ANNUAL REPORT 2019Year Ended February 28, 2019

Onward Holdings Co., Ltd.

ANNUAL REPORT 2019Year Ended February 28, 2019

Onward Holdings Co., Ltd.

Contents
02

38

Onward-Approved Factory System

04	A Message from the President

40

Environmental and Social Responsibility

06

Special Feature

44

Corporate Governance14

Apparel Business

18

Lifestyle Business48	Board of Directors, Audit & Supervisory Board Members,
and Executive Officers / Company Organization

20

Core Brands

49

Financial Section28

Our History

90

Main Subsidiaries

32

Our Value Chain

92

Corporate / Investor Information

35

Our Sales Channels

93

History36

Our Network

Onward at a Glance

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

Onward Holdings Co., Ltd. Annual Report 201901

Onward at a Glance
Fiscal year ended February 28, 2019The 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.

Financial Figures
Net Sales¥ million

300,000

281,502

Sales Breakdown

1927

By Business Segment

Lifestyle

10.8%

Apparel89.2%

Overseas4,643 people
Number of Stores(–1.0% YoY)
2015

2,855 stores

69.4%
North America¥ million / %

8,000

6.0
5,732

(See pages 41–42 for details)

Factory auditing throughthe OnwardApproved Factory
System(See pages 38–39 for details)

02

Onward Holdings Co., Ltd. Annual Report 2019

Groupwidebasis

OnwardKashiyama

76%

85%

4,462

4.0

1.9

2.0

2015

2016

2017

2018

2019

0

¥ 4,462 million(–13.6% YoY)

Operating Margin (right scale)

5,367
4,278

4,948

4,744

6.0

¥ 4,948 million

4.0

2,000

By Sales Channel

10.6%

4,204

3.1

76.8%

E-Commerce0

Operating Profit

4,204

18.6%

Ratio of sales conducted
through directly operated
e-commerce stores

5,167
3,778

4,000

Japan

the Onward Green
Campaign

2019

Operating Profit and Operating Margin

6,000

EuropeI tem collection forrecycling and reuse via

2018¥ million / %2.7%

Main CSR Activities

2017

Profit Attributable to Owners of Parent and ROE

1.9%
Asia

in 21 countries and regions

2016

2,000

Domestic

By Geographic
Region240,652

100,000

4,000

19.7%

243,075¥ 240,652 million

6,000

Number of Employees

244,901

200,000

0

Founding

263,516

Physical Storesand Others

89.4%

2.0

0

2015

2016

2017

Profit Attributable to Owners of Parent

2018

2019

0

ROE (right scale)

Total Net Assets andShareholders’ Equity Ratio¥ million / %200,000

185,315

Cash Dividends per Shareand Payout Ratio¥/%

172,337

165,670

168,153

162,211150,000

55.1

100,000
50,0000Total Net Assets

2015(–7.8% YoY)

2016

2017

2018

Shareholders’ Equity Ratio (right scale)

2019

80.0

40.00

60.0

30.00

40.0

20.00

20.0

10.00

0

0

200.0
24.00

24.00

24.00

24.00

24.00

150.0
100.0

66.9

2015

Cash Dividends per Share

2016

2017

2018

2019

50.0
0

Payout Ratio (right scale)

Onward Holdings Co., Ltd. Annual Report 201903

A Message from the 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

Onward has launched its new medium-term
management plan and is moving forward withthe three growth strategies defined therein.

+ 1.0
4.5

¥4.0 billion+

from growth strategies¥1.5 billion

from business structural reforms¥5.5 billion

Increaseover three fiscal years

Michinobu Yasumoto
Representative Director, President

Review of Fiscal Year 2019
In fiscal year 2019, net sales decreased 1.0% year on year, to ¥240.7
billion; operating profit was down 13.6%, to ¥4.5 billion; ordinary
profit dropped 12.9%, to ¥5.2 billion; and profit attributable toowners of parent declined 7.8%, to ¥4.9 billion.
We cannot deny the fact that performance in the domestic business,
which was impacted by natural disasters and unseasonable weather
as well as structural issues, was regrettable. Looking at the fourth
quarter, however, we saw a recovery trend apparent in the upturn inthe sales of Nijyusanku and other core brands.
As for the overseas business, the new creative team at JIL
SANDER drove sales growth. Unfortunately, this growth in sales
was counteracted by the impacts of closures of underperforming
stores advanced as part of our structural reforms in Europe, which
led operating profit in this business to decline.
On a consolidated basis, sales from e-commerce operations,which have been positioned as a growth pillar, achieved year-on-year
growth of 26%, to ¥25.5 billion. The ratio of e-commerce sales tototal sales was 10.6% in fiscal year 2019, an increase of 2.3 percentage points, while the ratio of e-commerce sales through directly
operated e-commerce sites grew 1.0 percentage points, to 76%. The
consistent e-commerce sales seen throughout the fiscal year underpinned overall Company sales.

Launch of the New Medium-Term Management Plan
The previous medium-term management plan, which concludedin fiscal year 2019, ended with numerical targets unmet.
Regardless, this plan successfully guided us in building foundations for future growth. We constructed these foundations throughproactive structural reforms, examples of which included a drastic
revision to the organizations of Onward Kashiyama as well as
logistic reforms anda change in the management system of the European business.
The new medium-term management plan that began in fiscal
year 2020 prescribes three growth strategies as well as structural

04

Onward Holdings Co., Ltd. Annual Report 2019reforms to be promoted in order to achieve net sales of ¥280.0 billion,
operating profit of ¥10.0 billion, and return on equity of 5% in fiscal
year 2022.
The first of these three growth strategies is to roll out the“Creation First Business.” This growth strategy entails advancing
initiatives tailored to the originality and specific characteristics ofeach of the Onward Group’s various brands.
In core brands, such as Nijyusanku, Gotairiku, and other brands
with long histories, we intend to approach new customers and reinvent our contents and merchandising approaches to be more suited
to preferences and communication styles of these new customers. In
smaller brands with relatively shorter histories, like ATON, TOCCA,
and Advanced Down System (ADS), we will capitalize on the uniquecharacteristics of each brand that differentiate them from others inorder to formulate growth strategies matched to these characteristics
and thereby steadily grow earnings. Meanwhile, the digital strategies
and the transmission of creativity from physical stores described in
the previous medium-term management plan will continue to befocuses for all brands. By augmenting brands in these ways, we willseek to engage in more effective communication with customers tofurther improve brand value.
The second growth strategy is to accelerate the “Factory to
Customer (F2C) Business” in keeping with the trend toward masscustomization.
One particular focus in this area is to expand the KASHIYAMA
the Smart Tailor made-to-order suit business launched in 2017. Thisbusiness employs a scheme that links a system for receiving orders
directly from customers to Kashiyama (Dalian) Co., Ltd., aCompany-operated manufacturing site located in Dalian, China,
to deliver made-to-order suits to customers in as little as one weekfrom the time of order. Despite the short delivery times, however,the production process still affords a significant amount of room forour high-level sewing techniques and other processes performed byhand, which is a distinctive characteristic of this business.
I have the utmost confidence in the substantial growth potentialof this business and in its ability to succeed. This confidence is notjust based on the rising attention made-to-order items are garnering

amid the diversification of consumer values; it is also founded on
the fact that this business takes full advantage of the expertiseand techniques the Onward Group has cultivated over its nearlycentury-long history as a leading Japanese apparel manufacturer.
Our second Dalian factory was completed in April 2019. Capitalizingon the fortified manufacturing platform granted by this new factory,
the Group will look to develop the KASHIYAMA the Smart Tailor
business into a pillar supporting the medium-to-long-term growthof the Group overall.
The third and final of these growth strategies is to develop a“High-Quality Lifestyle Business generating synergies with the
Apparel Business.”
The Onward Group is accelerating efforts to develop its multifaceted Lifestyle Business, which we anticipate will be an effective
catalyst for synergies with our mainstay Apparel Business. Offeringsin our Lifestyle Business include beauty and wellness products, dining and food sales, and gifts. To further augment this business, we
acquired all shares of Yamato Co., Ltd., a specialized planner andproducer of gifts and gift catalogs, in March 2019. This company
was thus converted into a wholly owned subsidiary. We anticipate
that Yamato will be a powerful tool for developing a gift solution
business and for generating synergies with other Onward Group
product lines through the new lens of gifts.
The structural reforms described in the medium-term management plan will include scrapping underperforming stores andbusinesses. This approach is prefaced on the outlook for the continuation of a harsh operating environment. We also expect to be able
to improve profitability by means of reforms in areas such as logistics, production, and general supply chain management. Throughthe steady implementation of these and other structural reforms, theOnward Group will look to increase business efficiency as it shifts its
focus toward growth strategies.
Changes were also seen in the Board of Directors. In fiscal
year 2020, Michio Osawa, representative director and presidentof Onward Kashiyama, became a representative senior managing
director of the Company while overseas business representative
Tsunenori Suzuki was made a senior managing director. In addition,

Yoshie Komuro, president and representative director of WORK
LIFE BALANCE Co., Ltd., joined Onward as an outside director,
our first female director, whether inside or outside. With this new
management team, we are committed to advancing the mediumterm management plan launched in fiscal year 2020 (see the Special
Feature on pages 06–11 for details).

Financial Strategy
We will continue to institute various measures to improve returnon equity.
The basic financial strategy of the Onward Group is to conduct
aggressive up-front growth investments to increase future earnings
and issue ongoing, consistent, and appropriate shareholder returns
all while maintaining a stable financial base.
Return on equity, or ROE, in fiscal year 2019 was 3.1%, a yearon-year decline of 0.2 percentage point. Boosting operating profit
will be part of our efforts to improve ROE. We will also continue toexamine such options as selling investments in securities, liquidating
assets, and acquiring and canceling treasury stock. Our initial target
for ROE is 5%, which we aim to realize as soon as possible, after
which we will seek to raise it to 8%.
Treasury stock acquisitions were an option we used in the past,
and we will position them as important aspects of shareholder
returns going forward. Accordingly, we will continue to flexibly conduct acquisitions based on thorough consideration of the future usesof such stocks as well as holding ratios and market capitalization.
Going forward, the Onward Group stands committed to
improving corporate value through the provision of high-quality
products and services, among other initiatives. I hope we can lookforward to your ongoing support as we advance on this quest.
August 2019

Michinobu Yasumoto
Representative Director, President

Onward Holdings Co., Ltd. Annual Report 201905

Special Feature

1

Special Feature

Roll Out the“Creation First Business”

Three Growth Strategies of
the New Medium-Term Management Plan
The Onward Group launched its new three-year, medium-term management planin March 2019. This new medium-term management plan prescribes three growthstrategies as well as structural reforms through which we will improve profitability
to develop business foundations for future growth. In this special feature, we will
introduce some of the concrete initiatives being implemented to advance the three
growth strategies of the new medium-term management plan in its first year.

Three Growth Strategies

1
2
3

P. 07

Roll Out the“Creation First Business”

P. 08

Accelerate the“Factory to Customer (F2C) Business”

My Standard―First Owned Media Strategy for Nijyusanku

The My Standard style magazine was launched for core brandNijyusanku in March 2019. This magazine is part of the first
owned media strategy for this brand.
My Standard features a robust assortment of information
enabling it to function as a dedicated catalog for Nijyusanku,
including details on the brand’s creative focus on standard items.
It does not stop there, however, as this magazine goes beyond a
simple catalog to provide snapshots of the latest trends in Parisand other topics of interest.
In conjunction with the publication of My Standard, we havealso launched a special website that features a convenient searchfunction for browsing for and making online purchases of items
showcased in the catalog.
To complement the release of the inaugural issue of My
Standard, Nijyusanku is taking steps to generate attention andthereby boost sales through visual advertisements utilizing a wide
range of mediums. Venues employed include magazines, theInternet, social media, pop-up stores, events, digital signage atmajor train stations, and advertisements inside of transportation
venues. We are also practicing mutual customer referral between
physical and virtual stores through sales promotions coordinating
catalogs, websites, stores, and the Onward Members’ loyalty point
card system.

Onward Holdings Co., Ltd. Annual Report 2019

Everyone seeks to express their individuality,
uninfluenced by trends and unbound by conventions.
Buying something new is easy; what we want issomething that will be a constant presence in our lives.
The standard for one’s individuality—this is My Standard.
We craft clothes that transcend ages and trends toearn the enduring support from wide-ranging customers,
clothes that are simple yet sophisticated and comfortable, and clothes that make their quality known the second they are worn.
Let us help your individuality shine.

Sales Promotion through a Wide Range of Mediums

P. 10

Develop a “High-Quality
Lifestyle Business Generating Synergies
with the Apparel Business”

Special websites

06

Concept of My Standard

Pop-up stores

Collaboration products
Onward Holdings Co., Ltd. Annual Report 201907

Special Feature

Accelerate the“Factory to Customer (F2C) Business”

2

Innovation in the
Made-to-Order Suit Business
6-7 Delivery
DAY

KASHIYAMA the Smart Tailor brings innovation to
the made-to-order suit business. In the past, it took
about a month after an order was placed before thedelivery of a made-to-order suit. We, however, haverealized turnaround in as little as one week, thanks to
the factory innovations of KASHIYAMA the Smart
Tailor. Factories used in the KASHIYAMA the
Smart Tailor scheme cut all time-related costs toswiftly deliver high-quality suits to customers.

Second Dalian factory

1

These factory innovations make it possible to supply affordable,
high-quality business suits that do not require inventories andthat can be delivered in as little as one week.
Original PACK-RUNNER compression packages are
employed to make it possible for suits, perfectly matched to customers based on our proprietarily developed database of morethan 160 size patterns, to be delivered directly from factories tocustomers. Following delivery to customers’ homes, suits can beworn roughly an hour after unsealing as any wrinkles or creases
will disappear naturally.
Also, subsequent suits can be ordered online at any time. In
this manner, KASHIYAMA the Smart Tailor innovates all areasof the made-to-order suit business.

Production

DAY

After customers’ sizes are measured by style guides(fitters), the data is sent to factories the same day.

Acceleration of the F2C Business

2-5 ProductionDAY

KASHIYAMA the Smart Tailor scheme factories
are able to complete the production of suits faster
while maintaining the same high quality customers
have come to expect. Rather than reducing thenumber of processes, this swift turnaround is realized through production lines designed from theground up with speed in mind.

08

Onward Holdings Co., Ltd. Annual Report 2019

In April 2019, Kashiyama (Dalian) Co., Ltd., opened its second
factory in Dalian, China. This cutting-edge smart factory combines sewing techniques with digital technologies in a mannercompatible with the era of mass customization. Located next
to the first factory, the second Dalian factory will be used as a
dedicated sewing factory for KASHIYAMA the Smart Tailor.
The two factories boast an annual production capacity of
100,000 suits. State-of-the-art equipment and systems havebeen introduced in the second factory to automate all procedures, from order processing to inventory management,

product conveyance and sorting, material purchasing, andtransportation. Furthermore, by merging the sewing techniquesand expertise our craftspeople have been accumulating since prior
to the construction of the factory, we will continue to evolve thisF2C business in which we swiftly deliver high-quality, made-toorder suits to customers directly from factories.
Furthermore, realizing that improving employee satisfaction
is imperative to achieving increases in customer satisfaction, weare taking steps to create more comfortable work environments
for the employees who are indispensable assets to sewing factories. Specific steps in Asia include renovating employee cafeterias, an important consideration to workers, installing air
conditioning throughout factories, adopting new uniforms, andcarrying out other labor environment related initiatives.
Directly operating factories enables the Onward Group to
combine the production, distribution, and sales expertise it
has accumulated thus far with digital technologies to develop
innovative smart factories and to accelerate its F2C business.

Onward Holdings Co., Ltd. Annual Report 201909

Special Feature

Develop a “High-Quality
Lifestyle Business Generating Synergies
with the Apparel Business”
Entry into the New Field of Gifts
and Gift Catalogs through theAcquisition of Yamato
In March 2019, specialized gift and major gift catalog
company Yamato Co., Ltd., was welcomed into the
Onward Group.
Founded in Nagano Prefecture in 1940, Yamato got its
start in the wholesale of glass products before fully leveraging
the expertise and distribution functions it had cultivatedin the gift field to integrate functions in the four areas ofproduct planning, purchasing, catalog publication, andlogistics. This company has thus established a distinctive gift
solutions system capable of furnishing flexible responses todiverse and transforming gift needs.
Today, Yamato is advancing its business as a dedicatedplanner and producer of gifts and gift catalogs based on
the goal of contributing to the development of moreenriched communities through the ongoing transformationof the gift market.

3

Head office and logistics center in Azumino City, Nagano Prefecture

Two Major Strengths of

Yamato

Logistics

Logistics

Logistics center floor space:

Located in the company’s head office in Azumino City,
Nagano Prefecture, Yamato’s expansive logistics centerhouses a comprehensive range of gift logistics functions,
including order processing, inventory management,
packaging, shipping, and call center functions. This center
makes it possible for catalogs and gifts to be delivered tocustomers on a one-stop basis. Yamato also provides
proxy services pertaining to shareholder benefits, Japan’s
furusato nozei (hometown tax donation) program, andother schemes.

