Annual Report 2008
Ye a r E n d e d F e b r u a r y 2 9 , 2 0 0 8

Profile
ProfileSince its establishment in 1947, ONWARD KASHIYAMA
CO., LTD., has been an active leader in the world of fashion.
The Company has drawn on its sophisticated capabilities inplanning, technological development, information network
management, and production to develop a wide range of
popular brands that appeal to the diverse tastes of consumers,
who differ not only in age but also in the values they hold.

Contents

Onward’s products are marketed through department stores,

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throughout Japan as well as via a global sales network that

Contents

Financial Highlights
A Message to Our Shareholders
Onward’s Brand-Leveraged
Management and World Strategy
Business Overview
Corporate Governancedirect merchants, shopping centers, and general retailers

spans Europe, Asia, and North America.
Onward has earned a strong reputation in all quarters for its
continued ability to anticipate consumer needs and offer new

Board of Directors
Organization Chart
Consolidated Six-Year Summary
Management’s Discussion and Analysis
Consolidated Balance Sheets

concepts that reflect those needs. As a leading retailer in the
global apparel industry, Onward is drawing on its long experience in planning and development, technology, information,

Consolidated Statements of Income
Consolidated Statements of Changes in
Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial
Statements
Report of Independent Accountants
Principal Subsidiaries
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 forunderstanding in this regard.

and production to more actively develop business in both
domestic and overseas markets.

Financial Highlights
Financial Highlights

ONWARD KASHIYAMA CO., LTD. and Subsidiaries
Years ended February 28, 2007 and February 29, 2008
Thousands of
U.S. dollars

Millions of yen
2007

2008

2008

At year-end:
Total current assets
Total current liabilities
Short-term loans
Total shareholders’ equity¥135,197
103,494
26,916
212,600¥112,519
93,321
25,677
213,625$1,073,864
890,636
245,059
2,038,796

For the year:
Net sales
Operating income
Net income¥318,691
25,431
11,438¥287,032
18,628
12,214$2,739,383
177,782
116,566

Yen

Per share:
Net income—basic
Cash dividends
ROE (%)
Operating income margin (%)

U.S. dollars

¥70.5
26.0

¥76.5
30.0

5.3
7.9

5.7
6.5

$0.7300.286

Note: Yen amounts have been translated, for convenience only, at ¥104.78=US$1, the approximate exchange rate on February 29, 2008.

Net Sales

Net Income

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

300,000

200,000

12,000250,000

160,000
9,000

200,000

120,000
150,000

6,000
80,000100,000
3,000

40,00050,0000

0’04 ’05 ’06 ’07 ’08

0’04 ’05 ’06 ’07 ’08’04 ’05 ’06 ’07 ’08

O N WA R D HO L DIN G S CO . , LTD .

01

A Message to Our Shareholders
A Message to Our Shareholders

The Onward Group made the transition to a holding company structure in September
2007 to strengthen management capabilities and accelerate the implementation of its
growth strategies. Group companies are now working to expand their businessdomains and increase their proﬁtability. Looking ahead, the Group will substantiallystep up its policy of Brand-Leveraged Management and, with a sense for the fashion
preferences and needs of the times, endeavor to give its brands additional polish andstrength.

Performance in Fiscal 2008
During the ﬁscal year ended February 29, 2008, we regret to report that net sales and ordinary
income declined. Net sales amounted to ¥287,032 million, 9.9% lower than for the previous year;
operating income was ¥18,628 billion, 26.8% lower than for the prior year; and ordinary income
amounted to ¥24,128 million, 12.0% lower than in the previous year.
In Japan, ONWARD KASHIYAMA CO., LTD., faced tough market conditions, and sales of core
brands, principally in the women’s fashion business, were weak. However, as a result of the elimination of unproﬁtable brands, the focusing of corporate resources (including personnel, ﬁnancial, andother resources) on core brands and the strict implementation of low-cost management, proﬁtability
began to recover in the second half of the ﬁscal year. Within the Group, we concentrated thosedepartments and companies engaged principally in non-store sales within ONWARD TRADING CO.,LTD., and worked to strengthen marketing capabilities and improve management efﬁciency. In ouroverseas business operations, we reported steady performances in Europe and Asia, and earnings
were above the planned levels.
Please note that we sold our full equity interest in former subsidiary IMPACT 21 CO., LTD., andthat company was excluded from the scope of consolidation beginning with the ﬁrst quarter ofﬁscal 2008.

Three-Year Medium-Term Management Plan
In Japan, the apparel market is shrinking as a result of the decreasing number of children per household and the overall decline in the country’s population. Sales at department stores, which are
our principal retail outlets, have declined each year since 1997, and over this 11-year period,
total sales have diminished about ¥1.5 trillion. Along with this trend, annual sales of apparel
have also dropped about ¥900 billion. Moreover, the department store sector has entered aperiod of major realignments, as competition has grown more intense. In principal urban
areas, the number of commercial facilities—such as fashion boutique buildings, transportation terminal buildings, shopping centers, and other retail venues—is expanding.
Domestic apparel manufacturers who have distributed their products mainly throughdepartment stores are approaching a critical time in their development.

Takeshi Hirouchi
Chairman & CEO

02

A n n ual Repo r t 2008

Amid this business environment, the Onward Group has prepared its Three-Year Medium-Term
Management Plan covering the period from ﬁscal 2008 through ﬁscal 2010. (For further details,
please see the section referring to the “Three-Year Medium-Term Management Plan” on pages 5 to
10 of this annual report.)
The thrust of our strategy is to “defend our position in the domestic market and expand into overseas markets.” We are aiming to expand our stable stream of earnings in the Japanese market,
while aggressively expanding our overseas operations.”
At present, we are proceeding to concentrate corporate resources on our core brands, and, while
implementing strict, low-cost management measures, we intend to continue this policy. At the sametime, to speed up the growth of the Group, we are strengthening existing brands and developing
new brands, as we implement an aggressive M&A policy. We are riding the wave of realignmentsthat is rising within the apparel industry and are working to acquire attractive brands in Japan andoverseas to make them part of our Group brand portfolio. Please note that we have not set an
upper limit for M&A activities and intend to make whatever investments may be necessary to meet
our objectives.

Domestic Policy: Top Priority on Polishing Our Brands
In Japan, even though there are no prospects for growth in consumer purchasing power, commercial facilities are being constructed one after another, and a surplus of sales space is emerging.
Along with this development, competition among retailers for this new space is intense, and, if they
do not pay attention and monitor developments carefully, other retailers will seize sales opportunities,
as if industry participants were in a game of musical chairs.
However, whatever direction these developments may take, one thing that will not change is that
consumers will visit retail venues looking for products they like. To maintain brand dominance, wehave to raise the value of our individual brands and continue to win the full conﬁdence and trust of
our customers.
The Onward Group is, ﬁrst, putting highest priority on adding polish to and strengthening its existing brands. It is essential for us to improve the proﬁtability of core brands and create brands withvalue that customers can perceive.
By taking the right steps to polish and increase the attractiveness of our brands, we canenhance their value again. It will be important to properly communicate our own brands insideand outside the Group and share this understanding and the image of their value. In the caseof NIJYUSANKU, which is our top core brand, we have begun airing commercials featuring
popular actresses, and, as a result of coordinated activities to polish all aspects of thisbrand, including products, sales areas, and planning, proﬁtability has improved signiﬁcantly.
For new brands, beginning in spring 2009, we are scheduled to introduce a new brandfor the age-group around 40, that will overlap the market coverage of JIYUKU andNIJYUSANKU. In addition, to strengthen our men’s casual offerings, we will expand the
CK Calvin Klein men’s product lineup. Moreover, we are working on the development oflower-priced standard products and strengthening our offerings of accessories.

Kentaro Mizuno
President

O N WA R D HO L DIN G S CO . , LTD .

03

A Message to Our Shareholders

Overseas Policy: Expansion Mainly in Europe and Asia
Onward was one of the ﬁrst Japanese apparel manufacturers to enter overseas markets in the
1970s. At present, our business activities in Europe are centered around the GIBO’ CO. Group and
the JOSEPH Group, and these operations are reporting solid growth, along with proﬁtability. In addition, in Asia, where we followed others in entering the markets of the region, as a result of the effortsof regional staff, we have captured the No. 1 position among Japanese apparel makers in thisregion.
Along with the trend toward globalization, the development of international brands is an issue thatmust be addressed by apparel manufacturers. We at Onward have positioned the development ofoverseas operations as a key to Group expansion and intend to sustain a solid growth trend.
In Europe, the GIBO’ CO. Group, which has an established reputation for the production of fashion items that embodied strong fashion sensitivity and high quality, has received many M&A offers.
At present, these are being considered carefully, but we are anticipating considerable further growthin its operations. On the other hand, in Asia, especially in China, we are developing our operations
around our own brands and plan to proceed with the creation of a “second Onward” with roots inthe local markets. In addition, we are moving forward aggressively with the further development ofour position in the U.S. market as well as entry into newly emerging countries.

With the Pride that Goes with Being a Leading Company
Our forecast for the year ending February 28, 2009, is for net sales of ¥291.0 billion, an increaseof 1.4% over ﬁscal 2008; operating income of ¥20.6 billion, a gain of 10.6%; ordinary income of¥24.2 billion (an increase of 0.3%); and net income of ¥12.4 billion (a gain of 1.5%).
Onward believes that returning a portion of proﬁt to shareholders is one of its most importantpriorities. Our basic policy is to set a target payout ratio of 35% or more and to make stable andappropriate distributions of proﬁts, taking account of performance. For ﬁscal 2008, we haveincreased the dividend for the full year by ¥4 per share to ¥30 per share. In addition, we intend to
conduct active buybacks of Company shares, taking account of funding demand and other issues
as well as changes in the management environment to make it possible to implement a ﬂexible
capital policy.
The Onward Group, as one of the top companies in the apparel industry, will continue to work to
capture the fashion sensitivities of the times, never forget to accept the challenge of attaining new
goals, and make a strong commitment to action.
We wish to thank you, our shareholders, for your understanding and support and look forward
to your continuing cooperation.

May 2008

Takeshi Hirouchi, Chairman & CEO

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A n n ual Repo r t 2008

Kentaro Mizuno, President

Onward’s Brand-Leveraged
Management and World Strategy

O n w a r d ’s B r a n d - L e v e r a g e d M a n a g e m e n t a n d Wo r l d S t r a t e g yThree-Year Medium-Term Management Plan:

2010, which seeks to establish new paths for growth. In domestic
activities, the Group is exercising selectivity and concentration in the

Fiscal 2008 to Fiscal 2010

allocation of its corporate resources and working to attain stable

The Onward Group is aiming to increase its corporate value by implementing its Brand-Leveraged Management strategy, which targets
expansion in business scale and strengthening of its managementbase by further polishing and enhancing the attractiveness of its
brands.

expansion in earnings from existing businesses. Overseas, the Groupis endeavoring to strengthen its foundation for growth and aggressively expand earnings. Moreover, with the goals of developing new business domains and expanding business scale, the Group is pursuingan active M&A strategy in Japan and overseas with the objective ofAt present, the Group is implementing its Three-Year Medium-Termaccelerating growth.

Management Plan covering the period from ﬁscal 2008 through ﬁscal

Quantitative Objectives for Fiscal 2010

Net sales¥350,000 million

Operating income¥30,000 million (an 8.6% ratio of operating income to net sales)

Ordinary income¥35,000 million (a 10.0% ratio of ordinary income to net sales)

Net income¥18,000 million (a 5.1% ratio of net income to net sales)

Return on equity

8% or higher• To strengthen the Group’s foundation for growth, plans call for making about ¥30 billion in capital investments.
• The Group has not set an upper limit for strategic business investments, including M&A, and intends to make whatever investments may benecessary to meet its objectives.

 Objectives by Business Segment
Apparel and Other Textile Product Businesses
Sales: ¥350,000 million
Operating income: ¥29,600 million (an 8.5% ratio of operating income to sales)
Service-Related Businesses
Sales: ¥22,800 million

Operating income: ¥600 million (a 2.6% ratio of operating income to sales)

Resort-Related Businesses
Sales: ¥6,700 million

Operating income: ¥300 million (a 4.5% ratio of operating income to sales) Domestic vs. Overseas Operations
Domestic operations
Sales: ¥280,000 million

Operating income: ¥21,000 million (a 7.5% ratio of operating income to sales)

Overseas operations
Sales: ¥100,000 million

Operating income: ¥9,500 million (a 9.5% ratio of operating income to sales)

O N WA R D HO L DIN G S CO . , LTD .

05

Basic Strategies by Business Segment

In the apparel and other textile product businesses segment, the Apparel and Other Textile Product Businesses

Group is proceeding with measures to strengthen marketing andIn this business, for ﬁscal 2010, the Group is planning to reach targets

technology (including production, logistics, information capabilities,of ¥350,000 million in sales and ¥29,600 million in operating incomeetc.), and create new value for its brands.

(with an 8.5% ratio of operating income to sales).

Basic Strategies of the Apparel and Other Textile Product Businesses

1. Develop original design and planning capabilities
Reinforce priority brands. Strengthen product development capabilities in planning and production units

2. Strengthen marketing
Substantially bolster capabilities as a group of sales professionals

3. Create attractive sales environments
Create shops that display brands attractively to win the interest and support of consumers

4. Use advertising and publicity that draws wide interest
Develop and implement advertising and publicity programs that inspire people and leave a strong impression. At the same time,transmit and strengthen the corporate brand and image

5. Create systems for augmenting the supply of best-selling items
Gather and analyze information quickly on best-selling products. Also, further develop and bolster domestic production systems

6. Implement quality production at low cost
Implement low-cost production while maintaining quality that will win consumer support. Strike a balance between productvalue and price while strengthening R&D capabilities

7. Use quick and nimble logistics and distribution systems
Create faster and more efﬁcient logistics and distribution systems

8. Use state-of-the-art information systems
Increase the accuracy of management data and retail store information, while also accelerating the speed of information delivery

9. Develop new businesses and new business domains
Aim for entering new domains created from the customer’s perspective. Develop new major brands for potential markets, while
expanding the accessory business06

A n nual Repo r t 2008

O n w a r d ’s B r a n d - L e v e r a g e d M a n a g e m e n t a n d Wo r l d S t r a t e g y

 Service-Related Businesses Resort-Related Businesses

In this business, for ﬁscal 2010, the Group is planning to reach targets

In this business, for ﬁscal 2010, the Group is planning to reach targetsof ¥22,800 million in sales and ¥600 million in operating income (withof ¥6,700 million in sales and ¥300 million in operating income (with aa 2.6% ratio of operating income to sales).

4.5% ratio of operating income to sales).

In the logistics and distribution business, the Group will work to

The Group is establishing an earnings base for ONWARD RESORT

establish an earnings base in ACROSS TRANSPORT that will enable& GOLF CO., LTD., as an all-round resort business based in Guam.

that company to become the leading logistics company in the fashion

By drawing on synergies between Onward’s beach resort and golf

business. The Group will also strengthen its logistics capabilities toresort facilities, the Group aims to make this the No. 1 resort in Guam.

become a comprehensive logistics company specializing in services
for the fashion industry with a global reach through its Shanghai base.
In the retail shop creation business, the Group will endeavor toestablish a strong presence for ONWARD CREATIVE CENTER as aleading shop design and implementation company with strong capabilities for creating fashionable retail venues. In addition, ONWARD
CREATIVE CENTER will draw on its implementation know-how gained
through creating stores for the Onward Group and expand its “total
space production and creation” business.

