Annual Report 2015
Year Ended February 28, 2015

ONWARD HOLDINGS CO., LTD.

VisionIn fiscal year 2015, we continued to focus on addressing challenges of the global apparelmarket. While we are happy to report stronger profitability in Europe, our overallbusiness continued to face headwinds in most of the key markets, particularly in Japan.
However, our history, spanning nearly 90 years, shows that we emerge stronger whenpresented with challenges. One of our secrets is that we invest focusing on future
decades, not the next few quarters.
In 2015, we invested at all levels, from the top executive suite to new domestic
subsidiaries and joint ventures, for sustainable growth. The new, modern Tokyo Head
Office building opened its doors to our employees and partners.
Our investment push will continue. Onward of the near future will be defined by anOmni-channel retailing strategy, new businesses within and beyond apparel, and global
balance and profitability. Our vision is that of a leading apparel company, committed
to its heritage but focused on achieving future growth and delivering enduring value
to customers.

Contents
02 Our History
04 Key Performance Trends
05 The Year in Brief
06 Review of Operations
08 A Letter to Our Shareholders
09 A Message from the President
1 2 Core Brands
20 Domestic Business
26 Overseas Business
30 Our Network
32 Environmental and Social Responsibility
36 Corporate Governance38 	Board of Directors, Audit & Supervisory

Board Members, and Executive Officers /Organization Chart

39
82
84
85

Financial Section
Main Subsidiaries
Corporate/Investor Information
History

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

01

Our History

4,000¥ 264.0 billion
300

Net Sales¥ billion
200

1927
Founding
Onward Kashiyama begins as Kashiyama Trading,established in Osaka by its founder Junzo Kashiyama.

1927

1960

100

1970

1980

1990

2000

2010

0

2016

(Forecast)1950s–1960s
Ready-Made Clothing Revolution

1970s–1980s
Overseas Expansion

1990s–2000
Launch of Core Brands

2001–Today
To the Next Growth Phase

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

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

The womenswear business dramatically expands inthe 1990s with the launch of core brands, beginningwith Kumikyoku in 1992 and followed by Nijyusanku
in 1993, ICB in 1995, and Jiyuku in 2000. The luxury
brand boom driven by Japan’s bubble economy comesto an end in the 1990s, and consumers start to look formore simple and practical clothing, and they are able
to find this style in Japanese brands. Department
stores begin expanding womenswear floor spaces andemphasizing new brands from Japanese makers.
Thanks to this trend, Onward Kashiyama’s store numbers grow rapidly after the launch of the new brands,
and this impressive growth forms the foundations for
future advancement.

After the turn of the century, Onward accelerates
its overseas business. Major advances include
its entry into the Chinese market and the establishment of a manufacturing platform in Europe. The transition to a holding company system is made in 2007.
At the same time, the Company successfully draws
strong global brands under the Group’s umbrella,acquiring the British brand and multi-brand store
JOSEPH in 2005 and the German luxury brand
JIL SANDER in 2008. Akinori Baba becomes presidentof Onward Kashiyama in 2011 and Michinobu Yasumoto
becomes president of Onward Holdings in 2015. Thischange in leadership signifies the start of theCompany’s next growth phase. By increasing its global
competitiveness, Onward is aggressively pursuing
growth in both domestic and overseas operations.

4

8

10

9

11

1

2
1
4

02

3

5

6

Company founder Junzo Kashiyama 2 Grading machine modifies and cuts basic sewing patterns 3 Jean-Paul Gaultier’s debut Paris fashion show, 1978
Jean-Paul Gaultier 5 Onward Kashiyama’s U.S. offices 6 Bus Stop store on Boulevard Saint-Germain in Paris

7
7

Launches Kumikyoku brand, 1992

8

Launches Nijyusanku brand, 1993

9

12

Launches ICB (International Concept Brand), 1995 10 Acquires Joseph Group, 2005

11 Acquires Jil Sander Group, 2008 12 JIL SANDER’s new creative director, Rodolfo Paglialunga

03

Key Performance Trends

The Year in Brief

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

Net Sales¥ million
300,000

245,387

243,204

259,100

280,008

2012

2013

2014

11,663

2015

11,8196.0

10,200

9,614
8,000

5,732

4,000

0

2011

Operating Income

2012

2013

2014

4.0

2.0

2.0

2015

0

Operating Margin (right scale)

Net Income and ROE¥ million / %
6,000

6.0

4,503

4,659

4,204

3,529

4,000

4.0

2,723

2.4

Onward Kashiyama

SHARE PARK Store Opens

TOCCA STORE GINZA Opens

The first SHARE PARK store
was opened in LaLaport
TOKYO-BAY, where it is
proposing casual but highquality fashion items.

TOCCA STORE GINZA, the
TOCCA brand’s largest flagshipstore with a floor space of
300m2, opened its doors in
Ginza, Tokyo.

¥ 5.7 billion -43.8% (YoY)

March

October

Onward Holdings

Onward Holdings

Operating Income

Onward Reuse Park Opens

Blankets Created from
Recycled Clothes Are Donatedto Myanmar

In the overseas business, profits showed significant improvement in Europe, as planned. However, overall income
decreased due to difficult consumer buying patterns in thedomestic market as well as to the costs of abolishing unprofitable businesses and investments in IT systems and infrastructure. Accordingly, operating income declined 43.8%
year on year, to ¥5.7 billion.

2011

Net Income

2012

2013

2014

2015

November

Onward Luxury Group

Chacott

Net Income

Rodolfo Paglialunga Is
Named as JIL SANDER’s
Creative Director

DANCE CUBE KACHIDOKI
Starts Up

Net income decreased ¥455 million, or 9.8%, to ¥4.2 billion,
and ROE declined 0.4 percentage points, to 2.4%.

0Cash Dividends per Share and Payout Ratio¥ million / %200,000

80.0

¥/%
40.00

60.0

30.00

100,000

40.0

20.00

50,000

20.0

10.00

0

0

157,303

165,372

175,029

185,315150,000

53.8

2011

Total Net Assets

04

Italian designer Rodolfo
Paglialunga was named as
JIL SANDER’s new creative
director.

DANCE CUBE KACHIDOKI,
a new, integrated commercial
facility containing a dancestudio, a ballet and other dancewear store, a bicycle shop, anda cafe, was started up in Tokyo.

September

November

Onward Kashiyama

Onward Holdings

Onward Members’ Loyalty
Point Card System Launches

Onward Park Building
Is Completed

The Onward members’ loyalty
point card system, applicable to
all Onward Kashiyama brands,
was launched in more than
2,000 stores nationwide.

After a two-year renovation
period, the Company’s new
Head Office building—
the Onward Park Building—
was completed in the
Nihonbashi district of Tokyo.

ROE (right scale)158,745

2012

2013

2014

2015

Shareholders’ Equity Ratio (right scale)

Clothing items collected
through the Onward Green
Campaign were recycled tocreate 4,000 blankets, whichwere donated to Myanmar
through the Japanese Red
Cross Society.

April

Total Net Assets and Shareholders’ Equity Ratio

0

Onward Reuse Park was
opened in Tokyo as a basefor conveying the Group’s
environmental and social
contribution initiatives.

¥ 4.2 billion -9.8% (YoY)

2.0

2,000

0

Onward Kashiyama

In the domestic business, performance was strong fore-commerce operations and strategic brands at Onward
Kashiyama. However, sales in this business decreased dueto the struggling performance of women’s brands, which
stemmed from the lingering impacts of the consumption tax
hike. Meanwhile, sales recovered in Europe and the UnitedStates in the overseas business. Both businesses recorded
sales in line with the previous fiscal year, and consequentiallynet sales rose 0.5% year on year, to ¥281.5 billion.

Operating Income and Operating Margin¥ million / %12,000

October

Net Sales

100,000

2011

March

¥ 281.5 billion +0.5% (YoY)

281,502200,000

0

2014

200.0

24.00

24.00

24.00

24.00

24.00
89.6

150.0
100.0
50.0

2011

2012

Cash Dividends per Share

2013

2014

2015

Payout Ratio (right scale)

005Review of Operations

Sales Breakdown
Sales by Business Segment
Other Business(Service / Resort)

Apparel Business Sales by Clothing Type
Apparel Business

93.9%

6.1%

Men’s

Others

19.1%

16.7%

Sales by Geographic Segment
Asia

2.8%

Onward Kashiyama Sales by Channel
United States

2.0%

EuropeChildren’s

16.1%

2.6%

Japan

79.1%

Other Japan

2.4%

3.5%

Others26.7%

Core Brands*2

35.8%

New
Distribution
Channels*1

22.1%

Department Stores

Onward Kashiyama

61.6%

Others(of whiche-commerceequals 3.4%)

26.3%
Women’sSpecialty Stores

Onward Kashiyama Sales by Brand

72.0%

52.8%

Main New
Distribution
Channel Brands

13.0%

Other Main
Department
Store Brands

24.5%*1. Channels other than department stores(including shopping centers, directly managed
stores, and e-commerce)*2. Nijyusanku, Kumikyoku, ICB, and Jiyuku

Main Subsidiaries
Japan

Overseas
Onward Kashiyama

Onward Luxury Group• Core company of the Group engaged in the manufacture and sale of menswear, womenswear, and children’s clothing, accessories, and other items.

• OEM, production, and wholesale of European and
U.S. brandsCore brands• Manufacture and sale of luxury men’s and women’s­clothing and accessories• Nijyusanku, Kumikyoku, ICB, Jiyuku, Gotairiku, J.PRESS

Core brands / Items• Designer clothing, knitwear, bags, shoes, and other items,
for luxury brands• JIL SANDER, JIL SANDER Navy

Onward Trading

Creative Yoko

• Manufacture and sale of uniforms
and sales promotion goods• Manufacture and sale ofpet-fashion items, character
accessories, and other goods.

ITEMS

Core brands• Company, school, and medical-related
uniforms and sales promotion goods• PET PARADISE, Mother Garden

Joseph• Manufacture and sale of men’s and women’s clothing andaccessories as well as operation of multi-brand stores

Core brand• JOSEPH

Chacott

Island• Manufacture and sale of ballet andother dance wear, shoes, andrelated goods• Manufacture and sale ofwomen’s clothing andaccessories

Core brandsCore brand• Chacott, Freed of London• Grace Continental

06

07

A Letter to Our Shareholders

A Message from the President

Dear Shareholders,Takeshi Hirouchi
Representative Director,
Chairman

In fiscal year 2015, ended February 28, 2015, mid-to-high-end apparel sales
struggled as the consumption tax hike continued to affect the domestic apparelmarket. Furthermore, the competitive landscape became more difficult in the
fashion industry. For example, the makeup of the industry is changing as theboundaries between different roles fade—with retailers becoming manufacturers—and new sales channels, such as e-commerce and omni-channel
retailing, emerge on a global scale.
In times such as these, we think the key to growth in the apparel businessis surely brands and products themselves. We aim to hone our skill as an­apparel manufacturer—our core business—and continue to offer “somethingnew,” in other words, innovative, original products and brands differentiatedfrom the competition. We have a strong conviction that by doing so we cangrow based on an international standard, with ample ability to compete.
Furthermore, the Onward Group already has the important management
resources needed to survive in this global market, including the diverse rangeof products and brands we have tirelessly cultivated over the years, a sales
network and manufacturing functions both in Japan and overseas, and humanresources active around the world. Our aim is to skillfully combine these factors as we strive to become a truly global company.
To achieve this goal, in fiscal year 2016 we plan to improve our profitability
in both domestic and overseas businesses while securing the foundations forongoing growth in the future.
From this year, the Onward Group will operate under a new structure, with
Michinobu Yasumoto appointed president of Onward Holdings. Together with
Akinori Baba, president of Onward Kashiyama, the Group’s core operating subsidiary, we shall continue striving to ensure that this year we take back the momentum, with these two young leaders in their 40s at the helm of our operations.
I would like to express my gratitude to all our shareholders for their ongoingsupport, cooperation, and trust.

Representative Director,
President

Greetings, my name is Michinobu
Yasumoto, and I assumed the position of president and representative
director of Onward Holdings Co.,
Ltd., in March 2015. I am committed
to further developing Onward’s
business while maximizing corporate value by actively fulfilling our
responsibilities toward society. On
behalf of the Onward Group, I want
to extend our sincere appreciation
to stakeholders for their supportand interest in us.

August 2015

Mission as President

Takeshi Hirouchi

The Onward Group is deploying an
Omni-channel retailing strategy,
which, combined with its existing
business strengths, is anticipated tohelp further boost competitiveness.
For this reason, my mission as president is to lead our employees as wetackle new business challenges. I
joined Onward Group from a different industry 10 years ago, and assuch the Company’s managers havemuch more experience in the fashion business than I. By fully

Representative Director, Chairman

08

Michinobu Yasumoto

leveraging the skills and insight ofthese individuals and my own experience, I will devote my efforts tofurthering the growth of the Group.
Fiscal year 2016, ending February
29, 2016, is the time for us to determine the future direction the
Onward Group will take and then toincorporate that vision into the next
medium-term management plan.
During this year, I am striving tocommunicate my own beliefs while
confirming the conditions at thefront lines of operations. I thereby
aim to cultivate a shared vision for
the entire Group, based on which
will we formulate the strategies andtargets of the plan. In Japan, the impacts of the consumption tax hikeare lingering much longer than expected, making for a difficult operating environment. In light of these
conditions, I am well aware of thefact that there may be some concern with regard to the growth potential of the Onward Group andeven of the industry as a whole.
There is thus a need to ensure
steady income growth to dispel thisair of uncertainty. In addition to accomplishing this task, we must thoroughly explain our policies, our
vision, and the progress of our plansin order to earn the understanding
and support of shareholders, investors, and other stakeholders.
Perhaps not needing to be said, but
I feel it is crucial to communicate
both the good and the bad when it
comes to our business.
Looking ahead, the Onward
Group will continue to leverage its
strengths as a leading apparel manufacturer to supply the global market
with products at reasonable prices
and with impeccable quality. I hopeall stakeholders will look forward
to our future accomplishments witha sense of anticipation.

Aims of Our Omni-Channel
Retailing Strategy
The Group is currently pushing forward with an Omni-channel retailingstrategy that forms an organic union
between online stores and physicalstores with the aim of reinforcing ourcustomer bases around the world.
Of course, we will continue toprovide customers with top-notch
hospitality and enjoyable shopping
experiences at our stores. At thesame time, however, we hope tomake it possible for customers to
use the Internet to check brand information and receive purchased
products in the manner that is mostideal for them.
Our products are made withhigh-quality materials and outstanding techniques to ensure that ourbrands continue to be loved foryears to come. This approach toward
production will not change going­forward. We believe that physicalstores are crucial to communicating
the value of our products, as they
provide an opportunity for customers to experience the actual feel andfit of these products. However,there are also times when a particular item is not in stock, forcing customers to wait weeks for this item
to be delivered from a warehouse oranother store. This waiting period isa major factor behind lost sales opportunities due to customers losing
their interest in making purchases.
Internet shopping is becoming increasingly mainstream. Accordingly,
the promotion of our Omni-channel
retailing strategy has the potential tocreate opportunities for us to reachnew customers and thereby expand
sales. This strategy will also entailchanges in the framework used forin-store sales and in how we approach customers. In the end, this09

A Message from the President

strategy is expected to create a virtuous spiral that will lead to reductions in lost sales opportunities
while also improving brand value.

Customer Base as a Strength
The customer base the Onward
Group has established throughout
its history of almost 90 years has
been one of its greatest sources ofcompetitiveness. We are compilingthis customer base into a database.
We realize that the interests of ourcustomers are not limited only to apparel items but that these customers are also increasingly turning theirattention to a wide range of lifestyles. By utilizing a database to develop new and innovative marketing
techniques, we will endeavor to respond to our customers’ non-apparelrelated needs. If we are able togenerate synergies between our existing apparel operations and businesses in new fields, we will be able
to expand the scope of earnings opportunities. This process will entail
initially creating new product categories that go beyond the existing concept of “product” or “brand” andthen exploring new markets. In thepast, our strategy has mainly focused on addressing the challenges
faced in specific sales channels,
such as department stores. Today,
however, we need to concentrate on
realizing new opportunities by catering to the specific needs of individual customers.

Expansion of Overseas
Customer Bases
Faced with the gradual decline inJapan’s population, we believe it isabsolutely essential for us to expand
our overseas customer bases.
Previous global expansion strategies
have been centered on increasing

10

A Message from the President

the number of store locations. In the
future, however, we will shift gears
to pursue sales growth by also taking advantage of e-commerce operations. At the same time, we plan toaddress the demand seen among inbound travelers to Japan, who visit
the country with a strong desire for
shopping.
One of our primary targets is
China, where the middle class continues to grow and consumption­demand remains robust. In thiscountry, we are witnessing a rapid
rise in the number of fashion-­conscious consumers, primarily inShanghai, Beijing, and other large
cities. We expect to be able to create substantial sales growth throughan approach that includes increasing
the number of stores located in
China while simultaneously responding to demand from Chinese consumers visiting Japan. Based on thisbelief, we plan to establish a joint
venture company with Laox Co.,
Ltd., in September 2015. This company will sell made-in-Japan products that are manufactured using
Onward’s production network in
Laox’s duty-free stores in Japan
while also conducting e-commercein China with the aim of achieving
annual sales of more than ¥20.0 billion in three years. Moreover, we are
examining the possibility of combining the strengths of Laox and
Onward to develop new products
and establish new brands.
Laox’s business consists of ecommerce in China and general dutyfree stores in Japan. Laox is wellrecognized in China and has a broadcustomer base. By leveraging thiscustomer base and Onward Groupapparel product creation specialties,
we hope to establish our own customer base with a breadth encompassing not only China but also otherprincipal Asian nations. Laox
Representative Director Yiwen Luo
was born in China and has lived inJapan for more than 20 years, andhe has acquired a deep understanding of both countries. With a profound appreciation for Japanesequality standards, Mr. Luo has the
dream of developing a comprehensive retail business centered on highquality, made-in-Japan products. The
Onward Group, meanwhile, is facedwith a sluggish domestic apparelmarket, which has made the exploration of the Chinese market a pressing task. The establishment of thisjoint venture, we hope, will enable
us to leverage Laox’s strong recognition as a retailer and sales channels
to expedite our expansion in the
Chinese market.
Going forward, we expect to engage in more joint projects in which
we can draw on our strengths, andwe will undertake such projects
while striving to limit investment
risks and reduce the time requiredfor investments to generate returns.
In addition to joint projects withcompanies from other industries,
cross-supply-chain and cross-business collaboration with industry
peers will also be viewed as a possible option as we abandon preconceptions to formulate wide-ranging
measures for improving Onward’s
corporate value.

network consisting of four manufacturing platforms is being developed
while working to prevent overconcentration on any one country, flexibly utilizing platforms in different
regions as necessary to meet production requirements.
We are also revising production
systems in Japan as it has once again
become important to institute such
revisions based on a range of considerations, including the trend of yen
depreciation, the presence of sophisticated technological capabilities, andthe shortness of transportation distances. At the same time, the entire
domestic apparel industry is working
to better communicate the Japanesequality standards, and made-in-Japan
items are garnering unprecedented
levels of attention overseas as a result. However, as we had previously
shifted the bulk of our production capacity overseas, it will not be easy tofill the production gap that currently
exists in Japan, and the speed ofchange in the operating environment
prohibits us from immediately conducting large investments to address
this gap issue. Nonetheless, it is essential for Japan to continue to bepositioned as a core production site
and for us to confirm that an appropriate balance is being maintained in
production across our four manufacturing platforms.

Strengthening of Global Planningand Production Network
Although the Onward Group manufacturing platform used to be primarily located in Japan, we later shifteda large portion of production to
China. Given the recent rise in costsin China, we are now extending ourmanufacturing platform into ASEAN
countries. We have also established
our own manufacturing platform in
Europe, which is based in Italy. In
this way, our manufacturing platforms are centered on Japan, China,
Southeast Asia, and Italy. This global

Competitiveness Built on Human
Resources
The current era is incredibly unpredictable. In this era, the achievementof further growth will require us tocultivate human resources with highlevels of autonomy; in other words,
human resources who are capableof acting on their own accord by
thinking independently based on
their own research. We hope to create a robust foundation of human resources who are inspired to actively

give form to new ideas, whether
those are for products, brands, services, or some other element of operations. We also aim to cultivate an
atmosphere inside the Group that
lends itself to ambitious efforts.
Time will be required before suchendeavors can begin generating­returns, and it will be no surprise if
an attempt to overcome a new challenge fails to create results.
Nevertheless, it is important for all
employees to have the experienceof tackling such challenges. By investing time and money into the ambitious efforts of employees, I hopeto steadily reap the benefits ofthese actions so that this pioneering
spirit can multiply itself and permeate the entire Group.