26,000 m

2

Number of pallets:

7,000
Total stock keeping units:

20,000Planning and Proposal Capabilities

Planning

Yamato produces 300 gift catalogs under 30 brands
prepared based on various life events and applications.
This company combines its planning capabilities,
which encompass purchasing products from Japan andother countries and developing original products, and its
ability to produce catalogs that make it easy to search for
products while communicating their appeal to make proposals in response to various gift needs.

Synergies with the Onward Group

Directly operated Artina Gift Studio store and inside Yamato’s logistics center10

Onward Holdings Co., Ltd. Annual Report 2019The Onward Group aims to develop frameworks for collaboration
with Yamato in sales activities targeting its primary business partners:
department stores and prominent bridal companies throughout Japan.
In addition, we see the potential for significant synergies to be generated
between Yamato and the Onward Group through the introduction of
Onward brand products into the gift catalog business and the utilizationof the Onward Group’s e-commerce and other digital platforms andglobal network. The introduction of the new field of gifts and gift catalogs into the Group’s business scope is anticipated to accelerate progressin the growth strategies of Yamato and of the Onward Group as a whole.
Onward Holdings Co., Ltd. Annual Report 201911

In November 2019, we followed up KASHIYAMA the Smart Tailor witha second factory-to-customer business, our new line of made-to-order women’s shoes.

12

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201913

Apparel Business
The Apparel Business segment, which operates the principal business of the Onward Group, comprises 87
operating companies and generates 89.2% of the Company’s consolidated net sales.
This segment primarily performs the planning, production, and sale of textile products.
The operations of this segment are divided into the domestic apparel business, which includes core
operating company Onward Kashiyama, and the overseas apparel business, a global business developed inregions such as Europe, Asia, and North America.
Contribution to
Total Sales¥ million

Net Sales byApparel Business

240,000
180,000
120,000

89.2%¥214,564 million

60,0000Domestic

2018

2019

Domestic Apparel BusinessOnward Kashiyama
Business Overview

14

Jiyukuefficiency through logistics reforms andenhancing our product planning andproduction capabilities as a manufacturer.

Performance and Outlook
In fiscal year 2019, logistics reforms were
undertaken, and the prior 11 logistics
warehouses dispersed throughout Japan

Onward Holdings Co., Ltd. Annual Report 2019

2017

2018

2019

Directly operated Nijyusanku Ginza store

The domestic apparel business is our mainstay business, generating 69.4% of consolidated net sales.
The operations of this business include 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 uniforms and sales promotion goods.

Onward Kashiyama is the Group’s core
operating company, generating 57.3% ofconsolidated net sales.
Engaged in planning, production, sales,
and other activities for providing clothingof impeccable quality, Onward Kashiyama
supplies womenswear, menswear, children’s
clothing, and accessories from private
brands as well as licensed brands.
Our products are distributed throughdepartment stores, our main sales channel
and an area of strength, and we are also
stepping up distribution through thegrowing venue of e-commerce.
Future initiatives will be aimed at
establishing operating foundations thatare adapted to the trend toward Omnichannel retailing. We will accomplish thisobjective by integrating the functions ofphysical and online stores while boosting2016

Overseas

were consolidated into four in March2018.
In addition, e-commerce warehouse
functions were transferred to the
Narashino Logistics Center in August
2018 in order to integrate inventories
for physical stores and e-commerce
operations.

Meanwhile, the official Onward smartphone application was upgraded in
November 2018, strengthening our ability
to grow sales through the application andto otherwise promote Omni-channel
retailing.
Regardless, sales and profits were down
as a result of faltering sales of full-priced
items in Nijyusanku and other core
brands combined with higher logistics
and point- and coupon-related expenses.
In fiscal year 2020, we will seek to growsales of core brands by partnering withoutside creators and ramping up promotional activities utilizing our brandmagazines.
At the same time, increased accuracy insupply chain management will be pursued
by utilizing directly operated factories inJapan and overseas as well as logistics
warehouses in Ho Chi Minh City,
Vietnam, and in Shanghai and Dalian,
China.
Onward Kashiyama’s retail strategies infiscal year 2020 will entail accelerating
digital strategies to bolster e-commerce
operations. We will also expand new sales
channels, such as wholesale and outlets,
while reducing the number of unprofitable stores.

Other Domestic
Apparel Subsidiaries
Business Overview ofMajor Subsidiaries
At Onward Trading, a leading domestic
manufacturer of uniforms, the apparelexpertise and product planning excellence
cultivated by the Group are used to provide
uniforms to suit any environment while
striking the best balance between styleand usability.
Island, which has Grace Continental as
its core brand, is providing fashion itemswith a distinctive aesthetic that is proving
immensely popular among women withrefined tastes. In addition to Onward
Trading and Island, the domestic apparelbusiness also includes the sale of European
high-end and luxury brands in Japan andthe operation of multi-brand stores, suchas VIA BUS STOP.

sales improved as a result of the withdrawal
from underperforming brands and stores.
Accordingly, other domestic apparel subsidiaries posted lower sales but higher
profits overall.
In fiscal year 2020, earnings are anticipated to improve at Onward Trading and
Island.
In regard to domestic apparel business
operations pertaining to the JIL SANDER
and Moreau Paris brands in Japan, a change
in the management structure of theEuropean business will result in the conversion of Onward Italia into a consolidated subsidiary in the second quarter offiscal year 2020.

Performance and Outlook
In fiscal year 2019, the uniform business of
Onward Trading struggled, as did sales at
physical Island stores, leading both subsidiaries to post lower sales and profits.
Conversely, earnings from luxury brandGrace Continental
Onward Holdings Co., Ltd. Annual Report 201915

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 19.7% of consolidated net sales.
Business scale expansion will be pursued centered on Europe, where operations are the largest, as we strengthen our competitiveness in the global market.

EuropeThe European business—our largest overseas
business—primarily conducts the manufacture and sale of luxury and high-end
apparel and 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 management of operations. Meanwhile, Joseph,which is growing the JOSEPH brandcentered on London, has implemented
new management and creative teams.

In this manner, the European business iscurrently in a period of great change.
Going forward, we will seek to maximize
synergies in the European business as wedevelop a unique presence in theEuropean fashion industry as a conglomerate boasting a comprehensive range offunctions encompassing brand, manufacturing, and retail operations.

Business Overview
Onward Italia
The core businesses of Onward Italia are
manufacturing operations, which areadvanced using directly operated factories
in Italy, and the JIL SANDER brand business. Through the organizational reform
instituted in March 2019, both of thesecore 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 a new CEO to oversee
the JIL SANDER brand business. In thismanner, the company is accelerating
growth strategies and business structurereforms in the European business.

In addition to the production of Groupbrands, Onward Luxury Group conducts
OEM and contract manufacturing andwholesale of outside brand products basedon licensing agreements.

Jil Sander

JosephThe 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.
Lucie and Luke Meier are the creative
directors of JIL SANDER, and this brandhas been taking advantage of their talents
since the 2018 spring/summer collection.
In conjunction with the reinvention ofthis brand, we renovated our JIL SANDER
stores in the Omotesando area of Tokyoin September 2018 and in Paris in
September 2019.

Joseph undertakes the planning, manufacture, and sale of JOSEPH brand menswear
and womenswear collections and accessories
and is also developing a network of multibrand stores and JOSEPH brand stores
centered on London.
In fiscal year 2019, a new management
team was installed under the leadership ofa new CEO. A new creative director was also
appointed, and she rolled out her first collection from the 2019 autumn/winter season.
Looking ahead, Joseph will move forwardwith structural reforms based on thethemes of customers, corporate culture,

Onward Luxury GroupNew eco-friendly brand F_WD

16

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 apparel as well as shoes, bags,
knitwear, and sneakers. Moreover, thecompany is constructing a manufacturing
platform capable of providing the utmost
levels of quality.

Onward Holdings Co., Ltd. Annual Report 2019

Meanwhile, the Florence production
site was transformed into an exclusive site
for use by the JIL SANDER brand in
October 2019.
Product development focused on the
JIL SANDER brand will be ramped up
going forward as we simultaneously enhance communication between creative
teams and production sites.
In addition, a new line JIL SANDER+
was made available from the 2019 autumn/winter season.
We look forward to communicating
the new JIL SANDER to the world togrow it as a global brand.

JIL SANDER+KASHIYAMA the Smart Tailor, North America

and creativity in order to enhance profitability and launch the JOSEPH brand on
a new growth track.

Asia
In our Asian business, Nijyusanku, ICB,
and other core Onward Group brands are
sold in department stores and shopping
centers in China—including HongKong—Taiwan, Thailand, and Vietnam.
In recent years, we have been transforming our business model while building
upon partnerships with local companies.
Furthermore, Asia is an important production site. Recognizing this fact, we arecoordinating with partner factories in
China and reinforcing the Company’s
manufacturing platform in the ASEAN
region. One example of these efforts is the2016 acquisition of a factory located in
Dalian, China, which is now Kashiyama(Dalian) Co., Ltd.
This factory established a highly efficient
made-to-order production system as amanufacturing site for the growth of the
made-to-order suit business. In April
2019, operations commenced at theGroup’s second Dalian factory. Together
with the first Dalian factory, it grants us
a joint production capacity of 100,000
suits a year and is thus anticipated to support the increasingly rapid growth of
KASHIYAMA the Smart Tailor.

North
America
North American operations comprise
retail businesses in the United States.
J. PRESS, acquired in 1986, is a wellloved brand among Ivy Leaguers. We currently have three directly managed stores inNorth America, including the location in
the Yale Club in New York City openedin October 2017. This flagship store will
drive efforts to attract new customers.
KASHIYAMA the Smart Tailor was
launched in North America in 2019, andwe are expanding the locations for thisbrand by using the shared office spaceprovided by WeWork Companies Inc.
As we move forward, we will conduct
necessary investments from a mediumto-long-term perspective to expand ourNorth American operations as we seek togrow the market for our products.

Performance and Outlook
In fiscal year 2019, sales of the JIL SANDER
brand were buoyed thanks to collections designed by its new creative directors. However,overseas sales and profits were down overall asa result of diminished profitability at European
manufacturing divisions, sluggish JOSEPH
sales, and ongoing losses in South Korea.
Our goals in fiscal year 2020 include further growing JIL SANDER sales and improving earnings in both Europe and Asia
through structural reforms.

Onward Holdings Co., Ltd. Annual Report 201917

Lifestyle Business
The Lifestyle Business segment comprises 22 operating companies and generates 10.8% of the Company’s
consolidated net sales.
In this segment, we capitalize on the Onward Group’s product development and sales capabilities to create
new values and lifestyles with fashionable proposals in a wide variety of fields. The Lifestyle Business segment
thus manufactures and sells items such as ballet and other dance wear, pet fashion, character goods and toys,and cosmetics; develops gift catalog operations; operates and manages resort facilities; and plans, designs, andconstructs commercial facilities.
Contribution to
Total Sales

Net Sales by
Lifestyle Business¥ million

30,00020,00010.8%¥26,088 million

10,000

0

2018

2019

2016

2017

2018

2019

In our resort business, we operate hotels
and golf courses in Guam as well as golfcourses and golf schools in Japan.

Performance and Outlook

Chacott Futako-Tamagawa store

Business Overview ofMajor Subsidiaries
Chacott, a manufacturer and retailer ofballet and other dance wear, is capitalizing
on its high recognition as a manufacturer
to broaden the scope of its business into
yoga, healthcare, and other new fields.
In Europe, we operate Freed of London,
the world’s leading manufacturer of professional dance shoes.
Creative Yoko offers a lineup of products for pets as well as an assortment ofcharacter goods and toys. This company isenhancing its stores to better cater to theneeds of inbound travelers to Japan while
also strengthening its character merchandise business.

18

Meanwhile, we are expanding our operations in the growth business of cosmetics
centered on Kokobuy, which manufactures and sells organic cosmetics and haircare products.
We also welcomed Yamato Co., Ltd.,a specialized planner and producer of gifts
and gift catalogs, into the Onward Groupin March 2019.
We anticipate that the completely new
gift business experience and expertise
Yamato brings to the Onward Groupwill catalyze synergies with the ApparelBusiness segment and spur the broadening of our business scope (see the Special
Feature on pages 10 – 11 for details).

Onward Holdings Co., Ltd. Annual Report 2019

In fiscal year 2019, overall sales and profits
in the Lifestyle Business segment were
down. Although profitability improved atCreative Yoko and Kokobuy, the benefits
were not able to counteract the lower sales
and profits in the resort business resulting
from a decline in Japanese tourists to Guam.
As for fiscal year 2020, we project sales
growth in existing businesses coupled withgrowth attributable to the newly consolidated Yamato and its gift catalog business.

20

Core Brands

28

Our History

32

Our Value Chain

35

Our Sales Channels

36

Our Network

38

Onward-Approved Factory System

40

Environmental and Social Responsibility

44

Corporate Governance48	Board of Directors, Audit & Supervisory
Board Members, and Executive Officers /Company Organization

Sirotan, the main character of Creative Yoko,celebrated his 20th anniversary

Onward Holdings Co., Ltd. Annual Report 201919

Core Brands

LAUNCHED

1993
ANNUAL SALES¥27.0 billion
NUMBER OF STORESOver 200
Nijyusanku is the leading brand of Onward
Kashiyama. With working women in their
30s and 40s as its core target, the brand 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 makefor elegant and comfortable clothing thatcan be enjoyed by all. With the March 2019
publication of the My Standard Nijyusanku
style magazine, a step forward was taken
in enhancing sales promotion activities
through an owned media strategy.

20

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201921

Core Brands

LAUNCHED

2017
ANNUAL SALES¥3.7 billion
NUMBER OF STORES44
KASHIYAMA the Smart Tailor is a new
made-to-order suit brand 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 2019

Onward Holdings Co., Ltd. Annual Report 201923

Core Brands

LAUNCHED

1973
ANNUAL SALES¥11.3 billion
NUMBER OF STORES

46
JIL SANDER is a luxury brand founded by
Ms. Jil Sander in Germany in 1973. Onward
Holdings acquired the brand in 2008. Fromthe 2018 spring/summer collection, Lucie andLuke Meier were named as the new creative
directors. A new line, JIL SANDER+ started
from the 2019 autumn/winter season.

24

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201925

Core Brands

LAUNCHED

1972
ANNUAL SALES¥14.8 billion
NUMBER OF STORES143
The JOSEPH brand grew from a small
multi-brand store owned by Joseph Ettedgui
in London. After the original label JOSEPH
was launched with the concept of“SLICK&CHIC,” Onward Holdings
acquired JOSEPH in 2005. The developmentof this brand in Japan is being undertaken
by Onward Kashiyama.

26

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201927

Our History
19 2 7

19 5 0 s – 19 6 0 s

Ready-Made
Clothing Revolution

92 nd
The Onward Group
is currently in its 92nd year
since its founding in 1927.
In this new decade of
growth leading up to the100th anniversary of
our founding, we are still
looking onward to the future
as we move forward.

Company founder Junzo Kashiyama

In the 1950s, Onward begins the production
and sale of ready-made menswear. Taking
its cue from apparel manufacturing in the
United States, the Company adopts anassembly-line production system andintroduces such advanced equipment as
Hoffman steam press machines. These
efforts result in substantial improvements
in productivity and the quality of readymade 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 ofdepartment stores. In the 1960s, driven by
Japan’s economic expansion, Onward grows
rapidly to become a leading menswear manufacturer in Japan.

19 7 0 s – 19 8 0 s

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

Bus Stop store on Boulevard Saint-Germain in Paris

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

Grading machine modifies and cuts basic sewing patterns

Onward Kashiyama’s U.S. office

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

Events Seen in Each Era
19 2 0 s

Roaring Twenties–
World War II

19 5 0 s• Westernization of women’s clothing trends (after the Great Kanto
Earthquake in 1923–)
19 4 0 s• Great Depression originatingin the United States (1929)• World War II (1939–1945)

28

Onward Holdings Co., Ltd. Annual Report 201919 6 0 s

Post-war reconstruction–
Japanese economic miracle

19 7 0 s

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

19 8 0 s• Enactment of Act on Securing, Etc. of Equal Opportunity andTreatment between Men and Women in Employment (1986)• Emergence of prominent Japanese designers• Spread of luxury fashion

Onward Holdings Co., Ltd. Annual Report 201929

Our History

19 9 0 s – 2 0 0 0

2 0 01 – 2 010

Launch ofCore Brands

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

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

2 0 11 – To d a y

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

Launches Nijyusanku, 1993

Department stores begin expanding
womenswear floor spaces and emphasizing new brands from Japanese makers.
Thanks to this trend, Onward Kashiyama’s
store numbers grow rapidly after thelaunch of the new brands, and this impressive growth forms the foundations for
future advancement.

