ANNUAL REPORT 2017
Year Ended February 28, 2017

Onward Holdings Co., Ltd.

Contents
02
Onward at a Glance
06
A Letter to Our Shareholders
07
A Message from the President
10
Key Performance Trends
12
Our History
16
Core Brands
24
Our Business in Japan
26
Overseas Business28
Our Value Chain
32
Our Sales Channels
34
Our Network

36
Onward-Approved Factory System38
Environmental and Social Responsibility
42
Corporate Governance

Onward Kashiyama’s production team participated in a textile project that was featured
in ART BY THE HAND EXHIBITION.

46
 Board of Directors, Audit & Supervisory Board Members,
and Executive Officers / Company Organization
47
Financial Section
90
Main Subsidiaries
92
Corporate / Investor Information
93
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 ofstated targets is dependent on not only the efforts of the Company but also the conditions facing the industry as a whole, and we ask for understanding inthis regard.

01
Onward Holdings Co., Ltd. Annual Report 2017

Onward at a Glance

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

Ever
OnwardThe Onward Group was founded in 1927 and has pushed ever onward forthe 90 years that followed. Establishing systems for the production ofmenswear in the 1950s and later transforming into a comprehensive apparel manufacturer offering womenswear and children’s clothing, Onward made strong strides in
its early years. Progress continued in the following decades with Onward expanding
overseas in the 1970s, launching core brands originating in Japan in the 1990s, andgrowing its operations on a global scale in the 2000s. The Onward Group eventuallytransitioned to a holding company system in 2007. Looking ahead, we will continue
to march onward, evolving in line with the times, no matter how they may change,
and calling upon the techniques and expertise cultivated over our long history as we
pursue future growth.

See “Our History” on pages 12–15 for details.

Brand-CentricManagementAt the Onward Group, we practice brand-centric management to further
refine our brands and maximize their value. To facilitate the enhancementof brand value, we adopt a product-out approach that entails proposing products
characterized by the utmost levels of quality and value with one eye toward thefuture. Bolstering our competitiveness through this approach constitutes our brandbusiness strategy. Currently, we are operating roughly 40 major brands. We willheighten the profitability of our brand business by growing sales and improving
operational efficiency.

See “Core Brands” on pages 16–23 for details.

GlobalNetworkNijyusanku GINZA

The Onward Group develops its business in four geographic segments:
Japan, Europe, Asia, and the United States. In the domestic business,
which accounts for almost 80% of consolidated net sales, we are pursuing stable
growth at core company Onward Kashiyama, as well as major subsidiaries such as
Onward Trading, Chacott, Island, and Creative Yoko. In the overseas business, we
strive to increase our presence in Europe, where we function as a fashion conglomerate that possesses manufacturing, retail, and brand business functions. At thesame time, we are moving forward with the expansion of markets and production
networks in Asia.
See “ Our Business in Japan” on pages 24–25,“Overseas Business” on pages 26–27, and“Our Network” on pages 34–35 for details.

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Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Onward at a Glance

Sales Channel StrategyThe expansion of e-commerce operations has been positioned as a priority
measure in the medium-term management plan started from fiscal year 2017.
Accordingly, we will seek to raise e-commerce sales to ¥36.0 billion and 12% of total
net sales by fiscal year 2019.
As we move forward, we will advance our Omni-channel retailing strategy,
which merges the strengths of both physical and online stores, to further expand
our customer base.

See “Our Sales Channels” on pages 32–33 for details.

Sustainable
W
Growthe launched the Onward-Approved Factory System in 2015 with the goalof developing a manufacturing platform that can continuously supply
impeccable quality products.
Safe and appropriate work environments at production sites are crucial to
improving employee retention rates and thereby securing manufacturing techniquesand ensuring stable product quality.
Through the Onward-Approved Factory System, we encourage partner factories
to reinforce their management systems for maintaining ethical working conditions(CSR) and securing necessary quality control (QC). We thereby support factories
exhibiting excellence in achieving sustainable growth.

See “Onward-Approved Factory System” on pages 36–37 for details.

Erika the luxury knit manufacture04
Onward Holdings Co., Ltd. Annual Report 2017

A Letter to Our Shareholders

A Message from the President
We will fundamentally strengthen
the Group’s business foundations andachieve growth through growth strategies
and structural reforms.

