ANNUAL REPORT 2020
Year Ended February 29, 2020

Onward Holdings Co., Ltd.

ANNUAL REPORT 2020
Year Ended February 29, 2020

Onward Holdings Co., Ltd.

Contents
04

Onward at a Glance

06	A Message from the President
08

Special Feature

14

Apparel Business

18

Lifestyle Business

20

Core Brands

28

Our History

32

Our Network

34

Onward-Approved Factory System

36	Environmental and Social Responsibility
40

Corporate Governance44	Board of Directors, Audit & Supervisory
Board Members,
and Executive Officers /Company Organization
45

Financial Section

85

Main Subsidiaries

87

Corporate / Investor Information

88

History

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

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 20203

Onward at a Glance
Fiscal year ended February 29, 2020

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

Founding

Main CSR Activities

1927

Item collection for

Number of Employees

the Onward Green
Campaign

Operating Margin¥ – 3,061 million

Profit Attributable to Owners of Parent

 actory auditing throughF
the Onward-Approved
Factory System

recycling and reuse via

5,153 people

Operating Profit(See pages 34–35 for details)–1.2 %

ROE¥ –52,135 million– 42.02 %(See pages 37–38 for details)

Sales Breakdown
By Business Segment

.

.

18.7%

Domestic





.



.
.

Overseas

E-Commerce 

82.7% 16.8%

.

17.3%

ApparelLifestyle 

By Sales Channel*

Total Net Assets
Physical Storesand Others

83.2%

Ratio of sales conducted through directly
operated e-commerce stores roupwide basis G nward Kashiyama 
O

64.0%

By Geographic Region

Shareholders’ Equity Ratio

85%
91%

¥ 94,037 million

38.3 %* Figures for Onward Kashiyama

Net Sales

Cash Dividends per ShareOthers 

8.1%


.
.

¥ 248,234 million

Europe

.

12.1%

79.8%

4

Japan

Onward Holdings Co., Ltd. Annual Report 2020

¥ 24.00(3.2% YoY)

Onward Holdings Co., Ltd. Annual Report 20205

A Message from the President

Michinobu Yasumoto

The Onward Group is pursuing improved
corporate value by steadily advancing
growth strategies positioning the digital field,
the customization field, and the lifestyle field as
pillars of future growth while moving forwardwith global business reforms.

Representative Director, President

Operating Profit Trends under the New Medium-Term Management Plan
¥ billion
2019

Growth Strategies
CreationFirst Business

Factory to Customer(F2C) BusinessBusiness Structural
Reforms

2022 (Plan)

+ 1.5

10.0

High-Quality
Lifestyle Business

+ 1.5
+ 1.5
+ 1.0
4.5

¥4.0 billion+

from growth strategies¥1.5 billion

from business structural reforms¥5.5 billion

Increaseover three fiscal years

Review of Fiscal Year 2020
In fiscal year 2020, net sales increased 3.2% year on year, to¥248.2 billion; operating loss of ¥3.1 billion was recorded, compared with operating profit of ¥4.5 billion in the previous fiscal year;
ordinary loss of ¥3.8 billion was posted, compared with ordinary
profit of ¥5.2 billion; and loss attributable to owners of parent cameto ¥52.1 billion, compared with profit attributable to owners ofparent of ¥4.9 billion.
In the domestic apparel business, sales and profit were down.
Although this business benefited from strong e-commerce sales,
overall performance suffered due to faltering sales at physical stores
stemming from the impacts of the consumption tax hike in Japan
as well as unseasonable weather, specifically the warm winter, andnatural disasters such as heavy rains and typhoons. Overseas, we
implemented global business reforms, enabling our Asian businessto achieve higher profit despite a decline in sales. The benefits ofthese reforms in the European and North American businesses,
however, did not appear in fiscal year 2020, but will be felt in fiscal
year 2021 forward. Accordingly, sales and profit were down in theoverseas apparel business. Due to these factors, overall sales andprofit in the Apparel Business segment decreased.
The Lifestyle Business segment, meanwhile, achieved higher sales
and profit. One factor behind this accomplishment was the newconsolidation of gift catalog business operator Yamato Co., Ltd.,
which enabled this segment to expand operations in the new fieldof gifts. Another factor was earnings improvements stemming fromthe deployment of new brands by Chacott Co., Ltd.

Steady Progress in Growth Strategies
and Global Business Reforms
Onward is making steady progress in growth strategies positioning
three fields as pillars of future growth: the digital field, the customization field, and the lifestyle field. At the same time, we aremoving forward with global business reforms. In these reforms, weseek to withdraw from and contract the scale of underperforming

6

Onward Holdings Co., Ltd. Annual Report 2020

businesses while closing unprofitable stores in the European,North American, Asian, and Japanese markets.
In the digital field, one of the pillars of our growth strategies, weachieved a 31% year-on-year increase in e-commerce sales, whichcame to ¥33.3 billion in fiscal year 2020 on a consolidated basis.
Centered on Onward Crosset, the ratio of sales through directly
operated e-commerce venues rose substantially to 85%. Comparedwith physical stores and third-party e-commerce sites, directly
operated e-commerce venues boast exceptional levels of profitability
coupled with a high capacity for managing customers. Accordingly,
these venues have always been positioned as a cornerstone of our
growth strategies. The stagnation of sales at physical stores is projected to be prolonged by the impacts of the global COVID-19
pandemic. For this reason, we intend to devote substantial efforts
to accelerating the growth of our e-commerce operations.
In this undertaking, we will look to overhaul our operational
structures to prioritize growing e-commerce operations. Thisapproach will include utilizing marketing data suited to e-commerce sales channels and will extend to everything, from productplanning to pricing. Another focus will be expanding the user baseof our e-commerce sites. Accordingly, we will be working toencourage users of Onward Members’ loyalty point card system toutilize our e-commerce sites in order to increase our number of
e-commerce customers.
We aspire to grow Onward into an e-commerce business operator
boasting high-level planning and production functions. To this end,
we plan to accelerate the growth of our e-commerce operations interms of both products and customer base, so as to expand these
operations to the point that they are generating more than 50% ofconsolidated net sales over the medium-to-long-term.
I also see a need to ramp up structural reforms in relation toexisting physical stores. In fiscal year 2020, the Onward Group
closed or consolidated approximately 700 stores around the world.
This move was taken in response to issues pertaining to our overabundance of store locations and to declining customer numbers.
Looking ahead, we expect that the decline in customer numbers

will accelerate as a result of the global COVID-19 pandemic.
Accordingly, we plan to close or consolidate an additional 700
stores as part of our selection and concentration efforts in fiscal
year 2021. Moreover, we will seek out the ideal form for the physicalstores of the future in the apparel business while endeavoring toincreasingly direct customers who frequent physical stores to
e-commerce venues and vice versa.
Efforts in the second pillar of our growth strategies, the customization field, included the development of factory-to-customer
operations that utilize a customization business model linking
factories and customers. The KASHIYAMA the Smart Tailor made-toorder suit business, one such business that saw a full-fledged launch
in 2018, posted net sales of about ¥5.0 billion in fiscal year 2020.
Our factory-to-customer operations started from men’s businesssuits, a business that we have been engaged in since the birth of the
KASHIYAMA. Moving forward, however, we aim to expand thescope of our KASHIYAMA customization business model to include
made-to-order women’s business suits as well as shoes and bags.
The third pillar of our growth strategies is the lifestyle field.
Operations in this field posted increases in sales and profit in fiscal
year 2020. Performance is holding firm even in the face of challenging
conditions, and some companies are even overcoming said conditions
to achieve growth in sales. The lifestyle field is home to Group
companies active in growth areas that address customer needs foritems for use while staying home as well as for healthy living andorganic products. These companies are eyeing Asia and other overseas
markets for their future business expansion efforts. Going forward,
we will continue to develop businesses in the lifestyle field while
proactively engaging in M&A activities.
Moving on, I would now like to talk about our global businessreforms. In our Asian business, we withdrew from directly operated
businesses in South Korea during fiscal year 2020. In addition, we
completed the transference of licensing businesses for Nijyusanku
and ICB in our Chinese sales operations. We recognize that stable
management of manufacturing operations in China and theASEAN region will be imperative to the future of the Asian business.

Moreover, we intend to deploy the KASHIYAMA customization
business model outside of Japan, developing it as a growth businessin China and other Asian markets. As for our European and North
American businesses, we have been marching forward with reforms,
such as bold withdrawals from underperforming businesses, since
fall 2019. However, we were forced to suspend these reforms due tothe impacts of the global COVID-19 pandemic, causing delays from
our initial schedule. Regardless, we still intend to rapidly advancebusiness reforms going forward, particularly in Europe.

Financial Strategy
The basic policy of the financial strategy of the Onward Group is
to conduct priority investments in growth businesses and to issue
appropriate shareholder returns all while maintaining a stable financial base. We recognize the importance of maintaining healthy cash
flows given the opaque outlook for the global operating
environment. Accordingly, we look to improve operating cash
flows based on management positioning EBITDA as an important
indicator, an approach carried on from the previous fiscal year. As for
dividends, our basic policy is to distribute regular and stable dividends to shareholders in accordance with our business performance,
and we target a dividend payout ratio of 35% or more. Meanwhile,
we will continue working to raise return on equity above 5% as soon
as possible, after which we will seek to increase this indicator to 8%.
Going forward, the Onward Group stands committed to improving corporate value through the provision of high-quality products
and services, among other initiatives. I hope we can look forward to
your ongoing support as we advance on this quest.
August 2020
Michinobu Yasumoto
Representative Director, President

Onward Holdings Co., Ltd. Annual Report 20207

SPECIALF E AT U R E
Advancement of Business Reforms andThree Pillars of Growth Strategies
The Onward Group is enacting a management policy of advancing
global business reforms and growth strategies positioning the digitalfield, the customization field, and the lifestyle field as pillars of
future growth.
In this special feature, we will look at some concrete examples
of initiatives to be implemented based on each of the pillars of theabovementioned growth strategies.

1

3

Acceleration of Growthin the Digital Field

Lifestyle Field
Businesses

2
Promotion of the
Factory-to-Customer
Business in the
Customization Field8

Onward Holdings Co., Ltd. Annual Report 2020

1

Acceleration of Growthin the Digital Field

Debut of New uncrave
E-Commerce-Oriented Brand—
The new direct-to-consumer brand uncrave, which targets
working women with diverse lifestyles and will primarily
be deployed through e-commerce venues, was launchedon the Onward Group’s official e-commerce website—
Onward Crosset—in February 2020.
With it becoming more commonplace for women tohave careers and thus be more socially active, they are
increasingly longing for clothing that exquisitely balances
the intellectual and the sensitive and the fashionable
and the basic and which is suitable for the needs of­various social situations. The uncrave brand therefore has
been launched focusing on coordinated outfits to meetthese needs.
We are currently promoting uncrave’s brand philosophy anddistributing the latest news through the brand’s official social
media accounts while also opening pop-up stores in orderto improve brand awareness and grow e-commerce sales.

#StayStylish Project—
Onward Holdings launched the #StayStylish Project on
May 14, 2020, based on its desire to help make the world
a brighter place through the power of fashion.
The #StayStylish Project seeks to empower everyone
who is feeling the stress of the limitations placed on themby the global COVID-19 pandemic.
In this project, all fashion lovers are encouraged to band
together as a single team to help make the world a brighter
place through the power of fashion.
The project is being promoted through television commercials and social media with the project message of“Seize this opportunity to find a new side of yourself in thefitting room; now is the time to make the world a brighter
place together.”Moreover, we held a RED CROSS WEEK event in
May 2020 during which a portion of all sales throughOnward Crosset, the Onward Group’s official e-commerce
website, were donated to the Japanese Red Cross Society,an organization with which the Group has collaborated insocial contribution activities since 2011. This event washeld to recognize the Japanese Red Cross Society’s endorsement of the #StayStylish Project and acknowledge its
annual designation of May as a month for promoting
activities based on its goals.

Onward Holdings Co., Ltd. Annual Report 20209

2
Promotion of the
Factory-to-Customer
Business in the
Customization Field
Launch of Made-to-Order
Women’s Shoes—
The Onward Group launched its second factory-to-customer
business in November 2019: made-to-order women’s shoes.
In our made-to-order women’s shoe business, we allow customers
to choose from an astounding lineup of design and material variations for pumps and other shoe types as well as from a robust
selection of size samples to make the shoe that fits their foot perfectly.
Prices start from a reasonable ¥9,900 (before tax) and theordered shoes are shipped directly to customers from the manufacturer: a partner factory in Japan equipped with cutting-edge
computer-aided design and computer-aided manufacturing(automatic cutting) systems.
Just like our made-to-order suits, customers can receive theirproducts in as little as a week. Customers can choose fromapproximately 300,000 different combinations of base designs,
materials, and heels to create their perfect shoe. Moreover, as theshoes are made to order, it is possible to buy a pair with different
sizes for the left foot and right foot. We offer a total of 30 size
combinations comprising 10 length choices and three circumference
choices. Orders can be placed through our e-commerce website.

10

Onward Holdings Co., Ltd. Annual Report 2020

Collaboration between ZOZO and KASHIYAMA to Explore
New Fashion Business Domains—
On August 26, 2020, Onward Personal Style Co., Ltd., began offering made-to-order coordinated outfits for men and women fromits KASHIYAMA made-to-order brand on the ZOZOTOWN website operated by ZOZO, Inc.
The KASHIYAMA brand boasts a robust lineup of size patterns made using data collected over the course of its long history
while also benefiting from the Onward Group’s directly operated manufacturing platform. ZOZO, meanwhile, has accumulated
big data on more than 1.0 million body types through its ZOZOSUIT line and serves over 8.6 million people via its website
every year (as of June 30, 2020). Combining these two massive databases of body data has allowed for the creation of a framework through which made-to-order fashion items can be ordered easily and completely online while accommodating a wide rangeof size variations. This service is offered in the multi-size section of the ZOZOTOWN website.
In the future, we hope to explore new fashion domains in which easy access to made-to-order items can be offered online. The
made-to-order women’s shoes available through the KASHIYAMA brand are one example of these efforts, and we are planningthe manufacture and sale of new made-to-order items going forward. We aim to grow the completely online sales business model
for made-to-order items being developed by KASHIYAMA and ZOZO to achieve sales of around ¥10.0 billion in five years.

Onward Holdings Co., Ltd. Annual Report 202011

3Lifestyle Field
Businesses
Celebration of
70th Anniversary of
Chacott—
Chacott’s history dates back to 1950,
shortly after the conclusion ofWorld War II, when Chacott’s founderencountered a pair of toe shoes that had
been completely worn out. Over theyears, the Chacott brand grew whilecatering to the needs of dancers of balletand various other styles, carving out anunshakable industry position as a brandspecializing in dance-related products.
We celebrated the 70th anniversary of
Chacott in January 2020. This
momentous occasion has been designated as the “first day of the future,”
symbolizing our desire to continue
evolving this brand and to utilize
the insight and experience we haveaccumulated thus far to encourage as
many customers as possible to embrace
the Chacott brand.

Release of Kateigaho Gourmet Gift Catalog OfferingOnce-in-a-Lifetime Gourmet Encounters Based on the
Theme of Travel and Food—On September 1, 2020, Yamato Co., Ltd., partnered with Sekai
Bunka Retailing Inc., the mail order business arm of the
Sekaibunka Group, to launch a gourmet gift catalog basedon the Kateigaho magazine published by SEKAI BUNKA
PUBLISHING INC.
Kateigaho has presented a world of dreams and beauty over thesome six decades that it has been in publication. The gift catalog
based on this magazine embraces the theme of travel and food,
introducing carefully selected items from across Japan throughspecial features that are in keeping with the world of dreams andbeauty illustrated by that exude a sense of beauty and culture
befitting of Kateigaho.
The Kateigaho gift catalog can be a very personal gift that adds
prestige to the lifestyles of high-class individuals with a discerning
sense of value.

Kateigaho Gourmet Gift Catalog

12

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202013

Apparel Business
Other Domestic
Apparel Subsidiaries

The Apparel Business segment, which operates the principal business of the Onward Group, comprises 70 operating companies
and generates 82.7% of the Company’s consolidated net sales. This segment primarily performs the planning, production, and saleof textile products. The operations of this segment are divided into the domestic apparel business, which includes core operatingcompany Onward Kashiyama, and the overseas apparel business, a global business developed in regions such as Europe, Asia, andNorth America.

Contribution to
Total Sales

Net Sales byApparel BusinessBusiness Overview ofMajor Subsidiaries
Island, which has Grace Continental as itscore brand, is providing fashion itemswith a distinctive aesthetic that is proving
immensely popular among women withrefined tastes. At Onward Trading, aleading domestic manufacturer of uniforms, the apparel expertise and productplanning excellence cultivated by theGroup are used to provide corporate
uniforms to suit any environment while
striking the best balance between styleand usability.

¥ million

240,000
180,000
120,000

82.7%¥205,265
million60,0000Domestic

2018
2019
Overseas

2020

2017

2018

2019


Domestic Apparel Business
The domestic apparel business is our mainstay business, generating 64.0% of consolidated net sales, and its operations encompass
the planning, manufacture, and retail of apparel items on the mid-range to high-end scale of prices. This business also carries out
the production and wholesale of corporate uniforms and sales promotion goods.