Acquires Joseph Group, 2005

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

Omni-channel retailing strategy, whichmerges the strengths of online storesand physical stores.
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 low prices and quick deliveries.
This groundwork for the expansion offactory-to-customer businesses is laid in
April 2019 with the commencement ofoperations at the second factory in
Dalian, China.
The Onward Group continues to increase
its global competitiveness while tacklingchallenges on the road to sustainable growth.

Opens Nijyusanku Ginza store, 2011

Acquires Island Co., Ltd., 2009
Launches Kumikyoku, 1992
Acquires Jil Sander Group, 200819 9 0 s

Bubble collapse–Post-b­­­­­­­­­­­­ubble recession

2 0 01• Release of Windows 95 (1995)

2000s

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

2 010 sLaunches Onward Crosset, 2009

2 0 11

Commences operations at second KASHIYAMA
the Smart Tailor factory in Dalian, China, 2019

Fourth industrial revolution (Industry 4.0)
• Great East Japan Earthquake (2011)• Annual inbound visitors to Japanexceed 30 million (2018)

To d a y• Burgeoning of fast fashion

30

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201931

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

Increased Supply Chain Management Precision
The Onward Group believes that swift, small-lot production and supply
will be crucial to the Apparel Business going forward, whether products
from factories are sent to stores or directly to customers.
Recognizing this need, we are taking steps to improve the precisionof our supply chain management. The Kashiyama Dalian factories, theKashiyama Saga factory, and other directly operated factories in Japanand overseas are being effectively utilized to pursue such improvements.
In addition, we are enhancing the one-stop procurement and logistics
system used in overseas production operations by coordinating our network with comprehensive warehouses in Ho Chi Minh City, Vietnam,
and in Shanghai and Dalian, China, and overseas partner factories.

Production Flow (primarily used by Onward Kashiyama)
PLANNING AND DESIGN

1RESEARCH
Product development starts with
our designers and merchandisers
actually visiting fashion capitals
around the world to research thelatest fashion trends. They also
attend fabric exhibitions in Japan,
Europe, and the United States toseek out new, high-quality fabrics.

PRODUCTION

2DESIGN AND
MATERIAL
SELECTION
Concept drawings are created,
and the design, materials, pricerange, and seasonal theme aredecided based on a considerationof fashion trends, fabric information, and other factors.

3

SAMPLE CREATION
From among the samples, theitems to be commercialized are
selected, and production volume
is decided.

4

INTERNAL AND
EXTERNAL
EXHIBITIONSInternal exhibitions are held forbrand representatives to share
information on products andreceive input.
When new technologies or
products are developed, exhibitions and events are held formembers of the press and otherinfluential individuals to promotethese new innovations.

5

PRODUCT
SELECTION
From among the samples, theitems to be commercialized are
selected, and production volume
is decided through coordination
with sales teams.

Planning and Production Teams

Japan Apparel Quality Center

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

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

32

Onward Holdings Co., Ltd. Annual Report 20196

PRODUCTPLANNING
Quality control teams ­inspect
samples to determine if any issues
exist with the fabric or manufacturing processes to be used. At thesame time, production control
teams decide which factories will
be used for mass production as wellas establish production schedules
and order ancillary materials.

Onward Holdings Co., Ltd. Annual Report 201933

Our Sales Channels

Our Value Chain

Logistics Reforms
In March 2018, Onward Kashiyama consolidated its prior 11 logistics
warehouses dispersed throughout Japan into four and transitioned
from the prior structure, which entailed the management of inventories by branch, to a structure based on centralized control.
In addition, the logistic base of e-commerce was transferred to
the Narashino Logistics Center in August 2018, thereby integrating
inventories for physical stores and e-commerce operations.
Furthermore, RFID reader gates were installed at all warehouses,
improving efficiency with regard to logistics procedures and increasing
the accuracy of inventory data.

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

8

FINAL CHECK
Finished products are delivered to
distribution warehouses. Stitchingand other product details areinspected once again before delivery.

9

10

Department Stores

DELIVERY

Department stores are the main sales channel of Onward
Kashiyama, accounting for 66% of its total sales in fiscal year 2019.
A diverse range of core and other brands are deployed through thischannel. In addition to enhancing existing stores, we are pursuing
improvements in the sales of individual stores and in operational
efficiency through strategic store openings and closures.
Recently, we have been promoting an Omni-channel retailingstrategy as we step up sales promotions coordinated with online
venues and augment services. Specific efforts on this front haveincluded utilizing the Group’s Onward Members’ loyalty point card
system and posting staff-recommended outfits on our website.

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

E-Commerce

DELIVERY AND SALES

7The Onward Group conducts its sales activities through a number of different sales channels.
As we move forward, we will advance our Omni-channel retailing strategy that merges
the strengths of both physical and online stores to further expand our customer base.

SALES
Products are sold at physical storesand online.

E-commerce boasts the highest growth potential among the
Onward Group’s sales channels.
We operate Onward Crosset and brand-specific online stores
and also list our products on domestic and overseas online shoppingsites. We have maintained high rates of sales through directly operated e-commerce sites, and these sales accounted for 76% of theGroup’s total e-commerce sales and 85% of Onward Kashiyama’s
e-commerce sales in fiscal year 2019.
Meanwhile, the official Onward smartphone application was
upgraded in November 2018. The upgraded application makes it
easier to narrow the scope of brand, store, and product information displayed while offering smooth access to e-commerce sites,
the benefits of which are manifesting in higher sales through thisapplication.

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

34

Onward Holdings Co., Ltd. Annual Report 2019

Directly Managed Standalone Stores

Outlets

Shopping Centers

These brand flagship stores double as brandbillboards.

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

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

Onward Holdings Co., Ltd. Annual Report 201935

Our Network
As of August 31, 2019

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

FranceDalianParis

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

Kashiyama (Dalian) Co., Ltd.

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

Spain

Hong Kong

Madrid		n	Onward Kashiyama Hong Kong Ltd.

		n Gallardo Dance S.L.

Italy

Seoul

Milan

		n Chacott Korea Co., Ltd.

		n

Onward Italia S.p.A.

		nJil Sander S.p.A.

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

		 nFrassineti s.r.l.

		 nFreeland s.r.l.

VietnamHo Chi Minh City

Florence
		n

Korea

	Onward Holdings Co., Ltd.

		n

J. Press, Inc.

	Onward Kashiyama Co., Ltd.

		n

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

	Onward Trading Co., Ltd.
	Island Co., Ltd.

		n	Onward International Fashion Co., Ltd.

		n	Jil Sander Japan Co., Ltd.

		n		n	Onward Beach Resort Guam, Inc.
		n	Onward Golf Resort Guam, Inc.

	Intimates Co., Ltd.

		n	Onward Mangilao Guam, Inc.

		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 Inc.

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
		n
n

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

		n
		n

	Yasuda (Vietnam) Co., Ltd.

		n

n n

	O & K Co., Ltd.
	Onward Life Design Network Co., Ltd.

Osaka

Verona	Tiaclasse Inc.

		n
		 n

Erika s.r.l.

NaganoVeniceOnward Luxury Group S.p.A. (Shoes)		n			n Creative Yoko Co., Ltd.
		n Yamato Co., Ltd.

Saga
		n

36

Onward Holdings Co., Ltd. Annual Report 2019

Guam	Onward Fashion Lab Co., Ltd.

		n	Showa (Vietnam) Co., Ltd.

n n

		n Innovate Organics, Inc.

	Maison Moreau Japan Co., Ltd.

		n	Onward Kashiyama Vietnam Ltd.

		n

California

Number of Stores

2,855

in 21 countries and regions
The Onward Group engages in business activities through a network that is made up of
87 subsidiaries and 22 affiliates, for a total of 110 Group companies. The Group operates in
the four geographic segments of Japan, Europe, Asia, and the United States.

Kashiyama Saga Co., Ltd.

Onward Holdings Co., Ltd. Annual Report 201937

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

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

will not immediately cease transactions with a factory should it notpass these audits. Rather, discussions will be held with the factoryin question and support will be offered in identifying issues anddetermining priorities in order to provide opportunities for gradualimprovement.

Audits Performed
Number of factories audited

Number of factories that passed compliance audit

268

239

2015–2018 (Actual)
2019 (Plan)

110 (Expected)

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

A. Legal compliance and management

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

B. Juvenile workforces

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

C. Forced labor

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

D. Wages, allowances, and benefits

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

E. Harassment and abuse

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

F. Work hours

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

G. Non-discrimination

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

H. Health and safety

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

I. Free association

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

J. Sub-contractors and homeworkers

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

K. Environmental practices

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

Audit Methods
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

ClearedOnward-Approved
Factory

Audits based on
QC guidelines

Not cleared

Guidance foraction plans

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

38

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201939

Environmental andSocial Responsibility
Onward Green Campaign

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.

4,250,243

777,494

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 2019.

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 thegreatest extent possible. Certain clothing items are recycled throughuse as refuse-derived fuel, which is utilized as an alternative source ofenergy for major paper factories. Other items are recycled by harvesting thread for use in new textile goods. This thread is used tocreate blankets and work gloves to be provided for disaster relief
purposes around the world. In addition, a portion of collected clothing items are reused by being sold at Onward Reuse Park*, and allproceeds from these sales are used to fund environmental and social
contribution initiatives.
* For details regarding Onward Reuse Park, please refer to page 43.

Recycling Process
Customers
Used items

Donated at dedicated collection booths in department stores

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

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

Onward Recycling Partners
Disposal
Reuse

RecycleSold at Onward Reuse Park

Materials sorted and collected foruse in textile products

Proceeds

Blankets

Buttons and other non-reusable andunrecyclable articles disposed ofWork gloves

Solid fuelUsed in environmental and social contribution initiatives

40

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201941

Environmental and Social Responsibility

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

Support Programs Using Recycled Blankets
Bangladesh

15

Mongolia

8

Vietnam

Refugee camp:

Impoverished area:

Impoverished area:

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

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

Regions primarily in thenorthern mountain range
and central highlands

3,000 blankets

2

2,000 blankets

First support program:May 2010

Kazakhstan

6

4,000 blankets

Nepal

9

Impoverished area:

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

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

3,300 blankets

3

Japan

7

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

4

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

Third support program:
September 2011

Seventh support program:
October 2014

China

11
2

3

9 6

Donated to a school andother facilities located in
the mountainous regionsof Sichuan Province thatwere affected by theearthquake in 2008111

Onward Holdings Co., Ltd. Annual Report 2019

Donated to impoverishedindividuals in India in
November 201878

Fourth support program:March 2012

India

4,000 blankets

5 12

4

2,000 blankets

Indonesia

4,000 blankets

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

Regions heavily
impacted by the2008 Sichuan
earthquake:

42

Ninth support program:February 2016

10

4,000 blankets

1,000 blankets

Onward Holdings opened Onward Reuse Park in Kichijoji, Tokyo, in March 2014as 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 tofund further environmental and social contribution initiatives. In this manner, thisshop creates a proprietary circular economy that encompasses everything from thesale 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, wehold workshops and sell accessories made from used apparel items. Furthermore,
the Onward Reuse Park online store was opened in August 2017 to provide a wider
range of options for utilizing collected clothing.

2,000 blankets

Impoverished area:

Regions heavily
impacted by
the Great East
Japan Earthquake:

Onward Reuse Park—A Base for Conveying Our ­Environmental
and Social Contribution Initiatives

Nepal

Sixth support program:
October 2013

12
10

Mongolia

4,000 blankets
Donated to impoverishedindividuals in Mongoliain October 2019

© Japanese Red Cross Society

Other Activities

Regions strickenby the Nepal
earthquake:

4,000 blankets

Second support program:February 2011

Onward received the President’s Award in the National Recognition Ceremony of theJapanese Red Cross Society 2019 held by the Japanese Red Cross Society in May
2019. This award was a reflection of the ongoing international support activities of
the Onward Group, which include general donations to Japanese Red Cross Society
projects as well as donations through the society to provide blankets made from recycled materials to disaster-stricken areas and to support developing countries as part of
the Onward Green Campaign.
Going forward, the Onward Group will strengthen its partnership with the Japanese
Red Cross Society as it continues to engage in proactive social contribution activities.

Eighth support program:
October 2015, April 2016

Fifth support program:
September 2012

Refugee camp:

Receipt of the President’s Award in the National Recognition Ceremonyof the Japanese Red Cross Society 2019

Eight Consecutive Years of Participation in
KIBOU311 Cherry Tree Planting Events forGreat East Japan Earthquake Relief
Onward Kashiyama participated in
the eighth KIBOU311 cherry tree
planting event, which took place in
Minamisanriku-cho, 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 through this project are provided to LOOMNIPPON, which uses the donations in turn to fund cherry tree
planting events.

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

Onward Holdings Co., Ltd. Annual Report 201943

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,
the Company believes that, in order to exercise this policy and­accomplish its objectives, it is vital that the Group builds andmaintains strong networks and relationships with customers andall other stakeholders it connects with in its corporate activities.

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

Evaluation of the Effectiveness of the Board of Directors
The Company’s directors conduct annual self-evaluations to assess
the effectiveness and appropriateness of the Board of Directors’
management oversight function as well as the degree of accomplishment of their own duties. The results of these evaluations arereported to the Board of Directors. Based on these self-evaluations,
the Board of Directors analyzes and evaluates its overall effectiveness, disclosing information on the results.
1. Scope of evaluations• All directors and Audit & Supervisory Board members
2. Procedures for evaluations• Self-evaluation via questionnaire• Support for evaluations provided by external advisor
3. Overview of results of analysis and evaluation of Board of
Directors’ effectiveness in fiscal year 2019
• Board of Directors effectively exercising functions for establishing management strategies and targets, resolving management issues, and overseeing business execution in accordancewith Onward’s Corporate Governance Policy

44

Onward Holdings Co., Ltd. Annual Report 2019

• Current operation methods, agendas, and composition of Boardof Directors appropriate; no issues requiring urgent attention• More efficient operation and more extensive, timely, and viable provision of information to outside directors and outside
Audit & Supervisory Board members required for improvements to the effectiveness of the Board of Directors

Corporate Governance Structure
General Meeting of Shareholders

Audit & Supervisory Board

Reasons for the Appointment of Outside Directors
Name

Reasons for Appointment as an Outside Director

Akira Kawamoto

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

Yoshie Komuro

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

We are expecting Ms. Komuro to use her significant insight
into the workstyle reforms that are becoming crucial tocompanies and the experience and insight that she gainedon expert panels as part of government affiliated councils toenhance the Company’s management.

Coordinate

SuperviseGroup Companies

Audit

Accounting Auditor

Accounting Audit

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

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

Reasons for Appointment as an
Outside Audit & Supervisory Board Member

Jotaro Yabe

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

Katsuaki Ohashi

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

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

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

Officer Classification

Total Amount ofCompensation Paid
(Millions of yen)

Basic
Compensation

BonusesCompensation for
Use in Acquiring
Company Stock

Numberof Eligible
Officers

Directors (excluding
Outside Directors)

419

234

95

90

6

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

36

36

—

—

3

Outside Officers

40

40

—

—

5

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

Takeshi Hirouchi(Director)

Total Amount ofCompensation Paid
(Millions of yen)

150

Company
Classification

Basic
Compensation

BonusesCompensation for
Use in Acquiring
Company Stock

Filingcompany

87

37

25

Onward Holdings Co., Ltd. Annual Report 201945

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

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

Policies for Cross-Shareholdings andExercise of Related Voting Rights
In addition to stocks held purely for investment purposes, theCompany will hold shares of stocks in listed 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. 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, the individual must not be affiliated with that entity.)
5. Donation recipients
The individual must not receive large donations from theCompany. (If the donations in question are received by a company,an association, or other entity, the individual must not be a person
involved in operation of that entity.)

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

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

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

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

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

1.	Has the counterparty been suffering from a significant and ongoing 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 a loss of understanding
from shareholders?

46

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201947

Board of Directors, Audit & Supervisory
Board Members, and Executive Officers
As of November 1, 2019

Financial Section

Board of Directors

Audit & Supervisory
Board Members

Executive Officers

Representative Director, President

Standing Audit & Supervisory
Board Members

Managing Executive Officers

Executive Officers

Hitoshi Aoyama

Masahiko Yoshikawa
Kenji Takeuchi

Tomohiko Sakamoto

Hirokazu Yoshizato

Takeshi EgashiraHikosaburo Seike

Outside Audit & Supervisory
Board Members

Yoshihiro Higuchi

Osamu Sato

Jotaro Yabe

Takehiro Shiraishi

Daisuke Ikeda

Hidekazu Imamura

50

Six-Year Financial Summary

52

Management’s Discussion and Analysis

55

Operating Risks

56

Consolidated Balance Sheets

58

Consolidated Statements of Operations

59

Consolidated Statements of Comprehensive Income

Akira Kawamoto

60

Consolidated Statements of Changes in Net Assets

Yoshie Komuro

62

Consolidated Statements of Cash Flows

64

Notes to Consolidated Financial Statements

89

Independent Auditor’s ReportMichinobu Yasumoto
Representative Senior Managing Director

Michio Osawa
Senior Managing Directors

Hisayuki Ichinose
Tsunenori Suzuki

Katsuaki Ohashi

Masanori Shozu

Outside Directors

Company Organization

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.