Outline of ONWARD HOLDINGSONWARD HOLDINGS CO., LTD.

ApparelBusiness

ONWARDKASHIYAMA
CO., LTD.

ONWARDTRADING
CO., LTD.

JOSEPH Group

Services
Business

BUS STOP
CO., LTD.

CHACOTT
CO., LTD.

ACROSS
TRANSPORT
CO., LTD.

Resort-Related
Business

ONWARD
CREATIVE
CENTER
CO., LTD.

ONWARDRESORT& GOLF
CO., LTD.

GIBO’ CO.
Group

O N WA R D HO L DIN G S CO . , LTD .

07

Domestic Strategy for Apparel-Related Businesses

Plans for ﬁscal 2010: Sales of ¥249,600 million and operating income of ¥20,000
million (an 8.0% ratio of operating income to sales)
ONWARD KASHIYAMA CO., LTD.
 Realizing Its Full Strengths as a Comprehensive Apparel Company
ONWARD KASHIYAMA will proceed with a review and the expansion

In new retail channels outside the department store channel, theof its portfolio of brands and work to achieve stable expansion in

Company will accelerate the opening of outlets in transportation sta-earnings from existing brands. At the same time, the Company will

tions and fashion boutique buildings as well as the opening of directly

strengthen its R&D and product development capabilities and move

operated street-level stores. For existing brands, the Company will

forward with the development of new brands. In addition to its apparelendeavor to increase the proﬁtability of existing brands while also

business, the Company will strengthen its existing lineup of accesso-

developing new brands by promoting sales not only of its in-houseries and implement a strategy for new accessory offerings drawing onbrands but also the brands of alliance partners and brands acquired

its global network.

through M&A. Also, by further developing sales of core brands
through street-level stores in prime retail locations (ﬂagship stores), theStrategy by Retail Channel

Company will enhance the presence of its brands and build on thisPlans for ﬁscal 2010 (by channel)

higher proﬁle in Japan to expand its overseas sales, especially in Asia.

• Department stores:

Sales of ¥164,200 million and operating income of ¥14,300 million (an8.7% ratio of operating income tosales)• New channels:

Sales of ¥42,200 million and operating
income of ¥2,900 million (a 6.9% ratioof operating income to sales)• Other channels:

Sales of ¥9,700 million and operating
income of ¥600 million (a 6.2% ratio of
operating income to sales)• Non-store sales channels:

Sales of ¥33,500 million and operating
income of ¥2,200 million (a 6.6% ratioof operating income to sales)

Strategies by Product Category
Plans for 2010 (by category)• Apparel:

Sales of ¥224,600 million and operating incomeof ¥18,600 million (an 8.3% ratio of operating
income to sales)• Accessories:

Sales of ¥25,000 million and operating income of¥1,400 million (a 5.6% ratio of operating income
to sales)In its fashion goods business, ONWARD KASHIYAMA will strength-

ONWARD KASHIYAMA will aim for stable growth of its existing
brands through the department store channel. At the same time, theCompany will develop new types of brands aimed at potential markets, newly enter product zones it has not developed in the past, andadopt other approaches to cultivate product zones where growth isanticipated.

08

A n n ual Repo r t 2008

en its existing lineup of accessories and develop new accessory offerings drawing on its global network.

O n w a r d ’s B r a n d - L e v e r a g e d M a n a g e m e n t a n d Wo r l d S t r a t e g y

ONWARD TRADING CO., LTD.
 Promoting the Transition to Being a Comprehensive Fashion Trading Company
on the Way to Moving onto a Growth Path
ONWARD TRADING will aim for stable expansion in its core business-and sales channels, including Internet e-commerce marketing, while

es of supplying uniforms and sales promotion services. This company

strengthening in-house overseas production and procurement capa-

will also target higher proﬁtability through developing new products

bilities.

CHACOTT CO., LTD.
 Strengthening Its Earnings Base as Leading Company in the Dance Market
CHACOTT will expand earnings by bolstering its retail sales, mainly
through directly operated outlets.

BUS STOP CO., LTD.
 Increasing Proﬁtability Mainly through “VIA BUS STOP” Boutiques
BUS STOP will work to expand earnings through boutiques that specialize in overseas creator brands reﬂecting an understanding of thetrends of the times.

O N WA R D HO L DIN G S CO . , LTD .

09

O n w a r d ’s B r a n d - L e v e r a g e d M a n a g e m e n t a n d Wo r l d S t r a t e g yApparel-Related Business Operations (Overseas Strategy)

Plans for 2010: Sales of ¥100,000 million and operating income of ¥9,500 million(a 9.5% ratio of operating income to sales)
Identify and highlight the needs of differing areas and the

The JOSEPH Group is a global fashion brand based in London thatstrengths of various companies, strengthen the business base,offers high-quality comfortable casual wear for sophisticated urban

and then work to expand earnings

men and women. Its annual sales are about ¥15.0 billion. This groupis now strengthening its product planning and design capabilities byPlans for 2010 (by overseas region)• Europe:• Asia:• United States:

Sales of ¥83,600 million and operating income of¥8,300 million (a 9.9% ratio of operating income tosales)
Sales of ¥10,700 million and operating income of¥1,100 million (a 10.3% ratio of operating income
to sales)Sales of ¥5,700 million and operating income of¥100 million (a 1.8% ratio of operating income tosales)

Note: Figures for the United States include the Group’s resort businesses located in Guam.

combining the Onward Group’s merchandising know-how in Japan
with JOSEPH’s own creative capabilities.
Going forward, the JOSEPH Group will actively expand its fashion
goods business and accelerate the implementation of a global strategy through operating alliances.

 AsiaExpanding Sales with a Focus on Onward Brands
In Asia, the Onward Group is strengthening its management base andopening new stores as it continues to report proﬁts. The Group is proceeding with the localization of its operations drawing on the capabilities of staff native to each area and is working to create a “second
Onward” in the region.

 Europe
The GIBO’ CO. Group is an Italian apparel maker that manufactures

 United Statesand supplies the world’s high-end designer brand goods to markets

Enhancing the Proﬁt Platform Concentrating on J. PRESS andaround the globe. It has annual sales of about ¥20.0 billion. GIBO’JOSEPH Brands

CO.’s modelist group, which has considerable depth of experience inIn the United States, the Onward Group is bolstering the competitive-

designer creations, has accumulated impressive planning expertise,ness of the J. PRESS and JOSEPH brands as well as aiming for

ranging from fabric to knitted items as well as shoes and bags. This

expansion in sales to enhance the balance of revenues and expenses.

company has established a production platform capable of supplying
products that meet high-quality standards.
In addition to expanding its existing businesses, the GIBO’ CO.
Group is implementing an aggressive M&A strategy that promises toyield important synergies and is aiming to become a corporate groupwith a presence in the world’s fashion markets.

10

A n n ual Repo r t 2008

Business Overview
Business Overview

The Onward Group made the transition to a holding company structure on September
1, 2007, and is currently implementing its policy of Brand-Leveraged Management.
In domestic business activities, sales of women’s fashions declined, reﬂecting the
difﬁcult conditions in Japan’s apparel market as a whole where trends in consumption
have become more diverse, but, on the other hand, sales of men’s fashions showed a
NIJYUSANKU

relatively better performance.
ONWARD KASHIYAMA continued to confront tough operating conditions, principally in the women’s fashion business. However, during the second half of the ﬁscal
year ended February 29, 2008, as a result of management measures to eliminate
unproﬁtable brands and concentrate corporate resources on core brands, the performance of the Company’s largest brand line, NIJYUSANKU, began to recover, thus

KUMIKYOKU

laying the foundation for proﬁtability during ﬁscal 2009. Although men’s fashions
performed relatively well during ﬁscal 2008, ﬁnal results showed declines in sales andincome overall.
At ONWARD TRADING, the Group took measures to concentrate departments
and companies engaged mainly in non-store retailing in that company and worked tostrengthen marketing capabilities and improve management efﬁciency.

ICB

In overseas business operations, sales outside Japan rose to ¥45.5 billion for ﬁscal
2008, raising the percentage of overseas sales to 15.7% of total Group sales.
In Europe, as a result of improvement in productivity, the GIBO’ CO. Group
reported a performance above initial targets. In addition, the Group acquired theoperating rights of FRASSINETI, a leading manufacturer of bags based in Italy, and
CORPORATE CO., an apparel manufacturer also based in Italy, thus moving towardJIYUKUthe establishment of a platform for new growth in the brand business and the creationof a platform for high-quality production. On the other hand, the JOSEPH Group
reported stable expansion in its existing retail activities and reported progress towardenhanced proﬁtability. The JOSEPH Group also began sales in new markets, including
Italy and Germany.
In Asia, sales, principally of Onward Group brand products, showed steady expansion, and the Group exceeded its initial targets for sales and income. Going forward,
the Group anticipates growth accompanied by proﬁtability in this region.

gotairiku

J.PRESSO N WA R D HO L DIN G S CO . , LTD .

11

Apparel Business(Manufacturing and Marketing of Men’s Fashions, Women’s Fashions, and Other
Products)
Sales of the apparel business declined 10.8% from the previous ﬁscal year, to ¥269,335 million, for the ﬁscal year under review.
Sales of Men’s Fashions

Note: While IMPACT 21 CO., LTD., was previously a subsidiary, the Company has sold all its shares in that company, which was excluded from the scope of consolidation beginning from the ﬁscal year under review.

(Millions of yen)
Years ended February 28 or 29

Men’s Fashions

100,000

Consolidated sales of men’s fashions were ¥50,593 million, and accounted for 25.6% ofconsolidated sales.

80,000As conditions remained difﬁcult in the department store market, the Company decided on its prod60,000

ucts for principal emphasis in the men’s fashion business on a week-by-week basis and strengthened its marketing activities. As a consequence, sales edged slightly above the level of the previous

40,000ﬁscal year.
Overall, the Company implemented a strong sales drive for men’s suits, including personal made-20,000to-order suits, but demand for “Cool Biz” apparel weakened and conditions in the jacket and shirtﬁelds were difﬁcult. However, sales of coats performed well, owing to the severe winter conditions

0’04 ’05 ’06 ’07 ’08

during the ﬁscal year.
Among CK Calvin Klein and JOSEPH brand products, sales of such items as suits, coats, andknitwear were stronger than in the previous ﬁscal year, and total sales exceeded those of the prioryear. In addition, the Company made a strong sales push for cut-and-sew as well as trousers andslacks products in the JOSEPH and NIJYUSANKU sports casual wear lines, and sales of theseproducts exceeded the levels of the previous ﬁscal year.

Women’s Fashions
Consolidated sales of women’s fashions were ¥129,984 million, and accounted for
65.8% of consolidated sales.
Sales of Women’s Fashions(Millions of yen)
Years ended February 28 or 29

Overall sales of “proper” items (with ﬁxed prices) were weak, and total sales of this business were
below the level of the previous ﬁscal year.
In department stores, sales of dresses and coats in the core brand lines of NIJYUSANKU,

180,000KUMIKYOKU, ICB, and JIYUKU were above the previous year’s levels, but market conditions, especially for jackets and skirts, were difﬁcult and total sales were below the previous year’s levels. Sales

150,000

of quasi core brand Paul Smith showed a slight decline, while sales of products in the Sonia, Sonia
120,000

Rikiel, MICHAEL MICHAEL KORS, and prideglide brand lines dropped substantially. Also, while salesof Jane Moore items in the Missy Misses brand line and CK Calvin Klein brand items dropped sharp-

90,000ly from the previous ﬁscal year, sales of NAVE brand products for young people held their own withthe prior year. Sales of new brand DOLLY GIRL BY ANNA SUI products were strong.

60,000In new retail channels, sales of Dip Drops and rosebullet brand line items expanded signiﬁcantly;
30,000however, sales of anyFAM and anySIS products, which are marketed mainly in shopping centers,
showed a marginal decline.

0’04 ’05 ’06 ’07 ’08

12

A n n ual Repo r t 2008

Business Overview

Children’s Fashions, Kimonos, and OtherChildren’s Fashions
Consolidated sales of children’s fashions were ¥7,696 million, and accounted for 3.9%of consolidated sales.
Reﬂecting the shrinkage in the market for children’s fashions along with the trend toward having few
children, conditions in this market were tough. Sales of CELINE brand products exceeded the levelof the previous year; as in the department store market, conditions for KUMIKYOKU line products
were severe. Sales of J. PRESS products for wearing to job interviews and for new school entrants
were favorable, but this was insufﬁcient to make up for the overall lackluster performance of brandproducts.

Kimonos

Sales of Children’s Fashions,
Kimonos(Millions of yen)
Years ended February 28 or 29
10,0008,000

Consolidated sales of kimonos were ¥3,230 million, and accounted for 1.6% of consolidated
sales.
In the luxury Japanese traditional apparel market segment, sales of formal kimonos held strong

6,000

4,000

throughout the ﬁscal year. Sales of long-sleeve kimonos, however, continued their long-term declining trend as a result of the continuing shift toward rentals and other factors. Sales of yukata (casual,

2,000

kimono-style robes) among younger people were weak during the ﬁscal year, but sales to seniorcitizens held ﬁrm.

0’04 ’05 ’06 ’07 ’08

Consolidated sales of other operations (including bags and jewelry) rose 3.6%, to ¥6,037 million,

 Children’s fashions
 Kimonos

and accounted for 3.1% of consolidated sales.
Among bags, sales of items in the NIJYUSANKU brand line exceeded those of the previous ﬁscal
year, and the favorable performance of casual leather mit-mitte brand leisure bags raised bag sales
over the prior year. Sales in the KUMIKYOKU line were below the previous year’s level, reﬂecting thetough going experienced in sales to younger people through department stores. In the jewelry business, sales of items for bridal occasions and limited-edition products for Christmas matchedcustomer interest in a broad range of items and held strong.

Service Businesses(Logistics-Related Business and Management of Resort Facilities)
Consolidated sales of service businesses were ¥27,488 million.

Service Businesses(Millions of yen)
Years ended February 28 or 29

50,000In the logistics-related and other services businesses, marketing activities were stepped up to win
business from customers outside the Onward Group, but sales were below the level of the previous

40,000ﬁscal year because of deterioration in the operating environment.
In the resort business, as a result of the concentration of its hotel and golf course operations

30,000in Guam into a comprehensive resort business, the Group was able to establish a business basefor these activities, and proﬁtability improved because of synergies among hotel and water park

20,000operations on the one hand and golf course operations on the other.
10,000

0’04 ’05 ’06 ’07 ’08

O N WA R D HO L DIN G S CO . , LTD .

13

Corporate GovernanceCorporate Governance

Basic Approach to Corporate GovernanceCompliance Manual that takes the Onward Group Compliance

The Onward Group understands that responding promptly to changes

Regulations as a basis and works to promote the creation andin the management environment and establishing corporate gover-

improvement of compliance systems for the Onward Group. The

nance systems that enhance soundness, fairness, transparency, andOnward Group Compliance Committee works together with thecompliance are important management issues related to increasing

Compliance Division to implement appropriate activities for training

corporate value, or, in other words, shareholder value. We are working

and increasing the awareness of compliance issues. The committee

to establish bonds of trust with all stakeholders, especially our share-

and the division also work jointly to ensure the Compliance Manual isholders, and improve our corporate governance by strengthening theproperly employed throughout the Group and to verify the upgrading

functions of our management systems and those of the Generaland improvement of compliance systems. In addition, the committee

Meeting of Shareholders, Board of Directors, and Board of Auditors.

and the division have established a “hotline,” which is based on the
Onward Group Internal Information Transmission Regulations, andFramework for Business Execution
and Management Surveillance

act as the conduit for transmitting conﬁdential information regarding
compliance matters.

