his robust insight and experience pertaining to capital
market transactions and financial transactions, in audits of theCompany.
We are expecting Ms. Kusano to use her wide-ranging experience and robust insight from her years of experience in the
media industry and her time on expert panels of government committees in audits of the Company.

Audit & Supervisory Board met 15 times.

Coordination

Internal Control
OfficeAudit

Board members (three men and one woman), two of whom are

3. O
 verview of results of analysis and evaluation of Board of
Directors’ effectiveness in fiscal 2020

Group Companies

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

Outside Audit &Supervisory Board Members

Board of Directors

Supervision

Directors and the Board of Directors

Standing Audit &Supervisory Board Members

Nomination andCompensation
Committee

Accounting
Audit

Accounting Auditor

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, the Boardof Directors convenes as necessary. In this manner, the Onward
Group has a system in place that ensures a swift and appropriate
response to rapid changes in the business environment.
Moreover, the Group has introduced an executive officer system

Nomination and Compensation Committee(six male executive officers but no female representation at thisThe Nomination and Compensation Committee was established astime) with the aim of clarifying management decision-making andan advisory body to the Board of Directors on February 26, 2021, forthe purpose of contributing to strengthening the oversight functionof the Board of Directors and enhancing the Company’s corporate
governance structure, by ensuring the transparency and objectivityof evaluation and decision-making processes related to director
nomination and compensation. The Nomination and Compensation
Committee functions as both a nominating committee and a compensation committee.

business execution functions. In order to facilitate flexible decisionmaking on a Groupwide basis, the Onward Group Strategy Meeting,which primarily comprises directors and operating officers fromGroup companies, is in place to review the management strategies
and important management matters of operating companies andconfirm the status of operations.
The Onward Group also has advisory contracts with a numberof attorneys to receive legal advice.

The Nomination and Compensation Committee responds toconsultations from the Board of Directors by discussing matterspertaining to the nomination and compensation of directors. The
results of these discussions are reported to the Board of Directors.
The Nomination and Compensation Committee is to comprise three or more members selected by the Board of Directors, amajority of whom should be outside directors designated as
independent directors.

Onward Group Compliance Committee

Directors’ and Audit & Supervisory
Board Members’ Compensation
Policies for Deciding Amounts of and Calculation Methods for
Directors’ and Audit & Supervisory Board Members’ Compensation
1. Policies for Deciding Amounts of Directors’ and Audit &Supervisory Board Members’ Compensation
Compensation paid to directors and Audit & Supervisory Board
members comprises basic compensation, compensation for

The Board of Directors has established the Onward Groupthe purpose of acquiring Company stock, and performance-

Compliance Committee as an organization for overseeing thelinked bonuses.

Company’s compliance structure.

i. Basic Compensation

numbers of agenda items at Board of Directors’ meetings as

Together with the Compliance Division, the Onward Group

well as more efficient operation required in fiscal 2021 forCompliance Committee conducts effective training and awareness-

Supervisory Board members based on predefined stan-

improvements to the effectiveness of the Board of Directors.

raising activities, takes steps to spread understanding of thedards that take into account factors such as full-time orCompliance Manual, enhances the Company’s compliance structure

part-time status, role, rank, years of service, and perfor-

to ensure functionality, and performs compliance-related checks.

mance evaluations. Specific amounts of compensation paid to

Onward Holdings Co., Ltd. Annual Report 2021

Basic compensation is paid to directors and Audit &Onward Holdings Co., Ltd. Annual Report 202127

Corporate Governancedirectors are determined by the Board of Directors whileamounts of compensation paid to Audit & Supervisory Board
members are determined through discussions among Audit &Supervisory Board members.
	ii. C ompensation for the Purpose of Acquiring Company Stock

Total Amount of Compensation Paid by Classification of
Directors and Audit & Supervisory Board Members, Total
Amount of Compensation Paid by Type of Compensation,
and Number of Eligible Directors and Audit &Supervisory Board Members

In June 2015, the Company replaced the prior stock options
with compensation for the purpose of acquiring Company
stock, with the aim of improving the motivation of directors to
pursue stock price increases and business performance
improvements. Compensation for the purpose of acquiring
Company stock is paid to directors (excluding outside
directors).
iii. P erformance-Linked Bonuses
Performance-linked bonuses are paid to directors (excluding
outside directors) based on the Company’s consolidated
performance, etc. for the given fiscal year.
2. Resolutions by the General Meeting of Shareholders with Regard
to Directors’ and Audit & Supervisory Board Members’Compensation
The upper limit for the compensation paid to directors was set
at ¥500 million a year via a resolution at the 60th Annual General

Classification

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

Total Amount ofCompensation Paid
(Millions of yen)
181

36

Total Amount of Compensation Paid by Type ofCompensation (Millions of yen)
Performance-Linked
Fixed Compensation
Compensation
Compensation
for the Purpose
Basicof Acquiring
Compensation Company Stock Bonuses
126

36

54

—

Number of
Eligible
Directors
and Audit &Supervisory
Board
Members

—

—

6

3

40

40

—

—

6

Note: As of February 28, 2021, the Company had four directors and two Audit &Supervisory Board members, four of whom were outside. The numbers of directors
and Audit & Supervisory Board members include two directors and one Audit &Supervisory Board member who resigned from their positions upon the conclusion of
the 73rd Annual General Meeting of Shareholders held on May 28, 2020.

amounts are determined within this limit by the Board ofThis information is omitted as there were no person who received

Directors.

payments exceeding ¥100 million on an individual basis infiscal 2020.

Supervisory Board members was set at ¥60 million a year via aheld on May 25, 1995. Compensation amounts are determinedwithin this limit through discussions among the Audit &Supervisory Board members.
The numbers of directors and Audit & Supervisory Board members at the time of the respective resolutions were seven andthree.
3. Performance Indicators and Method for Determining the amountof Performance-Linked Compensation
Bonuses are paid as performance-linked compensation. The
purpose of this compensation is to reflect single-year businessperformance in compensation, heighten motivation for improving
business performance, increase focus on accomplishing management targets, and clearly evaluate successes.
Bonuses are based on Companywide performance in accordance with the same standards used to calculate the bonuses of
employee ranks and adjusted based on performance evaluations
that comprehensively account for factors such as the degree ofthe following criteria from the perspective of the medium-to
long-term improvement of the corporate value of the businesseconomic benefits for the Company and Group companies, andmake a comprehensive decision on approval or disapproval at
the Board of Directors meeting each year.
1. W
 hether the counterparty has been suffering from a significant
and ongoing deterioration in business performance?
2. W hether the counterparty has engaged in any antisocial
activities or otherwise lost the trust of society?
3. W hether there are any proposals submitted that may harm the

Total Amount of Consolidated Compensation by Officer

resolution at the 48th Annual General Meeting of Shareholders

Company deliberates on each agenda item in accordance withpartner in question and medium-to long-term increases to the

Meeting of Shareholders held on May 24, 2007. Compensation

The upper limit for the compensation paid to Audit &Furthermore, with respect to the exercise of voting rights related
to cross-shareholdings, in order to ensure appropriate responses, theinterests of shareholders?

Criteria for Independence of Outside Directors andOutside Audit & Supervisory Board Members
Candidates for the positions of outside director and outside
Audit & Supervisory Board member will be deemed not to have
independence if they fall under any of the following criteria.
1. Positions at companies at which a person involved in­operation of the Company serves as a corporate officer
The individual must not be a person involved in operation atTraining of Directors, Audit & Supervisory Board
Members, and Executive Officers

a company at which a person involved in operation of the

The Company offers opportunities for directors, Audit & Supervisory

2. Major business partners

Board members, and executive officers to acquire the knowledge

The individual must not be a major customer or a person involved innecessary for performing their duties along with opportunities for

operation of a major customer of the Company or a major supplier or

ongoing self-study to ensure that they are able to fulfill their roles

a person involved in operation of a major supplier of the Company.

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 identification of issues faced by the Onward Group and theirCompany serves as a corporate officer.

The individual must not belong to the accounting auditor that
performs audits of the Company based on the Companies Act
or the Financial Instruments and Exchange Act.

Furthermore, by enhancing its corporate governance systems, theCompany aims to earn high levels of trust among its customers
and shareholders and from society as a whole. In specific terms,
the Group created the Compliance Manual to clearly outline thedirection 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 a part ofefforts to ensure widespread awareness and understanding.
Moreover, the Group strives to maintain and improve productquality and subsequently raise customer satisfaction by utilizing
its expertise in quality control through the Japan Apparel Quality
Center. In addition, the Company will continue to improve thework­ing environments at our partner factories through the
Onward-Approved Factory System as a facet of its supply
chain management.

Risk Management System
The Onward Risk Management Regulations were establishedwith the purpose of guiding the development of the Company’srisk management system. The Compliance Division is responsible
for the development of the risk management system, the identification of issues, and the formulation of risk-management-relatedplans. The division reports to the Board of Directors. An effective
system is in place 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 professionals as the situation
requires in order to respond appropriately to such risks.

Dialogues with Shareholders
The Company conducts various investor relations (IR) activities,
and the IR Division has been established as a dedicated body forensuring the functionality of these activities. This division maintains

members, meanwhile, are provided with explanations of the

The individual must not be a professional receiving large amounts ofclose coordination with Corporate Planning, Accounting, Legal

Company’s business and organizational structures when they aremonetary payments or other financial assets from the Company

Affairs, and other relevant divisions. It also reports the opinions

appointed, and necessary information pertaining to issues faced inother than compensation paid to directors and Audit & Supervisory

and requests obtained through IR activities to the Onward Groupbusiness activities and other matters is supplied regularly.

Board members. (Professionals include lawyers, accountants, tax

Strategy Meeting and the Board of Directors for use in discus-

accountants, patent attorneys, judicial scriveners, and consultants. If

sions regarding measures for improving corporate value.

assigned to each director at the beginning of each fiscal year.

In addition to stocks held purely for investment purposes, the

5. Donation recipients

Board members, and executive officers.

tioned compliance as an important issue for management.

4. External professionals

that include sales and profit and loss in the areas of responsibility

settlement meetings attended by directors, Audit & Supervisory

improve its compliance systems, the Onward Group has posi-

solutions. Outside directors and outside Audit & Supervisory Board

the financial assets in question are received by a company, an asso-

Performance evaluations are determined at financial account

Recognizing that society as a whole increasingly expects it to

3. The Company’s accounting auditor

Policies for Cross-Shareholdings andExercise of Related Voting Rights

accomplishment of target indicators for management accounting

Compliance System

Company may hold shares of listed companies with the aim ofmaintaining and strengthening business relationships and thereby

ciation, or other entity, the individual must not belong to that entity.)

The individual must not receive large donations from theCompany. (If the donations in question are received by a com-

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 business strategies.

pany, an association, or other entity, the individual must not be

2. Provision of IR materials on corporate website

cross-shareholdings, the Board of Directors will conduct annual as-a person involved in operation of that entity.)

An extensive amount of information is disclosed through Onward

sessments of the meaningfulness and economic rationality of these

6. Major shareholders

improving medium-to-long-term corporate value. With regard to

holdings, taking into account growth potential, profitability,
strengthening of business relationships, etc., from the perspectiveof controlling shareholding risk and capital efficiency. Our basic
policy is to sell those holdings that are deemed to no longer beappropriate after gaining the understanding of the business partner
in question. In addition, holdings that have been deemed appropriate may also be sold in light of the market environment, management and financial strategies.

The individual must not substantially hold 10% or more of thetotal voting rights of the Company or be a person involved in

Holdings’ corporate website. Please refer to this website for
information on various topics.
• A Message from Management

operation of an entity that possesses such holdings.

http://www.onward-hd.co.jp/site/english/ir/message.html

7. Those who have fallen a criteria in the past

• Financial Data

The individual must not have fallen under items 1. to 5. during

http://www.onward-hd.co.jp/site/english/ir/financ.html

the past five years.

• Information on Shares and Shareholders

8. Close relatives of a person who falls under any of the above criteria

http://www.onward-hd.co.jp/site/english/ir/stocks.html

The individual must not be a close relative of someone who falls
under items 1. to 7. (excluding immaterial persons).

28

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202129

Our History

The Onward Group iscelebrating its 94th anniversary

94thsince its founding in 1927.

1927 – 1940s
Founding
Onward Kashiyama is established by its
founder Junzo Kashiyama and begins­operations as Kashiyama Trading in Osaka.

Major Events Seen in the Era

Roaring Twenties–World War II• Westernization of women’s clothing trends(after the Great Kanto Earthquake in 1923–)• Great Depression originatingin the United States (1929–late 1930s)• World War II (1939–1945)

1950s – 1960s
Development as a
Menswear Manufacturer

Major Events Seen in the Era

In the 1950s, Onward begins the production
and sale of ready-made menswear. Taking its
cue from apparel manufacturing in the UnitedStates, the Company adopts an assembly-line
production system and introduces such advanced equipment as Hoffman steam press­machines. These efforts result in substantial improvements in productivity and the quality of ready-made clothing. Along with this success,the Company develops a business format for consignment transactions* between apparelcompanies and department stores that is now widely used in the business operations of department stores. In the 1960s, driven by Japan’s high economic growth, Onward grows rapidly to
become a leading menswear manufacturer in Japan.

Post-war reconstruction–
High economic growth• Start of mass-production boom (1950s–)• Ready-made clothing revolution for men’s
and women’s clothing (1960s–)• Economic boom created by
the Tokyo Olympic Games (1962–1964)• Japan ranked No. 2 in the world for grossnational product (1968)
* Consignment transactions

Consignment transactions are a type of transaction inwhich the ownership of a product is not transferred, nor
is a sale recorded, when a product is delivered to a
department store or other retailer. Rather, the ownershipof a product is transferred and a sale is recorded when acustomer purchases a product on display at a retailer.

1970s – 1980s
Acceleration of Overseas Expansion
In keeping a step ahead of other Japanese apparel manufacturers, during the 1970s Onward
develops its global strategy and establishes subsidiaries in three of the world’s major fashion cities:
New York, Paris, and Milan. By establishing the local subsidiaries in a short period of time,
Onward ­succeeded in laying the foundation of the overseas business, drawing on the most up-todate ­information on the global fashion business. In the late 1970s, Onward appointed up-andcoming designer Jean-Paul Gaultier to be a dedicated creative mind behind its Bus Stop line ofboutiques in Paris. His first fashion show is held in Paris in 1978 with the support of the Company.

Major Events Seen in the Era

Stable economic growth–Bubble economy• First oil crisis (1973)• Plaza Accord (1985)• Enactment of Equal Employment Opportunity Act
for Men and Women (1986)• Emergence of prominent Japanese designers• Spread of luxury fashion
Company founder Junzo Kashiyama

30

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202131

Our History

1990s

Major Events Seen in the Era

Launch ofCore Brands

Major Events Seen in the Era

The womenswear business dramatically
expands in the 1990s with the launch ofcore brands, beginning with Kumikyoku
in 1992 and followed by Nijyusanku,
ICB, Jiyuku, and Gotairiku.
The luxury brand boom driven by Japan’s
bubble economy comes to an end in the
1990s, and consumers start to attribute
greater value to more refined and practicalclothing, and they are able to find this stylein Japanese brands.
Department stores begin expanding­womenswear floor spaces and emphasizing
new brands from Japanese makers. Thanks
to this trend, Onward Kashiyama’s store
numbers grow rapidly after the launchof the new brands, and this impressive
growth forms the foundations for futureadvancement.

• Release of Windows 95 (1995)• Rapid spread of the Internet among
the general public• Diversification of retail channels and emergenceof specialty retailers selling of private label apparel

Burst of bubble economy–
Post-b­­­­­­­­­­­­ubble recession

Road to Ongoing Growth

Evolution into A Global Apparel Group
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 advance into the Chinese market, establishes a manufacturing platform in Italy, and acquires prominent European
brands JOSEPH and JIL SANDER.
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
and Island, the maker of the trusted Grace Continental brand for discerning
women. It was at this time that Onward truly makes a new start as a global apparel group that undertakes various types of fashion businesses all over the world.

