ONWARD HOLDINGS CO., LTD.
ANNUAL REPORT 2011

ANNUAL REPORT 2011
Ye ar E n d e d Febr u ar y 2 8 , 2 0 1 1

PROFILE

Since its establishment in 1947, Onward has been a top apparel manufacturer in Japanand has played a leading role in the fashion industry. In September 2007, the Onward
Group made the transition to a holding company structure. Today, the Group comprises
98 companies in Japan and the rest of the world.* Well-known global brands of the
JOSEPH Group and the JIL SANDER

A Leading Company in the Apparel Industry

Group have become members of the
Onward Group, and in collaboration with

the GIBO’ CO. Group, which plays the role of a production platform, the Onward Groupis accelerating the implementation of its global strategy.
The corporate philosophy of the Onward Group is to create new value and lifestyles by
proposing fashions that become an integral part of our living culture and, thereby, contribute to the enrichment of life for all people. Looking to the future, the Onward Groupwill continue to work to increase customer satisfaction as it aims for global growth byworking to secure stable growth in net income in its activities in Japan and by aggressively expanding its overseas business operations.
*As of February 28, 2011

CONTENTS

01

Financial Highlights

02

A Message to Our Shareholders

05

Basic Management Policies in Fiscal 201206

Domestic Apparel-Related Business

08

Overseas Apparel-Related Businesses

10

Corporate Social Responsibility (CSR)

12

Corporate Governance

13

Board of Directors

13

Organization Chart

14

Consolidated Six-Year Summary

15

Management’s Discussion and Analysis

18

Consolidated Balance Sheets

20

Consolidated Statements of Operations

21

Consolidated Statements of Changes in Net Assets

23

Consolidated Statements of Cash Flows25

Notes to Consolidated Financial Statements

51

Report of Independent Auditors

52

Principal Subsidiaries

53

Corporate Data

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

FINANCIAL HIGHLIGHTSONWARD HOLDINGS CO., LTD. and Subsidiaries
Years ended February 28, 2010 and 2011
Thousands of
U.S. dollars

Millions of yen

2010

2011

2011

At year-end:
Total current assets
Total current liabilities
Short-term loans
Total shareholders’ equity¥100,680
90,92931,881
175,450¥ 95,545
82,67727,354
174,454$1,169,314
1,011,840
334,765
2,135,038

For the year:
Net sales
Operating income
Net income¥248,635
4,384
2,188

¥244,551
8,929
2,723

$2,992,911
109,272
33,320Yen

Per share:
Net income—basic
Cash dividends

U.S. dollars¥13.9724.00¥17.38
24.00

1.4
1.8

1.7
3.7

ROE (%)
Operating income margin (%)

$0.21
0.29

Note: Yen amounts have been translated, for convenience only, at ¥81.71=US$1, the approximate exchange rate on February 28, 2011.

Net Sales

Net Income (Loss)

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

350,000

15,000240,000

12,000200,000

9,000

160,000

6,000

120,000

3,000

80,000040,000300,000
250,000
200,000
150,000
100,000
50,0000’07 ’08 ’09 ’10 ’11-60,000

0’07 ’08 ’09 ’10 ’11’07 ’08 ’09 ’10 ’11

ONWARD HOLDINGS CO., LTD.

01

A MESSAGE TO OUR SHAREHOLDERS
We are working to increase “brand value” as we
respect tradition and constantly evolve with thetimes. At the same time, we are pursuing a global
development strategy and aiming to aggressively
expand earnings from our overseas businessactivities.

Performance in Fiscal 2011
Takeshi Hirouchi
Chairman and President

During the fiscal year ended February 28, 2011, consolidated net sales amounted to ¥244,551 million, 1.6%
lower than for the previous fiscal year. Consolidated
operating income was ¥8,929 million, 103.7% higher
than in the previous fiscal year, and the Group reported
consolidated net income of ¥2,723 million, 24.4%
higher than in the prior year.
Apparel market trends in Japan in fiscal 2011 becameslightly more favorable for the Group—which targets
medium- to high-end clothing—as consumers showedsigns of growing weary of thriftiness and returning tofashionable, high-quality merchandise. As a result of
steady increases in sales of major core brand apparel,
the Group’s gross margin rose, and, as a consequenceof the efficient allocation of expenditures, profitability
was higher than in the previous fiscal year.
Focusing on Brand-Leveraged Management
To be successful in competition with other global
corporations, we have positioned Brand-Leveraged
Management as our basic strategy, and its objective is tomaximize the value of our brands. Our core distribution
channel in Japan is department stores. To increase
brand value through this channel, we are working
to enhance our operational and merchandising capabilities, marketing capabilities, and our sales area

02

ANNUAL REPORT 2011

environments, focusing on our high-margin, major core

Ready for the Trends of the Timesbrands. In addition, we are working to expand sales by

Today, when so-called “fast fashion” has become popu-

stepping up our “item strategy” across our brands andlar, it is indispensable that the Onward Group, which

by implementing “attractive and effective sales tactics.”

is an enterprise that has grown through wholesaling

To implement our item strategy, we are putting ourmainly medium- to high-end apparel, increase its brandcraftsmanship skills into practice to create products thatvalue. The Group is aggressively taking the initiative in

do not currently exist on the market, literally fromdrawing on its sales and promotion know-how in retail-scratch. By continuing to add value to new materials

ing to breathe new life into its wholesale operations.

and offering them to customers, we are aiming to

The first step in this direction has been the develop-

increase customer support for Onward products.

ment of directly managed flagship stores.

Examples of products that were created under this item

Our NIJYUSANKU GINZA store that we opened on

strategy that have been well received by customers areTokyo’s Ginza Street is one of the leading fashion shop-

our “AIR JACKET” and “2-Tension Pants.” The AIR

ping districts in Asia. This new store has become a flag-

JACKET was developed in collaboration with a fabricship for our presence in Asia, and it has raised ourmanufacturer, sewing plants, and other partners. Our

profile for transmitting our “brand message” through-

2-Tension Pants, which are made from a stretching fab-out the rest of Asia.

ric, were developed together with a material producer.

Our e-commerce business is off to a strong start, andAlso, as part of our drive to implement attractive andwe are planning to accelerate expansion. Plans also calleffective sales tactics, we are continuing our “Colorfor developing Web-based business in the rest of Asia.

Campaign,” which focuses on the concept of “color,”

In our production activities, we have a flexible policy

which is a sine qua non in creating successful fashionof shifting production to areas that are best suited to thegoods.

times. For example, we have invested capital in leading

In our overseas business activities, in Europe, which

factories in the Shanghai area, established exclusive pro-is a key to future growth, we are realizing additional

duction lines there dedicated to Onward apparel pro-synergies by shifting the commissioned production ofduction, and, thereby, secured stable supply capabilities.

the Onward Group as a whole, including that of JIL

At the same time, we are moving forward with expand-

SANDER and JOSEPH, to the GIBO’ CO. Group.

ing production bases in Vietnam and areas other thanEspecially through the development of the JIL SANDER

China.

Group’s new “JIL SANDER NAVY” lineup, we are aiming for additional synergies and increased profitability.

Moving Forward after the Crisis

In Asia, we are moving forward with aggressive

The Great East Japan Earthquake struck on March 11,

business expansion by developing new brands and2011. Since it caused unbelievably heavy damage andexpanding our sales outlets.

dealt a serious blow to the Japanese economy, conditions are believed likely to remain difficult for the

ONWARD HOLDINGS CO., LTD.

03

foreseeable future. In the apparel industry also, theFor the fiscal year ending February 2012, we aredisaster itself and its side effects, such as electric power

targeting consolidated net sales of ¥244.8 billion, an

conservation and rolling blackouts, are forecast to

increase of 0.1%; operating income of ¥10.2 billion,

have an adverse effect on consumer spending and

an increase of 14.2%; and net income of ¥3.5 billion,

other economic activities.

an increase of 28.6%.

To estimate the impact of the earthquake on Group

Even though events beyond anything we could have

performance, we have made assumptions regarding theimagined have occurred, we are continuing to conduct

side effects by area and by time frame. In our domestic

business as usual. The resources that keep us moving

operations, we estimate that the disaster will reduce oursteadily forward are “our people” and our corporate

net sales by ¥8.7 billion. Our policy will be to imple-

DNA that we have nurtured since the Company wasment measures to minimize the impact by allocating

founded. The Onward Group is proceeding to work to

our expenditures more efficiently. We believe, however,increase efficiency and implement its corporate strate-that the earthquake will not have any impact on ourgies with the aim of increasing corporate and share-

overseas activities.

holder value. We want to thank you, our shareholders,

The fiscal year ended in February 2011 was the final

for your continued understanding and support.

year of our Three-Year Medium-Term Management
Plan that we began to implement in fiscal 2009. We areplanning to newly announce our Second Medium-Term

May 2011

Management Plan after we have reviewed and checked
the figures once again.
Toward a New Onward where People

Takeshi Hirouchi

Are the Key Resource

Chairman and President

Onward positions the allocation of a portion of profits
to shareholders as one of its most-important priorities.
Our basic policy is to set a target dividend payout ratioof 35% or more and to make stable and appropriate distributions of profits, taking account of our performance.
For the fiscal year ended February 2011, after giving fullconsideration to performance and the operating environment going forward, we have set the cash dividend
for the full year at ¥24 per share, which is the same as in
the previous fiscal year.

04

ANNUAL REPORT 2011

BASIC MANAGEMENT POLICIES IN FISCAL 2012
Implementing a Global Strategy

Securing stable profitability in Japan while
aggressively expanding overseas earnings
JAPAN: MAKE STRONG BUSINESSES EVEN STRONGER, STEP UP
DEVELOPMENT OF NEW BUSINESS FIELDS
 Continue to relocate and expand store size: “Rainbow Strategy”
 Strengthen operations of directly managed flagship stores Aggressive expansion of e-commerce with a view to global opportunities
OVERSEAS: SHIFT MAIN FOCUS FROM IMPROVING PROFITABILITYTO GROWTH
 In Europe, improve profitability of subsidiaries and realize greaterGroup synergies to expand income
 In Asia: Accelerate growth through investment and expansion ofmarketing network
Net Sales (Actual in Fiscal 2011 and Planned for Fiscal 2012)
Fiscal 2011

Fiscal 2012

Total

¥259.4 billion¥262.1 billion

Domestic

217.9 billion

212.9 billion

Overseas41.5 billion

49.2 billion

Europe32.0 billion

39.1 billion

Asia (excl. Japan)

6.4 billion

6.8 billion

Americas

2.9 billion

3.1 billion

Simple total (before eliminations)

Assumptions regarding the impact of the Great East Japan Earthquake
The following effects are assumed by area and time frame: Kanto area: The impact will continue through the first quarter, depending on the status ofrolling electric power blackouts, etc.
 Tohoku area: The impact will continue through the end of fiscal 2012, depending on thestatus of repairs on stores that have been closed, the effects of the nuclear accidents,and other factors.
 Other areas: No impact is expected after April 2011.

ONWARD HOLDINGS CO., LTD.

05

DOMESTIC APPAREL-RELATED BUSINESS

Make strong businesses even stronger,
step up development of new business fields
 Increase brand value, aim for recovery principally in sales of majorcore brand products
 Concentrate corporate resources on high-margin brands and items toincrease overall profit ratio
In domestic business activities, we will continue to focus corporate resources in
ONWARD KASHIYAMA on major core brands and work to raise brand value
and increase earnings. We will strengthen the operations of flagship stores andraise our profile for transmitting our brand messages. We will also expand sales
by developing major new brands for shopping center malls. In e-commerce, wewill draw on the Onward Group’s wide range of capabilities to aggressively
expand the scope of this business area from a global perspective.

ONWARD KASHIYAMA Improve gross profit by making a major
reduction in royalty payments(Accompanying the renewal of licenses
Calvin Klein, Paul Smith, Dream Girl byAnna Sui, etc., reductions in manufacturingcosts)
 Implement our “Rainbow Strategy” indepartment stores and new distribution
channels: build new sales areas, renovate
existing areas, and close certain areas
 Further expand e-commerce business

06

ANNUAL REPORT 2011

Plans for Sales Area in Department Stores and New Distribution Channels (Fiscal 2012)
Sales area (m2)

Change year on year (%)

Department stores

164,680

1.6

New distribution channels

84,817

0.9

TOPIC 1
Grand opening of
the NIJYUSANKU GINZA brand store
A brand message transmission center for all of Asia

TOPIC 2
Revival of KUMIKYOKU brandOpened 100m2 flagship sales area in the Ikebukuro store of Seibu
Department Stores, accompanied by advertising and promotional campaign

OTHER MAJOR SUBSIDIARIES Each subsidiary clarifies its area of professional competence.
 ONWARD TRADING CO., LTD.: Works in collaboration with ONWARD
KASHIYAMA to strengthen production bases in China and Southeast Asiaand improve the Group’s gross margin
 CHACOTT CO., LTD.: Strengthen product development capabilities in threemain genres (ballet, ballroom dancing, and fitness) and expand sales
 CREATIVE YOKO CO., LTD.: Promote transition to handling a full lineupof pet-related products and services, differentiate directly managed stores BUS STOP CO., LTD.: Make the transition from being a boutique handlingselected merchandise to a retailer offering lifestyle suggestions, establisheda more-differentiated position as a selected merchandise store
 ISLAND CO., LTD.: Establish new, large-scale shops and strengthen existing
stores with the aim of expanding sales

ONWARD HOLDINGS CO., LTD.

07

OVERSEAS APPAREL-RELATED BUSINESSES

Shift main focus from improving profitability
to growthPlan for double-digit growth in Europe and China by increasing thenumber of brands and expanding sales channels
Improve profitability in Europe by working to increase brandvalue and realize additional synergies, in China, by strengthening
the brand lineup and expanding the sales network
In overseas operations, we have improved the management base ofEuropean subsidiaries, and now entered a new stage of implementing
an aggressive global growth strategy. The JIL SANDER Grouplaunched its new JIL SANDER NAVY collection in spring 2011 and,going forward, will realize additional synergies with the GIBO’ CO.
Group to improve profitability. In Asia also, we will make aggressive investments in both production and sales and accelerate theimplementation of our growth strategy.