Takeshi Hirouchi

Michinobu Yasumoto

Representative Director, Chairman

Representative Director, President

Dear Shareholders,In fiscal year 2017, ended February 28, 2017, the Onward Group launched a new mediumterm management plan that covers the period leading up to fiscal year 2019. I would liketo take this opportunity to review fiscal year 2017, the first year of this plan, and to
explain our management policies for the future.

Review of Fiscal Year 2017

The strong consumption by the middle class that has supported the apparel market to date is dwindlingamidst a persistent consumption slump, which is contributing to a rising trend toward thriftiness. As
a result, apparel purchases have increasingly been concentrated on the two extremes of the market: luxury apparel and fast fashion. If we are to rectify this situation, we will need to inspire society
by proposing a world of fashion, which has traditionally been an integral part of apparel businesses.
Accomplishing this objective will require that we devote ourselves to constantly stimulating new
demand with high-quality, made-in-Japan products tailored to meet refined tastes.
The 90th anniversary of the Onward Group’s founding took place in 2017.
Reflecting on this milestone, we aim to get back to the basics. Cultivating the DNA of Onward—its
unrelenting commitment to progress—within all employees, we will move customers to more actively
enjoy their lifestyles. This is our important mission as a lifestyle culture enterprise.
I would like to express my gratitude to all our shareholders for their continuing support,cooperation, and trust.
August 2017

Takeshi Hirouchi
Representative Director, Chairman

expected to become clearly apparent in the future.
By developing our business through both growth strategies andstructural reforms, we have succeeded in setting the Company on the propercourse for the remaining two years of the medium-term management plan.
Our efforts in fiscal year 2018 and beyond will be carried out inaccordance with the basic policies put forth by the medium-term
management plan. These efforts will include advancing growth strategies
focused on Omni-channel retailing and expansion in global markets.
We will also seek to develop new businesses and provide a diverse
sense of value; mergers and acquisitions will be one option in thisregard. In addition, the selection and concentration of management
resources will be practiced in existing businesses in order to move
forward with structural reforms for strengthening the Group’s businessfoundations and achieving growth.

Faced with a challenging operating environment, we moved
forward with growth strategies and structural reforms in the
pursuit of recovery in our earnings capacity.

In fiscal year 2017, the first year of the new medium-term management
plan, net sales decreased 7.1% year on year, to ¥244.9 billion, while
operating profit increased 11.3%, to ¥4.2 billion, and profit attributableto owners of parent rose 10.9%, to ¥4.7 billion. The operating environment remained challenging in the midst of a declining populationin Japan, diversifying consumer values, and increases in production
costs stemming from economic growth in Asia as well as rises inother operating costs.
Faced with this challenging operating environment, net sales fellslightly short of the Onward Group’s target. Conversely, operating
profit and profit attributable to owners of parent both increased year
on year and climbed above our targets. I therefore feel comfortablein saying that our progress in the plan’s first year was more or less inline with our expectations.
Throughout the year, we sought to stably expand earnings byincreasing the value of core brand products and enhancing customer
service. At the same time, we practiced selection and concentration
by stepping up efforts in fields in which we anticipate high margins
and strong growth, such as e-commerce. As a result, our e-commerce
operations achieved substantial growth domestically and abroad,contributing to higher sales and income for our core brands
Nijyusanku, any SiS, and TOCCA even in the midst of thischallenging operating environment.
In the second half of fiscal year 2017, we extensively examined
the need for Groupwide structural reforms. We thus chose to undertakethe reorganization of unprofitable businesses and stores.
Furthermore, we plan to institute reforms to logistics and organizational structures in fiscal year 2018. The benefits of these reforms are

Omni-Channel Retailing Strategy
The Onward Group seeks to realize Omni-channel retailing in thetruest sense of the word by merging brick-and-mortar storeswith online stores.

Advances in information and communication technologies, or ICT,
have presented us with a greater range of opportunities to develop
new customer contact points that have never been seen before.
Recognizing this situation, we have placed e-commerce at the centerof our growth strategies in light of the high levels of profitability andgrowth it promises. In addition, the promotion of Omni-channel
retailing will be accelerated on a Groupwide basis.
In fiscal year 2017, the Group generated sales totaling ¥15.0 billion
through e-commerce, as targeted, and massive growth rates of 23%
in Japan, 86% overseas, and 26% overall were achieved. Our efforts
in this year went beyond simply increasing the number of points

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Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