Onward Holdings Co., Ltd. Annual Report 2021

• Lehman Brothers bankruptcy and global financial crisis (2008)• Mass consolidation and reorganization of Japanese department stores• Growth of fast fashion

2010s – Today

2000 – 201032

Era of economic maturity

After the global financial crisis of 2008, the landscape of the fashion business and, subsequently, the structure of the apparel supply chain undergo a drastic transformation. The
emergence of so-called fast fashion, the increase in production costs in Asia, the reorganization of domestic department stores, and the rise of e-commerce can all be seen as indicators of this transformation.
Signaling its participation in the e-commerce field, the Onward Group cuts the ribbon
for Onward Crosset, its directly managed e-commerce website, in December 2009.
The Onward Members’loyalty point card system, applicable to all Onward Groupbrands, launches in 2014. Through this and other initiatives, the Onward Group proceeds
to expand its customer base while accelerating its Omni-channel retailing strategy, whichmerges the strengths of online stores and physical stores.
In 2017, the Onward Group launches the KASHIYAMA brand, a new made-to-ordersuit business that employs a proprietary factory innovation scheme to realize low prices andquick deliveries.
The global COVID-19 pandemic dealt a devastating blow to the Onward Group’s domestic and overseas operations in fiscal 2020. At the same time, the Group continued topush ahead with the global business reforms to its operations it undertook in October 2019,making steady progress regarding the withdrawal from unprofitable operations in Italy, thediscontinuation of underperforming brands, and the closure of domestic and overseas
stores that were not turning profits. In April 2021, we formulated ONWARD VISION
2030, our medium- to long-term management vision for the period up to fiscal 2030.

Major Events Seen in the Era

Fourth industrial revolution (Industry 4.0)
• Great East Japan Earthquake (2011)• Annual inbound visitors to Japan exceed 30 million (2018)• Global COVID-19 pandemic (ongoing from January 2020)
Onward Holdings Co., Ltd. Annual Report 202133

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

Thousands of
U.S. dollars*1

Millions of yen

FOR THE YEAR
Net sales
Cost of sales
Selling, general andadministrative expenses
Operating profit
Ordinary profit
Income taxes, current
Profit attributable toowners of parent

Financial Section
35

Six-Year Financial Summary

36

Management’s Discussion and Analysis

39

Operating Risks

40

Consolidated Balance Sheets

42

Consolidated Statements of Income

43

Consolidated Statements of Comprehensive Income

44

Consolidated Statements of Changes in Equity

46

Consolidated Statements of Cash Flows48

Notes to Consolidated Financial Statements

79

Independent Auditor’s Report

Note: I n 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.

2016

2017

2018

2019

2020

2021

2021

¥263,516
144,063¥244,901
131,638¥243,075
129,498¥240,652
129,019¥248,234
135,551¥174,323
104,601$1,640,690
984,484

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

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

108,410
5,167
5,929
3,305

107,171
4,462
5,162
1,244

115,744(3,061)(3,835)
1,653

90,953(21,231)(20,174)814

856,026(199,820)(189,876)
7,664

4,278

4,744

5,367

4,948

(52,135)(23,182)(218,181)

3,632

6,844

13,228

4,635

8,003

(19,614)(184,603)

CASH FLOWSCash flows fromoperating activities
Cash flows frominvesting activities
Cash flows fromfinancing activities
Free cash flow*2

1,783

25,271(7,300)(10,306)(10,758)

6,091

57,328(6,357)
5,415(32,856)
32,115(6,593)
5,928

11,543(5,671)(1,595)(2,755)

5,861(13,523)

55,159(127,275)

Capital expenditures
Depreciation and amortization

15,955
7,799

10,5996,663

12,0586,335

13,473
6,511

9,534
6,393

6,501
5,506

61,186
51,82529,407
121,469

26,097
103,573

26,335
105,978

31,284
117,298

28,795
106,782

21,30180,460200,485
757,275

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
168,153

96,718287,555
105,405
167,429
162,211

83,231
234,317
108,744
105,023
94,037

69,071
196,053
99,55068,92659,510650,076
1,845,201
936,940
648,718560,086

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

Yen

U.S. dollars*1

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

¥   35.24
1,148.30
24.00
66.9

¥ (383.97)
665.1724.00—¥(171.18)
418.3212.00—$(1.61)
3.94
0.11
—

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

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

3.1
1.7
1.9
46.4
44.5
55.1

(42.0)(20.0)
(1.2)
45.4
46.6
38.3

(31.6)(10.8)(12.2)
40.0
52.2
28.9

—
—
—
—
—
—

OTHER INFORMATION
Number of full-time employees*3

5,119

4,456

4,530

4,643

5,153

7,498

—

* 1. Yen amounts have been translated, for convenience only, at ¥106.25 = US$1, the rate of exchange as of February 28, 2021.
*2. Free cash flow = Cash flows from operating activities + Cash flows from investing activities*3 The number of employees as of February 28, 2021, increased by 2,345 from a year earlier. This increase was primarily due to a change in employment classifications at Onward Holdings
and Onward Kashiyama.

34

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202135

Management’s Discussion and Analysis
Overview of Operating Results

Net Sales
Sales in the Apparel Business decreased 32.1% year on year, to ¥139,422
million, while sales in the Lifestyle Business decreased 18.8%, to ¥34,901
million. As a result, consolidated net sales were decreased 29.8% comparedwith the previous fiscal year, to ¥174,323 million.

During the fiscal year under review, the Japanese economy remained in asituation where its outlook is unclear, due to the impact of events stemmingfrom the global spread of COVID-19, such as the state of emergency inJapan, which has been declared twice, lockdowns in various countries, andnegative influence on economic activities due to bans on overseas travel.
In this harsh management environment, the Company strived to curtailpurchasing and reduce fixed expenses, while steadily implementing measures
such as withdrawal from the Italy business, which had been an unprofitablebusiness, discontinuation of unprofitable brands, and closing of unprofitable stores in Japan and overseas, as part of the global business reforms thathas been conducted since the previous fiscal year.

Gross Profit
The gross profit margin decreased 5.4 percentage point, from 45.4% in
fiscal year 2019 to 40.0% in fiscal year 2020. Gross profit decreased ¥42,961
million, to ¥69,722 million.

Operating Profit
The ratio of selling, general and administrative (SG&A) expenses to net
sales increased 5.6 percentage points, from 46.6% to 52.2%. Operating lossof ¥21,231 million was posted, compared with operating loss of ¥3,061
million in the previous fiscal year.

Other Income (Expenses)

Segment Information

Outlook for the Fiscal Year 2021

Apparel BusinessIn fiscal year 2021, the Company plans to utilize new sales methods that
integrate physical stores with e-commerce and implement initiatives toadvance the customization field in the Apparel business. In addition, we will
step up group synergies in the Lifestyle business, including by leveraging
loyalty card membership programs. As a result, we forecast full-year consolidated sales of approximately ¥190.5 billion (up 9% year on year). We aretargeting e-commerce sales of ¥50 billion for the entire group. We expect
gross profit margin to improve 13% point year on year by leveraging products with lost sales opportunities in fiscal year 2020, conducting thoroughinventory control, and curbing discount sales. As a result, we forecast
operating profit of ¥3.2 billion and net income of approximately ¥6.3
billion.

In fiscal year 2020, sales in the Apparel Business segment declined 32.1%
year on year, to ¥139,422 million, while operating loss of ¥20,165 million
was recorded, compared with operating loss of ¥3,425 million in fiscal year
2019.

Domestic Apparel BusinessIn the domestic business, profit increased at companies including Onward
Trading Co., Ltd., which conducts a B2B uniform business, and TiaclasseCo., Ltd., whose main sales channel is e-commerce. Despite progress in ashift in sales channels to e-commerce such as Onward Crosset, a directly-managed online store, net sales through physical sales channels decreased
due to the impact of COVID-19, causing both sales and profit to decrease atcompanies including Onward Kashiyama Co., Ltd. As a result, both sales
and profit decreased for the domestic business.

Other expenses, net, amounted to ¥4,330 million, compared with otherexpenses, net, of ¥34,518 million in the previous fiscal year.
Other income was recorded in the form of gain on sales and disposal of
non-current assets, net, of ¥8,416 million loss on sales of investment securities, net, of ¥8 million.
In other expenses, impairment loss decreased from ¥27,756 million in fiscal
year 2019 to ¥3,299 million in fiscal year 2020.

Overseas Apparel BusinessProfit before Income Taxes and Profit Attributable to
Owners of Parent

In fiscal year 2020, sales in the Lifestyle Business segment decreased 18.8%
year on year, to ¥34,901 million, and operating profit declined 90.5%, to¥147 million.
In the Lifestyle Business, both sales and profit increased at Yamato Co.,
Ltd., which conducts a gift catalogue business, but sales decreased at companies including Onward Beach Resort Guam, Inc., which conducts a resort
business in Guam where a lockdown has continued since the second
quarter.
As a result, both sales and profit decreased for the Lifestyle Business,despite securing an operating profit.

Loss before income taxes of ¥25,561 million was recorded, compared withloss before income taxes of ¥37,580 million in fiscal year 2019. Loss attributable to owners of parent of ¥23,182 million was posted, compared withloss attributable to owners of parent of ¥52,135 million in the previous
fiscal year.

In the overseas business, despite cost reduction effects of the global businessreforms which have been conducted since the previous fiscal year, theimpact of COVID-19 continued in Europe and the U.S., causing both sales
and profit to decrease for the overseas business. As a result, both sales andprofit decreased for the Apparel Business as a whole.

Lifestyle Business

Domestic BusinessIn the domestic business, we will seek to improve business efficiency bydiversifying the value we provide, expanding our customer base.
Existing brand initiatives will include improving the value of appareland other brands from the customer’s perspective, advancing digital transformation strategies for expanding our ability to deliver experiences andservices that contribute to increased customer satisfaction and convenience,and improving profitability by bolstering e-commerce operations.
In addition, we are promoting KASHIYAMA, our brand of made-to-order suits, as a core, next-generation business that is compatible with masscustomization. At the same time, lifestyle businesses, such as cosmetics,
wellness, and gift operations, will be expanded.

Overseas BusinessIn the overseas business, we will move ahead with global business reforms
for optimizing operations.
In Europe, we completed the reorganization and sales of unprofitableproduction operations. Going forward, we will work to increase earnings
power by reorganizing JIL SANDER and improving the operational efficiency of Joseph.
In Asia, we have commenced initiatives with outside partners in China,
and we will be moving ahead with growth strategies that respond flexibly tomarket changes through means such as expanding internet-based businesses
and developing new sales channels going forward.
Initiatives in North America will include developing the J. PRESS brandand launching the KASHIYAMA made-to-order suits business in thismarket. In addition, we will carry out the investments deemed necessary
from a medium-term perspective while implementing initiatives for growing
our business in this market.

Millions of yen
2017

2018

2019

2020

2021

¥ 244,901¥ 243,075¥ 240,652¥ 248,234¥174,323

Operating Profit

4,204

5,167

4,462

(3,061)(21,231)

Profit Attributable to Owners of Parent

4,744

5,367

4,948

(52,135)(23,182)

Net sales

36

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202137

Operating Risks

Management’s Discussion and Analysis

Financial Position

Cash Flows from Financing Activities
Cash flows provided by financing activities amounted to ¥5,861 million (anoutflow of ¥1,595 million for the previous fiscal year), which primarily
included a net increase (decrease) in borrowings and dividends paid.
As a result, cash and cash equivalents at the end of the fiscal year underreview decreased by ¥7,509 million compared with the end of the previous
fiscal year to ¥21,270 million.

AssetsTotal assets on a consolidated basis as of the end of the fiscal year underreview decreased by ¥38,264 million compared with the end of the previous
fiscal year to ¥196,053 million. This was primarily due to decreases in cash
and deposits of ¥7,493 million, notes and accounts receivable—trade of¥7,464 million, merchandise and finished goods of ¥6,823 million, buildings and structures of ¥4,750 million, and land of ¥6,823 million.

Capital Expenditure
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 2020, our capital expenditures totaled ¥6,501 million. The
details of expenditures by segment are as follows. In the Apparel Businesssegment, capital expenditures amounted to ¥4,800 million, the majority ofwhich was channeled to sales floors at department stores and directly managed stores with the aim of strengthening the Group’s sales structure andnetwork.
In the Lifestyle Business segment, we invested ¥1,192 million to upgrade
commercial facilities and enhance operational efficiency.

Liabilities
Liabilities decreased by ¥3,736 million compared with the end of theprevious fiscal year to ¥136,543 million. This was primarily due to adecrease in other current liabilities of ¥11,172 million.

Net Assets
Net assets decreased by ¥34,527 million compared with the end of theprevious fiscal year to ¥59,509 million. This was primarily due to loss
attributable to owners of parent of ¥23,182 million, dividends of surplus of¥3,240 million, a decrease in retained earnings at the beginning of theperiod due to changes in the accounting policies of ¥10,011 million, and anincrease in valuation difference on available-for-sale securities and otheraccounts of ¥1,905 million.

Profit Distribution Policy

Cash Flows

The Company positions returning profits to its shareholders as one of themost important management measures, with the basic policy to provide
stable and appropriate shareholder returns linked to performance. With
regard to dividends for the fiscal year under review, despite the extremely
poor performance, the Company plans to pay out a dividend of ¥12 pershare in light of its basic policy regarding dividend policy. The Company
will determine whether to conduct a share buyback by taking into accountfactors such as its needs for funds.
The Company will flexibly utilize its internal reserve for strategic investments in the establishment of a robust business structure, enhancement offinancial constitution, and other efforts while giving consideration tobalancing its needs for funds.

Cash Flows from Operating Activities
Cash flows used in operating activities amounted to ¥19,614 million (aninflow of ¥8,003 million for the previous fiscal year) mainly due to a loss
before income taxes, an impairment loss, a decrease in trade receivables, anda decrease in trade payables.

Cash Flows from Investing Activities
Cash flows provided by investing activities amounted to ¥6,091 million (anoutflow of ¥10,758 million for the previous fiscal year) mainly due toproceeds from sales of property, plant and equipment and sales of shares ofsubsidiaries resulting in change in scope of consolidation.

Millions of yen
2018

2019

2020

2021

¥ 273,227¥ 278,134¥ 287,555¥ 234,317¥196,053

165,670

168,153

162,211

94,03759,510Cash Flows from Operating Activities

6,844

13,228

4,635

8,003

(19,614)

Cash Flows from Investing Activities

25,271(7,300)(10,306)(10,758)

6,091

Cash Flows from Financing Activities(32,856)(6,593)

11,543(1,595)

5,861

Total Net Assets

38

Onward Holdings Co., Ltd. Annual Report 2021

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 number ofexternal factors, such as sluggish consumer spending as a result of fluctuations in economic conditions, increased competition, and sudden changes
in fashion trends. Falling short of our targets may have an impact on ourGroup’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, anissue may arise as a result of an information leak due to unauthorized accessin our Group’s computer systems or criminal behavior that may undermine the trust placed in us by society, leading to an increased cost burden.
Such an occurrence may have an adverse impact on our Group’s businessperformance.

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 inaccordance 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 suchproperties 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.

2017

Total Assets

Changes in Consumer Needs

Legal Procedures and ComplianceIn doing business, the Onward Group pays careful attention to laws andregulations—including those concerning antitrust, the treatment of subcontractors, labeling, consumer product safety, and environment- and recycling-related laws—and strives to ensure compliance. The Onward Group
Compliance Committee spearheads the Group’s efforts to raise awarenessabout the importance of ensuring legal compliance and maintaining internal
control procedures. Despite the implementation of such control systems, anissue may arise as a result of dishonest acts and illegal acts of an employee ora business partner and may undermine the trust placed in the Company bysociety, leading to a substantial cost burden, such as the payment of indemnities. Such an eventuality may have an adverse impact on our Group’sbusiness 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 have an
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 a loss
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 and policies. Regardless, the occurrence of a natural disaster, such as an earthquake,a flood, or a fire; an accident; or an outbreak of an epidemic, such as a newstrain of influenza, may compel the Onward Group to suspend its business
operations. Such an occurrence may have an adverse impact on our Group’sbusiness performance.

The COVID-19 Pandemic
The COVID-19 pandemic has the potential to cause supply chain disruptions in Japan and overseas, reduced consumer spending due to lockdowns,
temporary closures of or shorten opening hours at stores, or other negative
developments. Such occurrences may have an adverse impact on the Group’sbusiness performance or financial position.
The Onward Group is taking steps to combat these risks throughexhaustive measures for preventing the spread of COVID-19 at its storesand offices, the introduction of teleworking systems, and other infection
prevention efforts while also accommodating new lifestyles and implementing workstyle reforms.