EUROPEJIL SANDER Launch of JIL SANDER NAVY collection to drive sales
higher Give the collection new vibrance by boosting productdevelopment systems
 Further leverage GIBO’ CO.’s production platform toincrease profitability
JOSEPH Strengthen product development that captures trends Increase sales by strengthening management at flagship and existing
stores Increase advertising and promotional capabilities and transmit astronger brand image to the world

08

ANNUAL REPORT 2011

GIBO’ CO.
 Put more emphasis on contemporary fashion segments (e.g., JIL
SANDER NAVY) Reap increased Group synergies through boosting Group productionratio Use new licensing agreements to expand sales
Current Status of Group Synergies
PLANETA

GIBO’ CO.

GIBO’ CO.

CORPORATE

ERIKA

IRIS

Group

(Apparel(Apparel(Knitwear

(Shoe

(Bag

manufacturing

manufacturing

manufacturing)

manufacturing

manufacturing)and sales)and sales)

JOSEPH

√

—

—

√

√

JIL SANDER

—

√

√

√

√

and sales)

ASIA Increase the lineup of brands sold in China (launch JIYUKU brandand others) Begin e-commerce business in China (schedule launch for fall 2011) Invested in leading factories in Shanghai area, established exclusive
production line dedicated to Onward apparel, secured stable supply
capabilities for the Japanese market. Established a “Quick Response”
system in Asia
Expansion in Number of Stores in the Rest of Asia
Actual in Fisca
Fiscalcall 2
20
2011
011
1

PlannedPlalaannnn d fornne
f FiscalFis al 2012
2 12
20

Change
Cha

161
161

175
17
7

14

Kong
Hong
Hon
gK
ong
n
ng

8

7

(1)

Korea
South
Sou
th Kor
th
K
ea

23

24

1

Taiwan
Tai
Ta
iwan

57

63

6

ASEAN
ASE
EAN
A

3

10

7

Total
T
ottal
a

25
252

279
27

27

China

UNITED STATES Revitalized the J. PRESS brand in cooperation with Yale University
 New designer hires and entry into new businesses under consideration

ONWARD HOLDINGS CO., LTD.

09

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Onward Group has adopted “Thinking of the Earth. Clothing Its People.”as its environmental concept and conducts environmental management.
Onward Group’s Environmental Concept

Thinking of the Earth. Clothing Its People.

As the pace of movement in the world around us

Highlights of Environmental Activities

becomes faster and faster, fashions and trends arechanging at a bewildering pace. Also, recently, more

Onward Sponsors Exhibit at “Eco-Products 2010,”

and more apparel has become available at low prices.

Japan’s Largest Environment-Related Trade Fair for

We believe that many people have sensed a growing

Second Consecutive Year

trend toward apparel that the consumer is apparently
expected “to use a few times and then dispose of.”
Fashions that are both trendy and “disposable” arelikely to place a gradually increasing burden on theenvironment in the years to come, and this may have

As part of its environmental management activities, theOnward Group presented an exhibit in the Eco-Products2010 trade fair, Japan’s largest environmental exhibit, forthe second year in a row. By introducing its many environ-a major impact on the lives of peoples around themental initiatives, the Group aims to make an appeal forworld. The role of fashion is to bring refreshment andits activities in the apparel field that contribute to increas-

beauty to people’s lives and, thereby, give them moreing environmental awareness and enhance its corporate

opportunities to experience happiness. Fashion must

image.

not be something that impairs or detracts from thevirtually unlimited future of the Earth’s natural environment and the peoples of the world.
The Onward Group, as one of the leading companies in the international apparel industry that offers
fashion on the global stage, has corporate social
responsibilities. These include owning up to the challenge of aiming to “achieve a balance between thenatural environment and the world’s people” in its
wide range of apparel and other products and in every
aspect of its corporate activities.
We are thinking of the future of the Earth, and it is1
10

precisely because we have a responsibility to the world

Expanding the “BIO TECH SERIES,” the Ultimate in

to offer fashionable apparel that brings refreshment

Ecological Wear That Can Be Recycled to Natureand beauty to people’s lives that the Onward Group is

Based on the concept that “apparel manufacturers should

thinking seriously about what it can do about preserv-

take responsibility for recycling their own products,”

ing the natural environment and is working to fulfill

Onward now designs products with a view to recyclability

each of its responsibilities.

in the natural environment. The first item in this series,

AnnualAnnu
ANNUALR
Reportepor
p REPORT
t 220
2010
10
2011

Highlights of Activities Contributing to Society
Assistance to Areas Stricken by the Great East Japan
Earthquake
The Great East Japan Earthquake occurred in the afternoon of Friday, March 11, 2011. To provide relief to people
in the stricken areas, the Group donated a total of about
100,000 items, including blankets, gloves, and winterclothing and donations amounting to ¥100 million
launched in summer 2010, was the “BIO TECH SUIT,”
which was followed in winter 2010 by the introduction of
the “BIO TECH JACKET” and “BIO TECH PANTS.” Thethrough the Japan Red Cross Society. The Group will continue to provide assistance flexibly to help meet the needsof these areas.

external appearance and durability of the products in the“BIO TECH SERIES” are the same as for regular apparel.
However, while they are quite fashionable, when no longer
needed, since they are biodegradable, they can be returned
to nature by burying them in the ground where they will
be decomposed by bacteria present in the soil. In addition,
since they contain no substances that have been identified
as harmful to human life, such as heavy metals, carcinogens, or allergy-causing ingredients, they leave no harmful
substances behind.

Donation of 3,300 Recycled Blankets to Communities
in Kazakhstan and Elsewhere
In February 2011, ONWARD KASHIYAMA donated3,300 blankets, which were made from items accepted forrecycling during 2010 to destitute refugees, children, andlocal communities in Almaty, Kazakhstan. As a result of
these activities, reports have been received of a decline in
the incidence of illnesses due to colds during the year. In
addition, information on the Group’s donations has been
mentioned on the Central Asian Website of the United

Developing a Recycling System for Apparel

Nations High Commissioner for Refugees.

Compared with other products, the recycling of textile
products needs to catch up with the times. At ONWARD
KASHIYAMA, we are working to make the most-effective
use of the world’s limited resources by encouraging therecycling of apparel. One of our activities for helping topreserve the Earth’s irreplaceable environment for future
generations is the Onward Green Campaign, which webegan in 2009. Through this campaign, Onward collects,
through department stores, the used men’s, women’s, children’s, and sportswear items that it has manufactured, and,
when possible, makes these items available for recycling
and reuse. Some of the items are used to make recycledthread and yarn, which are then made into blankets andwork gloves and distributed as part of the Group’s environmental and social activities.

ONWARD HOLDINGS CO., LTD.

11

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

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

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

Compliance System
The Group has prepared its Compliance Regulations, which state
its basic compliance policy, and has formed the Onward Group
Compliance Committee. The Compliance Division, which has
primary responsibility for compliance matters, has prepared a

12

ANNUAL REPORT 2011

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

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

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

BOARD OF DIRECTORS
Directors

Officers

Corporate Auditors

Chairman and President

Senior Managing Director

Executive Officers

Standing Corporate Auditors

Takeshi Hirouchi*

Masaaki Yoshizawa

Akira Okuda

Akito Yamamoto

Tsutomu Hagihira

Hitoshi Aoyama
Jotaro Yabe**
Katsuaki Ohashi**Vice Chairman

Managing Director

Masabumi Kiyohara

Kentaro Mizuno

Kenichi Iizuka

Hidenobu Tanaka
Hirokazu Yoshizato
Michinobu Yasumoto

Vice President

Outside Directors

Kazuya Baba

Hachiro Honjou

Eiji Touno

As of September 1, 2011

Yoshihide Nakamura* Representative Director** Outside Auditor

ORGANIZATION CHART(As of September 1, 2011)
General Meeting of Shareholders

Board of Corporate Auditors

Board of Directors

Compliance Committee

Representative Director,
Chairman and President

GeneralManagerin Charge ofInternational
Business

General Manager in Charge of Europe

General Manager in Charge ofNorth America and Asia

Group Strategy Committee(Onward Group Management Council)
General Manager in Charge ofFinance and Accounting

General Manager in Charge of
Global Business Development
Strategy Council
General Manager in Charge ofAdvertising and Marketing

General Manager in Charge of
Production and Logistics

Corporate
Planning
Division

IR Division

FinanceandAccounting
DivisionInternal
Auditing
Division

Compliance
Division

Human
Resources
Division

Secretariat
Division

GeneralAffairs
Division

Corporate
Communications
and Environmental
Management

E-Business
Division

Division

ONWARD HOLDINGS CO., LTD.

13

CONSOLIDATED SIX-YEAR SUMMARYONWARD HOLDINGS CO., LTD. and Subsidiaries
Years ended February 28 or 29
Thousands of
U.S. dollars

Millions of yen
2006

2007

2008

2009

2010

2011

2011

¥135,769¥135,197¥112,519¥ 98,946¥100,680¥ 95,545$1,169,314

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

99,68894,85095,00890,17589,742

86,623

1,060,125

Total assets

329,403347,936

309,092

296,283

292,569

281,6433,446,856

Total current liabilities

97,617

103,494

93,321

92,36990,92982,677

1,011,840

Total shareholders’ equity

201,599

212,600

213,625

178,023

175,450

174,454

2,135,038

Net sales¥283,111¥318,691¥287,032¥261,006¥248,635¥244,551$2,992,911

Cost of sales

152,043

175,796

156,842

142,676

134,459

128,726

1,575,397

administrative expenses

106,360

117,464

111,562

109,246

109,792

106,896

1,308,242

For the year:

Selling, general andOperating income

24,70825,431

18,628

9,084

4,384

8,929

109,272

Income taxes, current

12,321

14,409

9,780

4,639

4,016

5,555

67,988Net income (loss)

11,091

11,438

12,214(30,895)

2,188

2,723

33,320Yen

U.S. dollars

Per share:
Net income (loss)—basic

¥63.8

¥70.5

¥76.5

¥(197.2)

¥13.9

17.3

$0.21

Cash dividends

24.0

26.0

30.0

30.0

24.0

24.0

0.29

Note: Yen amounts have been translated, for convenience only, at ¥81.71=US$1, the approximate exchange rate on February 28, 2011.

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

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

350,000

10

350,000

280,000

8

280,000

80

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

80

60
60

210,000

6

210,000

140,000

4

140,000

70,0002

70,000

0

0

40
40
20

20

0

’07 ’08 ’09 ’10 ’11
왎 Net sales (left scale)왎 Operating income margin (right scale)

14

ANNUAL REPORT 20110

0

’07 ’08 ’09 ’10 ’11
왎 Total assets (left scale)첸 Total shareholders’ equity (left scale)왎 Shareholders’ equity ratio (right scale)-200’07 ’08 ’09 ’10 ’11
왎 Net income (loss) per share첸 Cash dividends per share

MANAGEMENT’S DISCUSSION AND ANALYSIS
Overview
During the fiscal year under review (ended February 28, 2011), there
were some signs of recovery in the Japanese economy because of
the positive effects of government policies to stimulate personal consumption and expansion in demand accompanying growth in theemerging countries. However, the outlook for the economy remained
uncertain because of continued difficult labor and income conditions,the sharp appreciation of the yen, prolonged deflation, and otherfactors.
In the apparel industry, signs of a moderate recovery emerged
beginning in the fall of 2010, but in part because of the persistenceof the deep-rooted economizing mood among consumers andunseasonable weather conditions, consumer spending remained weakoverall, and the operating environment remained challenging. Amidthese conditions, under its new growth strategy, in Japan, the Onward
Group invested in its sales areas, focusing especially on profitablemajor core brands and worked to expand income by aggressively
launching new products. In overseas markets, the Group implemented further measures to improve profitability in the European region,
which is key to growth, and took steps to expand its business
operations in Asia.
As a consequence of these various measures, ONWARD
KASHIYAMA, the core company of the Group, and subsidiaries inJapan and overseas reported performances above the planned levels.
The Group reported net sales of ¥244.5 billion, down 1.6% from theprevious fiscal year, operating income of ¥8.9 billion, which was
103.7% higher year on year, and net income of ¥2.7 billion, a 24.4%
rise over the previous year.

Results of Operations
Net Sales
Sales in the Group’s apparel business amounted to ¥229.7 billion,
down ¥4.4 billion, or 1.9%, from the previous fiscal year, but sales ofservice-related businesses rose ¥0.3 billion, or 2.5%, to ¥14.8 billion.
The Group’s consolidated net sales amounted to ¥244.5 billion, adecrease of ¥4.0 billion, or 1.6% year on year. The business activitiesof the Onward Group are divided into two principal segments: namely,
apparel and other textile product businesses and service-related businesses. The results for the fiscal year are summarized in the following
paragraphs.
• Apparel and Other Textile Product Businesses
Regarding operations in Japan, ONWARD KASHIYAMA concentrated
on its major core brands under its Brand-Leveraged Management
strategy and worked to increase brand value through the enhancement of our operational and merchandising capabilities, our marketing
capabilities, and our store environments. In addition, we worked to
expand sales by stepping up our “item strategy” across our brands
and by implementing “attractive and effective sales tactics.” Alongwith this, we made an aggressive entry into the e-commerce business, and, by adopting active measures to secure members for our
Website, results were above the planned levels. As a consequenceof these measures, we worked to expand sales of major core brands
and increase our gross profit ratio, and this, in turn, resulted in higher
income. Performances of other Group apparel companies in Japan,
especially ISLAND CO., LTD., were favorable and contributed to
growth in income.
Overseas, in Europe, both the JOSEPH Group and JIL SANDER
Group realized synergies with the GIBO’ CO. Group––which plays therole of a production platform for these two groups––and this collaboration brought improvement in their business position. Also, in Asia,
the Onward Group worked to attain growth as planned against thebackground of market expansion in this region. Group companies
in North America reported steady progress toward improvementin profitability.