To make clear the difference between management decision-making

The Internal Auditing Department has the responsibility for planning

functions and the functions related to the conduct of business activi-

for and structuring business process systems that ensure operations

ties, the Company has introduced the Executive Ofﬁcer System. The

in all departments are conducted appropriately and efﬁciently in com-

Board of Directors is responsible for making strategic decisions

pliance with relevant laws, the Articles of Incorporation, regulations,regarding Group matters and for supervising the activities of Groupmanuals, internal orders, and other directives. This department is also

companies. By separating these supervisory functions from the con-responsible for reporting to the Board of Directors on these matters.

duct of business activities, the Company has clariﬁed the responsibilities and authority of Group companies and has accelerated its

Risk Management Systems

strategic decision-making functions. This enables the Company to

The Group has designed and operates systems to improve its risk

conduct management quickly and execute business activities ﬂexibly

management, as provided for in its Onward Group Risk Management

and efﬁciently. In addition to the Board of Directors, the Company has

Regulations. The Compliance Division is in overall charge of related

formed the Group Strategic Council, which meets once a month andmatters, and its responsibilities include designing risk management

includes the presidents of core Group companies as members. The

systems, identifying issues to be addressed, preparing plans for risk

Company has also created the Group Management Promotion

management systems, reporting to the Board of Directors, and ready-Council, which meets periodically and includes the directors of Grouping appropriate systems to deal with risks that may impact the contin-

companies as members.

uation of the Company’s operations or have a major impact on its

Since the Company has adopted the Board of Auditor governance

operations, including the risk of natural disasters and information

model, the corporate auditors attend important meetings of the Board

systems risk. Moreover, as necessary, the Board of Directors works

of Directors and monitor the conduct of duties of the Directors fromtogether with outside specialists to strengthen the Company’s capa-

an independent perspective, while working to improve management

bilities for dealing with risk and establishing systems to prevent risk.

surveillance functions. In addition, outside directors and outside
auditors have been appointed to enhance the transparency ofMatters Related to Corporate Takeovers

management.

The General Meeting of Shareholders, which convened in May 2008,
approved the introduction of the “Policy for Responding to Large-

Strengthening Internal Control Systems

Scale Purchases of the Company’s Shares (TOB Defense Policy).”

To substantially strengthen internal control systems, revisions in cer-This policy established rules to be followed by parties that make large-

tain parts of the basic policy for designing and implementing internal

scale purchases of the Company’s shares. It also clariﬁes speciﬁed

control systems were approved by the Board of Directors in Aprilcases where there is a possibility that purchasers of the Company’s

2008. The Company is now working to swiftly design internal control

shares may incur damages as a result of defensive actions taken bysystems based on this revised policy and will conduct continuing

the Company and, by making appropriate disclosure, enables thereviews to make needed improvements to create efﬁcient corporate

Company to issue warnings to such purchasers whose behavior does

systems in compliance with legal regulations.

not contribute to enhancing corporate value and may be contrary to
the common interests of the shareholders. Please note that, when the

Compliance Systems

provisions of this policy are applied, the policy calls for the formation

The Company has prepared its Compliance Regulations, which stateof a committee that is independent of the Board of Directors to elimi-

its basic compliance policy, and has formed the Onward Groupnate arbitrary judgments by the Board and for maximum compliance

Compliance Committee. The Compliance Department, which haswith the recommendations of this committee.

primary responsibility for compliance matters, has prepared a

14

A n nual Repo r t 2008

Board of Directors
Board of Directors

Directors

Ofﬁcers

Corporate Auditors

Chairman & CEO

Managing Directors

Executive Ofﬁcers

Standing Corporate Auditors

Takeshi Hirouchi*

Masaaki Yoshizawa

Hitoshi Aoyama

Akito Yamamoto

President

Junji Nakamura

Hidenobu Tanaka

Hideo Matsumoto

Kentaro Mizuno*

Outside Directors

Hirokazu Yoshizato

Keiichi Ogawa**

Vice President

Hachiro Honjou

Kazuya Baba*

Yoshihide Nakamura

Jotaro Yabe**

As of May 29, 2008

* Representative Director** Outside Auditor

Organization Chart
Organization Chart(As of March 1, 2008)

General Meeting of Shareholders

Board of Corporate Auditors

Board of Directors

Representative Director, Chairman, and CEO

Representative Director, PresidentGroup Strategy Committee(Onward Group Management Council)

Compliance Committee

Corporate
Planning
Division

Compliance
Division

IR Division

Business Development Committee

Finance andAccounting
DivisionInternal
Auditing
Division

GeneralAffairs
Division

Corporate
Communications
and Marketing
Division

Human
Resources
Division

Secretariat
DivisionO N WA R D HO L DIN G S CO . , LTD .

15

Consolidated Six-Year Summary
C o n s o l i d a t e d S i x - Ye a r S u m m a r y

ONWARD KASHIYAMA CO., LTD. and Subsidiaries
Years ended February 28 or 29
Thousands of
U.S. dollars

Millions of yen
2003

2004

2005

2006

2007

2008

2008

¥141,468¥165,931¥150,969¥135,769¥135,197¥112,519$1,073,864

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

101,188

96,017

96,394

99,68894,85095,008906,738

Total assets

302,188318,270

308,170

329,403347,936

309,092

2,949,918

Total current liabilities

80,147

92,27079,02597,617

103,494

93,321

890,636

Total shareholders’ equity

190,755

196,796202,377

201,599

212,600

213,625

2,038,796

Net sales¥263,399¥267,746¥271,273¥283,111¥318,691¥287,032$2,739,383

Cost of sales

143,234

143,921

146,447

152,043

175,796

156,842

1,496,873

administrative expenses

100,558

100,929

100,621106,360

117,464

111,562

1,064,728

Operating income

19,60722,89624,20524,70825,431

18,628

177,782

Income taxes, current

6,166

13,868

7,490

12,321

14,4099,780

93,337

Net income

7,158

13,053

10,257

11,091

11,438

12,214

116,566

For the year:

Selling, general andYen

U.S. dollars

Per share:
Net income—basic

¥41.6

¥74.1

¥58.1

¥63.8

¥70.5

¥76.5

$0.730Cash dividends

16.5

20.0

22.0

24.0

26.0

30.0

0.286

Note: Yen amounts have been translated, for convenience only, at ¥104.78=US$1, the approximate exchange rate on February 29, 2008.

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

350,000

10

350,000

280,000

8

280,000

210,000

6

210,000

140,000

4

140,000

70,0002

70,0000

0

0’04 ’05 ’06 ’07 ’08
Net sales (left scale)Operating income margin (right scale)

16

Total Assets, Total Shareholders’Equity, and Shareholders’Equity Ratio

A n nual Repo r t 2008’04 ’05 ’06 ’07 ’08
Total assets (left scale); Total shareholders’ equity (left scale)
Shareholders’ equity ratio (right scale)

Net Income Per Share andCash Dividends Per Share(Yen)
Years ended February 28 or 29

80

80

60

60

40

40

20

20

0

0

’04 ’05 ’06 ’07 ’08
Net income per share; Cash dividends per share

Management’s Discussion
and Analysis
M a n a g e m e n t ’s D i s c u s s i o n a n d A n a l y s i sOverview

During the ﬁscal year under review (ended February 29, 2008), theJapanese economy continued on a gradual recovery trend supported
by private capital investment, which rose along with the improvement
in corporate proﬁts. However, the effects of the turmoil in world ﬁnancial markets, which was triggered by the subprime loan crisis, andthe rise in crude oil prices, created a lingering feeling of uncertainty
regarding the future course of economic trends. Consumer spending
also continued to lack robustness as consumer psychology deteriorated along with rising prices and stagnation in wage growth.
The apparel industry also faced severe conditions, as consumer
trends became increasingly diverse and weather conditions were
unseasonable, with cold temperatures in early spring, a delay in theonset of the rainy season, high temperatures that lingered into theearly fall, and other adverse trends. As a consequence, the operating
environment remained challenging throughout the ﬁscal year. Amid
this operating environment, the Onward Group made the transition toa pure holding company organizational structure to accelerate activities to augment its management strengths and implement its businessstrategies effectively, while working to expand the business domainsof its Group companies and increase proﬁtability.
In domestic business activities, issues to be addressed remained at
ONWARD KASHIYAMA, as performance of core brands weakened in
the ﬁrst half of the ﬁscal year, but in the second half, we took measures to achieve greater focus and concentration in the allocation ofmanagement resources and worked to reform our earnings structure
to provide a foundation for earnings in the next ﬁscal year. In addition,
we concentrated our Group divisions and companies that are focusedon non-store sales activities into ONWARD TRADING CO., LTD., andadopted measures to enhance management strengths and improvethe efﬁciency of management.
Overseas, activities in Europe and Asia reported steady performance and we were able to report sales and income above theplanned levels. Going forward, we will work to draw on the growth ofoverseas activities to further the development of our domestic operations, and strengthen our overseas brand strategies and productdevelopment capabilities drawing on our global network. Among otherdevelopments, we sold our full equity interest in subsidiary IMPACT 21
CO., LTD., and removed that company from the scope of consolidation beginning with the ﬁrst quarter of the ﬁscal year under review.
As a consequence of these developments and activities, theOnward Group reported net sales of ¥287.0 billion, 9.9% lower than in
the previous ﬁscal year; operating income of ¥18.6 billion, 26.8%
lower year on year; and net income of ¥12.2 billion, which was 6.8%
higher than for the prior year.

Results of Operations
Net Sales
Net sales for the ﬁscal year under review declined ¥31.7 billion, or
9.9%, from the level of the previous ﬁscal year, to ¥287.0 billion, as aresult of the removal of former subsidiary IMPACT 21 from the scopeof consolidation. The Onward Group’s business activities are divided
into two principal segments, namely, apparel and other textile productbusinesses and service-related businesses. The results of these twosegments are presented below.
• Apparel and Other Textile Product Businesses
In the Japanese market, ONWARD KASHIYAMA encountered toughconditions, principally in the women’s fashions business, because of

the growing diversity of consumer spending and the weakness inapparel markets. However, beginning in the second half of the ﬁscal
year, we eliminated unproﬁtable brands and focused corporate
resources on core brands. As a result, our largest brand
NIJYUSANKU began to show recovery in performance. However,overall, market conditions were challenging, and, despite strong
efforts, sales and income from the men’s fashions business declined,
and this had a major impact on consolidated performance.
In overseas markets, in the European region, GIBO’ CO. S.p.A.
attained performance exceeding initially planned levels. We made investments aimed at future growth, including the acquisition of the operatingrights of FRASSINETI s.r.l., a leading Italian bag manufacturer, and
CORPORATE CO., an apparel manufacturer, and took steps for establishing a foundation for new growth in the brand business. The JOSEPHGroup worked to enhance its proﬁtability and was successful in achieving stable expansion in sales of its existing stores and began sales in
new markets, including Italy and Germany. In Asia, we steadily expanded our sales, focusing on our in-house brands, and we are looking
for accelerated expansion in proﬁtability going forward. In the North
American market, we have created a management base focused on the
J. PRESS and JOSEPH brand businesses that will enhance proﬁtability.
As a result of these activities, sales of the apparel and other textile
product businesses declined 10.8%, to ¥269.3 billion, and operating
income decreased 18.7%, to ¥20.1 billion.
• Service-Related Businesses
In the Onward Group’s service-related businesses, efforts were madeto strengthen management by stepping up marketing activities to win
outsourcing business from outside the Group, but, as a result of thedeterioration in the management environment, performance was below
the levels of the previous ﬁscal year. In resort business activities, weconcentrated our resources on the Group’s hotel and golf course businesses in Guam, thus improving proﬁtability and establishing a business base for these operations. As a consequence of these activities,
sales in the Group’s service-related businesses declined 11.3%, to¥27.5 billion, and operating income decreased 60.4%, to ¥0.3 billion.
Cost of Sales, Selling, General and Administrative
Expenses, and Other Income (Expenses)
The consolidated cost of sales fell ¥19.0 billion, or 10.8% from theprevious ﬁscal year, to ¥156.8 billion, as a result of the exclusion offormer subsidiary IMPACT 21 from the scope of consolidation. As aconsequence of a substantial decline in net sales, gross proﬁt
decreased ¥12.7 billion, or 8.9%, to ¥130.2 billion, but the gross margin on net sales improved 0.6 percentage point from 44.8% to 45.4%.
Selling, general and administrative (SG&A) expenses declined ¥5.9
billion, or 5.0%, to ¥111.6 billion. The ratio of SG&A expenses to net
sales deteriorated 2.0 percentage points, from 36.9%, to 38.9%, asa result of the substantial drop in net sales. Mainly because of theincrease in the ratio of SG&A expenses to net sales, the ratio of operating income to net sales declined 1.5 percentage points, from 8.0%
to 6.5%, and operating income fell ¥6.8 billion, or 26.8%, to ¥18.6 billion, representing the ﬁrst decline in seven years.
Other income (expenses) amounted to income of ¥1.9 billion for theﬁscal year under review compared with expenses of ¥9.3 billion for theprevious ﬁscal year, thus representing an improvement of ¥11.2 billion.
Although the gain on the sale of investments in securities, net,declined from ¥4.1 billion in the previous ﬁscal year to zero for the ﬁscal year under review because of the absence of the ¥9.7 billion in the

O N WA R D HO L DIN G S CO . , LTD .

17gain on the cancellation of the pension trust, improvement in the otherincome (expenses) account was reported because losses on impairment of ﬁxed assets fell substantially from ¥17.0 billion in the previous
ﬁscal year to ¥1.3 billion in the ﬁscal year under review, and theCompany reported a gain of ¥6.9 billion from the sale of its equity
interest in IMPACT 21. As a result, income before income taxes andminority interests rose ¥4.4 billion, or 18.5%, to ¥27.9 billion. The
effective tax rate for the ﬁscal year rose 5.8 percentage points, from
47.8% to 53.6%, because of the reporting of gains from the sale of a
subsidiary. Net income rose ¥0.8 billion, or 6.8%, to ¥12.2 billion, forthe third consecutive annual increase. The ratio of net income to net
sales rose 0.7 percentage point, to 4.3%, and the ratio of net income
to shareholders’ equity increased 0.5 percentage point, to 6.1%.