Onward Holdings Co., Ltd. Annual Report 202139

Consolidated Balance Sheets
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 29, 2020 and February 28, 2021

Thousands of
U.S. dollars(Note 2. (23))

Millions of yen

ASSETS

2020

2021

2021

¥ 28,795¥ 21,301$  200,485

Current assets:
		 Cash and deposits (Notes 17 and 18)
		 Notes and accounts receivable—trade (Note 17)

25,716

18,252

171,779

		 Inventories (Note 2. (4))

43,22434,355323,343

		Other

9,536

6,829

64,275

			 Less: Allowance for doubtful accounts

(489)

(277)

(2,607)

106,782

80,460757,275

				Total current assets

LIABILITIES AND NET ASSETS
Current liabilities:
		 Notes and accounts payable—trade (Note 17)

2020

2021

2021

¥ 19,206¥ 13,472$  126,796

		 Electronically recorded obligations—operating (Note 17)

13,808

8,485

79,857

		 Short-term borrowings (Notes 5 and 17)

44,90756,567532,395

		 Current portion of long-term borrowings (Notes 5 and 17)

4,452

5,052

47,548808

2,041

19,205

		 Lease obligations (Notes 5 and 15)
		 Income taxes payable

528

669

6,298

		 Provision for bonuses

835

590

5,548

		 Provision for bonuses for directors

23

26

243

		 Provision for sales returns

229

125

1,177

		 Provision for point card certificates
Property, plant and equipment:

Thousands of
U.S. dollars(Note 2. (23))

Millions of yen

887

636

5,991

		Other

23,061

11,887

111,882

				Total current liabilities

108,744

99,550936,940

		 Buildings and structures

74,62757,981

545,704

		Leased assets

9,756

9,969

93,828		Other

32,40026,597250,325

			Less: Accumulated depreciation(75,635)(60,735)(571,635)

		 Deferred tax liabilities for land revaluation (Note 13)

1,756

761

7,171

41,14833,812

318,222

		 Retirement benefit liability (Note 6)

3,724

3,482

32,77442,08335,259331,854

		 Provision for retirement benefits for directors and corporate auditors

650,076

		 Other (Note 13)

		Land				 Total property, plant and equipment

83,231

69,071

Non-current liabilities:
		 Long-term borrowings (Notes 5 and 17)

17,02816,430154,635

		 Lease obligations (Notes 5 and 15)

4,224

11,616109,323

233

233

2,192

4,571

4,471

42,080				Total non-current liabilities

31,53636,993

348,175					Total liabilities

140,280

136,543

1,285,115

30,08030,080283,103

			Capital surplus

50,04350,391

474,267

			Retained earnings

46,3389,322

87,734

			 Less: Treasury shares, at cost, 22,901,445 ordinary shares and 22,322,123 ordinary shares atFebruary 29, 2020 and February 28, 2021, respectively(21,438)(20,866)(196,386)

				Total shareholders’ equity

105,023

68,927648,718(18,251)

Net assets:
		 Shareholders’ equity (Note 7):

Intangible assets, net:

			Share capital:

		Goodwill

6,128

5,251

49,422

				Authorized—400,000,000 ordinary shares

		Other

6,033

5,416

50,974				 Issued—157,921,669 ordinary shares at February 29, 2020 and February 28, 2021

				Total intangible assets, net

12,161

10,667

100,396

Investments and other assets:
		 Investment securities (Notes 4 and 17)
		 Long-term loans receivable
		 Long-term prepaid expenses

		 Accumulated other comprehensive income:
13,341
1,613

14,313
1,663

134,708

			 Valuation difference on available-for-sale securities (Note 4)(4,581)(1,939)15,649

			 Deferred gains or losses on hedges

22

15

142

			 Revaluation reserve for land (Note 8)(9,285)(7,864)(74,018)(15,714)

301

441

4,150

		 Retirement benefit asset (Note 6)

2,705

2,815

26,491		 Deferred tax assets (Note 13)

4,233

7,487

70,465		Other

10,256

9,429

88,746

			 Less: Allowance for doubtful accounts

(306)

(293)

(2,755)

		Non-controlling interests

3,741

2,647

24,911				 Total investments and other assets

32,14335,855

337,454

				Total net assets

94,03759,510560,086¥234,317¥196,053$1,845,201¥234,317¥196,053$1,845,201

Total assets

			 Foreign currency translation adjustment(604)(1,670)			 Remeasurements of defined benefit plans (Note 6)

(763)

(745)

(7,009)				 Total accumulated other comprehensive income(15,211)(12,203)(114,850)

484

139

1,307

		 Share acquisition rights

Total liabilities and net assets

Per share:
		 Net assets per share

U.S. dollars(Note 2. (23))

Yen¥665.17¥418.32$3.94

See accompanying notes to consolidated financial statements.

40

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202141

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 29, 2020 and February 28, 2021

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 29, 2020 and February 28, 2021

Thousands of
U.S. dollars(Note 2. (23))

Millions of yen
2020

2021

2021

Net sales¥248,234¥174,323$1,640,690

Cost of sales

135,551

104,601

984,484

Gross profit

112,683

69,722656,206

		 Valuation difference on available-for-sale securities

Selling, general and administrative expenses

115,744

90,953856,026

Operating profit (loss)(3,061)(21,231)(199,820)

2020

2021

2021

¥(51,435)¥(22,668)$(213,350)(4,792)

2,642

24,869		 Deferred gains or losses on hedges

(57)

(7)

(68)

		 Revaluation reserve for land

(107)

1,064

10,015

Profit (loss)
Other comprehensive income:		 Foreign currency translation adjustment
Other income (expenses):
		Interest income

45

55

521

		Dividend income

242

194

1,824

1,289

1,434

13,497

		Subsidy income

—

885

8,325

		Interest expenses

(403)

(595)

(5,603)

		 Rental income from land and buildings

		 Share of loss of entities accounted for using equity method(1,507)(1,081)(10,177)

		 Remeasurements of defined benefit plans, net of tax

(844)

18

168

		 Share of other comprehensive income of entities accounted for using equity method

(15)

—

—

(7,322)

2,636

24,807¥(58,757)¥(20,032)$(188,543)¥(59,454)¥(20,529)$(193,223)

697

497

4,680

			 Total other comprehensive income (Note 14)
Comprehensive income

		 Comprehensive income attributable to:(1,390)

(70)

(663)

(1)

(444)

(4,176)

			Non-controlling interests

(657)

(519)

(4,885)

See accompanying notes to consolidated financial statements.

		 Subsidies for employment adjustment

—

1,696

15,963

		 Gain (loss) on sales of investment securities, net (Note 4)

(71)

5

46

		 Gain (loss) on sales and disposal of non-current assets, net

2,424

8,135

76,565

		 Loss on liquidation of business (Note 10)(3,029)(954)(8,975)

		 Foreign exchange gains (losses)
		Rental expenses—(3,894)(36,646)

		 Impairment loss (Note 12)		Extraordinary loss due to closing and other (Note 11)(27,756)(3,299)(31,052)

		 Loss on valuation of investment securities (Note 4)(1,565)(1,685)(15,862)

		 Extra retirement payments(3,598)——

		 Gain (loss) on sales of shares of subsidiaries and associates, net—(5,017)(47,223)

		Other, net

(49)

(257)

(2,409)(37,580)(25,561)(240,573)

		Current

1,653

814

7,664

		Deferred

12,202(3,707)(34,887)

Profit (loss)(51,435)(22,668)(213,350)

700

514

4,831

¥ (52,135)¥ (23,182)$ (218,181)

Profit (loss) before income taxes

Thousands of
U.S. dollars(Note 2. (23))

Millions of yen

			Owners of parent

Income taxes (Note 13):

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

U.S. dollars(Note 2. (23))

Yen

Per share (Notes 7, 9, and 16):
		 Basic earnings (loss) per share¥(383.97)¥(171.18)$(1.61)

		 Diluted earnings per share

—

—

—

		 Cash dividends per share

24.00

12.00

0.11

See accompanying notes to consolidated financial statements.

42

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202143

Consolidated Statements of Changes in Equity
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 29, 2020 and February 28, 2021

Millions of yen

Millions of yen

Shareholders’ equity (Note 7)

Accumulated other comprehensive income

Number ofordinary shares(thousands)

SharecapitalCapitalsurplusRetainedearnings

TreasurysharesTotal

157,922¥30,080¥50,043¥107,140¥(19,834)¥167,429

Dividends of surplus

—

—

—

(3,309)—(3,309)Loss attributable to owners of parent

—

—

—

(52,135)—(52,135)(1,758)

Balance as at March 1, 2019

Purchase of treasury shares

—

—

—

—

(1,758)

Disposal of treasury shares

—

—

—

(79)

154

75

Reversal of revaluation reserve for land

—

—

—

222

—

222

Change in scope of equity method

—

—

—

(4,768)—(4,768)Change in scope of consolidation

—

—

—

(733)

—

(733)

Net changes in items other than shareholders’ equity

—

—

—

—

—

—

—

—

—

(60,802)(1,604)(62,406)

157,92230,08050,043

46,338(21,438)

105,023

		 Total changes in items during period
Balance as at February 29, 2020
Cumulative effect of change in accounting policy

—

—

—

(10,011)—(10,011)

157,92230,08050,04336,327(21,438)

95,012

Dividends of surplus

—

—

—

(3,240)—(3,240)Loss attributable to owners of parent

—

—

—

(23,182)—(23,182)

Restated balance

Purchase of treasury shares

—

—

—

—

(0)

(0)

Disposal of treasury shares

—

—

—

(226)

572

346

Reversal of revaluation reserve for land

—

—

—

(357)

—

(357)

Change in ownership interest of parent due totransactions with non-controlling interests

—

—

348

—

—

348

Net changes in items other than shareholders’ equity
		 Total changes in items during period
Balance as at February 28, 2021

—

—

—

—

—

—

—

—

348

(27,005)

572(26,085)

157,922¥30,080¥50,391¥   9,322¥(20,866)¥ 68,927

Thousands of U.S. dollars (Note 2. (23))
Shareholders’ equity (Note 7)

Balance as at February 29, 2020
Cumulative effect of change in accounting policy

SharecapitalCapitalsurplusRetainedearnings

TreasurysharesTotal$283,103$470,995$ 436,124$(201,765)$ 988,457——(94,224)—(94,224)

283,103

470,995

341,900(201,765)

894,233

Dividends of surplus——(30,499)—(30,499)

Loss attributable to owners of parent——(218,181)—(218,181)

Purchase of treasury shares

—

—

—

(3)

(3)

Restated balance

Disposal of treasury shares——(2,127)

5,382

3,255

Reversal of revaluation reserve for land——

(3,359)—(3,359)Change in ownership interest of parent due totransactions with non-controlling interests

—

3,272

—

—

3,272

Net changes in items other than shareholders’ equity
		 Total changes in items during period
Balance as at February 28, 2021
See accompanying notes to consolidated financial statements.

—

—

—

—

—

—

3,272

(254,166)

5,379(245,515)$283,103$474,267$  87,734$(196,386)$ 648,718

Valuationdifference on
Deferredavailable-for-salegains or losses
securities(Note 4)on hedges

Balance as at March 1, 2019
Dividends of surplus
Loss attributable to owners of parent
Purchase of treasury shares
Disposal of treasury shares
Reversal of revaluation reserve for land
Change in scope of equity method
Change in scope of consolidationNet changes in items other thanshareholders’ equity
		 Total changes in items during period
Balance as at February 29, 2020
Cumulative effect of change inaccounting policy
Restated balance
Dividends of surplus
Loss attributable to owners of parent
Purchase of treasury shares
Disposal of treasury shares
Reversal of revaluation reserve for landChange in ownership interest of parent
due to transactions with
non-controlling interestsNet changes in items other thanshareholders’ equity
Total changes in items during period
Balance as at February 28, 2021

Revaluation
reservefor landForeigncurrencytranslation
adjustment

Remeasurementsof defined
benefit plans(Note 8)

Total

Share
acquisitionrights

Noncontrollinginterests

Total net
assets¥(1,453)
—
—
—
—
—
—
—

¥ 80
—
—
—
—
—
—
—

¥(8,957)
—
—
—
—
—
—
—

¥ 1,134
—
—
—
—
—
—
—

¥  82
—
—
—
—
—
—
—

¥ (9,114)
—
—
—
—
—
—
—

¥ 559
—
—
—
—
—
—
—

¥ 3,337
—
—
—
—
—
—
—

¥162,211(3,309)(52,135)(1,758)75
222(4,768)(733)(3,128)(3,128)(4,581)

(58)
(58)
22

(328)
(328)
(9,285)(1,738)(1,738)
(604)

(845)
(845)
(763)

(6,097)(6,097)(15,211)

(75)
(75)
484

404
404
3,741

(5,768)(68,174)
94,037—(4,581)
—
—
—
—
—

—
22
—
—
—
—
—

—
(9,285)
—
—
—
—
—

—
(604)
—
—
—
—
—

—
(763)
—
—
—
—
—

—
(15,211)
—
—
—
—
—

—
484
—
—
—
—
—

—
3,741
—
—
—
—
—

(10,011)84,026(3,240)(23,182)
(0)
346
(357)

—

—

—

—

—

—

—

—

348

2,642
2,642
¥(1,939)

(7)
(7)
¥ 15

1,421
1,421
¥(7,864)(1,066)(1,066)¥(1,670)

18
3,008
18
3,008
¥(745) ¥(12,203)

(345)
(345)
¥ 139

(1,094)(1,094)¥ 2,647

1,569(24,516)¥ 59,510

Share
acquisitionrights

Noncontrollinginterests

Total net
assets$ 35,207$ 885,053

—
4,557
—
—
—
—
—

—
35,207—————(94,224)
790,829(30,499)(218,181)(3)
3,255(3,359)

—

—

3,272

168
28,318(3,250)168
28,318(3,250)$(7,009) $(114,850) $ 1,307(10,296)(10,296)$ 24,911

14,772(230,743)$ 560,086

Thousands of U.S. dollars (Note 2. (23))
Accumulated other comprehensive income

Balance as at February 29, 2020
Cumulative effects of changes inaccounting policies
Restated balance
Dividends of surplus
Loss attributable to owners of parent
Purchase of treasury shares
Disposal of treasury shares
Reversal of revaluation reserve for landChange in ownership interest of parent
due to transactions with non-controlling interestsNet changes in items other than shareholders’ equity
Total changes in items during period
Balance as at February 28, 2021

Valuationdifference on
Deferredavailable-for-salegains or losses
securities(Note 4)on hedges

Revaluation
reservefor land$(43,120)$210$(87,393) $ (5,688)$(7,177) $(143,168) $ 4,557—(43,120)
—
—
—
—
—

—
210
—
—
—
—
—

—
(87,393)
—
—
—
—
—

—
(5,688)
—
—
—
—
—

—
—
(7,177) (143,168)
—
—
—
—
—
—
—
—
—
—

—

—

—

—

24,86924,869$(18,251)

(68)
(68)
$142

Foreigncurrencytranslation
adjustment

13,375 (10,026)
13,375 (10,026)$(74,018) $(15,714)

Remeasurementsof defined
benefit plans(Note 8)

—

Total

—

See accompanying notes to consolidated financial statements.