As a result, as previously mentioned, sales of the apparel and othertextile product businesses amounted to ¥229.7 billion, a decline of
1.9% year on year, but operating income rose 97.1%, to ¥8.9 billion.
• Service-Related Businesses
Among service-related businesses, ACROSS TRANSPORT CO.,LTD., which operates a logistics business, showed a decline in profitability because of a decrease in subcontracted work and the effects ofhigh crude oil prices, but ONWARD CREATIVE CENTER CO., LTD.,
which designs and implements commercial facilities, reported a recovery in performance. In the resort business, improvements in results
were according to plan.
Consequently, sales of this segment increased 2.8%, to ¥21.7 billion, and the operating loss expanded to ¥117 million compared with
an operating loss of ¥39 million in the previous fiscal year.
The Onward Group’s performance by geographic region was asfollows.
• JapanAmong operations in Japan, ONWARD KASHIYAMA and ISLAND
showed results well above initial plans and reported increases in sales
and income.
As a consequence, sales in Japan rose 0.7%, to ¥207.7 billion, andoperating income rose 21.1%, to ¥11.2 billion.
• Europe
In Europe, progress was made toward strengthening the managementbase of Group companies in this region and resulted in improvementin profitability. Although sales in Europe amounted to ¥30.7 billion, adecrease of 15.6% year on year, the operating loss improved substantially to ¥2,595 million, compared with ¥4,173 million in the priorfiscal year.
• Other
The Group’s business operations in Asia reported steady expansion
in income, and operations in the United States returned to the black
as a result of activities to improve profitability.
As a result, sales amounted to ¥8.5 billion, an increase of 9.3%,
and operating income returned to the black, rising to ¥80 million,
compared with an operating loss of ¥902 million in the previous year.
Cost of Sales; Selling, General and Administrative Expenses;
and Other Income (Expenses)
Against a decline in net sales of ¥4.0 billion, or 1.6%, to ¥244.5 billion,
the cost of sales decreased along with cost-cutting measures by ¥5.7
billion, or 4.3%, to ¥128.7 billion. Because of the positive effect of therelatively large decrease in cost of sales, gross profit rose ¥1.6 billion,
an increase of 1.4% year on year, to ¥115.8 billion. As a consequence, the gross margin on net sales rose 1.5 percentage points,from 45.9% in the previous fiscal year to 47.4% in the fiscal year
under review. This was because of the expansion in sales of higher
margin products, mainly major core brand items, and the positiveeffects of improvement in profitability overseas in Europe, Asia, andNorth America.
Selling, general and administrative (SG&A) expenses decreased¥2.9 billion, or 2.6%, to ¥106.8 billion, because of lower compensation and wage allowances as well as rental costs among administrative expenses. Although net sales decreased, the ratio of SG&A
expenses to net sales declined 0.5 percentage point, from 44.2%
in the previous fiscal year to 43.7% in the fiscal year under review
because of the larger decline in SG&A expenses. Because of the
improvement in the ratio of cost of goods sold and the ratio of SG&A
expenses to net sales, the ratio of operating income to net sales rose
1.9 percentage points, from 1.8% to 3.7%. Therefore, despite thedecline in sales, the profit ratios showed marked improvement, andoperating income rose ¥4.6 billion, or 103.7%, to ¥8.9 billion.

ONWARD HOLDINGS CO., LTD.

15

Other income (expenses) amounted to expenses, net, of ¥377 million, compared with income, net, of ¥2.0 billion in the previous fiscal
year, representing a deterioration of ¥2.3 billion. This was mainly
because of the absence of the gain on the sale of investments insecurities of ¥2.3 billion reported in the previous fiscal year, an
increase in loss on write-down of investments in securities from ¥146
million in the previous fiscal year to ¥1.3 billion, a rise in impairment
losses on fixed assets from ¥294 million in the prior fiscal year to ¥937
million in the fiscal year under review, and other factors. As a consequence of the matters described, the Company reported income
before income taxes and minority interests of ¥8.5 billion, representing
an increase of ¥2.1 billion, or 33.8%. Income taxes, inhabitants’ taxes,
and enterprise taxes calculated based on assumptions that include
the assumption of a 40.7% effective tax rate amounted to ¥5.5 billion.
Consequently, the Group reported net income of ¥2.7 billion, whichwas ¥535 million, or 24.5% higher than in the previous fiscal year.

Financial Position
At the end of the fiscal year, total assets amounted to ¥281.6 billion,
down ¥10.9 billion from the end of the previous fiscal year. Current
assets were down ¥5.1 billion, or 5.1%, to ¥95.5 billion, owing to
a decrease in cash and time deposits of ¥3.4 billion, to ¥30.9 billion.
Total liabilities decreased ¥11.5 billion, or 8.6%, to ¥122.8 billion.
Current liabilities declined ¥8.2 billion, to ¥82.6 billion, and long-term
liabilities fell ¥3.2 billion, to ¥40.2 billion.
Shareholders’ equity decreased ¥1.0 billion, or 0.6%, to ¥174.4 billion, because of a decline in retained earnings of ¥1.0 billion, to¥117.7 billion. However, net assets, including minority interests inconsolidated subsidiaries, rose ¥581 million, or 0.4%, to ¥158.7 billion. As a result, although total assets decreased, total net assets
rose, and the shareholders’ equity ratio at the end of the fiscal year
increased to 55.8%, which was 2.3 percentage points higher than the
53.5% reported at the end of the previous fiscal year.
Cash FlowsNet cash provided by operating activities amounted to ¥11,207 million, down ¥2,851 million because of an increase in income taxes paidof ¥2,525 million and other factors.
Net cash used in investing activities amounted to ¥5,152 million,
an increase of ¥5,126 million over the previous year, reflecting investments in sales space equipment, acquisition of investments insecurities, and other factors.
Net cash used in financing activities amounted to ¥9,272 million, an
increase of ¥4,382 million compared with the previous fiscal year.
Principal factors accounting for this increase were repayments of debt
and dividends paid.
As a result of the aforementioned factors, the balance of cash andcash equivalents at the end of February 2011 was ¥28,634 million, or¥4,045 million lower than at the end of February 2010.

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

16

ANNUAL REPORT 2011

Outlook
Looking to future trends, in addition to the uncertainties created by
the appreciation of the yen and the labor and income environments,
the Great East Japan Earthquake, which occurred on March 11,
2011, left unbelievable damage in its wake and dealt a severe blow
to the economy. Therefore, for the time being, difficult conditions
are expected to persist in the Japanese economy.
Conditions in the industries where the Group conducts businessare forecast to be adversely affected because of the negative impact
on consumption and other economic activities of the earthquakeand events following it, including restraints on the use of electricity,rolling blackouts, and other circumstances.
Amid this management environment, the Onward Group will implement a global strategy with the aims of securing stable profitability
in domestic businesses and implementing a growth strategy toaggressively expand profit in its overseas businesses.
In domestic businesses, ONWARD KASHIYAMA will continue
to focus its management resources on major core brands, work toincrease brand value, and promote expansion in income. In addition,
ONWARD KASHIYAMA will strengthen operations of its directly managed flagship stores to enhance their capabilities for communicating
Onward’s brand message and expand sales through the developmentof major brands for marketing in shopping center malls. Moreover, tomake full use of the Onward Group’s comprehensive range of capabilities, the Group plans to move ahead to establish its presence, froma global perspective, in the rapidly expanding Internet market.
In overseas business operations, the Onward Group has strengthened the management bases of its subsidiaries in Europe and has
now entered a period when it is positioned to actively pursue a global
growth strategy. The JIL SANDER Group launched a new collection,
JIL SANDER NAVY, in spring 2011, and it will continue to pursue synergies with the GIBO’ CO. Group to increase profitability. In Asia outside Japan also, the Group will make aggressive investments in bothproduction and marketing and accelerate the implementation ofits growth strategy.
As a result of the implementation of these policies, the Onward
Group has prepared plans for the fiscal year ending February 28,
2012, calling for an increase in net sales of 0.1%, to ¥244.8 billion,
growth in operating income of 14.2%, to ¥10.2 billion, and a gain in
net income of 28.6%, to ¥3.5 billion. (Please note that these plans for
future performance are judgments that are based on information available at the time these figures were prepared, and they are subject tolatent risks and uncertainties. Therefore, if the factors that form
the basis for these forecasts differ from assumed conditions, actual
performance may differ substantially from the target levels.)
Description of Business Risks
The businesses of the Onward Group may be influenced by a numberof risks, which are described in the following paragraphs. Based on its
awareness of the possibility that these risks may emerge, the Group
conducts its business operations in a manner to avoid such risks andminimize their effects in the event that they should emerge. Please
note that the forward-looking statements contained in this section are
based on the Group’s judgments as of May 31, 2011.
(1) Risks Associated with Changes in Consumer Needs
To respond accurately to customer needs regarding the fashion products, the Group works to develop original and competitive products
through the implementation of its Brand-Leveraged Management policy. However, the Group may not be able to attain the performancetargets in its business plans because of a number of factors, including
stagnation in consumer spending as a result of fluctuations in economic conditions, competition with other companies, and suddenchanges in fashion trends. This failure to meet targets may have an
adverse impact on Group performance.

(2) Risks Associated with Weather Conditions
and Natural Disasters
Since sales of the Group’s core fashion products may vary becauseof weather conditions, the Group works to strengthen its systems forplanning and production on a short turnaround cycle. However, cool
weather in the summers and warm weather in the winters as well asother unexpected developments of this kind continuing over prolonged periods as well as a series of typhoons may result in the lossof sales opportunities during peak seasons, and there is a possibility
that such developments may have an adverse impact on performance. In addition, unexpected natural disasters—such as earthquakes and floods, sudden fires and accidents, and outbreaks of newstrains of viruses and other epidemic diseases—may make the cessation of the Group’s operations unavoidable. Such circumstances may
have an adverse impact on Group performance.
(3) Quality Risk
The Group has established “quality management standards” andworks to manage the quality of its products through the observance of
these standards. However, despite the establishment of systems for
quality management, incidents may occur related to product liability
as a result of matters relating to the Group and its business partners.
Such incidents may damage the Group and its brand image and resultin substantial expenses that may have an adverse impact on Group
performance.
(4) Risks Associated with Business Partners
The Group has strengthened its internal systems for periodicallyconfirming the operating conditions and the creditworthiness of
its business partners. However, losses may occur as a result of the
non-payment of obligations caused by a series of defaults during
times of credit instability and unexpected bankruptcies of large commercial facilities. Such circumstances may have an adverse impact
on Group performance.

(7) Risks Associated with Information
The Group works to take all necessary measures and strengthens
its systems for ensuring the security of information systems, and has
prepared its Guidelines for the Personal Information Protection Law.
The Group has taken steps to ensure all management and staff areaware of information security matters and strengthened its systems
for the management and supervision of information. However, issues
may arise if there are leakages of information resulting from improper
access to computer systems and criminal activities. Such issues may
impair the trust placed in the Group by society and result in the payment of related expenses. Such circumstances may have an adverse
impact on the Group’s performance.
(8) Risks Associated with Overseas Business Operations
The Group’s overseas operations may be exposed to a range of risks
resulting from natural disasters; political, social, and economic conditions; wars and terrorism; fluctuations in foreign currency exchange
rates; lawsuits related to intellectual property; and communicablediseases. When such risks emerge, the Group may have difficultyin continuing its business operations. Such circumstances may havean adverse impact on the Group’s performance.
(9) Risks Associated with Business/Capital Alliances
The Group’s growth strategy includes provisions for using M&A
transactions and similar methods in connection with domestic andoverseas investments. In the case that unexpectedly large changes
in the business environment were to cause deterioration in theGroup’s management and financial situations, there is a risk that theGroup might have to record losses on the impairment of goodwill.
Such circumstances may have an adverse impact on the Group’s
performance.

(5) Risks Associated with Intellectual Property
The Group owns trademarks and other intellectual property in Japanand overseas. The Group works to safeguard the rights to this property based on legal regulations, but the Group and its brand image may
be damaged and its capabilities for product development may be
impaired in the event of infringement of these rights by third parties.
Accordingly, such circumstances may have an adverse impact onGroup performance.
In addition, the Group obtains rights to the use of intellectual property owned by its alliance partners based overseas and conducts
business activities based on licensed brands. If the related contracts
are unexpectedly cancelled or, if the terms of such contracts become
unfavorable when they are renewed, then such circumstances may
have an adverse impact on Group performance.
(6) Legal Risks
The Group conducts its business activities with full regard for laws
and regulations, including those related to antimonopoly policies, thetreatment of subcontractors, labeling, the safety of everyday consumer products, as well as laws concerning the natural environment andrecycling. The Onward Group Compliance Committee plays a central
role in providing information related to the importance of compliancewith laws and regulations as well as internal control procedures withthe aim of ensuring proper compliance management. However,despite the establishment of these compliance systems, issues may
arise as a result of the illegal behavior of employees and the actionsof business partners. Such issues may impair the trust placed in theGroup by society and result in the payment of substantial expenses
for indemnities, etc. Such circumstances may have an adverse impact
on the Group’s performance.

ONWARD HOLDINGS CO., LTD.

17

Consolidated Balance Sheets
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
February 28, 2010 and 2011

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

Millions of yen

ASSETS

2010

2011

2011

¥ 34,330¥ 30,939$ 378,646

Accounts and notes receivable (Note 3)

25,731

25,399

310,846

Inventories (Note 2. (4))

30,89430,358371,531

Deferred tax assets (Note 11)

4,239

4,075

49,866

Other current assets

6,348

5,498

67,285Current assets:
Cash and time deposits (Notes 2.(17), 3 and 9.(1))

(862)

(724)

(8,860)100,680

95,545

1,169,314

Buildings and structures

78,58976,280933,547

Other depreciable property

26,34025,828316,093(68,519)(68,585)(839,377)

36,41033,523

410,263

Less: Allowance for bad debt
Total current assets

Property, plant and equipment (Note 6):

Less: Accumulated depreciation

53,332

53,100649,862

89,742

86,623

1,060,125

Goodwill

47,41843,732535,208

Other

3,393

3,014

36,88550,811

46,746572,093

Investments in securities (Notes 3 and 4)

31,194

34,592

423,353

Long-term loans receivable (Note 3)

4,969

4,839

59,227

881

751

9,189

Deferred tax assets (Note 11)

5,530

5,628

68,872Other investments

12,002

9,274

113,498

Land (Note 12)
Total property, plant and equipment

Intangible assets, net:

Total intangible assets, net

Investments and other assets:Long-term prepaid expenses

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

18

Annual Report 2011

(3,240)(2,355)(28,815)

51,33652,729645,324¥292,569¥281,643$3,446,856

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

Millions of yen

LIABILITIES AND NET ASSETS
Current liabilities:
Accounts and notes payable (Note 3)
Short-term loans payable (Notes 3 and 14)
Current portion of long-term loans payable (Notes 3 and 14)
Accrued income taxes
Accrued bonuses to directors
Accrued bonuses to employees
Allowance for sales returns
Provision for point program
Other current liabilities
Total current liabilities
Long-term liabilities:
Bonds (Note 14)
Long-term loans payable (Notes 3 and 14)
Accrued retirement benefits (Note 8)
Accrued retirement benefits for directors and corporate auditors
Deferred tax liabilities―revaluation of land (Notes 11 and 12)
Other
Total long-term liabilities
Total liabilities

2010

2011

2011

¥ 35,961
31,881
3,817
4,086
263
1,569
545
126
12,681
90,929¥ 32,704
27,354
3,534
4,533
299
1,569
870
163
11,651
82,677$ 400,241334,765
43,25055,483
3,664
19,19910,646
2,003
142,589
1,011,840

518
24,054
3,273
123
5,949
9,559
43,476
134,405367
22,298
3,468
119
5,942
8,027
40,221
122,898

4,494
272,896
42,445
1,459
72,71598,227492,236
1,504,076

30,08050,043
118,81730,08050,043
117,777

368,127
612,449
1,441,402(23,490)
175,450(23,446)
174,454(286,940)
2,135,038(5,560)(42)(10,993)(2,355)(18,950)(2,838)(5)(11,004)(3,558)(17,405)(34,731)(70)(134,668)(43,541)(213,010)

413

532

6,514

1,251

1,164

14,238Commitments and contingent liabilities (Note 13)
Net assets:
Shareholders’ equity:
Common stock:
Authorized―400,000,000 shares
Issued―172,921,669 shares at February 28, 2010 and 2011, respectively
Capital surplus
Retained earnings (Note 15)
Less: Treasury stock, at cost, 16,260,739 shares and 16,238,791 sharesat February 28, 2010 and 2011, respectively
Total shareholders’ equity
Valuation and translation adjustments:
Net unrealized losses on available-for-sale securities (Note 4)
Deferred losses on hedging instruments
Net revaluation loss of land (Note 12)
Foreign currency translation adjustments
Total valuation and translation adjustments
Stock acquisition rights
Minority interests in consolidated subsidiaries
Total net assets
Total liabilities and net assets

158,164

158,745

1,942,780¥292,569¥281,643$3,446,856
U.S. dollars

Yen

Per share:
Net assets per share¥998.98(Note 2. (20))¥1,002.34$12.27

See accompanying notes to consolidated financial statements.