KUMIKYOKU

Performance in Fiscal Year 2020
In fiscal year 2020, e-commerce operations
centered on core operating company
Onward Kashiyama were strong. At thesame time, Onward Trading, a company
that plans and sells corporate uniforms
and sales promotion goods, enjoyed higher
sales and profits. Overall, however, sales
and profits were down in the domestic
apparel business. This outcome was a
result of sales at physical stores beingheavily impacted by the consumption
tax hike in Japan; natural disasters such as
heavy rains and typhoons; and unseasonable
weather, most notably the warm winter.

JiyukuOnward Kashiyama
Business Overview
Onward Kashiyama is the Group’s core
operating company, generating 51.6%
of consolidated net sales. Engaged inplanning, production, sales, and otheractivities for providing clothing of impeccablequality, Onward Kashiyama supplies

14

Onward Holdings Co., Ltd. Annual Report 2020

womenswear, menswear, children’s clothing,
and accessories from private brands as wellas licensed brands.
Alongside distribution via department
stores, our main sales channel and an areaof strength, we are stepping up the distribution of our products through the growing
venue of e-commerce.

Future initiatives will be aimed at
establishing operating foundations adapted
to the trend toward Omni-channel retailing.
We will accomplish this objective byintegrating the functions of physical andonline stores while boosting efficiency
through logistics reforms and by enhancing
our product planning and production capabilities as a manufacturer.

TOCCA

Onward Holdings Co., Ltd. Annual Report 202015

Overseas Apparel Business
The overseas apparel business consists of operations in Europe, Asia, and North America, where we develop brands and conduct
planning and manufacturing activities, and accounts for 18.7% of consolidated net sales.
Higher profitability will be pursued through business reforms in Europe and Asia, as we strengthen our competitiveness in
the global market.

EuropeThe European business—our largest overseas
business—primarily conducts the manufacture and sale of luxury and high-end appareland accessories.
In March 2019, organizational reforms
were undertaken at core subsidiary Onward
Luxury Group.
Under the new structure, manufacturing
divisions and the JIL SANDER brandbusiness will be operated by independentcompanies while Onward Italia will beplaced in charge of the overall managementof operations. Meanwhile, Joseph Ltd., whichis growing the JOSEPH brand centered on
London, has implemented new management
and creative teams.
Going forward, we will seek to maximize

synergies in the European business as wedevelop a unique presence in the European
fashion industry as a conglomerate boasting
a comprehensive range of functions encompassing brand, manufacturing, and retail
operations.

Business Overview
Onward Italia
The core businesses of Onward Italia are
manufacturing, which is advanced using
directly operated factories in Italy, and theJIL SANDER brand business. Throughthe organizational reform instituted in
March 2019, both of these core businesses
were spun off into subsidiaries.
Onward Italia is taking steps to ­improveadministrative management and corporate
governance while reinforcing its management structure through means such as theappointment of new leadership. In thismanner, the company is accelerating
growth strategies and business structurereforms in the European business.

Jil Sander
The company conducts the planning,
manufacture, and wholesale of the JIL
SANDER brand luxury menswear andwomenswear collections and accessories
and manages retail on a worldwide basis.
JIL SANDER has been working to
reinvent its brand since appointing Lucieand Luke Meier as the creative directors of
JIL SANDER to coincide with the launchof the 2018 spring/summer collection.
In conjunction with this brand reinvention,
we renovated our JIL SANDER stores in
the Omotesando area of Tokyo in September
2018 and in Paris in October 2019. In
addition, the new line JIL SANDER+ waslaunched together with the 2019 autumn/
winter collection.
Meanwhile, the Florence production
site was transformed into an exclusive site
for use by the JIL SANDER brand in
October 2019.

Onward Luxury GroupJIL SANDER

Onward Luxury Group, a company
formed by restructuring prior manufacturing
divisions, undertakes the production of
the principal items that are indispensable
to a designer brand line, including appareland shoes. Moreover, the company isconstructing a manufacturing platform
capable of providing the utmost levels of
quality.
In addition to the production of Groupbrands, Onward Luxury Group conducts
OEM and contract manufacturing andwholesale of outside brand products basedon licensing agreements.
ICB

16

Onward Holdings Co., Ltd. Annual Report 2020

Product development focused on the
JIL SANDER brand will be ramped up
going forward as we simultaneously enhancecommunication between creative teams
and production sites.
We look forward to communicating the
new JIL SANDER to the world and increasing
its recognition as a global brandJosephJoseph undertakes the planning, manufacture,and sale of JOSEPH brand menswear andwomenswear collections and accessories andis also developing a network of multi-brandstores and JOSEPH brand stores centeredon London.
In 2019, management, creative teams,
and retail store networks were reinvented
and restructured.
Looking ahead, Joseph will move
forward with structural reforms focusing
on customers, corporate culture, andcreativity in order to enhance profitability
and launch the JOSEPH brand on a new
growth track.

JOSEPHAsia
In our Asian business, we transformed ourbusiness model in January 2020 after
becoming partners with local companies in
China for the purpose of further expanding
the Nijyusanku and ICB brands in thiscountry. Going forward, we aim to achieve
greater brand awareness of our core brands
through our new sales network.
With regard to KASHIYAMA, which is
positioned as a growth business for the
Onward Group, we opened a directly
operated store in Shanghai in August 2020
to expand this business in China.
Meanwhile, core Onward Kashiyama
brands are sold in department stores andshopping centers in areas such as Hong
Kong and Taiwan.
Furthermore, recognizing that Asia isalso an important production site, we areclosely coordinating with partner factories
in China and reinforcing the Company’s
manufacturing platform in the ASEAN
region. One example of these efforts is theacquisition of a factory located in Dalian,
China, in 2016, which is now Kashiyama(Dalian) Co., Ltd.
This factory established a highly efficient
made-to-order production system as amanufacturing site for the KASHIYAMA
business. In April 2019, operationscommenced at the Group’s second Dalianfactory, and we are currently in the processof rebuilding the first factory. These factories

are expected to support the increasingly
rapid growth of KASHIYAMA.

North
America
The North American business is mainly
focusing on retail operations.
J. PRESS, acquired by Onward
Holdings in 1986, is a well-loved brandamong Ivy Leaguers. We currently own
three directly managed stores in North
America, including the Yale Club store in
New York City opened in October 2017.
This flagship store will drive efforts to
attract new customers.
KASHIYAMA was launched in North
America in 2019, and we are developing
this brand by using the shared office spaceprovided by WeWork Companies Inc., inaddition to the new flagship store in New
York opened in 2020.
As we move forward, we will conduct
necessary investments from a medium-tolong-term perspective to expand ourNorth American business.

Performance in Fiscal Year 2020
In fiscal year 2020, the Asian businessachieved higher profit, despite lower sales,
due to the benefits of business reforms.
However, total sales and profits were downin the overseas business.
Onward Holdings Co., Ltd. Annual Report 202017

Lifestyle Business
The Lifestyle Business segment comprises 21 operating companies and generates 17.3% of the Company’s­consolidated net sales. In this segment, we capitalize on the Onward Group’s product development and sales­capabilities to create new values and lifestyles with fashionable proposals in a wide variety of fields. The LifestyleBusiness segment thus manufactures and sells items such as gifts, dance wear, pet fashion, character goods andtoys, and cosmetics; operates and manages resort facilities; and plans, designs, and constructs commercial facilities.

Contribution to
Total Sales

Net Sales byApparel Business¥ million

45,00030,00017.3%¥42,969
million

15,000Business Overview of Major Subsidiaries
Yamato Co., Ltd., a planner and producer of gifts and gift catalogs,
is anticipated to realize synergies with the Apparel Business segment
and broaden the Onward Group’s business scope in the completely
new field of gifts.
Chacott, a manufacturer and retailer of ballet and other dance
wear, is capitalizing on its high recognition as a manufacturer tobroaden the scope of its business into yoga, fitness, cosmetics, andother new fields. In Europe, we operate Freed of London, theworld’s leading manufacturer of professional dance shoes.
Creative Yoko offers a lineup of products for pets as well as anassortment of character goods and toys. This company is bolstering
sales through e-commerce venues while also strengthening its
character merchandise business, which is focused largely on its
original character Sirotan.
Meanwhile, we are expanding our operations in the growthbusiness of cosmetics centered on Kokobuy, which manufacturesand sells organic cosmetics and haircare products.
In our resort business, we operate hotels and golf courses in
Guam as well as golf courses and golf schools in Japan.

0

2018

2019

2020

2017

2018

2019

20

Core Brands

28

Our History

32

Our Network

34

Onward-Approved Factory System

36

Environmental and Social Responsibility

40

Corporate Governance44	Board of Directors, Audit & Supervisory
Board Members, and Executive Officers /Company Organization
Sirotan, the main character of Creative Yoko

Performance in Fiscal Year 2020
In fiscal year 2020, both sales and operating profit were up in theLifestyle Business segment. Incorporating the newly consolidated giftbusiness operator Yamato, the segment worked to grow its operationsin the new field of gifts. Great contributions to performance weremade by Yamato during this fiscal year. In addition, Chacottachieved improvements in earnings by deploying new brands.

18

Onward Holdings Co., Ltd. Annual Report 2020

product

Onward Holdings Co., Ltd. Annual Report 202019

Core Brands

LAUNCHED

1993
ANNUAL SALES¥26.6 billion

Nijyusanku is the leading brand of Onward
Kashiyama. With working women in their
30s and 40s as its core target, the brand isbased on the concept of creating a “Japanesewomen’s standard.” It thus seeks to capture
the hearts of customers of all ages with its
timeless and simple designs, which make for
elegant and comfortable clothing that can beenjoyed by all. With the March 2019 publication of the My Standard Nijyusanku stylemagazine, a step forward was taken in­enhancing sales promotion activities throughan owned media strategy (The name of the
My Standard Nijyusanku style magazine hassince been changed to #StayStylish).

20

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202021

Core Brands

LAUNCHED

2017
ANNUAL SALES¥4.3 billion

KASHIYAMA is a new made-to-order suitbrand founded on a
distinctive factory-to-customer scheme that
employs proprietary factory innovations todeliver exquisite made-to-order suits startingfrom ¥30,000 in as little as one week.
Customers can have their measurements
taken in stores or have staff dispatched totake measurements at their home or office.
Measurement data is saved to allow
subsequent orders to be made online.

22

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202023

Core Brands

LAUNCHED

1973
ANNUAL SALES¥10.0 billion

JIL SANDER is a luxury brand throughwhich Ms. Jil Sander announced her firstcollection in 1973. Onward Holdings
acquired the brand in 2008. From the 2018spring/summer collection, Lucie and Luke
Meier were appointed as the new creative
directors. A new line, JIL SANDER+, started
from the 2019 autumn/winter season.

24

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202025

Core Brands

LAUNCHED

1972
ANNUAL SALES¥8.4 billion

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

26

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202027

Our History
The Onward Group is
currently in its 93rd year
since its founding in 1927.

93r d

1950s – 1960s
Ready-Made
Clothing Revolution

Events Seen in Each Era

Post-war reconstruction–
Japanese economic miracleIn the 1950s, Onward begins the production and sale of ready-made menswear.
Taking its cue from apparel manufacturing in
the United States, the Company adopts anassembly-line production system and introducessuch advanced equipment as Hoffman steampress machines. 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 transactions between apparel companies
and department stores that is now widely used in the business operations of department stores.
In the 1960s, driven by Japan’s economic expansion, Onward grows rapidly to become a leading
menswear manufacturer in Japan.

• Start of mass-production boom (1950s–)• Ready-made clothing revolution for men’s
and women’s clothing (1960s–)• Economic boom surrounding
Summer Olympics in Tokyo (1962–1964)• Japan ranked No. 2 in the world for grossnational product (1968)

2 Grading machine modifies andcuts basic sewing patterns

1970s – 1980s

1927
1

2

Overseas Expansion

FoundingI

O

nward Kashiyama begins as Kashiyama
Trading, established in Osaka by its
founder Junzo Kashiyama.

Events Seen in Each Era

3Roaring Twenties–World War IIn keeping a step ahead of other Japanese apparel manufacturers, during the 1970s Onward
develops its global strategy and establishes subsidiaries in New York in 1972, Paris in 1973,
and Milan in 1974. By establishing local subsidiaries in three major fashion cities in a short periodof time, Onward succeeded in organizing the foundation of the overseas business, drawing on themost updated information on the global fashion business. In 1977, after an interview with up-andcoming designer Jean-Paul Gaultier, then 24, the Company decides to sponsor his brand creation.
His first fashion show is held in Paris in 1978 with the support of the Company.

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

Events Seen in Each Era

Pivot of change–Japanese asset price bubble• Oil crisis (1973)• Plaza Accord (1985)• Enactment of Act on Securing, Etc. of Equal
Opportunity and Treatment between Men and
Women in Employment (1986)• Emergence of prominent Japanese designers• Spread of luxury fashion
1 Company founder Junzo Kashiyama

3 Bus Stop store on Boulevard Saint-Germain in Paris
4 Onward Kashiyama’s U.S. office

428

Onward Holdings Co., Ltd. Annual Report 2020

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

Onward Holdings Co., Ltd. Annual Report 202029

Our History

1990s – 2000
Launch ofCore Brands

Events Seen in Each Era

6

Bubble collapse–
Post-b­­­­­­­­­­­­ubble recessionT

he womenswear business dramatically
expands in the 1990s with thelaunch of core brands, beginning with
Kumikyoku in 1992 and followed by
Nijyusanku in 1993, ICB in 1995, andJiyuku in 2000. The luxury brand boom
driven by Japan’s bubble economy comesto an end in the 1990s, and consumers start
to look for more simple and practicalclothing, and they are able to find thisstyle in Japanese brands. Department
stores begin expanding womenswear floor
spaces and emphasizing new brands fromJapanese makers. Thanks to this trend,
Onward Kashiyama’s store numbers growrapidly after the launch of the new brands,
and this impressive growth forms the­foundations for future advancement.

• Release of Windows 95 (1995)• Rapid spread of the Internet among
the general public• Diversification of retail channels and emergenceof specialty retailers selling private label apparel
6 Launches Kumikyoku, 1992

the maker of the trusted Grace Continental brand for discerning
women, in 2009. It was at this time that Onward truly makes a
new start as a global apparel group that undertakes various types
of fashion businesses all over the world.

Events Seen in Each Era

Global information era• Lehman Brothers bankruptcy and global financial crisis (2008)• Mass consolidation and reorganization of Japanese department stores• Burgeoning of fast fashion
9 Acquires Joseph Group, 200510

Acquires Island Co., Ltd., 20097 Launches Nijyusanku, 1993

72011 – Today

11

Road to Ongoing GrowthA82001 – 2010
Launch of Global Apparel GroupM

aintaining its focus on the department store channel in thedomestic market, Onward turns its eyes abroad at the
beginning of the century. By accelerating global strategies, theCompany begins its advance into the Chinese market, establishes amanufacturing platform in Italy, and acquires prominent European
brands JOSEPH in 2005 and JIL SANDER in 2008.
The transition to a holding company system is made in 2007. In
the years that follow, the Company continues to draw uniquely
powerful brands under its umbrella in Japan as well as overseas,acquiring pet fashion pioneer Creative Yoko in 2008 and Island,

Onward Holdings Co., Ltd. Annual Report 2020

10

8 Acquires Jil Sander Group, 2008

12

30

9

13

fter 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, thereorganization 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, theOnward Group cuts the ribbon for Onward Crosset, its directly managed e-commerce­website, in December 2009. The Onward Members’ loyalty point card system, applicable to
all Onward Group brands, launches in 2014. Through this and other initiatives, the Onward
Group proceeds to expand its customer base while accelerating its Omni-channel retailingstrategy, which merges the strengths of online stores and physical stores.
In 2017, the Onward Group launches KASHIYAMA the Smart Tailor, a new made-to-­order suit business that employs a proprietary factory innovation scheme to realize low­prices and quick deliveries.
In 2019, the Onward Group steadily advances growth strategies positioning the digital field,
the customization field, and the lifestyle field as pillars of future growth. Together with thesegrowth strategies, the Group moves forward with global business reforms in which it seeks towithdraw from and contract the scale of underperforming businesses while closing unprofitable
stores in the European, North American, Asian, and Japanese markets.
The Onward Group continues to increase its global competitiveness while tackling challenges on the road to sustainable growth.

Events Seen in Each 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)
Launches Onward Crosset, 2009
Opens Nijyusanku Ginza store, 201113 Commences operations at second KASHIYAMA
the Smart Tailor factory in Dalian, China, 201911
12

Onward Holdings Co., Ltd. Annual Report 202031

Our Network
As of August 31, 2020

United States

EuropeAsia

Japan

England

China

Japan

U.S.A.