Corporate Governance System for
Maximizing Corporate Value andShareholder ValueThe Onward Group has adopted aholding company structure underwhich the Company’s Board of
Directors conducts strategic decision making and supervises operating companies. At the same time,
we have separated the supervisoryand business execution functions inorder to clarify the responsibilities
and authority of each operating company and to allow for strategic decisions to be made more quickly.
Should urgent matters arise, theBoard of Directors will convene in atimely manner to offer swift response to any issue that may occur
in today’s rapidly changing operating
environment. In addition, an executive officer system has been adopted through which 17 executive
officers have been appointed withthe aim of clarifying responsibility
for management decision-making
and business execution functions.
Furthermore, the Onward Group
Strategy Meeting and the Group

Business Management Meeting
have been established as bodies forfacilitating flexible decision making
on a Groupwide basis. These bodies
examine the management strategies
of Group companies as well as otherimportant matters related to management and review the status ofbusiness execution. The term of directors has been set at one year tofurther clarify managerial responsibility and provide additional opportunities for proving director credibility
to shareholders. Two of the seven directors are outside directors, effectively strengthening the supervisory
function of the Board of Directors.
The Company employs an Audit &Supervisory Board structure, underwhich it has appointed four audit andsupervisory board members, two ofwhom are highly independent outside audit and supervisory board
members. The outside audit and supervisory board members oversee
the business execution of the directors and offer advice based on theirbreadth of experience to provide
more complete audits.
The enhancement of compliancesystems has also been positioned
as an important issue for management, and in that effort we are working to nurture high levels of trust
among customers and shareholders
as well as from society as a whole.
I am confident that maintaining andbuilding upon our strong relationships with various stakeholders willin turn contribute to the Onward
Group’s efforts to maximize corporate value and shareholder value.

August 2015

Michinobu Yasumoto
Representative Director, President

11Core BrandsCore Brands

1993
Annual Sales¥26.9 billion
Number of Stores Over 200
Launched

Nijyusanku is the leading brand of
Onward Kashiyama. The core targetof this brand is working women in
their 30s and 40s. The brand is available in department stores across thecountry as well as in its flagshipstore, Nijyusanku GINZA, which was
opened in the Ginza district of Tokyoin 2011.

12

13

Core BrandsCore Brands

1992
Annual Sales¥4.8 billion
Number of Stores 120
Launched

Gotairiku is Onward Kashiyama’s coremen’s brand. Based on the conceptof providing a “gentlemanly wardrobethat represents Japan,” this brandprimarily features suits aimed atbusinessmen in their 40s. The brandcontinues to be promoted throughthe Gotairiku Gonin Otoko campaign,
which features a quintet of Kabuki
actors as spokesmen.

1415Core BrandsCore Brands

1973
Annual Sales¥11.7 billion
Number of Stores 80
Launched

Founded by Ms. Jil Sander inGermany, JIL SANDER is a luxury
brand that is featured periodicallyin Milan Fashion Week. Onward
Holdings acquired JIL SANDER in
2008. The casual line JIL SANDER
Navy was launched in 2011. In 2014,
Italian designer Rodolfo Paglialunga
was appointed the new creative
director of JIL SANDER.

16

17

Core BrandsCore Brands

1972
Annual Sales¥18.6 billion
Number of Stores 130 stores
Launched

The JOSEPH brand grew from asmall multi-brand store owned by
Joseph Ettedgui in London. After theoriginal label JOSEPH was launchedwith the concept of “SLICK&CHIC,”
Onward Holdings acquired JOSEPH
in 2005. The development of thisbrand in Japan is being undertaken by
Onward Kashiyama.

18

19

Nijyusanku GINZA

Domestic Business
The domestic business is our mainstay business, generating 79% of consolidated net sales. This businessconsists of 23 companies: core operating company Onward Kashiyama Co., Ltd., as well as other domestic
subsidiaries that make fashion proposals in a wide range of fields not limited only to apparel items.

Onward Kashiyama

Contribution to total sales
Overseas Business
20.9%

Business Overview

Domestic Business

79.1%

Net Sales By Domestic Business Segment¥ million
240,000
180,000
120,000
60,0000Other Domestic Subsidiaries¥ 78,998 millionOnward Kashiyama¥ 158,273 million

2010
2011
2012
2013
2014
2015
Note: The figures shown reflect net sales prior to elimination of internal transactions

20

33.3%
66.7%

Onward Kashiyama is the Group’s
core operating company, generating
53% of consolidated net sales.
Onward Kashiyama manufacturesand sells menswear, womenswear,
children’s clothing, and accessories
and 72% of its sales come from its
main sales channel, department
stores. Core brands Nijyusanku,
Kumikyoku, ICB, and Jiyuku accountfor 36% of net sales. Nijyusanku
boasts particularly high sales—
reaching ¥36.0 billion on a retailprice basis in fiscal year 2015—andis one of Japan’s largest department
store brands. Similarly, mainstay
menswear brand Gotairiku is postinga solid performance, with its highquality suits meeting rising demandfor quality menswear.
Recently, the company has been
expanding its operations in the growing e-commence field, and it has defined the target of developing thedirectly managed e-commerce website Onward Crosset into a businesswith annual net sales of ¥10.0 billion
by fiscal year 2017. Also, we havelaunched a loyalty point card system,
which is applicable to all Onward
Kashiyama brands, and we are utilizing IT to enhance customer service.
We are taking such steps as we implement an Omni-channel retailingstrategy that efficiently integrates
the more than 3,000 physical storesin Japan with online stores.

Performance and Outlook
In fiscal year 2015, major womenswear brands posted weak sales because consumer confidence failed
to recover from the downturn that
followed the consumption tax hike.
Conversely, global brands, such as
JOSEPH and TOCCA, turned in solid
performances, as did men’s suits

sold under Gotairiku and other brands.
In addition, full-year e-commerce
sales were up 34% year on year,to ¥7.3 billion. In fiscal year 2016,
we will further strengthen core
brands Nijyusanku and Gotairiku
while deploying our Omni-channel
retailing strategy.

Other Domestic
Subsidiaries

women with refined tastes. Creative
Yoko Co., Ltd., is pursuing the differentiation of its core pet fashion business by opening large-scale storesdealing in products and services forpets. At Onward Trading Co., Ltd., aleading domestic manufacturer of uniforms and sales promotion goods,
the apparel expertise that pervades
the Group is used to provide uniforms
to suit any environment while striking
the best balance between style andusability.

Business Overview

Other domestic subsidiaries leverage the product development andsales capabilities of the Onward
Group to create new values and lifestyles by making fashion proposals
in a wide range of fields.
Chacott Co., Ltd., a manufacturer
and retailer of ballet and other dance
wear, is working to improve brand value and increase sales by accelerating
openings of new types of large-scale
stores. Meanwhile, Island Co., Ltd.,
which has Grace Continental as itscore brand, is providing fashion itemswith a distinctive aesthetic that isproving immensely popular among

Performance and Outlook
In fiscal year 2015, downward pressure was placed on profitability due
to increased costs for dissolving unprofitable businesses and conducting upfront investments in new
subsidiaries. Profitability is expected
to improve in fiscal year 2016 accompanying the benefits of business reorganizations and the shift to
new organizational structures.

21

Domestic Business

Domestic Business

Value Chain

Onward Research and Development InstituteAs a leader in the apparel industry, the Onward Group is guided by a mission of continually
proposing fresh, high-value-added products to consumers.
To fulfill this mission, we take advantage of the fashion trend information acquired
through our global network and the technological capabilities of the Onward Research andDevelopment Institute. By merging these strengths, we create new products that excel fromthe perspectives of fashion, technologies, and quality and propose new values and lifestyles.

Established in 1991, the Onward Research and Development
Institute is the Group’s proprietary center for comprehensive
research on new manufacturing technologies and product developments. The Technology Development Center carries out
numerous tests and trials to achieve the highest possible level of quality control. For example, fabric is tested for elasticity, tear resistance, friction durability, stretch recovery, andwrinkle resistance. The Onward Advanced Technology
Research Center works together with 16 leading companies
from the apparel industry, including raw material suppliers
and garment material suppliers, to develop new products.
The Professional Development Center is responsible fortraining and human resource development.

Product Flow (primarily used by Onward Kashiyama)

Planning
and Design

1 Year Before Start of Sales

6–9 Months Before

5 Months Before

4 Months Before

3–5 Months Before

Research

DesignSample Creation

Exhibition

Selection

Product development starts
with our designers andmerchandisers actually visiting fashion capitals aroundthe world to research thelatest fashion trends. They
also attend fabric exhibitions to seek out new, highquality fabrics.

Concept drawings are­created, and the design,materials, price range,and seasonal theme are­decided based on a consideration of fashion
trends, fabrics information,and other factors.

Samples are made basedon concept drawings created by designers to visualize how the design andthe materials will actuallyappear.

Buyers, press members,
and store managers are­invited to exhibitions displaying new products.
Alterations are made tosamples based on feedback
from buyers and store
managers.

From among the samples,the items to be commercialized are selected, andproduction numbers are
decided through coordination with sales teams.

Planning and Production Teams
Onward Kashiyama has approximately 1,000 professionals
in its planning and production control teams. With thesestrong teams in place, the Company assigns designers,
patternmakers, and merchandisers to each brand. The production control teams take care of other aspects of production, ranging from factory selection, technical guidance,
and fabric and other material sourcing to quality control.

Product Planning
Quality control teams­inspect samples to determine if any issues exist
with the fabric or manufacturing processes to be
used. At the same time,
production control teams
decide which factories will
be used for mass production as well as establish
production schedules andorder ancillary materials.

Production Network
Production Areas
China

72%

Japan

15%

ASEAN and other countries

13%

22

Production

3 Months Before

Of Onward Kashiyama’s products, 79% are manufactured
in cooperation with trading companies or delegated tofactories in Japan or overseas. Recently, however, wehave been establishing our own production network bystrengthening partnerships with highly capable Japanese
factories and expanding our low-cost production andsourcing network in China and Vietnam. Currently, about
72% of Onward Kashiyama’s products are manufactured
in China, 15% in Japan, and 13% in ASEAN and othercountries. We are expanding procurement and productionin Japan and the ASEAN region to ensure that we can always manufacture products in the most suitable location.

23

Domestic Business

Domestic Business

Sales Channels
Department Store Transactions
The majority of transactions between department stores
and apparel manufacturers are made under the consignment system, a transaction scheme indigenous to Japan
with the following characteristics.
 he apparel company owns the inventory and some store fixTtures and provides their own sales personnel. When a productis sold, it is then considered to have been procured by the­department store.
2 The apparel company pays an agreed percentage of its sales
to the department store as a tenant fee. Rent and other costs
generally do not apply.
3 The apparel company records a sale as the amount of thewholesale price of the item sold less the margin paid to thedepartment store.

We develop our sales activities via a number of different
sales channels. While maintaining our strength in department stores, we see new distribution channels as the key
to domestic growth.

1

2 Months Before

1–2 Weeks Before

Production

Final Check

Products are manufactured while production
control teams and fac­
tories monitor delivery
schedules and production
processes.

Finished products are­delivered to distribution
warehouses. Stitching andother product details areinspected once again­before delivery.

Deliveryand Sales

Department Stores
Department stores are Onward Kashiyama’s main sales
channel, with 2,700 shops nationwide. Sold in more than
200 such shops, our Nijyusanku brand is the largest
department store brand by revenue in Japan. We havebeen strategically relocating and redesigning our shops tomaximize individual shop sales and operational efficiency.

Nijyusanku

1 Week Before

Delivery
Products are transported
from warehouses tostores based on the instructions of sales managers and distributors.

New Distribution Channels
The term “new distribution channels” as used by the Onward Group refers to sales channels other than department stores.
These channels are a key focus, even though they only account for 22% of Onward Kashiyama’s sales. We aim to expand
the number of stores in the following sales channels while simultaneously bolstering sales from e-commerce operations.

Sales
Products are sold at storesand online.

Directly Managed Stores

Train Station Complexes / Fashion Malls

These brand flagship stores double as brand billboards for our cutting-edge
products.

We offer fashionable and trendy products through this sales channel, which isdisplaying impressive growth in Japan.

Shopping Centers

E-Commerce

These centers serve as a sales channel for Onward Kashiyama’s brands, suchas any FAM, any SiS, and the new SHARE PARK.

We conduct e-commerce sales of Group brands through our directly managed
e-commerce website Onward Crosset and other domestic and overseas online shopping sites.

In-house Transportation
Domestic subsidiary Across Transport specializes in theapparel logistics and transportation business. The company offers a total logistics service program that includes
warehouse management, transportation, and other logistics functions designed especially for apparel products
and accessories. These services are provided for Onward
Kashiyama and other companies in Japan.

24

25

Overseas Business
The overseas business consists of operations in Europe, Asia, and the United States and accounts for 21% ofconsolidated net sales. Business scale expansion will be pursued centered on Europe, where operations are
the largest, as we strengthen competitiveness on the global market.

Contribution to total sales
Overseas Business

20.9%

Domestic Business
79.1%

Net Sales By Overseas Business Segment¥ million
80,00060,00040,00020,0000

United States¥ 5,957 million

9.5%

Asia

13.5%

Europe77.0%¥ 8,439 million¥ 48,208 million

2010
2011
2012
2013
2014
2015
Note: The figures shown reflect net sales prior to elimination of internal transactions

EUROPE

Asia

United States

The European business—our largest
overseas business—primarily conducts the manufacture and sale ofhigh-end apparel and accessories.
Italian subsidiaries GIBO’Co S.p.A.
and Iris S.p.A. were merged in June2013 to establish Onward LuxuryGroup S.p.A. In 2014, Jil Sander Italy
S.p.A. was merged into Onward
Luxury Group. In the future, we aim
to merge Joseph Ltd. in England
into this company as we work to
improve the managerial efficiency
and profitability of the European
business.

The Onward Group commenced thefull-fledged development of its Asianbusiness with the 1995 establishment of a subsidiary in Shanghai,
China. Today, Nijyusanku, ICB, rosebullet, and other brands are sold in
department stores and shopping
centers in China, including Hong
Kong, Korea, Taiwan, Singapore,
Thailand, and Vietnam. Furthermore,
Asia is rising in importance as a production site. To supplement existing
partnerships with Chinese manufacturers that have high overall capacity, we aim to expand ourmanufacturing platform in ASEAN
countries, such as Vietnam. With its
sights set on capital alliances andthe acquisition of production capacity, we are determined to build amanufacturing platform in Asia withhigh profitability and quality as wellas superior material procurement capabilities and fast delivery time.

U.S. operations comprise retailbusinesses in the States as well as
hotel and golf course management
operations in Guam. J.PRESS,
acquired in 1986, is a well-loved
brand among Ivy Leaguers.
Meanwhile, York Street, which welaunched in 2013, targets the youth
market and is sold in directly manage stores as well as in shops insidedepartment stores. Between
J.PRESS and York Street, we havefour directly managed stores in the
United States. As part of recent
global strategies for European
brands, we have been strengthening
sales of JIL SANDER Navy and
JOSEPH in the United States.

Business Overview

Performance and Outlook
The new operational structure has
resulted in heightened efficiency,with earnings improving as forecast.
In fiscal year 2016, we will pursue
further profitability improvements
and expansion on the global market.
 or further details regardingF
the European business, pleaserefer to the special feature on
pages 30 and 31.

Business Overview

Performance and Outlook
In fiscal year 2015, we were forced
to proceed with the closure of unprofitable stores in China because
consumption in the market failed torecover. We will continue such closures in fiscal year 2016 while concentrating management resourceson highly promising stores in China.

Business Overview

Performance and Outlook
In fiscal year 2015, we streamlined
planning and manufacturing platforms in our U.S. retail operations
through greater coordination withplanning teams in Japan. At thesame time, we pushed forward withfacility quality improvements in hotel
and golf course management operations in Guam to increase the number of customers from Asia. The
implementation of these measures
will be further accelerated in fiscal
year 2016.

JIL SANDER NAVY

26

27

Overseas Business

Overseas Business

EuropeThe European business—at the core of the Onward
Group’s global strategies—is approaching a turning
point. The following is an overview of the European
business, its current activities, and its future vision
as we build upon its main operating company tostrengthen management platforms and expand
operations.
JIL SANDER Munich store

Development of theEuropean Business
The Onward Group’s European business began to growin earnest after the acquisition of Italian apparel company
GIBO’Co in 1990. Predicting the future growth of the luxury brand market, GIBO’Co concluded contracts with several promising designers, thereby putting its business on
track for solid growth. In the years that followed, we proceeded to expand our product lineups by acquiring planning and manufacturing companies for knitwear, bags,
and shoes while purchasing and merging apparel production sites. These efforts led to the creation of a massive,
integrated manufacturing platform.
The subsequent acquisition of Joseph by Onward
Holdings marked the Group’s full-fledged entry into theretail business. Later, the luxury brand JIL SANDER was
acquired and incorporated into the Group, cementing the
Onward Group’s presence as a fashion conglomeratein Europe.

JOSEPH Old Bond Street store

JIL SANDER Hamburg store

Business Overview
Onward Luxury Group
Manufacture and Wholesale
In the European
business, its manufacturing and wholesale divisions
undertake the production of the principal items that are
indispensable to a
designer brand line,
including apparel as OLG Erika Knitwear Factory
well as shoes, bags,
and knitwear, and are constructing a manufacturing platform capable of providing the utmost levels of quality.
Apparel item production is conducted by leveraging thestrengths of three sites in Italy: Florence, where we areskilled at tailored clothing, such as shoulder pieces;
Bergamo, which is home to our skilled crafting functions forlight fabric clothing; and Parma, where we create moreelaborate clothing items. Furthermore, the manufacturing
divisions are promoting synergies in product creation while
also utilizing Onward’s network of showrooms in Paris,
Milan, and New York to expand sales opportunities and generate sales-field synergies.

JIL SANDER
We conduct the planning, manufacture, and wholesale of
the JIL SANDER luxury menswear and womenswear collections and apparel and accessories from JIL SANDER
Navy, and we are developing stores on a worldwide basis.
Onward Luxury Group operates directly managed storesin Milan, Paris, Zurich, New York, and Chicago as well as
5 stores in Germany, making for a total of 10 stores.
Franchise flagship stores exist in Tokyo and Seoul, and a

28

JIL SANDER Berlin store

total of 31 franchisesales corners havebeen developed in
19 stores overseas,
located in London,
Paris, and Moscow
as well as in Thailand,
Singapore, andChina, and in 12 corners in department
stores in Japan*.

Moreover, Rodolfo Paglialunga, renowned for his workwith Prada and Vionnet, was named as the new creative­director for JIL SANDER and began lending his talents withthe 2015 spring and summer collections. We will promote
JIL SANDER in this new chapter of its development to further its growth as a global brand.
* Retail outlets in Japan are operated by domestic subsidiary Onward Global
Fashion Co., Ltd.

JosephWith its base in
London, Josephmanages 130
stores in major
cities throughout
the world.
In recent years,
flagship stores in
London and Paris
have been renovatJOSEPH 77 Fulham Road store
ed to enhance brandrecognition. To accelerate the brand’s global growth, Joseph
is increasing accessory and menswear lineups while exploring new markets in China, expanding operations in the
United States, and strengthening e-commerce businesses.

OLG Shoes Division

Outlook
Looking to the future of the European business, we willfurther leverage the established planning, manufacturing,
distribution, and sales platforms for the JIL SANDER andJOSEPH brand businesses and simultaneously strengthen initiatives with conventional licensing businesses andbrands. The Onward Luxury Group of today was formed in
March 2014 by merging Jil Sander into its prior production
and wholesale operations. In 2015, the Company will­revise its workflow processes and advance the integrationof its organizations while launching new projects.
Onward Luxury Group is the only company in the
Onward Group that operates in the specialized high-end
and luxury fashion field. In the long term, we aim tomerge Joseph into Onward Luxury Group to unite theEuropean business under a single company and generatesynergies in order to develop it into a fashion conglomerate with a strong presence in the European market.
This united Onward Luxury Group will be able to exercise its strengths in manufacturing as well as the strengthsof Jil Sander (brands) and Joseph (retail). With this comprehensive range of functions, Onward Luxury Group will seek
to become a unique presence in the European fashion industry. Moreover, organizational integration will be pursued
to further enhance the company’s ability to make swift andsynergetic management decisions.