44

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202145

Consolidated Statements of Cash Flows
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 29, 2020 and February 28, 2021

Thousands of
U.S. dollars(Note 2. (23))

Millions of yen
2020

2021

2020

2021

Cash flows from operating activities:
		 Profit (loss) before income taxes¥(37,580)¥(25,561)$(240,573)

			Depreciation and amortization

6,393

5,506

51,825

			Impairment loss

27,756

3,299

31,052

			Amortization of goodwill

1,749

787

7,407

			 Increase (decrease) in allowance for doubtful accounts

(225)

(57)

(534)

			 Decrease (increase) in retirement benefit asset

214

(110)

(1,034)

			 Increase (decrease) in retirement benefit liability

(241)

23

220

			 Interest and dividend income

(287)

(249)

(2,345)

			Interest expenses

403

595

5,603

			 Share of loss (profit) of entities accounted for using equity method

1,390

70

663

			 Loss (gain) on sales and disposal of non-current assets, net(2,424)(8,135)(76,565)

			 Loss (gain) on sales of investment securities, net

71

(5)

(46)

			 Loss (gain) on valuation of investment securities

1,565

1,685

15,862

			 Loss (gain) on sales of shares of subsidiaries and associates, net

—

5,017

47,223

			 Decrease (increase) in trade receivables

540

8,418

79,232

4,920

6,579

61,916

			 Increase (decrease) in trade payables

2021

2021

$114,096

Cash flows from financing activities:

		 Adjustments to reconcile profit (loss) before income taxes
to net cash provided by (used in) operating activities:

			 Decrease (increase) in inventories

Thousands of
U.S. dollars(Note 2. (23))

Millions of yen(33)(10,112)(95,174)

			Other, net

3,753(8,323)(78,359)

				Subtotal(193,627)

7,964(20,573)

		 Interest and dividends received

322

253

2,376

		Interest paid

(459)

(422)

(3,968)

		 Income taxes paid

(1,679)(744)(7,002)

		 Income taxes refund

1,855

1,872

17,618				 Net cash provided by (used in) operating activities

8,003(19,614)(184,603)

(21)

(92)

(865)

		 Net increase (decrease) in short-term borrowings¥ (8,044)¥ 12,123

		 Proceeds from long-term borrowings

16,300

10,39097,788

		 Repayments of long-term borrowings(3,986)(10,292)(96,866)

		 Purchase of treasury shares(1,758)(0)(3)

		Dividends paid

(3,309)(3,240)(30,499)

		 Dividends paid to non-controlling interests

(103)

(740)

(6,961)		Other, net(695)(2,380)(22,396)				 Net cash provided by (used in) financing activities(1,595)

5,861

55,159Effect of exchange rate change on cash and cash equivalents

(499)

52

495

Net increase (decrease) in cash and cash equivalents(4,849)(7,610)(71,621)

Cash and cash equivalents at beginning of period

31,23728,780270,872

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

2,392

100

941

¥28,780¥ 21,270$200,192

Cash and cash equivalents at end of period (Note 18)
See accompanying notes to consolidated financial statements.

Cash flows from investing activities:
		 Payments into time deposits
		 Proceeds from withdrawal of time deposits

53

76

714

		 Purchase of property, plant and equipment(5,701)(4,249)(39,992)

		 Proceeds from sales of property, plant and equipment

4,057

17,756167,115

		 Purchase of investment securities(2,277)

(88)

(829)
4,899

		 Proceeds from sales of investment securities

3,654

521

		 Purchase of long-term prepaid expenses

(132)

(49)

(460)

		 Payments of guarantee deposits

(695)

(276)

(2,600)		 Proceeds from refund of guarantee deposits
		 Purchase of shares of subsidiaries resulting in change in scope of consolidation
		 Payments for sales of shares of subsidiaries resulting in change in scope of consolidation
		Other, net				 Net cash provided by (used in) investing activities

46

Onward Holdings Co., Ltd. Annual Report 2021

900

687

6,467

(8,304)——(52,827)—(5,613)(2,292)(2,582)(24,294)¥(10,758)¥  6,091$  57,328

Onward Holdings Co., Ltd. Annual Report 202147

Notes to Consolidated Financial Statements
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 29, 2020 and February 28, 2021

1. Basis of Presentation of Consolidated Financial Statements(3) Investments in unconsolidated subsidiaries and associates

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 of Japan and in conformity with accounting principles and practices generally accepted inJapan, which are different in certain respects from the application and disclosure requirements of International Financial Reporting Standards.
Certain items presented in the consolidated financial statements submitted to the Director-General of the Kanto Local Finance Bureau in
Japan have been reclassified for the convenience of readers outside Japan.
The accompanying consolidated financial statements are not intended to present the consolidated financial position, results of operations andcash flows of the Company and its consolidated subsidiaries in accordance with accounting principles and practices generally accepted in countries
and jurisdictions other than Japan.

(4) Inventories

2. Summary of Significant Accounting Policies

Inventories held for sale in the ordinary course of business are measured at the lower of cost or net selling value, which is defined as the selling
price less additional estimated manufacturing costs and estimated direct selling expenses, determined principally by the specific identification
method. Write-downs recorded for the years ended February 29, 2020 and February 28, 2021 were ¥10,426 million and ¥12,937 million ($121,757
thousand), respectively.

(1) Scope of consolidation(5) Investment securities

The Company had 68 subsidiaries as at February 28, 2021 (83 as at February 29, 2020). The accompanying consolidated financial statements
include the accounts of the Company and 63 of its subsidiaries (76 for 2020). 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

Yamato Co., Ltd.

100.0

February 28

Onward Trading Co., Ltd.

100.0

February 28

Chacott Co., Ltd.

100.0

February 28
February 28

Island Co., Ltd.

100.0

Creative Yoko Co., Ltd.

100.0

February 28

Onward Personal Style Co., Ltd.

100.0

February 28

Onward Italia S.p.A.

100.0

November 30

Joseph Ltd.

100.0

November 30

Onward Fashion Trading (China) Co., Ltd.

100.0

December 31

J. Press, Inc.

100.0

December 31

Onward Creative Center Co., Ltd.

100.0

February 28

Excel Co., Ltd.

100.0

February 28

Onward Resort & Golf Co., Ltd.

100.0

February 28

Onward Life Design Network Co., Ltd.

100.0

February 28

Kokobuy 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, 2021, Onward Digital Lab Co., Ltd., which had been an unconsolidated subsidiary, became a consolidated subsidiary of the Company since its materiality has increased. Maison Moreau S.A.S., Maison Moreau Japan Co., Ltd., Onward LuxuryGroup UK Ltd., Onward Luxury Group S.p.A., Onward Luxury Group S.A.R.L., Onward Luxury Group Inc., Green Iris KFT, Iris Sud S.R.L.,
OLG LAB S.R.L., Frassinetti S.R.L., and Maglificio Erika S.R.L. were removed from the scope of consolidation due to the sale of their shares.
Jil Sander Austria GmbH, Onward Kashiyama Korea Co., Ltd., and Innovate Organics, Inc. were liquidated; therefore, these companies were
removed from the scope of consolidation.
The financial statements of subsidiaries with the fiscal year-end of December 31 or November 30 have been used for consolidation. Significant
adjustments considered necessary between the fiscal year-ends and the Company’s closing date have been made for consolidation.
6 subsidiaries (7 for 2020) were not consolidated because their total assets, net sales, profit or loss, or retained earnings did not have material
effect on the consolidated financial statements of the Companies.

(2) Consolidation and elimination

For the purpose 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.

48

Investments in unconsolidated subsidiaries and associates are accounted for by the equity method. 1 company (4 companies for 2020) was
accounted for by the equity method for the year ended February 28, 2021. Gailyglen Ltd. was removed from the scope of the equity method since
its effect has decreased.
The Company did not apply the equity method to Bien Co., Ltd. and others as the effects on profit or loss and retained earnings in the consolidated financial statements are not material individually or in the aggregate.
The fiscal year-end of Mulberry Japan Co., Ltd. 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.

Onward Holdings Co., Ltd. Annual Report 2021

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 profit or loss. Realized gains and losses are determined using the moving-average method
and are reflected in profit or loss.

(6) Derivative transactions

All derivatives are stated at fair value, and changes in fair value are included in profit or loss for the period in which they arise, except for derivatives that are 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 and loss in the period during which the gains andlosses on the hedged items or transactions are recognized. For forward exchange contracts, if they meet conditions for hedge accounting, the difference between the contract rate and spot rate at the date of the contract is recognized over the period from the contract date to the settlement date.
The derivatives designated as hedging instruments are principally forward exchange contracts. The related hedged items are trade payables andtrade receivables denominated in foreign currencies and forecasted 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 that are prescribed by Japanese income tax regulations, except for certain buildings (other than facilities attached to buildings)
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 (5 to 10 years) by the straight-line method.

(10) Income taxes

The accounting standard for income taxes requires 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 profit or loss in the period that includes the enactment date. A valuation allowance is provided to reduce deferred tax assets tothe amount that is realizable.

(11) Allowance for doubtful accounts

An allowance for doubtful accounts, including notes and accounts receivable—trade 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 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.

Onward Holdings Co., Ltd. Annual Report 202149

Notes to Consolidated Financial Statements(12) Provision for bonuses(24) Change in accounting policy(13) Provision for bonuses for directors(25) Accounting standard issued but not yet effective(14) Provision for sales returns(a) Overview
The standard is a comprehensive accounting standard for revenue recognition. Revenue is recognized in accordance with the following five-step
approach.
Step 1: Identify a contract with a customer
Step 2: Identify performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to each performance obligation in the contract
Step 5: Recognize revenue when or as a performance obligation is satisfied

Provision for bonuses is recognized for the estimated amount to provide for payment of bonuses to employees after the fiscal year-end, based onservices provided by them during the period.

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

The Companies provide for estimated losses based on the actual percentage of sales return in prior years and gross profit margin.

(15) Provision for point card certificates

Provision for point card certificates 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 tocover possible utilization of the points during and after the next fiscal year.

(16) Retirement benefits

To calculate projected benefit obligations, the Companies adopt the benefit formula basis for the method of attributing the projected benefits toperiods.
Unrecognized prior service costs are amortized and charged or credited to profit or loss on a straight-line basis over 5 to 10 years no longer than
the related employees’ average remaining service years when they occur. Unrecognized actuarial differences are amortized on a straight-line basis
over 5 to 10 years no longer than the related employees’ average remaining service years when they occur, commencing in the year following theone in which they occur.
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.

(17) Goodwill

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

The Company’s subsidiaries that had adopted International Financial Reporting Standards adopted International Financial Reporting Standard 16“Leases” (“IFRS 16”) in the year ended February 28, 2021.

- “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, revised on March 31, 2020)- “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, revised on March 31, 2020)(b) Scheduled date of adoption
The Companies expect to adopt the standard and the implementation guidance at the beginning of the year ending February 28, 2022.
(c) Impact of adopting the standard and the implementation guidance
The Company is currently evaluating the impact of adopting the standard and the implementation guidance on its consolidated financial
statements.

(26) Additional information

It is difficult to foresee whether the effects of the spread of the novel coronavirus disease 2019 (“COVID-19”) will develop or blow over.
In the light of these circumstances, the Companies made accounting estimates including the impairment of non-current assets and the recoverability of deferred tax assets, assuming that the effects of the COVID-19 would remain after the year ending February 28, 2022 while the environment surrounding the Companies’ businesses would recover slowly.

(18) Impairment of non-current assets

The accounting standard for impairment of fixed assets requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying
amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to be generated from the continued use andeventual 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 price at disposition.

The Board of Directors of the Company resolved to transfer all shares of Onward Luxury Group S.p.A. (“OLG S.p.A.” in this section) held byOnward Italia S.p.A., a consolidated subsidiary of the Company, at the Board of Directors’ meeting held on December 11, 2020 and executed ashare transfer agreement and transferred the shares on the same date.

(19) Cash and cash equivalents(1) Overview of share transfer

Cash and cash equivalents in the consolidated statement of cash flows are composed of cash on hand, bank deposits that 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.

(a) Name and business description of such subsidiary
Name: Onward Luxury Group S.p.A.
Business description: Production and sales of clothing and shoes for luxury brands(20) Accounting for Japanese consumption taxes(b) Transferee
NEMO S.R.L.

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 statement of income.

(21) Application of consolidated taxation system

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

(22) Application of tax effect accounting for transition from consolidated taxation system to group tax sharing system

As for items transitioned to the group tax sharing system established in the “Act for Partial Revision of the Income Tax Act, etc.” (Act No. 8 of2020) of Japan as well as items revised on the non-consolidated taxation system in association with the transition to the group tax sharing system,
the Company and certain domestic consolidated subsidiaries have not applied the provisions of paragraph 44 of the “Implementation Guidance on
Tax Effect Accounting” (Accounting Standards Board of Japan (“ASBJ”) Guidance No. 28, February 16, 2018) as allowed by the treatment in paragraph 3 of the “Practical Solution on the Treatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to theGroup Tax Sharing System” (Practical Issues Task Force No. 39, March 31, 2020), but applied the provisions of the Act before revision to theamounts of deferred tax assets and deferred tax liabilities.

(23) U.S. dollar amounts

Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of ¥106.25 = US$1, the rate of exchange as ofFebruary 28, 2021, has been used in translation. The inclusion of such amounts is not intended to imply that Japanese yen amounts have been or
could be readily converted, realized, or settled in U.S. dollars at that rate.

50

3. Business Combination

Onward Holdings Co., Ltd. Annual Report 2021(c) Grounds for share transfer
The Company, in order to address drastic changes in the Companies’ business environments, has proceeded with withdrawal from and scaling
down of unprofitable businesses and has worked on the selection and concentration on priority businesses as in the “Implementation of Global
Business Restructuring” timely disclosed on October 4, 2019.
The global spread of the COVID-19 caused a further worsening of the Companies’ business environments overseas primarily in Europe and asignificant impact on the Companies’ operating results.
Under these circumstances, as a result of examining various options for the future businesses in Europe, the Company determined, from theperspective of the Companies’ global business restructuring, that it was the best option to withdraw from the OLG S.p.A. business, which had
been unprofitable, and to transfer all the shares of OLG S.p.A. held by Onward Italia S.p.A primary to the current management of the businessthrough a management buyout.
(d) Date of share transfer
December 11, 2020(e) Overview of transaction including legal form
Share transfer in consideration for cash

Onward Holdings Co., Ltd. Annual Report 202151

Notes to Consolidated Financial Statements(2) Summary of applied accounting treatment(2) Information as of and for the year ended February 28, 2021

(a) Amount of profit or loss in association with transfer
Loss on sales of shares of subsidiaries and associates ¥4,537 million ($42,704 thousand)(a) Available-for-sale securities with readily determinable fair values
Investment securities whose fair values were readily determinable at February 28, 2021 are summarized as follows:
Millions of yen(b) Appropriate carrying value of assets and liabilities related to transferred business and their breakdown
The transfer price is not disclosed because of confidentiality provisions in the share transfer agreement.

Acquisition
cost

Unrealized
gain (loss)

Carrying
value

Acquisition
cost

Unrealized
gain (loss)¥ 4,902¥ 3,983¥  919$ 46,137$ 37,483$  8,654

3

1

2

25

12

13

4,905

3,984

921

46,16237,495

8,667(25,903)

Securities with unrealized gain:(c) Accounting treatment
The difference between the carrying value of such transferred shares for consolidation purposes and the sale value of the shares is recognized in “losson sales of shares of subsidiaries and associates” under other expenses.

Equity securities
Other
Subtotal
Securities with unrealized loss:(3) Name of segmentation which included such subsidiary in segment information

Equity securities

Apparel Business(4) Estimated amounts of profit and loss related to transferred subsidiary recognized in the consolidated statement of income for the year ended February 28, 2021
Net sales ¥14,856 million ($139,820 thousand)Thousands of U.S. dollars

Carrying
value

Operating loss ¥1,816 million ($17,090 thousand)

8,953

11,705(2,752)

84,265

110,168

Other

—

—

—

—

—

—

Subtotal

8,953

11,705(2,752)

84,265

110,168(25,903)

		Total¥13,858¥15,689¥(1,831)$130,427$147,663$(17,236)

Note: Non-marketable equity securities of ¥374 million ($3,515 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 values.

4. Investment Securities(b) Available-for-sale securities sold during the year ended February 28, 2021

(1) Information as of and for the year ended February 29, 2020

Millions of yen(a) Available-for-sale securities with readily determinable fair values
Investment securities whose fair values were readily determinable at February 29, 2020 are summarized as follows:
Millions of yen
Carrying
value

Acquisition
cost

Unrealized
gain (loss)

¥774

¥604

¥170

Securities with unrealized gain:
Equity securities
Other

2

1

1

Subtotal

776

605

171

11,95016,734(4,784)———

Subtotal

11,95016,734(4,784)

		Total¥12,726¥17,339¥(4,613)

Securities with unrealized loss:
Equity securities
Other

Note: N on-marketable equity securities of ¥334 million are not included in the above table because there were no quoted market prices available and it isextremely difficult to determine the fair values.

Proceeds from sales of securities¥28

Realized gain on sales of securities

983

Realized loss on sales of securities

(4)

(37)

(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and associates as of February 28, 2021 was ¥81 million ($766
thousand).
(d) For the year ended February 28, 2021, the Companies recognized loss on valuation of investment securities of ¥1,685 million ($15,862 thousand)(available-for-sale securities of ¥1,657 million ($15,600 thousand) and shares of subsidiaries and associates of ¥28 million ($262 thousand)) as an
impairment loss.

5. Short-Term Borrowings and Long-Term Borrowings
Short-term borrowings at February 29, 2020 and February 28, 2021 represented loans, principally from banks. The weighted-average interest rateon these loans was 0.6% and 0.4% in 2020 and 2021, respectively.