Financial Position
Total assets declined ¥38.8 billion, or 11.2%, to ¥309.1 billion.
Accompanying the exclusion of IMPACT 21 from the scope of consolidation, cash and deposits, accounts and notes receivable, and inventories declined, and, as a result of the sale of that company’s stock, theCompany’s investments in securities decreased ¥12.5 billion. As a consequence, current assets as a whole fell ¥22.7 billion, or 16.8%, andﬁxed assets decreased ¥16.2 billion, or 7.6%, to ¥196.6 billion. Please
note that tangible ﬁxed assets expanded ¥0.2 billion, to ¥95.0 billion, as
capital investments of ¥9.6 billion exceeded depreciation of ¥7.6 billion.
Liabilities declined ¥11.3 billion, or 9.2%, to ¥111.5 billion. Current
liabilities decreased ¥10.2 billion from the end of the previous ﬁscal
year, and long-term liabilities were down ¥1.2 billion. However, primarily as a result of the exclusion of IMPACT 21 from the scope of consolidation, accounts and notes payable declined ¥9.6 billion, to ¥42.1
billion, and short-term loans decreased ¥1.2 billion, to ¥25.7 billion.
Despite an increase in buybacks of Company shares, from ¥16.5
billion in the previous ﬁscal year to ¥23.5 billion during the year underreview, shareholders’ equity rose ¥1.0 billion, or 0.5%, to ¥213.6 billion, as a result of an increase in retained earnings of ¥8.1 billion, to¥157.0 billion, accompanying the reporting of net income for the ﬁscal
year. Total net assets, including minority interests in consolidated subsidiaries, declined ¥27.5 billion, to ¥197.6 billion, because of adecrease in minority interests in consolidated subsidiaries from ¥18.6
billion to ¥2.6 billion. The ratio of shareholders’ equity to total assets
was up 8.0 percentage points, because of the substantial decline intotal assets, and stood at 69.1% at the end of the ﬁscal year underreview. In addition, the ratio of interest-bearing debt to shareholders’equity rose 1.0 percentage point, from 12.0% to 13.0%. The current
ratio declined 10.0 percentage points, from 130.6% at the end of theprevious ﬁscal year to 120.6%.
The major changes in the balance sheets as a whole were all related
to the effects of the exclusion of IMPACT 21 from the scope of consolidation. Going forward, in part with the objective of eliminating policies
that may be contrary to the interests of shareholders, the Company will
review and put its brand portfolio in order and focus on its core brands
to substantially maximize the efﬁciency of its business activities.
Cash FlowsNet cash provided by operating activities declined ¥4.9 billion from theprevious ﬁscal year, to ¥12.5 billion, for the ﬁscal year under review.
Although income before income taxes and minority interests increased¥4.4 billion, to ¥27.9 billion, this was offset by the decline in net sales
and other changes in the ﬁnancial statements resulting from the exclusion of IMPACT 21 from the scope of consolidation.

18

A n nual Repo r t 2008

Net cash used in investing activities increased ¥6.8 billion, to ¥20.6
billion, as a result of the exclusion of IMPACT 21 from the scope of
consolidation.
Net cash used in ﬁnancing activities rose ¥6.7 billion, to ¥12.6 billion. This increase was due to the payment of cash dividends inaccord with the Company’s policy for the distribution of income andbuybacks of the Company’s shares amounting to ¥7.0 billion aimed atmaking possible the implementation of ﬂexible capital policies.
As a result of the aforementioned factors, the balance of cash andcash equivalents at the end of ﬁscal 2008 was ¥36.8 billion, ¥20.5 billion lower than at the end of ﬁscal 2007.

Policy on the 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 proﬁts thatare appropriate to trends in the Company’s performance.
Following the comprehensive consideration of performance forthe ﬁscal year under review and the future business environment, theCompany has decided to pay a cash dividend of ¥30 per share for theﬁscal year under review, ¥4 higher than the ¥26 per share paid for theprevious ﬁscal year.
The Company will make active buybacks of its outstanding shares,
giving due consideration to funding requirements and other factors,
with the objective of making possible the implementation of ﬂexible
capital policies.
Retained earnings will be employed in a ﬂexible manner that strikes abalance between strategic investments for the consolidation of a solid
business structure and improving the Company’s ﬁnancial position.

Outlook
Looking to future economic prospects, the Company believes thatdevelopments will require careful monitoring and attention because of
the instabilities in the world economy, including the deceleration of the
U.S. economy and the signs of weakness in the Japanese economy
resulting from political, economic, and a range of other factors.
In the apparel industry, the Company believes the operating environment will continue to be severe as there are no prospects for substantial improvement in consumer spending and competition among
both domestic and foreign companies and brands will become evenmore intense. To establish a new path for growth, the Onward Grouphas prepared its Three-Year Medium-Term Management Plan, which
will cover the period from ﬁscal 2008 through ﬁscal 2010. In its business activities in Japan, the Group will aim for stable expansion inearnings through exercising selectivity and concentration in allocating
resources to businesses and brands. In overseas activities, the Groupwill work toward strengthening its foundation for growth and aggressively expand earnings. Moreover, the Group will work to accelerate
growth by engaging aggressively in M&A activities to enter new business domains and expand existing businesses.
To implement these business policies, in the ﬁrst year of themedium-term plan, ONWARD KASHIYAMA implemented measuresto achieve stable expansion in earnings of existing brands throughactivities to review and expand its brand portfolio and proceed withthe development of new brands through strengthening R&D and product development capabilities. In addition, the Company is working
to expand its business categories outside the apparel area throughstrengthening its existing accessories businesses and implementing a

M a n a g e m e n t ’s D i s c u s s i o n a n d A n a l y s i s

new accessories strategy drawing on its global network. Other Group
companies are pursuing strategies that are basically similar to expand
earnings through improvements in their operating bases.
In overseas business activities, the Group is working to identify
special features of various areas and the strengths of Group companies to enhance their business bases and expand earnings. In Europe,
the Group will continue to invest in the GIBO’ CO. Group and the
JOSEPH Group and implement strategies aimed at establishing global
growth paths. In Asia, the Group is continuing to accelerate earnings
growth through expansion in sales of its own brands. In North
America, the Group is working to clarify the brands it will develop andits distribution strategies as well as implement measures aimed at
establishing a stronger earnings base.
As a consequence of the implementation of these policies, theGroup has prepared plans for the ﬁscal year ending February 28,
2009, calling for growth in net sales of 1.4%, to ¥291.0 billion, an
increase in operating income of 10.6%, to ¥20.6 billion, and expansion in net income of 1.5%, to ¥12.4 billion. (Please note that theseplans for future performance are judgments that are based on information available at the time these ﬁgures were prepared and they are
subject to latent risks and uncertainties. Therefore, if the factors thatform 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 they should emerge. Please notethat forward-looking statements contained in this section are basedon the Group’s judgments as of April 11, 2008.
• Risks Associated with Changes in Consumer Needs
To respond accurately to customer needs regarding the fashion products supplied by the Onward Group, the Group works to achieve originality and competitiveness of its products through the implementationof its Brand-Leveraged Management policy. However, the Group may
not be able to attain the performance targets 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 sudden changes in fashion trends. This
failure to meet targets may have an impact on Group performance.
• Risks Associated with Weather Conditions and Natural Disasters
Since sales of the Group’s core fashion products may vary because of
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 as well as a series oftyphoons may result in the loss of sales opportunities during peakseasons, and there is a possibility that such developments may havean adverse impact on performance. In addition, unexpected natural
disasters, such as earthquakes and ﬂoods, sudden ﬁres and accidents, and such illegal activities as acts of terrorism may make cessation of the Group’s operations unavoidable. Such circumstances may
have an impact on Group performance.
• 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 formaintaining quality, incidents may occur related to product liability as aresult of matters relating to the Group and its business partners. Suchincidents may damage the Group’s brand image and result in substantial expenses that may have an impact on Group performance.
• Risks Associated with Business Partners
The Group has strengthened its internal systems for conﬁrming theoperating condition and 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. Suchcircumstances may have an impact on Group performance.
• 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 impact on Group performance. In addition, the Group obtains rights to the use of intellectual property owned by its alliance partners based overseas andconducts 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 impact on Group performance.
• Legal Risks
The Group conducts its business activities will full regard for laws
and regulations, including those related to antimonopoly, treatmentof subcontractors, and labeling laws as well as laws concerning thenatural environment and recycling. The Onward Group Compliance
Committee takes a central role in providing information related to theimportance of compliance with laws and regulations as well as internal
control procedures with the aim of ensuring proper compliance management. However, despite the establishment of these compliancesystems, issues may arise as a result of the illegal behavior of employees and the actions of business partners. Such issues may impair thetrust placed in the Group by society and result in the payment of substantial expenses for indemnities, etc. Such circumstances may havean impact on the Group’s performance.
• Risks Associated with Information
The Group works to take all necessary measures and strengthen systems for ensuring the security of information systems as provided forunder the guidelines of Japan’s Private Information Protection Law.
The Group has established systems for the management and supervision of information and has taken steps to ensure all management
and staff are aware of information security matters. However, going
forward, 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 andresult in the payment of related expenses. Such circumstances may
have an impact on the Group’s performance.
• 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 outbreaks of communicable diseases. When such risks emerge, the Group may have
difﬁculty in continuing its business operations. Such circumstances
may have an impact on the Group’s performance.
O N WA R D HO L DIN G S CO . , LTD .

19

Consolidated Balance Sheets
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
February 28, 2007 and February 29, 2008

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

Millions of yen

ASSETS

2007

2008

2008

Current assets:
Cash and time deposits (Notes 2. (17) and 7. (1))

¥ 57,390¥ 36,849$ 351,680

Accounts and notes receivable

32,30828,323

270,313Inventories (Note 2. (4))

37,09833,233

317,171

Deferred tax assets (Note 9)

4,192

3,953

37,727

Other current assets

4,373

10,32998,573

(164)

(168)

(1,600)135,197

112,519

1,073,864

75,62377,814

742,646

Less: Allowance for bad debt
Total current assets

Property, plant and equipment (Note 5):
Buildings and structures
Other depreciable property
Less: Accumulated depreciation

Land (Note 10)

26,532

26,373

251,698(61,028)(62,340)(594,964)

41,127

41,847399,380

53,72353,161

507,358

94,85095,008906,738

Goodwill

24,311

23,084

220,314

Other

2,783

2,860

27,29027,09425,944

247,604

Total property, plant and equipment

Intangible assets, net:

Total intangible assets, net

Investments and other assets:
Investments in securities (Note 3)

63,30850,773

484,571

Long-term loans receivable

4,267

4,732

45,162Long-term prepaid expenses

3,708

1,861

17,762

Deferred tax assets (Note 9)

5,815

6,436

61,422Other investments

14,692

12,986

123,933(995)(1,167)(11,138)

90,79575,621

721,712¥347,936¥309,092$2,949,918

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

20

A n n ual Repo r t 2008

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

Millions of yen

LIABILITIES AND NET ASSETS

2007

2008

2008

Current liabilities:
Accounts and notes payable
Short-term loans (Note 12)
Accrued expenses
Accrued income taxes
Consumption taxes payable
Accrued bonuses to employees
Allowance for sales returns
Other current liabilities
Total current liabilities¥ 51,692
26,916
7,258
8,234
936
2,694
1,028
4,736
103,494¥ 42,075
25,677
8,478
7,237
2,359
2,428
712
4,355
93,321$ 401,554
245,059
80,91369,072
22,51523,172
6,793
41,558890,636

Long-term liabilities:
Negative goodwill
Accrued retirement benefits (Note 6)
Accrued retirement benefits for directors and statutory auditors
Deferred tax liabilities̆revaluation of land (Notes 9 and 10)
Other
Total long-term liabilities
Total liabilities

447
4,950
274
5,992
7,641
19,304
122,798

3,487
151
5,949
8,545
18,132
111,453

33,2791,446
56,777
81,548173,050
1,063,686

ʊ



ʊ

Commitments and contingent liabilities (Note 11)
Net assets:  6KDUHKROGHUV¶HTXLW\    &RPPRQVWRFN
Authorized̆400,000,000 shares
Issued̆172,921,669 shares at February 28, 2007 and February 29, 2008
Capital surplus
Retained earnings (Note 13)    /HVV7UHDVXU\VWRFNDWFRVWVKDUHVDQGVKDUHV 
at February 28, 2007 and February 29, 2008, respectively      7RWDOVKDUHKROGHUV¶ HTuity
9DOXDWLRQDQGWUDQVODWLRQDGMXVWPHQWVNet unrealized (losses) gains on available-for-sale securities (Note 3)
Deferred gains on hedging instruments
Net revaluation loss of land (Notes 9 and 10)
Foreign currency translation adjustment
Total valuation and translation adjustments  6WRFNDFTXLVLWLRQULJKWVMinority interests in consolidated subsidiaries
Total net assets
Total liabilities and net assets

30,08050,045
148,954
(16,479)
212,600

30,08050,044
157,016

287,074
477,613
1,498,529(23,515)
213,625(224,420)
2,038,796


3,813
21
(11,012)(1,578)(8,756)(5,887)(17)(11,075)(1,789)(18,768)(56,186)(166)(105,696)(17,071)(179,119)



135

1,294

21,221

2,647

25,261

225,138

197,639

1,886,232¥347,936¥309,092$2,949,918
U.S. dollars

Yen

Per share:
Net assets per share¥1,256.9(Note 2. (23))¥1,243.8$11.9

See accompanying notes to financial statements.

O N WA R D HO L DIN G S CO . , LTD .

21

Consolidated Statements of Income
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2007 and February 29, 2008

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

Millions of yen
2007

2008

2008

Net sales¥318,691¥287,032$2,739,383

Cost of sales

175,796

156,842

1,496,873

Gross profit

142,895

130,190

1,242,510

Selling, general and administrative expenses (Note 16)

117,464

111,562

1,064,728

Operating income

25,431

18,628

177,782

Other income (expenses):
Interest income

257

343

3,272

Interest expenses

(850)

(397)

(3,792)

Loss on disposal of property, net
Gain on sale of investments in securities, net (Note 3)

(82)

(82)

(779)

4,051

6,192

59,091

Loss on write-down of investments in securities

(40)

(16)

(150)

Royalty income

473

696

6,647

Equity in earnings of investees

̆

1,693

16,161

Loss on withdrawal of pension fund

̆

(487)

(4,648)Provision for allowance for bad debt

(378)

(781)

(7,456)

Foreign currency exchange gain (loss)

(137)

1,333
ʊ

Gain on cancellation of the pension trust
Impairment losses on fixed assets
Other, net
Income before income taxes and minority interests

9,665

140
ʊ

(16,968)(1,333)(12,719)

2,113

3,301

31,49623,53527,897266,238

14,4099,780

93,337



Income taxes:
Current (Note 2. (10))(3,170)5,18649,492

Income before minority interests

Deferred (Note 9)

12,296

12,931

123,409

Minority interests in subsidiaries

(858)

(717)

(6,843)¥ 11,438¥ 12,214$ 116,566

Net income

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

Yen

Per share (Notes 13,14 and 16):
Net incomĕbasic

¥70.5

¥76.5

$0.730

Diluted net income per share

70.5

76.5

0.730

Cash dividends

26.0

30.0

0.286

See accompanying notes to financial statements.