29Our Network

Our Network

As of August 31, 2015

England

China

Japan

LondonShanghaiTokyo

Joseph Ltd.
n Freed of London Ltd.
nFranceParis
		n Horloge Saint Benoit S.A.S.

Onward Fashion Trading(China) Co., Ltd.
n Onward Fashion Trading(Shanghai) Co., Ltd.
n	Shanghai Across Apparel
Processing Co., Ltd.
n

DalianOnward Fashion Trading(Dalian) Co., Ltd.

n n Taicangn nEurope aicang Onward HighT
Fashion Co., Ltd.

Nantong	Nantong Haimeng Garments
Co., Ltd.

n nHong Kong	Onward Kashiyama Hong Kong Ltd.

n

Number of Stores

4,100
in 22 countries and regions

	Onward Holdings Co., Ltd.
n	
Onward Kashiyama Co., Ltd.
n	
Onward Trading Co., Ltd.
n	
Chacott Co., Ltd.
n	
Creative Yoko Co., Ltd.
n	
Island Co., Ltd.
n	
Onward Global Fashion Co., Ltd.
n	Birz Association Ltd.
n	
Candela International Co., Ltd.
n	
J. Direction Co., Ltd.
n	Charles & Keith Japan Co., Ltd.
n	Intimates Co., Ltd.
n	Sakula Inc.
n	O.P.S. Co., Ltd.
n	
Onward J Bridge Co., Ltd.
n	
Across Transport Co., Ltd.
n	
Onward Creative Center Co., Ltd.
n	
Bien Co., Ltd.
n	
Onward Resort & Golf Co., Ltd.
n	
O & K Co., Ltd.
n	
Onward Life Design Network Inc.
and 15 additional companiesn

The Onward Group engages in business activities through a network that is
made up of 81 subsidiaries and 22 affiliates, for a total of 104 Group companies. The Group operates in the four geographic segments of Japan, Europe,Asia, and the United States.

Asia
Italy

Vietnam

Milan

Ho Chi Minh Citynn

Onward Italia S.p.A.
Onward Luxury Group S.p.A.
(JIL SANDER)

Florence
 nward Luxury Group S.p.A.
O(Apparel)n Frassineti s.r.l.

	Onward Kashiyama Vietnam Ltd.
	Showa (Vietnam) Co., Ltd.
n n	Yasuda (Vietnam) Co., Ltd.

nErika s.r.l.

VeniceOnward Luxury Group S.p.A.
(Shoes)n Madridn

30

Gallardo Dance S.L.

U.S.A.
New Yorknn nnSingapore
Singapore

J. Press, Inc.
Onward U.S.A. L.L.C.

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

	Onward Kashiyama Singapore
Pte. Ltd.
n	Charles & Keith Japan Pte. Ltd.
n

Korea
Seoul
n
n

Spain

Japan

n

n

VeronaUnited States

 nward Kashiyama Korea Co., Ltd.
O
Chacott Korea Co., Ltd.

ApparelOthern Joint Venture Factorynn31

Environmental and Social Responsibility

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

Environmental and Social Responsibility

Onward Green Campaign

1,650,000
Items Collected

67% Recycled
33% ReUSed

310,000

Customers That DonatedEnvironmental Concept
Thinking of the Earth. Clothing Its People.
The world is evolving faster than ever with fashions and trends changing at a
brisk pace. In recent years, we have seen an increase in products touting low
prices, and perhaps many of us feel, more than before, that clothing is becoming disposable. The disposal of clothing as trends change is slowly placing
an increasing burden on the environment and may one day significantly affectour lives. The original role of fashion was to enrich and color people’s lives
while promoting and inspiring prosperity. Fashion should not be somethingthat takes away from our planet’s natural environment, nor should it detractfrom the infinite possibilities of our future.

The Onward Green Campaign is designed
to create an apparel life-cycle circulation
system. In comparison with other consumables, the recycling of textile goods is relatively undeveloped. Onward Kashiyama launched the
Onward Green Campaign in 2009 with the objective of
encouraging the circulation of apparel to promote the efficient utilization of limited resources and to ensure thatour precious environment still exists for future generations to enjoy. Onward Kashiyama collects men’s, women’s, and children’s clothing as well as sportswear andother items sold by Onward Kashiyama at Onward Green
Campaign collection booths in department stores.

These items are recycled and reused to the greatest
extent possible with the aim of eliminating waste. Certain
clothing items are recycled through use as solid fuel. For
other garments, we sort and collect usable materials tocreate blankets, work gloves, and other recycled textile
products that contribute to the organization’s environmental and social contribution initiatives. In addition, a portionof collected clothing items are sold at Onward Reuse
Park, and the proceeds from these sales are used to fundenvironmental and social contribution initiatives.

>>> For details regarding Onward Reuse Park, please refer to page 35.

Onward remains committed to taking on the challenge of achieving harmony with the planet and its people through its corporate activities and arange of products that include fashion items, as it carries out its role as a lead-

Recycling Process

Customers

ing organization of the apparel industry that delivers fashion on a global scale.

Used items

Donated at dedicated collection booths in department stores

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

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

Onward Recycling Partners
Disposal
Reuse

RecycleSold at Onward Reuse Park

Materials sorted and collected
for use in textile products

Proceeds

Blankets

Buttons and other non-reusable
and unrecyclable articles
disposed ofWork gloves

Solid fuelUsed in environmental and social contribution initiatives

32

33

Environmental and Social Responsibility

Environmental and Social Responsibility

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

Support Programs Using Recycled Blankets
1

Bangladesh

4

Refugee camp:

3,000 blankets

Donated to a refugee camp in the
Cox’s Bazar district of Chittagong, insoutheastern Bangladesh, and to a
hospital that provides medical care in
the areaFirst support program:May 2010

China

Regions heavily impacted by the2008 Sichuan earthquake:

2,000 blankets

Fourth support program:March 2012

Donated to a school and other facilities
located in the mountainous regions ofSichuan Province that were affectedby the earthquake in 2008

5

Mongolia

Impoverished area:
2

2,000 blankets

5

3

4
6

9
1

Fifth support program:
September 20127

Donated to the area referred to locallyas “dzud” that is periodically afflictedwith severe snow damage(It is not uncommon for people living
in impoverished areas to share one
blanket during this period.)
6

8

Kazakhstan

Refugee camp:

3,300 blankets

Second support program:February 2011

Donated to refugees, orphans, othersocially marginalized people, and communities in the city of Almaty

7

Myanmar

Impoverished area:

Japan

Regions heavily impacted by theGreat East Japan Earthquake:

1,000 blankets

34

Donated to senior citizens and children
living in social welfare facilities, where
they are forced to face harsh winterseach year without sufficient protection
against the cold

4,000 blankets

3

Third support program:
September 2011

Sixth support program:
October 2013

Donated to 31 community centers in
Miyagi Prefecture that were affectedby the Great East Japan Earthquake

Seventh support program:
October 2014

Donated to impoverished individuals,
special needs schools, and children­living in orphanages in Myanmar
8

Onward Holdings opened
Onward Reuse Park in
Tokyo as a base for conveying the Group’s environmental and social
contribution initiatives. In
addition, Onward Reuse
Park sells used Onward
Onward Reuse Park
products at discounted
prices, and the proceeds from these sales are used tofund further environmental and social contribution initiatives. This store was the first in the industry to employ
such a sales model.

KIBOU311 Participation in Cherry
Tree Planting EventKIBOU311 is a Great East
Japan Earthquake relief
project promoted on a
global scale by DORMEUIL,
a French manufacturer ofluxury men’s apparel.
Donations collected
through this project areprovided to LOOM NIPPON, which uses the donations inturn to fund cherry tree planting events.

Working Conditions Inspections
Onward Kashiyama has
been working with affiliatedsewing factories in Japanand overseas to improve
the quality of products soldin department stores, raise
productivity, and manage
the safety of products. We
also emphasize the importance of properly manufacturing
products in factories while guaranteeing safe working
conditions. Such affiliated factories and other facilities
are regularly inspected by the Company and third-party
organizations to improve working conditions by ensuring
employee safety and eliminating compulsory labor andextensive work periods.

Bio Tech Jacket—Ecological-Wear
That Returns to the Earth
Since 2010, Onward Kashiyama has
been offering the Bio Tech Jacket, an
ecological product that returns to theearth. This item is highly fashionable
and yet is made of only biodegradable
materials, which means that it will be
broken down by natural bacteria andreturned to the soil after disposal.

Nepal

Impoverished area:

4,000 blankets

2

Onward Reuse Park—Used Onward Products Offeredat Discounted Prices

VIETNAM / 9 NEPAL

Reduced Environmental Footprint
through Low-Emission Vehicles
Across Transport is conducting a number of initiatives
to reduce its environmental
footprint. These activities
include the optimization ofvehicle allocation and transport routes; the promotionof and education regarding
environmentally friendly driving through the use of digitaltachographs; the promotion of the cessation of vehicle
idling; and the introduction of CNG vehicles, hybrid vehicles, and other low-emission vehicles.

Forest Preservation Initiatives at
Tosayama Onward Rainbow Forest
In 2008, Onward enteredinto a partnership agreement with the city of Kochi
and the Kochi City Forestry
Association and has been
participating in forest preservation efforts at Tosayama
Onward Rainbow Forest, aforest approximately 45 hectares in size that is located in
Kochi Prefecture. With the cooperation of local communities, we are conducting a forest regeneration program that
includes forest thinning twice a year.

IMPOVERISHED AREA:

2,000 blankets TO EACH AREA
Eighth and ninth support program:
October 201535

Corporate Governance

Our Basic Approach to Corporate Governance
The Onward Group believes that responding promptly tochanges in its business environment and ensuring a levelof corporate governance that enhances the health, fairness, transparency, and compliance of its management
and operations is one of its important responsibilities andintegral to increasing corporate and shareholder value. On
this basis, every effort is being made to build trusting relationships with all stakeholders, including shareholders,
and to strengthen the Group’s management systems aswell as the effectiveness of the General Meeting of
Shareholders, the Board of Directors, and the Audit &Supervisory Board. In this manner, the Onward Group is
working diligently to bolster its corporate governance.

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

Reasons for the Appointment of Outside Directors
Name

Reasons for Appointment as an Outside Director

Hachiro Honjo

We are expecting Mr. Honjo to use his businessand management experience as a corporate
officer to enhance the Company’s management,
based on his broad perspective, free from theindustry to which the Company belongs.

Yoshihide Nakamura

We are expecting Mr. Nakamura to use his abundant experience and knowledge as a member ofthe management of other companies to enhance
the Company’s management.

Audit & Supervisory Board Members
and the Audit & Supervisory Board
The Company has adopted an Audit & Supervisory Board
structure, under which the Company has appointed four audit and supervisory board members, two of whom are outside audit and supervisory board members. Audit andsupervisory board members have also assigned staff to assist them in carrying out their duties and to strengthen theirsupervisory function. Each member audits and monitors theperformance of directors; responsibilities include reviewing
the documentation of important decisions and attending important meetings, such as the Board of Directors’ meetings,
Group financial account settlement meetings, and Group
Business Management meetings, in accordance with audit
policies and the roles delegated by the Audit & Supervisory36

Corporate Governance

Board. In addition, the Internal Control Division and each department are under periodic monitoring in an effort to establish an effective and lawful corporate structure.
The Audit & Supervisory Board meets with the
Representative Director and the Accounting Auditor on aregular basis to share and exchange information and opinions. This initiative is also designed to ensure that a structure is in place that is capable of conducting audits in an
effective and lawful manner. Moreover, the Audit &Supervisory Board receives reports from each member inaccordance with audit policies and the roles delegated by
the Board. Deliberations are undertaken and resolutions
made based on this information as required.

Corporate Governance Structure
General Meeting of Shareholders

Audit & Supervisory Board
Board of Directors

ReportSuperviseStanding Audit &Supervisory Board Members

ReportReportAudit

Outside Audit &Supervisory Board Members

Onward Group
Compliance
Committee

Internal Control
DivisionGroup Strategy Meeting

Coordinate

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

Reasons for Appointment as an Outside
Audit & Supervisory Board Member

Jotaro Yabe

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

Katsuaki Ohashi

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

Business Execution Structure
The Onward Group has adopted a holding company structure that allows the Company’s Board of Directors to engage in strategic decision making and supervise operatingcompanies. At the same time, the Group has separated thesupervisory and execution functions in order to clarify the
responsibilities and authority of each operating company
and to facilitate accelerated strategic decision making.
When matters that require urgent attention arise, theBoard of Directors convenes as necessary. In this manner, the Onward Group has a system in place that ensures a swift and appropriate response to rapid changes
in the business environment.
Moreover, the Group has introduced an executive officer system with the aim of clarifying other management
decision-making and business execution functions. In
order to facilitate agile decision making as a corporategroup, the Onward Group Strategy Meeting and theGroup Business Management Meeting have been established. At these meetings, management strategies and theimportant management matters of operating companies
are debated and the state of operations is reviewed.
The Onward Group also has advisory contracts with anumber of attorneys to receive legal advice.

Directors’ and Audit & Supervisory
Board Members’ Compensation
Compensation paid to directors, excluding outside­directors, comprises a basic compensation component,­bonuses, and stock options.

SuperviseGroup Companies

Audit

The total amounts of compensation paid by officerclassification, the total amounts of compensation paid bytype of compensation, and details of the number of eligible officers are presented as follows.
Total Amount of Compensation Paid by Type ofCompensation (Millions of Yen)

Total Amount ofCompensation
Paid(Millions of Yen)

Basic
Compensation

Directors(excluding outside directors)

394

231

97

65

6

Audit &
Supervisory
Board Members(excluding outside audit andsupervisoryboard members)

36

36

—

—

2

Outside Officers

40

40

—

—

4

OfficerClassification

Bonuses

Stock Options

Number of Eligible
Officers

Payments of compensation to persons that exceed¥100 million are disclosed on an individual basis and arepresented as follows.
Total amount of consolidated compensation by officer

Name (By Officer
Classification)

Takeshi Hirouchi(Director)

Total Amount ofConsolidated
Compensation
Paid(Millions of Yen)

161

Total Amount of Consolidated Compensation Paid by
Type of Compensation (Millions of Yen)
Company
Classification

Filing company

BasicCompensation

94

Bonuses39

Stock Options

26

Compliance Structure
Recognizing that society as a whole is placing greater­emphasis on efforts aimed at upgrading and expanding
compliance structures, the Onward Group has positioned
compliance as an important issue for management.
Further, by enhancing its corporate governance systems,

Accounting Audit

Accounting Auditor

the Company aims to earn high levels of trust among its
customers and shareholders and from society as a whole.
In specific terms, the Group published the Compliance
Manual to clearly outline the direction of complianceactivities, taking into consideration ethical concerns andsocial norms. Established by the Board of Directors, theOnward Group Compliance Committee takes the lead in
conducting continuing educational activities, including inhouse training, as a part of efforts to ensure widespreadawareness and understanding. Moreover, the Compliance
Division has been positioned to oversee compliance, withenergies channeled toward building and promoting an
Onward Group compliance structure that is underpinnedby the Compliance Manual, which is in turn based on the
Onward Compliance Regulations.

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

37

Board of Directors, Audit & Supervisory Board Members,
and Executive Officers
As of September 1, 2015

Board of Directors

Audit & Supervisory
Board Members

Executive Officers

Representative Director, Chairman

Standing Audit & Supervisory
Board Members

Managing Executive Officers

Executive Officers

Kenichi Iizuka
TSUNENORI SUZUKI
Michio Ohsawa
Hirokazu Yoshizato
Eihachiro Umemiya
IZUMI SUGITAYOSHIHIRO GOTOU
Kazuyuki Suematsu
Tomohiko Sakamoto
Osamu Miwa
Takashi Sudo
Masanori Shozu
Masahiko Yamashita
TAKEHIRO SHIRAISHIHIKOSABURO SEIKE
Hironobu Mitsuta
Kenji Takeuchi

Takeshi Hirouchi
Representative Director, President

MICHINOBU YASUMOTO

Hitoshi Aoyama
Kenichiro Tamai
Outside Audit & Supervisory
Board Members

Senior Managing Director

Masaaki Yoshizawa
Director,
Representative Director, President,
Onward Kashiyama Co., Ltd.

Jotaro Yabe
Katsuaki Ohashi

Akinori Baba
Director

HISAYUKI ICHINOSE
Outside Directors

Hachiro Honjo
Yoshihide Nakamura

Organization Chart
As of September 1, 2015

General Meeting of Shareholders
Audit & Supervisory Board

Board of Directors

Compliance Committee

Representative Director, Chairman

Financial Section
Contents
40

Six-Year Financial Summary

42Management’s Discussion and Analysis

45

Operating Risks

46

Consolidated Balance Sheets48

Consolidated Statements of Operations

49

Consolidated Statements of Comprehensive Income

50

Consolidated Statements of Changes in Net Assets

52

Consolidated Statements of Cash Flows

54

Notes to Consolidated Financial Statements

81

Independent Auditor’s Report

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

Representative Director, President
Strategy Council
Executive Management Council
International Business
European and North American Operations
Corporate Planning
Asian Operations
Accounting

New Business Development

Secretary Office, Corporate Communications, and Human Resources

Administration

Omni-channel Retailing
Production

General Affairs

Logistics
Marketing and Advertising
Distribution Channel Development
Operational Reforms, Customer Relations, andEnvironmental Management

Hiroshima Region

38

Sendai Region

Sapporo Region

Nagoya Region

Fukuoka Region

Osaka Region

Tokyo Region39Six-Year Financial Summary

Six-Year Financial Summary

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

Thousands of
U.S. dollars*1

Millions of yen
2010

2011

2012

2013

2014

2015

Operating Income and Operating Margin¥ million

2015

300,000

For the year
Net sales
Cost of sales
Selling, general andadministrative expenses
Operating income
Ordinary income
Income taxes, current
Net income

Net Sales¥249,543
134,592¥245,387
128,877¥243,204
127,382¥259,100
133,983¥280,008
149,270¥281,502
152,438$2,360,206
1,278,092

109,792
5,159
6,120
4,016
2,188

106,896
9,614
10,497
5,555
2,723

104,160
11,663
13,3307,528
3,529

113,298
11,81913,405
7,398
4,503

120,538
10,20012,211
3,112
4,659

123,332
5,732
7,162
5,033
4,204

1,034,058
48,05660,051
42,20535,24814,058

11,207

13,181

10,13813,362

16,491

138,264

249,543

245,387

243,204

259,100

280,008

281,502¥ million / %11,663

12,0004.8
8,000

100,000

2010

2011

2012

2013

2014

4,000

2.1

0

2010

2015

4.6

3.9

5,159

3.6

2011

Operating Income

6.0

10,2009,614

200,000

0

11,819

2012

2013

2014

5,732

4.0

2.0

2.0

2015

0

Operating Margin (right scale)

Cash flows
Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Free cash flow*2(26)(5,152)(1,962)(10,683)(14,301)(15,657)(131,272)(4,890)14,032(9,272)
6,055(7,449)
11,219(7,848)
(545)

2,122
(939)

757
834

6,350
6,992

Net Income

ROE and ROA¥ million
5,000

4,503

%

4,204

3,529

4,000
3,000

4,659

4.0

2,188

2.0

2,000

Capital expenditures
Depreciation and amortization

5,794
5,747

5,405
5,642

6,230
5,478

8,949
5,721

16,7506,801

26,884
7,219

225,406
60,525

1,000
0

2010

2011

2012

2013

2014

34,330100,680

30,93995,54533,192
98,89524,677
100,320

27,376110,349

31,123
117,052

260,944
981,401

89,742
292,569
90,929175,450
158,164

86,623
281,643
82,677
174,454
158,745

82,988276,939
84,091
176,320
157,30386,862286,779
100,740
177,142
165,372

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

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

919,4122,857,838
919,086
1,508,171
1,553,744

Yen

U.S. dollars*1

Per share information
Net income (EPS)
Net assets
Cash dividends
Payout ratio (%)¥  13.97
998.9824.00
171.9¥   17.38
1,002.34
24.00
138.1