ONWARD HOLDINGS CO., LTD.

19

Consolidated Statements of Operations
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2010 and 2011

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

Millions of yen
2010

2011

2011

Net sales¥248,635¥244,551$2,992,911

Cost of sales

134,459

128,726

1,575,397

Gross profit

114,176

115,825

1,417,514

Selling, general and administrative expenses (Note 18)

109,792

106,896

1,308,242

4,384

8,929

109,272

110

113

1,390

Operating income
Other income (expenses):
Interest income

489

373

4,560

Land and house rent received

1,223

974

11,919Interest expenses(1,137)(808)(9,894)

Royalty income

909

836

10,234

Dividend income

Equity in earnings of investees

117

499

6,114

Foreign currency exchange loss

(643)

(702)

(8,593)

Loss on derivatives

(398)

(282)

(3,456)

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

2,326

―

―

Loss on write-down of investments in securities (Note 4)(146)(1,322)(16,175)

Provision for allowance for bad debt

(512)

―

―

Gain (loss) on disposal of fixed assets, net

(101)

49

603

Impairment loss on fixed assets (Note 7)

(294)

(937)

(11,469)63

830

10,159

6,390

8,552

104,664

Current (Note 2. (10))

4,016

5,555

67,988Deferred (Note 11)

158

153

1,875

2,216

2,844

34,801Other, net
Income before income taxes and minority interests
Income taxes:

Income before minority interests
Minority interests in subsidiaries
Net income

(28)

(121)

(1,481)¥ 2,188¥ 2,723$ 33,320
U.S. dollars(Note 2. (21))

Yen

Per share (Notes 15,16 and 18):
Net income ―basic¥13.97¥17.38$0.21

Diluted net income per share

13.91

17.28

0.21

Cash dividends

24.00

24.00

0.29

See accompanying notes to consolidated financial statements.

20

Annual Report 2011

Consolidated Statements of Changes in Net Assets
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2010 and 2011
Millions of yen
Shareholders’ equity

Balance as at February 28, 2009:
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of net revaluation loss of land
Net changes other than shareholders’ equity
Total changes during the year
Balance as at February 28, 2010
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of net revaluation loss of land
Increase in retained earnings resulting frommerger of non-consolidated subsidiaries
Net changes other than shareholders’ equity
Total changes during the year
Balance as at February 28, 2011

Number ofshares ofcommon stock(thousands)

Commonstock

CapitalsurplusRetainedearnings(Note 15)

Treasury
stock

Total

172,922
―
―
―
―
―
―
―
172,922―――――¥30,080
―
―
―
―
―
―
―
30,080―――――¥50,043
―
―
―
―
―
―
―
50,043―――――¥121,412(4,700)
2,188
―
(1)
(82)
―
(2,595)
118,817(3,760)
2,723
―
(16)
11

¥(23,512)
―
―
(7)
29
―
―
22
(23,490)
―
―
(30)
74
―

¥178,023(4,700)
2,188
(7)
28
(82)
―
(2,573)
175,450(3,760)
2,723
(30)
58
11

―
―
―
172,922―――¥30,080―――¥50,0432―(1,040)¥117,777――
44¥(23,446)

2
―
(996)
¥174,454

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

Balance as at February 28, 2010:
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of net revaluation loss of land
Increase in retained earnings resulting frommerger of non-consolidated subsidiaries
Net changes other than shareholders’ equity
Total changes during the year
Balance as at February 28, 2011

Commonstock

CapitalsurplusRetainedearnings(Note 15)

Treasury
stock

Total

$368,127―――――$612,449―――――$1,454,129 $(287,477) $2,147,228(46,014)(46,014)―33,32033,320
―
(367)
(367)
―
(192)
904
712
133
133
―

―
―
―
$368,127―――$612,449

26
26
―
―
―
―
(12,727)537(12,190)$1,441,402 $(286,940) $2,135,038

See accompanying notes to consolidated financial statements.

(Continued)

ONWARD HOLDINGS CO., LTD.

21

Millions of yen
Valuation and translation adjustments

Balance as at February 28, 2009:
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of net revaluation loss of land
Net changes other thanshareholders’ equity
Total changes during the year
Balance as at February 28, 2010
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of net revaluation loss of land
Increase in retained earnings resulting frommerger of non-consolidated subsidiaries
Net changes other thanshareholders’ equity
Total changes during the year
Balance as at February 28, 2011

Net unrealized
losses onavailable-for- sale Deferred losses Net revaluation Foreign currency
securities
on hedging
loss of landtranslation(Note 4)
instruments(Note 12)adjustments

Total¥(6,930)
―
―
―
―
―

¥(75)
―
―
―
―
―

¥(11,075)
―
―
―
―
―

¥(3,077)―――――¥(21,157)
―
―
―
―
―

1,370
1,370
(5,560)
―
―
―
―
―

33
33
(42)
―
―
―
―
―

82
82
(10,993)
―
―
―
―
―

722
722
(2,355)
―
―
―
―
―

―

―

―

2,722
2,722
¥(2,838)

37
37
¥(5)

(11)
(11)
¥(11,004)

Minority interests
Stock acquisition in consolidated
rightssubsidiaries

Total net
assets

¥294
―
―
―
―
―

¥1,258―――――¥158,418(4,700)
2,188
(7)
28
(82)

2,207
2,207
(18,950)
―
―
―
―
―

119
119
413
―
―
―
―
―

(7)
(7)
1,251
―
―
―
―
―

2,319
(254)
158,164(3,760)
2,723
(30)
58
11

―

―

―

―

2

(1,203)(1,203)¥(3,558)

1,545
1,545
¥(17,405)

119
119
¥532

(87)
1,577
(87)
581
¥1,164 ¥158,745

Thousands of U.S. dollars (Note 2. (21))
Valuation and translation adjustments

Balance as at February 28, 2010:
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of net revaluation loss of land
Increase in retained earnings resulting frommerger of non-consolidated subsidiaries
Net changes other thanshareholders’ equity
Total changes during the year
Balance as at February 28, 2011

Net unrealized
losses onavailable-for- sale Deferred losses Net revaluation Foreign currency
on hedging
loss of landtranslation
securities(Note 4)
instruments(Note 12)adjustments$(68,040)
―
―
―
―
―
―

33,30933,309$(34,731)

See accompanying notes to consolidated financial statements.

22

Annual Report 2011

Total$(519) $(134,534) $(28,820) $(231,913)
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―

Minority interests
Stock acquisition in consolidated
subsidiaries
rights$5,049
―
―
―
―
―

―

―

449
(134)
(14,721)
18,903449(134)(14,721)
18,903$ (70) $(134,668) $(43,541) $(213,010)

1,465
1,465
$6,514―――

Total net
assets$15,312 $1,935,676―(46,014)―33,320
―
(367)
―
712
―
133
―

26

(1,074)
19,294(1,074)
7,104$14,238 $1,942,780

Consolidated Statements of Cash Flows
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2010 and 2011

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

Millions of yen

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization
Impairment loss on fixed assets
Net amortization of goodwill on consolidation
Increase (decrease) in provision for allowance for bad debt
Decrease in provision for accrued retirement benefits
Interest and dividend income
Interest expense
Equity in earnings of investees(Gain) loss on disposal of fixed assets, net
Gain on sale of investments in securities, net
Loss on write-down of investments in securities
Valuation losses on investments
in unconsolidated subsidiaries and affiliates
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease in trade payables
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Refunded income taxes
Net cash provided by operating activities
Cash flows from investing activities:
Increase in time deposits
Decrease in time deposits
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Acquisition of investments in securities
Proceeds from sale of investments in securities
Payments for long-term prepaid expenses
Payments for security deposits
Proceeds from security deposits
Payment for acquisition of consolidated subsidiaries resulting ina change in the scope of consolidation (Note 9. (2))
Other, net
Net cash used in investing activities

2010

2011

2011

¥ 6,390¥ 8,552$104,664

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

5,642
937
3,638
(439)
431
(486)
808
(500)
(49)
―
1,322

69,054
11,46944,520(5,367)
5,272(5,949)9,894(6,114)(603)―
16,175

126
2,015
3,711
(4,499)(2,575)
14,664624(1,241)(2,294)2,305
14,058

―
(589)
(315)
(2,429)(1,545)
14,978693(770)(4,819)1,125
11,207―(7,211)(3,859)(29,726)(18,912)183,307
8,486(9,428)(58,986)
13,774
137,153(443)
891(2,976)8(7,128)12,858
(553)
(421)
835

(318)
1,652
(3,090)113(1,837)
14
(773)
(754)
761

(3,888)20,214(37,811)
1,378(22,481)174(9,462)(9,233)9,317(2,336)

―

―

(761)
(26)

(920)
(5,152)(11,260)(63,052)(Continued)

ONWARD HOLDINGS CO., LTD.

23

Millions of yen

Cash flows from financing activities:
Increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Acquisition of treasury stock
Dividends paid by the parent company
Dividends paid to minority shareholders
Other, net
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Increase in cash and cash equivalents resulting from merger with
non-consolidated subsidiaries
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 9. (1))
See accompanying notes to consolidated financial statements.

24

Annual Report 2011

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

2010

2011

2011

3,703
334
(3,816)(7)(4,700)(94)(2,984)2,080(4,118)(9)(3,760)(29)(36,525)
25,456(50,400)(107)(46,015)
(355)

(310)
(4,890)
211
9,353

(453)
(9,272)(829)(4,046)(5,527)(113,473)(10,141)(49,513)―
23,326¥32,679

1
32,679¥28,634

12
399,936$350,435

Notes to Consolidated Financial Statements
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2010 and 2011

1. Basis of Presentation of the Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared from the accounts maintained by ONWARD HOLDINGS Co., Ltd.
(the “Company”), and its consolidated subsidiaries in accordance with the provisions set forth in the Corporation Law of Japan (the “CorporationLaw”) and the Financial Instruments and Exchange Law 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.
Previously, the Company was allowed to use the financial statements of its foreign subsidiaries which had been prepared in conformity withthe financial accounting standards of the countries of their domicile. From the year ended February 28, 2010, the Company adopted “Practical
Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (ASBJ Practical Issues
Task Force (PITF) No. 18, May 17, 2006). This PITF requires that for the preparation of consolidated financial statements, the accounting
policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances
should be unified, in principle, and financial statements prepared by foreign subsidiaries in accordance with IFRSs or the generally accepted
accounting principles in the United States (U.S. GAAP) tentatively may be used for the consolidation process; however, the items listed in the
PITF should be adjusted in the consolidation process so that net income is accounted for in accordance with Japan GAAP unless they are notmaterial. The Company made necessary modifications to the consolidated financial statements according to the PITF. The effect of the change
on operating income and income before income taxes and minority interests was immaterial.
Certain items presented in the consolidated financial statements submitted to the Director of the Kanto Finance Bureau in Japan have been
reclassified for the convenience of readers outside Japan.
The accompanying consolidated financial statements are not intended to present the consolidated financial position, results of operations andcash flows of the Company and its consolidated subsidiaries in accordance with accounting principles and practices generally accepted incountries and jurisdictions other than Japan.
2. Summary of Significant Accounting Policies(1) Scope of Consolidation
The Company had 75 subsidiaries as at February 28, 2011 (80 as at February 28, 2010). The accompanying consolidated financial statements
include the accounts of the Company and 64 of its subsidiaries (68 for 2010). Major consolidated subsidiaries are listed below (the Company
and the consolidated subsidiaries are collectively referred to as the “Companies”):
Name of subsidiary

Onward KASHIYAMA Co., Ltd.
Onward Trading Co., Ltd.
Chacott Co., Ltd.
Creative Yoko Co., Ltd.
Island Co., Ltd.
Bus Stop Co., Ltd.
Project Sloane Ltd.
Joseph Ltd.
Gibo’ Co. S.p.A.
Violine S.à r.l.
Jil Sander Italy S.p.A
Onward Fashion Trading (China) Co., Ltd.
J. Press, Inc.
Across Transport Co., Ltd.
Onward Creative Center Co., Ltd.
BOOKLET CORP.
Excel Co., Ltd.
Onward Resort & Golf Co., Ltd.
Onward Life Design Network Co., Ltd.
Onward Beach Resort Guam, Inc.
Onward Mangilao Guam, Inc.