22

A n nual Repo r t 2008

Consolidated Statements of Changes in Net Assets
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2007 and February 29, 2008
Millions of yen
Balance as at February 28, 2006:
Cash dividends
Bonuses to directors and statutory auditors
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of reserve for land revaluation
Increase resulting from newly consolidated
subsidiaries  1HWFKDQJHVRWKHUWKDQVKDUHKROGHUV¶   HTXLW\Total changes during the year
Balance as at February 28, 2007:
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of reserve for land revaluation
Increase resulting from newly consolidated
subsidiaries  1HWFKDQJHVRWKHUWKDQVKDUHKROGHUV¶   HTXLW\Total changes during the year
Balance as at February 29, 2008

6KDUHKROGHUV¶HTXLW\Numberof sharesof commonstock(thousands)

Commonstock

172,922
̆
̆
̆
̆
̆
̆

¥30,080
̆
̆
̆
̆
̆
̆

̆

̆

̆
ʊ
172,922
ʊ
ʊ
ʊ
ʊ
ʊ

̆
ʊ
30,080
ʊ
ʊ
ʊ
ʊ
ʊ

ʊ

ʊ

ʊ
ʊ
172,922ʊʊ
¥30,080

CapitalsurplusRetainedearnings(Note 13)

Treasury
stock¥50,044 ¥137,922 ¥(16,447)(3,893)
̆
̆
(531)
̆
̆
11,438
̆
̆
(42)
̆
̆
1
10
̆
554
̆
̆

3,464
̆
̆

̆
̆
̆
1
11,032(32)
50,045 148,954(16,479)ʊ
(4,217)ʊʊ
12,214ʊʊʊ
(7,044)
(1)
ʊ
8
ʊ
62
ʊ
ʊ

Total

¥201,599(3,893)(531)
11,438
(42)
11
554
3,464
̆
11,001
212,600(4,217)
12,214(7,044)
7
62

3

ʊ

3

ʊ
ʊ
(1)
8,062
¥50,044 ¥157,016

ʊ(7,036)¥(23,515)

ʊ
1,025¥213,625

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

6KDUHKROGHUV¶HTXLW\
Commonstock

Balance as at February 28, 2007:
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of reserve for land revaluation
Increase resulting from newly consolidated
subsidiaries  1HWFKDQJHVRWKHUWKDQVKDUHKROGHUV¶   HTXLW\Total changes during the year
Balance as at February 29, 2008

CapitalsurplusRetainedearnings(Note 13)

Treasury
stock

Total

$287,074 $477,624 $1,421,587 $(157,267) $2,029,018
ʊʊ
(40,243)ʊ
(40,243)ʊʊ
116,566ʊ
116,566ʊʊʊ (67,231)(67,231)
ʊ
(11)
ʊ
78
67
ʊ
ʊ
596
ʊ
596
ʊ

ʊ

23

ʊ

23

ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
(11)
76,942 (67,153)
9,778$287,074 $477,613 $1,498,529 $(224,420) $2,038,796

See accompanying notes to financial statements.

(Continued)

O N WA R D HO L DIN G S CO . , LTD .

23

Millions of yen
Valuation and translation adjustments
Net unrealized(losses) gains
onavailable-forsale securities(Note 3)

Balance as at February 28, 2006:
Cash dividends
Bonuses to directors and statutory auditors
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of reserve for land revaluation
Increase resulting from newly consolidated
subsidiaries  1HWFKDQJHVRWKHUWKDQVKDUHKROGHUV¶equityTotal changes during the year
Balance as at February 28, 2007:
Cash dividends
Net income
Purchase of treasury stock
Reissuance of treasury stockReversal of reserve for land revaluation
Increase resulting from newly consolidated
subsidiaries  1HWFKDQJHVRWKHUWKDQVKDUHKROGHUV¶equityTotal changes during the year
Balance as at February 29, 2008

¥ 5,292
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ

Deferred
gains/losses
on hedging
instruments

Net
revaluation
loss of land
(Notes 9, 10)¥ ʊ ¥ (2,378)
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ

Foreigncurrencytranslation
adjustment

StockacquisitionrightsTotal¥ (687) ¥ 2,227
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ

¥ ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ

Minority
interests inconsolidated
subsidiaries

Total net
assets¥ 17,773 ¥221,599
ʊ(3,893)
ʊ(531)
ʊ
11,438
ʊ
(42)
ʊ
11
ʊ
554

ʊ

ʊ

ʊ

ʊ

ʊ

ʊ

ʊ

3,464

(1,479)(1,479)
3,813
ʊ
ʊ
ʊ
ʊ
ʊ

21
21
21
ʊ
ʊ
ʊ
ʊ
ʊ

(8,634)(8,634)(11,012)
ʊ
ʊ
ʊ
ʊ
ʊ

(891)
(891)
(1,578)ʊʊʊʊʊ(10,983)(10,983)(8,756)
ʊ
ʊ
ʊ
ʊ
ʊ

73
73
73
ʊ
ʊ
ʊ
ʊ
ʊ

3,448
3,448
21,221ʊʊʊʊʊ

(7,462)
3,539
225,138(4,217)
12,214(7,044)
7
62

ʊ

ʊ

ʊ

ʊ

ʊ

ʊ

ʊ

3

(211) (10,012)(211) (10,012)¥(1,789) ¥ (18,768)

62
62
¥135

(9,700)(9,700)¥(5,887)

(38)
(63)
(38)
(63)
¥(17) ¥(11,075)(18,574) (28,524)(18,574) (27,499)¥ 2,647 ¥197,639

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

Valuation and translation adjustments
Net unrealized(losses) gains
onavailable-forsale securities(Note 3)

Balance as at February 28, 2007:$ 36,396
Cash dividends
ʊ
Net incomeʊ
Purchase of treasury stockʊReissuance of treasury stockʊ
Reversal of reserve for land revaluation
ʊ
Increase resulting from newly consolidated
subsidiariesʊ  1HWFKDQJHVRWKHUWKDQVKDUHKROGHUV¶equity(92,582)
Total changes during the year
(92,582)
Balance as at February 29, 2008$(56,186)
See accompanying notes to financial statements.

24

A n n ual Repo r t 2008

Deferred
gains/losses Net revaluation
on hedging
loss of land
instruments (Notes 9, 10)

Foreigncurrencytranslation
adjustment

StockacquisitionrightsTotal$ 200 $(105,101) $ (15,056) $ (83,561)
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ
ʊ

ʊ

ʊ

ʊ

Minority
interests inconsolidated
subsidiaries

Total net
assets$ 695 $ 202,524 $2,148,676
ʊʊ
(40,243)ʊʊ
116,566ʊʊ(67,231)
ʊ
ʊ
67
ʊ
ʊ
596
ʊ

(366)
(595)
(2,015) (95,558)
599
(366)
(595)
(2,015) (95,558)
599$(166) $(105,696) $(17,071)$(179,119) $1,294

ʊ23(177,263) (272,222)(177,263) (262,444)$ 25,261 $1,886,232

Consolidated Statements of Cash Flows
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2007 and February 29, 2008

Thousands
ofU.S. dollars(Note 2. (23))

Millions of yen
2007

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
Increase (Decrease) in provision for accrued retirement benefits
Interest and dividend income
Equity in earnings of investees
Loss on disposal of property, 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
Gain on cancellation of the pension trust
Decrease (Increase) in trade receivables
Decrease (Increase) in inventories
Increase (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 deposits
Payment for acquisition of consolidated subsidiaries resulting ina change in the scope of consolidation (Note 7. (2))
 Payment related to a sale of consolidated subsidiary resulting ina change in the scope of consolidation (Notes 2 and 7. (2))
Other, net
Net cash used in investing activities

2008

2008

¥23,535¥27,897$ 266,238

6,697
16,968903
541(1,346)255
̆
82(4,051)
40

7,341
1,333
1,051
779
(855)
(878)
(1,693)82(6,192)
16

70,05912,71910,0297,437(8,155)(8,380)(16,161)779(59,091)150

127(9,665)(1,397)(3,337)
1,206
1,952
32,510957(864)(15,321)80
17,362

50
ʊ

477
ʊ

515
715
(5,121)(763)
24,277
1,571(393)(13,013)61
12,503

4,917
6,826(48,870)(7,276)
231,698
14,995(3,754)(124,189)
580
119,330(87)
81(7,687)
1,517(12,933)
6,585(2,021)(928)
948(2,594)2,604(8,379)1,247(6,380)2,795(1,404)(298)
363(24,757)
24,852(79,964)
11,902(60,886)
26,670(13,400)(2,847)
3,466(4,737)

ʊ

ʊ

̆
5,413
(13,849)(6,346)(2,218)(20,610)(60,573)(21,170)(196,707)

See accompanying notes to financial statements.

(Continued)

O N WA R D HO L DIN G S CO . , LTD .

25

Millions of yen
2007

Cash flows from financing activities:
Net repayments of short-term loans
Acquisition of treasury stock
Dividends paid by the parent company
Dividends paid to minority stockholders
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of newly consolidated subsidiaries
Cash and cash equivalents at end of year (Note 7. (1))
See accompanying notes to financial statements.

26

A n nual Repo r t 2008

(1,139)(42)(3,893)(773)
10(5,837)364(1,960)56,0583,208¥57,306

Thousands
ofU.S. dollars(Note 2. (23))

2008

2008

(1,301)(7,044)(4,217)
ʊ(12,413)(67,231)(40,243)ʊ(21)(12,583)
159(20,531)
57,306
ʊ(205)(120,092)
1,522(195,947)
546,921
ʊ

¥36,775$350,974

Notes to Consolidated Financial Statements
ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2007 and February 29, 2008

1. Basis of Presentation of the Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared from the accounts maintained by ONWARD HOLDINGS&R/WG WKH³&RPSDQ\´ DQGLWVFRQVROLGDWHGVXEVLGLDULHVLQDFcordance with the provisions set forth in the Corporation Law of-DSDQ WKH³&RUSRUDWLRQ/DZ´ DQGWKH)LQDQFLDO,QVWUXPHQWVDQG([change Law and in conformity with accounting principles andpractices generally accepted in Japan, which are different in certain respects from the application and disclosure requirements ofInternational Financial Reporting Standards.
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 ofoperations and cash flows of the Company and its consolidated subsidiaries in accordance with accounting principles and practices
generally accepted in countries and jurisdictions other than Japan.
2. Summary of Significant Accounting Policies(1) Scope of Consolidation
The Company had 89 subsidiaries as at February 29, 2008 (69 asDW)HEUXDU\ 7KHDFFRPSDQ\LQJFRQVROLGDWHGILQDQFLDO
statements include the accounts of the Company and its 47 subsLGLDULHV IRU 7KH47 subsidiaries which have been
consolidated by the Company are listed below (the Company and these consolidated subsidiaries are collectively referred to as the³&RPSDQLHV´ Name of subsidiary

Onward KASHIYAMA Co., Ltd.
Onward Trading Co., Ltd.
Onward Life Design Network Co., Ltd.
Freed of London Ltd.
O & K Co., Ltd.
Onward Resort & Golf Co., Ltd.
Donna Karan Japan K.K.
Onward Creative Center Co., Ltd.
([FHO&R/WG
Across Transport Co., Ltd.
Onward Beach Resort Guam, Inc.
Bus Stop Co., Ltd.
Chacott Co., Ltd.
%22./(7&253
3URMHFW6ORDQH/WG
Joseph Ltd.
Joseph Tricot Ltd.
Joseph at Old Bond Street Ltd.
Joseph at Wimbledon Ltd.
Joseph London SARL
Joseph Tricot Cannes SARL-RVHSK()UDQFH6$5/
-RVHSK3URGXFWLRQ(85/SCI Joseph-RVHSK8.,QF 1HZ<RUN -RVHSK(\HZHDU/WG
-RH¶V&DIHV/WG
*LER¶ &R6S$
0DJOLILFLR(ULND6UO
Iris S.p.A.
*LER¶86$,QF
*LER¶)UDQFH6$5/
Iris Sud S.r.l.
Rediris SARL
Iris France SARL(TXLW\RZQHUVKLSSHUFHQWDJH

&ORVLQJGDWH

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
51.0
100.0
100.0
100.0
65.0
100.0
65.0
100.0
100.0
100.0
84.0
70.0
60.0
100.0
100.0
99.0
99.0
100.0

February 29
February 29
February 29
December 31
February 29
February 29
December 31
February 29
February 29
February 29
December 31
February 29
February 29
February 29
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30
November 30

O N WA R D HO L DIN G S CO . , LTD .

27

Frassineti S.r.l
O.K.N. Amsterdam B.V.
Onward Kashiyama Korea Co., Ltd.
Onward Kashiyama Hong Kong Ltd.
Onward International Fashion China Co., Ltd.
Onward Trading (Shanghai) Co., Ltd.
J. Press, Inc.
Onward Retail, L.L.C.
Agana Resort Club L.P.S.
Onward Kashiyama Guam, Inc.
Onward Golf Resort Guam, Inc.
Onward Mangilao Guam, Inc.

60.0
100.0
100.0
100.0
100.0
67.0
100.0
100.0
81.1
100.0
100.0
100.0

November 30
November 30
December 31
December 31
December 31
December 31
December 31
December 31
December 31
December 31
December 31
December 31

On September 1,2007, the Company was reorganized as a pure holding company, and changed its name to ONWARD
HOLDINGS Co., Ltd. The Company transferred its apparel business to a wholly owned subsidiary, ONWARD KASHIYAMA Co., Ltd.,and its trading business to a wholly owned subsidiary, Onward Trading Co., Ltd.
Effective from September 1, 2007, Personal Order Japan Co., Ltd. transferred its business to Onward Trading Co., Ltd. and was
excluded from consolidation, as Personal Order Japan Co., Ltd. was liquidated on November 30, 2007.
All shares of Impact 21 Co., Ltd. were sold, and Impact 21 Co., Ltd. was excluded from consolidation accordingly.
A 60% share of Frassineti S.r.l was acquired on May 22, 2007 and Frassineti S.r.l became a consolidated subsidiary of theCompany.
Joseph at Richmond Ltd., Joseph at Notting Hill Ltd., Joseph at Brooks Street Ltd., Medtown Ltd., Joblin Ltd., Lynxmead Inc. andBridge UK Inc. were excluded from consolidation.
Shanghai Onward Fashion Co., Ltd. changed its name to Onward International Fashion China Co., Ltd.
The financial statements of the aforementioned subsidiaries with fiscal year-ends of December 31 or November 30 have beenused for consolidation. All material transactions that occurred in the periods from such fiscal year-ends and February 29, the&RPSDQ\¶VILVFDO\HDUHQGKDYHEHHQDGMXVWHG
The remaining 15 subsidiaries (14 for 2007) 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 theCompanies.

28

A n n ual Repo r t 2008

(2) Consolidation and Elimination
For the purposes of preparing the consolidated financial statements of the Companies, all significant intercompany transactions,account balances and unrealized profits among the Companies have been entirely eliminated, and the portion attributable to minority
interests is credited/charged thereto.
The assets and liabilities of newly acquired subsidiaries are measured at fair value at the time of acquisition, and the differences
between the cost of investments in the consolidated subsidiaries and the equity in their net assets at fair value are accounted for as
goodwill, which is amortized on a straight-line basis over 5-20 year periods.
(3) Investments in Unconsolidated Subsidiaries and Affiliates
Investments in unconsolidated subsidiaries and affiliates are accounted for by the equity method. 21 companies (23 companies for2007) are accounted for by the equity method for the year ended February 29, 2008.
All shares of Polo Ralph Lauren Japan Co., Ltd. were sold, and Polo Ralph Lauren Japan Co., Ltd. was excluded from the equity
method. The Daido International Co., Ltd. was added to the Daido Limited Group and the equity method was applied.
The Company did not apply the equity method to 15 unconsolidated subsidiaries (14 in 2007) and 6 affiliates (6in 2007) as at February 29, 2008, as the effect on net income or retained earnings of their consolidated financial statements would
not be material.
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 are stated at cost, cost being determined generally by the last purchase invoice price method. Merchandise and finishedgoods held at retail stores are measured using the retail cost method.
When the net realizable value of certain classes of inventories (consisting primarily of seasonal merchandise which remains unsold
after the end of such seasons) is substantially less than the carrying value (cost), and the decline in value is not expected to be
recovered in the near future, appropriate write-downs are recorded on such inventory items. The amount of write-down is determinedbased on the experience of sales of merchandise similar to those unsold items during the last three years. For the years ended
February 28, 2007 and February 29, 2008, the recorded write-downs were ¥11,262 million and ¥9,903 million ($94,509 thousand),
respectively.
(5) Investments in Securities
Debt securities and equity securities classified as available-for-sale securities whose fair values are readily determinable are carriedat the fair values prevailing at the fiscal year-end date with unrealized gains or losses included as a component of net assets, net of
applicable taxes.
Available-for-sale securities whose fair values cannot readily be determined are stated principally at cost. In cases where declines
in the fair values of individual securities are assessed to be other than temporary, the cost of the security is reduced to net realizablevalue and the impairment loss is charged to income. Realized gains and losses are determined using the moving-average method
and are reflected in income.
(6) Derivative Transactions
All derivatives are stated at fair value, and changes in fair value are included in income for the period in which they arise, except for
GHULYDWLYHVWKDWDUHGHVLJQDWHGDV³KHGJLQJLQVWUXPHQWV´ VHH³  +HGJH$FFRXQWLQJ´EHORZ (7) Hedge Accounting
All gains or losses arising from changes in the fair values of the derivatives GHVLJQDWHG DV ³KHGJLQJ LQVWUXPHQWV´ ZKLFK ZHUH
formerly deferred as assets or liabilities, are deferred as a component of net assets, net of applicable taxes, due to the adoption of a
new accounting standard described in Note 2. (20). The gains or losses on the hedging instruments are included in net income in thesame period during which the gains and losses on the hedge items or transactions are recognized. For foreign exchange forward

O N WA R D HO L DIN G S CO . , LTD .