¥  22.52
995.11
24.00
106.6¥   28.71
1,043.64
24.00
83.6

¥   29.69
1,102.99
24.00
80.8

¥   26.78
1,166.89
24.00
89.6

$0.22
9.78
0.20
—

1.4
0.7
2.1
46.1
44.0
53.5

1.7
1.0
3.9
47.5
43.6
55.8

2.3
1.3
4.8
47.6
42.8
56.3

2.8
1.6
4.6
48.3
43.7
57.1

2.8
1.6
3.6
46.7
43.0
55.2

2.4
1.3
2.0
45.8
43.8
53.8

—
—
—
—
—
—

Other informationNumber of full-time
employees¥ million

4,008

3,910

3,993

5,208

5,224

4,973

—

2.4

0.7

0

2010

ROE

ROA

1.0

2011

1.3

2012

1.6

1.6

2013

2014

¥ million / %400,000
300,000

1.4

1.7

292,569

1.3

2015

Total Net Assets and Shareholders’ Equity Ratio

281,643

276,939

286,779

313,431

340,854200,000

158,164

158,745

157,303

165,372

53.5

55.8

56.3

57.1

150,000

175,02955.2

185,315

80.0
60.0

53.8

200,000

100,000

40.0

100,000

50,000

20.0

0

2010

2011

2012

2013

2014

0

2015

2010

Total Net Assets

Capital Expenditures

RatiosROE (%)ROA (%)
Operating margin (%)
Gross profit margin (%)
SGA / Sales (%)
Shareholders’ equity ratio (%)

Total Assets

2.8

2.3

1.0

2015

At year-end
Cash and time deposits
Total current assetsTotal property, plant andequipment
Total assets
Total current liabilities
Total shareholders’ equity
Total net assets

2.8

3.0

2,723

2011

2012

2013

2014

2015

0

Shareholders’ Equity Ratio (right scale)

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

26,88430,00020,000

80.00

138.1

60.00

16,750

200.0

171.9

150.0

106.6
83.6

40.00
10,000

5,794

5,405

6,230

0

2010

2011

2012

24.00

8,949

24.00

24.00

24.00

80.8
24.00

89.6

50.0

20.00

2013

2014

2015

0

100.0

24.00

2010

2011

Cash Dividends per Share

2012

2013

2014

2015

0

Payout Ratio (right scale)*1. Yen amounts have been translated, for convenience only, at ¥119.27=US$1, the approximate exchange rate on February 28, 2015.
*2. Free cash flow = Cash flows from operating activities + Cash flows from investing activities

40

41

Management’s Discussion and Analysis

Overview of Operating Results
In fiscal year 2015, ended February 28, 2015, the domestic economy recovered moderately as corporate earnings improved, andthe Japanese government and Bank of Japan implemented economic and monetary easing policies. However, sluggish consumer spending continued because the impact of the consumption
tax hike persisted for longer than expected, while rapid yen depreciation led to rising prices of daily necessities and real wages
continued to decline.
In the domestic apparel and fashion industries, big-ticket
items and demand from inbound tourists supported performance,but overall store sales faced difficult conditions, owing to frugal
consumer behavior and the impact of successively harsh weather
conditions.
In this operating environment, we at the Onward Group selected and concentrated our strategies in businesses both athome and abroad. In addition, we made necessary investments
in our core businesses and mainstay brands, while also developing a new IT system for future growth and investing in infrastructure to enhance our management foundations. Furthermore,
we completed the reconstruction of our headquarters inNovember 2014.
In the domestic business, the Onward Group as a whole
strove to improve earnings, further pursuing high-quality products, sales environments, and services from the customer’s
perspective.
Overseas, earnings improved in our European and North
American businesses, in line with plans. In Asia, however,
the recovery in earnings was delayed.

Net Sales
Sales in the Apparel Business increased 0.5% year on year, to¥264,301 million, while sales in the Other Business climbed
1.2%, to ¥17,201 million. As a result, consolidated net sales grew
0.5% compared with the previous fiscal year, to ¥281,502 million.

Management’s Discussion and Analysis

margin declined 0.9 percentage points, from 46.7% in fiscal year
2014 to 45.8% in fiscal year 2015. This decline was mainly due todifficult conditions for full-price sales as consumers became increasingly frugal following the consumption tax hike.

Operating Income
Selling, general and administrative (SG&A) expenses grew 2.3%
year on year, to ¥123,332 million. The ratio of SG&A expenses to
net sales was 43.8%, up 0.8 percentage points from 43.0% in
the previous fiscal year. This increase was mainly due to one-timecosts booked in the second half on the closing of unprofitablebusinesses and stores, and upfront investment in new subsidiaries. In addition, the operating income margin contracted, from
3.6% to 2.0%, following a decline in the gross profit margin.
As a result, operating income decreased ¥4,468 million, to¥5,732 million.

300,000

245,387

243,204

280,008

281,502

Domestic BusinessWe will focus on improving profitability in existing core businesses at Onward Kashiyama and other important subsidiaries. In addition, we will also concentrate on subsidiaries where plans aredelayed, and on improving new businesses.

Overseas BusinessWith earnings growth centered on our European business, wewill increase our growth potential in the global market.

Other Business

AssetsIn fiscal year 2015, sales in the Other Business segment increased 1.2% compared with the previous fiscal year, to ¥17,201
million, and operating income increased 34.5%, to ¥390 million.
In our service-related businesses, sales declined for Onward
Creative Center, which designs and constructs commercial facilities, but profits increased owing to growth in high-margin new
businesses.
Our resort business performed favorably, posting higher sales
and profits.

As of February 28, 2015, total assets increased ¥27,423 million
from the previous fiscal year-end, to ¥340,854 million. Total current assets grew ¥6,703 million, mainly from gains in cash anddeposits, accounts and notes receivable, and inventories. Fixed
assets expanded ¥20,720 million, largely owing to rises in buildings and structures on the back of capital expenditure as well as
increases in investments in securities, which was a reflection ofhigher market values of stockholdings.

Income before Income Taxes andMinority Interests and Net Income
Income before income taxes and minority interests was ¥9,395
million, a decrease of ¥80 million, or 0.8%, year on year. Income
taxes climbed ¥390 million, or 8.2%, to ¥5,172 million, from
¥4,782 million in the previous fiscal year. Due to these factors,
net income was ¥4,204 million, a decline of ¥455 million, or
9.8%, from the previous fiscal year.

¥ million

11,663

12,000¥ million

4,000

2,723

300,000

10,200

6,000

3,529

4,503

Total liabilities as of February 28, 2015, expanded ¥17,137 million
from the previous fiscal year-end, to ¥155,539 million. Total current liabilities grew ¥8,609 million, mainly attributable to an increase in accounts payable. Total long-term liabilities rose ¥8,528
million, due to an increase in long-term loans payable.

Segment Sales

11,8199,614

Financial Position

Liabilities

Outlook for the Fiscal Year Ending
February 29, 2016
For fiscal year 2016, ending February 29, 2016, we at the Onward
Group forecast that net sales will decrease 6.2%, to ¥264,000
million, while operating income will grow 57.0% year on year,to ¥9,000.

8,000

100,000

At core operating subsidiary Onward Kashiyama, the e-commerce business grew and luxury brands such as JOSEPH and
TOCCA sold well, while sales of mainstay brands were also robust despite difficult conditions. However, profits declined fromnew distribution channels, leading to difficult results. At core subsidiaries, earnings were slow to recover and we made upfront investments in new operating subsidiaries, resulting in a decline inoverall profits.

In Europe, we achieved profitability as earnings significantly improved, in line with plans. In Asia, however, the recovery in earnings was delayed, owing partly to the negative impact of
streamlining our store network, and worsening economic
conditions.

10,000200,000

Domestic Business

Overseas Business

Operating Income and Net Income
259,100

In fiscal year 2015, sales in the Apparel Business segment grew
0.5% year on year, to ¥264,301 million, while operating income
decreased 29.1%, to ¥8,797 million.

Other income, net, amounted to ¥3,663 million, compared withother expenses, net, of ¥725 million in the fiscal previous year.
Other expenses were recorded in the forms of impairment loss
on fixed assets of ¥1,660 million, up ¥1,337 million year on year,
and special retirement expenses of ¥1,901 million, up ¥1,818­million. Nonetheless, gain on sale of investments in securities,
net, increased ¥4,472 million, to ¥5,363 million, and the previous
fiscal year’s loss from dissolution of corporate pension fund of¥1,264 million was not recorded.

Cost of sales grew 2.1%, to ¥152,438 million, and gross profit
was ¥129,064 million, a decrease of ¥1,674 million comparedwith the previous fiscal year. This decline was mainly due to higher production costs caused by the weak yen. The gross profit¥ million

Apparel BusinessAs a whole, we expect a recovery in the domestic economy asreal economic growth turns positive on the back of robust corporate earnings. In the domestic apparel and fashion industries,
however, we think difficult conditions will continue, as consumers’ spending patterns become increasingly diversified, and competition between companies heats up.
In this operating environment, we will focus on stable growthin core businesses while aiming to improve profitability, and also
develop new businesses in areas with a promising outlook
for growth.

Other Income (Expenses)

Gross Profit

Net Sales

Segment Information

4,659

5,732

200,000

14,813

14,870230,575

228,335

15,694
243,406

16,997

17,201

263,011

264,301

2014

2015

4,204
100,000

2,000
0

2011

2012

2013

2014

2015

0

2011

Operating Income

42

2012

2013

Net Income

2014

2015

0

2011

Apparel Business

2012

2013

Other Business

43

Operating Risks

Management’s Discussion and Analysis

Net Assets
As of February 28, 2015, total net assets increased ¥10,286 million from the previous fiscal year-end, to ¥185,315 million. Total
shareholders’ equity rose ¥1,802 million, reflecting growth in retained earnings. Accumulated other comprehensive income expanded ¥8,391 million, mainly attributable to a rise in net
unrealized gains on available-for-sale securities given the improvement in market values of our stockholdings as well as more beneficial foreign currency translation adjustments.

Cash Flows
Cash Flows from Operating Activities
Net cash provided by operating activities for fiscal year 2015 was¥16,491 million (¥13,362 million in the previous fiscal year), mainly from income before income taxes, and depreciation and amortization, along with the payment of income taxes.

Cash Flows from Investing Activities
Net cash used in investing activities for fiscal year 2015 totaled¥15,657 million (¥14,301 million in the previous fiscal year),mainly due to investments in sales facilities and the acquisitionof real estate.

In the Apparel Business segment, capital expenditures
amounted to ¥11,501 million, the majority of which was channeled to sales floors at department stores and directly managed
stores with the aim of strengthening the Group’s sales structureand systems. In the Other Business segment, we at the Onward
Group invested ¥778 million to upgrade commercial facilities andenhance operational efficiency.

Changes in Consumer Needs

Profit Distribution Policy
At Onward Holdings, we recognize that the distribution of profits
to shareholders is one of our top priorities. Our basic policy is to
distribute regular and stable dividends to shareholders based on
our business performance, and we target a dividend payout ratioof at least 35%. For fiscal year 2015, we have decided to distribute a cash dividend of ¥24.00 per share.
Treasury stock acquisitions will be conducted based on funding requirements. Additionally, we intend to utilize our retained
earnings flexibly and adopt a balanced approach to meet ourfunding requirements. Based on this policy, our retained earnings
will be used for strategic investments to build a solid businessfoundation and strengthen our financial position as and when we
consider appropriate.

Cash Flows from Financing Activities
Net cash provided by financing activities for fiscal year 2015
amounted to ¥757 million (¥2,122 million in the previous fiscal
year), owing mainly to changes in borrowings and dividends paid.
As a result, cash and cash equivalents as of February 28, 2015,
moved up ¥2,587 million, to ¥29,818 million.

Capital Expenditures

Cash Flows¥ million¥ million

400,000

200,000

158,745276,939

286,779

157,303

313,431

165,372

340,854

Total Assets

44

2011

Sales of our Group’s mainstay fashion products may be affected by
the weather. Consequently, we as a Group have put in place andcontinue to strengthen our systems for planning and production fora quick turnaround cycle. However, unseasonal weather over a prolonged period, such as cool weather in the summer or warm weather in the winter, or a series of typhoons may result in the loss ofsales opportunities during peak seasons. Such developments may
have an adverse impact on our Group’s business performance.
In addition, the occurrence of a natural disaster, such as an earthquake, a flood, a fire or an accident, or an outbreak of an epidemic,
such as a new strain of influenza, may compel us at the Onward
Group to suspend our business operations. Such an occurrence may
have an adverse impact on our Group’s business performance.

2012

Total Net Assets

2013

18,000Business Partners

11,207

13,181

10,13813,362

16,4919,000

175,029

185,315

100,000
0

Weather Conditions and Disasters

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

Total Assets and Total Net Assets

281,643

To respond accurately to customer needs regarding fashion products, we work to develop original and competitive products
through the implementation of our Brand-Leverage Management
policy. However, our performance targets in our business plan
may be challenging at times due to a number of external factors,
such as sluggish consumer spending as a result of fluctuations ineconomic conditions, increased competition, and sudden changes in fashion trends. Falling short of our targets may have an impact on our Group’s performance.

Product Liability

We at the Onward Group undertake capital expenditures on acontinuous basis to upgrade and expand our planning, production, sales, and logistics structures and systems. Our Group’s
capital expenditures are the wellspring that enables us to address
the diverse needs of our customers. In fiscal year 2015, our capital expenditures totaled ¥26,884 million.

300,000

Risks that may have an impact on our Group’s operations are outlined as follows. After determining the potential for these risks tomaterialize, we at the Onward Group will implement measuresdesigned to mitigate these risks or to minimize their impact.
Forward-looking statements in this section are based on theGroup’s judgments in light of information available at the time
this report was prepared.

2014

2015

2,122
0

757

–1,962–9,000–5,152–9,272–18,000

2011–7,4492012–7,848–10,683–14,3012013

Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities2014–15,657

2015

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

Intellectual Property
We at the Onward Group own trademarks and other intellectual
properties in Japan and overseas. We strive to safeguard therights relating to such property in accordance with laws and regulations. However, in the event of an infringement of such rights
by a third party, both the image of our Group and brand image

may be undermined, resulting in impairment of our Group’s product development activities. Such an occurrence may have an adverse impact on our Group’s business performance.
Moreover, we at the Onward Group are actively engaged in licensed brand business activities. In undertaking these activities,
we as a Group secure rights to use intellectual property owned
by our overseas partners. For unexpected reasons, the relevant
contracts may be cancelled or the terms and conditions may become unfavorable upon renewal. Such an outcome may have an
adverse impact on our Group’s business performance.

Legal Procedures and ComplianceIn doing business, the Onward Group pays careful attention tolaws and regulations—including those concerning antitrust, thetreatment of subcontractors, labeling, consumer product safety,
and environment- and recycling-related laws—and strives to ensure compliance. The Onward Group Compliance Committee
spearheads the Group’s efforts to raise awareness about the importance of ensuring legal compliance and maintaining internal
control procedures. Despite the implementation of such control
systems, an issue may arise as a result of the illegal acts of an employee or a business partner and may undermine the trust placedin the Company by society, leading to a substantial cost burden,such as the payment of indemnities. Such an eventuality may havean adverse impact on our Group’s business performance.

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

Overseas Business Operations
Our overseas business operations of the Onward Group are exposed to a range of risks, including natural disasters, political turmoil, changes in social and economic conditions, terrorism, war,fluctuations in foreign currency exchange rates, lawsuits related tointellectual property, and infectious diseases. In the event that sucha risk materializes, it may become difficult for us to continue ourbusiness operations in the affected region. Such an occurrence may
have an adverse impact on our Group’s business performance.

Business and Capital Tie-ups
As a part of our growth strategies, we at the Onward Group undertake a variety of investments in Japan and internationallythrough a broad spectrum of vehicles, including M&A transactions. In the event of deterioration in business performance andfinancial position owing to a change in the business environmentthat exceeds expectations, we may record a loss on impairmentof goodwill. Such an occurrence may have an adverse impact on
our Group’s business performance.

45

Consolidated Balance Sheets

Consolidated Balance Sheets

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2014 and February 28, 2015

Thousands of
U.S. dollars(Note 2. (22))

Millions of yen

ASSETS

2014

2015

2014

Cash and time deposits (Notes 3 and 10)¥ 27,376¥ 31,123$  260,944

Accounts and notes receivable (Note 3)

28,25130,793

258,177

Inventories (Note 2. (4))

40,68043,862367,757

Deferred tax assets (Note 12)

5,109

4,066

34,088Less: Allowance for bad debt
Total current assets

Millions of yen

LIABILITIES AND NET ASSETS

2014

2015

2015

Current liabilities:

Current assets:

Other current assets

Thousands of
U.S. dollars(Note 2. (22))

9,568

8,132

68,181

(635)

(924)

(7,746)110,349

117,052

981,401¥ 38,306¥ 40,341$  338,230

Short-term loans payable (Notes 3 and 14)

Accounts and notes payable (Note 3)

41,82542,404355,531

Current portion of long-term loans payable (Notes 3 and 14)

3,132

3,250

27,246956

3,178

26,649Accrued bonuses to employees

1,286

1,155

9,682

Accrued bonuses to directors

186

166

1,390

Accrued income taxes

Allowance for sales returns

497

405

3,395

Provision for point program

264

331

2,778

Other current liabilities (Notes 12 and 14)
Total current liabilities

14,55818,389154,185

101,010

109,619

919,086

150

100

838

Long-term liabilities:
Bonds (Note 14)

Property, plant and equipment (Note 6):Long-term loans payable (Notes 3 and 14)

13,902

20,979

175,893

Deferred tax liabilities—revaluation of land (Notes 12 and 13)

3,966

3,209

26,90773,814

Accrued retirement benefits (Note 8)

3,421

—

—

35,747299,719

Net defined benefit liability (Note 8)

—

4,126

34,595(75,328)(79,148)(663,605)

5,981

5,892

49,40046,55747,623399,291

137

142

1,194

56,322

62,035

520,121

9,835

11,472

96,181

102,879

109,658

919,412

Buildings and structures

80,72382,220689,363

Leased assets

8,073

8,804

Other depreciable property

33,089Less: Accumulated depreciation

Land (Note 13)
Total property, plant and equipment

Lease obligations (Note 14)
Accrued retirement benefits for directors and corporate auditors
Other long-term liabilities (Note 12)
Total long-term liabilities
Total liabilities

37,39245,920385,008

138,402

155,539

1,304,094

Net assets:
Shareholders’ equity (Note 15):
Common stock:

Intangible assets, net:

Authorized—400,000,000 shares

Goodwill

29,741

26,569222,762

Other

4,536

7,487

62,774

Total intangible assets, net

34,277

34,056

285,536

Issued—172,921,669 shares at February 28, 2014 and February 28, 2015,
respectively

30,08030,080252,198

Capital surplus

50,04350,043

419,579

Retained earnings

121,008

122,590

1,027,832

Less: Treasury stock, at cost, 15,988,357 shares and 15,846,086 sharesat February 28, 2014 and February 28, 2015, respectively
Total shareholders’ equity

Investments and other assets:(22,833)(191,438)

179,880

1,508,171

5,005

11,207

93,961

(33)

147

1,234

(12,503)(13,871)(116,300)
43,088

Accumulated other comprehensive income:Investments in securities (Notes 3 and 4)

49,162

54,162454,113Long-term loans receivable

5,446

2,294

19,235

Deferred gain (loss) on hedging instruments

Long-term prepaid expenses

1,182

1,119

9,382

Net revaluation loss of land (Note 13)

—

3,267

27,389Net defined benefit asset (Note 8)(23,053)
178,078

Net unrealized gain on available-for-sale securities (Note 4)

2,550

5,139

Remeasurements of defined benefit plans (Note 8)

Foreign currency translation adjustments

—

788

6,611

Total accumulated other comprehensive income(4,981)

3,410

28,594

Deferred tax assets (Note 12)

3,079

1,168

9,794

Other investments

10,02918,726

157,012(2,972)(648)(5,436)65,92680,088671,489

Total net assets

175,029

185,315

1,553,744$2,857,838

Total liabilities and net assets¥ 313,431¥340,854$2,857,838

Less: Allowance for bad debt
Total investments and other assets
Total assets¥313,431¥340,854

Stock acquisition rights
Minority interests in consolidated subsidiaries

823

871

7,306

1,109

1,154

9,673

Per share :Net assets per share

U.S. dollars(Note 2. (22))

Yen¥1,102.99¥1,166.89$9.78

See accompanying notes to consolidated financial statements.