Equity ownership percentage

Closing date

100.0%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

February 28
February 28
February 28
February 28
February 28
February 28
November 30
November 30
November 30
November 30
November 30
December 31
December 31
February 28
February 28
February 28
February 28
February 28
February 28
December 31
December 31

ONWARD KASHIYAMA SINGAPORE PTE, LTD. was established during the year ended February 28, 2011; therefore, ONWARD
KASHIYAMA SINGAPORE PTE, LTD. became a consolidated subsidiary of the Company.
In the Jil Sander AG Group, Jil Sander BV and Jil Sander SA were liquidated. Jil Sander AG merged with Jil Sander Collection GMBH and
Jil Sander Women’s Wear GMBH. In the Joseph Group, Joseph at Wimbledon Ltd. was liquidated, Joseph at Wimbledon Ltd. became an

ONWARD HOLDINGS CO., LTD.

25

unconsolidated subsidiary of the Company. Also, Onward Creative Center Co., Ltd. merged with Voice dam Co., Ltd., an unconsolidated
subsidiary of the Company.
The financial statements of the aforementioned subsidiaries with fiscal year-ends of December 31 or November 30 have been used forconsolidation. All material transactions that occurred in the periods from such fiscal year-ends and February 28, the Company’s fiscal year-end,
have been adjusted.
The remaining 11 subsidiaries (12 for 2010) were not consolidated because their total assets, net sales, net income and retained earnings
were not material individually or in the aggregate compared with those of the consolidated financial statements of the Companies.
(2) Consolidation and Elimination
For the purposes of preparing the consolidated financial statements of the Companies, all significant intercompany transactions, accountbalances and unrealized profits among the Companies have been entirely eliminated, and the portion attributable to minority interests iscredited/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 isamortized on a straight-line basis within 20-year periods.
(3) Investments in Unconsolidated Subsidiaries and Affiliates
Investments in unconsolidated subsidiaries and affiliates are accounted for by the equity method. A total of 20 companies (20 companies for2010) are accounted for by the equity method for the year ended February 28, 2011.
The Company did not apply the equity method to 10 unconsolidated subsidiaries (11 in 2010) and 1 affiliate (1 in 2010) as at February 28,
2011, as the effect on net income or retained earnings of their consolidated financial statements are not material individually or in theaggregate.
The Company applied the equity method by using the November 30 financial statements of Gailyglen Ltd., which has a fiscal year-end of
November 30. Also, the December 31 financial statements of Daido Limited, which has a fiscal year-end of March 31, prepared on a basis
similar to that for year-end closing, were used for consolidation purposes.
(4) Inventories
Inventories held for sale in the ordinary course of business are measured at the lower of cost or net selling value, which is defined as the selling
price less additional estimated manufacturing costs and estimated direct selling expenses, determined principally by the specific identification
method. For the year ended February 28, 2011, the recorded write-downs were ¥10,307 million ($126,141 thousand). For the year ended
February 28, 2010, the recorded write-downs were ¥11,593 million.
From the year ended February 28, 2010, the Company adopted “Accounting Standard for Measurement of Inventories” (ASBJ Statement No.
9, July 5, 2006), and inventories held for sale in the ordinary course of business are measured at the lower of cost or net selling value, which isdefined as the selling price less additional estimated manufacturing costs and estimated direct selling expenses, determined principally by theaverage method. The change did not have a material impact on the Companies’ results of operations.
(5) Investments in Securities
Debt securities and equity securities classified as available-for-sale securities whose fair values are readily determinable are carried at the fairvalues 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-sale securities whose fair values cannot readily be determined are stated principally at cost.
In cases where declines in the fair values of individual securities are assessed to be other than temporary, the cost of the security is reduced
to net realizable value and the impairment loss is charged to income. Realized gains and losses are determined using the moving-averagemethod and are reflected in income.
(6) Derivative Transactions
All derivatives are stated at fair value, and changes in fair value are included in income for the period in which they arise, except for derivatives
that are designated as “hedging instruments” (see “(7) Hedge Accounting” below).

26

Annual Report 2011

(7) Hedge Accounting
All gains or losses arising from changes in the fair values of the derivatives are designated as “hedging instruments,” which are deferred as acomponent of net assets, net of applicable taxes. The gains or losses on the hedging instruments are included in net income in the same period
during which the gains and losses on the hedge items or transactions are recognized. For foreign exchange forward contracts, if they meet
conditions for hedge accounting, the difference between the contract rate and spot rate at the date of the contract is recognized over the period
from the contract date to the settlement date.
The derivatives designated as hedging instruments are principally foreign exchange forward contracts. The related hedged items are tradeaccounts payable and trade accounts receivable denominated in foreign currencies and scheduled transactions.
The Company has a policy of utilizing hedging instruments in order to reduce the exposure to the risk of foreign currency exchange rate
fluctuation.
(8) Property, Plant and Equipment
The Company and its domestic consolidated subsidiaries provide depreciation by the declining-balance method at rates based on theestimated useful lives of assets which are prescribed by Japanese income tax regulations, except for certain buildings (other than
improvements) acquired on and after April 1998, which are depreciated by the straight-line method pursuant to an amendment to Japaneseincome tax law.
Overseas consolidated subsidiaries provide depreciation by the straight-line method.
The useful lives of property, plant and equipment are summarized as follows:
Buildings and structures

3 to 50 years

Other

2 to 20 years(9) Amortization
Intangible assets and long-term prepaid expenses are amortized by the straight-line method.
Software costs for internal use are amortized over their expected useful lives (five years) by the straight-line method.
(10) Income Taxes
The accounting standards for income taxes require that deferred income taxes be accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in 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 incomein the years in which those temporary differences are expected to be recovered or settled, and the effect on deferred tax assets and liabilities ofa change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to reducedeferred tax assets to the amount that is realizable.
(11) Allowances 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 Company and subsidiaries designate certain accounts as highly doubtful accounts andprovide a specific allowance for these accounts based on the management’s detailed credit analysis. Other than these accounts, the Company
provides an allowance for doubtful accounts based on the Company’s historical average charge-off ratio.
(12) Allowances for Sales Returns
An allowance for sales returns is provided for the estimated losses based on the actual percentage of sales return in prior years and grossprofit margin.
(13) Retirement Benefits
Accrued retirement benefits are provided for at the present value of the projected benefit obligation less the estimated fair value of plan assets
and deferred gains or losses at the balance sheet date. Unrecognized prior service costs are amortized and charged or credited to income on astraight-line basis over 5 to 10 years, which is within the related employees’ average remaining service years. Unrecognized actuarial
differences are amortized on a straight-line basis over 5 to 10 years, which is within the related employees’ average remaining service years,
from the year following the one in which they arise.
Accrued retirement benefits for directors and statutory auditors are provided for at the amount required at the balance sheet dates in

ONWARD HOLDINGS CO., LTD.

27

accordance with the internal rules of the Company and certain consolidated subsidiaries.
(14) Provision for Point Program
The provision for point program was provided for the future cost generating from the utilization of points that customers of certain consolidated
subsidiaries have earned under the point service program which is for sales promotions. The Company reserves an amount consideredappropriate to cover possible utilization of the points during and after the next fiscal year.
(15) Accounting for Leases
Previously, finance leases, except for those where the legal title of the underlying property is transferred from the lessor to the lessee at the endof the lease term, are accounted for similarly to operating leases. On March 30, 2007, the ASBJ issued ASBJ Statement No.13, “AccountingStandard for Lease Transactions,” which revised the former accounting standard for lease transactions issued on June 17, 1993, and ASBJ
Guidance No.16, “Guidance on Accounting Standard for Lease Transactions,” which revised the former guidance issued on January 18, 1994.
From the year ended February 28, 2010, the Company adopted the revised accounting standards. The revised accounting standards requirethat all finance lease transactions shall be capitalized. Leased assets related to finance lease transactions without title transfer are depreciatedon a straight-line basis, over the lease periods as their useful lives and no residual value. Regarding finance leases transactions without title
transfer for which the starting date for the lease transactions is prior to the initial fiscal year in which these new accounting standards apply, theCompany and its domestic consolidated subsidiaries have continued to recognize lease payments as expenses. The change did not have amaterial impact on the Companies’ results of operations.
(16) 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 thepurchase of goods and services are not included in the accompanying consolidated statements of operations.
(17) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits which can bewithdrawn on demand, and short-term investments which are readily convertible into cash or with an original maturity of three months or less,which represent insignificant risk of changes in value.
(18) Impairment of Long-Lived Assets
The standard of impairment of long-lived assets requires that fixed assets be reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be 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 thecontinued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which thecarrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use andeventual disposition of the asset or the net selling price at disposition.
(19) Accrued Bonuses to Employees
Allowance for bonuses to employees are provided by the estimated amounts, which are obligated to pay to employees after the fiscal year-end,
based on services provided during the current period.
(20) Directors’ Bonuses
Under the standard of directors’ bonuses, directors’ bonuses are accounted for as an expense as incurred, instead of being accounted for as
an appropriation of retained earnings upon approval at a general meeting of shareholders.
(21) United States Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of ¥81.71=US$1, the rate of exchange asof February 28, 2011, has been used in translation. The inclusion of such amounts is not intended to imply that Japanese yen have been or
could be readily converted, realized or settled in U.S. dollars at that rate or any other rate.

28

Annual Report 2011

(22) Reclassifications
Certain reclassifications have been made to the prior year’s consolidated financial statements to conform with the presentation used for theyear ended February 28, 2011.
(23) Goodwill
Goodwill is evaluated on an individual basis and amortized on a straight-line basis within 20 years.
3. Financial Instruments
1. Matters pertaining to the status of financial instruments(1) Policy on financial instruments
The Company and its subsidiaries invest their funds in short-term deposits and meet their financing needs through bank loans. The Company
and its subsidiaries utilize derivatives to hedge various risks as described in detail below and do not enter into derivatives for trading or
speculative purposes.
(2) Financial instruments and risks
Accounts and notes receivable are exposed to credit risk of customers. Trade receivables denominated in foreign currencies, being subject torisks associated with changes in the foreign currency exchange rates, are hedged by forward exchange contracts.
Investment securities mainly comprise stocks of companies with which the Company and its subsidiaries have business alliances and are
exposed to risks associated with fluctuations of their market prices.
Accounts and notes payable are due within one year. Trade payables denominated in foreign currencies, being subject to risks associatedwith changes in foreign currency exchange rates, are hedged by forward exchange contracts, currency swaps, and currency option trading. The
purpose for loans is for working capital (mainly short-term) and funds of capital investment (long-term). Interest-rate swaps are used to fix
interest expenses for interest rate risk of a portion of long-term loans payable.
Regarding derivatives, forward foreign exchange contracts, currency swap, and currency option trading are used to hedge the foreignexchange rate fluctuation risk associated with the operating receivables and payables, and interest rate swap is used to mitigate the interest
rate risk for loans payable.
(3) Risk management for financial instruments(a) Monitoring of credit risk (the default risk for customers and counterparties)
In accordance with the internal policies of the Company and its consolidated subsidiaries for managing credit risk arising from notes andaccounts receivable, the Company and its subsidiaries monitor creditworthiness of their main customers and counterparties on a periodicalbasis and monitor due dates and outstanding balances by individual customers. Additionally, as means to mitigate credit risks, derivativetransactions are only conducted with high-credit worthy financial institutions as counterparties.
(b) Monitoring of market risk (the risk arising from fluctuations in foreign exchange rates, interest rates and others)
The Company and its consolidated subsidiaries hedge risks associated with changes in the foreign currency exchange rates, arising from tradereceivable and payable denominated in foreign currencies mainly by forward exchange contracts. Additionally, interest rate swap contracts areused to mitigate the risks associated with fluctuations in the interest payments on the long-term loans payable.
For investment securities, the Company and its consolidated subsidiaries periodically review their fair values and the financial position of theissuers. Additionally, the Company and its consolidated subsidiaries continuously evaluate whether securities should be maintained taking into
account their fair values and relationships with the issues.
In derivative transactions, the division in charge of each derivative transaction follows the internal management policies within the actual
demand. Additionally, the Company and its consolidated subsidiaries monthly review transactions balance and the valuation gain (loss).
(c) Monitoring of liquidity risk related to fund procurement (the risk that the Company and its consolidated subsidiaries may not be able to meettheir obligations on scheduled due dates)
In order to manage liquidity risk, the Company and its consolidated subsidiaries timely prepare and update the cash flow plans based upon thereport and maintain fund liquidity.

ONWARD HOLDINGS CO., LTD.

29

(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price if available. When no quoted market price is available, fair value isreasonably estimated. Since various variable assumptions are reflected in estimating the fair value, different assumptions could result indifferent fair values.
2. Matters related to fair values of financial instruments
The following are the consolidated balance sheet amounts, the fair values and the differences between them as of February 28, 2011 (theclosing date of the consolidated account).