29

contracts, if they meet conditions for hedge accounting, the difference between the contract rate and spot rate at the date of thecontract 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 trade accounts payable and trade accounts receivable denominated in foreign currencies and scheduled transactions.
The Company has a policy of utilizing hedging instruments in order to reduce 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
the estimated 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 toJapanese income tax law.
Effective April 1, 2007, the Company and its domestic subsidiaries changed their method of depreciation of property, plant andequipment acquired on or after April 1, 2007 in connection with the revision to the Japanese Corporation Tax Law. The change did
not have a material impact on the &RPSDQLHV¶UHVXOWVRIRSHUDWLRQV
Overseas consolidated subsidiaries provide depreciation by the straight-line method.
(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 thefinancial statements or tax returns. Under this method, deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled, andthe effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes theenactment date.
(11) Allowances for Bad Debt
An allowance for bad debt is provided for estimated losses on known bad debt and those on doubtful accounts using the historical
write-off ratio at the balance sheet date.
(12) Allowances for Sales Returns
An allowance for sales returns is provided for the estimated losses on sales returns calculated under the Japanese tax regulations.
(13) Retirement Benefits
Accrued retirement benefits are provided for at the present value of the projected benefit obligation less the estimated fair value ofplan assets and deferred gains or losses at the balance sheet date. Unrecognized prior service costs are amortized and charged or
credited to income on a straight-line basis over 5 to 10 years,ZKLFKLVZLWKLQWKHUHODWHGHPSOR\HHV¶DYHUDJHUHPDLQLQJVHUYLFe years.
Unrecognized actuarial differences are amortized on a straight-line basis over 5 to 10 years, which is within the related emplo\HHV¶
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 accordance with the internal rules of the Company and certain consolidated subsidiaries.
(14) Provision for Loss on Guarantee Obligations
The provision for loss on guarantee obligations was provided for the estimated losses on WKH&RPSDQ\¶VREOLJDWLRQVWRSD\IRUWheguaranteed debts of subsidiaries. In estimating the provision, the Company considers the financial condition of each of thesubsidiaries.

30

A n nual Repo r t 2008

(15) Accounting for Leases
For the Company and its domestic consolidated subsidiaries, finance leases other than those which are deemed to transfer theownership of the lease assets to lessees are accounted for as operating leases.
(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
the purchase of goods and services are not included in the accompanying consolidated statements of income.
(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
Effective March 1, 2006, the Company and its domestic consolidated subsidiaries adopted a new accounting standard for the
LPSDLUPHQWRIIL[HGDVVHWV ³2SLQLRQFRQFerning the Establishment of an Accounting StDQGDUGIRUWKH,PSDLUPHQWRI)L[HG$VVHWV´issued by the Business Accounting Deliberation Council on August  DQGWKH³,PSOHPHQWDWLRQ*XLGDQFHRQWKH$FFRXQWLQJ
6WDQGDUGIRUWKH,PSDLUPHQWRI)L[HG$VVHWV´ %XVLQHVV$FFRXQWLQJ6WDQGDUG,PSOHPHQWDWLRQ*XLGDQFH1RLVVXHGRQ2FWREHU
 
The standard requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that thecarrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amountof an asset or asset group exceeds the sum of the undiscounted future cash flows expected to be generated from the continued use
and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying
amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use andeventual disposition of the asset or the net selling price at disposition.
The effect of adoption of the standard was to decrease income before income taxes and minority interests by ¥16,968 million forthe year ended February 28, 2007.
7KHPLOOLRQLPSDLUPHQWORVVZDVUHFRJQL]HGIRUODQG PLOOLRQ EXLOGLQJVDQGVWUXFWXUHV PLOOLRQ DQGRWKerIL[HGDVVHWV PLOOLRQ 

O N WA R D HO L DIN G S CO . , LTD .

31 'LUHFWRUV¶%RQXVHVDuring the year ended February 28, 2007, the Company and its domestic consolidated subsidiaULHVDGRSWHGWKH³$FFRXQWLQJ
6WDQGDUGIRU'LUHFWRUV¶%RQXVHV´ $FFRXQWLQJ6WDQGDUGV%RDUGRI-DSDQ6WDWHPHQW1RLVVXHGE\WKH$FFRXQWLQJ6WDQGDUGV%RDUG
RI-DSDQRQ1RYHPEHU 
8QGHUWKHVWDQGDUGGLUHFWRUV¶ERQXVHVDUHDFFRXQWHGIRUDV an expense as incurred, instead of being accounted for as an
DSSURSULDWLRQRIUHWDLQHGHDUQLQJVXSRQDSSURYDODWDJHQHUDOPHHWLQJRIVKDUHKROGHUV7KHHIIHFWRIDGRSWLRQRIWKHQHZVWDQGDrd
ZDVWRGHFUHDVHLQFRPHEHIRUHLQFRPHWD[HVDQGPLQRULW\LQWHUHVWVE\PLOOLRQIRUWKH\HDUHQGHG)HEUXDU\
 3UHVHQWDWLRQRI1HW$VVHWVRQWKH%DODQFH6KHHW
During the year ended February 28, 2007, the Company adopted thH³$FFRXQWLQJ6WDQGDUGIRU3UHVHQWDWLRQRI1HW$VVHWVRQWKH
%DODQFH6KHHW´ $FFRXQWLQJ6WDQGDUGV%RDUGRI-DSDQ6WDWHPHQW1RLVVXHGE\WKH$FFRXQWLQJ6WDQGDUGV%RDUGRI-DSDQRQ'HFHPEHU DQGWKH³*XLGDQFHRQ$FFRXQWLQJ6WDQGDUGIRU3UHVHQWDWLRQRI1HW$VVHWVRQWKH%DODQFH6KHHW´ $FFRXQWLQJ
6WDQGDUGV%RDUGRI-DSDQ*XLGDQFH1RLVVXHGE\WKH$FFRXQWLQJ6WDQGDUGV%RDUGRI-DSDQRQ'HFHPEHU 
8QGHUWKHVWDQGDUG³6KDUHKROGHUV¶HTXLW\´LVSUHVHQWHGDVDFRPSRQHQWRI³1HWDVVHWV´DORQJZLWKWKHRWKHUFRPSRQHQWVRI
³9DOXDWLRQDQGWUDQVODWLRQDGMXVWPHQWV´³6WRFNDFTXLVLWLRQULJKWV´DQG³0LQRULW\LQWHUHVWVLQFRQVROLGDWHGVXEVLGLDULHV´³'HIerred
JDLQVORVVHVRQKHGJLQJLQVWUXPHQWV´IRUPHUO\SUHVHQWHGDVDVVHWVRUOLDELOLWLHVDUHSUHVHQWHGDVDFRPSRQHQWRI³9DOXDWLRQDQG
WUDQVODWLRQDGMXVWPHQWV´³0LQRULW\LQWHUHVWVLQFRQVROLGDWHGVXEVLGLDULHV´IRUPHUO\OLVWHGDIWHU³/LDELOLWLHV´DUHDOVRLQFOXGHGLQ³1HW
DVVHWV´6KDUHKROGHUV¶HTXLW\EDVHGRQWKHSUHYLRXVFODVVLILFDWLRQDPRXQWHGWRPLOOLRQIRUWKH\HDUHQGHG)HEUXDU\ 6WRFN2SWLRQVDuring the year ended February 28, 2007, the Company adopted thH³$FFRXQWLQJ6WDQGDUGIRU6KDUH%DVHG3D\PHQW´ $FFRXQWLQJ
6WDQGDUGV%RDUGRI-DSDQ6WDWHPHQW1RLVVXHGE\WKH$FFRXQWLQJ6WDQGDUGV%RDUGRI-DSDQRQ'HFHPEHU DQG
³*XLGDQFHRQ$FFRXQWLQJ6WDQGDUGIRU6KDUH%DVHG3D\PHQW´ $FFRXQWLQJ6WDQGDUGV%RDUGRI-DSDQ*XLGDQFH1RLVVXHGE\
WKH$FFRXQWLQJ6WDQGDUGV%RDUGRI-DSDQUHYLVHGRQ0D\ 
7KHVHVWDQGDUGVSURYLGHWKDWVWRFNRSWLRQV should be recognized as an H[SHQVHDQGSUHVHQWHGDV³6WRFNDFTXLVLWLRQULJKWV´DV 
DFRPSRQHQWRIQHWDVVHWV7KHVWDQGDUGVDUHDSSOLHGWRVWRFNRSWLRQVWKDWDUHJUDQWHGRQDQGDIWHU0D\7KHHIIHFWRIDGRSWLRQRIWKHQHZVWDQGDUGVZDVLPPDWHULDO %XVLQHVV&RPELQDWLRQVDQG%XVLQHVV'LYHVWLWXUHVDQGWKH5HODWHG,PSOHPHQWDWLRQ*XLGDQFH
'XULQJWKH\HDUHQGHG)HEUXDU\WKH&RPSDQ\DQGLWVGRPHVWLFVXEVLGLDULHVDGRSWHGWKH³$FFRXQWLQJVWDQGDUGIRU
EXVLQHVVFRPELQDWLRQV´ $FFRXQWLQJ6WDQGDUGVLVVXHGE\WKH%XVLQHVV$FFRXQWLQJ&RXQFLOLQ-DSDQRQ2FWREHU ³$FFRXQWLQJ6WDQGDUGIRU%XVLQHVV'LYHVWLWXUHV´ $FFRXQWLQJ6WDQGDUGV%RDUGRI-DSDQ6WDWHPHQW1R DQG³,PSOHPHQWDWLRQ*XLGDQFHRQ$FFRXQWLQJ6WDQGDUGVIRU%XVLQHVV&RPELQDWLRQVDQG$FFRXQWLQJ6WDQGDUGVIRU%XVLQHVV'LYHVWLWXUHV´ $FFRXQWLQJ
6WDQGDUGV%RDUGRI-DSDQ*XLGDQFH1R ERWKLVVXHGE\WKHDFFRXQWLQJ6WDQGDUGV%RDUGRI-DSDQRQ'HFHPEHU7KHUH
ZDVQRHIIHFWIURPWKHDGRSWLRQRIWKHQHZVWDQGDUGV 8QLWHG6WDWHV'ROODU$PRXQWV$PRXQWVLQ86GROODUVDUHLQFOXGHGVROHO\IRUWKHFRQYHQLHQFHRIUHDGHUVRXWVLGHRI-DSDQ7KHUDWHRI 86WKHUDWH
RIH[FKDQJHDVRI)HEUXDU\KDVEHHQXVHGLQWUDQVODWLRQ7KHLQFOXVLRQRIVXFKDPRXQWVLVQRWLQWHQGHGWRLPSO\WKDW-DSDQHVH\HQKDYHEHHQRUFRXOGEHUHDGLO\FRQYHUWHGUHDOL]HGRUVHWWOHGLQ86GROODUVDWWKDWUDWHRUDQ\RWKHUUDWH

32

A n nual Repo r t 2008

3. Investments in Securities(1) Information as of and for the Year Ended February 29, 2008(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 29, 2008 are summarized as follows:
Millions of yen
Acquisition
cost

Thousands of U.S. dollars

Fair value
Unrealized gain(carrying value)(loss)

Acquisition
cost

Fair value
Unrealized gain(carrying value)(loss)

Securities with unrealized gains:
Equity securities
Total¥ 6,783¥ 9,225¥ 2,442$ 64,736$ 88,038$ 23,302

6,783

9,225

2,442

64,73688,03823,302

43,12030,756(12,364)

411,528

293,532(117,996)

43,12030,756(12,364)

411,528

293,532(117,996)¥49,903¥39,981¥ (9,922)$476,264$381,570$ 94,694

Securities with unrealized losses:
Equity securities
Total
Total

(b) Available-for-sale securities sold during the year ended February 29, 2008:
Millions of yen

Thousands of
U.S. dollars

Proceeds from sale of securities

¥15

$138

Gross realized gain on sale of securities

11

105

Gross realized loss on sale of securitiesʊʊ(c) Major securities which were not stated at fair value as of February 29, 2008:
Millions of yen

Thousands of
U.S. dollars¥341$3,259Available-for-sale securities:
Non-marketable equity securities(d) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 29, 2008 was ¥10,451
million ($99,742 thousand).
(2) Information as of and for the Year Ended February 28, 2007(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2007 are summarized as follows:
Millions of yen
Acquisition
cost

Fair value
Unrealized gain(carrying value)(loss)

Securities with unrealized gains:
Equity securities
Total¥34,583¥42,398¥7,81534,58342,398

7,815

9,218

7,883

(1,335)

9,218

7,883

(1,335)¥43,801¥50,281¥6,480

Securities with unrealized losses:
Equity securities
Total
Total

(b) Available-for-sale securities sold during the year ended February 28, 2007:
Millions of yen

Proceeds from sale of securities¥6,565Gross realized gain on sale of securities

4,060

Gross realized loss on sale of securities

9(c) Major securities which were not stated at fair value as of February 28, 2007:
Millions of yen

Available-for-sale securities:
Non-marketable equity securities¥345(d) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2007 was¥12,683 million.

O N WA R D HO L DIN G S CO . , LTD .