LondonShanghaiTokyo

New York		n		nJoseph Ltd.

		n

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

		n

Freed of London Ltd.

		n

Shanghai Onward Fashion Co., Ltd.

		n

		n

Onward Trading (Shanghai) Co., Ltd.

		n

FranceParis
		n La Maison Moreau S.A.S.
		n Horloge Saint Benoit S.A.S.

Dalian		nKashiyama (Dalian) Co., Ltd.

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

Italy

Hong Kong

Milan

		n

		n

Onward Italia S.p.A.

		nJil Sander S.p.A.

Florence	Onward Kashiyama Hong Kong Ltd.

VietnamHo Chi Minh City	Onward Kashiyama Vietnam Ltd.

		n	Onward Holdings Co., Ltd.

		n

J. Press, Inc.

	Onward Kashiyama Co., Ltd.

		n

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

	Onward Trading Co., Ltd.

		n OKB Distribution, Inc.

	Island Co., Ltd.

Guam

		n

	Onward International Fashion Co., Ltd.

		n	Jil Sander Japan Co., Ltd.

		n

	Maison Moreau Japan Co., Ltd.

		n	Onward Fashion Lab Co., Ltd.
	Intimates Co., Ltd.

		n	Onward Personal Style Co., Ltd.

		n	Onward J Bridge Co., Ltd.

		n	Mulberry Japan Co., Ltd.

		nn

		n Chacott Co., Ltd.

Pure Holding Companyn		n Kokobuy Co., Ltd.

Apparel-Related Businessn	Kashiyama Daikanyama Co., Ltd.

Lifestyle-Related Businessn	Onward Creative Center Co., Ltd.

Lifestyle-Related (service) Businessn	Bien Co., Ltd.

Lifestyle-Related (resort) Businessn

Joint Venture Factory		nOnward Luxury Group S.p.A. (Apparel)

		 nFrassineti s.r.l.

		n

		 n

Freeland s.r.l.

n

		 n

Erika s.r.l.

VeniceOnward Luxury Group S.p.A. (Shoes)		n			n	Onward Golf Resort Guam, Inc.

		n

		n

Verona		n	Onward Beach Resort Guam, Inc.

		n Onward Digital Lab Co., Ltd.
	Onward Resort & Golf Co., Ltd.

		n	O & K Co., Ltd.

		n

Osaka
	Tiaclasse Co., Ltd.

		n

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

Saga
		n

32

Onward Holdings Co., Ltd. Annual Report 2020

Kashiyama Saga Co., Ltd.
Onward Holdings Co., Ltd. Annual Report 202033

Onward-Approved Factory System
Society’s expectations for companies to exercise social responsibility are rising, expanding in the scope ofrisks that could present problems in business operations. These risks include environmental pollution incountries and regions 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 launchedin fiscal year 2015. By implementing this system, we will build a robust and reliable supply chain while
practicing CSR procurement through an ongoing virtuous cycle of factory audits and mutual improvement.

Audit Targets
In fiscal year 2015, the Onward Group introduced the OnwardApproved Factory System, which is used when performing audits ofsewing 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.

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

Audits Performed
A. Legal compliance and management

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

Note: Audit plans were halted in fiscal year 2020 and fiscal year 2021 due to restrictions in traveling to the applicable countries.
These plans will be resumed after these r­ estrictions have been lifted.

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.

Audit Methods

C. Forced labor

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

D. Wages, allowances, and benefits

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

E. Harassment and abuse

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

F. Work hours

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

G. Non-discrimination

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

H. Health and safety

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

I. Free association

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

J. Sub-contractors and homeworkers

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

K. Environmental practices

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

Number of factories audited

Number of factories that passed compliance audit

2015–2019 (Actual)

441

396

2020–2021 (Plan)

180 (Expected)

Audits related to CSR are conducted in accordance with Onward
Holdings’ proprietary Suppliers’ Code of Conduct, which is basedon international 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 tohelp ensure appropriate auditing based on the current businessenvironment and to develop the understanding necessary for us toexercise our responsibility as the order placer to support factories incarrying out any improvements that need to be made. Audits relating
to QC are conducted directly by the 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 theaudit, a certificate of approval is issued that is valid for two years.
If ­improvements are deemed necessary, feedback is supplied with­regard to the areas requiring improvements and guidance for actionplans is provided by the Japan Apparel Quality Center. The factoryis then ­re-audited after a period of approximately one year.

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

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

D. Wages, allowances, and benefits

J.	Sub-contractors andhomeworkers

E. Harassment and abuse

K. Environmental practices

Factory Audits
Audits based on
CSR guidelines

Audits based on
QC guidelines

ClearedNot cleared

Onward-Approved
Factory

Guidance foraction plans

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

34

Onward Holdings Co., Ltd. Annual Report 2020

Attempt to clear re-audit

Onward Holdings Co., Ltd. Annual Report 202035

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

Onward Green Campaign

4,837,951

907,207

Items Collected

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

77% Recycled
23% Reused
Note: The figures above represent totals from 2009 to August 2020.

The Onward Green Campaign is designed to create
an apparel life-cycle circulation system. In comparison
with other consumables, the recycling of textile
goods is relatively uncommon. Onward Kashiyama
launched the Onward Green Campaign in 2009 with the objectiveof encouraging the circulation of apparel to promote the efficientutilization of limited resources and to ensure that our precious environment still exists for future generations to enjoy. Through thiscampaign, clothing items designed, produced, and sold by the
Onward Group are collected to be recycled and reused to the greatest

extent possible. Certain clothing items are recycled through use as
refuse-derived fuel, which is utilized as an alternative source of energy
for major paper factories. Other items are recycled by harvesting thethread thereof for use in new textile goods. This thread is used tocreate blankets and work gloves to be provided for disaster relief
purposes and delivered to developing countries around the world.
In addition, collected clothing items that can still be worn are reusedby being sold at Onward Reuse Park,* with all proceeds used to fundenvironmental and social contribution initiatives.
* For details regarding Onward Reuse Park, please refer to page 39.

Recycling Process
Customers
Used items

Donated at dedicated collection booths in department stores

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

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

Onward Recycling Partners
Disposal
Reuse

RecycleSold at Onward Reuse Park

Materials sorted and collected foruse in textile products

Proceeds

Blankets

Buttons and other non-reusable andunrecyclable articles disposed ofWork gloves

Solid fuelUsed in environmental and social contribution initiatives

36

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202037

Environmental and Social Responsibility

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

Support Programs Using Recycled Blankets
1

Bangladesh

5

Mongolia

8

Vietnam

Refugee camp:

Impoverished area:

Impoverished area:

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

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

Regions primarily in thenorthern mountain range
and central highlands

3,000 blankets

2

2,000 blankets

First support program:May 2010

Kazakhstan

6

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

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

3,000 blankets

3

Japan

7

Regions heavily
impacted by
the Great East
Japan Earthquake:

Donated to 31 community
centers in Miyagi Prefecturethat were affected by
the Great East Japan
Earthquake
4

Myanmar10

Donated to impoverished individuals,
orphanages, and medical
facilities in Indonesia in
October 2017

Donated to impoverishedindividuals, special needs
schools, and children­living in orphanages
in Myanmar
Third support program:
September 2011

2

38

3

4

11

1

Donated to impoverishedindividuals in India in
November 20187
8

Onward Holdings Co., Ltd. Annual Report 2020

India

4,000 blankets

5 12

9 6

Fourth support program:March 2012

Onward Reuse Park—A Base for Conveying Our­Environmental and Social Contribution Initiatives
Onward Holdings opened Onward Reuse Park in Kichijoji, Tokyo,
in March 2014 as a base for conveying the Group’s environmental
and social contribution initiatives directly to consumers. Onward
Reuse Park sells used products from Onward Group brands at discounted prices, and the proceeds from these sales are used to fundfurther environmental and social contribution initiatives. In thismanner, this shop creates a proprietary circular economy thatencompasses everything from the sale of apparel items to collection
and recycle and reuse.
The Onward Group also implements other initiatives to create
accessible opportunities for customers to become more ecologically
active. For example, we hold workshops and sell accessories madefrom used apparel items. Furthermore, the Onward Reuse Park
online store was opened in August 2017 to provide a wider range ofoptions for utilizing collected clothing.

Onward Green Store Eco-Friendly Bargain StoreIn September 2020, Onward Kashiyama opened its first
Onward Green Store, a new eco-friendly bargain store format, inthe MALLAGE KASHIWA shopping mall.
This eco-friendly bargain store format is based on the concept
of contributing to the global environment by taking full responsibility
for the products (clothing items) we manufacture by creating a cycleof use that prevents products from becoming waste.

Seventh support program:
October 201411

2,200 blankets

Indonesia

4,000 blankets

China

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

Ninth support program:February 2016

Sixth support program:
October 2013

4,000 blankets

Regions heavily
impacted by the 2008
Sichuan earthquake:

Nepal

2,000 blankets

Impoverished area:

1,000 blankets

Other Activities

Regions strickenby the Nepal
earthquake:

4,000 blankets

Second support program:February 2011

© Japanese Red Cross Society

Eighth support program:
October 2015, April 2016

Fifth support program:
September 2012
9

Impoverished area:

In March 2020, Onward received a letter of appreciation from the Minister of Health,Labour and Welfare via the Japanese Red Cross Society. This letter of appreciation
expressed gratitude for the social contributions made through Onward Crosset, ourdirectly managed e-commerce website, as well as through family sales.
Going forward, the Onward Group will continue to engage in proactive environmental
and social contribution activities as it strengthens its ties with the Japanese Red Cross
Society to offer even wider-ranging support.

4,000 blankets

Nepal

Refugee camp:

Receipt of Letter of Appreciation from Minister of Health, Labour andWelfare via the Japanese Red Cross Society

12
10

Mongolia

4,000 blankets

Donated to impoverishedindividuals in Mongoliain October 2019

Eight Consecutive Years of Participation in
KIBOU311 Cherry Tree Planting Events forGreat East Japan Earthquake Relief
Onward Kashiyama participated in theeighth KIBOU311 cherry tree planting
event, which took place in Minamisanrikucho, Miyagi Prefecture. We have participated in KIBOU311 events for eight
consecutive years. KIBOU311 is a Great East Japan Earthquake relief
project promoted on a global scale by DORMEUIL, a French
manufacturer of luxury men’s apparel. Donations collected throughthis project are provided to LOOM NIPPON, which uses the donations
in turn to fund cherry tree planting events.

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

Onward Holdings Co., Ltd. Annual Report 202039

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

Directors and the Board of Directors
In order to further clarify the management responsibilities of directors,
to increase the ability and opportunity to gain the confidence ofshareholders, and to put in place an optimal and agile 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, two of the six members of theBoard of Directors (five men and one woman) are appointed fromoutside the Company and selected on the basis of their high level of
independence. This initiative is aimed at reinforcing the supervisory
function of the Board.
In fiscal year 2020, the Board of Directors met nine times,
and one separate meeting was held in the form of document
correspondence.

Evaluation of the Effectiveness of the Board of Directors
The Company’s directors conduct annual self-evaluations to assess
the effectiveness and appropriateness of the Board of Directors’
management oversight function as well as the degree of accomplishment of their own duties. The results of these evaluations arereported to the Board of Directors. Based on these self-evaluations,
the Board of Directors analyzes and evaluates its overall effectiveness,
disclosing information on the results.
1. Scope of evaluations• All directors and Audit & Supervisory Board members
2. Procedures for evaluations• Self-evaluation via questionnaire• Support for evaluations provided by external advisor
3. Overview of results of analysis and evaluation of Board of
Directors’ effectiveness in fiscal year 2020

40Onward Holdings Co., Ltd. Annual Report 2020

• Board of Directors effectively exercising functions for establishingmanagement strategies and targets, resolving management
issues, and overseeing business execution in accordance with
Onward’s Corporate Governance Policy

Corporate Governance Structure
General Meeting of Shareholders

Audit & Supervisory Board• Current composition, discussion quality, and operation methodsof Board of Directors appropriate; no issues requiring urgent
attention• More efficient operation, higher shared recognition of issues
among outside directors and outside Audit & Supervisory
Board members, and more extensive provision of information
to outside directors required for improvements to the effectiveness of the Board of Directors

Board of Directors

ReportSuperviseStanding Audit &Supervisory Board Members

ReportReportAudit

Outside Audit &Supervisory Board Members

Onward Group
Compliance
Committee

Internal Control
Division

Onward Group Strategy Meeting

Coordinate

Reasons for the Appointment of Outside Directors
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 toenhance the Company’s management.

Supervise

Yoshie Komuro

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

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

Audit & Supervisory Board Members
and the Audit & Supervisory Board
The Company has adopted an Audit & Supervisory Board structure,under which the Company has appointed four Audit & Supervisory
Board members (three men and one woman), two of whom areoutside Audit & Supervisory Board members. Audit & Supervisory
Board members have also assigned staff to assist them 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 theGrowth Oriented Management Committee, in accordance withaudit policies and the roles delegated by the Audit & Supervisory
Board. In addition, the Internal Audit Office and businessdepartments conduct periodic monitoring in an effort to establish
an effective and lawful corporate structure.
The Audit & Supervisory Board meets with the representative
directors and the accounting auditor on a regular basis to share andexchange information and opinions. This initiative is also designed
to ensure that a structure is in place that is capable of conducting
audits in an effective and lawful manner. Moreover, the Audit &Supervisory Board receives reports from each member in accordancewith audit policies and the roles delegated by the board. Deliberations
are undertaken and resolutions are made based on this information
as required.
In fiscal year 2020, the Audit & Supervisory Board met 17 times.

Group Companies

Audit

Reasons for Appointment as an
Outside Audit & Supervisory Board Member

Ryu Umezu

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 financialtransactions, in audits of the Company.

Mitsuyo Kusano

We are expecting Ms. Kusano to use her wide-ranging
experience and robust insight from her years of experiencein the media industry and her time on expert panels ofgovernment committees in audits of the Company.

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

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 operatingcompany and to facilitate accelerated strategic decision-making.
When matters that require urgent attention arise, the Board of
Directors convenes as necessary. In this manner, the Onward
Group has a system in place that ensures a swift and appropriate
response to rapid changes in the business environment.
Moreover, the Group has introduced an executive officer system(six male executive officers but no female representation at this time)with the aim of clarifying other management decision-making
and business execution functions. In order to facilitate flexible decisionmaking on a Groupwide basis, the Onward Group Strategy Meeting,which primarily comprises directors and executive representatives
from operating companies, is in place to review the management
strategies and important management matters of operating companies
and confirm the status of operations.
The Onward Group also has advisory contracts with a number ofattorneys to receive legal advice.

Accounting Auditor

Accounting Audit

Performance-Linked
Compensation

Fixed Compensation

Officer Classification

Total Amount ofCompensation Paid
(Millions of yen)

Basic
Compensation

Compensation for
the Purpose of
AcquiringCompany Stock

Numberof Eligible
Officers

Bonuses

Directors (excluding
Outside Directors)

218

150

67

—

6

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

36

36

—

—

2

Outside Officers

40

40

—

—

5

Note: As of February 29, 2020, the Company had four directors and two Audit &Supervisory Board members, four of whom were outside officers.
The number of directors includes two directors who resigned from theirpositions upon the conclusion of the General Meeting of Shareholders heldon May 23, 2019.

Total Amount of Consolidated Compensation by Officer
This information is omitted as there were no officers who received
payments exceeding ¥100 million on an individual basis in fiscal
year 2020.

Onward Holdings Co., Ltd. Annual Report 202041

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

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

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

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

Policies for Cross-Shareholdings andExercise of Related Voting Rights
In addition to stocks held purely for investment purposes, theCompany will hold shares of stocks in listed companies with theaim of maintaining and strengthening business relationships andthereby improving medium-to-long-term corporate value. With
regard to major cross-shareholdings, the Board of Directors willconduct annual assessments of the meaningfulness and economic
rationality of these holdings from the perspectives of shareholding
risk limitation and capital efficiency with consideration paid to theCompany’s growth potential and profitability and to the reinforcement and maintenance of business relationships as well as otherconcerns. Our basic policy is to sell those holdings that are deemed
to no longer be appropriate after gaining the understanding of thebusiness partner in question. In addition, holdings that have been
deemed appropriate may also be sold when necessitated by themarket environment or by management or financial strategies.
Furthermore, the Company strives to make the best possible
decision when exercising voting rights related to cross-shareholdings.
We therefore determine how these rights will be exercised based on
a comprehensive evaluation of factors, including the medium-tolong-term improvement of the corporate value of the business
partner in question and medium-to-long-term increases to theeconomic benefits for the Company and Group companies.
These decisions are made by the Board of Directors each year after
deliberation based on the following considerations.
1.	Has the counterparty been suffering from a significant andongoing deterioration of performance?
2.	Has the counterparty engaged in antisocial activities or otherwise
lost the trust of society?
3.	Are proposals being made that threaten to adversely impact theinterests of shareholders?