46

47

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2014 and February 28, 2015

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2014 and February 28, 2015

Thousands of
U.S. dollars(Note 2. (22))

Millions of yen

Net sales

Thousands of
U.S. dollars(Note 2. (22))

Millions of yen

2014

2015

2015

¥280,008¥281,502$2,360,206

Income before minority interests
Other comprehensive income

2014

2015

2015

¥ 4,693¥ 4,223$ 35,404

3,389

6,096

51,110

Cost of sales

149,270

152,438

1,278,092

Gross profit

130,738

129,064

1,082,114

Net unrealized gain on available-for-sale securities

Selling, general and administrative expenses

120,538

123,332

1,034,058

Deferred gain (loss) on hedging instruments

(67)

180

1,513

Operating income

10,200

5,732

48,056

Foreign currency translation adjustments

4,768

2,546

21,344

451

225

1,891

8,541

9,047

75,858¥13,234¥13,270$111,262¥13,098¥13,176$110,470

136

94

792

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

Other income (expenses):
Interest income

139

97

809

Dividend income

440

463

3,885

Land and house rent received

717

890

7,461

Interest expenses

(575)

(583)

(4,891)Equity in losses of investees

(29)

(147)

(1,231)

Foreign currency exchange gain

465

397

3,332

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

891

5,363

44,968Gain (Loss) on sales or disposal of fixed assets, net(1,318)

440

3,686

Impairment loss on fixed assets (Note 7)(323)(1,660)(13,919)(1,264)——

Special retirement expenses(83)(1,901)(15,939)

Other, net

215

304

2,555

9,475

9,395

78,772Current

3,112

5,033

42,205

Deferred

1,670

139

1,163

Income before minority interests

4,693

4,223

35,404

Minority interests in subsidiaries

(34)

(19)

(156)

4,204

$   35,248

Loss from dissolution of corporate pension fund

Income before income taxes and minority interests

Total other comprehensive income (Note 9)Comprehensive income

Comprehensive income attributable to:
Owners of the parent
Minority interests
See accompanying notes to consolidated financial statements.

Income taxes (Note 12):Net income¥¥4,659

Per share (Notes 15, 16 and 18):

U.S. dollars(Note 2. (22))

Yen

Net income—basic¥29.69¥26.78$0.22

Diluted net income per share

29.40

26.48

0.22

Cash dividends

24.00

24.00

0.20

See accompanying notes to consolidated financial statements.

48

49

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Changes in Net Assets

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2014 and February 28, 2015

Millions of yen

Millions of yen

Shareholders' equity
Number ofshares ofcommon stock(thousands)

Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings(Note 16)

172,922¥30,080¥50,043¥120,165¥(23,146)¥177,142

Cash dividends

—

—

—

(3,765)—(3,765)

Net income

—

—

—

4,659

—

4,659

Purchase of treasury stock

—

—

—

—

(7)

(7)

Reissuance of treasury stock

—

—

—

(51)

100

49

Net changes other than shareholders'equity

—

—

—

—

—

—

—

—

—

843

93

936

172,92230,08050,043

121,008(23,053)

178,078

Cash dividends

—

—

—

(3,766)—(3,766)

Net income

—

—

—

4,204

—

4,204

Purchase of treasury stock

—

—

—

—

(4)

(4)

Reissuance of treasury stock

—

—

—

(141)

224

83

Reversal of revaluation of land

—

—

—

1,368

—

1,368

Change of scope of consolidation

—

—

—

(83)

—

(83)

Net changes other than shareholders'equity

—

—

—

—

—

—

—

—

—

1,582

220

1,802

172,922¥30,080¥50,043¥122,590¥(22,833)¥179,880

Balance as at March 1, 2013

Total changes during the year
Balance as at February 28, 2014

Total changes during the year
Balance as at February 28, 2015

Treasurystock

Net unrealized
RemeasureDeferredgain onments of
Net
Foreignavailable-for- gain (loss) revaluation currency
definedsale securities on hedging loss of land translation benefit plans(Note 4) instruments (Note 13) adjustments (Note 8)

Total

Balance as at March 1, 2013

¥ 1,532¥ 34 ¥(12,503) ¥(2,484)
—

—

—

—

—

—

(3,765)

Net income

—

—

—

—

—

—

—

—

4,659

Purchase of treasury stock

—

—

—

—

—

—

—

—

(7)

Reissuance of treasury stock

—

—

—

—

—

—

—

—

49

3,473

(67)

—

5,034

—

8,440

99

182

8,721

3,473

(67)

—

5,034

—

8,440

99

182

9,657

5,005

(33) (12,503)

2,550

—

(4,981)

823

1,109

175,029

Net changes other than shareholders'equityTotal changes during the year
Balance as at February 28, 2014
Cash dividends

—

—

—

—

—

—

—

—

(3,766)

Net income

—

—

—

—

—

—

—

—

4,204

Purchase of treasury stock

—

—

—

—

—

—

—

—

(4)

Reissuance of treasury stock

—

—

—

—

—

—

—

—

83

Reversal of revaluation of land

—

—

—

—

—

—

—

—

1,368

Change of scope of consolidation

—

—

—

—

—

—

—

—

(83)

6,202

180

(1,368)

2,589

788

8,391

48

45

8,484

6,202

180

(1,368)

2,589

788

8,391

48

45

10,286¥788 ¥ 3,410¥871

Net changes other than shareholders'equityTotal changes during the year
Balance as at February 28, 2015

¥11,207¥147 ¥(13,871) ¥ 5,139¥1,154 ¥185,315

Thousands of U.S. dollars (Note 2. (22))

CapitalsurplusRetainedearnings(Note 16)

$252,198$419,579$1,014,567

Cash dividends——(31,579)—(31,579)

Net income——

35,248—35,248Purchase of treasury stock

—

—

—

(35)

(35)

Reissuance of treasury stock——(1,183)

1,877

694

Reversal of revaluation of land——

11,474—

11,474

Change of scope of consolidation

—

—

(695)

—

(695)

Net changes other than shareholders' equity

—

—

—

—

—

—

—

13,265

1,842

15,107$252,198$419,579$1,027,832

Balance as at February 28, 2015

¥ 927 ¥165,372—

Accumulated other comprehensive income

Commonstock

See accompanying notes to consolidated financial statements.

¥724

—

Shareholders' equity

Total changes during the year

¥ — ¥(13,421)

Total net
assetsCash dividends

Thousands of U.S. dollars (Note 2. (22))

Balance as at February 28, 2014

Total

Minority
Stockinterests inacquisition consolidated
rightssubsidiaries

Treasurystock

Net unrealized
RemeasureDeferredgain onments of
Net
Foreignavailable-for- gain (loss) revaluation currency
definedsale securities on hedging loss of land translation benefit plans(Note 4) instruments (Note 13) adjustments (Note 8)

Total$(193,280) $1,493,064$(191,438) $1,508,171

Balance as at February 28, 2014

$41,959$ (279) $(104,826) $21,381$

Minority
Stockinterests inacquisition consolidated
rightssubsidiaries

Total— $(41,765)$6,904

Total net
assets$9,299 $1,467,502

Cash dividends

—

—

—

—

—

—

—

—

(31,579)

Net income

—

—

—

—

—

—

—

—

35,248Purchase of treasury stock

—

—

—

—

—

—

—

—

(35)

Reissuance of treasury stock

—

—

—

—

—

—

—

—

694

Reversal of revaluation of land

—

—

—

—

—

—

—

—

11,474

Change of scope of consolidation

—

—

—

—

—

—

—

—

(695)

Net changes other than shareholders'equity52,002

1,513(11,474)

21,707

6,611

70,359402

374

71,13552,002

1,513(11,474)

21,707

6,611

70,359402

374

86,242$93,961$1,234 $(116,300) $43,088$6,611$28,594$7,306

Total changes during the year
Balance as at February 28, 2015

$9,673 $1,553,744

See accompanying notes to consolidated financial statements.

50

51

Consolidated Statements of Cash Flows

Consolidated Statements of Cash Flows

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 28, 2014 and February 28, 2015

Thousands of
U.S. dollars(Note 2. (22))

Millions of yen
2014

2015

2015

Income before income taxes and minority interests¥ 9,475¥ 9,395$ 78,772

Millions of yen
2014

Cash flows from operating activities:

and minority interests to net cash provided by operating activities:

Increase (decrease) in short-term loans payable

10,504(875)(7,339)15,35410,00083,843

Repayments of long-term loans payable(19,015)(3,358)(28,151)

(7)

(4)

(35)

(3,765)(3,766)(31,579)

6,801

7,219

60,525Acquisition of treasury stock

Impairment loss on fixed assets

323

1,660

13,919Dividends paid by the parent company

Increase (decrease) in provision for accrued retirement benefits
Increase (decrease) in net defined benefit liability

3,313

3,327

27,893

Dividends paid to minority shareholders

(58)

(83)

(694)

515

(2,064)(17,305)

Other, net(891)(1,157)(9,695)

1,944

—

—

—

(934)

(7,834)

Net cash provided by financing activities

2,122

757

6,350

Effect of exchange rate changes on cash and cash equivalents

1,486

835

7,003

2,669

2,426

20,345Interest and dividend income

(579)

(560)

(4,694)

Net increase (decrease) in cash and cash equivalents

Interest expenses

575

583

4,891

Equity in (earnings) losses of investees

29

147

1,231

Increase (decrease) in cash and cash equivalents resulting from change ofscope of consolidation(Gain) loss on sales or disposal of fixed assets, net

1,318

(440)

(3,686)

Cash and cash equivalents at beginning of year

(Gain) loss on sale of investments in securities, net(891)(5,363)(44,968)

Cash and cash equivalents at end of year (Note 10)(Increase) decrease in trade receivables(Increase) decrease in inventories(325)(1,450)(12,157)(4,025)(1,948)(16,329)

Increase (decrease) in trade payables

2,515

1,175

9,847

Other, net(3,047)

7,231

60,625

Subtotal

150,730

17,941

17,978Interest and dividends received

812

687

5,762

Interest paid

(593)

(600)

(5,034)

Income taxes paid

(6,283)(2,595)(21,761)

Refunded income taxes

1,485

1,021

8,567

13,362

16,491

138,264

Increase in time deposits(32)(1,168)(9,793)

Decrease in time deposits

35

16

137

(13,678)(22,182)(185,979)
23,525

Net cash provided by operating activities

2015

Proceeds from long-term loans payable

Depreciation and amortization
Net amortization of goodwill on consolidation

2015

Cash flows from financing activities:

Adjustments to reconcile income before income taxes

Increase (decrease) in provision for allowance for bad debt

Thousands of
U.S. dollars(Note 2. (22))

17

161

1,350

24,54527,231

228,312¥ 27,231¥29,818$250,007See accompanying notes to consolidated financial statements.

Cash flows from investing activities:

Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment

694

2,806

Acquisition of investments in securities

(125)

(543)

(4,553)

Proceeds from sale of investments in securities

2,268

10,17085,266

(871)

(586)

(4,910)

Payments for security deposits

Payments for long-term prepaid expenses(1,333)(1,394)(11,684)

Proceeds from security deposits

1,275

1,317

11,043

(13)

(205)

(1,715)(2,521)(3,888)(32,609)(14,301)(15,657)(131,272)

Purchase of investments in subsidiaries resulting in change in scope of
consolidation
Other, net
Net cash used in investing activities

52

53

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 28, 2014 and February 28, 2015

1. Basis of Presentation of the Consolidated Financial Statements(2) Consolidation and Elimination

The accompanying consolidated financial statements have been prepared from the accounts maintained by
ONWARD HOLDINGS Co., Ltd. (the “Company”), and its consolidated subsidiaries in accordance with the provisions set forthin the Corporation Law of Japan (the “Corporation Law”) and the Financial Instruments and Exchange Law and in conformity
with accounting principles and practices generally accepted in Japan, which are different in certain respects from the applicationand disclosure requirements of International 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, resultsof operations and cash flows of the Company and its consolidated subsidiaries in accordance with accounting principles andpractices generally accepted in countries and jurisdictions other than Japan.

2. Summary of Significant Accounting Policies(1) Scope of Consolidation
The Company had 81 subsidiaries as at February 28, 2015 (81 as at February 28, 2014). The accompanying consolidated financial
statements include the accounts of the Company and 72 of its subsidiaries (69 for 2014). Major consolidated subsidiaries arelisted below (the Company and the consolidated subsidiaries are collectively referred to as the “Companies”):
Name of subsidiary

Onward KASHIYAMA Co., Ltd.
Onward Trading Co., Ltd.
Chacott Co., Ltd.
Creative Yoko Co., Ltd.
Island Co., Ltd.
Onward Global Fashion Co., Ltd.
Birz Association Co., Ltd.
Bus Stop Co., Ltd.
Onward Luxury Group S.p.A.
Project Sloane Ltd.
Joseph Ltd.
Onward Fashion Trading (China) Co., Ltd.
J. Press, Inc.
Across Transport Co., Ltd.
Onward Creative Center Co., Ltd.
Booklet Co., Ltd.
Excel Co., Ltd.
Onward Resort & Golf Co., Ltd.
Onward Life Design Network Co., Ltd.
Onward Beach Resort Guam, Inc.
Onward Mangilao Guam, Inc.

Equity ownership percentage

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

Closing dateFebruary 28
February 28
February 28
February 28
February 28
February 28
February 28
February 28
November 30
November 30
November 30
December 31
December 31
February 28
February 28
February 28
February 28
February 28
February 28
December 31
December 31

Intimates Co., Ltd. was newly established, and TOYO FRAME Co., LTD., and Mother International CO., Ltd. were fully acquired
during the year ended February 28, 2015; therefore, these companies became consolidated subsidiaries of the Company.
Horloge Saint Benoit S.A.S., which was an affiliate accounted for using the equity method in the previous fiscal year, and J. Direction Co., Ltd. and Candela International Co., Ltd., which were the Company’s unconsolidated subsidiaries in the previous fiscal year,
have been included in the scope of consolidation from the year ended February 28, 2015, since their importance has increased.
Although Mother International Co., Ltd. was included in the scope of consolidation due to acquisition of all its shares, it was removed from the scope of consolidation as it was absorbed into Candela International Co., Ltd. due to merger.
Jil Sander Italy S.p.A was absorbed into Onward Luxury Group S.p.A., and Jil Sander America Inc. was absorbed into Onward
Luxury Group Inc. due to merger; therefore, these companies were removed from the scope of consolidation.
The financial statements of the aforementioned subsidiaries with fiscal year-ends of December 31 or November 30 have beenused for consolidation. Significant adjustments considered necessary due to different closing date from February 28 have been madewith consolidation.
The remaining 9 subsidiaries (12 for 2014) were not consolidated because their total assets, net sales, net income and retained
earnings were not material individually or in the aggregate compared with those of the consolidated financial statements of the Companies.

54

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 tominority 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 within 20 years.

(3) Investments in Unconsolidated Subsidiaries and Affiliates
Investments in unconsolidated subsidiaries and affiliates are accounted for by the equity method. A total of 18 companies (19companies for 2014) are accounted for by the equity method for the year ended February 28, 2015.
The Company did not apply the equity method to Onward Italia S.p.A. and others as the effect on net income or retained
earnings of their consolidated financial statements are not material individually or in the aggregate.
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 Daidoh Limited, which has a fiscal year-end of March
31, prepared on a basis similar to that for year-end closing, were used for consolidation purposes.

(4) Inventories
Inventories held for sale in the ordinary course of business are measured at the lower of cost or net selling value, which is defined as the selling price less additional estimated manufacturing costs and estimated direct selling expenses, determined principally by the specific identification method. For the year ended February 28, 2015, the recorded write-downs were ¥11,466
million ($96,135 thousand). For the year ended February 28, 2014, the recorded write-downs were ¥12,247 million.

(5) Investments in Securities
Debt securities and equity securities classified as available-for-sale securities whose fair values are readily determinable arecarried at the fair values prevailing at the fiscal year-end date with unrealized gains or losses included as a component of net
assets, net of applicable taxes. Available-for-sale securities whose fair values cannot readily be determined are stated principallyat cost.
In cases where declines in the fair values of individual securities are assessed to be other than temporary, the cost of the
security is reduced to net realizable value and the impairment loss is charged to income. Realized gains and losses are determined using the moving-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 derivatives that are designated as “hedging instruments” (see “(7) Hedge Accounting” below).

(7) Hedge Accounting
All gains or losses arising from changes in the fair values of the derivatives are designated as “hedging instruments,” which aredeferred as a component of net assets, net of applicable taxes. The gains or losses on the hedging instruments are included in net
income in the same period during which the gains and losses on the hedge items or transactions are recognized. For foreign exchange forward contracts, if they meet conditions for hedge accounting, the difference between the contract rate and spot rate at
the date of the contract is recognized over the period from the contract date to the settlement date.
The derivatives designated as hedging instruments are principally foreign exchange forward contracts. The related hedged
items are 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 basedon 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 anamendment to Japanese income tax law.
Overseas consolidated subsidiaries provide depreciation by the straight-line method.
The useful lives of property, plant and equipment are summarized as follows:
Buildings and structures
3 to 50 years
Other
2 to 20 years(9) Intangible Assets and Long-term Prepaid Expenses
Intangible assets and long-term prepaid expenses are amortized by the straight-line method.
Software costs for internal use are amortized over their expected useful lives (five years) by the straight-line method.

55

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(10) Income Taxes(20) Accrued Bonuses to Employees

The accounting standards for income taxes require that deferred income taxes be accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled, and the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. A valuation allowance is provided to reduce deferred tax assets to the amount that isrealizable.

Allowance for bonuses to employees are provided by the estimated amounts, which are obligated to pay to employees after the
fiscal year-end, based on services provided during the current period.

(11) Allowances for Bad Debt
An allowance for doubtful accounts, including trade notes and accounts receivable and certain investments and other assets, isprovided against probable future losses on collection. The Company and subsidiaries designate certain accounts as highly
doubtful accounts and provide a specific allowance for these accounts based on the management’s detailed credit analysis.
Other than these accounts, the Company provides an allowance for doubtful accounts based on the Company’s historical average charge-off ratio.

(12) Allowances for Sales Returns
An allowance for sales returns is provided for the estimated losses based on the actual percentage of sales return in prior years
and gross profit margin.

(13) Retirement Benefits
To calculate projected benefit obligations, the Company adopts the straight-line basis for the method of attributing the projected
benefits to periods.
Unrecognized prior service costs are amortized and charged or credited to income on a straight-line basis over 5 to 10 years,
which is within the related employees’ average remaining service years. Unrecognized actuarial differences are amortized on astraight-line basis over 5 to 10 years, which is within the related employees’ average remaining service years, from the year
following the one in which they arise.
Accrued retirement benefits for directors and statutory auditors are provided for at the amount required at the balance sheet
dates in accordance with the internal rules of certain domestic consolidated subsidiaries.

(14) Provision for Point Program(21) Directors’ Bonuses
Under the standard of directors’ bonuses, directors’ bonuses are accounted for as an expense as incurred, instead of being accounted for as an appropriation of retained earnings upon approval at a general meeting of shareholders.

(22) United States Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of ¥119.27=US$1, the rateof exchange as of February 28, 2015, has been used in translation. The inclusion of such amounts is not intended to imply thatJapanese yen have been or could be readily converted, realized or settled in U.S. dollars at that rate or any other rate.

(23) Reclassifications
Certain reclassifications have been made to the prior year’s consolidated financial statements to conform with the presentation
used for the year ended February 28, 2015.
(Changes in Presentation Method)“Royalty income” and “Royalty payment,” which were included in “Other income (expenses)” for the prior fiscal year, have been
included in “Net sales” and “Cost of sales,” respectively.
The Onward Group has accelerated the implementation of our Brand-Leverage Management policy to increase revenues actively in overseas business through measures including reorganization of companies to enhance synergies between high quality
production of Onward Luxury Group in Europe and strong brand value of Jil Sander Group. Amid these circumstances, as thequantitative materiality of these accounts is expected to increase in the future, we decided to change the presentation method
to more appropriately present the Onward Group’s actual situation.
To reflect this changes in presentation, the consolidated financial statements for the year ended February 28, 2014 havebeen reclassified.
As a result, the amount of ¥935 million, which was presented in “Royalty income” under “Other income” in the consolidated
statements of operations for the year ended February 28, 2014, has been reclassified into “Net sales.” The amount of ¥157 million, which was presented in “Royalty payment” under “Other expenses” in the consolidated statements of operations for theyear ended February 28, 2014, has been reclassified into “Cost of sales.”The provision for point program was provided for the future cost generating from the utilization of points that customers of certain domestic consolidated subsidiaries have earned under the point service program which is for sales promotions. They reserve an amount considered appropriate to cover possible utilization of the points during and after the next fiscal year.