33

4. Derivative Transactions
Derivatives are used in order to hedge foreign exchange market risk on the transactions which occur in the normal course ofbusiness. Derivatives are not used for speculative purposes or for highly leveraged transactions. Derivatives are executed withfinancial institutions with high credit ratings, and the Company does not anticipate significant losses due to the credit risks of its
counterparties.
The Company and its consolidated subsidiaries applied hedge accounting for all derivative transactions as of February 28, 2007
and February 29, 2008; therefore, disclosure requirements of market value information on those derivatives are not applicable.
5. 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 tooffset such gains against the cost of newly acquired fixed assets. When such accounting is followed, the cost of the new fixed assets
is reduced to the extent of the deferred capital gains, thereby affecting related depreciation charges and accumulated depreciation.
Property, plant and equipment at February 28, 2007 and February 29, 2008, were reduced by ¥8,420 million and ¥8,353 million($79,715 thousand), respectively, representing accumulated deferred gains from eligible sales.
6. Retirement Plan and Retirement Benefits
The Company and its 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 :HOIDUH3HQVLRQ,QVXUDQFH/DZ ³:HOIDUH
%HQHILW3ODQ´ WD[TXDOLILHGSHQVLRQSODQVDQGSOans for lump-sum retirement benefits.
The reserve for retirement benefits as of February 28, 2007 and February 29, 2008 is analyzed as follows:
Thousands of
U.S. dollars

Millions of yen
February 28,
2007

February 29,
2008

February 29,
2008¥(37,366)¥(35,870)$(342,340)

36,58930,144

287,687

Funded status(776)(5,726)(54,653)

Unrecognized prior service costs

(146)

(117)

(1,112)

Unrecognized actuarial differences(4,029)2,602

24,831

Projected benefit obligations
Plan assets (including employee retirement benefit fund)Unrecognized pension assets
Subtotal
Prepaid pension costAccrued retirement benefits

̆

̆

̆

(4,950)(3,241)(30,934)

̆

246

2,346

¥ (4,950)¥ (3,487)$ (33,279)

The net periodic pension expenses for the years ended February 28, 2007 and February 29, 2008, were as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost

2007

2008

2008

¥1,669¥1,544$14,737

Interest cost

674

649

6,191

Expected return on plan assets

(592)

(504)

(4,807)(43)(1,061)

(29)

(281)

Amortization of unrecognized actuarial differences

(71)

(680)

Net periodic pension expenses¥ 647¥1,589$15,160

Amortization of unrecognized prior service costs

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, 2007

As of February 29, 2008

Straight-line basis

Straight-line basis

2.0%

2.0%

Expected rate of return on plan assets

0.6~2.5%

0.7~2.8%

Amortization of unrecognized prior service costs

5~10 years

5~10 years

Amortization of unrecognized actuarial differences

5~10 years

5~10 years

Discount rate

34

A n nual Repo r t 2008

7. Notes to Consolidated Statements of Cash Flows(1) Cash and cash equivalents at February 28, 2007 and February 29, 2008 consisted of the following:
Millions of yen
February 28,
February 29,
2007
2008

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

Thousands of
U.S. dollars
February 29,
 
2008

¥57,390¥36,849

(84)

(74)

$351,680(706)¥57,306¥36,775$350,974(2) Payment related to a sale of consolidated subsidiary resulting in a change in the scope of consolidation
For the year ended February 29, 2008, due to a sale of shares of Impact 21 Co., Ltd., Impact 21 Co., Ltd. was excluded fromconsolidation. The assets and liabilities of the company were as follows:

Current assets

Millions of yen

Thousands of
U.S. dollars¥ 33,112$ 316,012

Fixed assets

5,802

55,379Current liabilities(7,041)(67,196)

Long-term liabilities
Minority interests in the subsidiary(705)(6,732)(18,966)(181,010)

Gain on sale of investments in securities

6,885

65,705

Cash income from the sale of the subsidiary

19,087

182,158

Cash and cash equivalents held by the subsidiary(25,433)(242,729)

Payment for selling of the subsidiary¥ (6,346)$ (60,573)

Payment for acquisition of consolidated subsidiaries resulting in a change in the scope of consolidation
For the year ended February 28, 2007, due to the acquisition of shares of Onward Mangilao Guam, Inc., Onward Mangilao Guam,
Inc. was newly consolidated. The assets and liabilities of the company at the time of initial consolidation, additional cash paid for theacquisition, cash and cash equivalents held by the subsidiary and net payment for acquisition of the subsidiary were as follows:
Millions of yen

Current assets¥ 627

Fixed assets

3,937

Goodwill on consolidation

754

Current liabilities(108)

Cash paid for acquisition of the subsidiary

5,210

Cash and cash equivalents held by the subsidiary
Payment for acquisition of the subsidiary(473)¥4,737

O N WA R D HO L DIN G S CO . , LTD .

35

8. Lease Transactions
7KH&RPSDQLHV¶ILQDQFHOHDVHFRQWUDFWVWKDWDUHQRWGHHPHGWRWUDQVIHUWKHRZQHUVKLSRIWKHOHDVHGDVVHWVWROHVVHHVDUHDFFRXQWHG
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DVVHWVZKLFKLQFOXGHGWKHSRUWLRQRILQWHUHVWWKHUHRQDVRI)HEUXDU\DQG)HEUXDU\DUHVXPPDUL]HGDVIROORZV0LOOLRQVRI\HQ
)HEUXDU\


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$FTXLVLWLRQFRVW7RWDO
¥3,1602WKHU$7,3757RWDO
$30,164(372)(1,517)(10,928)(3,554)(14,482)ʊ

(145)(1,381)ʊ(1,381)¥400¥1,498$10,480$3,821$14,301   

(1,145)̆  (145)
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February 29,
2008

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¥772

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7KRXVDQGVRI86GROODUVFebruary 29,
 2008

7RROVIXUQLWXUHDQGIL[WXUHV¥2,388

7RROVIXUQLWXUHDQGIL[WXUHV$FFXPXODWHGGHSUHFLDWLRQ  7KHVFKHGXOHGPDWXULWLHVRIIXWXUHOHDVHSD\PHQWVRQVXFKOHDVHFRQWUDFWVDVRI)HEUXDU\DQG)HEUXDU\DUHDs
IROORZV
0LOOLRQVRI\HQ

7KRXVDQGVRI
86GROODUV)HEUXDU\ February 29 
2008

February 29,
2008

6FKHGXOHGPDWXULWLHVRIIXWXUHOHDVHV  'XHZLWKLQRQH\HDU

 

¥ 678

  'XHRYHURQH\HDU



965

9,212

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¥1,643$15,682$ 6,470

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0LOOLRQVRI\HQ

7KRXVDQGVRI
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2008

February 29,
2008



¥32

$304

  /HDVHH[SHQVHVUHYHUVDORILPSDLUPHQWORVVRIOHDVHGDVVHWVGHSUHFLDWLRQDQGLPSDLUPHQWORVVIRUWKH\HDUVHQGHG)HEUXDU\DQG)HEUXDU\DUHDVIROORZV/HDVHH[SHQVHVIRUWKH\HDU

0LOOLRQVRI\HQ

7KRXVDQGVRI
86GROODUV)HEUXDU\ February 29,

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February 29,
2008



¥715

5HYHUVDORILPSDLUPHQWORVVRIOHDVHGDVVHWV

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53

509

'HSUHFLDWLRQ

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715

6,820

,PSDLUPHQWORVV



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36

A n n ual Repo r t 2008

$6,8207KH&RPSDQLHV¶RSHUDWLQJOHDVHFRQWUDFWV 7KHVFKHGXOHGPDWXULWLHVRIIXWXUHOHDVHSD\PHQWVRQRSHUDWLQJOHDVHFRQWUDFWVDVRI)HEUXDU\DQG)HEUXDU\DUH
DVIROORZV
0LOOLRQVRI\HQ

7KRXVDQGVRI
86GROODUV)HEUXDU\ February 29  2008

February 29
2008

6FKHGXOHGPDWXULWLHVRIIXWXUHOHDVHV  'XHZLWKLQRQH\HDU



 ¥2

  'XHRYHURQH\HDU

363

ʊ

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¥2

$24

$24

/HVVRU $FTXLVLWLRQFRVWDFFXPXODWHGGHSUHFLDWLRQDQGQHWERRNYDOXHRIWKHOHDVHGDVVHWVDVRI)HEUXDU\DQG)HEUXDU\
DUHVXPPDUL]HGDVIROORZV
7KRXVDQGVRI
86GROODUV

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)HEUXDU\ $FTXLVLWLRQFRVW$FFXPXODWHGGHSUHFLDWLRQ
1HWERRNYDOXH

February 29,
2008

2WKHU

7RWDO 

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¥ 83

¥ 83

February 29,
2008


2WKHU

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

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(68)

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(645)

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

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¥ 15

¥ 15

$ 143

$ 143

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IROORZV
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2008

February 29,
2008'XHZLWKLQRQH\HDU

¥ 

¥ 73

'XHRYHURQH\HDU

134

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

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0LOOLRQVRI\HQ

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86GROODUV)HEUXDU\ February 29
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2008

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¥18

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O N WA R D HO L DIN G S CO . , LTD .

37

9. Income Taxes
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as at February
28, 2007 and February 29, 2008 consisted of the following elements:
Millions of yen

Thousands of
U.S. dollars

February 28, February 29,
2007
2008

February 29,
2008

Deferred tax assets:¥ 2,143¥ 1,434

Evaluation loss on investments in unconsolidated subsidiaries

1,033

28

263

Accrued bonuses to employees

1,011

987

9,424

Accrued retirement benefits

5,923

5,937

56,661

Accrued retirement benefits for directors and auditors

1,080

62

588

Allowance for bad debt

1,182

503

4,799

Tax loss carryforwards

11,273

12,200116,434

Impairment loss

8,599

7,582

72,363

̆

4,035

38,511

2,514

3,053

29,146

Valuation loss on inventories

Net unrealized gains on available-for-sale securities
Other
Subtotal
Less: Valuation allowance
Total deferred tax assets$ 13,684

34,75835,821

341,873(14,783)(17,848)(170,335)

19,975

17,973

171,538

Deferred tax liabilities:
Gain on securities contributed to an employee retirement benefit trust(3,474)(237)(2,261)Gain on securities returned from an employee retirement benefit trust(3,931)(3,474)(33,154)

Net unrealized gains on available-for-sale securities(37,513)(2,638)(3,930)

Provision for deferred capital gains on real property for tax purposes

(22)

(22)

(206)

Other

(95)

(155)

(1,483)

Total deferred tax liabilities(10,160)(7,818)(74,617)

Net deferred tax assets¥ 9,815¥ 10,155$ 96,921

The reconciliation of the difference between the statutory tax rate and the effective tax rate for the years ended February 28, 2007
and February 29, 2008 is as follows:%

Statutory tax rate

2007

2008

40.7

40.7

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

2.9

1.7

Change in valuation allowance

5.5

(3.4)

̆

15.9

Deductible losses on sales of investments in subsidiaries and affiliates which are eliminated for consolidation
Other
Effective tax rate

38

A n nual Repo r t 2008

(1.3)

(1.3)

47.8

53.6

10. 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 29, 2008, the accumulated revaluation loss amounted to ¥17,024 million ($162,472 thousand), for which the related
deferred tax liability of ¥5,949 million ($56,777 thousand) is recognized. The net revaluation loss of ¥11,075 million ($105,696
thousand) is presented as a separate component of netDVVHWVDV³1HWUHYDOXDWLRQORVVRIODQG´ 
As of February 28, 2007, the accumulated revaluation loss amounted to ¥17,004 million, for which the related deferred tax liabilityof ¥5,992 million is recognized. The net revaluation loss of ¥11,012 million is presented as a separate component of net assets as a
³1HWUHYDOXDWLRQORVVRIODQG´
The difference between the market value of land subject to the revaluation and the book value was ¥5,810 million as at February
28, 2007.
11. Commitments and Contingent Liabilities
The Company was contingently liable as a guarantor for certain DIILOLDWHV¶EDQNORDQV7KHRXWVWDQGLQJEDODQFHRIVXFKEDQNORDns
guaranteed as at February 28, 2007 and February 29, 2008 aggregated to ¥1,339 million and ¥96 million ($919 thousand),
respectively.
12. Short-term Loans
Short-term loans at February 28, 2007 and February 29, 2008 represented loans, principally from banks. The weighted-averageinterest rate on these loans was 3.1% in 2007 and 3.8% in 2008.
6KDUHKROGHUV¶(TXLW\On May 1, 2006, a new corporation law (the "Corporation Law") became effective, which reformed and replaced the Commercial
Code of Japan with various revisions that would, for the most part, be applicable to events or transactions which occur on or after
May 1, 2006 and for the fiscal years ending on or after May 1, 2006. Under the Corporation Law, the entire amount of the issue priceof shares is required to be designated as a stated common stock account, although a company in Japan may, by resolution of its
Board of Directors, account for an amount not exceeding 50% of the issue price of new shares as additional paid-in capital.
The Corporation Law provides that an amount equal to 10% of distributions from retained earnings paid by the Company and its
Japanese subsidiaries be appropriated as a lHJDOUHVHUYH1RIXUWKHUDSSURSULDWLRQVDUHUHTXLUHGZKHQWKHWRWDODPRXQWRIWKH
additional paid-in capital and the legal reserve equals 25% of their respective stated capital. The Corporation Law also provides that
additional paid-in capital and the legal reserve are available for appropriations by a resolution of the shareholders. Balances of thelegal reserve are included in retained earnings in the accompanying consolidated balance sheets.
Cash dividends charged to retained earnings for the years ended February 29, 2008 and February 28, 2007 represent dividends
paid out during those years. The amount available for diviGHQGVLVEDVHGRQWKHDPRXQWUHFRUGHGLQWKH&RPSDQ\¶V
non-consolidated books of account in accordance with the Corporation Law.
Dividends to be paid after the balance sheet date, which were approved by the general meeting of shareholders held on May 29,
2008, 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

¥4,700 million ($44,855 thousand)
Retained earnings¥30 ($0.29)
February 29, 2008
May 30, 2008

O N WA R D HO L DIN G S CO . , LTD .