42

Onward Holdings Co., Ltd. Annual Report 2020

1. Positions at companies at which a person involved in operationof the Company serves as a corporate officer
The individual must not be a person involved in operation at acompany at which a person involved in operation of the Company
serves as a corporate officer.
2. Material business relationships
The individual must not be a major customer or a person involvedin operation of a major customer of the Company or a major
supplier or a person involved in operation of a major supplier of
the Company.
3. The Company’s accounting auditor
The individual must not be affiliated with the accounting auditor
that performs audits of the Company based on the Companies Act
or the Financial Instruments and Exchange Act.
4. External specialists
The individual must not be a specialist receiving large amounts ofmonetary payments or other financial assets from the Company
that are separate from compensation received for services as adirector or an Audit & Supervisory Board member. (Specialists
include lawyers, accountants, tax accountants, patent attorneys,
judicial clerks, and consultants. If the financial assets in question
are received by a company, an association, or other entity, theindividual must not be affiliated with that entity.)
5. Donation recipients
The individual must not receive large donations from theCompany. (If the donations in question are received by a company,an association, or other entity, the individual must not be a person
involved in operation of that entity.)
6. Major shareholders
The individual must not possess direct or indirect holdings equating
to 10% or more of the total voting rights of the Company or be a
person involved in operation of an entity that possesses such holdings.
7. Past relationships
The individual must not have been applicable under items 1. to 5.
during the past five years.

8. Relationships of kinship
The individual must not be a close relative of someone who isapplicable under items 1. to 7. (excluding cases in which therelationship in question is nonmaterial).

1. Periodic briefings for analysts and institutional investors
The officer responsible for IR information disclosure plays a central rolein holding periodic briefings for analysts and institutional investors
at which we explain our financial results and business strategies.

Compliance Structure

2. Provision of IR materials on corporate website
An extensive amount of information is disclosed through Onward
Holdings’ corporate website. Please refer to this website for information on various topics.

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

• A Message from Management
http://www.onward-hd.co.jp/site/english/ir/message.html• Financial Data
http://www.onward-hd.co.jp/site/english/ir/financ.html• Information on Shares and Shareholders
http://www.onward-hd.co.jp/site/english/ir/stocks.html

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

Interaction with Shareholders
The Company conducts various investor relations (IR) activities,
and the Investor Relations Division has been established as a dedicated body for ensuring the functionality of these activities. Thisdivision maintains close coordination with Corporate Planning,
Accounting, Legal Affairs, and other relevant divisions. It also
relays the input and requests solicited through IR activities to the
Executive Management Council and the Board of Directors for use
in discussions of measures for improving corporate value.

Onward Holdings Co., Ltd. Annual Report 202043

Board of Directors, Audit & Supervisory
Board Members, and Executive Officers
As of November 1, 2020

Board of Directors

Audit & Supervisory
Board Members

Executive Officers

Representative Director, President

Standing Audit & Supervisory
Board Members

Managing Executive Officers

Executive Officers

Hirokazu Yoshizato

Hidekazu Imamura

Tomohiko Sakamoto

Kenji Takeuchi

Hikosaburo Seike

Michinobu Yasumoto
Senior Managing Director

Hisayuki Ichinose

Tsunenori Suzuki

Takeshi EgashiraOutside Audit & Supervisory
Board Members

Directors

Osamu Sato

Yoshihiro Higuchi

Financial Section

Ryu Umezu

Daisuke Ikeda

Mitsuyo Kusano

Outside Directors

Akira Kawamoto
Yoshie Komuro

Company Organization
As of September 1, 2020

Audit & Supervisory Board

General Meeting of Shareholders
Board of Directors
Representative Director, PresidentInternational Operations

European Operations

President’s Office

North American Operations

46

Six-Year Financial Summary

47

Management’s Discussion and Analysis

50

Operating Risks

51

Consolidated Balance Sheets

53

Consolidated Statements of Income

54

Consolidated Statements of Comprehensive Income

55

Consolidated Statements of Changes in Equity

57

Consolidated Statements of Cash Flows59

Notes to Consolidated Financial Statements

84

Independent Auditor’s Report

85

Main Subsidiaries

87

Corporate / Investor Information

88

History

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

Asian Sales
Corporate Planning,
Human Resources,
General Affairs

Asian Customization Businesses
Production
Distribution Channel Development

Finance, Accounting,
Investor Relations

Promoting Omni-channel
Information System

Advertising & Marketing

Promoting Supply Chain Management
Environmental Management

44

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202045

Six-Year Financial Summary

Management’s Discussion and Analysis

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
CASH FLOWSCash flows fromoperating activities
Cash flows frominvesting activities
Cash flows fromfinancing activities
Free cash flow*2
Capital expenditures
Depreciation and amortization
AT YEAR-END
Cash and deposits
Total current assets
Total property, plantand equipment
Total assets
Total current liabilities
Total shareholders’ equity
Total net assets

2015

2016

2017

2018

2019

2020

2020

¥281,502
152,438¥263,516
144,063¥244,901
131,638¥243,075
129,498¥240,652
129,019¥248,234
135,551$2,268,426
1,238,699

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

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

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

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

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

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

1,057,702(27,975)(35,048)
15,106

4,204

4,278

4,744

5,367

4,948

(52,135)(476,428)

16,491

3,632

6,844

13,228

4,635

8,003

73,135(15,657)

1,783

25,271(7,300)(10,306)(10,758)(98,313)757
834(6,357)
5,415(32,856)
32,115(6,593)
5,928

11,543(5,671)(1,595)(2,755)(14,578)(25,178)

26,884
7,219

15,955
7,799

10,5996,663

12,0586,335

13,473
6,511

9,534
6,393

87,121
58,41831,123
117,052

29,407
121,469

26,097
103,573

26,335
105,978

31,284
117,298

28,795
106,782

263,138
975,803

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

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

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

93,714
278,134
86,384
168,342
168,153

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

83,231
234,317
108,744
105,023
94,037760,591
2,141,247
993,724
959,733
859,335Yen

PER SHARE INFORMATION
Basic earnings per share (EPS)
Net assets
Cash dividends
Payout ratio (%)¥   26.78
1,166.89
24.00
89.6

¥   28.27
1,101.21
24.00
86.5

¥   31.47
1,116.47
24.00
74.0

Overview of Operating Results

Net Sales
Sales in the Apparel Business decreased 4.3% year on year, to ¥205,265
million, while sales in the Lifestyle Business increased 64.7%, to ¥42,969
million. As a result, consolidated net sales were up 3.2% compared with theprevious fiscal year, to ¥248,234 million.

In fiscal year 2020, ended February 29, 2020, the outlook for the global
operating environment rapidly grew opaque. Factors behind this opaquenessincluded intensifying economic disputes among countries, the stalemate innegotiations between the United Kingdom and the European Union regarding the former’s departure from the latter, the tense situation in the Middle
East, and the global COVID-19 pandemic.
In response to this environment, the Onward Group implemented
global business reforms that included withdrawing from and contracting
the scale of underperforming businesses and closing unprofitable storesin the European, North American, Asian, and Japanese markets. In conjunction with these reforms, growth strategies were advanced positioning
the digital field, the customization field, and the lifestyle field as pillars of
future growth.

Gross Profit
The gross profit margin decreased 1.0 percentage point, from 46.4% in fiscal
year 2019 to 45.4% in fiscal year 2020. Gross profit increased ¥1,049 million, to ¥112,683 million.

Operating Profit
The ratio of selling, general and administrative (SG&A) expenses to net
sales increased 2.1 percentage points, from 44.5% to 46.6%. Operating lossof ¥3,061 million was posted, compared with operating profit of ¥4,462
million in the previous fiscal year.

Other Income (Expenses)
Other expenses, net, amounted to ¥34,518 million, compared with otherexpenses, net, of ¥1,306 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 ¥2,424 million loss on sales of investment securities, net ¥71 , of-¥71 million. In other expenses, impairment loss on fixed assets increased
from ¥5,533 million in fiscal year 2019 to ¥27,756 million in fiscal year
2020, and extra retirement expenses of ¥3,598 million and loss on liquidation of business of ¥3,029 million were recorded.

Profit before Income Taxes and Profit Attributable to
Owners of Parent
Loss before income taxes of ¥37,580 million was recorded, compared withprofit before income taxes of ¥3,155 million in fiscal year 2019. Loss attributable to owners of parent of ¥52,135 million was posted, compared withprofit attributable to owners of parent of ¥4,948 million in the previous
fiscal year.

U.S. dollars*1¥   36.97
1,155.04
24.00
63.7

¥   35.24
1,148.30
24.00
66.9

¥ (383.97)
665.1724.00—$    (3.51)
6.08
0.22
—
Millions of yen

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

2.4
1.3
2.0
45.8
43.8
53.8

2.4
1.3
1.4
45.3
43.9
54.2

2.8
1.6
1.7
46.2
44.5
59.8

3.3
1.9
2.1
46.7
44.6
59.2

3.1
1.7
1.9
46.4
44.5
55.1

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

—
—
—
—
—
—

OTHER INFORMATION
Number of full-time employees

4,973

5,119

4,456

4,530

4,643

5,153

—

2016

2017

2018

2019

2020

¥ 263,516¥ 244,901¥ 243,075¥ 240,652¥ 248,234

Operating Profit

3,778

4,204

5,167

4,462

-3,061

Profit Attributable to Owners of Parent

4,278

4,744

5,367

4,948

-52,135

Net sales* 1. Yen amounts have been translated, for convenience only, at ¥109.43 = US$1, the rate of exchange as of February 29, 2020.
*2. Free cash flow = Cash flows from operating activities + Cash flows from investing activities

46

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202047

Management’s Discussion and Analysis

Segment Information

Outlook for the Fiscal Year Ending February 28, 2021

Financial Position

Apparel Business

For fiscal year 2021, ending February 28, 2021, it is projected that a recovery
will take time with regard to the impacts of the global COVID-19 pandemic. Examples of these impacts include shortened operating hours andtemporary closures of department stores, train station building stores, andother commercial facilities; sluggish inbound demand in Japan; and low
consumption demand as government requests for people to stay home erode
consumer confidence.
In response to this challenging operating environment, the Onward
Group is seeking to strengthen its corporate constitution and improveearnings by accelerating global business reforms. The Group will also continue to move forward with growth strategies positioning the digital field,
the customization field, and the lifestyle field as pillars of growth from a
medium-to-long-term perspective.

AssetsDomestic Business

Net Assets

In the domestic business, we will seek to improve business efficiency bydiversifying the value we provide, expanding our customer base, and evolving in line with the times.
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 the Smart Tailor, ourbrand of made-to-order suits, as a core, next-generation business that iscompatible with mass customization. At the same time, lifestyle businesses,
such as cosmetics, wellness, and gift operations, will be expanded.

On February 29, 2020, total net assets were down ¥68,173 million from theprevious fiscal year-end, to ¥94,037 million. Total shareholders’ equity
decreased ¥62,405 million following a decline in retained earnings and theacquisition of treasury shares. Total accumulated other comprehensive loss
increased ¥6,097 million, mainly because of downward adjustments associated with net unrealized loss on available-for-sale securities, a result of
declines in the market price of stock holdings, and foreign currency translation adjustment.

In fiscal year 2020, sales in the Apparel Business segment declined 4.3%
year on year, to ¥205,265 million, while operating loss of ¥3,425 million
was recorded, compared with operating profit of ¥5,255 million in fiscal
year 2019.

Domestic Apparel Business
E-commerce sales were strong centered on core operating subsidiary
Onward Kashiyama Co., Ltd., while Onward Trading Co., Ltd., which
designs and sells corporate uniforms and sales promotion merchandise,enjoyed increases in sales and profit. Conversely, sales at physical stores
suffered greatly due to the impacts of the consumption tax hike in Japan;
natural disasters such as heavy rains and typhoons; and unseasonable
weather, most notably the warm winter. As a result, sales and profit were
down for the domestic apparel business overall.

Overseas Apparel Business
The Asian business achieved higher profit despite lower sales due to thebenefits of global business reforms. However, the benefits of these reforms in
the European and North American businesses will not be felt until fiscal
year 2021, and these businesses therefore posted declines in sales and profit.
As a result, overall sales and profit decreased in the overseas apparel business.

Lifestyle BusinessIn fiscal year 2020, sales in the Lifestyle Business segment increased 64.7% year
on year, to ¥42,969 million, and operating profit rose 0.8%, to ¥1,553 million.
With the new consolidation of gift catalog business operator Yamato
Co., Ltd., acquired in the first quarter of fiscal year 2020, the LifestyleBusiness segment proceeded to expand its operations in the new field of gifts.
Yamato greatly contributed to performance while Chacott Co., Ltd., improved
earnings following the deployment of new brands. As a result, both sales
and operating profit were up for the Lifestyle Business segment overall.

Overseas BusinessIn the overseas business, we will move ahead with global business reforms
for optimizing operations.
In Europe, we are working to increase earnings power by refining
operating structures for the manufacturing platform of Onward LuxuryGroup and the brands of JOSEPH and JIL SANDER.
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 the Smart Tailor made-to-order suits
business in this market. 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.

Capital Expenditures

Liabilities

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 ¥9,534 million.
The details of expenditures by segment are as follows.
In the Apparel Business segment, capital expenditures amounted to¥6,587 million, the majority of which was channeled to sales floors at
department stores and directly managed stores with the aim of strengthening the Group’s sales structure and network.
In the Lifestyle Business segment, we invested ¥1,467 million to upgrade
commercial facilities and enhance operational efficiency.

Total liabilities as of February 29, 2020, were up ¥14,935 million from theprevious fiscal year-end, to ¥140,280 million. Total current liabilities rose
¥3,337 million, mainly attributable to an increase in notes and accounts
payable. Total long-term liabilities expanded ¥11,597 million, largely due
to an increase in long-term loans payable.

Profit Distribution Policy
At Onward Holdings, we recognize that the distribution of profits to shareholders is one of our top priorities. Our basic policy is to distribute regularand stable dividends to shareholders based on our business performance,
and we target a dividend payout ratio of 35% or more.
A single dividend payment is issued each year and is decided via
approval at the General Meeting of Shareholders. For fiscal year 2020, we
resolved to distribute a cash dividend of ¥24 per share, the same level as infiscal year 2019, based on a comprehensive evaluation of this year’s performance and our outlook for the operating environment.
Additionally, we intend to utilize our retained earnings flexibly andadopt a balanced approach to meet our funding requirements. Based on thispolicy, our retained earnings will be used for strategic investments to build asolid business foundation and strengthen our financial position as and when
we consider appropriate.

Cash Flows
Cash Flows from Operating Activities
Net cash provided by operating activities for fiscal year 2020 was ¥8,003
million (¥4,635 million in the previous fiscal year), mainly from loss before
income taxes, impairment loss on fixed assets, and a decrease in inventories.

Cash Flows from Investing Activities
Net cash used in investing activities for fiscal year 2020 totaled ¥10,758
million (¥10,306 million in the previous fiscal year), mainly due to investments in sales facilities and business assets and payments for sale of investments in subsidiaries resulting in change in scope of consolidation.

Millions of yen
2016

2017

2018

2019

2020

¥ 313,454¥ 273,227¥ 278,134¥ 287,555¥ 234,317

172,337

165,670

168,153

162,211

94,037

Cash Flows from Operating Activities

3,632

6,844

13,228

4,635

8,003

Cash Flows from Investing Activities

1,783

25,271–7,300–10,306–10,758

Cash Flows from Financing Activities–6,357–32,856–6,593

11,543–1,595

Total Net Assets

Onward Holdings Co., Ltd. Annual Report 2020

Net cash used in financing activities for fiscal year 2020 amounted to ¥1,595
million (net cash provided by financing activities of ¥11,543 million in theprevious fiscal year), owing mainly to changes in borrowings and dividends
paid.
As a result, cash and cash equivalents as of February 29, 2020, decreased¥2,456 million, to ¥28,780 million.

Total assets on February 29, 2020, stood at ¥234,317 million, down
¥53,238 million from the previous fiscal year-end. Total current assets
decreased ¥7,542 million, mainly due to lower cash and deposits andinventories. Fixed assets fell ¥45,695 million, largely reflecting impairment
losses stemming from the global business reforms.

Total Assets

48

Cash Flows from Financing Activities

Onward Holdings Co., Ltd. Annual Report 202049

Operating Risks

Consolidated Balance Sheets
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2019 and February 29, 2020

Changes in Consumer Needs

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.

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

Millions of yen

ASSETS

2019

2020

2020

Current assets:¥ 31,284¥ 28,795$  263,138

		 Notes and accounts receivable—trade (Note 3)

		 Cash and deposits (Notes 3 and 10)

25,50825,716234,995

		 Inventories (Note 2. (4))

46,76643,224394,990

		Other

11,521

9,536

87,147

(754)

(489)

(4,467)

114,325

106,782

975,803

		 Buildings and structures

84,32574,627

681,959

		Leased assets

9,071

9,756

89,153

			 Less: Allowance for doubtful accounts
				Total current assets

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.