Millions of yen¥3,742

Realized gain on sales of securities

161

Unsecured loans, principally from banks, maturing in installments through 2027

Realized loss on sales of securities(232)(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and associates as of February 29, 2020 was ¥281 million.
(d) For the year ended February 29, 2020, the Companies recognized loss on valuation of investment securities (available-for-sale securities) of¥1,565 million as an impairment loss.

Thousands of
U.S. dollars

Millions of yen

Proceeds from sales of securities

2020

2021

2021

¥21,480¥21,482$202,183

Less: Current portion with weighted-average interest rate of 0.3% at February 29, 2020 and
February 28, 2021

4,452

5,052

47,548Long-term borrowings, less current portion, with weighted-average interest rate of 0.3% and0.4% at February 29, 2020 and February 28, 2021, respectively¥17,028¥16,430$154,635

Lease obligations at February 29, 2020 and February 28, 2021 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Lease obligations
Less: Current portion of lease obligations

Onward Holdings Co., Ltd. Annual Report 2021

$267

Long-term borrowings at February 29, 2020 and February 28, 2021 are summarized as follows:(b) Available-for-sale securities sold during the year ended February 29, 202052Thousands of
U.S. dollars

2020

2021

2021

¥5,032¥13,657$128,528

808

2,041

19,205¥4,224¥11,616$109,323

Onward Holdings Co., Ltd. Annual Report 202153

Notes to Consolidated Financial Statements

The aggregate annual maturities of long-term borrowings after February 28, 2022 are as follows:(b) Changes in plan assets
Millions of yen

Thousands of
U.S. dollars

2022¥5,052$47,548

Balance at beginning of period

2023

4,053

38,146

Expected return on plan assets

2024

3,720

35,012

Actuarial differences

2025

4,464

42,014

Year ending February 28 or 29:

2020

2021

2021

¥12,608¥10,988$103,418

219

212

1,996

(1,506)

336

3,162

Employer contributions

290

246

2,317

Benefits paid

(623)

(1,024)(9,639)¥10,988¥10,758$101,254

Balance at end of period

The aggregate annual maturities of lease obligations after February 28, 2022 are as follows:
Millions of yen

Thousands of
U.S. dollars

2022¥2,041$19,205

2023

1,673

15,747

2020

2021

2021

2024

1,455

13,694

Funded projected benefit obligations¥ 11,308¥ 10,889$ 102,489

2025

1,313

12,360Plan assets(10,988)(10,758)(101,253)

320

131

1,236

699

536

5,047

1,019

667

6,283

Year ending February 28 or 29:

The Company is subject to financial covenants on its borrowings from certain financial institutions that the Company is required to maintain acertain level of net assets and ordinary profit or loss, which is operating profit or loss plus recurring income less recurring expenses, in the consolidated and non-consolidated financial statements.
The balance of borrowings subject to the financial covenants at February 29, 2020 and February 28, 2021 is shown below:
Thousands of
U.S. dollars

Millions of yen
2020

2021

2021

Short-term borrowings¥25,000¥25,000$235,294

Long-term borrowings

13,78010,34097,318(Of which current portion of long-term borrowings)

3,440

3,440

32,376¥38,780¥35,340$332,612

Total(c) Reconciliation from projected benefit obligations and plan assets to retirement benefit asset and liability recognized in the consolidated balance sheet

Unfunded projected benefit obligations
Net amount of liability and asset recognized in the consolidated balance sheet
Retirement benefit liability

3,724

3,482

32,774Retirement benefit asset(2,705)(2,815)(26,491)¥  1,019¥   667$   6,283

Net amount of liability and asset recognized in the consolidated balance sheet(d) Net periodic pension expenses and their breakdown

The Company and certain of its consolidated subsidiaries have adopted funded and unfunded defined benefit retirement plans as well as defined
contribution retirement plans to provide retirement benefits to their employees.
Under the defined benefit corporate pension plans, all of which are funded, the Company and certain of its consolidated subsidiaries grantlump-sum payments or pensions to their employees based on the salary levels and service periods. Retirement benefit trusts have been establishedin 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 consolidated subsidiaries grant lump-sum payments to their employees as retirement benefits, basedon the salary levels and service periods.
Under the lump-sum retirement payment plans for certain consolidated subsidiaries, retirement benefit liability and net periodic pension
expenses are calculated by using the simplified method.

2020

2021

2021

¥ 931

¥ 856

$ 8,057

36

32

302

Expected return on plan assets

(220)

(212)

(1,996)

Amortization of unrecognized actuarial differences

(66)

145

1,369

Amortization of unrecognized prior service costs

(47)

(47)

(442)

Other

(25)

(21)

(202)

¥ 609

¥ 753

$ 7,088

Net periodic pension expenses

Note: In addition to the above, extra retirement payments of ¥3,598 million were recognized in the year ended February 29, 2020.

(e) Remeasurements of defined benefit plans in other comprehensive income
The 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

Balance at beginning of period
Service cost
Interest cost
Actuarial differences
Benefits paid
Other
Balance at end of period

2020

2021

2021

¥13,682¥12,007$113,008

930

856

8,057

36

32

302

(329)

403

3,792

(2,091)(1,667)(15,690)

(221)

(205)

(1,932)¥12,007¥11,426$107,537

2021

2021

Prior service costs¥   (47)¥(47)

Actuarial differences(1,243)79739¥(1,290)

¥ 32

$ 297

Total

$(442)(f ) Remeasurements of defined benefit plans in accumulated other comprehensive income
The breakdown of items recognized as remeasurements of defined benefit plans (before tax effect) in accumulated other comprehensive income isas follows:
Thousands of
U.S. dollars

Millions of yen

Unrecognized prior service costs
Unrecognized actuarial differences
Total

Onward Holdings Co., Ltd. Annual Report 2021

Thousands of
U.S. dollars

Millions of yen
2020(1) Defined benefit plans(a) Changes in projected benefit obligations

Thousands of
U.S. dollars

Millions of yen

Interest cost

6. Retirement Plan and Retirement Benefits

Thousands of
U.S. dollars

Millions of yen

Service cost54Thousands of
U.S. dollars

Millions of yen

2020

2021

2021

¥    74¥    27$    258(1,246)(1,168)(10,995)¥(1,172)¥(1,141)$(10,737)

Onward Holdings Co., Ltd. Annual Report 202155

Notes to Consolidated Financial Statements

8. Revaluation Reserve for Land(g) Plan assets(i) Percentage by major category of plans assets is as follows:
2020

2021

Life insurance company general accounts

35%

30%

Equity securities

44%

49%

Debt securities

4%

3%

Short-term funds

17%

18%

100%

100%

Total

Note: Total plan assets include retirement benefit trusts established for defined benefit corporate pension plans and lump-sum retirement payment plans of
52% and 58% for the years ended February 29, 2020 and February 28, 2021, respectively.

(ii) 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.
(h) Actuarial assumptions
2020

2021

Discount rate

0.3% to 0.7%

0.3% to 0.7%

Long-term expected rate of return on plan assets

1.5% to 2.9%

1.5% to 3.6%

(2) Defined contribution plans
The amounts to be paid by the Companies to the defined contribution pension plans for the years ended February 29, 2020 and February 28, 2021
were ¥312 million and ¥297 million ($2,795 thousand), respectively.

7. Shareholders’ Equity
Under the Companies Act, the entire amount of the issue price of shares is required to be designated as a stated capital 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
be available for appropriations by resolution of a shareholders’ meeting. The balance of the legal reserve is included in retained earnings in theaccompanying consolidated balance sheet.
Cash dividends charged to retained earnings for the years ended February 29, 2020 and February 28, 2021 represent dividends paid out during
those years. The amount available for dividends is based on the amount recorded in the Company’s non-consolidated books of account in accordance with the Companies Act.
Dividends to be paid after the balance sheet date, which were approved by the General Meeting of Shareholders held on May 27, 2021, are as
follows:(a) Total dividends:
¥1,627 million ($15,315 thousand)(b) Source of dividends:
Retained earnings(c) Cash dividends per ordinary share:
¥12 ($0.11)(d) Date to determine which shareholders receive the dividends:
February 28, 2021(e) Effective date:
May 28, 2021

The Companies revalued land for business and have recorded the amount equivalent to applicable taxes in relation to the revaluation differences in“deferred tax liabilities for land revaluation” under liabilities section and the remaining amount in “revaluation reserve for land” under net assets
section pursuant to the “Act on Revaluation of Land” (Act No. 34 of 1998) and the “Act for Partial Revision of the Act on Revaluation of Land”(revised on March 31, 2001) of Japan.
- Revaluation method
In order to determine the land prices that were to become the basis of calculation for the assessed value of land-holding tax stipulated in Article 16of the “Land-holding Tax Act” (Act No. 69 of 1991) of Japan specified in Article 2, item (iv) of the “Order for Enforcement of the Act on Revaluation of Land” (Cabinet Order No. 119 of March 31, 1998) of Japan, the Companies determined the land prices on the basis of prices calculatedusing the method established and published by Commissioner of National Tax Agency, Japan, making reasonable adjustments for the depth ofland and, for certain land, determined the prices, making reasonable adjustments to the assessed value of fixed assets tax specified in Article 2, item(iii) of the same order.
- Revaluation dateFebruary 28, 2002
Since the fair value of revalued land exceeded the carrying value of the land after revaluation, the difference as of February 29, 2020 and February 28, 2021 is omitted.

9. Share Options
The cost recognized for the share options for the years ended February 29, 2020 and February 28, 2021 was nil.

2014 Share Option Plan (No. 16)

Under the 2014 share option plan (No. 16), share options were granted to 5 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 no longer occupy their positions as directors of the Company.
The number of share options granted by type of shares is 122,900 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥317 ($2.98)
		 Fair value at the grant date:
¥526 ($4.95)
A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:2014 share option plan (No. 16)

Non-vested (shares):
Outstanding at February 29, 2020
GrantedForfeited

73,100——

Vested65,200

Outstanding at February 28, 2021

7,900

Vested (shares):
Outstanding at February 29, 2020

49,800

Vested65,200Exercised

105,000

Forfeited
Outstanding at February 28, 2021—
10,000The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

56

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202157

Notes to Consolidated Financial Statements

2014 Share Option Plan (No. 15)

Under the 2014 share option plan (No. 15), share options were granted to 12 executive officers of the Company and 5 directors and 9 executive
officers of a 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 no longer occupy their positions as executive officers of the Company, or as directors or executive officers of said Company subsidiary.
The number of share options granted by type of shares is 146,100 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥409 ($3.85)
		 Fair value at the grant date:
¥466 ($4.39)
A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:2013 Share Option Plan (No. 13)

Under the 2013 share option plan (No. 13), share options were granted to 14 executive officers of the Company and 6 directors and 9 executive
officers of a Company 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 no longer occupy their positions as executive officers of the Company, or as directors or executive officers of said Company subsidiary.
The number of share options granted by type of shares is 151,300 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥488 ($4.59)
		 Fair value at the grant date:
¥572 ($5.38)
A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:2014 share option plan (No. 15)

Non-vested (shares):2013 share option plan (No. 13)

Non-vested (shares):

Outstanding at February 29, 2020

52,600

Outstanding at February 29, 2020—

GrantedForfeited—

Forfeited—

Vested3,700

Vested3,100

Outstanding at February 28, 2021

48,900

Outstanding at February 28, 2021

46,200

Vested (shares):—

Vested (shares):

Outstanding at February 29, 2020

28,300

Outstanding at February 29, 2020

Vested3,700

Vested3,100

Exercised

23,800Exercised

17,100—Forfeited

Forfeited
Outstanding at February 28, 2021

8,200

20,900—

Outstanding at February 28, 2021

6,900

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

2013 Share Option Plan (No. 14)

2012 Share Option Plan (No. 12)

Under the 2013 share option plan (No. 14), share options were granted to 5 directors of the Company on June 20, 2013. They are exercisable in the
period from June 21, 2013 to June 20, 2043. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they no longer occupy their positions as directors of the Company.
The number of share options granted by type of shares is 107,000 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥377 ($3.55)
		 Fair value at the grant date:
¥629 ($5.92)
A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:

Under the 2012 share option plan (No. 12), share options were granted to 5 directors of the Company on June 20, 2012. They are exercisable in the
period from June 21, 2012 to June 20, 2042. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they no longer occupy their positions as directors of the Company.
The number of share options granted by type of shares is 141,400 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥374 ($3.52)
		 Fair value at the grant date:
¥458 ($4.31)
A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:2013 share option plan (No. 14)

Non-vested (shares):
Outstanding at February 29, 20202012 share option plan (No. 12)

Non-vested (shares):56,700

Outstanding at February 29, 2020

Granted—GrantedForfeited—

Forfeited

VestedOutstanding at February 28, 2021

56,700—

Vested (shares):

VestedOutstanding at February 28, 2021

74,900——74,900—

Vested (shares):

Outstanding at February 29, 2020

33,400

Outstanding at February 29, 2020

6,800

Vested56,700

Vested74,900Exercised90,100Exercised

81,700Forfeited—

Forfeited—

Outstanding at February 28, 2021—

Outstanding at February 28, 2021—

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

58

49,300GrantedOnward Holdings Co., Ltd. Annual Report 2021

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

Onward Holdings Co., Ltd. Annual Report 202159

Notes to Consolidated Financial Statements

2012 Share Option Plan (No. 11)

2011 Share Option Plan (No. 9)

Under the 2012 share option plan (No. 11), share options were granted to 1 executive officer of the Company and 9 directors and 18 executive officers of a Company subsidiary on March 19, 2012. They are exercisable in the period from March 20, 2012 to February 28, 2042. The terms of theoptions include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year
after they no longer occupy their positions as an executive officer of the Company, or as directors or executive officers of said Company subsidiary.
The number of share options granted by type of shares is 234,700 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥488 ($4.59)
		 Fair value at the grant date:
¥444 ($4.18)

A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:

A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:2011 share option plan (No. 9)

2012 share option plan (No. 11)

Non-vested (shares):Non-vested (shares):
Outstanding at February 29, 2020

Outstanding at February 29, 2020

30,30039,300Granted—Granted—Forfeited—

Forfeited—

VestedVested—Outstanding at February 28, 2021

Outstanding at February 28, 2021

39,300

Vested (shares):

Vested (shares):11,400—3,600—

Exercised

Exercised

2,400

Forfeited

Forfeited—

Outstanding at February 28, 2021

9,000

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

2011 Share Option Plan (No. 10)

Under the 2011 share option plan (No. 10), share options were granted to 5 directors of the Company on June 20, 2011. They are exercisable in the
period from June 21, 2011 to June 20, 2041. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they no longer occupy their positions as directors of the Company.
The number of share options granted by type of shares is 144,800 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥377 ($3.55)
		 Fair value at the grant date:
¥510 ($4.80)

Non-vested (shares):

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

2010 Share Option Plan (No. 8)

Under the 2010 share option plan (No. 8), share options were granted to 5 directors of the Company on June 18, 2010. They are exercisable in the
period from June 19, 2010 to June 18, 2040. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they no longer occupy their positions as directors of the Company.
The number of share options granted by type of shares is 115,800 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥377 ($3.55)
		 Fair value at the grant date:
¥613 ($5.77)

Non-vested (shares):
Outstanding at February 29, 2020

69,400GrantedGranted—Forfeited

Forfeited—

Vested69,400—

Vested (shares):
Outstanding at February 29, 2020

7,700

2010 share option plan (No. 8)

2011 share option plan (No. 10)

Outstanding at February 28, 2021—

Outstanding at February 28, 2021

A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:

A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:

Vested11,300

VestedVestedOutstanding at February 29, 2020—
30,300

Outstanding at February 29, 2020

Outstanding at February 29, 2020

Outstanding at February 28, 2021

52,300——52,300—

Vested (shares):
Outstanding at February 29, 2020——

Vested52,300

Vested69,400Exercised

52,300Exercised

69,400Forfeited—

Forfeited—

Outstanding at February 28, 2021—

Outstanding at February 28, 2021—

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

60

Under the 2011 share option plan (No. 9), share options were granted to 1 executive officer of the Company and 12 directors and 18 executive officers of a Company subsidiary on March 18, 2011. They are exercisable in the period from March 19, 2011 to February 28, 2041. The terms of theoptions include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year
after they no longer occupy their positions as an executive officer of the Company, or as directors or executive officers of said Company subsidiary.
The number of share options granted by type of shares is 199,900 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥339 ($3.19)
		 Fair value at the grant date:
¥444 ($4.18)