39

14. 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 ofincome 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, 2007 and February 29,
2008 is as follows:
Thousands of
U.S. dollars

Millions of yen

Net income
Less: Components not pertaining to common shareholders
Net income pertaining to common stock
Average outstanding shares of common stock (shares)
Effect of dilutive stock options (shares)

2007

2008

2008

¥11,438¥12,214$116,566

̆̆̆

¥11,438¥12,214$116,566

162,187,211

159,602,933

43,81487,523

15. Related-Party Transactions
Year Ended February 29, 2008
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 ($69 thousand). Also, Mr. Hirouchi paid a rental fee of ¥17 million ($163 thousand) to the Company for a house.
The rental fees were determined by the market average amounts.
Year Ended February 28, 2007
The Company leased land from Mr. Hirouchi, Chairman of Onward Kashiyama Co., Ltd., during the year and the rental fee was¥7 million. Also, Mr. Hirouchi paid a rental fee of ¥21 million to the Company for a house. The rental fees were determined by themarket average amounts.
16. Stock Options
The Company has two stock option plans granted to directors and corporate auditors.
2007 Stock Option Plan
Under the 2007 stock option plan, stock options were granted to 5 directors and 2 corporate auditors 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.
  $VXPPDU\RILQIRUPDWLRQIRUWKH&RPSDQ\¶VVWRFNRSWLRQSODQLVDVIROORZV
Exercise price¥1 ($0.01)

Fair value at the grant date

¥1,284 ($12.25)

Number of stock options granted

40,000 shares

The cost recognized for the stock options for the year ended February 29, 2008 was ¥63 million ($599 thousand), which isincluded in selling, general and administrative expenses.
$VXPPDU\RIWKHVFDOHDQGPRYHPHQWRIWKH&RPSDQ\¶VVWRFNRSWLRQSODQDVRI)HEUXDU\LVDVIROORZV
Stock options not exercisable:
2007 stock option plan
Outstanding at February 28, 2007

40,000Forfeited̆

VestedOutstanding at February 29, 200840

̆GrantedA n n ual Repo r t 2008

̆
40,000

The fair value of the stock options granted for the year ended February 29, 2008 was estimated using the Black-Scholes
option-valuation model with the following assumptions:
Expected volatility
Expected lives

31.207%
7 years and 6 months

Expected dividend¥26 per share

Risk-free interest rate

1.7498%The number of rights to vest in the future periods is determined based on actual forfeited number of the stock option because it isdifficult to estimate forfeiture in the future.
2006 Stock Option Plan
Under the 2006 stock option plan, stock options were granted to 12 directors and 2 corporate auditors on June 20, 2006. They are
exercisable in the period from July 1, 2006 to June 30, 2036. The terms of the options include certain limitations on the exercisability
under which grantees can exercise their options during a five-year period starting a year after they lose their positions as directors or
corporate auditors.
  $VXPPDU\RILQIRUPDWLRQIRUWKH&RPSDQ\¶VVWRFNRSWLRQSODQLVDVIROORZV
Exercise price¥1

Fair value at the grant date

¥1,541

Number of stock options granted

63,000 shares

The cost recognized for the stock options for the year ended February 28, 2007 was ¥73 million, which is included in selling,
general and administrative expenses.
$VXPPDU\RIWKHVFDOHDQGPRYHPHQWRIWKH&RPSDQ\¶VVWRFNRSWLRQSODQDVRI)HEUXDU\LVDVIROORZV
Stock options not exercisable:
2006 stock option plan̆Outstanding at February 28, 2006
Granted63,000Forfeited̆̆

VestedOutstanding at February 28, 2007

63,000The fair value of the stock options granted for the year ended February 28, 2007 was estimated using the Black-Scholes
option-valuation model with the following assumptions:
Expected volatility
Expected lives

33.507%
7 years and 6 months

Expected dividend¥24 per share

Risk-free interest rate

1.6000%The number of rights to vest in the future periods is determined based on actual forfeited number of the stock option because it isdifficult to estimate forfeiture in the future.
17. Segment Information(1) Industry Segment Information
The Company and its consolidated subsidiaries operate prinFLSDOO\LQWZRLQGXVWULDOVHJPHQWV³$SSDUHO´DQG³2WKHU´  7KH$SSDUHO'LYLVLRQSURGXFHVDQGVHOOVDZLGHUDQJHRIZRPHQ¶VDQGPHQ¶VFORWKLQJLQFOXGLQJGUHVVHVVXLWVVKLUWVVNLUWV
sweaters, trousers and casual wear.
The Other Division operates logistics, sports facilities, resort facilities, etc.
On September 1, 2007, the Company was reorganized as a pure holding company; therefore, the Group management expenses
and the assets used for management activity which were included in the Apparel segment have been transferred to Elimination ofintersegment sales.

O N WA R D HO L DIN G S CO . , LTD .

41

The management expenses transferred to Elimination of intersegment sales as of February 29, 2008, was ¥1,801 million ($17,188
thousand) and the assets used for management activity as of February 29, 2008, was ¥180,201 million ($1,719,803 thousand).
Segment information classified by industry segment of the Companies for the year ended February 29, 2008 is as follows:
For the year ended February 29, 2008

Millions of yen
Industry segment

Elimination ofintersegment sales

Consolidated
total

Apparel

Other

Total

Sales to outside customers
Intersegment sales¥269,322¥17,710¥287,032

9,778

9,791

̆
(9,791)¥287,032

13

Total
Costs and expenses

269,335
249,191

27,48827,211

296,823
276,402(9,791)(7,998)287,032
268,404¥

̆

Operating income¥ 20,144¥277¥ 20,421¥ (1,793)¥ 18,628

AssetsDepreciation and amortization¥178,035¥ 6,246¥40,664¥ 1,148¥218,699¥ 7,394¥90,393¥(53)¥309,092¥ 7,341

Impairment loss

¥ 1,312

¥

21

¥

1,333

¥

̆

¥

1,333

Capital expenditures¥ 8,565¥ 1,037

¥

9,602

¥

(36)

¥

9,566

For the year ended February 29, 2008

Thousands of U.S. dollars
Industry segment
Apparel

Other

Total

Sales to outside customers
Intersegment sales$2,570,356
129$169,027
93,319$2,739,383
93,448

Total
Costs and expenses

2,570,485
2,378,234

262,346
259,702

Operating income$ 192,251$

AssetsDepreciation and amortization$1,699,133$ 59,608

Impairment loss$

12,526$

Capital expenditures$

81,741$Elimination ofintersegment sales

Consolidated
total̆
(93,448)$2,739,383

2,832,831
2,637,936(93,448)(76,334)

2,739,383
2,561,602

2,645$ 194,896$ (17,114)$ 177,782$388,089$ 10,960$2,087,222$ 70,568$862,696$(509)$2,949,918$ 70,059

193$

12,719$̆

$

12,719

9,902$

91,643

$

(346)

$

91,297$

̆Segment information classified by industry segment of the Companies for the year ended February 28, 2007 is as follows:
For the year ended February 28, 2007

Millions of yen
Industry segment
Clothing

Other

Total

Sales to outside customers
Intersegment sales¥301,845
24¥16,845
14,131¥318,690
14,155

Total
Costs and expenses

301,869
277,086

30,97630,277

332,845
307,363

Elimination ofintersegment sales¥

Consolidated
total̆
(14,155)¥318,690
̆

(14,155)(14,104)

318,690
293,259

Operating income¥ 24,783¥

699¥ 25,482¥(51)¥ 25,431

AssetsDepreciation and amortization¥337,035¥ 5,917¥52,807¥ 844¥389,842¥ 6,761¥(41,906)¥(65)¥347,936¥ 6,696

Impairment loss¥

¥12,597¥ 16,968¥̆¥ 16,968

Capital expenditures¥ 10,020¥¥ 10,617¥(111)¥ 10,506

4,371

597

(2) Geographic Segment Information
The sales in Europe were over 10% of total segment sales for the year ended February 28, 2007, therefore, the Company disclosed
geographic segment information.
The major countries or regions in the respective divisions are as follows:
Europe: United Kingdom, Italy and France
Other: U.S.A., China and Korea
On September 1, 2007, the Company was reorganized as a pure holding company; therefore, the Group management expense
and the assets used for management activity which were included in the Japan segment have been transferred to Elimination ofintersegment sales.

42

A n n ual Repo r t 2008

The management expenses transferred to Elimination of intersegment sales as of February 29, 2008, was ¥1,801 million ($17,188
thousand) and the assets used for management activity as of February 29, 2008, was ¥180,201 million ($1,719,803 thousand).
Segment information classified by geographic segment of the Company for the year ended February 29, 2008 is as follows:
For the year ended February 29, 2008

Millions of yen
Geographic segment

Japan

Europe

Other

Total

Sales to outside customers
Intersegment sales¥243,199¥34,107¥ 9,726

1,536

623

121

¥287,032
2,280

Total
Costs and expenses

244,735
226,700

34,73031,892

9,847
10,765

Operating income (loss)¥ 18,035¥ 2,838

Assets¥152,615¥47,114

For the year ended February 29, 2008

Elimination ofintersegment sales

Consolidated
total̆
(2,280)¥287,032

289,312269,357(2,280)(952)

287,032
268,405¥ (917)¥ 19,956¥ (1,328)¥ 18,628¥17,839¥217,568¥91,524¥309,092

Elimination ofintersegment sales

Consolidated
total

¥

̆

Thousands of U.S. dollars
Geographic segment

Japan

Europe

Other

Total

Sales to outside customers
Intersegment sales$2,321,044
14,665$ 325,510
5,944$ 92,829
1,154$2,739,383
21,763

Total
Costs and expenses

2,335,709
2,163,585

331,454304,373

93,983
102,736

Operating income (loss)$ 172,124 $ 27,081

Assets$1,456,524$ 449,646

̆(21,763)$2,739,383

2,761,146
2,570,694(21,763)(9,093)2,739,383
2,561,601$ (8,753)$ 190,452$ (12,670)$ 177,782$170,255$2,076,425$873,493$2,949,918$

̆Segment information classified by geographic segment of the Company for the year ended February 28, 2007 is as follows:
For the year ended February 28, 2007

Millions of yen
Geographic segment

Elimination ofintersegment sales

Consolidated
total

Japan

Europe

Other

Total

Sales to outside customers
Intersegment sales¥280,169
1,138¥31,395
1,109¥ 7,126122¥318,690
2,369

Total
Costs and expenses

281,307258,126

32,50429,277

7,248
8,334

321,059
295,737

Operating income (loss)¥ 23,181¥ 3,227¥ (1,086)¥ 25,322¥

109¥ 25,431

Assets¥321,911¥31,595¥18,041¥371,547¥(23,611)¥347,936¥̆
(2,369)¥318,690
̆

(2,369)(2,478)318,690
293,259(3) Overseas Sales
Overseas sales were over 10% of consolidated sales for the year ended February 28, 2007 , therefore, the Company disclosed
overseas sales information.
The major countries or regions in the respective divisions are as follows:
Europe: United Kingdom, Italy and France
Other: U.S.A., China and 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 29, 2008 is as follows:
For the year ended February 29, 2008

Millions of yen
Overseas sales

Overseas sales
Consolidated sales
Percentage of overseas sales against consolidated sales

Europe

Other

Total

¥25,917¥19,243¥45,160
287,032

9.0%

6.7%

15.7%

O N WA R D HO L DIN G S CO . , LTD .

43

For the year ended February 29, 2008

Thousands of U.S. dollars
Overseas sales

Overseas sales
Consolidated sales
Percentage of overseas sales against consolidated sales

Europe

Other

Total

$247,351$183,651$ 431,002
2,739,383

9.0%

6.7%

15.7%

Segment information classified as overseas sales of the Company for the year ended February 28, 2007 is as follows:
For the year ended February 28, 2007

Millions of yen
Overseas sales

Overseas sales
Consolidated sales
Percentage of overseas sales against consolidated sales

44

A n nual Repo r t 2008

EuropeOther¥23,985¥13,925

7.5%

Total

4.4%

¥ 37,910
318,69011.9%

‫ ع‬Tel : 03 3503 1100

‫ ع‬Certified Public Accountants

Hibiya Kokusai Bldg.
2-2-3, Uchisaiwai-cho
Chiyoda-ku, Tokyo, Japan 100-0011
C.P.O. Box 1196. Tokyo, Japan 100-8611

Fax : 03 3503 1197

REPORT OF INDEPENDENT AUDITORSThe Board of Directors of
ONWARD HOLDINGS Co., Ltd.

We have audited the accompanying consolidated balance sheets of ONWARD
HOLDINGS Co., Ltd. and its consolidated subsidiaries as of February 28, 2007 andFebruary 29, 2008, and the related consolidated statements of income, changes in net
assets, and cash flows for each of the two years in the period ended February 29, 2008,
all expressed in Japanese Yen. These consolidated financial statements are theresponsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted inJapan. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, inall material respects, the consolidated financial position of ONWARD HOLDINGS Co.,
Ltd. and its consolidated subsidiaries as of February 28, 2007 and February 29, 2008,
and the consolidated results of their operations and their cash flows for each of the twoyears in the period ended February 29, 2008, in conformity with accounting principles
and practices generally accepted in Japan (see Note 1).
The amounts expressed in U.S. dollars, provided solely for the convenience of thereader, have been translated on the basis set forth in Note 2(23) to the accompanying
consolidated financial statements.
As more fully described in Note 2(18) to the consolidated financial statements, theCompany has adopted the provisions of a new accounting standard for the impairmentof fixed assets, effective March 1, 2006.

May 29, 2008
A MEMBER OF ERNST & YOUNG GLOBALO N WA R D HO L DIN G S CO . , LTD .

45

Principal Subsidiaries
Principal Subsidiaries

Overseas Subsidiaries
J. PRESS, INC.
262 York Street,
New Haven, CT 06511, U.S.A.
Tel: (1) 203-772-1310

HORLOGE SAINT BENOIT S.A.

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 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 ITALIA S.p.A.
Via Della Spiga 9, 20121 Milano, Italy
Tel: (39) 02-783-667
SHANGHAI ONWARD
FASHION CO., LTD.
5F Jinjiang Dickson Center,#400 Changle Road, Shanghai,
People’s Republic of China
Tel: (86) 21-6466-6466
ONWARD FASHION TRADING(China) CO., LTD.
5F Jinjiang Dickson Center,#400 Changle Road, Shanghai,
People’s Republic of China
Tel: (86) 21-6472-3660
ONWARD RETAIL L.L.C.
530 7th Ave., 29th Floor,
NAVE Soho Store,
New York, NY 10018, U.S.A.
Tel: (1) 212-997-3600
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

46

Domestic Subsidiaries

A n nual Repo r t 2008

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

ONWARD GOLF RESORT GUAM, INC.
#825, Route 4A, Talofofo,
Guam 96915, U.S.A.
Tel: (1) 671-789-5555
FREED OF LONDON LTD.
94, St. Martin’s Lane,
London WC2N 4AT, U.K.
Tel: (44) 20-7240-0432
JOSEPH LTD.
Unit 11, 50 Carnwath Road,
London SW6 3JX, U.K.
Tel: (44) 20-7736-2522
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

APPAREL AND TEXTILEPRODUCTSONWARD TRADING CO., LTD.
CHACOTT CO., LTD.
CREATIVE YOKO CO., LTD.
BUS STOP CO., LTD.
DONNA KARAN JAPAN K.K.
FUSION CO., LTD.
J. DIRECTION CO., LTD.

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

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

As of February 29, 2008

Corporate Data
Corporate Data

(As of February 29, 2008)

Head Ofﬁce

10-5, Nihonbashi 3-chome,

Major Shareholders

Chuo-ku, Tokyo 103-8239, Japan

Percentage ofTotal Shares Issued

Tel: (81) 3-3272-2317
Kashiyama Scholarship Foundation

5.5%

Japan Trustee Services Bank, Ltd.

5.0

Nippon Life Insurance Company

3.9

The Master Trust Bank of Japan, Ltd.

3.9

Lehman Brothers International (Europe), Limited

3.7

Isetan Company, Limited

3.1

Authorized—400,000,000 shares

State Street Bank and Trust Company

2.8

Issued—172,921,669 shares

The Dai-ichi Mutual Life Insurance Company

2.6

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

September 1947

Paid-in Capital¥30,080 million

Common Stock

Number of Shareholders

6,056

Stock Listings

Tokyo, Osaka, and Nagoya

2.1

Trust & Custody Services Bank, Ltd. (Trust Account)

2.0

Distribution of Ownership among Shareholders

stock exchanges
Transfer AgentMARUI GROUP CO., LTD.

(On a number of shares basis)

Mitsubishi UFJ Trust

Other Japanese corporations
20.8%& Banking Co., Ltd.
4-5, Marunouchi 1-chome, Chiyodaku, Tokyo 100-8212, Japan

Japanese ﬁnancial institutions
33.1%

Foreign institutions and others
25.3%

Japanese securities companies
1.0%Japanese individuals and others
19.8%

Number of Employees(Consolidated)

2,469 (As of the end of February 2008)

Stock Price Movement(Thousands of shares)

(Yen)

2,000

10,000

8,000
1,500
6,000
1,000
4,000
500
2,000

0

0
Mar.
2007

Apr.

May

June

July

Aug.

Sept.

Oct.

Nov.

Dec.

Jan.
2008

Feb.

Mar.

Trading Volume (left scale)
ONWARD KASHIYAMA’s Stock Price (Closing) (right scale)O N WA R D HO L DIN G S CO . , LTD .

47

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.co.jp/

Annual Report 2008

Printed in Japan