As of September 1, 2019
General Meeting of Shareholders
Board of Directors

Audit & Supervisory Board

Representative Director, PresidentGroup Strategy Meeting

International Business
International
Operations

Corporate Planning, Legal Affairs

European Operations
North American Operations
Korean Operations

Asian Operations

Chinese Operations
Hong Kong-ASEAN Operations
Kinki Region
Kyushu-Okinawa Region

Domestic
Operations

Tokai-Hokuriku Region
Hokkaido Region
Tohoku-Kitakanto Region
Chugoku-Shikoku Region

Finance, Accounting

Secretary Office, Corporate
Communications,
Human Resources, General Affairs

Administrative
Division

Production & Quality Control
Distribution Channel Development
Creation, Advertising & Marketing
Digital Innovation Promoting
E-Commerce BusinessInformation Systems
Supply Chain Management
Environmental Management

48

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201949

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

Thousands of
U.S. dollars*1

Millions of yen
2014

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

2015

2016

2017

2018

2019

Net Sales¥ million

2019

300,000¥280,008
149,270¥281,502
152,438¥263,516
144,063¥244,901
131,638¥243,075
129,498¥240,652
129,019$2,170,581
1,163,698

120,538
10,20012,211
3,112

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

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

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

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

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

966,641
40,242
46,550
11,222

4,659

4,204

4,278

4,744

5,367

4,948

44,633

13,362

16,491

3,632

6,844

13,2284,635

41,809(14,301)(15,657)

1,783

25,271(7,300)(10,306)(92,955)

2,122
(939)

757
834

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

11,543(5,671)

104,110(51,146)

16,7506,801

26,884
7,219

15,955
7,799

10,5996,663

12,0586,335

13,473
6,511

125,52058,722280,008

Operating Profit and Operating Margin
281,502¥ million / %263,516

244,901

243,075

240,652

12,000200,000

8,000

100,000

0

2015

2016

2017

2018

0

2019

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

27,376110,349

31,123
117,052

29,407
121,469

26,097
103,573

26,335
105,978

31,284
117,298

282,173
1,057,976

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

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

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

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

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

96,718287,555
105,405
167,429
162,211872,351
2,593,621
950,7111,510,139
1,463,074

Yen

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

U.S. dollars*1

Profit Attributable to Owners of Parent

ROE and ROA¥ million

%

5,367

6,000
5,000

4,659

4,204

4,278

4,744

3.0

3,000

2.0

¥   26.78
1,166.89
24.00
89.6

¥   28.27
1,101.21
24.00
86.5

¥   31.47
1,116.47
24.00
74.0

¥   36.97
1,155.04
24.00
63.7

¥   35.24
1,148.30
24.00
66.9

2014

2015

2016

2017

2018

2.8
1.6
3.6
46.7
43.0
55.2

2.4
1.3
2.0
45.8
43.8
53.8

2.4
1.3
1.4
45.3
43.9
54.2

2.8
1.6
1.7
46.2
44.5
59.8

3.3
1.9
2.1
46.7
44.6
59.2

3.1
1.7
1.9
46.4
44.5
55.1

—
—
—
—
—
—

OTHER INFORMATION
Number of full-time employees

5,224

4,973

5,119

4,456

4,530

4,643

—

2016

2017

1.6

4,462

2.1

1.9

2.0

2018

2019

0

1.7

Operating Margin (right scale)

3.3
2.8

0

2014

ROE

ROA

2019

2.4

2.4

1.3

1.3

2015

2016

2.8
1.9

1.6

3.1

1.7

2017

2018

2019

Total Assets

Total Net Assets and Shareholders’ Equity Ratio¥ million¥ million / %400,000
313,431

340,854200,000
313,454300,000

273,227

278,134

287,555

150,000

175,02955.2

185,31553.8

172,33754.2

165,670

168,153

162,211

59.8

59.2

55.1

80.0
60.0

200,000

100,000

40.0

100,000

50,000

20.0

2014

2015

2016

2017

2018

0

2019

$ 0.32
10.36
0.22
—

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

1.4

4,204

1.0

1,000
0

2015

3,778

5,167

4.0

4,948

4,000

0

¥   29.69
1,102.99
24.00
80.8

2014

4.0

5,732
2.0

Operating Profit

2,000Capital expenditures
Depreciation and amortization

3.6

4,000

2014

6.0

10,2002014

Total Net Assets

2015

2016

2017

2018

Cash Dividends per Share and Payout Ratio¥ million¥/%

26,884

60.00

120.0
80.8

20,00016,75010,59912,05813,473

86.5

24.00

24.00

24.00

74.0
24.00

63.7

66.9

24.00

24.00

20.00

10,000

0

89.6

40.00

15,955

2014

2015

2016

2017

2018

2019

0

0

Shareholders’ Equity Ratio (right scale)

Capital Expenditures
30,000

2019

80.0

40.0

2014

2015

Cash Dividends per Share

2016

2017

2018

2019

0

Payout Ratio (right scale)* 1. Yen amounts have been translated, for convenience only, at ¥110.87=US$1, the rate of exchange as of February 28, 2019.
*2. Free cash flow = Cash flows from operating activities + Cash flows from investing activities

50

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201951

Management’s Discussion and Analysis

Overview of Operating Results

Gross Profit

In fiscal year 2019, ended February 28, 2019, the domestic economy enjoyedongoing improvements in corporate earnings, the job market, and wages,
while consumer spending levels recovered. However, consumer confidence
remained low as a result of record-breaking typhoons, earthquakes, and othernatural disasters. Meanwhile, a recovery trend was seen in Europe and theUnited States, but this recovery was restricted by the impacts of trade disputes, uncertainty pertaining to government policies, and the United
Kingdom’s decision to withdraw from the European Union.
In the domestic apparel and fashion industries, the diversification of sales
channels and a shift toward e-commerce was seen in reflection of changes in
consumer purchasing intentions. Regardless, the pronounced trend towardfrugality in clothing purchases persisted, and competition remained generally
fierce. Amid this operating environment, the Onward Group moved forwardwith the implementation of its medium-term management plan during its
final year. Based on this plan, we sought to steadily raise profits by heightening the value of products in core brands and improving customer service. We
also advanced selection and concentration measures that included reinforcing
our e-commerce operations and other businesses from which we can expect
high margins and strong growth.

Net Sales
Sales in the Apparel Business decreased 0.5% year on year, to ¥214,564
million, while sales in the Lifestyle Business declined 4.6%, to ¥26,088
million. As a result, consolidated net sales were down 1.0% compared withthe previous fiscal year, to ¥240,652 million. Effective from fiscal year
2019, the Company’s segments were revised. As part of this revision, theOther Business was renamed the Lifestyle Business, which now comprises
Chacott Co., Ltd., Creative Yoko Co., Ltd., and other companies.

The gross profit margin decreased 0.3 percentage point, from 46.7% in
fiscal year 2018 to 46.4% in fiscal year 2019. Gross profit decreased ¥1,944
million, to ¥111,633 million.

Operating Income
The ratio of selling, general and administrative (SG&A) expenses to net
sales decreased 0.1 percentage point, from 44.6% to 44.5%. Operating
profit, meanwhile, decreased ¥705 million year on year, to ¥4,462 million.

Other Income (Expenses)
Other expenses, net, amounted to ¥1,307 million, compared with otherincome, net, of ¥4,862 million in the previous fiscal year. Other income
was recorded in the form of gain on sale or disposal of fixed assets, net, of¥2,313 million and gain on sale of investments in securities, net, of ¥2,432
million. In other expenses, impairment loss on fixed assets increased from
¥1,202 million in fiscal year 2018 to ¥5,533 million in fiscal year 2019.

Profit before Income Taxes and Profit Attributable to
Owners of Parent
Profit before income taxes was ¥3,155 million, a decrease of ¥6,874 million
year on year.
Profit attributable to owners of parent decreased ¥419 million from theprevious fiscal year, to ¥4,948 million.

Segment Information

Outlook for the Fiscal Year Ending February 29, 2020

Apparel Business

For fiscal year 2020, ending February 29, 2020, the Onward Group forecasts consolidated net sales to increase 6.4% year on year, to ¥256,000
million, and operating profit to grow 23.7%, to ¥5,520 million.
In the apparel and fashion industries, progress in globalization and thetrend toward digitalization will serve as a backdrop for the difficult conditions characterized by fierce competition. Amid this operating environment, the Onward Group will seek to improve product value and enhancecustomer service in its core businesses with the aim of steadily improving
profitability. At the same time, we will develop new businesses with apromising outlook for growth.

In fiscal year 2019, sales in the Apparel Business segment declined 0.5%
year on year, to ¥214,564 million, while operating profit was down 10.1%,
to ¥5,255 million.

Domestic Apparel Business
Sales from e-commerce operations, which have been an ongoing target forconcentrated resource allocation, rose 25.8% year on year on a consolidated basis, making large contributions to overall sales. At core operating
subsidiary Onward Kashiyama Co., Ltd., year-on-year increases were seenin the sales of brands such as Jiyuku, ICB, and J. PRESS, which benefited
from a higher percentage of sales through e-commerce channels.
Conversely, sales of Nijyusanku, Kumikyoku, Gotairiku, and other brands
were down year on year. Sales decreases were also experienced by domestic
subsidiaries Onward Trading Co., Ltd., and Onward Global Fashion Co.,
Ltd. Regardless of these decreases, higher profit was posted due to thewithdrawal from underperforming businesses and brands and the implementation of cost control measures. As a result, operating profit was up
while sales were down for the domestic business overall.

Overseas Apparel Business
The enhanced creative team at JIL SANDER continued to drive sales
growth. At the same time, success in promoting the new J. PRESS flagshipstore and increased e-commerce sales in North America contributed toearnings improvement in this region. However, profits were down due toalterations in contracts in European manufacturing divisions and one-time
expenses associated with closures of underperforming stores. As a result, sales
were up while operating profit was down for the overseas business overall.

Lifestyle BusinessIn fiscal year 2019, sales in the Lifestyle Business segment declined 4.6%
year on year, to ¥26,088 million, while operating profit decreased 10.7%,
to ¥1,542 million.
Improvements in profitability were seen at Creative Yoko, which
designs and sells products for pets as well as character goods and toys, andKokobuy Inc., which manufactures and sells brand name organic haircare
and skincare products. However, the resort business struggled due to a
decline in the number of Japanese tourists visiting Guam. As a result, bothsales and operating profit were down for the Lifestyle Business overall.

Net Sales¥ million

300,000

281,502

Overseas BusinessIn the overseas business, we will move ahead with the acceleration of ourglobal strategies.
In Europe, we aim to realize higher profitability by cementing ourframeworks for generating synergies between the manufacturing platformof Onward Luxury Group and the brands of JOSEPH and JIL SANDER.
Meanwhile, we will establish a manufacturing platform for Moreau Parisand otherwise work to expand this brand with a view to solidifying its
position as a luxury brand centered on bags and other accessories.
In Asia, we will move ahead with selection and concentration measuresin existing businesses while advancing growth strategies that respondflexibly to market changes through means such as expanding Internetbased businesses and developing new sales channels.
Initiatives in North America will include developing operating structuresand carrying out the investments deemed necessary from a medium-term
perspective, such as those in the J. PRESS store in Yale Club in New York City.
At the same time, we will implement initiatives for growing our business.

¥ million

263,516

244,901

243,075

240,652

7,500
5,732
5,000

100,000

2,500

2015

2016

2017

2018

2019

0

4,204

2015

Operating Profit

52

In the domestic business, we will seek to grow our operations by diversifying the value we provide, expanding our customer base, and evolving inline with the times.
Our focus in existing brands will be to improve the value of products
centered on apparel from the perspective of customers in order to increase
profitability. At the same time, we will grow operations in lifestyle-related
fields, such as cosmetics and wellness.
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. We are also forging ahead with our
Omni-channel retailing strategy, which entails expanding our offerings ofexperiences and services, as part of our efforts to realize higher levels ofsatisfaction and convenience for customers.

Operating Profit and Profit Attributable to Owners of Parent

200,000

0

Domestic BusinessOnward Holdings Co., Ltd. Annual Report 2019

5,367
4,948
4,744 5,167
4,462
4,278 4,204
3,778

2016

2017

2018

2019

Profit Attributable to Owners of Parent

Onward Holdings Co., Ltd. Annual Report 201953

Operating Risks

Management’s Discussion and Analysis

Financial Position

Cash Flows from Financing Activities

AssetsTotal assets on February 28, 2019, stood at ¥287,555 million, up ¥9,421
million from the previous fiscal year-end. Total current assets increased¥11,320 million, mainly from an increase in cash and deposits. Fixed assets
were down ¥1,899 million, largely reflecting a decrease in investments insecurities.

Liabilities
Total liabilities as of February 28, 2019, were up ¥15,363 million from theprevious fiscal year-end, to ¥125,344 million. Total current liabilities rose
¥19,021 million, mainly attributable to an increase in short-term loans
payable. Total long-term liabilities were down ¥3,658 million, largely due
to an increase in long-term loans payable.

Net Assets
On February 28, 2019, total net assets were down ¥5,942 million from theprevious fiscal year-end, to ¥162,211 million. Total shareholders’ equity
decreased ¥913 million following a decrease in retained earnings. Total
accumulated other comprehensive income decreased ¥5,381 million,
mainly because of a downward adjustment associated with net unrealized
loss on available-for-sale securities.

Cash Flows
Cash Flows from Operating Activities
Net cash provided by operating activities for fiscal year 2019 was ¥4,635
million (¥13,228 million in the previous fiscal year), mainly from profit
before income taxes and income taxes paid.

Cash Flows from Investing Activities
Net cash used in investing activities for fiscal year 2019 totaled ¥10,306
million (¥7,300 million in the previous fiscal year), mainly due to investments in sales facilities and business assets.

Net cash provided by financing activities for fiscal year 2019 amounted to¥11,543 million (net cash used in financing activities of ¥6,593 million in
the previous fiscal year), owing mainly to changes in borrowings.
As a result, cash and cash equivalents as of February 28, 2019, increased¥5,587 million, to ¥31,237 million.

Capital Expenditures
We at the Onward Group undertake capital expenditures on a continuous
basis to upgrade and expand our planning, production, sales, and logistics
structures and systems. Our capital expenditures are the wellspring thatenables us to address the diverse needs of our customers.
In fiscal year 2019, our capital expenditures totaled ¥13,473 million.
The details of expenditures by segment are as follows.
In the Apparel Business segment, capital expenditures amounted to¥8,518 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 ¥635 million to upgrade
commercial facilities and enhance operational efficiency.

Profit Distribution Policy
At Onward Holdings, we recognize that the distribution of profits toshareholders is one of our top priorities. Our basic policy is to distribute
regular and stable dividends to shareholders based on our business performance, and we target a dividend payout ratio of 35% or more.
A single dividend payment is issued each year and is decided via
approval at the General Meeting of Shareholders. For fiscal year 2019, we
resolved to distribute a cash dividend of ¥24 per share, the same level as infiscal year 2018, based on a comprehensive evaluation of this year’s performance and our outlook for the operating environment.
Additionally, we intend to utilize our retained earnings flexibly andadopt a balanced approach to meet our funding requirements. Based on
this policy, our retained earnings will be used for strategic investments tobuild a solid business foundation and strengthen our financial position as
and when we consider appropriate.

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 numberof external factors, such as sluggish consumer spending as a result offluctuations in economic conditions, increased competition, and suddenchanges in fashion trends. Falling short of our targets may have an impact
on our Group’s performance.