A Message from the President

through which we can connect with customers online. Rather,
we established systems for planning and developing online-exclusive
items through collaboration with brand business divisions.
At the same time, we integrated inventories to allow, for example,
a product to be shipped, with zero hassle, from the stock of physicalstores should it not be present in the stock put aside for Internet
sales. Such efforts were no doubt a proponent behind the­aforementioned sales growth.
We were quick to integrate the inventories of physical andonline stores with regard to our core Nijyusanku brand. As a result,although sales at physical stores declined 1.9% in fiscal year 2017,
sales via e-commerce channels surged 32.4%, contributing
to an overall increase of 1.4% in sales for the brand.
Our Omni-channel retailing efforts have not been limited
to the integration of physical and online store inventories. We havealso been stepping up online marketing initiatives. These included
advance reservation sales, which also functioned as part of test sales
conducted at the beginning of the fiscal year, as well as an expanded
lineup of online-exclusive items. Successful initiatives will be extended
to all brands in order to lay the foundations for increased sales andincome for Onward Kashiyama and consequently the entire
Onward Group.
The Onward Group is also augmenting its infrastructure forpromoting Internet sales. Previously, our Internet sales initiatives
had been based around Onward Crosset, our directly operated
e-commerce website. However, as this site was designed similarly
to a shopping mall, it was unable to completely capture the uniqueatmosphere and visual flair of each brand. To rectify this issue,
we have begun installing e-commerce functions into individual
brand websites in fiscal year 2018. By promoting sales through boththe shopping mall that is Onward Crosset and our brand-specific
e-commerce sites, we aim to further grow sales. In addition to ourofficial Onward Group websites, our products have been madeavailable on roughly 10 different online shopping malls. Sales
through these external sites have come to represent roughly 20% of
overall e-commerce sales. Going forward, the Onward Group willcontinue to offer its products through external websites in order toreach new customers.
In conjunction with our Omni-channel retailing initiatives,
we have also been enhancing the services offered through our
Onward Members’ loyalty point card system, which boasts membershipconsisting of users of both physical stores and e-commerce websites.
In April 2016, we completed the integration of the user base of usersof the Onward Members’ system saved at physical stores and that of
Onward Crosset to create a database of 1.2 million customers. The
total number of members had risen to 1.6 million as of February 28,
2017. By encouraging members among the customer bases of otherdomestic Group companies, we aim to increase this number to 2.1
million by February 2018. Moreover, it is our goal to utilize theOnward Members’ system to increase sales by exposing customers tovarious products from throughout the Onward Group and also to
encourage customers of our e-commerce websites to visit brick-andmortar stores. Encouraging such visits will require us to coordinate
with retail partners, including department stores and shopping centers,in order to develop new types of stores that are suited to the current
era of the Internet and Omni-channel retailing. After developing
such stores, we will solicit the appealing services available at thesestores through the Onward Members’ system to encourage members
to visit said stores, which should contribute to the invigoration ofbrick-and-mortar stores.

Provision of a Diverse Sense of Value
Our focus on apparel products will be maintained even as we
spread into new fields presenting the potential for synergies inorder to provide greater levels of value.

It goes without saying that we are committed to further enhancing
the apparel product operations that constitute our main business.
The provision of a diverse sense of value is another crucial componentof our growth strategies.
For example, food products and cosmetics are areas that arebooming in terms of sales at department stores and sales to inboundvisitors. These areas are also thought to be highly compatible with
Onward’s apparel product operations. We thus chose to open our
Onward Marche food sales website in November 2016. This e-­commerce website represents a new merchant business throughwhich we introduce luxury food products and other food-related
items assembled from across Japan. Currently, deliveries are only
available in Japan, but we hope to make this website able to offer
cross-border sales to countries overseas in the near future. Customers
from overseas are incredibly interested in Japanese cuisine, for which
they hold high expectations. I therefore suspect that there is room
for the development of appealing business models in this area.
In addition, Onward Holdings converted KOKOBUY Inc.,a venture company offering a lineup of primarily organic skincare
and haircare products, into a subsidiary in fiscal year 2018. We hope
to foster the new business of this company into a pillar that will support
the Onward Group in the future.
These are just some examples of our efforts to provide a diverse
sense of value. Looking ahead, we will continue working to improvethe value of our apparel product operations themselves. At the sametime, we will also expand operations in a wide range of fields related

A Message from the President

to the necessities of our daily lives, where we can anticipate synergies
with other Group businesses in order to provide a greater scope ofvalue to our customers.