(a) Cash and time deposits(b) Accounts and notes receivable(c) Investment in securities
Available-for-sale securities
Investment to affiliates(d) Accounts and notes payable(e) Short-term loans payable(f) Long-term loans payable(Cover current portion of long-term loans
payable)(g) Derivative transactions

Millions of yen
Fair value¥ 30,939
25,399Difference¥ ――26,782
7,041(32,704)(27,354)

26,782
5,240(32,704)(27,354)―(1,801)――

327,764
86,172(400,241)(334,765)

327,764
64,134(400,241)(334,765)―(22,038)――(25,832)(1,469)(25,838)(1,469)6―(316,146)(17,984)(316,221)(17,984)

75―

Book value¥ 30,939
25,399Thousands of U.S. dollars
Book value
Fair value
Difference$―$ 378,646$ 378,646―
310,846
310,846

Notes:
1. Fair value measurement of financial instruments, including securities and derivatives(a) Cash and time deposits and (b) Accounts and notes receivable
Since these items are settled in a short period of time, their book value approximates fair value.
(c) Investment in securities
The fair value of equity securities is calculated by the quoted market price.
(d) Accounts and notes payable and (e) Short-term loans payable
Since these items are settled in a short period of time, their book value approximates fair value.
(f) Long-term loans payable
The fair values of long-term loans payable are measured as present values obtained by discounting the total amount of principal and interestat the estimated interest rate if similar loans payable were newly made. Of long-term loans payable that have a variable interest rate, the bookvalue is used as fair value, as they are deemed to reflect market interest rates within a short time.
(g) Derivative transactions
The fair value is calculated on the basis of the price quoted by the financial institutions.
2. Book values of financial instruments deemed extremely difficult to determine their fair value as of February 28, 2011 are as follows:
Millions of yen
February 28, 2011

Classification
Investment securities
Unlisted equity securities

Thousands of U.S. dollars
February 28, 2011

¥769

$9,416

The fair values of these items are not included in (3) “Investment securities” because their market prices are not available and whose fairvalues are deemed extremely difficult to determine.
3. The redemption schedule for monetary receivables and marketable securities with maturities as of February 28, 2011 is as follows:

Cash and time deposits
Accounts and notes receivable
Marketable and investment securities
Available for sale securities with maturities
Total

30

Annual Report 2011

Due within
1 year¥30,939
25,399―¥56,338

Millions of yen
1 to 55 to 10
years
years
¥ ―
¥ ―
1
―
58
¥ 59

―
¥ ―

Over 10
years
¥ ―
―

Due within
1 year$378,646
310,846

600
¥600

―
$689,492

Thousands of U.S. dollars
1 to 55 to 10
years
years
$ ―
$―
7
―
710
$ 717

―
$―

Over 10
years
$ ―
―
7,343
$7,343

4. Expected repayment amounts of long-term loans payable subsequent to the balance sheet date
See Note 14. “Short-Term Loans payable and Long-Term Loans payable”.
(Additional information)
Effective from March 1, 2010, the Company and its consolidated subsidiaries have adopted the “Accounting Standard for Financial Instruments”(ASBJ Statement No.10, March, 10, 2008) and the “Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ No.19
Guidance, March 10, 2008).
4. Investments in Securities(1) Information as of and for the Year Ended February 28, 2011(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2011 are summarized as follows:
Millions of yen

Thousands of U.S. dollars

Carrying
value

Acquisition
cost

Unrealized gain
(loss)

Carrying
value

Acquisition
cost

Unrealized gain
(loss)$ 29,909

Securities with unrealized gains:
Equity securities¥12,356¥ 9,994¥ 2,362$152,220$122,311

Other

42

35

7

517

423

94

Total

12,39810,0292,369

151,737

122,734

30,003(40,427)

Securities with unrealized losses:
Equity securities

14,165

17,468(3,303)

173,354

213,781

Other

218

291

(73)

2,673

3,562

(889)

Total

14,38317,759(3,376)

176,027

217,343(41,316)¥26,781¥27,788¥ (1,007)$328,764$340,077$ (11,313)

Total

Note: Non-Marketable equity securities of ¥337 million ($4,124 thousand) are not included in the above table because there were no quoted
market prices available and they are extremely difficult to determine the fair value.
(b) Available-for-sale securities sold during the year ended February 28, 2011:
Millions of yen

Thousands of
U.S. dollars

Proceeds from sale of securities

¥14

$174

Realized gain on sale of securities――

Realized loss on sale of securities――(c) Losses on impairment of available-for-sale securities recognized to reflect declines in market value considered to be other than temporary
were ¥1,321 million ($16,175 thousand) for the year ended February 28, 2011.
(d) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2011 was ¥7,473 million($91,455 thousand).

ONWARD HOLDINGS CO., LTD.

31

(2) Information as of and for the Year Ended February 28, 2010(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2010 are summarized as follows:
Millions of yen
Acquisition
cost

Fair value Unrealized gain(carrying value)(loss)

Securities with unrealized gains:¥ 8,173¥ 9,309

Other

Equity securities55

63¥ 1,136
8

Total

8,228

9,372

1,144
(4,853)

Securities with unrealized losses:
Equity securities

18,74013,887

Other

271

224

(47)

Total

19,011

14,111(4,900)¥27,239¥23,483¥(3,756)

Total

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

Proceeds from sale of securities¥12,858

Realized gain on sale of securities

2,361

Realized loss on sale of securities

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

Available-for-sale securities:
Non-marketable equity securities¥338(d) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2010 was ¥7,372 million.

32

Annual Report 2011

5. Derivative Transactions
Derivatives are used in order to hedge foreign exchange market risk on the transactions which occur in the normal course of business.
Derivatives are not used for speculative purposes or for highly leveraged transactions. Derivatives are executed with financial institutions withhigh credit ratings, and the Company does not anticipate significant losses due to the credit risks of its counterparties.
The contract or notional amounts and fair value of derivative financial instruments held as of February 28, 2011 are summarized as follows:(1) Derivative transactions not subject to hedge accounting:Millions of yen
Contract or notionalamounts

Valuation
gain (loss)

Fair value

Forward exchange contracts:
To buy foreign currency:
U.S. dollarEuro¥ 3,276¥ (422)¥ (422)

1,824

(68)

(68)

572

(8)

(8)

2,347

(307)

(307)

To sell foreign currency:
U.S. dollar
Currency swap agreements:
U.S. dollars received for Japanese yen
Currency option contracts:
Buy:

U.S. dollar call

2,622

94

94

Sell:

U.S. dollar put

3,358

(718)

(718)

Buy:

Euro dollar call

148

3

3

Sell:

Euro dollar put

296

(27)

(27)

¥14,443¥(1,453)¥(1,453)

Variable rate received for fixed rate

¥300

¥4

¥4

Variable rate received for variable rate

536

(7)

(7)

Fixed rate received for variable rate

100

(4)

(4)

¥936

¥(7)

¥(7)

Interest rate swap agreements:

Thousands of U.S. dollars
Contract or notionalamounts

Valuation
gain (loss)

Fair value

Forward exchange contracts:
To buy foreign currency:
U.S. dollarEuro$ 40,090$ (5,168)$ (5,168)

22,325

(828)

(828)

7,000

(104)

(104)

28,721(3,756)(3,756)To sell foreign currency:
U.S. dollar
Currency swap agreements:
U.S. dollars received for Japanese yen
Currency option contracts:
Buy:

U.S. dollar call

32,086

1,155

1,155

Sell:

U.S. dollar put

41,100(8,788)(8,788)Buy:

Euro dollar call

1,811

34

34

Sell:

Euro dollar put

3,621

(328)

(328)

$176,754$(17,783)$(17,783)

Variable rate received for fixed rate

$ 3,671

$ 49

$ 47

Variable rate received for variable rate

6,560

(86)

(86)

Fixed rate received for variable rate

1,224

(49)

(48)

$11,455

$(86)

$(87)

Interest rate swap agreements:

ONWARD HOLDINGS CO., LTD.

33

(2) Derivative transactions processed by hedge accounting:Millions of yen
Contract or notionalamounts

Hedged Items

Fair value

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

Accounts payable

¥189

¥(7)

Euro

Accounts payable

758

(2)

Bond

Accounts payable

13

0

¥960

¥(9)

Thousands of U.S. dollars
Contract or notionalamounts

Hedged Items

Fair value

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

Accounts payable$ 2,314$ (94)

Euro

Accounts payable

9,275

(20)

Bond

Accounts payable155

0$11,744$(114)

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

Valuation
gain (loss)

Fair value

Forward exchange contracts:
To buy foreign currency:¥ 2,744¥2,452¥ (292)

U.S. dollar
To sell foreign currency:
U.S. dollar

446

441

5

Yen

223

223

(0)

3,403

(214)

(214)

Currency swap agreements:
U.S. dollars received for Japanese yen
Currency option contracts:
Buy:
Sell:

U.S. dollar call
U.S. dollar put

3,016

178

178

3,876

(701)

(701)

Buy: Euro dollar call

817

14

14

Sell: Euro dollar put

570

(67)

(67)

¥15,095¥2,326¥(1,077)

Interest rate swap agreements:
Variable rate received for fixed rate

¥ 300

¥ 4

¥ 4

Variable rate received for variable rate

905

(20)

(20)

Fixed rate received for variable rate

100

(4)

(4)

¥1,305

¥(20)

¥(20)

6. Property, Plant and Equipment
The Japanese tax regulations allow a company to defer capital gains on the sale of qualified real property, if the company intends to offset suchgains against the cost of newly acquired fixed assets. When such accounting is followed, the cost of the new fixed assets is reduced to theextent of the deferred capital gains, thereby affecting related depreciation charges and accumulated depreciation.
Property, plant and equipment at February 28, 2010 and 2011 were reduced by ¥8,232 million and ¥8,178 million ($100,091 thousand),
respectively, representing accumulated deferred gains from eligible sales.

34

Annual Report 2011

7. Impairment Loss on Fixed Assets
For the years ended February 28, 2010 and 2011, the Company reviewed its long-lived assets for impairment and, as a result, recognized an
impairment loss as follows:
February 28, 2011
Thousands ofLocation

Usage

Tokyo metropolitan area and other

Business assets

Osaka Prefecture

Lease assets

Description

Millions of yen

U.S. dollars

Buildings and structures¥264$3,234

Other intangible assets

426

5,211

Other

230

2,822

Land

17

202

February 28, 2010
Location

Usage

Tokyo metropolitan area and other

Business assets

Kanagawa Prefecture

United States

Idle assets

Business assets

Description

Millions of yen

Buildings and structures

¥ 50

Other

200

Buildings and structures

15

Land

17

Other

12

Buildings and structures

―

Other

1

The long-lived assets are basically grouped by brand, and assets for lease and idle assets are grouped individually by each item. The
Company has recognized a loss on impairment on assets for lease and idle assets due to a significant decline in their market value, and on
business assets due to a continuous loss generated from their operating activities, by reducing their book value to the respective net realizablevalue of each asset.
The impairment loss on long-lived assets for the years ended February 28, 2010 and 2011 consisted of the following:Thousands of
U.S. dollars

Millions of yen
February 28,
2010

Buildings and structures

February 28,
2011

February 28,
2011

¥ 64

¥264

Land

17

17

202

Other Intangible assets

―

426

5,211

Other
Total

$ 3,234

213

230

2,822

¥294

¥937

$11,469

The net realizable value for these assets is based on their net selling price or their value in use. The net selling price is estimated by using
their estimated disposal price. The value in use is calculated by discounting the future cash flow with 5.0% and 6.5% discount rates for theyears ended February 28, 2010 and 2011, respectively.

ONWARD HOLDINGS CO., LTD.

35

8. Retirement Plan and Retirement Benefits
The Company and its certain subsidiaries have defined benefit retirement plans covering substantially all employees. Defined benefit retirement
plans include a plan which is governed by the regulations of the Japanese Welfare Pension Insurance Law, tax-qualified pension plans andplans for lump-sum retirement benefits.
The reserve for retirement benefits as of February 28, 2010 and 2011 is analyzed as follows:
Thousands of
U.S. dollars

Millions of yen

Projected benefit obligations

February 28,
2010

February 28,
2011

February 28,
2011$(460,366)¥(37,507)¥(37,616)

Plan assets (including employee retirement benefit fund)25,463

26,295

321,812Funded status(12,044)(11,321)(138,554)

Unrecognized prior service costs

(72)

(38)

(461)

Unrecognized actuarial differences

9,014

7,907

96,764(3,102)(3,452)(42,251)

171

16

194

¥ (3,273)¥ (3,468)$ (42,445)

Subtotal
Prepaid pension costAccrued retirement benefits

The net periodic pension expenses for the years ended February 28, 2010 and 2011 were as follows:
Thousands of
U.S. dollars

Millions of yen
2010

2011

2011

¥1,593¥1,611$19,722

Service cost
Interest cost

644

509

6,230

Expected return on plan assets

(144)

(173)

(2,122)

Amortization of unrecognized prior service costs

(35)

(35)

(422)

Amortization of unrecognized actuarial differences

1,318

1,242

15,194

Net periodic pension expenses¥3,376¥3,154$38,602

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

As of February 28, 2010

As of February 28, 2011

Straight-line basis

Straight-line basis

Discount rate

1.5%

1.5%

Expected rate of return on plan assets

0.2~1.5%

0.2~1.5%

Amortization of unrecognized prior service costs

5~10 years

5~10 years

Amortization of unrecognized actuarial differences

5~10 years

5~10 years

9. Notes to Consolidated Statements of Cash Flows(1) Cash and cash equivalents at February 28, 2010 and 2011 consisted of the following:
Millions of yen
February 28,
February 28,
2010
2011

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

36

Annual Report 2011

Thousands of
U.S. dollars
February 28,
2011¥34,330¥30,939(1,651)(2,305)(28,211)¥32,679¥28,634$350,435$378,646

(2) Payment for acquisition of consolidated subsidiaries resulting in a change in the scope of consolidation
For the year ended February 28, 2010, due to the acquisition of shares of the below company, the below company was newly consolidated.
The assets and liabilities of the company at the time of initial consolidation, additional cash paid for the acquisition, cash and cash equivalents
held by the subsidiary and net payment for acquisition of the subsidiary were as follows:(Island Co., Ltd.)
Millions of yen

Current assets¥2,745

Fixed assets

801

Goodwill on consolidation

3,389

Current liabilities(1,974)Long-term liabilities(1,801)

Cash paid for acquisition of the subsidiary

3,160

Cash and cash equivalents held by the subsidiary(824)

Payment for acquisition of the subsidiary¥2,336

10. Lease Transactions
Certain finance lease contracts that are not deemed to transfer the ownership of the leased assets to lessees are accounted for as operatingleases, which is still permitted by Japanese accounting principles. Certain key information on such lease contracts of the Companies for theyears ended February 28, 2010 and 2011 are as follows:(Lessee)
Assumed data as to acquisition cost, accumulated depreciation, accumulated impairment loss and net book value of the leased assets, which
included the portion of interest thereon, as of February 28, 2010 and 2011 are summarized as follows:
Millions of yen

Acquisition cost

Net book value

Other$ 6,458

Total$17,334(376)(1,012 )(7,785)(4,597)(12,382)―(145)(1,771)―(1,771)260$ 1,320$ 1,861$ 3,181(1,601)

(636)

(145)

(145)

¥ 662

¥ 108

¥ 152

Total
¥ 2,408(1,184)

(417)

(145)

―

¥ 398

¥ 264

Accumulated depreciation

Total¥ 1,417

Other
¥ 528

Other
¥ 681

February 28,
2011

Tools,
furniture,and fixtures$ 10,876

Tools,
furniture,and fixtures¥ 889

Tools,
furniture,and fixtures¥ 1,727

Accumulated impairment loss

Thousands of U.S. dollars
February 28,
2011

February 28,
2010¥

The scheduled maturities of future lease payments on such lease contracts as of February 28, 2010 and 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen
February 28,
2010

February 28,
2011

February 28,
2011

Due within one year

¥389

¥227

$2,775Due over one year

418

178

2,176

¥807

¥405

$4,951

Scheduled maturities of future leases:

Lease expenses, reversal of impairment loss of leased assets, depreciation and impairment loss for the years ended February 28, 2010 and2011 are as follows:
February 28,
2010

February 28,
2011

Thousands of
U.S. dollars
February 28,
2011$4,654

Millions of yen

Lease expenses for the year

¥637

¥380

Reversal of impairment loss of leased assets

17

―

―

Depreciation

637

380

4,654

ONWARD HOLDINGS CO., LTD.