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

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

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

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

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

Total Assets and Total Net Assets

Cash Flows¥ million¥ million

400,000

340,854

30,000313,454300,000
200,000

185,315

172,337

273,227
165,670

278,134
168,153

287,555

20,00010,000162,211–20,000

100,000

25,271
16,491

Total Assets

54

2015

2016

2017

2018

2019

Total Net Assets

Onward Holdings Co., Ltd. Annual Report 2019

–40,000

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

11,543
4,635–7,300 –6,593–10,306–6,357–15,657–30,000
0

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

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

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

Legal Procedures and Compliance0–10,000

Overseas Business Operations–32,856

2015

2016

Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities

2017

2018

2019

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

Onward Holdings Co., Ltd. Annual Report 201955

Consolidated Balance Sheets
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2018 and 2019

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

Millions of yen

ASSETS

2018

2019

2019

¥ 26,335¥ 31,284$  282,173

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

25,05725,508230,072

		 Inventories (Note 2. (4))

42,98046,766

421,808

		 Deferred tax assets (Note 12)

4,130

2,973

26,816

		 Other current assets

7,827

11,521103,906

			 Less: Allowance for bad debt

(351)

(754)

(6,799)105,978

117,298

1,057,976

				Total current assets

Millions of yen

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

2018

2019

2019

$  158,355¥ 18,059¥ 17,557

		 Electronically recorded obligations—operating (Note 3)

14,873

14,183

127,922

		 Short-term loans payable (Notes 3 and 13)

29,53353,886

486,028

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

5,800

2,800

25,257

		 Accrued income taxes

2,085

475

4,285

		 Accrued bonuses to employees

1,052

777

7,012

		 Accrued bonuses to directors

196

156

1,410

		 Allowance for sales returns

272

241

2,178

		 Provision for point program

736

765

6,897

		 Other current liabilities (Notes 12 and 13)

13,77814,565

131,367

				Total current liabilities

86,384105,405

950,711Long-term liabilities:

Property, plant and equipment:		 Buildings and structures

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

80,95084,325760,577

		 Long-term loans payable (Notes 3 and 13)

6,819

4,707

42,452

		 Deferred tax liabilities—revaluation of land (Note 12)

2,259

1,747

15,753

		Leased assets

8,428

9,071

81,818		 Other depreciable property

34,36335,410319,381			Less: Accumulated depreciation(77,032)(78,354)(706,721)

46,70950,452455,055

		Land47,00546,266417,296				 Total property, plant and equipment

93,71496,718872,351

		 Net defined benefit liability (Note 8)

4,141

3,993

36,018

		 Lease obligations (Note 13)

4,384

4,411

39,786

188

203

1,827

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

5,806

4,878

44,000				Total long-term liabilities

23,597

19,939179,836					Total liabilities

109,981

125,344

1,130,547

Net assets:
		 Shareholders’ equity (Note 14):
			Common stock:
				Authorized—400,000,000 shares

Intangible assets, net:
		Goodwill

16,2289,455

85,284

		Other

8,284

7,570

68,281

				Total intangible assets, net

24,512

17,025

153,565				 Issued—167,921,669 shares and 157,921,669 shares at February 28, 2018				 and 2019, respectively

30,08030,080271,306

			Capital surplus

50,04350,043451,368

			Retained earnings

115,799

107,140

966,357

			 Less: Treasury stock, at cost, 25,406,796 shares and 20,052,156 shares			  at February 28, 2018 and 2019, respectively(27,580)(19,834)(178,892)

				Total shareholders’ equity

168,342

167,429

1,510,139

1,271(1,453)(13,101)

		 Accumulated other comprehensive income:Investments and other assets:

			 Net unrealized gain (loss) on available-for-sale securities (Note 4)		 Investments in securities (Notes 3 and 4)

30,491

27,846251,155

		 Long-term loans receivable

1,888

2,469

22,272

		 Long-term prepaid expenses

360

447

4,031

		 Net defined benefit asset (Note 8)

3,847

2,919

26,327

		 Deferred tax assets (Note 12)

6,971

12,926

116,590

		Other investments

10,634

10,34493,295

		 Stock acquisition rights

(261)

(437)

(3,941)

		Non-controlling interests

53,93056,514

509,729

				Total net assets¥278,134¥287,555$2,593,621

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

(74)

80

717

			 Net revaluation loss on land

			 Deferred gain (loss) on hedging instruments(7,865)(8,957)(80,787)

			 Foreign currency translation adjustments

2,097

1,134

10,231

			 Remeasurements of defined benefit plans (Note 8)

838

82

738

				 Total accumulated other comprehensive income(3,733)(9,114)(82,202)

730

559

5,046

2,814

3,337

30,091

Total liabilities and net assets

Per share:
		 Net assets per share

168,153

162,211

1,463,074¥278,134¥287,555$2,593,621
U.S. dollars(Note 2. (21))

Yen¥1,155.04¥1,148.30$10.36

See accompanying notes to consolidated financial statements.

56

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201957

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2018 and 2019

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2018 and 2019

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

Millions of yen

Net sales

2018

2019

2019

¥243,075¥240,652$2,170,581

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

Millions of yen
2018

2019

2019

¥6,788¥ 5,809$ 52,398

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

750(2,628)(23,698)

ProfitCost of sales

129,498

129,019

1,163,698

Gross profit

113,577

111,633

1,006,883

Selling, general and administrative expenses

108,410

107,171966,641

		 Deferred gain (loss) on hedging instruments

(131)

154

1,385

5,167

4,462

40,242

		 Foreign currency translation adjustments

1,427

(891)

(8,034)

		 Remeasurements of defined benefit plans, net of tax

497

(756)

(6,824)

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

335

(207)

(1,867)

2,878(4,328)(39,038)¥9,666¥ 1,481$ 13,360

Operating profit

Other income (expenses):
		Interest income
		Dividend income

48

55

499

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

252

258

2,327

		 Land and house rent received

1,231

1,303

11,751

		Interest expenses

(318)

(370)

(3,339)

		 Equity in losses of investees

(775)

(84)

(754)

			 Owners of the parent¥8,249¥   659$  5,945

		 Foreign currency exchange gain (loss)

(82)

27

240

			Non-controlling interests

1,417

822

7,415

		Compensation income

763

418

3,775

		Rent expenses

(467)

(548)

(4,943)

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

1,711

2,432

21,933

		 Gain on sale or disposal of fixed assets, net

3,645

2,313

20,861

664

25

226

		 Impairment loss on fixed assets (Note 6)(1,202)(5,533)(49,909)

		 Business restructuring expenses (Note 7)

(394)

—

—

		 Loss on liquidation of subsidiaries and affiliates

(289)

—

—

		 Loss on sale of shares of subsidiaries and associates—(1,185)(10,690)

		 Gain on liquidation of subsidiaries and affiliates

		Other, net

75

(418)

(3,763)

10,0293,155

28,456

		Current

3,305

1,244

11,222

		Deferred(64)(3,898)(35,164)

Profit

6,788

5,809

52,398

Profit before income taxes

		 Comprehensive income attributable to:

See accompanying notes to consolidated financial statements.

Income taxes (Note 12):

Profit attributable to non-controlling interests
Profit attributable to owners of parent

1,421

861

7,765

¥  5,367¥  4,948$   44,633
U.S. dollars(Note 2. (21))

Yen

Per share (Notes 14, 15, and 17):
		 Basic earnings per share¥36.97¥35.24$0.32

		 Diluted earnings per share

36.61

34.96

0.32

		 Cash dividends per share

24.00

24.00

0.22

See accompanying notes to consolidated financial statements.

58

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201959

Consolidated Statements of Changes in Net Assets
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2018 and 2019

Millions of yen

Millions of yen

Shareholders’ equity (Note 14)

Accumulated other comprehensive income

Number ofshares ofcommon stock(thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

167,922¥30,080¥50,043¥113,072¥(24,168)¥169,027

Cash dividends

—

—

—

(3,511)—(3,511)

Profit attributable to owners of parent

—

—

—

5,367

—

5,367

Purchase of treasury stock

—

—

—

—

(3,532)(3,532)

Reissuance of treasury stock

—

—

—

(70)

120

50

Reversal of revaluation of land

—

—

—

941

—

941

Net changes in items other thanshareholders’ equity

—

—

—

—

—

—

		 Total changes during the year

—

—

—

2,727

(3,412)(685)

167,92230,08050,043

115,799(27,580)

168,342

Cash dividends

—

—

—

(3,420)—(3,420)

Profit attributable to owners of parent

—

—

—

4,948

—

4,948

Purchase of treasury stock

—

—

—

—

(3,725)(3,725)

Reissuance of treasury stock

—

—

—

(223)

393

170

Retirement of treasury stock

10,000——(11,078)

11,078

—

—

—

—

1,114

—

1,114

Balance as at March 1, 2017

Balance as at February 28, 2018

Reversal of revaluation of land

—

—

—

—

—

—

		 Total changes during the yearNet changes in items other than shareholders’ equity

10,000——(8,659)

7,746

(913)

Balance as at February 28, 2019

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

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

Balance as at March 1, 2017

Net
revaluation
loss on landRemeasurements
Foreignof definedcurrency
benefit planstranslation(Note 8)adjustments

Total

Stock
acquisitionrights

Noncontrollinginterests

Total net
assets¥  323¥  57¥(6,923)¥  528¥ 341¥(5,674)¥ 780¥1,537¥165,670

Cash dividends

—

—

—

—

—

—

—

—

(3,511)

Profit attributable to owners of parent

—

—

—

—

—

—

—

—

5,367

Purchase of treasury stock

—

—

—

—

—

—

—

—

(3,532)

Reissuance of treasury stock

—

—

—

—

—

—

—

—

50

Reversal of revaluation of land

—

—

—

—

—

—

—

—

941

Net changes in items other thanshareholders’ equity

948

(131)

(942)

1,569

497

1,941

(50)

1,277

3,168

		 Total changes during the year

948

(131)

(942)

1,569

497

1,941

(50)

1,277

2,483

Balance as at February 28, 2018

1,271

(74)

(7,865)

2,097

838

(3,733)

730

2,814

168,153

Cash dividends

—

—

—

—

—

—

—

—

(3,420)

Profit attributable to owners of parent

—

—

—

—

—

—

—

—

4,948

Purchase of treasury stock

—

—

—

—

—

—

—

—

(3,725)

Reissuance of treasury stock

—

—

—

—

—

—

—

—

170

Retirement of treasury stock

—

—

—

—

—

—

—

—

—

Reversal of revaluation of land

—

—

—

—

—

—

—

—

1,114

Net changes in items other thanshareholders’ equity(2,724)154(1,092)

(963)

(756)

(5,381)

(171)

523

(5,029)

		 Total changes during the year

(2,724)154(1,092)

(963)

(756)

(5,381)

(171)

523

(5,942)

Balance as at February 28, 2019¥(1,453)¥  80¥(8,957)¥1,134¥  82¥(9,114)¥ 559¥3,337¥162,211

Stockacquisitionrights

Noncontrollinginterests

Total net
assets$(33,662) $ 6,581

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

Balance as at February 28, 2018

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

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

Accumulated other comprehensive income$271,306$451,368$1,044,454$(248,757)$1,518,371

Cash dividends——(30,850)—(30,850)

Profit attributable to owners of parent——

44,633—

44,633Purchase of treasury stock

—

—

—

(33,600)(33,600)

Reissuance of treasury stock——(2,007)

3,546

1,539

Retirement of treasury stock——(99,919)

99,919—

Reversal of revaluation of land——

10,046—

10,046

Net changes in items other than shareholders’ equity
		 Total changes during the year
Balance as at February 28, 2019
See accompanying notes to consolidated financial statements.

Balance as at February 28, 2018

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

Net
revaluation
loss on land$(70,935) $18,920

Remeasurements
Foreignof definedcurrency
benefit planstranslation(Note 8)adjustments$ 7,561

Total$ 11,460$ (668)$25,377$1,516,667

Cash dividends

—

—

—

—

—

—

—

—

(30,850)

Profit attributable to owners of parent

—

—

—

—

—

—

—

—

44,633Purchase of treasury stock

—

—

—

—

—

—

—

—

(33,600)
1,539

—

—

—

—

—

Reissuance of treasury stock

—

—

—

—

—

—

—

—

—

—

(78,097)

69,865(8,232)Retirement of treasury stock

—

—

—

—

—

—

—

—

—

$271,306$451,368$  966,357$(178,892)$1,510,139

Reversal of revaluation of land

—

—

—

—

—

—

—

—

10,046Net changes in items other thanshareholders’ equity(24,561)

1,385(9,852)(8,689)(6,823)(48,540)(1,535)

4,714(45,361)		 Total changes during the year

(24,561)

1,385(9,852)(8,689)(6,823)(48,540)(1,535)

4,714(53,593)

Balance as at February 28, 2019$(13,101)$  717$(80,787) $10,231$  738$(82,202) $ 5,046$30,091$1,463,074

See accompanying notes to consolidated financial statements.

60

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201961

Consolidated Statements of Cash Flows
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2018 and 2019

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

Millions of yen
2018

2019

		 Profit before income taxes¥10,029¥  3,155$  28,456

			Depreciation and amortization

6,335

6,511

58,722

			 Impairment loss on fixed assets

1,202

5,533

49,909

			 Net amortization of goodwill on consolidation

2,563

2,302

20,762

			 Increase (decrease) in allowance for bad debt

(462)

586

5,289

			 (Increase) decrease in net defined benefit asset

(670)

928

8,373

			 Increase (decrease) in net defined benefit liability

98

(131)

(1,181)

			 Interest and dividend income

(300)

(313)

(2,826)

			Interest expenses

318

370

3,339

			 Equity in (earnings) losses of investees

775

84

754

			 (Gain) loss on sale or disposal of fixed assets, net(3,645)(2,313)(20,861)			 (Gain) loss on sale of investments in securities, net(1,711)(2,432)(21,933)

			 (Increase) decrease in trade receivables

1,648

(752)

(6,785)			 (Increase) decrease in inventories(1,980)(4,186)(37,753)

921

(904)

(8,154)			Other, net(1,830)(1,537)(13,864)

				Subtotal

62,247

13,291

6,901

		 Interest and dividends received

376

394

3,553

		Interest paid

(323)

(367)

(3,313)(1,961)(2,304)(20,780)

		 Income taxes paid

2018

2019

2019

6,004

24,800223,684

Cash flows from financing activities:

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

			 Increase (decrease) in trade payables

Millions of yen

2019

Cash flows from operating activities:

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

		 Refunded income taxes

1,845

11

102

				 Net cash provided by (used in) operating activities

13,2284,635

41,809

(640)

(5)

(46)

		 Net increase (decrease) in short-term loans payable
		 Proceeds from long-term loans payable

20,000——		 Repayments of long-term loans payable(24,570)(5,086)(45,871)

		 Acquisition of treasury stock(3,532)(3,725)(33,600)

		 Dividends paid by the parent company(3,511)(3,420)(30,850)

		 Dividends paid to non-controlling interests

(196)

(154)

(1,387)

		Other, net

(788)

(872)

(7,866)104,110				 Net cash provided by (used in) financing activities(6,593)

11,543

Effect of exchange rate changes on cash and cash equivalents

291

(285)

(2,570)Net increase (decrease) in cash and cash equivalents

(374)

5,587

50,394

Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 10)

26,02425,650231,351¥ 25,650¥31,237$281,745

See accompanying notes to consolidated financial statements.

Cash flows from investing activities:
		 Increase in time deposits
		 Decrease in time deposits
		 Acquisition of property, plant and equipment

29

599

5,402

(9,459)(11,220)(101,199)

		 Proceeds from sale of property, plant and equipment

6,392

4,803

43,320		 Acquisition of investments in securities(6,302)(10,138)(91,438)

		 Proceeds from sale of investments in securities

4,864

9,444

85,179

		 Payments for long-term prepaid expenses

(256)

(166)

(1,501)

		 Payments for security deposits(301)(1,166)(10,516)

		 Proceeds from security deposits

1,121

1,465

13,212—39

351

		 Proceeds from purchase of shares of subsidiaries resulting in change in scope of consolidation
		 Payments for sale of investments in subsidiaries resulting in change in scope of consolidation

—

(20)

(181)

		Other, net(2,748)(3,941)(35,538)				 Net cash provided by (used in) investing activities(7,300)(10,306)(92,955)

62

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201963

Notes to Consolidated Financial Statements
ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
Years ended February 28, 2018 and 2019

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

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

(4) Inventories

2. Summary of Significant Accounting Policies

Inventories held for sale in the ordinary course of business are measured at the lower of cost or net selling value, which is defined as the selling
price less additional estimated manufacturing costs and estimated direct selling expenses, determined principally by the specific identification
method. Write-downs recorded for the years ended February 28, 2018 and 2019 were ¥10,136 million and ¥8,958 million ($80,795 thousand),
respectively.

(1) Scope of consolidation(5) Investments in securities

The Company had 87 subsidiaries as at February 28, 2019 (84 as at February 28, 2018). The accompanying consolidated financial statements
include the accounts of the Company and 72 of its subsidiaries (71 for 2018). Major consolidated subsidiaries are listed below (the Company andits consolidated subsidiaries are collectively referred to as the “Companies”):
Name of subsidiary

Equity ownership percentage

Closing date

Onward Kashiyama Co., Ltd.

100.0%

February 28

Onward Trading Co., Ltd.

100.0

February 28

Chacott Co., Ltd.

100.0

February 28

Creative Yoko Co., Ltd.

100.0

February 28

Island Co., Ltd.

100.0

February 28

Onward Global Fashion Co., Ltd.

100.0

February 28

Onward Luxury Group S.p.A.

100.0

November 30

Joseph Ltd.

100.0

November 30

Onward Fashion Trading (China) Co., Ltd.

100.0

December 31

J. Press, Inc.

100.0

December 31

Onward Creative Center Co., Ltd.

100.0

February 28

Excel Co., Ltd.

100.0

February 28

Onward Resort & Golf Co., Ltd.

100.0

February 28

Onward Life Design Network Co., Ltd.

100.0

February 28

Onward Beach Resort Guam, Inc.

100.0

December 31

Onward Mangilao Guam, Inc.