Property, plant and equipment:

		Other

35,41032,400296,084

			Less: Accumulated depreciation(78,354)(75,635)(691,166)

50,452

41,148376,030

		Land46,26642,083

384,561				 Total property, plant and equipment

96,71883,231

760,591

9,455

6,128

55,997

Intangible assets, net:
		Goodwill
		Other

7,570

6,033

55,132

				Total intangible assets, net

17,025

12,161

111,129

Investments and other assets:
		 Investment securities (Notes 3 and 4)

27,846

13,341

121,913

		 Long-term loans receivable

2,469

1,613

14,738

		 Long-term prepaid expenses

447

301

2,749

Legal Procedures and Compliance		 Retirement benefit asset (Note 8)

2,919

2,705

24,717

In doing business, the Onward Group pays careful attention to laws andregulations—including those concerning antitrust, the treatment of subcontractors, labeling, consumer product safety, and environment- 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.

		 Deferred tax assets (Note 12)15,8994,233

38,678		Other

10,344

10,256

93,72550

Onward Holdings Co., Ltd. Annual Report 2020

			 Less: Allowance for doubtful accounts

(437)

(306)

(2,796)				 Total investments and other assets

59,48732,143

293,724¥287,555¥234,317$2,141,247

Total assets

Onward Holdings Co., Ltd. Annual Report 202051

Consolidated Statements of Income

Consolidated Balance Sheets

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2019 and February 29, 2020

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

Millions of yen

LIABILITIES AND NET ASSETS
Current liabilities:
		 Notes and accounts payable—trade (Note 3)

2019

2020

2020

¥ 17,557¥ 19,206$  175,513

		 Electronically recorded obligations—operating (Note 3)

14,18313,808126,185

		 Short-term borrowings (Notes 3 and 13)

53,88644,907410,373

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

2,800

4,452

40,684

475

528

4,823
7,634

		 Income taxes payable
		 Provision for bonuses

777

835

		 Provision for bonuses for directors

156

23

208

		 Provision for sales returns

241

229

2,089

		 Provision for point card certificates

765

887

8,101

		 Other (Note 13)

14,56523,869218,114

				Total current liabilities

105,405

108,744993,724

Non-current liabilities:
		 Long-term borrowings (Notes 3 and 13)

4,707

17,028

155,611

		 Deferred tax liabilities for land revaluation (Note 12)

1,747

1,756

16,043

		 Retirement benefit liability (Note 8)

3,993

3,724

34,029

		 Lease obligations (Note 13)

4,411

4,224

38,603

203

233

2,131

		 Other (Note 12)

4,878

4,571

				Total non-current liabilities

19,939					Total liabilities

125,344

		 Provision for retirement benefits for directors and corporate auditors

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

Millions of yen
2019

2020

2020

Net sales¥240,652¥248,234$2,268,426

Cost of sales

129,019

135,551

1,238,699

Gross profit

111,633

112,683

1,029,727

Selling, general and administrative expenses

107,171

115,744

1,057,702

4,462(3,061)(27,975)

		Interest income

55

45

415

		Dividend income

258

242

2,207

		 Rental income from land and buildings

1,303

1,289

11,778

		Interest expenses

(370)

(403)

(3,683)

		 Share of loss of entities accounted for using equity method(84)(1,390)(12,705)

Operating profit (loss)

Other income (expenses):		 Foreign exchange gains (losses)

27

(1)

(9)

		Compensation income

418

—

—

		Rental expenses

(548)

(657)

(6,006)

41,771

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

2,432

(71)

(650)

31,536288,188

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

2,313

2,424

22,151

140,280

1,281,912

		 Gain on liquidation of subsidiaries and associates

25

—

—

		 Loss on liquidation of business (Note 7)—(3,029)(27,676)

Net assets:
		 Shareholders’ equity (Note 14):

		 Impairment loss (Note 6)

			Share capital:
				Authorized—400,000,000 ordinary shares(5,533)(27,756)(253,642)

		 Loss on valuation of investment securities (Note 4)(45)(1,565)(14,298)—(3,598)(32,880)(1,185)

—

—

(373)

(49)

(440)

3,155

(37,580)(343,413)				 Issued—157,921,669 ordinary shares at February 28, 2019 and February 29, 2020

30,08030,080274,876

		 Extra retirement payments

			Capital surplus

50,04350,043457,308

		 Loss on sales of shares of subsidiaries and associates
		Other, net

			Retained earnings

107,140

46,338423,451

			 Less: Treasury shares, at cost, 20,052,156 ordinary shares and 22,901,445 ordinary shares atFebruary 28, 2019 and February 29, 2020, respectively(19,834)(21,438)(195,902)

				Total shareholders’ equity

167,429

105,023

959,733(1,453)(4,581)(41,867)

		Current

1,244

1,653

15,106

		Deferred(3,898)

12,202

111,511

Profit (loss)

5,809(51,435)(470,030)

861

700

6,398

¥  4,948¥(52,135)$ (476,428)

Income taxes (Note 12):

		 Accumulated other comprehensive income:			 Valuation difference on available-for-sale securities (Note 4)
			 Deferred gains or losses on hedges

80

22

204

			 Revaluation reserve for land

(8,957)(9,285)(84,853)

			 Foreign currency translation adjustment

1,134

(604)

(5,523)

			 Remeasurements of defined benefit plans (Note 8)

82

(763)

(6,968)				 Total accumulated other comprehensive income(9,114)(15,211)(139,007)		 Share acquisition rights

559

484

4,424

		Non-controlling interests

3,337

3,741

34,185

				Total net assets
Total liabilities and net assets

Per share:
		 Net assets per share
See accompanying notes to consolidated financial statements.

52

Onward Holdings Co., Ltd. Annual Report 2020

Profit (loss) before income taxes

162,211

94,037859,335¥287,555¥234,317$2,141,247
U.S. dollars(Note 2. (21))

Yen¥1,148.30¥665.17$6.08

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

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

Yen

Per share (Notes 14, 15, and 17):
		 Basic earnings (loss) per share¥35.24¥(383.97)$(3.51)

		 Diluted earnings per share

34.96

—

—

		 Cash dividends per share

24.00

24.00

0.22

See accompanying notes to consolidated financial statements.

Onward Holdings Co., Ltd. Annual Report 202053

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Equity

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2019 and February 29, 2020

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2019 and February 29, 2020

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

Millions of yen

Profit (loss)

2019

2020

2020

¥ 5,809¥(51,435)$(470,030)(2,628)(4,792)(43,787)

		 Deferred gains or losses on hedges

154

(57)

(523)

		 Revaluation reserve for land

—

(107)

(977)

		 Foreign currency translation adjustment(891)(1,507)(13,771)		 Remeasurements of defined benefit plans, net of tax

(756)

(844)

(7,715)

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

(207)

(15)

(136)

(4,328)(7,322)(66,909)

			 Total other comprehensive income (Note 9)Comprehensive income

Number ofordinary shares(thousands)

SharecapitalCapitalsurplusRetainedearnings

TreasurysharesTotal

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

Dividends of surplus

—

—

—

(3,420)—(3,420)

Profit attributable to owners of parent

—

—

—

4,948

—

4,948

Purchase of treasury shares

—

—

—

—

(3,725)(3,725)
170

Balance as at March 1, 2018

Other comprehensive income:		 Valuation difference on available-for-sale securities

Millions of yen
Shareholders’ equity (Note 14)¥ 1,481¥(58,757)$(536,939)

Disposal of treasury shares
Cancellation of treasury shares
Reversal of revaluation reserve for land
Net changes in items other than shareholders’ equity

—

—

—

(223)

393

(10,000)——(11,078)

11,078

—

—

—

—

1,114

—

1,114

—

—

—

—

—

—

		 Total changes in items during period(10,000)——(8,659)

7,746

(913)

Balance as at February 28, 2019

167,429

157,92230,08050,043

107,140(19,834)

Dividends of surplus

—

—

—

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

—

—

—

(52,135)—(52,135)(1,758)

		 Comprehensive income attributable to:Purchase of treasury shares

—

—

—

—

(1,758)

Disposal of treasury shares

—

—

—

(79)

154

75

			Owners of parent

Reversal of revaluation reserve for land

—

—

—

222

—

222

			Non-controlling interests
See accompanying notes to consolidated financial statements.

¥  659¥(59,454)$(543,311)

822

697

6,372

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)

157,922¥30,080¥50,043¥ 46,338¥(21,438)¥105,023

		 Total changes in items during period
Balance as at February 29, 2020

Thousands of U.S. dollars (Note 2. (21))
Shareholders’ equity (Note 14)
SharecapitalCapitalsurplusRetainedearnings

TreasurysharesTotal$274,876$457,308$ 979,073$(181,246)$1,530,011

Dividends of surplus——(30,237)—(30,237)

Loss attributable to owners of parent——(476,428)—(476,428)

Purchase of treasury shares

—

—

—

(16,064)(16,064)

Disposal of treasury shares

—

—

(719)

1,408

689

Reversal of revaluation reserve for land

—

—

2,027

—

2,027

Change in scope of equity method——(43,570)—(43,570)

Change in scope of consolidation——(6,695)—(6,695)

Net changes in items other than shareholders’ equity

—

—

—

—

—

—

—

(555,622)(14,656)(570,278)$274,876$457,308$ 423,451$(195,902)$  959,733

Balance as at February 28, 2019

		 Total changes in items during period
Balance as at February 29, 2020
See accompanying notes to consolidated financial statements.

54

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202055

Consolidated Statements of Cash Flows

Consolidated Statement of Changes in Equity

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2019 and February 29, 2020

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

Millions of yen
Accumulated other comprehensive income
Valuationdifference on
Deferredavailable-for-salegains or losses
securities(Note 4)on hedges

Balance as at March 1, 2018

Millions of yen

Revaluation
reservefor landForeigncurrencytranslation
adjustment

Remeasurementsof defined
benefit plans(Note 8)

Total

Share
acquisitionrights

Noncontrollinginterests

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

Dividends of surplus

—

—

—

—

—

—

—

—

(3,420)

Profit attributable to owners of parent

—

—

—

—

—

—

—

—

4,948

Purchase of treasury shares

—

—

—

—

—

—

—

—

(3,725)

Disposal of treasury shares

—

—

—

—

—

—

—

—

170

Cancellation of treasury shares

—

—

—

—

—

—

—

—

—

Reversal of revaluation reserve for land

—

—

—

—

—

—

—

—

1,114

Net changes in items other thanshareholders’ equity

2019

2020

2020

¥  3,155¥(37,580)$(343,413)

Cash flows from operating activities:
		 Profit (loss) before income taxes
		 Adjustments to reconcile profit (loss) before income taxes
to net cash provided by (used in) operating activities:
			Depreciation and amortization

6,511

6,393

58,418

			Impairment loss

5,533

27,756

253,642

			Amortization of goodwill

2,302

1,749

15,979

			 Increase (decrease) in allowance for doubtful accounts

586

(225)

(2,060)			 Decrease (increase) in retirement benefit asset

928

214

1,956

			 Increase (decrease) in retirement benefit liability

(131)

(241)

(2,205)(2,724)154(1,092)

(963)

(756)

(5,381)

(171)

523

(5,029)

			 Interest and dividend income

(313)

(287)

(2,622)

		 Total changes in items during period(2,724)154(1,092)

(963)

(756)

(5,381)

(171)

523

(5,942)

			Interest expenses

370

403

3,683

Balance as at February 28, 2019

(1,453)80(8,957)

1,134

82(9,114)

559

3,337

162,211

Dividends of surplus

—

—

—

—

—

—

—

—

(3,309)

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

Loss attributable to owners of parent

—

—

—

—

—

—

—

—

(52,135)

Purchase of treasury shares

—

—

—

—

—

—

—

—

(1,758)

Disposal of treasury shares

—

—

—

—

—

—

—

—

75

Reversal of revaluation reserve for land

—

—

—

—

—

—

—

—

222

Change in scope of equity method

—

—

—

—

—

—

—

—

(4,768)Change in scope of consolidation

—

—

—

—

—

—

—

—

(733)

Net changes in items other thanshareholders’ equity(3,128)

(58)

(328)

(1,738)(845)(6,097)(75)

404(5,768)84

1,390

12,705

			 Loss (gain) on sales and disposal of non-current assets, net(2,313)(2,424)(22,151)

			 Loss (gain) on sales of investment securities, net(2,432)71

650

			 Loss (gain) on valuation of investment securities

45

1,565

14,298

			 Decrease (increase) in trade receivables
			 Decrease (increase) in inventories
			 Increase (decrease) in trade payables

(752)

540

4,939

(4,186)

4,920

44,959

(904)

(33)

(305)

			Other, net(1,582)

3,753

34,302

				Subtotal

6,901

7,964

72,775

		 Total changes in items during period(3,128)

(58)

(328)

(1,738)(845)(6,097)(75)

404(68,174)

		 Interest and dividends received

394

322

2,946

Balance as at February 29, 2020¥(4,581)¥ 22¥(9,285)¥  (604)¥(763) ¥(15,211)¥ 484¥3,741¥ 94,037

		Interest paid

(367)

(459)

(4,195)

		 Income taxes paid

(2,304)(1,679)(15,340)

		 Income taxes refund

11

1,855

16,949

4,635

8,003

73,135

		 Payments into time deposits

(5)

(21)

(195)

		 Proceeds from withdrawal of time deposits

599

53

482

(11,220)(5,701)(52,100)

4,803

4,057

37,073(10,138)(2,277)(20,806)

9,444

3,654

33,392Thousands of U.S. dollars (Note 2. (21))

				 Net cash provided by (used in) operating activities

Accumulated other comprehensive income
Valuationdifference on
Deferredavailable-for-salegains or losses
securities(Note 4)on hedges

Revaluation
reservefor land$(13,273)$ 727$(81,850) $ 10,366

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 consolidation——

Balance as at February 28, 2019

Net changes in items other thanshareholders’ equity

Foreigncurrencytranslation
adjustment

Remeasurementsof defined
benefit plans(Note 8)Cash flows from investing activities:

Shareacquisitionrights

Noncontrollinginterests

Total net
assets$5,112$30,487$1,482,327

—

—

—

(30,237)

		 Purchase of property, plant and equipment

—

—

—

(476,428)

		 Proceeds from sales of property, plant and equipment

—

—

—

—

(16,064)

		 Purchase of investment securities

—

—

—

—

—

689

—

—

—

—

—

—

2,027

(166)

(132)

(1,204)

—

—

—

—

—

—

(43,570)

		 Payments of guarantee deposits(1,166)(695)(6,350)

—

—

—

—

—

—

(6,695)

		 Proceeds from refund of guarantee deposits

1,465

900

8,220

		 Purchase of shares of subsidiaries resulting in change in scope of consolidation—(8,304)(75,887)

		 Proceeds from purchase of shares of subsidiaries resulting in change in scope of consolidation

39

—

—

Total

$  747 $ (83,283)(28,594)(523)(3,003)(15,889)(7,715)(55,724)

(688)

3,698

(52,714)

		 Total changes in items during period(28,594)(523)(3,003)(15,889)(7,715)(55,724)

(688)

3,698

(622,992)

Balance as at February 29, 2020$(41,867)$ 204$(6,968) $(139,007)$4,424$34,185$  859,335

See accompanying notes to consolidated financial statements.

56

Onward Holdings Co., Ltd. Annual Report 2020$(84,853) $ (5,523)

		 Proceeds from sales of investment securities
		 Purchase of long-term prepaid expenses

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

(20)

—

—

(3,941)(2,292)(20,938)¥(10,306)¥(10,758)$ (98,313)

Onward Holdings Co., Ltd. Annual Report 202057

Notes to Consolidated Financial Statements

Consolidated Statements of Cash Flows

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2019 and February 29, 2020

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

Millions of yen
2019

2020

2020

Cash flows from financing activities:
		 Net increase (decrease) in short-term borrowings¥24,800¥ (8,044)$ (73,506)

		 Proceeds from long-term borrowings—

16,300148,954

		 Repayments of long-term borrowings(5,086)(3,986)(36,427)

		 Purchase of treasury shares(3,725)(1,758)(16,064)		Dividends paid

(3,420)(3,309)(30,237)

		 Dividends paid to non-controlling interests

(154)

(103)

(943)

		Other, net

(872)

(695)

(6,355)				 Net cash provided by (used in) financing activities

11,543(1,595)(14,578)

Effect of exchange rate change on cash and cash equivalents

(285)

(499)

(4,554)

Net increase (decrease) in cash and cash equivalents

5,587(4,849)(44,310)

Cash and cash equivalents at beginning of period

25,65031,237285,453—

2,392

21,858¥31,237¥28,780$263,001

Increase (decrease) in cash and cash equivalents resulting from change in scope of consolidation
Cash and cash equivalents at end of period (Note 10)
See accompanying notes to consolidated financial statements.

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

2. Summary of Significant Accounting Policies(1) Scope of consolidation

The Company had 83 subsidiaries as at February 29, 2020 (87 as at February 28, 2019). The accompanying consolidated financial statements
include the accounts of the Company and 76 of its subsidiaries (72 for 2019). Major consolidated subsidiaries are listed below (the Company andits consolidated subsidiaries are collectively referred to as the “Companies”):
Equity ownership percentage

Closing date

Onward Kashiyama Co., Ltd.

Name of subsidiary

100.0%

February 29

Yamato Co., Ltd.

100.0

February 29

Onward Trading Co., Ltd.

100.0

February 29

Chacott Co., Ltd.