37

The Companies’ operating lease contracts:
The scheduled maturities of future lease payments on operating lease contracts as of February 28, 2011 are as follows:
Millions of yen

Thousands of
U.S. dollars

Due within one year¥102

$1,251

Due over one year

171

2,088

¥273

$3,339

Scheduled maturities of future leases:(Lessor)
The scheduled maturities of future lease income on such lease contracts as of February 28, 2010 and 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen
February 28,
2011

February 28,
2010

February 28,
2011

Due within one year

¥ 63

¥ 33

Due over one year

56

23

285

¥119

¥ 56

$ 690

$ 405

11. Income Taxes
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities as at February 28,
2010 and 2011 consisted of the following elements:
Thousands of
U.S. dollars

Millions of yen
February 28,
2010

February 28,
2011

February 28,
2011$ 26,931

Deferred tax assets:
Valuation loss on inventories¥ 2,648¥ 2,201

Evaluation loss on investments in unconsolidated subsidiaries

177

173

2,117

Accrued bonuses to employees

645

647

7,922

3,489

3,664

44,838

64

57

696

Allowance for bad debt

1,310

1,087

13,308Tax loss carryforwards

11,872

10,187

124,672

Impairment loss

5,993

7,257

88,808

747

742

9,079

4

38

463

4,097

3,688

45,150Accrued retirement benefits
Accrued retirement benefits for directors and corporate auditors

Investments in securities
Net unrealized gains on available-for-sale securities
Other
Subtotal

31,04629,741

363,984(19,325)(18,804)(230,125)

11,721

10,937

133,859

Gain on securities contributed to an employee retirement benefit trust

(699)

(161)

(1,976)

Provision for deferred capital gains on real property for tax purposes

(21)

(20)

(251)

(1,590)(1,335)(16,332)

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

Other

38

Total deferred tax liabilities(2,310)(1,516)(18,559)

Net deferred tax assets¥ 9,411¥ 9,421$ 115,300

Annual Report 2011

The reconciliation of the difference between the statutory tax rate and the effective tax rate for the years ended February 28, 2010 and 2011 is
as follows:%
Statutory tax rate

2010

2011

40.7

40.7

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

4.3

3.9

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

(1.5)

(1.0)

Goodwill and amortization

14.1

12.3

Other

7.7

10.9

65.3

66.8

Effective tax rate

12. Revaluation of Land
On February 28, 2002, the Company revaluated its land for business use at market value as a result of the application of the Land Revaluation
Law, which permits a one-time revaluation of land for business use.
As of February 28, 2011, the net accumulated revaluation loss amounted to ¥11,004 million ($134,668 thousand), which is presented as aseparate component of net assets as “Net revaluation loss of land.” Related deferred tax liabilities of ¥5,942 million ($72,715 thousand) is
recognized.
As of February 28, 2010, the net accumulated revaluation loss amounted to ¥10,993 million, which is presented as a separate component of
net assets as “Net revaluation loss of land.” Related deferred tax liabilities of ¥5,949 million is recognized.
The difference between the market value of land subject to the revaluation and the book value was ¥1,729 million ($21,156 thousand) as at
February 28, 2011.

13. Commitments and Contingent Liabilities
The Company was contingently liable as a guarantor for certain affiliates’ bank loans. The outstanding balance of such bank loans guaranteed
as at February 28, 2010 and 2011 aggregated to ¥48 million and ¥23 million ($286 thousand), respectively.

ONWARD HOLDINGS CO., LTD.

39

14. Short-Term Loans payable and Long-Term Loans payable
Short-term loans payable at February 28, 2010 and 2011 represented loans, principally from banks. The weighted-average interest rate onthese loans was 1.5% in 2010 and 1.2% in 2011.
Long-term loans payable at February 28, 2010 and 2011 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen
February 28,
2010

February 28,
2011

February 28,
2011¥27,871¥25,832$316,146

Unsecured loans, principally from banks, maturing in installments through2014 with weighted average interest of 1.0% at February 28, 2011
Less current portion

3,817

3,534

43,250¥24,054¥22,298$272,896

Millions of yen

Thousands of
U.S. dollars¥1,016$12,439

Lease obligations at February 28, 2011 are summarized as follows:

Lease obligations
Less current portion of lease obligations

304

3,722

¥ 712

$ 8,717

The aggregate annual maturities of long-term loans payable after February 29, 2012 are as follows:
Millions of yen

Thousands of
U.S. dollars

Year ending February 28 or 29:
2013¥ 3,446$ 42,180

2014

18,849230,676

2015

3

40

2016

―

―

The aggregate annual maturities of lease obligations after February 29, 2012 are as follows:
Millions of yen

Thousands of
U.S. dollars

Year ending February 28 or 29:

40

2013

¥304

2014

276

3,379

2015

124

1,514

2016

8

100

Annual Report 2011

$3,724

Bonds at February 28, 2010 and 2011 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

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

February 28,
2010
¥ 20

February 28,
2011
¥ ―

February 28,
2011$―

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

150

150

1,836

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

75

25

303

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

70

50

612

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

100

67

820

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

100

66

815

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

200

160

1,958

0.79% unsecured yen bonds issued by a subsidiary, due 2010
Less current portion

8

―

―

723

518

6,344

205

151

1,850

¥518

¥367

$4,494

The aggregate annual maturities of bonds after February 29, 2012 are as follows:
Millions of yen

Thousands of
U.S. dollars

2013

¥277

$3,392

2014

50

612

2015

40

490

2016

―

―

Year ending February 28 or 29:

15. Shareholders’ Equity
Under the Corporation Law of Japan, 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 priceof new shares as additional paid-in capital.
The Corporation Law of Japan 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 the legal reserve equals 25% of their respective stated capital. The Corporation Law of Japan also provides that additional paid-in
capital and the legal reserve are available for appropriations by a resolution of the shareholders. Balances of the legal reserve are included inretained earnings in the accompanying consolidated balance sheets.
Cash dividends charged to retained earnings for the years ended February 28, 2011 and 2010 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 inaccordance with the Corporation Law of Japan.
Dividends to be paid after the balance sheet date, which were approved by the general meeting of shareholders held on May 26, 2011, are as
follows:(a) Total dividends(b) Source of dividends(c) Cash dividends per common share(d) Date to determine which shareholders receive the dividends(e) Effective date

¥3,760 million ($46,021 thousand)
Retained earnings¥24 ($0.29)
February 28, 2011
May 27, 2011

ONWARD HOLDINGS CO., LTD.

41

16. Per Share Information
Net income per share of common stock is computed based upon the weighted-average number of shares of common stock outstanding during
each year. Cash dividends per share shown for each year in the accompanying consolidated statements 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 net income per share for the years ended February 28, 2010 and 2011 is as follows:
Thousands of
U.S. dollars

Millions of yen

Net income
Less: Components not pertaining to common shareholders

2010

2011

2011

¥ 2,188¥ 2,723$ 33,320―――

Net income pertaining to common stock¥ 2,188¥ 2,723$ 33,320

Average outstanding shares of common stock (thousand shares)

156,655

156,680

156,680

628

892

892

Effect of dilutive stock options (thousand shares)

17. Related-Party Transactions
Year Ended February 28, 2011
The Company leased land from Takeshi Hirouchi, Chairman and CEO of ONWARD HOLDINGS Co., Ltd., during the year and the rental fee
was ¥7 million ($89 thousand). Also, Mr. Hirouchi paid a rental fee of ¥16 million ($199 thousand) to the Company for a house. The rental fees
were determined by the average market prices.
Year Ended February 28, 2010
The Company leased land from Mr. Hirouchi, Chairman and CEO of ONWARD HOLDINGS Co., Ltd., during the year and the rental fee was¥7 million. Also, Mr. Hirouchi paid a rental fee of ¥16 million to the Company for a house. The rental fees were determined by the average
market prices.

18. Stock Options
The cost recognized for the stock options for the years ended February 28, 2011 and 2010 was ¥162 million ($1,988 thousand) and ¥164
million, respectively, which is included in selling, general and administrative expenses.
2010 Stock Option Plan (No. 8)
Under the 2010 stock option plan (No. 8), stock options were granted to 5 directors of the Company on June 18, 2010. They are exercisable in
the period from June 19, 2010 to June 18, 2040. The terms of the options include certain limitations on the exercisability under which grantees
can exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥613 ($7.50)
115,800 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2011 is as follows:2010 stock option plan(No. 8)Non-vested:
Outstanding at February 28, 2010
Granted

115,800

Forfeited

2,700

VestedOutstanding at February 28, 201142―

Annual Report 2011―
113,100

The fair value of the 2010 stock options (No. 8) was estimated using the Black-Scholes option-valuation model with the following assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

33.456%
5 years and 10 months¥24 per share
0.5110%The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult toestimate forfeiture in the future.
2010 Stock Option Plan (No. 7)
Under the 2010 stock option plan (No. 7), stock options were granted to 8 directors and 22 executive officers of the Company’s subsidiary on
March 19, 2010. They are exercisable in the period from March 20, 2010 to February 29, 2040. The terms of the options include certain
limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose theirpositions as directors of the Company.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥475 ($5.81)
194,600 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2011 is as follows:2010 stock option plan(No. 7)
Non-vested:
Outstanding at February 28, 2010―

Granted

194,600

Forfeited

2,900

VestedOutstanding at February 28, 2011―
191,700

The fair value of the 2010 stock options (No. 7) was estimated using the Black-Scholes option-valuation model with the following assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

33.080%9 years and 8 months¥30 per share
1.3046%

The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.
2009 Stock Option Plan (No. 6)
Under the 2009 stock option plan (No. 6), stock options were granted to 5 directors of the Company on June 19, 2009. They are exercisable in
the period from June 20, 2009 to June 19, 2039. The terms of the options include certain limitations on the exercisability under which grantees
can exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥432 ($5.29)
155,000 shares

ONWARD HOLDINGS CO., LTD.

43

A summary of the scale and movement of the stock option plan for the year ended February 28, 2011 is as follows:2009 stock option plan(No. 6)
Non-vested:
Outstanding at February 28, 2010

155,000

Granted―Forfeited―

VestedOutstanding at February 28, 2011―
155,000.
The fair value of the 2009 stock options (No. 6) was estimated using the Black-Scholes option-valuation model with the following
assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

32.873%
6 years and 10 months¥30 per share
1.0478%The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.
2009 Stock Option Plan (No. 5)
Under the 2009 stock option plan (No. 5), stock options were granted to 11 directors and 19 executive officers of the Company’s subsidiary on
March 18, 2009. They are exercisable in the period from March 19, 2009 to February 28, 2039. The terms of the options include certain
limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose theirpositions as directors or executive officers of the Company’s subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥362 ($4.43)
268,900 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2011 is as follows:2009 stock option plan(No. 5)
Non-vested:
Outstanding at February 28, 2010

264,600

Granted―Forfeited

4,700

Vested3,000

Outstanding at February 28, 2011

256,900

Vested:Outstanding at February 29, 2010
Vested3,000

Exercised―

Forfeited―

Outstanding at February 28, 201144―

Annual Report 2011

3,000

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

34.842%
9 years and 11 months¥30 per share
1.3003%The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.
2008 Stock Option Plan (No. 4)
Under the 2008 stock option plan (No. 4), stock options were granted to 12 directors and 21 executive officers of the Company’s subsidiary on
June 20, 2008. They are exercisable in the period from June 21, 2008 to February 28, 2038. The terms of the options include certain limitations
on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as
directors or executive officers of the Company’s subsidiary.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised¥1 ($0.01)¥696 ($8.52)

Fair value at the grant date

¥905 ($11.08)

Number of stock options granted

91,100 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2011 is as follows:2008 stock option plan(No. 4)
Non-vested:
Outstanding at February 28, 2010
GrantedForfeited

91,100――

Vested24,000

Outstanding at February 28, 2011

67,100

Vested:Outstanding at February 29, 2010―

Vested24,000Exercised

19,000Forfeited―

Outstanding at February 28, 2011

5,000

2008 Stock Option Plan (No. 3)
Under the 2008 stock option plan (No. 3), stock options were granted to 5 directors of the Company on June 20, 2008. They are exercisable in
the period from June 21, 2008 to June 20, 2038. The terms of the options include certain limitations on the exercisability under which grantees
can exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
A summary of information for the stock option plan is as follows:
Exercise price¥1 ($0.01)

Fair value at the grant date

¥944 ($11.55)

Number of stock options granted

70,000 shares

ONWARD HOLDINGS CO., LTD.

45

A summary of the scale and movement of the stock option plan for the year ended February 28, 2011 is as follows:2008 stock option plan(No. 3)
Non-vested:
Outstanding at February 28, 2010

68,800Granted―Forfeited―

Vested3,800

Outstanding at February 28, 2011

65,000

Vested:Outstanding at February 29, 2010
VestedExercised
Forfeited
Outstanding at February 28, 2011

―
3,800
―
―
3,800

2007 Stock Option Plan (No. 2)
Under the 2007 stock option plan (No. 2), stock options were granted to 5 directors and 2 corporate auditors of the Company on July 20, 2007.
They are exercisable in the period from July 21, 2007 to July 20, 2037. The terms of the options include certain limitations on the exercisability
under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors or corporate
auditors.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥640 ($7.83)¥1,284 ($15.71)
40,000 shares

A summary of the scale and movement of the stock option plan for the year ended February 28, 2011 is as follows:2007 stock option plan(No. 2)
Non-vested:
Outstanding at February 28, 2010

23,300Granted―Forfeited―

Vested―Outstanding at February 28, 201123,300

Vested:Outstanding at February 28, 2010
Vested15,200―Exercised

10,500Forfeited―

Outstanding at February 28, 2010

4,700

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

46

Annual Report 2011

2006 Stock Option Plan (No. 1)
Under the 2006 stock option plan (No. 1), stock options were granted to 12 directors and 2 corporate auditors of the Company on June 20,
2006. They are exercisable in the period from July 1, 2006 to June 30, 2036. The terms of the options include certain limitations on theexercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors
or corporate auditors.
A summary of information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date
Number of stock options granted¥1 ($0.01)¥691 ($8.46)¥1,541 ($18.86)
63,000 shares

A summary of the scale and movement of the Company’s stock option plan for the year ended February 28, 2011 is as follows:
2006 stock option plan(No. 1)
Non-vested:
Outstanding at February 28, 2010

20,000Granted―Forfeited―

VestedOutstanding at February 28, 2011―
20,000

Vested:Outstanding at February 28, 2010

23,500

Vested―Exercised

3,000

Forfeited
Outstanding at February 28, 2010―
20,500The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

ONWARD HOLDINGS CO., LTD.