Onward Holdings Co., Ltd. Annual Report 2021

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

Onward Holdings Co., Ltd. Annual Report 202161

Notes to Consolidated Financial Statements

2010 Share Option Plan (No. 7)

Under the 2010 share option plan (No. 7), share options were granted to 8 directors and 22 executive officers of a Company 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 theexercisability under which grantees can exercise their options during a five-year period starting a year after they no longer occupy their positions as
directors or executive officers of said Company subsidiary.
The number of share options granted by type of shares is 194,600 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Fair value at the grant date:
¥475 ($4.47)
A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:2009 Share Option Plan (No. 5)

Under the 2009 share option plan (No. 5), share options were granted to 11 directors and 19 executive officers of a Company 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 no longer occupy their positions as directors or executive officers of said Company subsidiary.
The number of share options granted by type of shares is 268,900 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Fair value at the grant date:
¥362 ($3.41)
A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:2010 share option plan (No. 7)

Non-vested (shares):
Outstanding at February 29, 2020

28,500

Outstanding at February 29, 2020

31,800Granted—Granted—Forfeited—

Forfeited—

Vested—VestedOutstanding at February 28, 2021

28,500The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

2009 Share Option Plan (No. 6)

Under the 2009 share option plan (No. 6), share options were granted to 5 directors of the Company on June 19, 2009. They are exercisable in the
period from June 20, 2009 to June 19, 2039. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they no longer occupy their positions as directors of the Company.
The number of share options granted by type of shares is 155,000 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥377 ($3.55)
		 Fair value at the grant date:
¥432 ($4.07)
A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:2009 share option plan (No. 6)

Non-vested (shares):
Outstanding at February 29, 2020
GrantedForfeited
VestedOutstanding at February 28, 2021

72,000——72,000

Outstanding at February 29, 2020—

Outstanding at February 28, 2021

31,800

Vested (shares):
Outstanding at February 29, 2020

4,600

Vested—Exercised—

Forfeited—

Outstanding at February 28, 2021

4,600

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

2008 Share Option Plan (No. 4)

Under the 2008 share option plan (No. 4), share options were granted to 12 directors and 21 executive officers of a Company subsidiary on June20, 2008. They are exercisable in the period from June 21, 2008 to February 28, 2038. The terms of the options include certain limitations on theexercisability under which grantees can exercise their options during a five-year period starting a year after they no longer occupy their positions as
directors or executive officers of said Company subsidiary.
The number of share options granted by type of shares is 91,100 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Fair value at the grant date:
¥905 ($8.52)
A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:—

Vested (shares):2008 share option plan (No. 4)

Non-vested (shares):—

Outstanding at February 29, 2020

8,200

Vested72,000Granted—Exercised

72,000Forfeited—

Forfeited—

VestedOutstanding at February 28, 2021—

Outstanding at February 28, 2021

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in future.

62

2009 share option plan (No. 5)

Non-vested (shares):

Onward Holdings Co., Ltd. Annual Report 2021

—
8,200

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

Onward Holdings Co., Ltd. Annual Report 202163

Notes to Consolidated Financial Statements

2008 Share Option Plan (No. 3)

Under the 2008 share option plan (No. 3), share options were granted to 5 directors of the Company on June 20, 2008. They are exercisable in the
period from June 21, 2008 to June 20, 2038. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they no longer occupy their positions as directors of the Company.
The number of share options granted by type of shares is 70,000 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥378 ($3.56)
		 Fair value at the grant date:
¥944 ($8.88)

2006 Share Option Plan (No. 1)

Under the 2006 share option plan (No. 1), share options were granted to 12 directors and 2 corporate auditors of the Company on June 20, 2006.
They are exercisable in the period from July 1, 2006 to June 30, 2036. The terms of the options include certain limitations on the exercisability
under which grantees can exercise their options during a five-year period starting a year after they no longer occupy their positions as directors or
corporate auditors of the Company.
The number of share options granted by type of shares is 63,000 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥377 ($3.55)
		 Fair value at the grant date:
¥1,541 ($14.50)

A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:
A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:2008 share option plan (No. 3)

2006 share option plan (No. 1)

Non-vested (shares):
Outstanding at February 29, 2020

32,000Non-vested (shares):

Granted—Outstanding at February 29, 2020

Forfeited—

Granted32,000Forfeited

VestedOutstanding at February 28, 2021—

14,500——

Vested14,500

Outstanding at February 28, 2021

Vested (shares):
Outstanding at February 29, 2020——

Vested (shares):32,000

Outstanding at February 29, 2020

Exercised

32,000

Vested14,500Forfeited—

Exercised

14,500

Outstanding at February 28, 2021—

Forfeited—

Outstanding at February 28, 2021—

VestedThe number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

2007 Share Option Plan (No. 2)

Under the 2007 share option plan (No. 2), share options were granted to 5 directors and 2 corporate auditors of the Company on July 20, 2007.
They are exercisable in the period from July 21, 2007 to July 20, 2037. The terms of the options include certain limitations on the exercisability
under which grantees can exercise their options during a five-year period starting a year after they no longer occupy their positions as directors or
corporate auditors of the Company.
The number of share options granted by type of shares is 40,000 ordinary shares.
A summary of price information for the share option plan is as follows:		 Exercise price:
¥1 ($0.01)
		 Average share price on the date the option was exercised:
¥377 ($3.55)
		 Fair value at the grant date:
¥1,284 ($12.08)—

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

10. Loss on Liquidation of Business
Loss on liquidation of business for the years ended February 29, 2020 and February 28, 2021 consisted of the following:

Loss on disposal of inventories

2020

2021

2021

¥1,282¥ —$   —Bad debts expenses

647

—

—

1,100

954

8,975

¥3,029¥954$8,975

Expenses in relation to withdrawal from unprofitable stores

A summary of the scale and movement of the share option plan for the year ended February 28, 2021 is as follows:

Thousands of
U.S. dollars

Millions of yen

Total

2007 share option plan (No. 2)

Non-vested (shares):
Outstanding at February 29, 2020

16,600Granted—Forfeited—

VestedOutstanding at February 28, 2021

16,600—11. Extraordinary Loss due to Closing and Other
The Companies temporarily closed many stores in commercial facilities, their own stores, and resort facilities in Japan, North America, Europe andother areas as requested by governments and local governments in association with the COVID-19. Fixed costs for stores and resort facilities
incurred during the closure, such as personnel expenses, depreciation, and rent expenses, were recognized in “Extraordinary loss due to closing andother” under other expenses.

Vested (shares):
Outstanding at February 29, 2020—

Vested

16,600Exercised16,600Forfeited—

Outstanding at February 28, 2021—

The number of rights to vest in future periods is determined based on the actual forfeited number of the share options because it is difficult toestimate forfeiture in the future.

12. Impairment Loss
For the years ended February 29, 2020 and February 28, 2021, the Companies reviewed its non-current assets for impairment and, as a result, recognized an impairment loss as follows:
February 29, 2020
Location

Tokyo metropolitan area and other
—

Usage

Business assets—

Description

Buildings and structures

Millions of yen¥ 9,075

Other

7,819

Goodwill

10,862The non-current assets are basically grouped by store, 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 carrying amounts to the respective recoverable amounts.

64

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202165

Notes to Consolidated Financial Statements

February 28, 2021

Millions of yen

Location

Tokyo metropolitan area and other

Millions of yen

Thousands of
U.S. dollars

Buildings and structures¥1,203$11,323

Other

2,096

19,729Usage

Description

Business assets

The non-current assets are basically grouped by store, 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 carrying amounts to the respective recoverable amounts.
For the year ended February 29, 2020, the Company recognized an impairment loss of ¥10,862 million on goodwill for consolidated subsidiaries in and outside Japan as a result of consideration of their recoverability based on cash flow projections. For the year ended February 28, 2021,
the Company recognized an impairment loss of ¥3,299 million ($31,052 thousand).
The recoverable amounts of these assets are 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 a discount rate of 5.1% and 4.4% for the years ended
February 29, 2020 and February 28, 2021, respectively.

13. Income Taxes
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities as at February 29, 2020 and
February 28, 2021 consisted of the following elements:
Thousands of
U.S. dollars

Millions of yen
2020

2021

2021

¥ 27,423¥ 33,065$ 311,201

Deferred tax assets:
Tax loss carry forwards
Impairment loss

10,64913,742

129,336

Loss on write-down of inventories

2,555

3,028

28,502Retirement benefit liability

3,725

2,972

27,974

Allowance for doubtful accounts

1,266

2,875

27,055

Valuation difference on available-for-sale securities

1,457

685

6,445

281

201

1,888

Provision for bonuses

Within 1 year

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years

After 5 years

Total

Tax loss carry forwards (a)

¥ 285

¥ 464

¥ 610

¥ 745

¥ 2,611¥ 28,350¥ 33,065

Valuation allowance

(285)

(464)

(610)

(745)

(2,611)(28,255)(32,970)

Deferred tax assets

—

—

—

—

—

95

(b) 95

Within 1 year

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years

After 5 years

Total

Tax loss carry forwards (a)$ 2,686$ 4,364$ 5,739$ 7,011$ 24,573$ 266,828$ 311,201

Valuation allowance(2,686)(4,364)(5,739)(7,011)(24,573)(265,928)(310,301)

Deferred tax assets

—

—

—

—

—

900

(b) 900

February 28, 2021

Thousands of U.S. dollars
February 28, 2021

(a) Tax loss carry forwards present the amounts computed by multiplying the statutory tax rate.
(b)	The Company recognized ¥291 million and ¥95 million ($900 thousand) of deferred tax assets for ¥27,423 million and ¥33,065 million($311,201 thousand) of tax loss carry forwards (amounts computed by multiplying the statutory tax rate) as of February 29, 2020 and February
28, 2021, respectively. The Company did not recognize any valuation allowance for some portions of the tax loss carry forwards since it
expected that the portions could be utilized due to the existence of probable future taxable profit.
The reconciliation of the difference between the statutory tax rate and the effective tax rate for the year ended February 29, 2020 and February
28, 2021 is omitted due to the recording of loss before income taxes.

14. Note to Consolidated Statements of Comprehensive Income
Other comprehensive income for the years ended February 29, 2020 and February 28, 2021 consisted of the following:

2020

2021

2021

Valuation difference on available-for-sale securities:
Amount arising during period¥(6,468)¥ 1,121$ 10,550

1,602

1,652

15,553(4,866)

2,773

26,10374(131)(1,234)(4,792)

2,642

24,869

87

86

810

Reclassification adjustment for gain and loss

1,960

50

471

Amount before income tax effect

27

24

222

Income tax effect

Other

3,339

2,897

27,269  Total  Subtotal

52,76959,625561,173

Deferred gains or losses on hedges:

Valuation allowance for tax loss carry forwards (Note 2)(27,132)(32,970)(310,301)

Amount arising during period

32

22

212

Valuation allowance for deductible temporary differences(19,014)(17,544)(165,122)

Reclassification adjustment for gain and loss

(103)

(32)

(303)

(46,146)(50,514)(475,423)

Amount before income tax effect

(71)

(10)

(91)

6,623

9,111

85,750

Income tax effect

14

3

23

(57)

(7)

(68)

(107)

1,064

10,015

(107)

1,064

10,015(1,508)(1,009)(9,494)

1

(72)

(683)

(1,507)(1,081)(10,177)(1,177)

(66)

(630)

(113)

98

927

(1,290)

32

297

446

(14)

(129)

(844)

18

168

(15)

—

—

(15)

—

—

¥(7,322)¥ 2,636$ 24,807

Provision for retirement benefits for directors and corporate auditors
Loss on valuation of shares of subsidiaries and associates
Loss on valuation of investment securities   Total valuation allowances (Note 1)    Total deferred tax assets  TotalDeferred tax liabilities:
Retirement benefit asset

Revaluation reserve for land:

(936)

(974)

(9,163)

Valuation difference on available-for-sale securities

(6)

(137)

(1,289)Gain on securities contributed to employee retirement benefit trusts

(43)

(43)

(408)

  TotalProvision for deferred capital gain on real property for tax purposes

(40)

(39)

(371)

Foreign currency translation adjustment:(1,444)(494)(4,645)

Amount arising during period
Reclassification adjustment for gain and loss

Other    Total deferred tax liabilities(2,469)(1,687)(15,876)    Net deferred tax assets¥  4,154¥  7,424$  69,874

Income tax effect  TotalRemeasurements of defined benefit plans:

Notes: 1. Valuation allowances increased by ¥4,368 million ($41,111 thousand) due to increased tax loss carry forwards.
		 2. The amounts of tax loss carry forwards and related deferred tax assets disaggregated by period of expiration:

Amount arising during period
Reclassification adjustment for gain and loss
Amount before income tax effectMillions of yen

Income tax effectWithin 1 year

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years

After 5 years

Total  TotalTax loss carry forwards (a)

¥ 685

¥ 281

¥ 479

¥ 618

¥ 769

¥ 24,591¥ 27,423

Share of other comprehensive income of entities accounted for using

Valuation allowance

(685)

(281)

(479)

(618)

(769)

(24,300)(27,132)

Deferred tax assets

—

—

—

—

—

291

(b) 291

February 29, 2020

equity method:Amount arising during period  Total    Total other comprehensive income66

Thousands of
U.S. dollars

Millions of yen

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202167

Notes to Consolidated Financial Statements

15. Lease Transactions(iii) 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.

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

16. Per Share Information

Thousands of
U.S. dollars

Millions of yen
2020

2021

2021

¥ (52,135)¥ (23,182)$(218,181)

—

—

—

Profit (loss) pertaining to ordinary shareholders¥ (52,135)¥ (23,182)$(218,181)

Average number of ordinary shares (thousand shares)

135,779

135,421——

Less: Components not pertaining to ordinary shareholders

Effect of dilutive share options (thousand shares)(2) Matters related to fair values of financial instruments
The following are carrying values on the consolidated balance sheet and fair values and differences between them as of February 29, 2020 and February 28, 2021.
Millions of yen

Earnings per share is computed based upon the weighted-average number of ordinary shares outstanding during each year. Cash dividends per
share shown in the accompanying consolidated statement of income represent dividends declared as applicable to the year rather than those paid
during the year.
The basis for the calculation of basic and diluted earnings per share for the years ended February 29, 2020 and February 28, 2021 is as follows:

Profit (loss) attributable to owners of parent(d) Supplementary explanation of fair values of financial instruments
The fair values of financial instruments are 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 values, different assumptions could result in different
fair values.

17. Financial Instruments(1) Matters pertaining to the status of financial instruments(a) 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.
(b) Financial instruments and risks
Notes and accounts receivable—trade are exposed to credit risk of customers. Operating receivables denominated in foreign currencies, being subject to risk associated with changes in foreign currency exchange rates, are hedged by forward exchange contracts. Investment securities mainlycomprise stocks of companies with which the Companies have business alliances and are exposed to risk associated with fluctuations of theirmarket prices.
Notes and accounts payable—trade and electronically recorded obligations—operating are due within one year. Operating payables denominated in foreign currencies, being subject to risk associated with changes in foreign currency exchange rates, are hedged by forward exchange contracts. The purpose for borrowings is for working capital (mainly short term) and funds for capital investments (long term). A portion of long-termborrowings is subject to interest rate risk.
Regarding derivatives, forward exchange contracts, interest rate swaps, and currency options are used to hedge foreign exchange rate fluctuation
risk associated with operating receivables and payables denominated in foreign currencies.

February 29, 2020

Carrying value

Fair value

Difference(a) Cash and deposits¥ 28,795¥ 28,795¥—

25,71625,716—(b) Notes and accounts receivable—trade(c) Investment securities:

12,726

12,726—(d) Notes and accounts payable—trade

Available-for-sale securities(19,206)(19,206)—(e) Electronically recorded obligations—operating(13,808)(13,808)—(f ) Short-term borrowings(44,907)(44,907)—(g) Long-term borrowings (including current portion of long-term borrowings)(21,480)(21,401)

(79)

46

46

—

(h) Derivative transactions

Millions of yen
February 28, 2021

Carrying value

Fair value

Difference(a) Cash and deposits¥ 21,301¥ 21,301¥—

18,252

18,252—(b) Notes and accounts receivable—trade(c) Investment securities:

13,85813,858—(d) Notes and accounts payable—trade

Available-for-sale securities(13,472)(13,472)—(e) Electronically recorded obligations—operating(8,485)(8,485)—(f ) Short-term borrowings(56,567)(56,567)—(g) Long-term borrowings (including current portion of long-term borrowings)(21,482)(21,406)

(76)

24

24

—

(h) Derivative transactions(c) Risk management for financial instruments(i) Management of credit risk (risk of default by customers and counterparties)
For credit risk of customers associated with notes and accounts receivable—trade, in accordance with the credit management regulations, theCompanies monitor the status of their main customers on a periodical basis and manage due dates and outstanding balances by customer whileworking to at an early stage 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.
(ii) Management of market risk (risk of fluctuations in foreign currency exchange rates, interest rates and others)
The Companies hedge risk associated with changes in foreign currency exchange rates arising from receivables and payables denominated in foreign
currencies mainly by forward exchange contracts. For investment 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
and monthly review transaction balances, valuation gains or losses, and other conditions.