100.0

February 29

Island Co., Ltd.

100.0

February 29

Creative Yoko Co., Ltd.

100.0

February 29

Onward Personal Style Co., Ltd.

100.0

February 29

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 29

Excel Co., Ltd.

100.0

February 29

Onward Resort & Golf Co., Ltd.

100.0

February 29

Onward Life Design Network Co., Ltd.

100.0

February 29

Onward Beach Resort Guam, Inc.

100.0

December 31

Onward Mangilao Guam, Inc.

100.0

December 31

During the year ended February 29, 2020, shares in Yamato Co., Ltd. were acquired; therefore, it became a consolidated subsidiary of theCompany. Onward Italia S.p.A., Kashiyama Daikanyama Co., Ltd., and Onward Personal Style Co., Ltd., which had been unconsolidated subsidiaries, became consolidated subsidiaries of the Company since their materiality has increased. Onward International Fashion Co., Ltd., Onward
Fashion Lab Co., Ltd., Jil Sander Japan Co., Ltd., Maison Moreau Japan Co., Ltd., and OLG LAB S.R.L. were newly established; therefore, thesecompanies became consolidated subsidiaries of the Company.
Onward Kashiyama Singapore Pte. Ltd. was removed from the scope of consolidation since its materiality has decreased. Onward LuxuryGroup S.p.A., OLG S.R.L., Sakura Co., Ltd. and Jitensya Shokunin Co., Ltd. were liquidated; therefore, these companies were removed from thescope of consolidation.
The financial statements of subsidiaries with the fiscal year-end of December 31 or November 30 have been used for consolidation. The fiscal
year-end of Kokobuy Co., Ltd. is September 30, and its financial statements prepared on a basis similar to that for the year-end closing as ofDecember 31 have been used for consolidation purposes. Significant adjustments considered necessary between the fiscal year-ends and theCompany’s closing date have been made for consolidation.
The remaining 7 subsidiaries (8 for 2019) were not consolidated because their total assets, net sales, profit or loss, and retained earnings were
not material individually or in the aggregate compared with those of the consolidated financial statements of the Companies.

(2) Consolidation and elimination

For the 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.

58

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202059

Notes to Consolidated Financial Statements(3) Investments in unconsolidated subsidiaries and associates

Investments in unconsolidated subsidiaries and associates are accounted for by the equity method. A total of 4 companies (24 companies for 2019)were accounted for by the equity method for the year ended February 29, 2020. Daidoh Limited was removed from the scope of the equity
method since its effect has decreased. Charlotte Olympia Holdings Ltd. was liquidated; therefore, it was removed from the scope of theequity method.
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.

(4) Inventories

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

(13) Retirement benefits

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

Inventories held for sale in the ordinary course of business are measured at the lower of cost or net selling value, which is defined as the selling
price less additional estimated manufacturing costs and estimated direct selling expenses, determined principally by the specific identification
method. Write-downs recorded for the years ended February 28, 2019 and February 29, 2020 were ¥8,958 million and ¥10,426 million ($95,279
thousand), respectively.

(14) Provision for point card certificates(5) Investment securities(15) Accounting for Japanese consumption taxes

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

The 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.

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.

(16) Application of consolidated taxation system

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

(17) Cash and cash equivalents

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).

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.

(7) Hedge accounting(18) Impairment of non-current assets

Gains or losses arising from changes in the fair values of derivatives designated as “hedging instruments” are deferred as a component of net assets,
net of applicable taxes. The gains or losses on the hedging instruments are included in profit in the period during which the gains and losses on thehedged items or transactions are recognized. For forward exchange contracts, if they meet conditions for 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 scheduled transactions.
The Company has a policy of utilizing hedging instruments in order to reduce exposure to the risk of foreign currency exchange rate fluctuation.

(8) Property, plant and equipment

The Company and its domestic consolidated subsidiaries provide depreciation by the declining-balance method at rates based on the estimateduseful lives of assets 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 (five 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.

60(12) Provision for sales returns

Onward Holdings Co., Ltd. Annual Report 2020

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.

(19) Provision for bonuses

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.

(20) Provision for bonuses for directors

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.

(21) U.S. dollar amounts

Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of ¥109.43 = US$1, the rate of exchange as ofFebruary 29, 2020, 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 or any other rate.

(22) Goodwill

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

(23) Accounting standards issued but not yet effective- “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 29, March 30, 2018)- “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, March 30, 2018)(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
Onward Holdings Co., Ltd. Annual Report 202061

Notes to Consolidated Financial Statements(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, 2023.
(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.

(24) Change in presentation method

Changes associated with adoption of Partial Amendments to “Accounting Standard for Tax Effect Accounting” and related implementation
guidances
The Company adopted the Partial Amendments to “Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16, 2018;
the “Amendments”) and related implementation guidances at the beginning of the year ended February 29, 2020, and changed to the methodof presentation where deferred tax assets are presented under “investments and other assets” and deferred tax liabilities are presented under“non-current liabilities” and changed the notes on income taxes.
As a result, in the consolidated balance sheet as of February 28, 2019, “deferred tax assets” presented under “current assets” decreased by ¥2,973
million, and “deferred tax assets” presented under “investment and other assets” increased by the same amount.
Moreover, matters in Note 8 (except for total amount of valuation allowances) and Note 9 of Interpretive Notes to the “Accounting Standard
for Tax Effect Accounting” specified in Paragraphs 3 to 5 of the Amendments have been added to the notes on income taxes. Comparative information for the year ended February 28, 2019, however, is not presented in accordance with the transitional provisions in Paragraph 7 of theAmendments.

(25) Additional information

Some stores of the Companies in and outside Japan have temporarily closed due to the global spread of the novel coronavirus.
The Companies made accounting estimates including the recoverability of deferred tax assets, assuming that the effect of the coronavirus disease will remain serious at least until the first quarter of the year ending February 28, 2021, thereafter beginning to ease and mostly subsiding by
the fiscal year-end with considerations of its long-standing uncertainty.

3. 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.
(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 and counterparties on a periodical basis and manage due dates and outstanding balances bycustomer while working to at an early stage identify and mitigate any concerns about collection due to deterioration of financial conditions andother 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.

62

Onward Holdings Co., Ltd. Annual Report 2020(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.
(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.

(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 28, 2019 andFebruary 29, 2020.
Millions of yen
February 28, 2019

Carrying value

Fair value

Difference¥ 31,284¥ 31,284¥    —

25,50825,508—Available-for-sale securities

17,89017,890—Shares of subsidiaries and associates

6,204

2,220

(3,984)(d) Notes and accounts payable—trade(17,557)(17,557)—(e) Electronically recorded obligations—operating(14,183)(14,183)—(f ) Short-term borrowings(53,886)(53,886)—(g) Long-term borrowings (including current portion of long-term borrowings)(7,507)(7,512)

5

103

103

—

(a) Cash and deposits(b) Notes and accounts receivable—trade(c) Investment securities:(h) Derivative transactions

Millions of yen
February 29, 2020(a) Cash and deposits(b) Notes and accounts receivable—trade

Carrying value

Fair value

Difference¥ 28,795¥ 28,795¥—

25,71625,716—(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

Thousands of U.S. dollars
February 29, 2020

Carrying value

Fair value

Difference(a) Cash and deposits$ 263,138$ 263,138$ —234,995

234,995—(b) Notes and accounts receivable—trade(c) Investment securities:

116,297

116,297—(d) Notes and accounts payable—trade

Available-for-sale securities(175,513)(175,513)—(e) Electronically recorded obligations—operating(126,185)(126,185)—(f ) Short-term borrowings(410,373)(410,373)—(g) Long-term borrowings (including current portion of long-term borrowings)(196,295)(195,573)

(722)

422

422

—

(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.

Onward Holdings Co., Ltd. Annual Report 202063

Notes to Consolidated Financial Statements(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
rate that 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 28, 2019 and February 29,2020 are as follows:
Thousands of
U.S. dollars

Millions of yen
Classification

Millions of yen

Proceeds from sales of securities¥9,535

Realized gain on sales of securities

2,432

Realized loss on sales of securities(0)(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and associates as of February 28, 2019 was ¥9,622 million.

2019

2020

2020

(d) For the year ended February 28, 2019, the Companies recognized loss on valuation of investment securities (available-for-sale securities) of ¥45
million as an impairment loss.

¥3,751¥615$5,616(2) Information as of and for the year ended February 29, 2020

Investment securities:
Unlisted equity securities(b) Available-for-sale securities sold during the year ended February 28, 2019(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:

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.

Millions of yen

3. The redemption schedules for monetary receivables and marketable securities with maturities as of February 28, 2019 and February 29, 2020 are as follows:
Millions of yen
February 28, 2019

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits¥31,284

¥—

¥—

¥—

Notes and accounts receivable—trade25,508———

		Total¥56,792

¥—

¥—

¥—

Thousands of U.S. dollars

Carrying
value

Acquisition
cost

Unrealized
gain (loss)

Carrying
value

Acquisition
cost

Unrealized
gain (loss)$ 1,557

Securities with unrealized gain:
Equity securities¥   774¥   604¥  170$  7,069$  5,512

Other

2

1

1

22

12

10

Subtotal

776

605

171

7,091

5,524

1,567

11,95016,734(4,784)109,206

152,920(43,714)

—

—

—

—

—

—

Subtotal

11,95016,734(4,784)109,206

152,920(43,714)

		Total¥12,726¥17,339¥(4,613)$116,297$158,444$(42,147)

Securities with unrealized loss:
Equity securities
Other

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———

		Total¥54,511

¥—

¥—

¥—

February 29, 2020

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits$263,138

$—

$—

$—

Notes and accounts receivable—trade234,995———

		Total$498,133

$—

$—

$—

Note: Non-marketable equity securities of ¥334 million ($3,049 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.

(b) Available-for-sale securities sold during the year ended February 29, 2020

Thousands of U.S. dollars

4. Expected repayment amounts of long-term borrowings subsequent to the balance sheet date
See Note 13. “Short-Term Borrowings and Long-Term Borrowings.”

Millions of yen

Thousands of
U.S. dollars

Proceeds from sales of securities¥3,742$34,197

Realized gain on sales of securities

161

1,470

Realized loss on sales of securities(232)(2,120)(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and associates as of February 29, 2020 was ¥281 million ($2,567
thousand).
(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 ($14,298 thousand) as an impairment loss.

4. Investment Securities(1) Information as of and for the year ended February 28, 2019(a) Available-for-sale securities with readily determinable fair values
Investment securities whose fair values were readily determinable at February 28, 2019 are summarized as follows:

5. Derivative Transactions

Millions of yen
Acquisition
cost

Unrealized
gain (loss)¥11,205¥ 9,706¥ 1,499

2

1

1

11,207

9,707

1,500

6,683

7,914

(1,231)———

Forward exchange contracts:

Securities with unrealized gain:
Equity securities
Other
Subtotal

The contract or notional amounts and fair values of derivative financial instruments held as of February 28, 2019 and February 29, 2020 are summarized as follows:(1) Derivative transactions to which hedge accounting was not applied
No applicable items.

Carryingvalue(2) Derivative transactions to which hedge accounting was applied
Millions of yen

Securities with unrealized loss:
Equity securities
Other

Hedged item

Contract ornotional amount

Fair value

Subtotal

6,683

7,914

(1,231)

		 To buy foreign currency:

		Total¥17,890¥17,621¥  269

			U.S. dollar

Accounts payable—trade¥2,185¥ 97

			EuroAccounts payable—trade

1,474

(5)

			PoundAccounts payable—trade23

1

			Chinese yuan

Accounts payable—trade

207

10

¥3,889¥103

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.

64

February 28, 2019

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202065

Notes to Consolidated Financial Statements

7. Loss on Liquidation of BusinessMillions of yen
February 29, 2020

Contract ornotional amount

Hedged item

Fair value

Forward exchange contracts:

Loss on liquidation of business for the years ended February 28, 2019 and February 29, 2020 consisted of the following:			U.S. dollar

Accounts payable—trade¥1,205¥32

			EuroAccounts payable—trade973

9

			PoundAccounts payable—trade——

			Chinese yuan

Accounts payable—trade57

5¥2,235¥46

Thousands of U.S. dollars

2019

2020

2020

¥1,282$11,712

Loss on disposal of inventories¥—

Bad debts expenses

—

647

5,910

Expenses in relation to withdrawal from unprofitable stores

—

1,100

10,054

		Total¥—¥3,029$27,676

8. Retirement Plan and Retirement Benefits

Hedged item

Contract ornotional amount

Fair value

			U.S. dollar

Accounts payable—trade$11,006$296

			EuroAccounts payable—trade

8,893

82

			PoundAccounts payable—trade——

			Chinese yuan

Accounts payable—trade

524

44

$20,423$422

February 29, 2020

Forward exchange contracts:		 To buy foreign currency:

6. Impairment Loss

The Company and certain of its 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 subsidiaries grant lump-sum
payments or pensions to their employees based on the salary levels and service periods. Retirement benefit trusts have been established in certain
defined benefit corporate pension plans.
Under the lump-sum retirement payment plans, which are unfunded plans, some of which are funded plans as a result of the establishment of
retirement benefit trusts, the Company and its subsidiaries grant lump-sum payments to their employees as retirement benefits, based on the salarylevels and service periods.
Under the lump-sum retirement payment plans for certain consolidated subsidiaries, retirement benefit liability and net periodic pension
expenses are calculated by using the simplified method.

(1) Defined benefit plans

For the years ended February 28, 2019 and February 29, 2020, the Companies reviewed its non-current assets for impairment and, as a result,recognized an impairment loss as follows:(a) Changes in projected benefit obligations

February 28, 2019
Location

Usage

Description

Thousands of
U.S. dollars

Millions of yen

Millions of yen

2019

2020

2020

¥14,380¥13,682$125,029

Service cost

955

930

8,503

Interest cost

37

36

326

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.

Actuarial differences

6

(329)

(3,007)(1,737)(2,091)(19,105)

41

(221)

(2,022)February 29, 2020

Balance at end of period¥13,682¥12,007$109,724

Tokyo metropolitan area and other

Business assets

Buildings and structures
Other

588

—

—

Goodwill

4,290

Location

Tokyo metropolitan area and other
—

Usage

Business assets—

Description

Buildings and structures¥  655

Balance at beginning of period

Millions of yen

Thousands of
U.S. dollars¥ 9,075$82,929

Other

7,819

71,449Goodwill

10,862

99,264

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 28, 2019, the Company recognized an impairment loss of ¥4,290 million on goodwill for Onward Luxury Group
S.p.A., a consolidated subsidiary of the Company, as a result of consideration of its recoverability based on cash flow projections. For the year
ended February 29, 2020, the Company recognized an impairment loss of ¥10,862 million ($99,264 thousand) on goodwill for consolidated subsidiaries in and outside Japan as a result of consideration of their recoverability based on cash flow projections.
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% for the years ended February
28, 2019 and February 29, 2020.

66

Thousands of
U.S. dollars

Millions of yen

		 To buy foreign currency:

Onward Holdings Co., Ltd. Annual Report 2020

Benefits paid
Other(b) Changes in plan assets
Thousands of
U.S. dollars

Millions of yen

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

2019

2020

2020

¥14,086¥12,608$115,211

237

219

2,009

(1,283)(1,506)(13,767)

Employer contributions

297

290

2,650

Benefits paid

(729)

(623)

(5,691)¥12,608¥10,988$100,412

Balance at end of period

Onward Holdings Co., Ltd. Annual Report 202067

Notes to Consolidated Financial Statements(c) Reconciliation from projected benefit obligations and plan assets to retirement benefit asset and liability recognized in the consolidated balance sheet
Thousands of
U.S. dollars

Millions of yen
2019

2020

2020

Funded projected benefit obligations¥ 12,945¥ 11,308$ 103,340

Plan assets(12,608)(10,988)(100,412)

337

320

2,928

737

699

6,384

1,074

1,019

9,312

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

3,993

3,724

34,029Retirement benefit asset(2,919)(2,705)(24,717)¥  1,074¥  1,019$  9,312

Net amount of liability and asset recognized in the consolidated balance sheet(h) Actuarial assumptions
2019

2020

Discount rate

0.3% to 0.7%

0.3% to 0.7%

Long-term expected rate of return on plan assets

1.3% to 2.4%

1.5% to 2.9%

(2) Defined contribution plans

The amounts to be paid by the Companies to the defined contribution pension plans for the years ended February 28, 2019 and February 29, 2020
were ¥331 million and ¥312 million ($2,847 thousand), respectively.

9. Note to Consolidated Statement of Comprehensive Income
Other comprehensive income for the years ended February 28, 2019 and February 29, 2020 consisted of the following:Thousands of
U.S. dollars

Millions of yen(d) Net periodic pension expenses and their breakdown
Thousands of
U.S. dollars

Millions of yen

Service cost
Interest cost

2019

2020

2020

¥ 955

¥ 931

$ 8,504

37

36

326

Expected return on plan assets

(237)

(220)

(2,009)Amortization of unrecognized actuarial differences

246

(66)

(601)

Amortization of unrecognized prior service costs

(47)

(47)

(429)

Other

(61)

(25)

(226)

¥ 893

¥ 609

$ 5,565

Net periodic pension expenses

Note: In addition to the above, extra retirement payments of ¥3,598 million ($32,880 thousand) were recognized.