47

19. Segment Information(1) Industry Segment Information
The Company and its consolidated subsidiaries operate principally in two industrial segments, “Apparel” and “Other.”
The Apparel Division produces and sells a wide range of women’s and men’s clothing, including dresses, suits, shirts, skirts, sweaters,
trousers and casual wear.
The Other Division operates logistics, sports facilities, resort facilities, etc.
Segment information classified by industry segment of the Companies for the year ended February 28, 2011 is as follows:
Millions of yen

For the year ended February 28, 2011
Industry segment
ApparelSales to outside customers
Intersegment sales¥ 229,738
12

Total
Costs and expenses

Other

¥

229,750
220,769

Total

14,813
6,982¥ 244,551
6,994

21,795
21,912

251,545
242,681

Operating income (loss)

¥

8,981

¥

(117)

AssetsDepreciation and amortization¥ 191,020
¥
4,629

¥
¥

30,462777

Impairment loss

¥

921

¥

―

¥

Capital expenditures

¥

4,724

¥

626

¥

¥

Consolidated
total

¥

¥

(6,994)

244,551―(6,994)(7,059)244,551
235,622

―

8,864

¥

65

¥

8,929

¥ 221,482
¥
5,406

¥
¥

60,161
236¥¥

281,643
5,642

921

¥

16

¥

937

5,350

¥

55

¥

5,405

Thousands of U.S. dollars

For the year ended February 28, 2011

Industry segment
ApparelSales to outside customers
Intersegment sales

Elimination ofintersegment sales$ 2,811,630

Total
Costs and expenses

Other
$

Total

Elimination ofintersegment sales―

181,281$ 2,992,911

144

85,45085,594(85,594)―

2,811,774

266,7313,078,505(85,594)

2,992,911

2,701,857

268,164

Operating income (loss)$

109,917$(1,433)

AssetsDepreciation and amortization$ 2,337,774$

372,807$56,653$

Impairment loss$

11,266$

Capital expenditures$

57,819$$Consolidated
total

2,970,021$$ 2,992,911(86,382)

2,883,639

108,484$788$$ 2,710,581$

736,275

109,272

9,511$

66,164

$

2,890

$

―

$

11,266$

203$

11,4697,664$

65,483$669$

66,152$ 3,446,856
69,054The management expenses in Elimination of intersegment sales as of February 28, 2011 were ¥3,719 million ($45,509 thousand) and theassets used for management activities as of February 28, 2011 were ¥189,574 million ($2,320,083 thousand).
Segment information classified by industry segment of the Companies for the year ended February 28, 2010 is as follows:
For the year ended February 28, 2010

Millions of yen
Industry segment
ApparelSales to outside customers
Intersegment sales¥ 234,181
21

Total
Costs and expenses

Other

¥

234,202229,645

Total

14,454
6,743¥ 248,635
6,764

21,197
21,236

255,399
250,881¥

Elimination ofintersegment sales

Consolidated
total

¥

¥

―
(6,764)(6,764)(6,630)248,635―
248,635
244,251

Operating income (loss)

¥

4,557

¥

(39)

AssetsDepreciation and amortization¥ 201,278
¥
4,735

¥
¥

31,753
699

4,518

¥

(134)

¥

4,384

¥ 233,031
¥
5,434

¥
¥

59,538313¥¥

292,569
5,747

Impairment loss

¥

251

¥

―

¥

251

¥

43

¥

294

Capital expenditures

¥

4,777

¥

438

¥

5,215

¥

579

¥

5,794

The management expenses transferred to Elimination of intersegment sales as of February 28, 2010 were ¥3,703 million and the assets used
for management activities as of February 28, 2010 were ¥186,048 million.

48

Annual Report 2011

(2) Geographic Segment Information
The major countries or regions in the respective divisions are as follows:
Europe: United Kingdom, Italy, France and Germany
Other: U.S.A., China and South Korea
Segment information classified by geographic segment of the Company for the year ended February 28, 2011 is as follows:
Millions of yen

For the year ended February 28, 2011
Geographic segment

Japan
Sales to outside customers
Intersegment sales¥ 205,876
1,880

Total
Costs and expenses

Europe¥207,756
196,498

30,360
353

Other

¥

30,71333,308

Total

8,315
198

¥ 244,551
2,431

8,513
8,433

246,982
238,239

Operating income (loss)¥

11,258¥(2,595)¥80

Assets¥ 148,367¥

59,784¥

12,882¥Elimination ofintersegment sales¥

Consolidated
total(2,431)¥ 244,551―(2,431)(2,617)

244,551
235,622

―

8,743

¥

186

¥ 221,033¥

60,610¥¥ 281,643

8,929

Elimination ofintersegment sales

Consolidated
total

Thousands of U.S. dollars

For the year ended February 28, 2011

Geographic segment

Japan

Europe

Other

Total

Sales to outside customers
Intersegment sales$2,519,594
23,014$ 371,552
4,325$ 101,765
2,421$ 2,992,911
29,760Total
Costs and expenses

2,542,608
2,404,823

375,877
407,601

104,186
103,2113,022,671
2,915,635

Operating income (loss)$ 137,785$ (31,724)$

975$ 107,036

$

2,236

$ 109,272

Assets$1,815,778$ 731,662$ 157,652$ 2,705,092$ 741,764$3,446,856$(29,760)$2,992,911―(29,760)(31,996)

2,992,911
2,883,639―

The management expenses in Elimination of intersegment sales as of February 28, 2011 were ¥3,719 million ($45,509 thousand) and theassets used for management activities as of February 28, 2011 were ¥189,574 million ($2,320,083 thousand).
Segment information classified by geographic segment of the Company for the year ended February 28, 2010 is as follows:
For the year ended February 28, 2010

Millions of yen
Geographic segment

Japan
Sales to outside customers
Intersegment sales¥ 204,889
1,434

Total
Costs and expenses

Europe¥206,323
197,023

36,056
345

Other

¥

36,401
40,574

Total

7,690
97

¥ 248,635
1,876

7,787
8,689

250,511
246,286

Operating income (loss)

¥

9,300

¥

(4,173)¥(902)

Assets¥ 152,818¥

66,241¥

13,812¥Elimination ofintersegment sales¥

Consolidated
total―(1,876)¥ 248,635―(1,876)(2,035)

248,635
244,251

4,225

¥

159

¥ 232,871¥

59,698¥4,384¥ 292,569

The management expenses transferred to Elimination of intersegment sales as of February 28, 2010 were ¥ 3,703 million and the assets used
for management activities as of February 28, 2010 were ¥186,048 million.

ONWARD HOLDINGS CO., LTD.

49

(3) Overseas Sales
The major countries or regions in the respective divisions are as follows:
Europe: United Kingdom, Italy, France and Germany
Other: U.S.A., China and South Korea
The overseas sales are sales except for sales to the Japan area of the Company and its consolidated subsidiaries.
Segment information classified as overseas sales of the Company for the year ended February 28, 2011 is as follows:
Millions of yen

For the year ended February 28, 2011

Overseas sales

Overseas sales
Consolidated sales
Percentage of overseas sales against consolidated sales

Europe

Other

Total

¥19,480¥16,626¥36,106
244,551

8.0%

6.8%

14.8%

Thousands of U.S. dollars

For the year ended February 28, 2011

Overseas sales

Overseas sales
Consolidated sales
Percentage of overseas sales against consolidated sales

Europe

Other

Total

$238,402$203,473$ 441,875
2,992,911

8.0%

6.8%

14.8%

Segment information classified as overseas sales of the Company for the year ended February 28, 2010 is as follows:
For the year ended February 28, 2010

Millions of yen
Overseas sales

Overseas sales
Consolidated sales
Percentage of overseas sales against consolidated sales

50

Annual Report 2011

EuropeOther¥24,220¥16,725¥ 40,945
248,635

Total

9.7%

6.7%

16.5%

ONWARD HOLDINGS CO., LTD.

51

PRINCIPAL SUBSIDIARIES
Overseas Subsidiaries
J. PRESS, INC.
262 York Street,
New Haven, CT 06511, U.S.A.
Tel: (1) 203-772-1310
ONWARD KASHIYAMAHONG KONG LTD.
Units 1208-9, Lippo Sun Plaza,
28 Canton Road, T.S.T.,
Kowloon, Hong Kong,
People’s Republic of China
Tel: (852) 2721-7068

ONWARD KASHIYAMA VIETNAM LTD.
11th Floor, 60 Nguyen Dinh Chieu St.,
Dist. 1, Ho Chi Minh City, Vietnam
Tel: (84) 8-3911-8857
HORLOGE SAINT BENOIT S.A.
22 Rue Saint Benoit,
75006 Paris, France
Tel: (33) 1-4544-1118
ONWARD BEACH RESORT GUAM, INC.
445 Governor Carlos G. Camacho Road,
Tamuning, Guam 96911, U.S.A.
Tel: (1) 671-647-7777

GIBO’ CO. S.p.A.
Via Cassia 69, Tavarnuzza,
50029 Firenze, Italy
Tel: (39) 055-237-2020

ONWARD GOLF RESORT GUAM, INC.
#825, Route 4A, Talofofo,
Guam 96915, U.S.A.
Tel: (1) 671-789-5555

ONWARD ITALIA S.p.A.
Via Della Spiga 9, 20121 Milano, Italy
Tel: (39) 02-783-667

FREED OF LONDON LTD.
94, St. Martin’s Lane,
London WC2N 4AT, U.K.
Tel: (44) 20-7240-0432

SHANGHAI ONWARD
FASHION CO., LTD.
9F Want Want Bldg.,
211 Shimen Yi Lu, Shanghai,
People’s Republic of China
Tel: (86) 21-6472-3660
ONWARD FASHION TRADING(China) CO., LTD.
9F Want Want Bldg.,
211 Shimen Yi Lu, Shanghai,
People’s Republic of China
Tel: (86) 21-6466-6466
ONWARD KASHIYAMAKOREA CO., LTD.
GF, Hwankyoung B/D,
1-118, Jang Chung-Dong, Chung-ku,
Seoul 100-391, Republic of Korea
Tel: (82) 2-548-5841
ONWARD KASHIYAMASINGAPORE PTE. CO., LTD.
1 Scotts Road, #23-12 Shaw Centre,
Singapore 228208, Republic of Singapore
Tel: (65) 6838-0690

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

ANNUAL REPORT 2011

APPAREL AND TEXTILEPRODUCTSONWARD KASHIYAMA CO., LTD.
ONWARD TRADING CO., LTD.
CHACOTT CO., LTD.
CREATIVE YOKO CO., LTD.
BUS STOP CO., LTD.
ISLAND. CO., LTD.
DONNA KARAN JAPAN K.K.
FUSION CO., LTD.
CANDELA INTERNATIONAL CO., LTD.
J. DIRECTION CO., LTD.
O.P. S. CO., LTD.

SERVICESACROSS TRANSPORT CO., LTD.
ONWARD LIFE DESIGNNETWORK CO., LTD.
ONWARD CREATIVE CENTER CO., LTD.
BIEN CO., LTD.
EXCEL CO., LTD.
BOOKLET CORP.

RESORTSO & K CO., LTD.
ONWARD RESORT & GOLF CO., LTD.

JIL SANDER S.p.A.
Piazza Castello 1,
20121 Milano, Italy
Tel: (39) 02-806913. 1
IRIS S.p.A.
Via Pampagnina 42,
Fisso D’Artico,
30032 Venezia, Italy
Tel: (39) 041-5169911
ERIKA s.r.l.
Via Boschi, 42/bis,
37060 MACCARI (Verona), Italy
Tel: (39) 0442-56666
FRASSINETI s.r.l.
Via E. Fermi 7, Loc. Scopeti - Rufina,
50068 Firenze, Italy
Tel: (39) 055-839-7385
CORPORATE s.r.l.
Via Robuschi, 3 43100 Parma, Italy
Tel: (39) 0521-292-961

52

Domestic Subsidiaries

As of September 1, 2011

CORPORATE DATA
(As of February 28, 2011)

Head Office10-5, Nihonbashi 3-chome,

Major Shareholders

Chuo-ku, Tokyo 103-8239, Japan

Percentage ofTotal Shares Issued

Tel: (81) 3-3272-2317
Japan Trustee Services Bank, Ltd. (Trust account)

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

September 1947

6.0%

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

5.9

Kashiyama Scholarship Foundation

5.5

Nippon Life Insurance Company

3.9

Isetan Company, Limited

3.1

Paid-in Capital¥30,080 million

The Dai-ichi Mutual Life Insurance Company

2.5

Common Stock

Authorized—400,000,000 shares

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

2.2

Issued—172,921,669 shares

MARUI GROUP CO., LTD.

2.0

Trust & Custody Services Bank, Ltd. (Securities investment trust account) 2.1

Number of Shareholders
Stock Listings

11,130SUMITOMO MITSUI BANKING CORPORATIONTokyo, Osaka, and Nagoyastock exchanges

Transfer Agent

1.8

Note: The Company holds 16,238 treasury shares but has been excluded fromthe list of major shareholders.

Mitsubishi UFJ Trust

Distribution of Ownership among Shareholders& Banking Co., Ltd.

(On a number of shares basis)

4-5, Marunouchi 1-chome,

Other Japanese corporations
23.13%

Japanese financial institutions
38.33%

Chiyoda-ku, Tokyo 100-8212, Japan
Foreign institutions and others
14.93%

Number of Employees(Consolidated)

3,910 (As of the end of February 2011)

Japanese individuals and others
22.20%

Japanese securities companies
1.41%

Stock Price Movement(Thousands of shares)

(Yen)

1,800

15,0001,500

12,000

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

300
0

0
May
2010

June

July

Aug.

Sept.

Oct.

Nov.

Dec.

Jan.
2011

Feb.

Mar.

Apr.

May

June

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

ONWARD HOLDINGS CO., LTD.

53

ONWARD HOLDINGS CO., LTD.

Head Office: 10-5, Nihonbashi 3-chome, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-3272-2317
URL: http://www.onward-hd.co.jp/

ANNUAL REPORT 2011

Printed in Japan