(24) Goodwill(15) Accounting for Leases(25) Changes in Accounting Policies

Leased assets related to finance lease transactions without title transfer are depreciated on a straight-line basis, over the lease
periods as their useful lives and no residual value. Regarding finance leases transactions without title transfer for which thestarting date for the lease transactions is prior to February 28, 2009, the Company and its domestic consolidated subsidiaries
have continued to recognize lease payments as expenses.

Effective from the year ended February 28, 2015, the Company adopted “Accounting Standard for Retirement Benefits”(Accounting Standards Board of Japan (hereinafter “ASBJ”) Statement No. 26, May 17, 2012) and “Guidance on AccountingStandard for Retirement Benefits” (ASBJ Guidance No. 25, May 17, 2012), except for certain provisions described in the mainclause of paragraph 35 of the standard and in the main clause of paragraph 67 of the guidance. Accordingly, the Company haschanged the method to record projected benefit obligations less plan assets as net defined benefit asset or net defined benefit
liability, and recorded unrecognized actuarial differences and unrecognized prior service costs under net defined benefit asset or
net defined benefit liability.
The effects of this change were recorded in remeasurements of defined benefit plans included in accumulated other comprehensive income, in accordance with the transitional treatment stated in the paragraph 37 of the standard.
As a result, as of February 28, 2015, net defined benefit asset and net defined benefit liability were recorded in an amount of¥3,267 million ($27,389 thousand) and ¥4,126 million ($34,595 thousand), respectively. Accumulated other comprehensive income increased ¥788 million ($6,611 thousand). Net assets per share increased ¥5.02 ($0.04).

(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 operations.

(17) Application of Consolidated Taxation System
The Company and certain domestic consolidated subsidiaries apply the consolidated taxation system.

(18) 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 be withdrawn 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.

(19) Impairment of Long-Lived Assets
The standard of impairment of long-lived assets requires that fixed assets be reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment
loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash
flows expected to be generated from 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 and eventual disposition of the asset or the net selling price at
disposition.

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

(26) Unapplied Accounting Standards“Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26, May 17, 2012) and “Guidance on Accounting Standard
for Retirement Benefits” (ASBJ Guidance No. 25, May 17, 2012)(1) Overview
Accounting standard for retirement benefits and the guidance on accounting standard for retirement benefits has been revised
from the viewpoint of improvements to financial reporting and international convergence, mainly focusing on (a) how unrecognized actuarial differences and unrecognized prior service costs should be accounted for, (b) how projected benefit obligations
and service costs should be determined and (c) enhancement of disclosures.
(2) Date of adoption
The Company will adopt the amendments to the method for calculating projected benefit obligations and service costs from the
beginning of the fiscal year ending February 29, 2016.
(3) The effect of adopting the accounting standards
The effect is under evaluation at the time consolidated financial statements were prepared.

56

57

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

3. Financial Instruments

Thousands of U.S. dollars
February 28, 2015

1. Matters pertaining to the status of financial instruments(1) Policy on financial instruments
The Company and its subsidiaries invest their funds in short-term deposits and meet their financing needs through bank loans.
The Company and its subsidiaries utilize derivatives to hedge various risks as described in detail below and do not enter into derivatives for trading or speculative purposes.
(2) Financial instruments and risks
Accounts and notes receivable are exposed to credit risk of customers. Trade receivables denominated in foreign currencies, being subject to risks associated with changes in the foreign currency exchange rates, are hedged by forward exchange contracts.
Investment securities mainly comprise stocks of companies with which the Company and its subsidiaries have business alliances and are exposed to risks associated with fluctuations of their market prices.
Accounts and notes payable are due within one year. Trade payables denominated in foreign currencies, being subject torisks associated with changes in foreign currency exchange rates, are hedged by forward exchange contracts. The purpose forloans is for working capital (mainly short-term) and funds of capital investment (long-term). A portion of long-term loans payable
are subject to interest rate risk.
Regarding derivatives, forward foreign exchange contracts and interest rate swaps are used to hedge the foreign exchange
rate fluctuation risk associated with the operating receivables and payables.
(3) Risk management for financial instruments(a) Monitoring of credit risk (the default risk for customers and counterparties)
In accordance with the internal policies of the Company and its consolidated subsidiaries for managing credit risk arising fromnotes and accounts receivable, the Company and its subsidiaries monitor creditworthiness of their main customers and counterparties on a periodical basis and monitor due dates and outstanding balances by individual customers. Additionally, as means
to mitigate credit risks, derivative transactions are only conducted with high-credit worthy financial institutions as
counterparties.
(b) Monitoring of market risk (the risk arising from fluctuations in foreign exchange rates, interest rates and others)
The Company and its consolidated subsidiaries hedge risks associated with changes in the foreign currency exchange rates,
arising from trade receivable and payable denominated in foreign currencies mainly by forward exchange contracts.
For investment securities, the Company and its consolidated subsidiaries periodically review their fair values and the financial position of the issuers. Additionally, the Company and its consolidated subsidiaries continuously evaluate whether securities
should be maintained taking into account their fair values and relationships with the issues.
In derivative transactions, the division in charge of each derivative transaction follows the internal management policies within the actual demand. Additionally, the Company and its consolidated subsidiaries monthly review transactions balance and thevaluation gain (loss).
(c) Monitoring of liquidity risk related to fund procurement (the risk that the Company and its consolidated subsidiaries may not
be able to meet their obligations on scheduled due dates)
In order to manage liquidity risk, the Company and its consolidated subsidiaries timely prepare and update the cash flowplans based upon the report and maintain fund liquidity.
(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price if available. When no quoted market price is available, fair value is reasonably estimated. Since various variable assumptions are reflected in estimating the fair value, different
assumptions could result in different fair values.
2. Matters related to fair values of financial instruments
The following are the consolidated balance sheet amounts, the fair values and the differences between them as of February 28,
2015 and February 28, 2014 (the closing dates of the consolidated account).
Millions of yen
February 28, 2015(a) Cash and time deposits(b) Accounts and notes receivable(c) Investment in securities
Available-for-sale securities
Investment to affiliates(d) Accounts and notes payable(e) Short-term loans payable(f) Long-term loans payable (Cover current portion of long-term loans payable)(g) Derivative transactions

58

Book value

Fair value

Difference¥ 31,123
30,793¥ 31,123
30,793¥——44,3908,970(40,341)(42,404)(24,229)230

44,3904,264(40,341)(42,404)(24,468)
230—(4,706)——239—

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

Fair value

Difference$ 260,944
258,177$ 260,944
258,177$——

372,182
75,209(338,230)(355,531)(203,139)
1,926

372,182
35,747(338,230)(355,531)(205,142)
1,926—(39,462)
—
—
2,003
—

Millions of yen
February 28, 2014

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

Fair value

Difference¥ 27,376
28,251¥ 27,376
28,251¥——

39,322
9,024(38,306)(41,825)(17,034)(41)

39,322
5,001(38,306)(41,825)(17,206)(41)—(4,023)——172—

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

2. Book values of financial instruments deemed extremely difficult to determine their fair value as of February 28, 2014 andFebruary 28, 2015 are as follows:
Thousands of
U.S. dollars

Millions of yen
Classification

Investments in securities
Unlisted equity securities

February 28, 2014

February 28, 2015

February 28, 2015

¥816

¥802

$6,721

The fair values of these items are not included in (c) “Investment in securities” because their market prices are not available
and whose fair values are deemed extremely difficult to determine.
3. The redemption schedule for monetary receivables and marketable securities with maturities as of February 28, 2015 andFebruary 28, 2014 is as follows:
Millions of yen
February 28, 2015

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

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years¥31,123
30,793

¥—
—

¥—
—

¥ —
—

—
¥61,916

—
¥—

—
¥—

350
¥350

5 to 10 years

Over 10 years

Thousands of U.S. dollars
February 28, 2015

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

Due within 1 year

1 to 5 years$260,944
258,177

$—
—

$—
—

$

—
—

—
$519,121

—
$—

—
$—

2,935
$2,93559

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Millions of yen
February 28, 2014

Due within 1 year

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

1 to 5 years

5 to 10 years

Over 10 years¥27,376
28,251

¥—
—

¥—
—

¥ —
—

57
¥55,684

—
¥—

—
¥—

500
¥500

4. Expected repayment amounts of long-term loans payable subsequent to the balance sheet date
See Note 14. “Short-Term Loans Payable and Long-Term Loans Payable.”

5. Derivative Transactions
The contract or notional amounts and fair value of derivative financial instruments held as of February 28, 2015 and February 28,
2014 are summarized as follows:(1) Derivative transactions not subject to hedge accounting:Millions of yen
February 28, 2015

4. Investments in Securities(1) Information as of and for the Year Ended February 28, 2015(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2015 are summarized as follows::
Millions of yen
Carrying
value

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

(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2014 was¥9,504 million.

¥43,268355
43,623767—
767¥44,390

Thousands of U.S. dollars

Acquisition
cost

Unrealized
gain (loss)¥23,898
133
24,031¥19,370
222
19,592910—
910¥24,941

(143)
—
(143)
¥19,449

Carrying
value

Acquisition
cost

Unrealized
gain (loss)$362,773
2,982
365,755$200,373
1,118
201,491$162,400
1,864
164,264

6,428
—
6,428
$372,183

7,626
—
7,626
$209,117(1,198)—(1,198)$163,066

Note: Non-Marketable equity securities of ¥336 million ($2,820 thousand) are not included in the above table because there were noquoted market prices available and they are extremely difficult to determine the fair value.

(b) Available-for-sale securities sold during the year ended February 28, 2015:
Proceeds from sale of securities
Realized gain on sale of securities
Realized loss on sale of securities

Millions of yen

Thousands of
U.S. dollars¥10,170
5,363—$85,266
44,968—(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2015 was¥9,435 million ($79,110 thousand).

(2) Information as of and for the Year Ended February 28, 2014(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2014 are summarized as follows:
Millions of yen

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

Carrying
value

Acquisition
cost

Unrealized
gain (loss)¥31,905422
32,327¥21,645226
21,871¥10,260
196
10,456

6,995
—
6,995
¥39,322

7,426
—
7,426
¥29,297

(431)
—
(431)
¥10,025

Note: Non-Marketable equity securities of ¥336 million are not included in the above table because there were no quoted market prices
available and they are extremely difficult to determine the fair value.

Contract or notionalamounts

Currency option contracts:
Buy: U.S. dollar call
Sell: U.S. dollar put
Interest rate swap agreements:
Variable rate receive / variable rate pay
Variable rate receive / fixed rate pay
Fixed rate receive / variable rate pay

Fair value

Valuation
gain (loss)

¥ —
—
¥ —

¥—
—
¥—

¥—
—
¥—

¥300
—
100
¥400

¥ 0
—
(0)
¥ 0

¥ 0
—
(0)
¥ 0

Thousands of U.S. dollars
February 28, 2015

Currency option contracts:
Buy: U.S. dollar call
Sell: U.S. dollar put

Contract or notionalamounts

Fair value

Valuation
gain (loss)

—
—
—

$—
—
$—

$—
—
$—

$2,515—839$3,354

$ 4
—
(0)
$ 4

$ 4
—
(0)
$ 4

$
$

Interest rate swap agreements:
Variable rate receive / variable rate pay
Variable rate receive / fixed rate pay
Fixed rate receive / variable rate pay

Millions of yen
February 28, 2014

Currency option contracts:
Buy: U.S. dollar call
Sell: U.S. dollar put
Interest rate swap agreements:
Variable rate receive / variable rate pay
Variable rate receive / fixed rate pay
Fixed rate receive / variable rate pay

Contract or notionalamounts

Fair value

Valuation
gain (loss)

¥ 97
211
¥308

¥5
(5)
¥(0)

¥5
(5)
¥(0)

¥300
3
100
¥403

¥2
(0)
1
¥3

¥2
(0)
1
¥3

(2) Derivative transactions processed by hedge accounting:Millions of yen
February 28, 2015

Forward exchange contracts:
To buy foreign currency:
U.S. dollar
Euro
Pound
Chinese Yuan
To sell foreign currency:
U.S. dollar

Hedged Items

Contract or notionalamounts

Fair value

Accounts payable
Accounts payable
Accounts payable
Accounts payable¥4,660
1,475
38
183

¥265
(37)
2
(0)

Accounts receivable

1¥6,357(0)¥230(b) Available-for-sale securities sold during the year ended February 28, 2014:
Millions of yen

Proceeds from sale of securities
Realized gain on sale of securities
Realized loss on sale of securities

60¥2,268891—

61

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Thousands of U.S. dollars
February 28, 2015

Hedged Items

Forward exchange contracts:
To buy foreign currency:
U.S. dollar
Euro
Pound
Chinese Yuan
To sell foreign currency:
U.S. dollar

Contract or notionalamounts

Fair value

Accounts payable
Accounts payable
Accounts payable
Accounts payable$39,072
12,370316
1,535$2,219
(307)
15
(3)

Accounts receivable

9$53,302(2)$1,922Millions of yen
February 28, 2014

Hedged Items

Forward exchange contracts:
To buy foreign currency:
U.S. dollar
Euro
Pound
Chinese Yuan
To sell foreign currency:
U.S. dollar

Contract or notionalamounts

Fair value

Accounts payable
Accounts payable
Accounts payable
Accounts payable¥2,249
2,509
121
126

¥(31)
(20)
4
(1)

Accounts receivable

140¥5,1454¥(44)

6. Property, Plant and Equipment
The Japanese tax regulations allow a company to defer capital gains on the sale of qualified real property, if the company intends to offset 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, 2014 and February 28, 2015 were reduced by ¥8,035 million and ¥7,993 million($67,014 thousand), respectively, representing accumulated deferred gains from eligible sales.

7. Impairment Loss on Fixed Assets
For the years ended February 28, 2015 and February 28, 2014, the Company reviewed its long-lived assets for impairment and,as a result, recognized an impairment loss as follows:
February 28, 2015
Location

Tokyo metropolitan area and other

Usage

Business assets

Description

Millions of yen

Thousands of
U.S. dollars

¥739
921

$6,198
7,721

Buildings and structures
Other

Based on the result of future cash flow analysis that the recoverable amount of goodwill on Birz Association Ltd., which is aconsidered subsidiary of the Company was less than the carrying amount, the Company recognized impairment loss of ¥800
million ($6,709 thousand) on the remaining unamortized portion of the goodwill for the year ended February 28, 2015.
The net realizable value for these assets is based on their net selling price or their value in use. The net selling price is estimated by using their estimated disposal price. The value in use is calculated by discounting the future cash flow with 5.1% and5.5% discount rates for the years ended February 28, 2014 and February 28, 2015, respectively.

8. Retirement Plan and Retirement Benefits
The Company and its certain subsidiaries have adopted funded and unfunded defined benefit retirement plans as well as defined contribution retirement plans to provide retirement benefits to employees.
Under the defined benefit corporate pension plans, all of which are funded, the Company and its certain subsidiaries makelump-sum payments or pensions to employees based on their salary level and service period. Retirement benefit trusts havebeen established in certain defined benefit corporate pension plans.
Under the lump-sum retirement payment plans, of which some are funded, the Company and its subsidiaries make lumpsum payments to employees as retirement benefits, based on their salary level and service period. Retirement benefit trusts
have been established in some of lump-sum retirement payment plans.
Under the lump-sum retirement payment plans for certain consolidated subsidiaries, net defined benefit liability and net periodic pension expenses are calculated by using the simplified method.

(1) Information as of and for the year ended February 28, 2015
A. Defined benefit plans(i) Change in projected benefit obligations
Balance at beginning of year
Service cost
Interest cost
Actuarial differences
Benefits paid
OthersBalance at end of year

Location

Usage

Business assets

Description

Millions of yen

Buildings and structures
Other

¥211
112

The long-lived assets are basically grouped by brand, and assets for lease and idle assets are grouped individually by each
item. The Company has recognized a loss on impairment on assets for lease and idle assets due to a significant decline in theirmarket value, and on business assets due to a continuous loss generated from their operating activities, by reducing their bookvalue to the respective net realizable value of each asset.
The impairment loss on long-lived assets for the years ended February 28, 2014 and February 28, 2015 consisted of thefollowing:Thousands of
U.S. dollars

Millions of yen

Buildings and structures
Other intangible assets
Other
Land
Goodwill
Total

62

February 28, 2014

February 28, 2015

February 28, 2015

¥211
—
112
—
—
¥323

¥ 739
31
78
12
800
¥1,660$ 6,198
258
657
97
6,709
$13,919

Thousands of
U.S. dollars¥18,591
979
233
(764)
(2,714)
227¥16,552$155,878
8,209
1,955
(6,410)(22,755)
1,904$138,781

Millions of yen

Thousands of
U.S. dollars¥13,859
235
2,026
293
(720)
¥15,693$116,198
1,972
16,9842,460(6,039)$131,575(ii) Change in plan assets
Balance at beginning of year
Expected return on plan assets
Actuarial differences
Employer contributions
Benefits paid
Balance at end of year(iii) Reconciliation from projected benefit obligations and plan assets to net defined benefit asset and liability recognized in the
consolidated balance sheets
Millions of yen

Thousands of
U.S. dollars

Funded projected benefit obligations¥ 15,786$ 132,359

Plan assets(15,693)93766(131,575)
784
6,422

859

7,206

February 28, 2014

Tokyo metropolitan area and other

Millions of yen

Unfunded projected benefit obligations
Net amount of liability and asset recognized in the consolidated balance sheets
Net defined benefit liability

4,126

34,595Net defined benefit asset(3,267)(27,389)

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

¥

859

$

7,206

(iv) Net periodic pension expenses and their breakdown
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized actuarial differences
Amortization of unrecognized prior service costs
OthersNet periodic pension expenses

Millions of yen

Thousands of
U.S. dollars

¥ 979
233
(235)
228
(54)
(14)
¥1,137$ 8,209
1,955(1,972)
1,909
(449)
(120)
$ 9,532

63

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(v) Remeasurements of defined benefit plans
The components of items recognized in remeasurements of defined benefit plans (before tax effect) are as follows:
Millions of yen

Thousands of
U.S. dollars

¥ 320
909
¥1,229$ 2,6817,624$10,305

Unrecognized prior service costs
Unrecognized actuarial differences
Total(vi) Plan assets(a) Percentage by major category of plans assets is as follows:
Life insurance company general accounts
Equity securities
Bonds
Cash and cash equivalents
Total

40%
51%
2%
7%
100%

Total plan assets include 54% of contribution of securities to retirement benefit trust in the corporate pension plan.
(b) Determination procedure of long-term expected rate of return on plan assets
In determining long-term expected rate of return on plan assets, the Companies consider the current and projected asset allocations, as well as current and future long-term rate of returns for various categories of the plan assets.
(vii) Basis for calculation of actuarial assumptions
Discount rateLong-term expected rate of return on plan assets

1.5%
1.2% 2.1%

B. Defined contribution plans
The amount to be paid by the Company and certain consolidated subsidiaries to the defined contribution pension plans was¥434 million ($3,637 thousands) for the year ended February 28, 2015.