(e) Remeasurements of defined benefit plans in other comprehensive income
Breakdown of items recognized as remeasurements of defined benefit plans (before tax effect) in other comprehensive income is as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2020

2020

Amount arising during period¥(1,196)¥(6,468)$(59,105)

Reclassification adjustment for gain and loss

(2,591)

1,602

14,636

Amount before income tax effect(3,787)(4,866)(44,469)

Valuation difference on available-for-sale securities:

Income tax effect		Total

1,159

74

682

(2,628)(4,792)(43,787)

Deferred gains or losses on hedges:
Amount arising during period

103

32

295

Reclassification adjustment for gain and loss

103

(103)

(941)

Amount before income tax effect

206

(71)

(646)

Income tax effect

(52)

14

123

154

(57)

(523)

—

(107)

(977)

—

(107)

(977)
(13,779)

		Total
Revaluation reserve for land:
Income tax effect		TotalForeign currency translation adjustment:

2019

2020

2020

Prior service costs¥   (47)¥   (47)$   (429)

Amount arising during period(843)(1,508)Actuarial differences(1,043)(1,243)(11,361)

Reclassification adjustment for gain and loss

(48)

1

8

Total

¥(1,090)¥(1,290)$(11,790)(891)(1,507)(13,771)(1,289)(1,177)(10,759)

199

(113)

(1,031)(1,090)(1,290)(11,790)

		TotalRemeasurements of defined benefit plans:(f ) Remeasurements of defined benefit plans in accumulated other comprehensive income
Breakdown of items recognized as remeasurements of defined benefit plans (before tax effect) in accumulated other comprehensive income is asfollows:
Thousands of
U.S. dollars

Millions of yen

Unrecognized prior service costs
Unrecognized actuarial differences
Total

2019

2020

2020

¥121

¥   74$   680(3)(1,246)(11,393)¥118¥(1,172)$(10,713)

Amount arising during period
Reclassification adjustment for gain and loss
Amount before income tax effect
Income tax effect

334

446

4,075

(756)

(844)

(7,715)

Amount arising during period

(521)

(15)

(136)

Reclassification adjustment for gain and loss

314

—

—

(207)

(15)

(136)

¥(4,328)¥(7,322)$(66,909)

		TotalShare of other comprehensive income of entities accounted for using
equity method:

		Total(g) Plan assets(i) Percentage by major category of plans assets is as follows:			 Total other comprehensive income
2019

2020

Life insurance company general accounts

38%

35%

Equity securities

48%

44%

10. Note to Consolidated Statement of Cash Flows
Cash and cash equivalents at February 28, 2019 and February 29, 2020 consisted of the following:

Debt securities

3%

4%

Short-term funds

11%

17%

Total

100%

100%

Note: Total plan assets include retirement benefit trusts established for defined benefit corporate pension plans and lump-sum retirement payment plans of
56% and 52% for the years ended February 28, 2019 and February 29, 2020, 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.

68

Onward Holdings Co., Ltd. Annual Report 2020

Thousands of
U.S. dollars

Millions of yen

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

2019

2020

2020

¥31,284¥28,795$263,138

(47)

(15)

(137)

¥31,237¥28,780$263,001

Onward Holdings Co., Ltd. Annual Report 202069

Notes to Consolidated Financial Statements

11. Lease Transactions

Millions of yen
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

¥ 685

¥ 281

¥ 479

¥ 618

¥ 769

¥ 24,591¥   27,423

Valuation allowance

(685)

(281)

(479)

(618)

(769)

(24,300)(27,132)

Deferred tax assets

—

—

—

—

—

291

(b) 291

February 29, 2020

(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).

Thousands of U.S. dollars(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.

12. Income Taxes
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities as at February 28, 2019 andFebruary 29, 2020 consisted of the following elements:
Thousands of
U.S. dollars

Millions of yen

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$ 6,255$ 2,568$ 4,381$ 5,647$ 7,028$ 224,720$ 250,599

Valuation allowance(6,255)(2,568)(4,381)(5,647)(7,028)(222,059)(247,938)

Deferred tax assets

—

—

—

—

—

2,661

2,661

February 29, 2020(a) Tax loss carry forwards present the amounts computed by multiplying the statutory tax rate.
(b)	The Company recognized ¥291 million ($2,661 thousand) of deferred tax assets for ¥27,423 million ($250,599 thousand) of tax loss carry forwards (amount computed by multiplying the statutory tax rate). 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.

2019

2020

2020

¥ 10,833¥ 27,423$ 250,599

Impairment loss

6,419

10,64997,310Statutory tax rate

Retirement benefit liability

2,711

3,725

34,042

Reconciliation:

Loss on write-down of inventories

1,371

2,555

23,350Loss on valuation of shares of subsidiaries and associates

7,135

1,960

17,90853

1,457

13,316Per capita inhabitant tax

Deferred tax assets:
Tax loss carry forwards

Valuation difference on available-for-sale securities
Allowance for doubtful accounts

The reconciliation of the difference between the statutory tax rate and the effective tax rate is as follows:
%
2019

2020

30.9

—

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

5.1—

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

(3.1)

—

4.3

—

1,576

1,266

11,566

Amortization of goodwill

16.1

—

Provision for bonuses

240

281

2,571

Impairment loss on goodwill

42.0

—

Provision for retirement benefits for directors and corporate auditors

83

87

792

Changes in valuation allowances(213.5)—Investment securities

25

27

246

Consolidation adjustments to gain or loss on sales of shares of subsidiaries and associates

10.2

—

Other

3,749

3,339

30,515

Effects due to liquidation of consolidated subsidiaries

0.9—

		Subtotal

34,19552,769482,215

Differences in statutory tax rate

20.4

—

Valuation allowance for tax loss carry forwards (Note 2)—(27,132)(247,938)

2.6—

Valuation allowance for deductible temporary differences—(19,014)(173,756)

		 Effective tax rate

(84.1)—

		 Total valuation allowances (Note 1)(16,624)(46,146)(421,694)

			 Total deferred tax assets

17,571

6,623

60,521

Note: The details for the year ended February 29, 2020 are omitted due to the recording of loss before income taxes.

Retirement benefit asset

(894)

(936)

(8,550)Gain on securities contributed to employee retirement benefit trusts

(43)

(43)

(396)

Provision for deferred capital gain on real property for tax purposes

(38)

(40)

(369)

Valuation difference on available-for-sale securities

(133)

(6)

(58)

Other

(564)

(1,444)(13,192)

		 Total deferred tax liabilities(1,672)(2,469)(22,565)

			 Net deferred tax assets¥ 15,899¥  4,154$  37,956

Deferred tax liabilities:

Notes: 1. Valuation allowances increased by ¥29,522 million ($269,782 thousand) due to increased tax loss carry forwards and valuation allowance for
impairment loss.
2. The amounts of tax loss carry forwards and related deferred tax assets disaggregated by period of expiration:

Other

13. Short-Term Borrowings and Long-Term Borrowings
Short-term borrowings at February 28, 2019 and February 29, 2020 represented loans, principally from banks. The weighted-average interest rateon these loans was 0.6% in 2019 and 2020.
Long-term borrowings at February 28, 2019 and February 29, 2020 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen
2019

2020

2020

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

¥7,507¥21,480$196,295Less: Current portion with weighted-average interest rate of 0.3% at February 28, 2019
and February 29, 2020

2,800

4,452

40,684Long-term borrowings, less current portion, with weighted-average interest rate of
0.3% at February 28, 2019 and February 29, 2020

¥4,707¥17,028$155,611

Lease obligations at February 28, 2019 and February 29, 2020 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Lease obligations
Less: Current portion of lease obligations

70

Onward Holdings Co., Ltd. Annual Report 2020

2019

2020

2020

¥5,050¥5,032$45,990

639

808

7,387

¥4,411¥4,224$38,603

Onward Holdings Co., Ltd. Annual Report 202071

Notes to Consolidated Financial Statements

The aggregate annual maturities of long-term borrowings after February 28, 2021 are as follows:
Millions of yen

Thousands of
U.S. dollars

2021¥4,452$40,684

2022

4,548

41,565

2023

2,952

26,976

2024

2,452

22,407

Millions of yen

Thousands of
U.S. dollars

Year ending February 28 or 29:

The aggregate annual maturities of lease obligations after February 28, 2021 are as follows:Year ending February 28 or 29:
2021

¥808

$7,387

2022

659

6,022

2023

495

4,519

2024

384

3,511

16. Related-Party Transactions
Year Ended February 28, 2019

The Company leased land from Takeshi Hirouchi, Representative Director and Chairman of ONWARD HOLDINGS Co., Ltd., during the fiscal
year, and the rental fee was ¥7 million. Also, Mr. Hirouchi paid a rental fee of ¥16 million to the Company for a house. The rental fees were determined by the average market prices.
Onward Global Fashion Co., Ltd., a consolidated subsidiary of the Company, sold goods to BOLS 1987 Co., Ltd., over which Hitoshi Futamura,
Representative Director, President of Onward Global Fashion Co., Ltd., held 100% of voting rights directly, during fiscal year 2019. The transaction
amount was ¥51 million, and the balance of relevant accounts receivable—trade as of February 28, 2019 was ¥12 million. Prices and other terms
and conditions were determined by reference to market prices or general terms and conditions.

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 ($73 thousand). Also, Mr. Hirouchi paid a rental fee of ¥15 million ($137 thousand) 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 ($402 thousand), and the balance of relevant accounts receivable—trade as of February 29, 2020 was ¥9 million($82 thousand). Prices and other terms and conditions were determined by reference to market prices or general terms and conditions.

17. Share Options

14. 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 28, 2019 and February 29, 2020 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 28, 2020, areas follows:(a) Total dividends:¥3,240 million ($29,612 thousand)(b) Source of dividends:(c) Cash dividends per ordinary share:(d) Date to determine which shareholders receive the dividends:

2014 Share Option Plan (No. 16)

Under the 2014 share option plan (No. 16), share options were granted to five directors of the Company on June 20, 2014. They are exercisable in
the period from June 21, 2014 to June 20, 2044. The terms of the options include certain limitations on the exercisability under which grantees
can exercise their options during a five-year period starting a year after they 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:¥526 ($4.81)

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:2014 share option plan (No. 16)

Non-vested (shares):
Outstanding at February 28, 2019
Granted¥24 ($0.22)

Forfeited

May 29, 2020

¥1 ($0.01)

		 Fair value at the grant date:

Retained earnings
February 29, 2020(e) Effective date:

The cost recognized for the share options for the years ended February 28, 2019 and February 29, 2020 was nil.

103,700——

Vested30,600

Outstanding at February 29, 2020

73,100

Vested (shares):
Outstanding at February 28, 201919,20015. Per Share Information

Vested30,600Earnings 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 28, 2019 and February 29, 2020 is as follows:

Forfeited

ExercisedThousands of
U.S. dollars

Millions of yen

Profit (loss) attributable to owners of parent
Less: Components not pertaining to ordinary shareholders

2020

2020

¥  4,948¥(52,135)$(476,428)

—

—

—

Profit (loss) pertaining to ordinary shareholders¥  4,948¥(52,135)$(476,428)

Average number of ordinary shares (thousand shares)

140,406

135,779

1,147—

Effect of dilutive share options (thousand shares)

72

2019

Onward Holdings Co., Ltd. Annual Report 2020

Outstanding at February 29, 2020——
49,800The 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 202073

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 five directors and nine 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:¥588 ($5.37)

		 Fair value at the grant date:¥466 ($4.26)

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 six directors and nine 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:¥584 ($5.34)

		 Fair value at the grant date:¥572 ($5.23)

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:
A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:2013 share option plan (No. 13)
2014 share option plan (No. 15)

Non-vested (shares):
Outstanding at February 28, 2019Non-vested (shares):
Outstanding at February 28, 201958,60063,700GrantedGranted—Forfeited—

Forfeited—

Vested9,300

Outstanding at February 29, 2020

49,300

Vested11,100

Outstanding at February 29, 2020

52,600

Vested (shares):—

Vested (shares):
Outstanding at February 28, 2019

33,900

Outstanding at February 28, 2019

38,300

Vested9,300

Vested11,100Exercised

22,300Exercised

21,100Forfeited

Forfeited—

Outstanding at February 29, 2020

28,300The 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)

Under the 2013 share option plan (No. 14), share options were granted to five directors of the Company on June 20, 2013. They are exercisable in
the period from June 21, 2013 to June 20, 2043. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they 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:¥591 ($5.40)

		 Fair value at the grant date:¥629 ($5.75)—

Outstanding at February 29, 2020

20,900The 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.

2012 Share Option Plan (No. 12)

Under the 2012 share option plan (No. 12), share options were granted to five directors of the Company on June 20, 2012. They are exercisable in
the period from June 21, 2012 to June 20, 2042. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they 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:¥580 ($5.30)

		 Fair value at the grant date:¥458 ($4.19)

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:
A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:2012 share option plan (No. 12)2013 share option plan (No. 14)

Non-vested (shares):
Outstanding at February 28, 2019

Outstanding at February 28, 2019108,500

82,100GrantedGranted—Forfeited

Forfeited—

Vested33,600

Outstanding at February 29, 2020

74,900

Vested25,400

Outstanding at February 29, 2020

56,700

Vested (shares):——

Vested (shares):
Outstanding at February 28, 2019

14,000

Outstanding at February 28, 201922,700

Vested33,600

Vested25,400Exercised

40,800Exercised

14,700Forfeited

Forfeited—

Outstanding at February 29, 2020

33,400The 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.

74

Non-vested (shares):

Onward Holdings Co., Ltd. Annual Report 2020

Outstanding at February 29, 2020

—
6,800

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 202075

Notes to Consolidated Financial Statements

2012 Share Option Plan (No. 11)

Under the 2012 share option plan (No. 11), share options were granted to one executive officer of the Company and nine 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
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 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)

2011 Share Option Plan (No. 9)

Under the 2011 share option plan (No. 9), share options were granted to one 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
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 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:¥591 ($5.40)

		 Average share price on the date the option was exercised:¥589 ($5.38)

		 Fair value at the grant date:¥444 ($4.06)

		 Fair value at the grant date:¥444 ($4.06)

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:2012 share option plan (No. 11)

Non-vested (shares):
Outstanding at February 28, 201947,500

Outstanding at February 28, 201937,500Granted—GrantedForfeited—

Forfeited—

Vested8,200

Vested7,200

Outstanding at February 29, 2020

39,300

Outstanding at February 29, 2020

30,300

Vested (shares):—

Vested (shares):

Outstanding at February 28, 201936,500

Outstanding at February 28, 2019

Vested8,200

Vested7,200

Exercised

33,300Exercised

10,800—Forfeited

Forfeited
Outstanding at February 29, 2020

11,40014,900—

Outstanding at February 29, 2020

11,300The 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.

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

Under the 2011 share option plan (No. 10), share options were granted to five directors of the Company on June 20, 2011. They are exercisable in
the period from June 21, 2011 to June 20, 2041. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they 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:		 Fair value at the grant date:¥1 ($0.01)¥510 ($4.66)

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:2011 share option plan (No. 10)

Non-vested (shares):
Outstanding at February 28, 201969,400Granted—Forfeited—

Vested—Outstanding at February 29, 2020

69,400The 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.

76

2011 share option plan (No. 9)

Non-vested (shares):

Onward Holdings Co., Ltd. Annual Report 2020

Under the 2010 share option plan (No. 8), share options were granted to five directors of the Company on June 18, 2010. They are exercisable in
the period from June 19, 2010 to June 18, 2040. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they 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)

		 Fair value at the grant date:¥613 ($5.60)

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:2010 share option plan (No. 8)

Non-vested (shares):
Outstanding at February 28, 201952,300Granted—Forfeited—

VestedOutstanding at February 29, 2020—
52,300The 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 202077

Notes to Consolidated Financial Statements

2010 Share Option Plan (No. 7)

Under the 2010 share option plan (No. 7), share options were granted to eight 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 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 194,600 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:¥589 ($5.38)

		 Fair value at the grant date:¥475 ($4.34)

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 ($3.31)

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:
A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:2009 share option plan (No. 5)2010 share option plan (No. 7)

Non-vested (shares):
Outstanding at February 28, 2019Non-vested (shares):31,80032,400Granted—Granted—Forfeited—

Forfeited—

VestedVested3,900

Outstanding at February 29, 2020

28,500

Outstanding at February 28, 2019—

Outstanding at February 29, 2020

31,800

Vested (shares):
Outstanding at February 28, 2019

Vested (shares):

4,600

Outstanding at February 28, 2019

3,900

Vested—Vested3,900

Exercised—

Exercised

7,800

Forfeited

Forfeited—

Outstanding at February 29, 2020—

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.