68

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202169

Notes to Consolidated Financial Statements

Thousands of U.S. dollars
February 28, 2021

Carrying value

Fair value

Difference(a) Cash and deposits$ 200,485$ 200,485$ —(b) Notes and accounts receivable—trade

171,779

171,779—(c) Investment securities:

130,427

130,427

Available-for-sale securities—(d) Notes and accounts payable—trade(126,796)(126,796)—(e) Electronically recorded obligations—operating(79,857)(79,857)—(f ) Short-term borrowings(532,395)(532,395)—(g) Long-term borrowings (including current portion of long-term borrowings)(202,184)(201,471)

(713)

224

224

—

(h) Derivative transactions

Notes:
1. Fair value measurement of financial instruments and matters related to securities and derivatives(a) Cash and deposits and (b) Notes and accounts receivable—trade
Since these items are settled in a short period of time, their carrying values approximate fair values.
(c) Investment securities
The fair value of equity securities is based on the quoted market price.
(d) Notes and accounts payable—trade, (e) Electronically recorded obligations—operating and (f ) Short-term borrowings
Since these items are settled in a short period of time, their carrying values approximate fair values.
(g) Long-term borrowings
The fair values of long-term borrowings are measured as present values obtained by discounting the total amount of principal and interest at the interest ratethat is assumed if any similar loan is newly made.
(h) Derivative transactions
The fair value is calculated on the basis of the price quoted by financial institutions.

2. Carrying values of financial instruments whose fair values are deemed to be extremely difficult to determine as of February 29, 2020 and February 28, 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen
Classification

2020

2021

2021

¥615

¥455

$4,281

18. Note to Consolidated Statements of Cash Flows
Cash and cash equivalents at February 29, 2020 and February 28, 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Cash and deposits

2020

2021

2021

¥28,795¥21,301$200,485

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

(15)

(31)

(293)

¥28,780¥21,270$200,192

19. Derivative Transactions
The contract or notional amounts and fair values of derivative financial instruments held as of February 29, 2020 and February 28, 2021 are summarized as follows:(1) Derivative transactions to which hedge accounting was not applied
No applicable items.
(2) Derivative transactions to which hedge accounting was applied
Millions of yen
Hedged item

Contract ornotional amount

Fair value

			U.S. dollar

Accounts payable—trade¥1,205¥ 32

			EuroAccounts payable—trade973

9

			PoundAccounts payable—trade——

			Chinese yuan

Accounts payable—trade

February 29, 2020

Forward exchange contracts:		 To buy foreign currency:

57

5¥2,235¥ 46

Investment securities:
Unlisted equity securities

The fair values of these items are not included in “(c) Investment 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 29, 2020 and February 28, 2021 are as follows:
Millions of yen
February 29, 2020

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits¥28,795

¥—

¥—

¥—

Notes and accounts receivable—trade

25,716———¥54,511

¥—

¥—

¥—

February 28, 2021

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits¥21,301

¥—

¥—

¥—

Total

Millions of yen
Hedged item

Contract ornotional amount

Fair value

			U.S. dollar

Accounts payable—trade¥  934¥ 17

			EuroAccounts payable—trade

1,056

7

			PoundAccounts payable—trade

20			Chinese yuan

Accounts payable—trade——¥1,992¥ 24

February 28, 2021

Forward exchange contracts:		 To buy foreign currency:

Thousands of U.S. dollars

Millions of yen

Notes and accounts receivable—tradeTotal

18,252———¥39,553

¥—

¥—

¥—

Thousands of U.S. dollars
February 28, 2021

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits$200,485

$—

$—

$—

Notes and accounts receivable—trade

171,779———$372,264

$—

$—

$—

Total

Hedged item

Contract ornotional amount

Fair value

			U.S. dollar

Accounts payable—trade$ 8,786$156

			EuroAccounts payable—trade

9,943

66

			PoundAccounts payable—trade202

			Chinese yuan

Accounts payable—trade——$18,749$224

February 28, 2021

Forward exchange contracts:		 To buy foreign currency:

4. Expected repayment amounts of long-term borrowings subsequent to the balance sheet date
See Note 5. “Short-Term Borrowings and Long-Term Borrowings.”

70

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202171

Notes to Consolidated Financial Statements

20. 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 Companies engage in the apparel business (planning, production, and sales of textile products, including men’s and women’s clothing) andthe lifestyle business in Japan and overseas.
The reportable segments of the Companies comprise the “Apparel Business,” which is divided geographically into two categories, “Domestic”
and “Overseas,” and the “Lifestyle Business.”
The “Apparel Business (Domestic)” operates the apparel business in Japan; the “Apparel Business (Overseas)” operates the apparel businessoverseas. The “Lifestyle Business” operates businesses including a cosmetic business, a wellness business related to ballet and dance and resorts, apet supply and other business, and a business related to gifts.
(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.
(3) I nformation on net sales, profit or loss, assets, liabilities, and other items by reportable segment for the years ended February 29, 2020 and
February 28, 2021 is as follows:
Millions of yen
Apparel
For the year ended February 29, 2020

Domestic

Overseas

Total

Lifestyle

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers¥158,955¥46,310¥205,265¥42,969¥248,234¥    —¥248,234

Intersegment sales or transfers

1,393

2,499

3,892

2,870

6,762

(6,762)—¥160,348¥48,809¥209,157¥45,839¥254,996¥ (6,762)¥248,234¥  2,515¥ (5,940)¥  (3,425)¥ 1,553¥  (1,872)¥ (1,189)¥  (3,061)

Total
Segment profit (loss)
Segment assets¥113,017¥38,622¥151,639¥50,007¥201,646¥32,671¥234,317

Depreciation and amortization (Note 2)¥  3,675¥   944¥  4,619¥ 1,278¥  5,897¥   496¥  6,393

67

17

84

—

84

—

84

4,944

1,643

6,587

1,467

8,054

1,480

9,534

Investments in equity-method entities
Increases in property, plant and equipment,
and intangible assets (Notes 2 and 4)

Notes: 1. Adjustments consist of the following:			 (1) Th e adjustment amount for segment profit (loss) of ¥(1,189) million includes amortization of goodwill of ¥(1,748) million, elimination ofintersegment transactions of ¥5,138 million, and corporate expenses not allocated to reportable segments of ¥(4,579) million. Corporate
expenses are mainly general and administrative expenses that are not attributable to reportable segments.
			 (2) Th e adjustment amount for segment assets of ¥32,671 million includes the unamortized balance of goodwill of ¥6,128 million, elimination ofintersegment transactions of ¥(142,558) million, and corporate assets not allocated to reportable segments of ¥169,101 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 (furnitureand fixtures).
		 3. Segment profit (loss) coincides with the amount of operating loss in the consolidated statement of income.
		 4. Increases in property, plant and equipment, and intangible assets do not include an increase in goodwill resulting from the inclusion of subsidiaries
in the consolidation.

For the year ended February 28, 2021

Domestic

Overseas

Total

Lifestyle

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers$ 975,512$336,698$1,312,210$328,480$1,640,690$     —

$1,640,690

Intersegment sales or transfers

13,245

12,51025,755

18,95544,710(44,710)—$ 988,757$349,208$1,337,965$347,435$1,685,400$ (44,710)$1,640,690

Total
Segment profit (loss)$(128,634)$ (61,155)$  (189,789)$  1,387$  (188,402)$ (11,418)$  (199,820)

Segment assets$ 892,353$242,457$1,134,810$417,736$1,552,546$292,655$1,845,201

Depreciation and amortization (Note 2)$  29,030$8,610$   37,640$  9,505$   47,145$  4,680$   51,825

114

—

114

—

114

—

114

26,393

18,78045,173

11,22356,396

4,796

61,192

Investments in equity-method entities
Increases in property, plant and equipment,
and intangible assets (Note 2)

Notes: 1. Adjustments consist of the following:			 (1) The adjustment amount for segment profit (loss) of ¥(1,213) million ($(11,418) thousand) includes amortization of goodwill of ¥(787) million($(7,407) thousand), elimination of intersegment transactions of ¥3,639 million ($34,252 thousand), and corporate expenses not allocated toreportable segments of ¥(4,065) million ($(38,263) thousand). Corporate expenses are mainly general and administrative expenses that are not
attributable to reportable segments.
			 (2) The adjustment amount for segment assets of ¥31,095 million ($292,655 thousand) includes the unamortized balance of goodwill of ¥5,251 million ($49,422 thousand), elimination of intersegment transactions of ¥(133,274) million ($(1,254,346) thousand), and corporate assets not allocated to reportable segments of ¥159,118 million ($1,497,579 thousand). Corporate assets are mainly assets held by the Company, a pure holding
company.
		 2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses (furnitureand fixtures).
		 3. Segment profit (loss) coincides with the amount of operating loss in the consolidated statement of income.

(4) Segment information by geographical area for the years ended February 29, 2020 and February 28, 2021 is as follows:(a) Sales
For the year ended February 29, 2020

Millions of yen

Japan

Europe

Other

Total

¥198,071¥29,983¥20,180¥248,234

For the year ended February 28, 2021

Millions of yen

Japan

Europe

Other

Total

¥139,861¥23,840¥10,622¥174,323

For the year ended February 28, 2021

Thousands of U.S. dollars

Japan

Europe

Other

Total

$1,316,340$224,375$99,975$1,640,690(b) Property, plant and equipment
February 29, 2020

Millions of yen

Japan

U.S.A.

Europe

Other

Total

¥68,089¥9,358¥4,336¥1,448¥83,231

Millions of yen
Apparel¥    —¥174,323

4,751(4,751)—¥36,915¥179,074¥ (4,751)¥174,323¥ (20,165)¥   147¥ (20,018)¥ (1,213)¥ (21,231)

Japan

U.S.A.

Europe

Other

Total

¥25,761¥120,574¥44,384¥164,958¥31,095¥196,053$544,324$73,061$17,706$14,985$650,076¥  3,084¥   915¥  3,999¥ 1,010¥  5,009¥   497¥  5,506

12

—

12

—

12

—

12

2,804

1,996

4,800

1,192

5,992

510

6,502

Net sales to outside customers¥103,648¥35,774¥139,422¥34,901

Intersegment sales or transfers

1,408

1,329

2,737

2,014

¥105,056¥37,103¥142,159

Segment profit (loss)¥ (13,667)¥ (6,498)

Segment assets¥ 94,813

Depreciation and amortization (Note 2)
Increases in property, plant and equipment,
and intangible assets (Note 2)72

¥174,323

Overseas

Investments in equity-method entities

Onward Holdings Co., Ltd. Annual Report 2021

Millions of yen

Consolidated
total (Note 3)

Domestic

Total

February 28, 2021

Adjustments(Note 1)For the year ended February 28, 2021

Total

Lifestyle

Total

Japan

U.S.A.

Europe

Other

Total

¥57,835¥7,763¥1,881¥1,592¥69,071

February 28, 2021

Thousands of U.S. dollars

Onward Holdings Co., Ltd. Annual Report 202173

Notes to Consolidated Financial Statements(5) Segment information on impairment loss by reportable segment for the years ended February 29, 2020 and February 28, 2021 is as follows:
Millions of yen

For the year ended February 29, 2020

Domestic

Overseas

Apparel
Total

Lifestyle

Unallocatedamounts andelimination

Total

Impairment loss

¥3,137¥5,261¥8,398¥8,259¥11,099¥27,756

Millions of yen
Apparel
For the year ended February 28, 2021

Domestic

Overseas

Total

Lifestyle

Unallocatedamounts andelimination

Impairment loss

¥1,386¥1,003¥2,389

¥910

¥—

Total

¥3,299Domestic

Overseas

Total

Lifestyle

Unallocatedamounts andelimination

Total

Impairment loss

$13,044$9,442$22,486$8,566$—$31,052

21. Related-Party Transactions
Year Ended February 29, 2020

The Company leased land from Takeshi Hirouchi, Supreme Advisor of ONWARD HOLDINGS Co., Ltd., during the fiscal year, and the rental
fee was ¥8 million. Also, Mr. Hirouchi paid a rental fee of ¥15 million to the Company for a house. The rental fees were determined by the average
market prices.
Onward Fashion Lab 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., held 100% of voting rights directly, during fiscal year 2020. The transaction amount was ¥44 million, and the balance of relevant accounts receivable—trade as of February 29, 2020 was ¥9 million. Prices and otherterms and conditions were determined by reference to market prices or general terms and conditions.

Year Ended February 28, 2021

Onward Fashion Lab 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., held 100% of voting rights directly, during fiscal year 2021. The transaction amount was ¥45 million ($423 thousand), and the balance of relevant accounts receivable—trade as of February 28, 2021 was ¥0 million ($0thousand). Prices and other terms and conditions were determined by reference to market prices or general terms and conditions.

22. Subsequent Events(1) Transfer of fixed assets
As shown below, the Board of Directors of the Company resolved to transfer its subsidiaries’ fixed assets at the Board of Directors’ meeting held on
March 11, 2021.
(a) Grounds for transfer
To increase the efficiency of assets and improve financial strength.
(b) Details of transferred assets(i) Land and building in Nakamura-ku, Nagoya, Aichi
Land and building in Nakamura-ku, Nagoya, Aichi

Address and description

Meieki-minami 4-1107, Nakamura-ku, Nagoya, Aichi, Japan
Land area: 3,158.01 square meters
Total floor area: 16,227.29 square meters

Current state

Office* The gain from the transfer is expected to be approximately ¥3.5 billion ($33 million), which is the transfer price of ¥6.5 billion ($61 million) less the carrying amount of ¥2.8 billion ($26 million) and costs related to the transfer.

(ii) Land and building in Shibuya-ku, Tokyo
Asset nameLand and building in Shibuya-ku, Tokyo

Sumitomo Realty & Development Co., Ltd.

(2) Address

Shinjuku NS Building, Nishi-shinjuku 2-4-1, Shinjuku-ku, Tokyo, Japan(3) Name and title of representative

Kojun Nishima, Representative Director and President* There is no information to be specified between the transferee and the Company as a capital relationship, personnel relationship, business relationship, or
related party.

(d) Overview of consolidated subsidiaries(i) Land and building in Nakamura-ku, Nagoya, Aichi

For the year ended February 28, 2021

Asset name(1) Name(ii) Land and building in Shibuya-ku, Tokyo
Details are not disclosed because of a non-disclosure agreement with the transferee.

Thousands of U.S. dollars
Apparel(c) Overview of transferee(i) Land and building in Nakamura-ku, Nagoya, Aichi

Address and description

Current state

Jinnan 1-34-6, 1-34-24, Shibuya-ku, Tokyo, Japan
Land area: 246.65 square meters
Total floor area: 1,675.56 square meters

Store and office(1) Name

Onward Kashiyama Co., Ltd.

(2) Address

Nihonbashi 3-10-5, Chuo-ku, Tokyo, Japan(3) Name and title of representative

Tsunenori Suzuki, Representative Director and President(4) Business description

Planning, production and sales of men’s clothing, women’s clothing, children’s clothing, accessories and other items(5) Share capital¥100 million(ii) Land and building in Shibuya-ku, Tokyo(1) Name

Excel Co., Ltd.