100.0

December 31

During the year ended February 28, 2019, Onward Luxury Group S.r.l., Jil Sander S.p.A., Jil Sander Paris S.a.r.l., and Jil Sander USA Inc. were
newly established, and shares in Kashiyama Saga Co., Ltd. were acquired; therefore, these companies became consolidated subsidiaries of theCompany.
CHARLES & KEITH JAPAN PTE. LTD., SCI Joseph, and Joseph E France S.A.R.L. were liquidated, and shares in Toyo Frame Co., Ltd.
were transferred; therefore, these companies were removed from the scope of consolidation.
The financial statements of subsidiaries with the fiscal year-end of December 31 or November 30 have been used for consolidation. The fiscal
year-end of KOKOBUY Inc. is September 30, and its financial statements prepared on a basis similar to that for the year-end closing as of December
31 have been used for consolidation purposes. Significant adjustments considered necessary between the fiscal year-ends and the Company’s closing
date have been made for consolidation.
The remaining eight subsidiaries (seven for 2018) were not consolidated because their total assets, net sales, net income and retained earnings
were not material individually or in the aggregate compared with those of the consolidated financial statements of the Companies.

(2) Consolidation and elimination

For the 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.

64

Investments in unconsolidated subsidiaries and affiliates are accounted for by the equity method. A total of 24 companies (25 companies for 2018)
were accounted for by the equity method for the year ended February 28, 2019.
The Company did not apply the equity method to Onward Italia S.p.A. and others as the effect on net income and retained earnings of theconsolidated financial statements are not material individually or in the aggregate.
Although the fiscal year-end of Gailyglen Ltd. is November 30, its financial statements for the fiscal year-end have been used. Also, the fiscal
year-end of Daidoh Limited is March 31, and its financial statements prepared on a basis similar to that for the year-end closing as of December 31
have been used for consolidation purposes.

Onward Holdings Co., Ltd. Annual Report 2019

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

(6) Derivative transactions

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

(7) Hedge accounting

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

(8) Property, plant and equipment

The Company and its domestic consolidated subsidiaries provide depreciation by the declining-balance method at rates based on the estimateduseful lives of assets that are prescribed by Japanese income tax regulations, except for certain buildings (other than facilities attached tobuildings) acquired on and after April 1, 1998 and facilities attached to buildings and structures acquired on and after April 1, 2016, which are
depreciated by the straight-line method pursuant to an amendment to the Japanese income tax act.
Overseas consolidated subsidiaries provide depreciation by the straight-line method.
The useful lives of property, plant and equipment are summarized as follows:
3 to 50 years
Buildings and structures
Other depreciable property
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 income in the period that includes the enactment date. A valuation allowance is provided to reduce deferred tax assets to theamount that is realizable.

Onward Holdings Co., Ltd. Annual Report 201965

Notes to Consolidated Financial Statements(11) Allowance for bad debt

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

(12) Allowance for sales returns

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

(13) Retirement benefits

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

(14) Provision for point program

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

(15) Accounting for Japanese consumption taxes

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

(16) Application of consolidated taxation system- “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(b) Scheduled date of adoption
The Companies expect to adopt the standard and implementation guidance at the beginning of the year ending February 28, 2023.
(c) Impact of adopting the standard and implementation guidance
The Company is currently evaluating the impact of adopting the standard and implementation guidance on its consolidated financial statements.

(24) Changes in accounting estimates

Inventories of certain consolidated subsidiaries were previously carried at the book value that was systematically written down at certain rates when
the inventory-holding period exceeded certain periods. As a result of the collectability and analyzability of complete sales data on the inventoryholding period and sales channel for each single item, owing to the strengthened inventory management due to logistics reform and centralized
inventory, they changed to a method whereby the book value is gradually written down according to the inventory-holding period in order tomore appropriately reflect the fair inventory valuation in the year ended February 28, 2019.
As a result, cost of sales for the year ended February 28, 2019 decreased by ¥2,166 million ($19,536 thousand), and gross profit, operating
profit, and profit before income taxes increased by the same amount, compared with those amounts determined by the previous method.

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

3. Financial Instruments(17) Cash and cash equivalents(1) Matters pertaining to the status of financial instruments

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

(a) 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.

(18) Impairment of long-lived assets(b) Financial instruments and risks
Accounts and notes receivable are exposed to credit risk of customers. Operating receivables denominated in foreign currencies, being subject torisk associated with changes in foreign currency exchange rates, are hedged by forward exchange contracts.
Investments in securities mainly comprise stocks of companies with which the Companies have business alliances and are exposed to risk associated with fluctuations of their market prices.
Accounts and notes payable and electronically recorded obligations—operating are due within one year. Operating payables denominated inforeign currencies, being subject to risk associated with changes in foreign currency exchange rates, are hedged by forward exchange contracts. The
purpose for loans is for working capital (mainly short term) and funds for capital investments (long term). A portion of long-term loans payable issubject 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.

The accounting standard for impairment of long-lived assets requires that fixed assets be reviewed for impairment whenever events or changes incircumstances 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) Accrued bonuses to employees

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

(20) Accrued bonuses to directors

The Company and certain of its domestic consolidated subsidiaries recognize accrued bonuses to directors in an estimated amount to provide forpayment 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 ¥110.87=US$1, the rate of exchange as ofFebruary 28, 2019, 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.

66(23) Accounting standards issued but not yet effective

Onward Holdings Co., Ltd. Annual Report 2019(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 accounts and notes receivable, in accordance with the credit management regulations, the Companies
monitor the status of their main customers and counterparties on a periodical basis and manage due dates and outstanding balances by customer
while working to at an early stage identify and mitigate any concerns about collection due to deterioration of financial conditions and other reasons.
For derivative transactions, to mitigate the credit risk, the Companies conduct transactions only with highly rated financial institutions.
(ii) Management of market risk (risk of fluctuations in foreign 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 investments in securities, the Companies periodically perceive the fair values and financial conditions of the issuers and continuously evaluate whether the securities should be maintained taking into account relationships with their business partners.
For derivatives, the Companies conduct transactions only for their actual requirements in accordance with internal management rules andmonthly review transaction balances, valuation gain or loss, and other conditions.

Onward Holdings Co., Ltd. Annual Report 201967

Notes to Consolidated Financial Statements(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 value of financial instruments is based on their quoted market price if available. When no quoted market price is available, fair value is reasonably estimated. Since various variable assumptions are reflected in estimating the fair value, different assumptions could result in different fair values.

2. Book values of financial instruments deemed extremely difficult to determine their fair values as of February 28, 2018 and 2019 are as follows:(2) Matters related to fair values of financial instruments

Classification

Millions of yen
February 28, 2018

Book value

Fair value

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

25,05725,057—Available-for-sale securities

20,792

20,792—

Investments in unconsolidated subsidiaries and affiliates

8,384

3,848

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

16

(103)

(103)

—

(c) Investments in securities:(h) Derivative transactions

February 28, 2019

Book value

Fair value

Difference(a) Cash and deposits¥ 31,284¥ 31,284¥   —

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

17,89017,890—Investments in unconsolidated subsidiaries and affiliates

6,204

2,220

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

5

103

103

—

(c) Investments in securities:(h) Derivative transactions

2018

2019

2019

¥1,315¥3,751$33,837

Investments in securities:
Unlisted equity securities

The fair values of these items are not included in “(c) Investments in securities” because their market prices are not available and fair values are deemed
extremely difficult to determine.
3. The redemption schedules for monetary receivables and marketable securities with maturities as of February 28, 2018 and 2019 are as follows:
Millions of yen
February 28, 2018

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits¥26,335

¥—

¥—

¥—

Accounts and notes receivable

25,057———

		Total¥51,392

¥—

¥—

¥—

February 28, 2019

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits¥31,284

¥—

¥—

¥—

Accounts and notes receivable

25,508———

		Total¥56,792

¥—

¥—

¥—

February 28, 2019

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits$282,173

$—

$—

$—

Accounts and notes receivable

230,072———

		Total$512,245

$—

$—

$—

Millions of yen

Millions of yen(b) Accounts and notes receivableThousands of
U.S. dollars

Millions of yen

The following are the consolidated balance sheet amounts and fair values and differences between them as of February 28, 2018 and 2019.

(b) Accounts and notes receivable(g) Long-term loans payable
The fair values of fixed interest rate long-term loans payable are measured as present values obtained by discounting the total amount of principal andinterest at the interest rate that is assumed if any similar loan is newly made. Variable interest rate long-term loans payable are deemed to reflect market
interest rates in a short period of time, so the book value is used as fair value.
(h) Derivative transactions
The fair value is calculated on the basis of the price quoted by the financial institutions.

Thousands of U.S. dollars

4. Expected repayment amounts of long-term loans payable subsequent to the balance sheet date
See Note 13. “Short-Term Loans Payable and Long-Term Loans Payable.”Thousands of U.S. dollars
February 28, 2019

Book value

Fair value

Difference(a) Cash and deposits$ 282,173$ 282,173$     —

230,072

230,072—

161,357

161,357—(b) Accounts and notes receivable(c) Investments in securities:
Available-for-sale securities

55,961

20,027(35,934)(d) Accounts and notes payable

Investments in unconsolidated subsidiaries and affiliates(158,355)(158,355)—(e) Electronically recorded obligations—operating(127,922)(127,922)—(f ) Short-term loans payable(486,028)(486,028)—(g) Long-term loans payable (including current portion of long-term loans payable)(67,709)(67,755)

46

928

928

—

(h) Derivative transactions

Notes:
1. Fair value measurement of financial instruments and matters related to securities and derivatives(a) Cash and deposits and (b) Accounts and notes receivable
Since these items are settled in a short period of time, their book values approximate fair values.
(c) Investments in securities
The fair value of equity securities is based on the quoted market price.
(d) Accounts and notes payable, (e) Electronically recorded obligations—operating and (f ) Short-term loans payable
Since these items are settled in a short period of time, their book values approximate fair values.

68

Onward Holdings Co., Ltd. Annual Report 2019

4. Investments in Securities(1) Information as of and for the year ended February 28, 2018(a) Available-for-sale securities with readily determinable fair values
Investments in securities whose fair values were readily determinable at February 28, 2018 are summarized as follows:
Millions of yen
Carrying
value

Acquisition
cost

Unrealized
gain (loss)¥17,746¥13,007¥4,7393

1

2

17,74913,008

4,741
(684)

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

3,044

3,728

Other

—

—

—

Subtotal

3,044

3,728

(684)

		Total¥20,793¥16,736¥4,057

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

Onward Holdings Co., Ltd. Annual Report 201969

Notes to Consolidated Financial Statements(b) Available-for-sale securities sold during the year ended February 28, 2018

Millions of yen
Millions of yen

Proceeds from sale of securities¥4,458Realized gain on sale of securities

1,715

Realized loss on sale of securities(5)

Hedged item

Contract ornotional amount

Fair value

			U.S. dollar

Accounts payable¥2,185¥ 97

			EuroAccounts payable

1,474

(5)

			PoundAccounts payable

231

			Chinese yuan

Accounts payable

207

10

¥3,889¥103

February 28, 2019

Forward exchange contracts:		 To buy foreign currency:(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2018 was ¥9,362 million.

(2) Information as of and for the year ended February 28, 2019(a) Available-for-sale securities with readily determinable fair values
Investments in securities whose fair values were readily determinable at February 28, 2019 are summarized as follows:
Millions of yen
Carrying
value

Acquisition
cost

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

Carrying
value

Acquisition
cost

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

Securities with unrealized gain:
Equity securities
Other
Subtotal¥11,205¥ 9,706¥ 1,499$101,061$ 87,539$ 13,522

2

1

1

24

12

12

11,207

9,707

1,500

101,085

87,551

13,534

Securities with unrealized loss:
Equity securities
Other

6,683

7,914

(1,231)

60,272

71,379(11,107)

—

—

—

—

—

—

Subtotal

6,683

7,914

(1,231)

60,272

71,379(11,107)

		Total¥17,890¥17,621¥  269$161,357$158,930$  2,427

Note: Non-marketable equity securities of ¥334 million ($3,009 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 28, 2019
Millions of yen

Thousands of
U.S. dollars

Proceeds from sale of securities¥9,535$86,000

Realized gain on sale of securities

2,432

21,933

Realized loss on sale of securities

(0)

(0)

Hedged item

Contract ornotional amount

Fair value

			U.S. dollar

Accounts payable$19,711$870

			EuroAccounts payable

13,293(49)

			PoundAccounts payable

205

13

			Chinese yuan

Accounts payable

1,869

94

$35,078$928

February 28, 2019

Forward exchange contracts:		 To buy foreign currency:

6. Impairment Loss on Fixed Assets
For the years ended February 28, 2018 and 2019, the Companies reviewed its long-lived assets for impairment and, as a result, recognized an
impairment loss as follows:
February 28, 2018
Location

Tokyo metropolitan area and other
—

Usage

Business assets—

Description

Millions of yen

Buildings and structures

¥484

Other

556

Goodwill

162

The long-lived assets are basically grouped by brand, and assets for lease and idle assets are grouped individually by each item. The Companies
have recognized a loss on impairment on assets for lease and idle assets due to a significant decline in their market value and on business assets due
to a continuous loss generated from their operating activities by reducing their book values to the respective recoverable amounts.

(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2019 was ¥9,622 million($86,788 thousand).
(d) For the year ended February 28, 2019, the Companies recognized loss on valuation of investments in securities (available-for-sale securities) of¥45 million ($402 thousand) as an impairment loss.

February 28, 2019
Location

Tokyo metropolitan area and other

Millions of yen

Thousands of
U.S. dollars

Buildings and structures¥  655$ 5,905

Other depreciable property

588

5,310

4,290

38,694

Usage

Business assets

Description

5. Derivative Transactions—

The contract or notional amounts and fair values of derivative financial instruments held as of February 28, 2018 and 2019 are summarized
as follows:(1) Derivative transactions to which hedge accounting was not applied
No applicable items.

The long-lived 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 book values to the respective recoverable amounts.
The impairment loss on long-lived assets for the years ended February 28, 2018 and 2019 consisted of the following:—

Goodwill

2018

2019

2019

¥  484¥  655$ 5,905

Other intangible assets

339

376

3,392

Other depreciable property

168

212

1,918

Land

49

—

—

Goodwill

162

4,290

38,694

		Total¥1,202¥5,533$49,909

Millions of yen
February 28, 2018

Hedged item

Contract ornotional amount

Buildings and structures
Fair value

Forward exchange contracts:		 To buy foreign currency:70			U.S. dollar

Accounts payable¥4,233			EuroAccounts payable

2,199

3

			PoundAccounts payable

17

(0)

			Chinese yuan

Accounts payable

140

(4)

¥6,589¥(103)

Onward Holdings Co., Ltd. Annual Report 2019

Thousands of
U.S. dollars

Millions of yen(2) Derivative transactions to which hedge accounting was applied¥(102)For the year ended February 28, 2018, the Company recognized an impairment loss of ¥162 million on the unamortized balance of goodwill
for Tiaclasse Inc., a consolidated subsidiary of the Company, as a result of consideration of its recoverability based on cash flow projections. For theyear ended February 28, 2019, the Company recognized an impairment loss of ¥4,290 million ($38,694 thousand) 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.
The recoverable amount of these assets is based on their net selling price or their value in use. The net selling price is estimated by using theirestimated disposal price. The value in use is calculated by discounting the future cash flows at discount rates of 5.3% and 5.1% for the years ended
February 28, 2018 and 2019, respectively.
Onward Holdings Co., Ltd. Annual Report 201971

Notes to Consolidated Financial Statements

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

Business restructuring expenses for the years ended February 28, 2018 and 2019 consisted of the following:
Millions of yen
2018

2019

2019

Business portfolio restructuring:
Expenses in relation to withdrawal from unprofitable stores
Retirement expenses resulting from logistics and organization restructuring, etc.
		Total$ 116,759

Plan assets(14,086)(12,608)(113,714)

(453)

337

3,045

74

—

—

Unfunded projected benefit obligations

747

737

6,646

¥394

¥—

$—

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

294

1,074

9,691

(a) Changes in projected benefit obligations

Net defined benefit liability

4,141

3,993

36,018Net defined benefit asset(3,847)(2,919)(26,327)

Net amount of liability and asset recognized in the consolidated balance sheets¥   294¥  1,074$   9,691(d) Net periodic pension expenses and their breakdown
Thousands of
U.S. dollars

Millions of yen

Service cost
Interest cost

2018

2019

2019

¥1,013¥ 955$ 8,616

39

37

335

Expected return on plan assets

(222)

(237)

(2,136)

Amortization of unrecognized actuarial differences

568

246

2,214

Amortization of unrecognized prior service costs

(47)

(47)

(424)

Other

(64)

(61)

(552)

¥1,287¥ 893$ 8,053

Net periodic pension expenses
Thousands of
U.S. dollars

Millions of yen
2018

2019

2019

¥14,982¥14,380$129,697

Service cost

1,013

955

8,616

Interest cost

39

37

335

Actuarial differences

5

6

50

(1,783)(1,737)(15,665)

124

41

372

¥14,380¥13,682$123,405

Balance at end of year2019

¥ 12,945$—(1) Defined benefit plans

Other

2019

¥ 13,633¥—

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 for 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, net defined benefit liability and net periodic pension
expenses are calculated by using the simplified method.