2009 Share Option Plan (No. 6)—

Outstanding at February 29, 2020

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 2009 share option plan (No. 6), share options were granted to five directors of the Company on June 19, 2009. They are exercisable in
the period from June 20, 2009 to June 19, 2039. The terms of the options include certain limitations on the exercisability under which grantees
can exercise their options during a five-year period starting a year after they 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:

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:		Exercise price:		 Fair value at the grant date:¥1 ($0.01)¥432 ($3.95)¥1 ($0.01)

		 Average share price on the date the option was exercised:¥598 ($5.46)

		 Fair value at the grant date:¥905 ($8.27)

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:2009 share option plan (No. 6)

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:2008 share option plan (No. 4)

Non-vested (shares):
Outstanding at February 28, 2019

72,000Non-vested (shares):

Granted—Outstanding at February 28, 2019

Forfeited—

Granted—

Vested—Forfeited—

Outstanding at February 29, 2020

72,000The 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 future.

VestedOutstanding at February 29, 2020

8,200

—
8,200

Vested (shares):
Outstanding at February 28, 2019

1,600

Vested—Exercised

1,600

Forfeited—

Outstanding at February 29, 2020—

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.

78

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202079Notes to Consolidated Financial Statements

2008 Share Option Plan (No. 3)

Under the 2008 share option plan (No. 3), share options were granted to five directors of the Company on June 20, 2008. They are exercisable in
the period from June 21, 2008 to June 20, 2038. The terms of the options include certain limitations on the exercisability under which grantees
can exercise their options during a five-year period starting a year after they 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:		 Fair value at the grant date:¥1 ($0.01)¥944 ($8.63)

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:2008 share option plan (No. 3)

Non-vested (shares):
Outstanding at February 28, 2019

32,000Granted—Forfeited—

VestedOutstanding at February 29, 2020—
32,000The 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.

2007 Share Option Plan (No. 2)

Under the 2007 share option plan (No. 2), share options were granted to five directors and two corporate auditors of the Company on July 20,
2007. They are exercisable in the period from July 21, 2007 to July 20, 2037. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they 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:		 Fair value at the grant date:¥1 ($0.01)¥1,284 ($11.73)

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:2007 share option plan (No. 2)

Non-vested (shares):
Outstanding at February 28, 2019

16,600Granted—Forfeited—

VestedOutstanding at February 29, 2020—
16,600The 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.

2006 Share Option Plan (No. 1)

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

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.

18. Segment Information(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) Information on net sales, profit or loss, assets, liabilities, and other items by reportable segment for the years ended February 28, 2019 andFebruary 29, 2020 is as follows:
Millions of yen
Apparel
For the year ended February 28, 2019

Domestic

Overseas

Total

Lifestyle

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers¥167,058¥47,506¥214,564¥26,088¥240,652¥    —¥240,652

Intersegment sales or transfers

1,424

3,702

5,126

2,318

7,444

(7,444)—¥168,482¥51,208¥219,690¥28,406¥248,096¥ (7,444)¥240,652

Total
Segment profit (loss)¥  9,018¥ (3,763)¥  5,255¥ 1,542¥  6,797¥ (2,335)¥  4,462

Segment assets¥125,674¥49,516¥175,190¥40,188¥215,378¥72,177¥287,555

Depreciation and amortization (Note 2)¥  3,729¥ 1,281¥  5,010¥   998¥  6,008¥   503¥  6,511

Investments in equity-method entities

6,334

842

7,176

—

7,176

—

7,176

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

6,150

2,368

8,518

635

9,153

4,320

13,473

Notes: 1. Adjustments consist of the following:			 (1) The adjustment amount for segment profit (loss) of ¥(2,335) million includes amortization of goodwill of ¥(2,302) million, elimination ofintersegment transactions of ¥4,523 million, and corporate expenses not allocated to reportable segments of ¥(4,556) million. Corporate
expenses are mainly general and administrative expenses that are not attributable to reportable segments.
			 (2) The adjustment amount for segment assets of ¥72,177 million includes the unamortized balance of goodwill of ¥9,455 million, elimination ofintersegment transactions of ¥(138,800) million, and corporate assets not allocated to reportable segments of ¥201,522 million. Corporate assets
are mainly assets held by the Company, a pure holding company.
		 2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses(furniture and fixtures).
		 3. Segment profit (loss) coincides with the amount of operating profit in the consolidated statement of income.
Millions of yen
Apparel
For the year ended February 29, 2020

Domestic

Overseas¥1 ($0.01)

Net sales to outside customers¥158,955¥46,310¥205,265¥42,969¥1,541 ($14.08)

Intersegment sales or transfers

1,393

2,499

3,892

2,870

¥160,348¥48,809¥209,157¥45,839

Total

A summary of the scale and movement of the share option plan for the year ended February 29, 2020 is as follows:
2006 share option plan (No. 1)

Non-vested (shares):
Outstanding at February 28, 2019—

Forfeited—

Outstanding at February 29, 2020

80Onward Holdings Co., Ltd. Annual Report 2020

Lifestyle

Adjustments(Note 1)

Consolidated
total (Note 3)¥248,234¥    —¥248,234

6,762(6,762)—¥254,996¥ (6,762)¥248,234

Total

Segment profit (loss)¥  2,515¥ (5,940)¥  (3,425)¥ 1,553¥  (1,872)¥ (1,189)¥  (3,061)

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

14,500Granted
VestedTotal—
14,500
Onward Holdings Co., Ltd. Annual Report 202081

Notes to Consolidated Financial Statements

Investments in equity-method entities

67

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

4,944

17

84

1,643

—

6,587

84

1,467

—

8,054

84

1,480

9,534

Thousands of U.S. dollars
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$1,452,571$423,194$1,875,765$392,661$2,268,426$     —

$2,268,426Intersegment sales or transfers

12,73022,84035,57026,22561,795(61,795)—$1,465,301$446,034$1,911,335$418,886$2,330,221$ (61,795)$2,268,426

Segment profit (loss)$   22,982$ (54,282)$   (31,300)$ 14,193$   (17,107)$ (10,868)$   (27,975)

Segment assets$1,032,776$352,936$1,385,712$456,976$1,842,688$298,559$2,141,247

Depreciation and amortization (Note 2)$   33,584$  8,624$   42,208$ 11,679$   53,887$  4,531$    58,418

613

156

769

—

769

—

769

45,17915,01560,194

13,40473,59813,52387,121

Total

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

Notes: 1. Adjustments consist of the following:			 (1) Th e adjustment amount for segment profit (loss) of ¥(1,189) million ($(10,868) thousand) includes amortization of goodwill of ¥(1,748) million($(15,979) thousand), elimination of intersegment transactions of ¥5,138 million ($46,957 thousand), and corporate expenses not allocated toreportable segments of ¥(4,579) million ($(41,846) thousand). 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 ($298,559 thousand) includes the unamortized balance of goodwill of ¥6,128
million ($55,997 thousand), elimination of intersegment transactions of ¥(142,558) million ($(1,302,729) thousand), and corporate assets notallocated to reportable segments of ¥169,101 million ($1,545,291 thousand). Corporate assets are mainly assets held by the Company, a pureholding company.
		 2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses (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.

(4) Segment information by geographical area for the years ended February 28, 2019 and February 29, 2020 is as follows:(a) Sales
For the year ended February 28, 2019

Millions of yen

Japan

Europe

Other

Total

¥186,458¥34,745¥19,449¥240,652

For the year ended February 29, 2020

Japan

U.S.A.

Europe

Other

Total

$622,215$85,515$39,623$13,238$760,591(Change in presentation method)
Property, plant and equipment in U.S.A., which was included in “other” in the consolidated financial statements for the year ended February 28,
2019, have been presented separately in the financial statements for the year ended February 29, 2020, since significance of the amount has
increased. As a results, certain line item amounts as of February 28, 2019 stated in “(4) Segment information by geographical area, (b) Property,
plant and equipment” have been reclassified.
(5) Segment information on impairment loss by reportable segment for the years ended February 28, 2019 and February 29, 2020 is as follows:
Millions of yen
Apparel
For the year ended February 28, 2019

Impairment loss

Domestic

Overseas

Total

Lifestyle

Unallocatedamounts andelimination

¥631

¥610

¥1,241¥2¥4,290

Total¥27,756

Total¥5,533

Millions of yen
Apparel
For the year ended February 29, 2020

Domestic

Overseas

Total

Lifestyle

Unallocatedamounts andelimination

Impairment loss

¥3,137¥5,261¥8,398¥8,259¥11,099

Thousands of U.S. dollars
Apparel
For the year ended February 29, 2020

Domestic

Overseas

Total

Lifestyle

Unallocatedamounts andelimination

Impairment loss

$28,664$48,072$76,736$75,477$101,429

Total$253,642

19. Subsequent Event
Restrictions and other emergency measures were implemented in many countries due to the global spread of the novel coronavirus. In Japan,
the state of emergency due to the spread of the novel coronavirus was declared by the Japanese government on April 7, 2020, and the state of
emergency expanded to the entire nation on April 16.
Some stores of the Companies in and outside Japan have temporarily closed accordingly, which may have a significant effect on consolidated
net sales for the year ending February 28, 2021. It is difficult to reasonably compute the effect on the date of submission (May 29, 2020).
Assumptions of accounting estimates associated with the spread of the novel coronavirus for the year ended February 29, 2020 are presented in“2. Summary of Significant Accounting Policies, (25) Additional information.”

Millions of yen

Japan

Europe

Other

Total

¥198,071¥29,983¥20,180¥248,234

For the year ended February 29, 2020

Thousands of U.S. dollars

Japan

Europe

Other

Total

$1,810,023$273,994$184,409$2,268,426(b) Property, plant and equipment
February 28, 2019

Millions of yen

Japan

U.S.A.

Europe

Other

Total

¥78,202¥9,498¥7,908¥1,110¥96,718

February 29, 2020
U.S.A.

Europe

Other

Total

¥68,089¥9,358¥4,336¥1,448¥83,231

February 29, 202082Millions of yen

Japan

Onward Holdings Co., Ltd. Annual Report 2020

Thousands of U.S. dollars

Onward Holdings Co., Ltd. Annual Report 202083Independent Auditor’s Report

Main Subsidiaries
As of August 31, 2020

Japan
Onward Kashiyama Co., Ltd.

Chacott Co., Ltd.

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

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

Onward Trading Co., Ltd.

Creative Yoko Co., Ltd.

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

667-16 Takada, Nagano City, Nagano 381-8545, Japan
Tel: (81) 26-226-2001

Island Co., Ltd.

Kokobuy Co., Ltd.

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

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

Onward International
Fashion Co., Ltd.

Yamato Co., Ltd.

3-26-8 Sendagaya, Shibuya-ku, Tokyo 151-0051, Japan
Tel: (81) 3-5770-5370

Jil Sander Japan Co., Ltd.
3-26-8 Sendagaya, Shibuya-ku, Tokyo 151-0051, Japan
Tel: (81) 3-5770-5331

Maison Moreau Japan Co., Ltd.
3-26-8 Sendagaya, Shibuya-ku, Tokyo 151-0051, Japan
Tel: (81) 3-5770-5339

Onward Fashion Lab Co., Ltd.
3-26-8 Sendagaya, Shibuya-ku, Tokyo 151-0051, Japan
Tel: (81) 3-5770-5358

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

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

Onward J Bridge Co., Ltd.

1178-11 Toyoshinatakibe, Azumino City, Nagano 399-8204, Japan
Tel: (81) 263-71-3600

Kashiyama Daikanyama Co., Ltd.
14-18 Daikanyama-cho, Shibuya-ku, Tokyo 150-0034, Japan
Tel: (81) 3-5784-1287

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

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

Onward Digital Lab Co., Ltd.
3-9-32 Kaigan, Minato-ku, Tokyo 108-8439, Japan

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

O & K Co., Ltd.
1086 Fukuokamachi, Utsunomiya City, Tochigi 321-0342, Japan
Tel: (81) 28-652-4411

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

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

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

Kashiyama Saga Co., Ltd.
6656 Tachibanacho Nagashima, Takeo City, Saga 843-0014,
Japan
Tel: (81) 954-23-2118

84

Onward Holdings Co., Ltd. Annual Report 2020

Onward Holdings Co., Ltd. Annual Report 202085

Corporate / Investor Information

Main Subsidiaries

As of February 29, 2020

Overseas
EuropeAsia

United States

Onward Italia S.p.A.

Onward Fashion Trading(China) Co., Ltd.

J. Press, Inc.

Via Orobia, 34-20139 Milano, Italy
Tel: (39) 02-783-667

Onward Luxury Group S.p.A.
Via Cassia 69, 50029 Tavarnuzze, Firenze, Italy
Tel: (39) 055-237-201

Jil Sander S.p.A.
Foro Buonaparte 71, 20121 Milano, Italy
Tel: (39) 02-806-9131

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

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

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

Joseph Ltd.
Unit 11, 50 Carnwath Road,
London SW6 3JX, U.K.
Tel: (44) 207-610-8400

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

La Maison Moreau S.A.S.
14 Rue de Savoie, 75006 Paris, France
Tel: (33) 1-8565-8410

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

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

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

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

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

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

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

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

Established

September 1947

Capital¥30,080 million

Common Stock

Authorized— 400,000,000 shares
Issued—157,921,669 shares
Note: The total number of issued and outstanding shares included 22,901,445 shares of treasury stock.

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

Number of Shareholders

17,526

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

Stock Exchange Listings

Tokyo, Nagoya

Transfer Agent

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

Number of Employees(Consolidated)

5,153

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

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

Onward Mangilao Guam, Inc.
1810 Route 15, Pagat Mangilao,
Guam 96913, U.S.A.
Tel: (1) 671-734-1111

Major Shareholders
Number of
Shares Held(Thousands)

Percentage ofTotal Shares
Issued (%)

Kashiyama Scholarship Foundation

8,710

6.4

Japan Trustee Services Bank, Ltd. (Trust account)

8,011

5.9

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

7,677

5.6

BNYMSANV AS AGENT/CLIENTS LUX UCITS NON TREATY 1

4,825

3.5

Nippon Life Insurance Company

4,671

3.4

Onward Holdings Customers’ Shareholding Association

4,665

3.4

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

4,536

3.3

The Dai-ichi Mutual Life Insurance Company, Ltd.

4,200

3.1

STATE STREET BANK AND TRUSTCOMPANY 505001

3,481

2.5

Sumitomo Mitsui Banking Corporation

2,931

2.1

Notes:
1.	The Company holds 22,901,445 shares of treasury stock. Treasury stock is not included in the above
Major Shareholders information.
2. The percentage of total shares issued is calculated after deducting 22,901,445 shares of treasury stock.

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

Japanese individuals
and others

29.4%Japanesefinancial
institutions

30.0%

Foreigninstitutions
and others

Japanese
securities
companies

18.2%

Other Japanese
corporations

1.9%

20.5%

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

Stock Price Range and Trading Volume
Stock Price¥

Trading Volume
Thousand Shares

1,000

120,000

750

90,000500

60,000250

30,000

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

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History

1927

February

1947

September

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

1960

October

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

1962

April

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

1964

July

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

1966

September

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

1972

July

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

September

Established Onward Kashiyama U.S.A. INC.

1973

February

Established Onward Kashiyama France S.A.

1974

February

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

1986

October

Acquired J. Press, Inc.

1988

February

Established Onward Kashiyama Hong Kong Ltd.

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

1989

DecemberEstablished Onward Kashiyama U.K. Ltd.

1990

January

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

July

Acquired Chacott Co., Ltd.

1991

February

Launched Onward Research and Development Institute.

1992

May

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

1994

May

Established Bus Stop Co., Ltd.

1995

June

Established Shanghai Onward Fashion Co., Ltd.

1997

June

Established Onward Kashiyama Korea Co., Ltd.

2004

January

Acquired Erika s.r.l.

2005

May

Acquired Project Sloane Ltd. (Joseph Group).

July

Acquired Iris S.p.A.

2006

October

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

2007

April

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

May

Acquired Frassineti s.r.l.

June

Established J. Direction Co., Ltd.

September

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

October

Acquired Corporate s.r.l.

2008

October

Acquired Creative Yoko Co., Ltd.

2009

DecemberAcquired controlling interest in Island Co., Ltd.

2010

June

Established Onward Kashiyama Singapore Pte. Ltd.

2011

AugustEstablished Onward Kashiyama Vietnam Ltd.

2012

April

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

May

Established Onward Trading (Shanghai) Co., Ltd.

DecemberEstablished Charles & Keith Japan Co., Ltd.

February

Acquired Sakura Co., Ltd.

June

Established Onward Luxury Group S.p.A.

March

Established Onward Global Fashion Co., Ltd.

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

MarchMichinobu Yasumoto became president and representative director.

September

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

March

Acquired La Maison Moreau S.A.S.

April

Acquired Tiaclasse Co., Ltd.

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

January

Acquired Kokobuy Co., Ltd. and Innovate Organics, Inc.

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

2018

March

Acquired General Clothing Co., Ltd. (currently Kashiyama Saga Co., Ltd.).

2019

March

Acquired Yamato Co., Ltd.

Acquired Jil Sander A.G.

2013

2014

2015

2016

2017

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Onward Holdings Co., Ltd. Annual Report 2020

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