(2) Address

Jinnan 1-20-8, Shibuya-ku, Tokyo, Japan(3) Name and title of representative

Koji Watanabe, Representative Director and President(4) Business description

Leasing of real estate property(5) Share capital¥80 million(e) Transfer schedule(i) Land and building in Nakamura-ku, Nagoya, Aichi(ii) Land and building in Shibuya-ku, Tokyo(1) Resolved at the Board of Directors’ meeting on:

March 11, 2021

March 11, 2021

(2) Agreement executed on:

March 11, 2021

March 11, 2021

(3) Property delivered on:

March 31, 2021

March 11, 2021(f ) Impact on operating results
The Company plans to recognize the gain from the transfer of the fixed assets of approximately ¥4.8 billion ($45 million) in “gain on sales of
non-current assets” under other income in the consolidated financial statements for the first quarter of the year ending February 28, 2022.
(2) Transfer of consolidated subsidiary (share transfer)
The Board of Directors of the Company resolved to transfer all shares of Jil Sander S.p.A. held by Onward Italia S.p.A., a consolidated subsidiaryof the Company, at the Board of Directors’ meeting held on March 5, 2021.
Due to the share transfer, Jil Sander S.p.A. has been removed from the scope of consolidation.
(a) Grounds for transfer
The Company, in order to address drastic changes in the Companies’ business environments, has proceeded with withdrawal from and scaling
down of unprofitable businesses and has worked on the selection and concentration on priority businesses as in the “Implementation of Global
Business Restructuring” timely disclosed on October 4, 2019.
The global spread of the COVID-19 caused a further worsening of the Companies’ business environments overseas primarily in Europe and asignificant impact on the Companies’ operating results.
Under these circumstances, as a result of examining various options for the future businesses in Europe, the Company determined, from theperspective of the Companies’ global business restructuring, that it was the best option to withdraw from the Jil Sander S.p.A. business, which had
been unprofitable, and to transfer its shares to a third party, and decided to transfer all the shares of Jil Sander S.p.A. held by Onward Italia S.p.A.
The Company transferred the shares of Onward Luxury Group S.p.A. as in the “Notice on Transfer of Consolidated Subsidiary (Share Transfer)” timely disclosed on December 11, 2020. Furthermore, the Company has disposed of an underperforming business through this share transfer
and will improve and strengthen the financial standing and accelerate the improvement of the Companies’ corporate value by further concentrating management resources on growth areas and stabilizing the revenue base.

* The transfer price and the carrying amount are not disclosed because of a non-disclosure agreement with the transferee. The gain from the transfer is
expected to be approximately ¥1.3 billion ($12 million) after deduction of the carrying amount and costs related to the transfer.

74

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202175

Notes to Consolidated Financial Statements(b) Overview of transferred subsidiary(1) Name

Jil Sander S.p.A.

(2) Address

Foro Buonaparte 71, 20121 Milano, Italy(3) Name and title of representative

Axel Keller, Representative Director(4) Business description

Planning and sales of “Jil Sander” brand items(5) Share capital€24,650 thousand(6) Established on

October 19, 2018(7) Major shareholder andshareholding percentage

Onward Italia S.p.A.: 100%(8) Relationship between
the Company and such company

Capital relationship: A consolidated subsidiary of the Company
Personnel relationship: 3 employees of the Company assuming the director of such company
Business relationship:	No direct business relationship(The Company has provided services related to consulting and management to such company’s parent company, Onward Italia S.p.A.)(c) Name of reportable segment including such company in segment information
Apparel Business (Overseas)(d) Overview of transferee(1) NameOTB S.p.A.

(2) Address

Via Dell’Industria 2, Breganze (Vicenza), Italy(3) Name and title of representative

Renzo Rosso, Representative Director(4) Business description

Holding company of fashion businesses(5) Share capital€25,000 thousand(6) Established on

December 7, 1981

(7) Net assets€884,356 thousand(8) Total assets€1,833,885 thousand(9) Relationship between
the Company and transferee

Capital relationship: There is no capital relationship to be stated between the Company and the transferee.
Personnel relationship: There is no personnel relationship to be stated between the Company and the transferee.
Business relationship: There is no business relationship to be stated between the Company and the transferee.

(3) Transfer of consolidated subsidiary (share transfer)
The Board of Directors of the Company resolved to transfer all shares of Freeland s.r.l. held by Onward Italia S.p.A., a consolidated subsidiary of
the Company, at the Board of Directors’ meeting held on March 26, 2021.
Due to the share transfer, Freeland s.r.l. has been removed from the scope of consolidation.
(a) Grounds for transfer
The Company, in order to address drastic changes in the Companies’ business environments, has proceeded with withdrawal from and scaling
down of unprofitable businesses and has worked on the selection and concentration on priority businesses as in the “Implementation of Global
Business Restructuring” timely disclosed on October 4, 2019.
The global spread of the COVID-19 caused a further worsening of the Companies’ business environments overseas primarily in Europe and asignificant impact on the Companies’ operating results.
Under these circumstances, as a result of examining various options for the future businesses in Europe, the Company determined, from theperspective of the Companies’ global business restructuring, that it was the best option to withdraw from the Freeland s.r.l. business and to transfer
its shares to a third party, and decided to transfer all the shares of Freeland s.r.l. held by Onward Italia S.p.A.
The Board of Directors of the Company resolved to transfer the shares of Onward Luxury Group S.p.A. and the shares of Jil Sander S.p.A. as
in the “Notice on Transfer of Consolidated Subsidiary (Share Transfer)” timely disclosed on December 11, 2020 and March 5, 2021, respectively.
The Company has executed this share transfer to complete a series of business restructuring initiatives in Italy.
The Company will dispose of underperforming businesses through the global business restructuring, which the Company has worked on since
the year ended February 29, 2020, and will improve and strengthen the financial standing and accelerate the improvement of the Companies’ corporate value by further concentrating management resources on growth areas and stabilizing the revenue base.
(b) Overview of transferred subsidiary(1) Name

Freeland s.r.l.

(2) Address

Via G da Verrazzano 4/6/8, 50054, Fucecchio Firenze, Italy(3) Name and title of representative

Claudio Tiezzi, Representative Director(4) Business description

Production and sales of sports footwear for luxury brands(5) Share capital€20,000 thousand(6) Established on

May 29, 2000(7) Major shareholder andshareholding percentage

Onward Italia S.p.A.: 60%(8) Relationship between
the Company and such company

Capital relationship: A consolidated subsidiary of the Company
Personnel relationship: 3 employees of the Company assuming the office of Director of such company
Business relationship:	No direct business relationship(The Company has provided services related to consulting and management to such company’s parent company, Onward Italia S.p.A.)(e) Transfer price and ownership percentage before and after transfer(1) Ownership percentage before
transfer

Ownership percentage: 100%(2) Ownership percentage transferred

Ownership percentage: 100%

(3) Share transfer price

The transfer price is not disclosed because of confidentiality provisions in the share transfer agreement.

(4) Ownership percentage after transfer Ownership percentage: 0%(f ) Schedule(c) Name of reportable segment including such company in segment information
Apparel Business (Overseas)(d) Overview of transferee(1) Name

FREE S.r.l.

(2) Address

Via Giovanni da Verrazzano n. 4/6/8, Fucecchio Firenze, Italy
Gabriella Pantani, Representative Director(1) Resolved at the Board of
Directors’ meeting on:

March 5, 2021

(3) Name and title of representative(4) Business description

Investing in companies and organizations(2) Agreement executed on:

March 5, 2021

(5) Share capital€1,010 thousand(3) Shares transferred on:

April 16, 2021

(6) Established on

February 16, 2020

(7) Net assets€40,000 thousand(8) Total assets€53,300 thousand(9) Relationship between
the Company and transferee

Capital relationship: There is no capital relationship to be stated between the Company and the transferee.
Personnel relationship: There is no personnel relationship to be stated between the Company and the transferee.
Business relationship: There is no business relationship to be stated between the Company and the transferee.

(g) Impact on operating results
The impact of this share transfer will be recognized in the year ending February 28, 2022.
The Company is currently examining the impact on the Companies’ operating results for the year ending February 28, 2022.

(e) Transfer price and ownership percentage before and after transfer(1) Ownership percentage before
transfer

Ownership percentage: 60%(2) Ownership percentage transferred

Ownership percentage: 60%(3) Share transfer price

The transfer price is not disclosed because of confidentiality provisions in the share transfer agreement.

(4) Ownership percentage after transfer Ownership percentage: 0%76

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202177

Notes to Consolidated Financial Statements

Independent Auditor’s Report(f ) Schedule(1) Resolved at the Board of
Directors’ meeting on:

March 26, 2021

(2) Agreement executed on:

March 26, 2021

(3) Shares transferred on:

March 29, 2021

(g) Impact on operating results
The impact of this share transfer will be recognized in the year ending February 28, 2022.
The Company is currently examining the impact on the Companies’ operating results for the year ending February 28, 2022.
(4) Reductions in amounts of legal capital surplus and legal retained earnings as well as appropriation of surplus
As shown below, at the Board of Directors’ meeting on April 8, 2021, the Board of Directors of the Company resolved to discuss the proposal for
reductions in the amounts of legal capital surplus and legal retained earnings as well as appropriation of surplus at the General Meeting of Shareholders on May 27, 2021, and the proposal was approved at the said shareholders’ meeting.
(a) Reduction in amount of legal capital surplus(i) Purpose of reduction in amount of legal capital surplus
In order to increase surplus as dividend resources and implement a flexible and stable dividend policy that responds to changes in the Companies’
business environments in future, the amount of legal capital surplus has been reduced and transferred to other capital surplus in accordance withthe provisions of Article 448, paragraph (1) of the Companies Act.
(ii) Summary of reduction in amount of legal capital surplus
1) Amount of reduction in legal capital surplus¥13,000,000,000 ($122,352,941) of legal capital surplus ¥51,550,605,414 ($485,182,169)
2) Method of reducing amount of legal capital surplus
All the amount of reduction in legal capital surplus has been transferred to other capital surplus.
(b) Reduction in amount of legal retained earnings(i) Purpose of reduction in amount of legal retained earnings
In order to increase surplus as dividend resources and implement a flexible and stable dividend policy that responds to changes in the Companies’
business environments in future, the amount of legal retained earnings has been reduced and transferred to retained earnings brought forward inaccordance with the provisions of Article 448, paragraph (1) of the Companies Act.
(ii) Summary of reduction in amount of legal retained earnings
1) Amount of reduction in legal retained earnings¥5,482,510,554 ($51,600,099) of legal retained earnings ¥5,482,510,554 ($51,600,099) (full amount)2) Method of reducing amount of legal retained earnings
All the amount of reduction in legal retained earnings has been transferred to retained earnings brought forward.
(c) Schedule of reductions in amounts of legal capital surplus and legal retained earnings(1) Resolved at the Board of
Directors’ meeting on:

April 8, 2021

(2) Public notice to creditors forobjections:

April 16, 2021

(3) Final date on which creditors may
state objections:

May 17, 2021

(4) Resolved at the General Meeting of May 27, 2021
Shareholders on:(5) Effective date:

May 27, 2021(d) Appropriation of surplus
In order to increase surplus as dividend resources and implement a flexible and stable dividend policy that responds to changes in the Companies’
business environments in future, all the amount of general reserve ¥38,709,000,000 ($364,320,000) has been reversed and transferred to retained
earnings brought forward.
(e) Impact on operating results
This does not have any impact on the Company’s operating results, since the accounts have been transferred under “net assets section” and there is
no change in the amount of net assets.

78

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202179

Independent Auditor’s Report80

Onward Holdings Co., Ltd. Annual Report 2021

Onward Holdings Co., Ltd. Annual Report 202181

Our Network
As of August 31, 2021

United States

Europe
Asia

Japan

U.K.

China

Japan

U.S.A.

LondonShanghaiTokyo

New York				Joseph Ltd.
	Freed of London Ltd.

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

		

Onward Holdings Co., Ltd.

		

J. Press, Inc.

		

Shanghai Onward Fashion Co., Ltd.

		

Onward Kashiyama Co., Ltd.

		

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

		

Onward Trading (Shanghai) Co., Ltd.

		

Onward Trading Co., Ltd.

		

Island Co., Ltd.

		

Onward Personal Style Co., Ltd.

		 	Onward Beach Resort Guam, Inc.

		

Intimates Co., Ltd.

		 	Onward Golf Resort Guam, Inc.

		

Onward Digital Lab Co., Ltd.

Dalian				 	Horloge Saint Benoit S.A.S.

Kashiyama (Dalian) Co., Ltd.

Hong Kong			Onward Kashiyama Hong Kong Ltd.

VietnamHo Chi Minh City			Onward Kashiyama Vietnam Ltd.

Guam		 	Chacott Co., Ltd.
		 KOKOBUY Co., Ltd.
			Kashiyama Daikanyama Co., Ltd.

			Onward Creative Center Co., Ltd.

			Onward Resort & Golf Co., Ltd.

			O & K Co., Ltd.

Pure Holding Company
Apparel-Related Business
Lifestyle-Related Business

Osaka
		

	Tiaclasse Co., Ltd.

Nagano		 	Creative Yoko Co., Ltd.
		 	Yamato Co., Ltd.

Saga
		

82

Onward Holdings Co., Ltd. Annual Report 2021

Kashiyama Saga Co., Ltd.

Onward Holdings Co., Ltd. Annual Report 202183

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

Corporate / Investor Information
As of February 28, 2021

As of May 27, 2021

Name

Directors

President and CEO

Michinobu Yasumoto
Senior Managing Director

Audit & Supervisory
Board Members

Executive Officers

Standing Audit & Supervisory
Board Members

Senior Managing Executive
Officer

Hirokazu Yoshizato

Yasuharu Tamura

Hisayuki Ichinose

Tsunenori Suzuki

Head Office 	10-5, Nihonbashi 3-chome, Chuo-ku, Tokyo 103-8239, Japan

Directors

Osamu Sato

Ryu Umezu

Daisuke Ikeda

Mitsuyo Kusano

Tel(+81) 3-4512-1051 (IR Div.)

Established

September 1947

Capital¥30,079 million

Common Stock 	Authorized— 400,000,000 shares
Issued—157,921,669 shares

Managing Executive Officers

Outside Audit & Supervisory
Board Members

Onward Holdings Co., Ltd.

Note: The total number of issued and outstanding shares includes 22,322,123 shares of treasury stock.

Kenji Takeuchi
Takeshi Egashira
Yoshihiro Higuchi

Number of Shareholders

37,657

Stock Exchange Listing

Tokyo Stock Exchange (as of September 30, 2021)

Transfer Agent	Mitsubishi UFJ Trust & Banking Co., Ltd.
1-1, Nikkocho, Fuchu, Tokyo 183-0044, Japan

Outside Directors

Number of Employees(Consolidated)

Akira Kawamoto
Yoshie Komuro

7,498

Kenji Chishiki
Note: The name of Mr. Tsunenori Suzuki in the family register is Tsunenori Hasegawa, and the name of Ms. Yoshie Komuro in the family register is Yoshie Ishikawa.

Major Shareholders

Distribution of Ownership among
Shareholders

Number of
Shares Held(Thousands)

Percentage ofTotal Shares
Issued (%)

Kashiyama Scholarship Foundation

8,710

6.4

Company Organization

Individuals
and others

Financial
institutions

Onward Holdings Customers’ Shareholdings Association

5,163

3.8

44.9%

21.2%

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

5,066

3.7

As of September 1, 2021

Nippon Life Insurance Company

4,671

3.4

Fumiya Shino

4,201

3.0

The Dai-ichi Life Insurance Company, Ltd.

4,200

3.0

STATE STREET BANK AND TRUST COMPANY 505001

3,182

2.3

Sumitomo Mitsui Banking Corporation

2,931

2.1

SMBC Nikko Securities Inc.

2,660

1.9

Isetan Mitsukoshi Ltd.

2,301

1.6

General Meeting of Shareholders
Audit & Supervisory Board
Board of Directors
President and CEO

Notes:
1. The Company holds 22,322,123 shares of treasury stock.

(On a number of shares basis)

Securities
companies

3.4%

Foreigninstitutions
and others

11.4%

Other
corporations

19.1%

Note: Data regarding individuals and others
includes treasury stock.

2. The percentage of total shares issued is calculated after deducting 22,322,123 shares of treasury stock.

Internal Control Office

European Operations

President’s Office

North American Operations

Stock Price Range and Trading Volume
Stock Price
(¥)

800

Asian Operations
Corporate Planning,
Human Resources,

Planning & Production

600

General Affairs, Corporate Sustainability
Advertising & Marketing

Trading Volume(ThousandShares)400

Information System

Finance, Accounting,
Investor Relations

Supply Chain Management

60,000200

40,00020,000

Corporate Business84

Onward Holdings Co., Ltd. Annual Report 2021

0

2020/32021/30

Onward Holdings Co., Ltd. Annual Report 202185