Benefits paid

2018

Funded projected benefit obligations¥320

8. Retirement Plan and Retirement Benefits

Balance at beginning of year

Thousands of
U.S. dollars

Millions of yen

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

Millions of yen(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

Prior service costs

2018

2019

2019

¥ (47)¥   (47)$  (424)

Actuarial differences

764(1,043)(9,411)

Total¥  717¥(1,090)$(9,835)(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 isas follows:
Thousands of
U.S. dollars

2018

2019

2019

¥14,171¥14,086$127,048

222

237

2,136

Unrecognized prior service costs

Actuarial differences200(1,283)(11,576)

Unrecognized actuarial differences

1,040

(3)

(32)

Employer contributions

310

297

2,681

Total

¥1,208¥118$1,063

Balance at beginning of year
Expected return on plan assets

Benefits paid
Balance at end of year

(817)

(729)

(6,575)¥14,086¥12,608$113,714

Millions of yen
2018

2019

2019

¥  168¥121$1,095(g) Plan assets(i) Percentage by major category of plans assets is as follows:
2018

2019

Life insurance company general accounts

37%

38%

Equity securities

52%

48%

Debt securities

2%

3%

Short-term funds

9%

11%

100%

100%

Total

Total plan assets include retirement benefit trusts established for defined benefit corporate pension plans and lump-sum retirement payment plansof 58% and 56% for the years ended February 28, 2018 and 2019, respectively.

72

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201973

Notes to Consolidated Financial Statements(ii) Determination of long-term expected rate of return on plan assets
In determining long-term expected rate of return on plan assets, the Companies consider the current and projected asset allocations, as well as current and future long-term rate of returns from various assets constituting plan assets.
(h) Basis for calculation of actuarial assumptions
2018

2019

Discount rate

0.3% to 0.7%

0.3% to 0.7%

Long-term expected rate of return on plan assets

0.7% to 2.4%

1.3% to 2.4%

(2) Defined contribution plans

The amounts to be paid by the Companies to the defined contribution pension plans for the years ended February 28, 2018 and 2019 were¥350 million and ¥331 million ($2,985 thousand), respectively.

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

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

The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities as at February 28, 2018 and2019 consisted of the following elements:

Other comprehensive income for the years ended February 28, 2018 and 2019 consisted of the following:

2018

2019

2019

Amount arising during the year

¥ 2,869¥(1,196)$(10,790)

Reclassification adjustment for gain and loss

(1,788)(2,591)(23,368)

Amount before income tax effect1,081(3,787)(34,158)

Income tax effect

(331)

1,159

10,460750(2,628)(23,698)

Amount arising during the year

(103)

103

929

Reclassification adjustment for gain and loss

(83)

103

927

Amount before income tax effect

(186)

206

1,856

55

(52)

(471)

(131)

154

1,385

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

		TotalDeferred gain (loss) on hedging instruments:

Income tax effect		TotalForeign currency translation adjustments:
Amount arising during the year
Reclassification adjustment for gain and loss		Total

1,464

(843)

(7,600)

(37)

(48)

(434)

1,427

(891)

(8,034)Remeasurements of defined benefit plans:
Amount arising during the year

196

(1,289)(11,625)

Reclassification adjustment for gain and loss

521

199

1,790

Amount before income tax effect717(1,090)(9,835)

Income tax effect

(220)

334

3,011

497

(756)

(6,824)

Amount arising during the year

335

(521)

(4,702)

Reclassification adjustment for gain and loss

—

314

2,835

335

(207)

(1,867)¥ 2,878¥(4,328)$(39,038)

		TotalShare of other comprehensive income of associates accounted for using the equity method:

		Total			 Total other comprehensive income

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

¥  2,167¥  1,371$  12,367

1,718

7,135

64,358

Accrued bonuses to employees

325

240

2,164

Net defined benefit liability

2,708

2,711

24,450

Deferred tax assets:
Loss on write-down of inventories
Loss on write-down of investments in unconsolidated subsidiaries

Accrued retirement benefits for directors and corporate auditors

78

83

753

Allowance for bad debt

1,457

1,576

14,213Tax loss carry forwards

11,08010,833

97,712

Impairment loss on fixed assets

4,699

6,419

57,893

Investments in securities

25

25

228

Net unrealized loss on available-for-sale securities

—

53

476

3,641

3,749

33,808Other
		Subtotal

27,89834,195

308,422

Less: Valuation allowance(13,738)(16,624)(149,940)

			 Total deferred tax assets

14,16017,571

158,482

Deferred tax liabilities:
Gain on securities contributed to employee retirement benefit trusts
Net defined benefit asset
Provision for deferred capital gain on real property for tax purposes
Net unrealized gain on available-for-sale securities
Other

(56)

(43)

(391)

(1,178)(894)(8,061)

(38)

(38)

(339)

(1,240)(133)(1,197)

(547)

(564)

(5,091)

			 Total deferred tax liabilities(3,059)(1,672)(15,079)

				Net deferred tax assets¥ 11,101¥ 15,899$ 143,403

10. Notes to Consolidated Statements of Cash Flows
Cash and cash equivalents at February 28, 2018 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

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

74

Onward Holdings Co., Ltd. Annual Report 2019

2018

2019

2019

¥26,335¥31,284$282,173

(685)

(47)

(428)

¥25,650¥31,237$281,745

Onward Holdings Co., Ltd. Annual Report 201975

Notes to Consolidated Financial Statements

14. Shareholders’ Equity

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

Statutory tax rate

2018

2019

—

30.9

Reconciliation:
Permanently non-deductible expenses (entertainment expenses, etc.)—

5.1

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

—

(3.1)

Per capita inhabitant tax—

4.3

Amortization of goodwill

—

16.1

Impairment loss on goodwill

—

42.0

Changes in valuation allowance—(213.5)

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

—

10.2

Effects due to liquidation of consolidated subsidiaries—

0.9

Differences in statutory tax rate

—

20.4

Other

—

2.6

—

(84.1)

		 Effective tax rate

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

Under the Companies Act, the entire amount of the issue price of shares is required to be designated as a stated common stock account, although a
company in Japan may, by resolution of its Board of Directors, account for an amount not exceeding 50% of the issue price of new shares as additional paid-in capital.
The Companies Act provides that an amount equal to 10% of distributions from retained earnings paid by the company and its Japanese subsidiaries be appropriated as a legal reserve. No further appropriations are required when the total amount of the additional paid-in capital and thelegal reserve equals 25% of their respective stated capital. The Companies Act also provides that the additional paid-in capital and the legal reserve
are available for appropriations by resolution of a shareholders’ meeting. Balances of the legal reserve are included in retained earnings in theaccompanying consolidated balance sheets.
Cash dividends charged to retained earnings for the years ended February 28, 2018 and 2019 represent dividends paid out during those years.
The amount available for dividends is based on the amount recorded in the Company’s non-consolidated books of account in accordance with theCompanies Act.
Dividends to be paid after the balance sheet date, which were approved by the General Meeting of Shareholders held on May 23, 2019, areas follows:(a) Total dividends:¥3,309 million ($29,845 thousand)(b) Source of dividends:

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

13. Short-Term Loans Payable and Long-Term Loans Payable
Short-term loans payable at February 28, 2018 and 2019 represented loans, principally from banks. The weighted-average interest rate on theseloans was 0.9% and 0.6% in 2018 and 2019, respectively.
Long-term loans payable at February 28, 2018 and 2019 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen
2018

2019

2019

¥12,619¥7,507$67,707Less: Current portion with weighted-average interest rate of 0.5% at February 28, 2018
and 0.3% at February 28, 2019

5,800

2,800

25,255Long-term loans payable, less current portion, with weighted-average interest rate of
0.3% at February 28, 2018 and 2019

¥ 6,819¥4,707$42,452

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

Lease obligations at February 28, 2018 and 2019 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Lease obligations

2018

2019

2019

¥5,052¥5,050$45,546

668

639

5,760

¥4,384¥4,411$39,786

Less: Current portion of lease obligations

The aggregate annual maturities of long-term loans payable after February 29, 2020 are as follows:
Millions of yen

Thousands of
U.S. dollars

2020¥2,800$25,255

2021

2,103

18,971

2022

2,103

18,971

2023

501

4,510

Year ending February 28 or 29:

The aggregate annual maturities of lease obligations after February 29, 2020 are as follows:
Millions of yen

Thousands of
U.S. dollars

Year ending February 28 or 29:

76

2020

¥639

$5,760

2021

571

5,151

2022

482

4,348

2023

403

3,633

Onward Holdings Co., Ltd. Annual Report 2019

February 28, 2019
May 24, 201915. Per Share Information
Earnings per share of common stock is computed based upon the weighted-average number of shares of common stock outstanding during eachyear. Cash dividends per share shown for each year in the accompanying consolidated statements of operations represent dividends declared as
applicable to the respective years rather than those paid during the years.
The basis for the calculation of basic and diluted earnings per share for the years ended February 28, 2018 and 2019 is as follows:
Thousands of
U.S. dollars

Millions of yen

Profit attributable to owners of parent
Less: Components not pertaining to common shareholders

2018

2019

2019

¥5,367¥4,948$44,633———

Profit pertaining to common shareholders¥5,367¥4,948$44,633

Average outstanding shares of common stock (thousand shares)

145,154

140,406

1,448

1,147

Effect of dilutive stock options (thousand shares)

16. Related-Party Transactions
Year Ended February 28, 2018

The Company leased land from Takeshi Hirouchi, Representative Director and Chairman of ONWARD HOLDINGS Co., Ltd., during the
fiscal year, and the rental fee was ¥7 million. 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
2018. The transaction amount was ¥57 million, and the balance of relevant accounts receivable as of February 28, 2018 was ¥9 million. Prices andother terms and conditions were determined by reference to market prices or general terms and conditions.

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 ($65 thousand). Also, Mr. Hirouchi paid a rental fee of ¥16 million ($147 thousand) to the Company
for a house. The rental fees were determined by the average market prices.
Onward Global Fashion Co., Ltd., a consolidated subsidiary of the Company, sold goods to BOLS 1987 Co., Ltd., over which
Hitoshi Futamura, Representative Director, President of Onward Global Fashion Co., Ltd., held 100% of voting rights directly, during fiscal year
2019. The transaction amount was ¥51 million ($460 thousand), and the balance of relevant accounts receivable as of February 28, 2019 was ¥12
million ($108 thousand). Prices and other terms and conditions were determined by reference to market prices or general terms and conditions.

Onward Holdings Co., Ltd. Annual Report 201977

Notes to Consolidated Financial Statements

17. Stock Options

2013 Stock Option Plan (No. 14)

The cost recognized for the stock options for the years ended February 28, 2018 and 2019 was nil.

2014 Stock Option Plan (No. 16)

Under the 2014 stock option plan (No. 16), stock options were granted to five directors of the Company on June 20, 2014. They are exercisable in
the period from June 21, 2014 to June 20, 2044. The terms of the options include certain limitations on the exercisability under which grantees
can exercise their options during a five-year period starting a year after they no longer occupy their positions as directors of the Company.
The number of stock options granted by type of shares is 122,900 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:		 Fair value at the grant date:¥1 ($0.01)¥526 ($4.74)

2014 stock option plan (No. 16)

Non-vested (shares):103,700

Granted—Forfeited—

Vested—Outstanding at February 28, 2019

103,700

Vested (shares):
Outstanding at February 28, 201819,200

Vested—Exercised—

Forfeited—

Outstanding at February 28, 201919,200The number of rights to vest in future periods is determined based on the actual forfeited number of the stock options because it is difficult toestimate forfeiture in the future.

2014 Stock Option Plan (No. 15)

Under the 2014 stock option plan (No. 15), stock options were granted to 12 executive officers of the Company and five directors and nine executive
officers of 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 theoptions include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after
they no longer occupy their positions as executive officers of the Company, or as directors or executive officers of said Company subsidiary.
The number of stock options granted by type of shares is 146,100 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Average stock price on the date the option was exercised:¥769 ($6.94)

		 Fair value at the grant date:¥466 ($4.20)

2014 stock option plan (No. 15)

Non-vested (shares):99,400Granted—Forfeited—

Vested35,700

Outstanding at February 28, 2019

63,700

Vested (shares):
Outstanding at February 28, 2018

40,600

Vested35,700Exercised

38,000Forfeited—

Outstanding at February 28, 2019

¥1 ($0.01)

		 Average stock price on the date the option was exercised:¥654 ($5.90)

		 Fair value at the grant date:¥629 ($5.67)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:2013 stock option plan (No. 14)

Outstanding at February 28, 201882,100Granted—Forfeited—

Vested—Outstanding at February 28, 201982,100

Vested (shares):
Outstanding at February 28, 2018

24,900

Vested—Exercised

2,200

Forfeited—

Outstanding at February 28, 201922,700The number of rights to vest in future periods is determined based on the actual forfeited number of the stock options because it is difficult toestimate forfeiture in the future.

2013 Stock Option Plan (No. 13)

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

		 Average stock price on the date the option was exercised:¥740 ($6.67)

		 Fair value at the grant date:¥572 ($5.16)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:2013 stock option plan (No. 13)

Non-vested (shares):

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:

Outstanding at February 28, 2018

		Exercise price:

Non-vested (shares):

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:

Outstanding at February 28, 2018

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

38,300

Outstanding at February 28, 2018

88,600Granted—Forfeited—

Vested30,000

Outstanding at February 28, 201958,600

Vested (shares):
Outstanding at February 28, 2018

51,800

Vested30,000Exercised

47,900Forfeited—

Outstanding at February 28, 2019

33,900The number of rights to vest in future periods is determined based on the actual forfeited number of the stock 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 stock options because it is difficult toestimate forfeiture in the future.

78

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201979

Notes to Consolidated Financial Statements

2012 Stock Option Plan (No. 12)

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

2011 Stock Option Plan (No. 10)

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

		 Average stock price on the date the option was exercised:¥657 ($5.93)

		 Average stock price on the date the option was exercised:¥684 ($6.17)

		 Fair value at the grant date:¥458 ($4.13)

		 Fair value at the grant date:¥510 ($4.60)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:2012 stock option plan (No. 12)

Non-vested (shares):
Outstanding at February 28, 20182011 stock option plan (No. 10)

Non-vested (shares):108,500

Outstanding at February 28, 2018—

Granted—Forfeited—

Forfeited—

Vested—VestedOutstanding at February 28, 2019108,500

Vested (shares):
Outstanding at February 28, 2018
VestedExercised
Forfeited
Outstanding at February 28, 2019—

Outstanding at February 28, 201969,400

Vested (shares):32,900—

Outstanding at February 28, 2018

12,000

Vested—18,900Exercised

12,000—Forfeited—

Outstanding at February 28, 2019—

14,000The number of rights to vest in future periods is determined based on the actual forfeited number of the stock 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 stock options because it is difficult toestimate forfeiture in the future.

2012 Stock Option Plan (No. 11)

2011 Stock Option Plan (No. 9)

Under the 2012 stock option plan (No. 11), stock options were granted to one executive officer of the Company and nine directors and 18 executive
officers of 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 executive officers of the Company, or as directors or executive officers of said Company subsidiary.
The number of stock options granted by type of shares is 234,700 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

Under the 2011 stock option plan (No. 9), stock options were granted to one executive officer of the Company and 12 directors and 18 executive
officers of the Company 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 executive officers of the Company, or as directors or executive officers of said Company subsidiary.
The number of stock options granted by type of shares is 199,900 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Average stock price on the date the option was exercised:¥734 ($6.62)

		 Average stock price on the date the option was exercised:¥744 ($6.71)

		 Fair value at the grant date:¥444 ($4.00)

		 Fair value at the grant date:¥444 ($4.00)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:2012 stock option plan (No. 11)

Non-vested (shares):
Outstanding at February 28, 20182011 stock option plan (No. 9)

Non-vested (shares):72,900

Outstanding at February 28, 2018

Granted—GrantedForfeited—

Forfeited

Vested25,400

Outstanding at February 28, 201947,500

Vested (shares):56,000——

Vested18,500

Outstanding at February 28, 201937,500

Vested (shares):

Outstanding at February 28, 2018

93,500

Outstanding at February 28, 201857,700

Vested25,400

Vested18,500Exercised

82,400Exercised

61,300Forfeited—

Forfeited

Outstanding at February 28, 201936,500The number of rights to vest in future periods is determined based on the actual forfeited number of the stock options because it is difficult toestimate forfeiture in the future.

80

69,400GrantedOnward Holdings Co., Ltd. Annual Report 2019—

Outstanding at February 28, 2019

14,900The number of rights to vest in future periods is determined based on the actual forfeited number of the stock options because it is difficult toestimate forfeiture in the future.