9. Notes to Consolidated Statements of Comprehensive Income
Other Comprehensive income for the years ended February 28, 2014 and February 28, 2015 consisted of the following:

Millions of yen
February 28, 2014

Projected benefit obligations
Plan assets (including employee retirement benefit fund)¥ (18,592)
13,859Funded status
Unrecognized prior service costs
Unrecognized actuarial differences
Subtotal
Prepaid pension cost

(4,733)(371)
2,106(2,998)423

Accrued retirement benefits

February 28, 2015

¥ 6,302(984)
5,318(1,929)3,389¥15,211(5,787)
9,424(3,328)6,096$127,533(48,519)
79,014(27,904)
51,110

(44)
(70)
(114)
47
(67)

229
44
273
(93)
180

1,922
373
2,295
(782)
1,513

4,768
4,768

2,546
2,546

21,344
21,344451
451¥ 8,541

225
225¥ 9,047

1,891
1,891
$ 75,858

10. Notes to Consolidated Statements of Cash Flows
Cash and cash equivalents at February 28, 2014 and February 28, 2015 consisted of the following:Thousands of
U.S. dollars

2014

Service cost
Interest cost

¥ 1,301
381

Expected return on plan assets
Amortization of unrecognized prior service costs
Amortization of unrecognized actuarial differences
Contributions paid to the defined contribution pension plans
Net periodic pension expenses

(182)
(54)
269
464
¥ 2,179

Actuarial assumptions used in the calculation of the aforementioned information are as follows:
As of February 28, 2014

Straight-line basis
1.5%

February 28, 2015

February 28, 2015

¥27,376(145)¥27,231¥31,123(1,305)¥29,818$260,944(10,937)$250,007

11. Lease Transactions
Certain finance lease contracts that are not deemed to transfer the ownership of the leased assets to lessees are accounted for
as operating leases, which is still permitted by Japanese accounting principles. Certain key information on such lease contractsof the Companies for the years ended February 28, 2014 and February 28, 2015 are as follows:(Lessee)
Assumed data as to acquisition cost, accumulated depreciation, accumulated impairment loss and net book value of the leased
assets, which included the portion of interest thereon, as of February 28, 2014 and February 28, 2015 are summarized asfollows:
Millions of yen¥ (3,421)

Millions of yen

February 28, 2014

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

February 28, 2014

The net periodic pension expense for the years ended February 28, 2014 is as follows:64

February 28, 2015

Millions of yen

The Company and its certain subsidiaries have defined benefit pension plan and plans for lump-sum retirement benefits as defined benefit retirement plans, as well as defined contribution pension plans as defined contribution retirement plans.
The corporate pension fund, which the Company and its certain subsidiaries have adopted, were dissolved on February 27,
2014, by the approval of dissolution obtained from the Minister of Health, Labour and Welfare. As a result of this dissolution,
loss from dissolution of corporate pension fund of ¥1,264 million was recognized in other expenses.
The reserve for retirement benefits as of February 28, 2014 is analyzed as follows:

Expected rate of return on plan assets
Amortization of unrecognized prior service costs
Amortization of unrecognized actuarial differences

February 28, 2014

Net unrealized gain on available-for-sales securities:
Amount arising during the year
Reclassification adjustment for gain and loss
Amount before income tax effect
Income tax effect
Total
Deferred gain (loss) on hedging instruments:
Amount arising during the year
Reclassification adjustment for gain and loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments:
Amount arising during the year
Total
Share of other comprehensive income of associates accounted for using
the equity-method:Amount arising during the year
Total
Total other comprehensive income(2) Information as of and for the year ended February 28, 2014

Method of attributing the projected benefits to periods of service
Discount rate

Thousands of
U.S. dollars

Millions of yen

Tools,
furniture,and fixtures

Acquisition cost
Accumulated depreciation
Net book value

¥157
(157)
¥  0

Thousands of U.S. dollars
February 28, 2015

Other

Total

¥108
(106)
¥  2

¥265
(263)
¥  2

Tools,
furniture,and fixtures

¥ 5
(5)
¥—

Other

¥ 21
(21)
¥—

Total

February 28, 2015
Tools,
furniture,and fixtures
Other
Total

¥ 26
(26)
¥—

$ 40
(40)
$—

$181
(181)
$ —

$221
(221)
$ —

The scheduled maturities of future lease payments on such lease contracts as of February 28, 2014 and February 28, 2015 are
as follows:
Thousands of
U.S. dollars

Millions of yen

Scheduled maturities of future leases:
Due within one year
Due over one year

February 28, 2014

February 28, 2015

February 28, 2015

¥ 2
—
¥ 2

¥—
—
¥—

$—
—
$—

0.0~1.5%
5~10 years
5~10 years

65Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Lease expenses, reversal of impairment loss of leased assets, depreciation and impairment loss for the years ended February
28, 2014 and February 28, 2015 are as follows:
Thousands of
U.S. dollars

Millions of yen

Lease expenses for the year
Depreciation

February 28, 2014

February 28, 2015

February 28, 2015

¥32
32

¥2
2

$17
17

The Companies’ operating lease contracts:
The scheduled maturities of future lease payments on operating lease contracts as of February 28, 2014 and February 28, 2015
are as follows:
Thousands of
U.S. dollars

Millions of yen

Scheduled maturities of future leases:
Due within one year
Due over one year

February 28, 2014

February 28, 2015

February 28, 2015

¥27
—
¥27

¥—
—
¥—

$—
—
$—

(Lessor)
Disclosure is omitted because it is immaterial as of February 28, 2014 and February 28, 2015.

12. Income Taxes
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities as at
February 28, 2014 and February 28, 2015 consisted of the following elements:
Thousands of
U.S. dollars

Millions of yen

Deferred tax assets:
Loss on write-down of inventories
Loss on write-down of investments in unconsolidated subsidiaries
Accrued bonuses to employees
Accrued retirement benefits
Net defined benefit liability
Accrued retirement benefits for directors and corporate auditors
Allowance for bad debt
Tax loss carry forwards
Impairment loss on fixed assets
Investments in securities
Net unrealized loss on available-for-sale securities
Other
Subtotal
Less: Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Gain on securities contributed to an employee retirement benefit trust
Net defined benefit asset
Provision for deferred capital gain on real property for tax purposes
Net unrealized gain on available-for-sale securities
Other
Total deferred tax liabilities
Net deferred tax assets

February 28, 2014

February 28, 2015

February 28, 2015

¥ 2,697
184
490
2,620
—
53
2,400
10,256
6,023
432
37
5,382
30,574(19,071)
11,503¥ 2,473
130
412
—
3,082
55
372
10,625
6,193
432
—
6,069
29,843(18,298)
11,545$ 20,732
1,093
3,455
—
25,844459
3,115
89,08551,9203,626—
50,883
250,212(153,414)
96,798

(126)
—
(18)
(3,585)(597)(4,326)¥ 7,177(113)(1,164)(17)(6,914)(709)(8,917)¥ 2,628(952)(9,756)(141)(57,973)(5,942)(74,764)$ 22,034

The reconciliation of the difference between the statutory tax rate and the effective tax rate for the years ended February 28,
2014 and February 28, 2015 is as follows:%
2014

Statutory tax rate
Reconciliation:
Permanently non-deductible expenses (entertainment expenses, etc.)
Income not taxable for tax purposes (dividends received, etc.)
Amortization of goodwill
Other
Effective tax rate

66

2015

38.0

38.0

2.6
(1.5)
12.3
(0.9)
50.5

2.5
(1.6)
12.5
3.7
55.1

(Change in tax rates after the closing dates of the consolidated accounts)
On March 31, 2015, “Partial Amendment of the Income Tax Act” (Act No. 9 of 2015) and “Partial Amendment of the Local Tax
Act” (Act No. 2 of 2015) were promulgated, and the income tax rate will be reduced from the consolidated fiscal years beginning on or after April 1, 2015. Accordingly, the statutory tax rates applied to the calculation of deferred tax assets and liabilities
will be lowered from 35.6% to 33.1% for temporary differences expected to be settled in the fiscal year beginning on March 1,
2016, and to 32.3% for temporary differences expected to be settled in the fiscal years beginning on or after March 1, 2017.
If the revised statutory tax rates are adopted for the year ended February 28, 2015, deferred tax assets, deferred tax liabilities and deferred tax liabilities – revaluation of land will decrease by ¥245 million ($2,057 thousand), ¥527 million ($4,420 thousand) and ¥299 million ($2,508 thousand), respectively, and income taxes - deferred, net unrealized gain on available-for-salesecurities, remeasurements of defined benefit plans and net revaluation loss of land will increase by ¥403 million ($3,380 thousand), ¥644 million ($5,399 thousand), ¥41 million ($344 thousand) and ¥299 million ($2,508 thousand), respectively.

13. Revaluation of Land
The Company revaluated its own land for business use in accordance with “Act on Revaluation of Land” (Act No. 34, promulgated on March 31, 1998) and “Act for Partial Revision of Act on Revaluation of Land” (amended on March 31, 2001). The income
taxes corresponding to the net unrealized gain are reported in long-term liabilities as deferred tax liabilities-revaluation of land
and the net unrealized gain, net of deferred taxes, are reported as net revaluation loss of land in net assets.
Pursuant to Article 2-4 of “Order for Enforcement of Act on Revaluation of Land” (the “Order”; Cabinet Order No. 119, promulgated on March 31, 1998), in order to calculate the land value for a basis of determining the taxable amount subject to land
value tax prescribed by Article 16 of “Land Value Tax Law” (Law No. 69 of 1991), in addition to conducting appropriate adjustments for land shape of the assessment, certain lands are determined by the assessed value of the fixed assets stipulated in
Article 2-3 of the Order, based on the method established and published by the Director General of National Tax Agency.
The difference between the market value of land subject to the revaluation and the book value as at February 28, 2014 and2015 was ¥3,460 million and ¥1,774 million ($14,875 thousand), respectively.

14. Short-Term Loans Payable and Long-Term Loans Payable
Short-term loans payable at February 28, 2014 and February 28, 2015 represented loans, principally from banks. The weighted-average interest rate on these loans was 0.8% in 2014 and 0.7% in 2015.
Long-term loans payable at February 28, 2014 and February 28, 2015 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Unsecured loans, principally from banks, maturing in installments through 2020
Less current portion with weighted average interest of 0.8% at February 28, 2015
Long-term loans payable, less current portion with weighted average interest of
0.8% at February 28, 2015

February 28, 2014

February 28, 2015

February 28, 2015

¥17,034
3,132¥24,229
3,250$203,139
27,246¥13,902¥20,979$175,893

Lease obligations at February 28, 2014 and February 28, 2015 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Lease obligations
Less current portion of lease obligations

February 28, 2014

February 28, 2015

February 28, 2015

¥6,862881¥5,981¥6,835943¥5,892$57,305
7,905$49,400

Millions of yen

Thousands of
U.S. dollars¥ 3,262
14,6693,021
14$ 27,353
122,992
25,327120

Millions of yen

Thousands of
U.S. dollars

¥792
633
481
288

$6,642
5,306
4,032
2,417

The aggregate annual maturities of long-term loans payable after February 29, 2016 are as follows:Year ending February 28 or 29:
2017
2018
2019
2020

The aggregate annual maturities of lease obligations after February 29, 2016 are as follows:Year ending February 28 or 29:
2017
2018
2019
2020

67

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Bonds at February 28, 2014 and February 28, 2015 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen
February 28, 2014

February 28, 2015

February 28, 2015

40

—

—

200
10
250
100
¥150

150
—
150
50
¥100

1,257
—
1,257
419
$ 838

Millions of yen

Thousands of
U.S. dollars

¥50
50
—
—

$419
419
—
—

0.90% in 2014 and 2015 unsecured yen bonds issued by a subsidiary, due 2014
0.45% in 2014 and 0.39% in 2015 unsecured yen bonds issued by a subsidiary,due 2018
0.99% in 2014 and 2015 unsecured yen bonds issued by a subsidiary, due 2014
Less current portion

The aggregate annual maturities of bonds after February 29, 2016 are as follows:Year ending February 28 or 29:
2017
2018
2019
2020

15. Shareholders’ Equity
Under the Corporation Law of Japan, the entire amount of the issue price of shares is required to be designated as a statedcommon stock account, although a company in Japan may, by resolution of its Board of Directors, account for an amount notexceeding 50% of the issue price of new shares as additional paid-in capital.
The Corporation Law of Japan provides that an amount equal to 10% of distributions from retained earnings paid by theCompany and its Japanese subsidiaries be appropriated as a legal reserve. No further appropriations are required when the total
amount of the additional paid-in capital and the legal reserve equals 25% of their respective stated capital. The Corporation Law
of Japan also provides that additional paid-in capital and the legal reserve are available for appropriations by a resolution of theshareholders. Balances of the legal reserve are included in retained earnings in the accompanying consolidated balance sheets.
Cash dividends charged to retained earnings for the years ended February 28, 2014 and February 28, 2015 represent dividends paid out during those years. The amount available for dividends is based on the amount recorded in the Company’s
non-consolidated books of account in accordance with the Corporation Law of Japan.
Dividends to be paid after the balance sheet date, which were approved by the general meeting of shareholders held on
May 28, 2015, are as follows:(a) Total dividends(b) Source of dividends(c) Cash dividends per common share(d) Date to determine which shareholders receive the dividends(e) Effective date

¥3,770 million ($31,607 thousand)
Retained earnings¥24 ($0.20)
February 28, 2015
May 29, 201516. 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 ofoperations 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, 2014 and February
28, 2015 is as follows:

68

2014

2015

2015

¥

¥

$35,248—$35,248

4,659—¥ 4,659
156,904
1,581

Year Ended February 28, 2015
The Company leased land from Takeshi Hirouchi, Representative Director, Chairman and President of ONWARD HOLDINGS Co.,
Ltd., during the year and the rental fee was ¥7 million ($61 thousand). Also, Mr. Hirouchi paid a rental fee of ¥16 million ($136
thousand) to the Company for a house. The rental fees were determined by the average market prices.

Year Ended February 28, 2014
The Company leased land from Takeshi Hirouchi, Representative Director, Chairman and President of ONWARD HOLDINGS Co.,
Ltd., during the year and the rental fee was ¥7 million. Also, Mr. Hirouchi paid a rental fee of ¥16 million to the Company for ahouse. The rental fees were determined by the average market prices.

18. Stock Options
The cost recognized for the stock options for the years ended February 28, 2014 and February 28, 2015 was ¥149 million and¥131 million ($1,095 thousand), respectively, which is included in selling, general and administrative expenses.

2014 Stock Option Plan (No. 16)
Under the 2014 stock option plan (No. 16), stock options were granted to 5 directors of the Company on June 20, 2014. They are
exercisable in the period from June 21, 2014 to June 20, 2044. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions
as directors of the Company.
Number of stock options granted by the type of shares is 122,900 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Fair value at the grant date

¥1 ($ 0.01)¥526 ($ 4.41)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:2014 stock option plan (No. 16)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015—
122,900——
122,900

The fair value of the 2014 stock options (No. 16) was estimated using the Black-Scholes option-valuation model with the following assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

31.40%
9 years and 4 months¥24 per share
0.527%The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult to estimate forfeiture in the future.

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 (thousand shares)
Effect of dilutive stock options (thousand shares)

17. Related-Party Transactions

4,204—¥ 4,204
157,006
1,729

69

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

2014 Stock Option Plan (No. 15)

2013 Stock Option Plan (No. 13)

Under the 2014 stock option plan (No. 15), stock options were granted to 12 executive officers of the Company, 5 directors and9 executive officers of the Company’s subsidiary on March 20, 2014. They are exercisable in the period from March 21, 2014 to
February 29, 2044. The terms of the options include certain limitations on the exercisability under which grantees can exercise
their options during a five-year period starting a year after they lose their positions as executive officers of the Company, directors or executive officers of the Company’s subsidiary.
Number of stock options granted by the type of shares is 146,100 shares of common stock.
A summary of price information for the stock option plan is as follows:

Under the 2013 stock option plan (No. 13), stock options were granted to 14 executive officers of the Company, 6 directors and9 executive officers of the Company’s subsidiary on March 18, 2013. They are exercisable in the period from March 19, 2013 to
February 28, 2043. The terms of the options include certain limitations on the exercisability under which grantees can exercise
their options during a five-year period starting a year after they lose their positions as executive officer of the Company, directors or executive officers of the Company’s subsidiary.
Number of stock options granted by the type of shares is 151,300 shares of common stock.
A summary of price information for the stock option plan is as follows:

Exercise price
Fair value at the grant date

¥1 ($ 0.01)¥466 ($ 3.91)

Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

¥1 ($ 0.01)¥697 ($ 5.84)¥572 ($ 4.80)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:2014 stock option plan (No. 15)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 20152013 stock option plan (No. 13)—
146,100
6,100—
140,000

The fair value of the 2014 stock options (No. 15) was estimated using the Black-Scholes option-valuation model with the following assumptions:
Expected volatility
Expected lives
Expected dividend
Risk-free interest rate

32.04%
8 years and 4 months¥24 per share
0.467%The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult to estimate forfeiture in the future.

2013 Stock Option Plan (No. 14)
Under the 2013 stock option plan (No. 14), stock options were granted to 5 directors of the Company on June 20, 2013. They are
exercisable in the period from June 21, 2013 to June 20, 2043. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions
as directors of the Company.
Number of stock options granted by the type of shares is 107,000 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Fair value at the grant date

¥1 ($ 0.01)¥629 ($ 5.27)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:2013 stock option plan (No. 14)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015

107,000———
107,000

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

70

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:
Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
Vested:Outstanding at February 28, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

143,200——
2,800
140,400
—
2,800
2,800
—
—

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

2012 Stock Option Plan (No. 12)
Under the 2012 stock option plan (No. 12), stock options were granted to 5 directors of the Company on June 20, 2012. They are
exercisable in the period from June 21, 2012 to June 20, 2042. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions
as directors of the Company.
Number of stock options granted by the type of shares is 141,400 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Fair value at the grant date

¥1 ($ 0.01)¥458 ($ 3.84)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:2012 stock option plan (No. 12)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015

141,400———
141,400

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

71

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

2012 Stock Option Plan (No. 11)

2011 Stock Option Plan (No. 9)

Under the 2012 stock option plan (No. 11), stock options were granted to 1 executive officer of the Company, 9 directors and 18
executive officers of the Company’s subsidiary on March 19, 2012. They are exercisable in the period from March 20, 2012 toFebruary 28, 2042. The terms of the options include certain limitations on the exercisability under which grantees can exercise
their options during a five-year period starting a year after they lose their positions as the executive officer of the Company, directors or executive officers of the Company’s subsidiary.
Number of stock options granted by the type of shares is 234,700 shares of common stock.
A summary of price information for the stock option plan is as follows:

Under the 2011 stock option plan (No. 9), stock options were granted to 1 executive officer of the Company, 12 directors and 18
executive officers of the Company’s subsidiary on March 18, 2011. They are exercisable in the period from March 19, 2011 to
February 28, 2041. The terms of the options include certain limitations on the exercisability under which grantees can exercise
their options during a five-year period starting a year after they lose their positions as the executive officer of the Company, directors or executive officers of the Company’s subsidiary.
Number of stock options granted by the type of shares is 199,900 shares of common stock.
A summary of price information for the stock option plan is as follows:

Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

¥1 ($ 0.01)¥685 ($ 5.74)¥444 ($ 3.72)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:

Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:2012 stock option plan (No. 11)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
Vested:Outstanding at February 28, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

174,000——
31,600142,400
23,30031,6004,100—
50,800¥1 ($ 0.01)¥691 ($ 5.79)¥444 ($ 3.72)

2011 stock option plan (No. 9)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
Vested:Outstanding at February 28, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

143,300——
27,500115,800
31,00027,5007,200—
51,300The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult to estimate forfeiture in the future.

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

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

Under the 2011 stock option plan (No. 10), stock options were granted to 5 directors of the Company on June 20, 2011. They are
exercisable in the period from June 21, 2011 to June 20, 2041. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions
as directors of the Company.
Number of stock options granted by the type of shares is 144,800 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Fair value at the grant date

¥1 ($ 0.01)¥510 ($ 4.28)

Under the 2010 stock option plan (No. 8), stock options were granted to 5 directors of the Company on June 18, 2010. They are
exercisable in the period from June 19, 2010 to June 18, 2040. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions
as directors of the Company.
Number of stock options granted by the type of shares is 115,800 shares of common stock.
A summary of price information for the stock option plan is as follows:
Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

¥1 ($ 0.01)¥695 ($ 5.83)¥613 ($ 5.14)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:2011 stock option plan (No. 10)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
Vested:Outstanding at February 28, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

79,400———79,40065,400———65,400The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult to estimate forfeiture in the future.

72

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:2010 stock option plan (No. 8)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
Vested:Outstanding at February 28, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

52,300———52,30052,500—32,800—19,700The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult to estimate forfeiture in the future.

73

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

2010 Stock Option Plan (No. 7)

2009 Stock Option Plan (No. 5)

Under the 2010 stock option plan (No. 7), stock options were granted to 8 directors and 22 executive officers of the Company’s
subsidiary on March 19, 2010. They are exercisable in the period from March 20, 2010 to February 29, 2040. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period
starting a year after they lose their positions as directors or executive officers of the Company’s subsidiary.
Number of stock options granted by the type of shares is 194,600 shares of common stock.
A summary of price information for the stock option plan is as follows:

Under the 2009 stock option plan (No. 5), stock options were granted to 11 directors and 19 executive officers of the Company’s
subsidiary on March 18, 2009. They are exercisable in the period from March 19, 2009 to February 28, 2039. The terms of theoptions include certain limitations on the exercisability under which grantees can exercise their options during a five-year period
starting a year after they lose their positions as directors or executive officers of the Company’s subsidiary.
Number of stock options granted by the type of shares is 268,900 shares of common stock.
A summary of price information for the stock option plan is as follows:

Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

¥1 ($ 0.01)¥698 ($ 5.85)¥475 ($ 3.98)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:

Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:2010 stock option plan (No. 7)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
Vested:Outstanding at February 28, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

114,900——
20,90094,00039,20020,9007,800—
52,3002009 stock option plan (No. 5)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
Vested:Outstanding at February 28, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

127,600——
27,300100,300
34,80027,300
11,200—50,900The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult to estimate forfeiture in the future.

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

2009 Stock Option Plan (No. 6)

2008 Stock Option Plan (No. 4)

Under the 2009 stock option plan (No. 6), stock options were granted to 5 directors of the Company on June 19, 2009. They are
exercisable in the period from June 20, 2009 to June 19, 2039. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions
as directors of the Company.
Number of stock options granted by the type of shares is 155,000 shares of common stock.
A summary of price information for the stock option plan is as follows:

Under the 2008 stock option plan (No. 4), stock options were granted to 12 directors and 21 executive officers of the Company’s
subsidiary on June 20, 2008. They are exercisable in the period from June 21, 2008 to February 28, 2038. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period
starting a year after they lose their positions as directors or executive officers of the Company’s subsidiary.
Number of stock options granted by the type of shares is 91,100 shares of common stock.
A summary of price information for the stock option plan is as follows:

Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

¥1 ($ 0.01)¥693 ($ 5.81)¥432 ($ 3.62)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:

Exercise price
Average stock price on the date the option was exercised
Fair value at the grant dateNon-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
Vested:Outstanding at February 28, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

72,000———72,00057,200—57,200——The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult to estimate forfeiture in the future.

¥1 ($ 0.01)¥712 ($ 5.97)¥905 ($ 7.59)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:2008 stock option plan (No. 4)

2009 stock option plan (No. 6)

74¥1 ($ 0.01)¥711 ($ 5.96)¥362 ($ 3.04)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
Vested:Outstanding at February 28, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

34,900——6,600
28,300
8,400
6,600
5,000
—
10,000The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult to estimate forfeiture in the future.

75

Notes to Consolidated Financial Statements

2008 Stock Option Plan (No. 3)

2006 Stock Option Plan (No. 1)

Under the 2008 stock option plan (No. 3), stock options were granted to 5 directors of the Company on June 20, 2008. They are
exercisable in the period from June 21, 2008 to June 20, 2038. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions
as directors of the Company.
Number of stock options granted by the type of shares is 70,000 shares of common stock.
A summary of price information for the stock option plan is as follows:

Under the 2006 stock option plan (No. 1), stock options were granted to 12 directors and 2 corporate auditors of the Company
on June 20, 2006. They are exercisable in the period from July 1, 2006 to June 30, 2036. The terms of the options include certain limitations on 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 of the Company.
Number of stock options granted by the type of shares is 63,000 shares of common stock.
A summary of price information for the stock option plan is as follows:

Exercise price
Average stock price on the date the option was exercised
Fair value at the grant date

¥1 ($ 0.01)¥699 ($ 5.86)¥944 ($ 7.91)

Exercise price
Fair value at the grant date

¥1 ($ 0.01)¥1,541 ($ 12.92)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:
A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:

2006 stock option plan (No. 1)

2008 stock option plan (No. 3)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
Vested:Outstanding at February 28, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

32,000———32,00020,000—20,000——The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult to estimate forfeiture in the future.

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
Vested:Outstanding at February 28, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

15,500——1,000
14,500
—
1,000
—
—
1,000

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

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

¥1 ($ 0.01)¥1,284 ($ 10.77)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2015 is as follows:2007 stock option plan (No. 2)

Non-vested:
Outstanding at February 28, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
Vested:Outstanding at February 28, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

18,100——1,500
16,600
—
1,500
—
—
1,500

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

76

77

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

19. Segment Information

Millions of yen
Apparel(1) Summary of reportable segments
The Onward Group’s reportable segments are components for which separate financial information is available and regular evaluation by the Board of Directors is being performed to decide how management resources are allocated and to assess
performance.
The principal business of the Onward Group is the apparel business (planning, production and sales of textile products, including men’s and women’s clothing). Additionally, the Onward Group also operates service and resort businesses.
The reportable segments of the Onward Group comprise the “Apparel Business,” which has been divided geographically into
three categories, “Japan,” “Europe,” and “Asia/North America,” and “Other Business.”
The “Apparel Business (Japan)” operates the apparel business in Japan; the “Apparel Business (Europe)” operates the apparel business in Europe; and the “Apparel Business (Asia/North America)” operates the apparel business in Asia and North
America. “Other Business” operates the logistics, sports facilities and resort facilities businesses.
(2) Method of calculating sales, profit or loss, assets, liabilities and other items by reportable segment
Accounting methods for reportable segments are mostly the same as the accounting methods described in “Basis of
Presentation of the Consolidated Financial Statements.”
Income by reportable segment refers to operating income. Intersegment sales and transfers are based on market values.
(3) Information on sales, profit or loss, assets, liabilities and other items by reportable segment for the years ended February 28,
2015 and February 28, 2014 are as follows:
Millions of yen
Apparel
For the year ended February 28, 2015

Sale to outside customers
Intersegment sales
Total
Segment income (loss)
Segment assets
Depreciation and amortization (Note 2)
Investments in equity-method affiliates
Increases in property, plant andequipment, and intangible
assets (Note 2)

Adjustments Consolidated(Note 1) total (Note 3)

Japan

EuropeAsia/North
America

Total

Other

Total

¥211,019
1,343¥212,362¥ 10,573¥151,869¥ 4,158
8,970¥45,338
2,485¥47,823¥
62¥38,028¥ 1,10473¥ 7,944611¥ 8,555¥(1,838)¥ 5,725¥ 484—¥264,301
4,439¥268,740¥ 8,797¥195,622¥ 5,746
9,043¥17,201
8,090¥25,291¥ 390¥36,307¥ 1,072—¥281,502
12,529¥294,031¥ 9,187¥231,929¥ 6,818
9,043—(12,529)¥ (12,529)¥ (3,455)¥108,925¥
401—¥281,502—¥281,502¥ 5,732¥340,854¥ 7,219
9,043

10,140841

520

11,501778

12,27914,60526,884¥

ApparelSale to outside customers
Intersegment sales
Total
Segment income (loss)
Segment assets
Depreciation and amortization (Note 2)
Investments in equity-method affiliates
Increases in property, plant andequipment, and intangible
assets (Note 2)Japan

Europe$1,769,256 $380,125
11,257
20,839$1,780,513 $400,964$ 88,645 $524$1,273,323 $318,839$ 34,860 $ 9,256
75,209610

85,021

7,052

Total

Other

Total

Adjustments Consolidated(Note 1) total (Note 3)$ 66,604 $2,215,985 $144,221 $2,360,206 $— $2,360,206
5,123
37,21967,830105,049 (105,049)—$ 71,727 $2,253,204 $212,051 $2,465,255 $(105,049) $2,360,206$(15,409) $ 73,760 $ 3,267 $ 77,027 $ (28,971) $ 48,056$ 48,001 $1,640,163 $304,413 $1,944,576 $ 913,262 $2,857,838$ 4,061 $ 48,177 $ 8,985 $ 57,162 $ 3,363 $ 60,525—
75,819—75,819—75,8194,355

96,428

6,521

102,949

122,457

225,406

Adjustments Consolidated(Note 1) total (Note 3)

Japan

EuropeAsia/North
America

Total

Other

Total

¥208,357
1,438¥209,795¥ 14,014¥142,327¥ 3,9109,024¥46,195
601¥46,796¥ (564)¥35,557¥ 1,06991¥ 8,459441¥ 8,900¥(1,038)¥ 6,038¥ 466—¥263,011
2,480¥265,491¥ 12,412¥183,922¥ 5,445
9,115¥16,9978,354¥25,351¥ 290¥27,756¥ 959—¥280,008
10,834¥290,842¥ 12,702¥211,678¥ 6,404
9,115—(10,834)¥ (10,834)¥ (2,502)¥101,753¥
397—¥280,008—¥280,008¥ 10,200¥313,431¥ 6,801
9,115

13,471

1,156

762

15,3891,270

16,6595,805

22,464¥(Notes) 1. Adjustments consist of the following:(1)	The adjustment amount for segment income (loss) of ¥(2,502) million includes amortization of goodwill of ¥(3,313) million,
elimination of intersegment sales of ¥3,984 million, and corporate expenses not allocated to reportable segments of¥(3,173) million. Corporate expenses are mainly general administrative expenses not allocated to reportable segments.
(2)	The adjustment amount for segment assets of ¥101,753 million includes the unamortized balance of goodwill of ¥29,741
million, elimination of intersegment sales of ¥(130,059) million, and corporate assets not allocated to reportable segmentsof ¥202,071 million. Corporate assets are mainly assets held by the Company, a pure holding company.
2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses (furniture and fixtures).
3.	Segment income (loss) coincides with the amount of operating income in the consolidated statements of operations.
4. 	As stated in “Reclassification,” the consolidated financial statements for the year ended February 28, 2014 have been reclassified due to the change of presentation.
		As a result, “Sale to outside customers” in the Apparel Business segment increased ¥262 million in Japan, ¥671 million in
Europe, ¥2 million in Asia/North America, and ¥935 million in Total. “Segment income (loss)” in the Apparel Business segment increased ¥137 million in Japan, ¥671 million in Europe, decreased ¥30 million in Asia/North America, and increased¥778 million in Total.

(4) Segment information by geographical areas for the year ended February 28, 2015 and February 28, 2014 are as follows:(a) Sales
For the year ended February 28, 2015
Japan

Millions of yen
Europe¥29,213

For the year ended February 28, 2015

Asia/North
America(Notes) 1. Adjustments consist of the following:(1)	The adjustment amount for segment income (loss) of ¥(3,455) million ($(28,971) thousand) includes amortization of goodwillof ¥(3,327) million ($(27,893) thousand), elimination of intersegment sales of ¥3,859 million ($32,351 thousand), and corporate expenses not allocated to reportable segments of ¥(3,987) million ($(33,429) thousand). Corporate expenses are mainly
general administrative expenses not allocated to reportable segments.
(2)	The adjustment amount for segment assets of ¥108,925 million ($913,262 thousand) includes the unamortized balance of
goodwill of ¥26,569 million ($222,762 thousand), elimination of intersegment sales of ¥(134,150) million ($(1,124,761) thousand), and corporate assets not allocated to reportable segments of ¥216,506 million ($1,815,261 thousand). Corporate
assets are mainly assets held by the Company, a pure holding company.
2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses (furniture and fixtures).
3.	Segment income (loss) coincides with the amount of operating income in the consolidated statements of operations.

78

Sale to outside customers
Intersegment sales
Total
Segment income (loss)
Segment assets
Depreciation and amortization (Note 2)
Investments in equity-method affiliates
Increases in property, plant andequipment, and intangible
assets (Note 2)¥223,620

Thousands of U.S. dollars

For the year ended February 28, 2015

For the year ended February 28, 2014

Japan

$1,874,904¥225,315

Total¥28,669¥281,502

Thousands of U.S. dollars
EuropeOther$244,930$240,372

For the year ended February 28, 2014
Japan

Other

Total

$2,360,206

Millions of yen
Europe¥26,544

Other

Total

¥28,149¥280,008

As stated in “Reclassification,” the consolidated financial statements for the year ended February 28, 2014 have been reclassified due to the change of presentation.
As a result, “Sales” increased ¥258 million in Japan, ¥458 million in Europe, ¥219 million in Other and ¥935 million in Total.
(b) Property, plant and equipment
For the year ended February 28, 2015
Japan

¥89,448

Millions of yen
Europe¥8,843For the year ended February 28, 2015
Japan$749,960¥83,440

Total¥11,367¥109,658

Thousands of U.S. dollars
Europe$74,145

For the year ended February 28, 2014
Japan

Other

Other

Total

$95,307$919,412

Millions of yen
Europe¥9,366

Other

Total

¥10,073¥102,879

79Independent Auditor’s Report

Notes to Consolidated Financial Statements(5) Segment information on impairment losses on property, plant and equipment by reportable segment for the year ended
February 28, 2015 and February 28, 2014 are as follows:
Millions of yen
Apparel
For the year ended February 28, 2015

Japan

EuropeAsia/North
America

Impairment loss

¥632

¥—

¥216

Total

¥848

Other

¥12

Elimination ofintersegment
amounts

Total

¥800

¥1,660Thousands of U.S. dollars
Apparel
For the year ended February 28, 2015

Japan

EuropeAsia/North
America

Impairment loss

$5,296$—$1,815

Total$7,111

Other$99

Elimination ofintersegment
amounts

Total$6,709$13,919

Elimination ofintersegment
amounts

Total

Millions of yen
Apparel80

For the year ended February 28, 2014

Japan

EuropeAsia/North
America

Impairment loss

¥251

¥—

¥51

Total

¥302

Other

¥21

¥—

¥323

81

Main Subsidiaries

Main Subsidiaries

As of August 31, 2015

Japan

Overseas
EuropeAsia

United States

Onward Italia S.p.A.

Onward Fashion Trading(China) Co., Ltd.

J. Press, Inc.

Onward Kashiyama Co., Ltd.

Across Transport Co., Ltd.

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

3-9-32 Kaigan, Minato-ku, Tokyo 108-0022, Japan
Tel: (81) 3-3455-2311

Onward Trading Co., Ltd.

Onward Creative Center Co., Ltd.

6-3-2 Kiba, Koto-ku, Tokyo 135-8508, Japan
Tel: (81) 3-3649-3111

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

Chacott Co., Ltd.

Onward Resort & Golf Co., Ltd.

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

3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1130

Creative Yoko Co., Ltd.

O & K Co., Ltd.

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

3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1130

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

Onward Life Design Network Inc.

Freed of London Ltd.

3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1133

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

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

Bien Co., Ltd.

Onward Global Fashion Co., Ltd.

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

Minami-Aoyama Building, 3-13-18 Minami-Aoyama,
Minato-ku, Tokyo 107-0062, Japan
Tel: (81) 3-6406-0350

O.P.S. Co., Ltd.

Birz Association Ltd.
BIRZ Building, 3-26-8 Sendagaya, Shibuya-ku,
Tokyo 151-0051, Japan
Tel: (81) 3-5786-3655

Candela International Co., Ltd.

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

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

Joseph Ltd.

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

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

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

Taicang Onward HighFashion Co., Ltd.
28 Group of Taixi Village, Shaxi Town, Taicang City,
Jiangsu Province, People’s Republic of China
Tel: (86) 512-5325-4297

3-11-6 Kaigan, Minato-ku, Tokyo 108-8439, Japan
Tel: (81) 3-5476-6131

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

ONWARD J BRIDGE CO., LTD.

Onward Kashiyama Korea Co., Ltd.

3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1170

Ground Floor, HwanKyoung B/D, Donho-ro 240,
Jung-gu, Seoul, 100-391, Republic of Korea
Tel: (82) 2-548-5841

Onward Kashiyama Singapore
Pte. Ltd.

J. Direction Co., Ltd.

150 Orchard Road, #06-12/13 Orchard Plaza,
Singapore 238841
Tel: (65) 6838-0690

Charles & Keith Japan Co., Ltd.
4-31-10 Jingumae, Shibuya-ku,
Tokyo 150-0001, Japan
Tel: (81) 3-5785-1873

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

Onward U.S.A. L.L.C.
3rd Floor, 8 Crosby Street, New York,
NY10013, U.S.A.
Tel: (1) 212-997-3600

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

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

ONWARD KASHIYAMA HONG KONG LTD.

Onden Imaizumi Building, 5-7-4 Jingumae,
Shibuya-ku, Tokyo 150-0001, Japan
Tel: (81) 3-5766-3507

401, Parkvilla Yakumo Building, 3-12-10 Yakumo,
Meguro-ku, Tokyo 152-0023, Japan
Tel: (81) 3-5731-6239

3rd Floor, 8 Crosby Street, New York,
NY10013, U.S.A.
Tel: (1) 212-997-3600

Onward Kashiyama Vietnam Ltd.
10th Floor, 60 Nguyen Dinh Chieu Street,
District 1, Ho Chi Minh City, Vietnam
Tel: (84) 8-3911-8857

Shanghai Across Apparel
Processing Co., Ltd.
Building 6, No. 258, Jinglian Road, Minhang,
Shanghai, People’s Republic of China
Tel: (86) 21-6434-3099

Sakula Inc.
3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1160

82

83

Corporate/Investor Information

History

As of February 28, 2015

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

1927

February

Junzo Kashiyama established Kashiyama Trading.

1947

September

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

1960

October

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

1962

April

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

Established

September 1947

1964

July

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

Capital¥30,079 million

1966

September

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

Common Stock

Authorized—400,000,000 shares
Issued—172,921,669 shares

1972

July

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

September

Established Onward Kashiyama U.S.A. INC.

Note: The total number of issued and outstanding shares included 15,846,000 shares of treasury stock.

1973

February

Established Onward Kashiyama France S.A.

Number of Shareholders

11,541

1974

February

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

Stock Exchange Listings

Tokyo, Nagoya

1986

October

Acquired J. Press, Inc.

Transfer Agent

Mitsubishi UFJ Trust & Banking Co., Ltd.
10-11, Higashisuna 7-chome, Koto-ku, Tokyo 137-8081, Japan

1988

February

Established Onward Kashiyama Hong Kong Ltd.

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

Number of Employees(Consolidated)

4,973

1989

DecemberEstablished Onward Kashiyama U.K. Ltd.

1990

January

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

Major Shareholders

Distribution of Ownershipamong Shareholders

Number of
Shares Held(Thousands)

Percentage ofTotal Shares
Issued (%)

Kashiyama Scholarship Foundation

8,710

5.5

Japan Trustee Services Bank, Ltd. (Trust account)

7,700

4.9

Isetan Mitsukoshi, Ltd.

5,001

3.1

Japan Trustee Service Bank, Ltd. (Trust account9)

4,698

2.9

Nippon Life Insurance Company

4,671

2.9

The Dai-ichi Mutual Life Insurance Company Ltd.

4,200

2.6

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

4,138

2.6

Onward Holdings Customers’ Shareholding Association

4,082

2.5

BNYML-NON TREATY ACCOUNT

3,418

2.1

20.4%

MARUI GROUP CO., LTD.

3,417

2.1

Other Japanese
corporations

Notes:
1.	The Company holds 15,846,000 shares of treasury stock. Treasury stock is not included in the above
Major Shareholders information.
2. Percentage of total shares issued are calculated after deducting 15,846,000 shares of treasury stock.

(On a number of shares basis)

Japanese individuals
and others

24.3%

Japanesefinancial
institutions

30.1%

Foreigninstitutions
and others

July

Acquired Chacott Co., Ltd.

1991

February

Launched Onward Research and Development Institute.

1992

May

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

1994

May

Established Bus Stop Co., Ltd.

1995

June

Established Shanghai Onward Fashion Co., Ltd.

1997

June

Established Onward Kashiyama Korea Co., Ltd.

2004

January

Acquired Erika s.r.l.

2005

May

Acquired Project Sloane Ltd. (Joseph Group).

July

Acquired Iris S.p.A.

2006

October

Acquired Mangilao Golf Club (currently Onward Mangilao Golf Club).

2007

April

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

May

Acquired Frassineti s.r.l.

June

Established J. Direction Co., Ltd.

September

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

Japanese
securities
companies

1.0%

24.2%

Note: Japanese individuals and others data­include treasury stock.

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

2008

October

Acquired Corporate s.r.l.

October

Acquired Creative Yoko Co., Ltd.

Stock Price Range and Trading Volume

Acquired Jil Sander A.G.

Stock Price¥
1,200

Trading Volume
Thousand Shares

2009

DecemberAcquired controlling interest in Island Co., Ltd.

100,000

2010

June

Established Onward Kashiyama Singapore Pte. Ltd.

2011

AugustEstablished Onward Kashiyama Vietnam Ltd.

2012
75,000900

2013
50,000600

2014
25,000300

0842013/3

2014/3

2015/3

2015

April

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

May

Established Onward Fashion Trading (Shanghai) Co., Ltd.

DecemberEstablished Charles & Keith Japan Co., Ltd.

February

Acquired Sakula Inc.

June

Established Onward Luxury Group S.p.A.

March

Established Onward Global Fashion Co., Ltd.

NOVEMBER

Completed Onward Park Building (Head Office building in Nihonbashi district of Tokyo).

MARCH

Michinobu Yasumoto became president and representative director.

September

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

085

ONWARD HOLDINGS CO., LTD.
Head Office:10-5, Nihonbashi 3-chome, Chuo-ku,
Tokyo 103-8239, Japan
Tel: +81-3-4512-1020
http://www.onward-hd.co.jp/

Printed in Japan