Onward Holdings Co., Ltd. Annual Report 201981

Notes to Consolidated Financial Statements

2010 Stock Option Plan (No. 8)

Under the 2010 stock option plan (No. 8), stock options were granted to five directors of the Company on June 18, 2010. They are exercisable in
the period from June 19, 2010 to June 18, 2040. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they no longer occupy their positions as directors of the Company.
The number of stock options granted by type of shares is 115,800 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:		 Fair value at the grant date:¥1 ($0.01)¥613 ($5.53)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:2009 Stock Option Plan (No. 6)

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

		 Fair value at the grant date:¥432 ($3.90)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:2009 stock option plan (No. 6)

2010 stock option plan (No. 8)

Non-vested (shares):Non-vested (shares):
Outstanding at February 28, 201852,300

Outstanding at February 28, 2018—

Granted—Forfeited—

Forfeited—

Vested—VestedOutstanding at February 28, 201952,300—

Outstanding at February 28, 2019

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

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

2010 Stock Option Plan (No. 7)

2009 Stock Option Plan (No. 5)

Under the 2010 stock option plan (No. 7), stock options were granted to eight directors and 22 executive officers of 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 stock options granted by type of shares is 194,600 shares of common stock.
A summary of price information for the stock option plan is as follows:

Under the 2009 stock option plan (No. 5), stock options were granted to 11 directors and 19 executive officers of 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 stock options granted by type of shares is 268,900 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:		Exercise price:¥1 ($0.01)¥1 ($0.01)

		 Average stock price on the date the option was exercised:¥754 ($6.80)

		 Average stock price on the date the option was exercised:¥756 ($6.82)

		 Fair value at the grant date:¥475 ($4.28)

		 Fair value at the grant date:¥362 ($3.27)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:2009 stock option plan (No. 5)2010 stock option plan (No. 7)

Non-vested (shares):Non-vested (shares):
Outstanding at February 28, 2018

44,100

Outstanding at February 28, 2018

Granted—GrantedForfeited—

Forfeited

Vested11,700

Outstanding at February 28, 2019

32,40042,000——

Vested10,200

Outstanding at February 28, 2019

31,800

Vested (shares):

Vested (shares):
Outstanding at February 28, 2018

36,800

Outstanding at February 28, 2018

31,800

Vested11,700

Vested10,200Exercised

44,600Exercised

37,400Forfeited—

Forfeited

Outstanding at February 28, 2019

3,900

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

82

72,000GrantedOnward Holdings Co., Ltd. Annual Report 2019—

Outstanding at February 28, 2019

4,600

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

Onward Holdings Co., Ltd. Annual Report 201983

Notes to Consolidated Financial Statements

2008 Stock Option Plan (No. 4)

Under the 2008 stock option plan (No. 4), stock options were granted to 12 directors and 21 executive officers of 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 stock options granted by type of shares is 91,100 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Average stock price on the date the option was exercised:¥739 ($6.67)

		 Fair value at the grant date:¥905 ($8.16)

2007 Stock Option Plan (No. 2)

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

		 Fair value at the grant date:¥1,284 ($11.58)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:
A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:2007 stock option plan (No. 2)
2008 stock option plan (No. 4)

Non-vested (shares):
Outstanding at February 28, 2018

Non-vested (shares):16,60011,400Granted—Granted—Forfeited—

Forfeited—

VestedVested3,200

Outstanding at February 28, 2019

8,200

Outstanding at February 28, 2018

Vested (shares):
Outstanding at February 28, 2018

10,000

Vested3,200

Exercised

11,600Forfeited—

Outstanding at February 28, 2019

1,600

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

Under the 2008 stock option plan (No. 3), stock options were granted to five directors of the Company on June 20, 2008. They are exercisable in
the period from June 21, 2008 to June 20, 2038. The terms of the options include certain limitations on the exercisability under which grantees
can exercise their options during a five-year period starting a year after they no longer occupy their positions as directors of the Company.
The number of stock options granted by type of shares is 70,000 shares of common stock.
A summary of price information for the stock option plan is as follows:		 Fair value at the grant date:¥1 ($0.01)¥944 ($8.51)

2008 stock option plan (No. 3)

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

VestedOutstanding at February 28, 2019

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

2006 Stock Option Plan (No. 1)

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

		 Fair value at the grant date:¥1,541 ($13.90)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:
2006 stock option plan (No. 1)

Non-vested (shares):
Outstanding at February 28, 2018

14,500Granted—Forfeited—

VestedA summary of the scale and movement of the stock option plan for the year ended February 28, 2019 is as follows:

Outstanding at February 28, 2018

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

		Exercise price:—

Outstanding at February 28, 2019—

Outstanding at February 28, 201914,500The number of rights to vest in future periods is determined based on the actual forfeited number of the stock options because it is difficult toestimate forfeiture in the future.

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

84

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201985

Notes to Consolidated Financial Statements

18. Segment Information

Millions of yen
Apparel(1) Summary of reportable segments
The Companies’ reportable segments are components for which separate financial information is available and regular evaluation by the Board of
Directors is performed to decide how management resources are allocated and to assess performance.
The Companies engage in the apparel business (planning, production, and sales of textile products, including men’s and women’s clothing) andthe lifestyle business in Japan and overseas.
The reportable segments of the Companies comprise the “Apparel Business,” which is divided geographically into two categories, “Japan” and“Overseas,” and the “Lifestyle Business.”
The “Apparel Business (Japan)” operates the apparel business in Japan; the “Apparel Business (Overseas)” operates the apparel business overseas.
The “Lifestyle Business” operates businesses including a cosmetic business, a wellness business related to ballet and dance and resorts, and a pet
supply and other business.
In the year ended February 28, 2019, the Companies reviewed their segmentation and changed their reportable segments from the “ApparelBusiness (Japan),” “Apparel Business (Europe),” “Apparel Business (Asia / North America),” and “Other Business” to the “Apparel Business(Japan),” “Apparel Business (Overseas),” and “Lifestyle Business.”
Segment information for the year ended February 28, 2018 is on the basis of the new segmentation.
(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, 2018 and 2019is as follows:
Millions of yen
Apparel
For the year ended February 28, 2018

Japan

Overseas

Total

Lifestyle

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers¥170,215¥45,517¥215,732¥27,343¥243,075¥    —¥243,075

Intersegment sales or transfers

1,239

2,940

4,179

2,402

6,581

(6,581)—¥171,454¥48,457¥219,911¥29,745¥249,656¥    (6,581)¥243,075

Segment profit (loss)¥  8,563¥    (2,716)¥  5,847¥ 1,727¥  7,574¥    (2,407)¥  5,167

Segment assets¥125,695¥45,054¥170,749¥40,813¥211,562¥66,572¥278,134

Depreciation and amortization (Note 2)¥  3,611¥ 1,274¥  4,885¥   994¥  5,879¥   456¥  6,335

Investments in equity-method affiliates

8,384

842

9,226

—

9,226

—

9,226

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

5,746

2,524

8,270

1,065

9,335

2,723

12,058Notes:

86

1. Adjustments consist of the following:(1)	The adjustment amount for segment profit (loss) of ¥(2,407) million includes amortization of goodwill of ¥(2,563) million, elimination ofintersegment transactions of ¥4,532 million, and corporate expenses not allocated to reportable segments of ¥(4,376) million. Corporate
expenses are mainly general and administrative expenses that are not attributable to reportable segments.
(2)	The adjustment amount for segment assets of ¥66,572 million includes the unamortized balance of goodwill of ¥16,228 million, elimination ofintersegment transactions of ¥(120,941) million, and corporate assets not allocated to reportable segments of ¥171,285 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 statements of operations.

Onward Holdings Co., Ltd. Annual Report 2019

Japan

Overseas

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

Intersegment sales or transfers

1,424

3,702

5,126

2,318

¥168,482¥51,208¥219,690¥28,406

Total

Total

Adjustments(Note 1)

Consolidated
total (Note 3)¥240,652¥    —¥240,652

7,444(7,444)—¥248,096¥    (7,444)¥240,652

Lifestyle

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 affiliates

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

13,473Thousands of U.S. dollars
Apparel
For the year ended February 28, 2019

Japan

Overseas

Total

Lifestyle

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers$1,506,790$428,484$1,935,274$235,307$2,170,581$     —

$2,170,581

Intersegment sales or transfers

12,84833,393

46,241

20,89967,140(67,140)—$1,519,638$461,877$1,981,515$256,206$2,237,721$    (67,140)$2,170,581

Total(Changes in accounting estimates)
As stated in (24) Changes in accounting estimates, 2. Summary of Significant Accounting Policies, inventories of certain consolidated subsidiaries
were previously carried at the book value that was systematically written down at certain rates when the inventory-holding period exceeded certain
periods. These subsidiaries changed to a method whereby the book value is gradually written down according to the inventory-holding period.
As a result, segment profit of the “Apparel Business (Japan)” for the year ended February 28, 2019 increased by ¥2,166 million ($19,536 thousand), compared with that amount recorded by the previous method.

Total

For the year ended February 28, 2019

Segment profit (loss)$   81,340$    (33,943)$   47,397$ 13,905$   61,302$    (21,060)$   40,242

Segment assets$1,133,527$446,610$1,580,137$362,481$1,942,618$651,003$2,593,621

Depreciation and amortization (Note 2)$   33,629$ 11,555$   45,184$  9,002$   54,186$  4,536$   58,722

Investments in equity-method affiliates

57,131

7,595

64,726—64,726—64,726

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

55,47021,35476,824

5,731

82,55538,965

121,520

Notes:

1. Adjustments consist of the following:(1)	The adjustment amount for segment profit (loss) of ¥(2,335) million ($(21,060) thousand) includes amortization of goodwill of ¥(2,302) million($(20,762) thousand), elimination of intersegment transactions of ¥4,523 million ($40,799 thousand), and corporate expenses not allocated toreportable segments of ¥(4,556) million ($(41,097) thousand). 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 ($651,003 thousand) includes the unamortized balance of goodwill of ¥9,455 million($85,284 thousand), elimination of intersegment transactions of ¥(138,800) million ($(1,251,920) thousand), and corporate assets not allocatedto reportable segments of ¥201,522 million ($1,817,639 thousand). Corporate assets are mainly assets held by the Company, a pure holding
company.
2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses (furniture and fixtures).
3. Segment profit (loss) coincides with the amount of operating profit in the consolidated statements of operations.

(4) Segment information by geographical area for the years ended February 28, 2018 and 2019 is as follows:(a) Sales
For the year ended February 28, 2018

Millions of yen

Japan

Europe

Other

Total

¥190,496¥33,394¥19,185¥243,075

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 28, 2019

Thousands of U.S. dollars

Japan

Europe

Other

Total

$1,681,769$313,381$175,431$2,170,581

Onward Holdings Co., Ltd. Annual Report 201987

Independent Auditor’s Report

Notes to Consolidated Financial Statements(b) Property, plant and equipment
February 28, 2018

Millions of yen
Japan

Europe

Other

Total

¥75,348¥8,168¥10,198¥93,714

Japan

Europe

Other

Total

¥78,202¥7,908¥10,608¥96,718

Japan

Europe

Other

Total

$705,350$71,324$95,677$872,351

February 28, 2019

Millions of yen

February 28, 2019

Thousands of U.S. dollars(5) Segment information on impairment loss on fixed assets by reportable segment for the years ended February 28, 2018 and 2019 is as follows:
Millions of yen
Apparel
For the year ended February 28, 2018

Japan

Overseas

Total

Lifestyle

Unallocatedamounts andelimination

Impairment loss

¥371

¥620

¥991

¥—

¥211

Total

¥1,202Millions of yen
Apparel
For the year ended February 28, 2019

Japan

Overseas

Total

Lifestyle

Unallocatedamounts andelimination

Total

Impairment loss

¥631

¥610

¥1,241¥2¥4,290¥5,533Thousands of U.S. dollars
Apparel88

For the year ended February 28, 2019

Japan

Overseas

Total

Lifestyle

Unallocatedamounts andelimination

Total

Impairment loss

$5,695$5,499$11,194$21$38,694$49,909

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201989

Main Subsidiaries
As of August 31, 2019

Japan

Overseas

Onward Kashiyama Co., Ltd.

Kokobuy Inc.

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

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

Onward Trading Co., Ltd.
2-10-10 Iidabashi, Chiyoda-ku, Tokyo 102-8115, Japan
Tel: (81) 3-5266-1333

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

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

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.

Yamato 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.

EuropeAsia

United States

Onward Italia S.p.A.

Onward Fashion Trading(China) Co., Ltd.

J. Press, Inc.

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

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

Jil Sander S.p.A.
Foro Buonaparte 71, 20121 Milano, Italy
Tel: (39) 02-8069131

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

Erika s.r.l.

Bien Co., Ltd.

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

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

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

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

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

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) 20-7736-2522

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

Freed of London Ltd.

Tiaclasse Inc.

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

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

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

Kashiyama Saga Co., Ltd.

La Maison Moreau S.A.S.

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

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

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

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

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

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

Onward Trading(Shanghai) Co., Ltd.

Onward Golf Resort Guam, Inc.

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

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

Onward Mangilao Guam, Inc.

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

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

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

14 Rue de Savoie, 75006 Paris, France
Tel: (33) 1-8565-8410

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

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

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

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

90

Onward Holdings Co., Ltd. Annual Report 2019

Onward Holdings Co., Ltd. Annual Report 201991

Corporate / Investor Information

History

As of February 28, 2019

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

1927

February

Junzo Kashiyama established Kashiyama Trading.

1947

September

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

1960

October

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

1962

April

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

1964

July

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

1966

September

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

1972

July

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

September

Established Onward Kashiyama U.S.A. INC.

1973

February

Established Onward Kashiyama France S.A.

Note: The total number of issued and outstanding shares included 20,052,156 shares of treasury stock.

1974

February

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

Number of Shareholders

16,201

1986

October

Acquired J. Press, Inc.

1988

February

Established Onward Kashiyama Hong Kong Ltd.

Stock Exchange Listings

Tokyo, Nagoya

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

Transfer Agent

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

Number of Employees(Consolidated)

4,643

Major Shareholders

Distribution of Ownershipamong Shareholders

1989

DecemberEstablished Onward Kashiyama U.K. Ltd.

1990

January

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

July

Acquired Chacott Co., Ltd.

1991

February

Launched Onward Research and Development Institute.

1992

May

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

1994

May

Established Bus Stop Co., Ltd.

1995

June

Established Shanghai Onward Fashion Co., Ltd.

1997

June

Established Onward Kashiyama Korea Co., Ltd.

2004

January

Acquired Erika s.r.l.

2005

May

Acquired Project Sloane Ltd. (Joseph Group).

Number of
Shares Held(Thousands)

Percentage ofTotal Shares
Issued (%)

Kashiyama Scholarship Foundation

8,710

6.3

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

6,976

5.0

July

Acquired Iris S.p.A.

BNYMSANV AS AGENT/CLIENTS LUX UCITS NON TREATY 1

6,078

4.4

2006

October

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

Japan Trustee Services Bank, Ltd. (Trust account)

5,714

4.1

2007

April

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

Nippon Life Insurance Company

4,671

3.3

May

Acquired Frassineti s.r.l.

Onward Holdings Customers’ Shareholding Association

4,556

3.3

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

4,511

3.2

The Dai-ichi Mutual Life Insurance Company, Ltd.

4,200

3.0

Sumitomo Mitsui Banking Corporation

2,931

2.1

SMBC Nikko Securities Inc.

2,785

2.0

Notes:
1.	The Company holds 20,052,156 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 20,052,156 shares of treasury stock.

(On a number of shares basis)

Japanese individuals
and others

Japanesefinancial
institutions

28.0%

30.2%

Foreigninstitutions
and others

Japanese
securities
companies

17.8%

2009

DecemberAcquired controlling interest in Island Co., Ltd.

2010

June

Established Onward Kashiyama Singapore Pte. Ltd.

2011

AugustEstablished Onward Kashiyama Vietnam Ltd.

2012

April

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

May

Established Onward Trading (Shanghai) Co., Ltd.

DecemberEstablished Charles & Keith Japan Co., Ltd.

February

Acquired Sakula Inc.

June

Established Onward Luxury Group S.p.A.

March

Established Onward Global Fashion Co., Ltd.

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

Acquired Jil Sander A.G.

100,000

2013

75,000

900

2014

2015

March

Michinobu Yasumoto became president and representative director.

September

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

March

Acquired La Maison Moreau S.A.S.

April

Acquired Tiaclasse Inc.

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

January

Acquired Kokobuy Inc. and Innovate Organics, Inc.

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

2018

March

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

2019

March

Acquired Yamato Co., Ltd.

50,000600

2016

25,000300

2017

Onward Holdings Co., Ltd. Annual Report 2019

Acquired Creative Yoko Co., Ltd.

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

1,200

92

Acquired Corporate s.r.l.

October

Trading Volume
Thousand Shares2018/3October2008

Stock Price¥

2017/3

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

21.7%

Stock Price Range and Trading Volume0

Established J. Direction Co., Ltd.

September

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

2.3%

Other Japanese
corporations

June

2019/30

Onward Holdings Co., Ltd. Annual Report 201993

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/

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/