Centered on core company Onward Kashiyama, the existing
frameworks were developed over the course of several years, andaltering these established frameworks will require time, due in partto the time needed to gain the understanding of frontline employees.
Nonetheless, we aim to advance reforms at a rapid clip, gaining
the understanding of the entire organization through this process.

Structural Reforms
We are advancing structural reforms to strengthen the Group’sbusiness foundations and achieve growth in response to the

Financial Strategy

challenging operating environment.

We will institute various measures to ensure stable dividends

In fiscal year 2017, we launched a business restructuring project tobe advanced alongside the growth strategies that were put forthpreviously.
This project will entail the selection and concentration ofmanagement resources, through which we will strengthen the Group’sbusiness foundations and achieve growth. In conjunction with therestructuring project, we formulated a meticulously prepared plan
for reallocating Group staff. This plan includes provision for
employee shifts, training, education, and other factors, and will be
implemented in accordance with a highly detailed timetable. At thesame time, we will continue to carry out the reorganization of
unprofitable businesses and stores as required by the rapidlychanging fashion business. We will also institute reforms to theunderlying frameworks for logistics and organizational structuresin order to transition to structures that will enable swift responses
to the changing times.

and improve return on equity.

We recognize that the distribution of profits to shareholders is
one of our top priorities. Our basic policy is to stably distribute
appropriate dividends to shareholders based on the Company’sbusiness performance, and we target a dividend payout ratio of
35% or more. In addition, we have set a target of 5% for returnon equity in fiscal year 2019. Steps taken in fiscal year 2017 tomove toward the accomplishment of this goal included the acquisition of treasury stock and sale of shareholdings and existing
assets as well as other proactive measures. We will continue such
efforts in the future in order to improve return on equity while
also considering funding, profit margins, and other matters.
August 2017

Business Restructuring Project
FY2017 (implemented)•D iscontinue unprofitable brands•C lose unprofitable stores•R eform logistics and organization• I mplement business selection
and concentration•C reate an organization suited
to the times

FY2018–FY2019 (planned)

Michinobu Yasumoto
Representative Director, President•R eview the business portfolio• I mplement organizational andlogistics reforms corresponding
to the Omni-channel strategy•R einforce core businesses andprofit-generating potential
growth businesses• P romote new business development

Strengthen Group business foundations to promote growth

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Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

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

Net Sales¥ million

300,000

259,100

280,008

281,502

263,516¥

244,901

244.9 billion – 7.1% (YoY)

Net Sales
200,000

In the domestic business, overall sales were down as sales at major apparelsubsidiaries struggled over the period from summer to the beginning of fall
and performance was impacted by the transference of shares held in AcrossTransport Co., Ltd. that was conducted during fiscal year 2016.
Meanwhile, foreign exchange rates weighed heavily on performance inthe overseas business. Consequently, consolidated net sales decreased 7.1%
year on year, to ¥244.9 billion.

100,000

0

2013

2014

2015

2016

2017

Operating Profit and Operating Margin¥ million / %12,00011,819

8,000

4,000

1.7

2013

2014

2015

The operating margin increased by 0.3 percentage point year on year,
coming to 1.7% as profitability improved due to the growth of e-commerce
operations, thorough inventory management, and general streamlining ofbusiness costs. Although net sales were down, operating profit was up
11.3%, to ¥4.2 billion, as a result of a substantial increase in operational
efficiency stemming from business structure reforms.

4,204

3,778

0

2016

2017

2.0

0

Operating Margin (right scale)Profit Attributable to Owners of Parent and ROE¥¥ million / %

6,000
4,503

4,659

4,204

4,744

4,278

4,000

2.8

2,000

6.0

4.7 billion +10.9% (YoY)

Profit Attributable to Owners of Parent
4.0

Profit attributable to owners of parent was up 10.9% year on year, to¥4.7 billion, and return on equity increased 0.4 percentage point, to 2.8%.

2.0

0

2013

2014

2015

Profit Attributable to Owners of Parent

2016

2017

0

ROE (right scale)

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

4.2 billion +11.3% (YoY)

Operating Profit
4.0

5,732

Operating Profit¥

6.0

10,200165,372

175,029

185,315

Cash Dividends per Share and Payout Ratio¥/%

172,337

165,670

150,000

59.8

100,000

80.0

40.00

60.0

30.00

40.0

20.00

200.0
24.00

24.00

24.00

24.00

24.00

150.0
100.0

74.0
20.0

50,0000Total Net Assets

2013

2014

2015

2016

2017

50.0

10.00
0

0

Shareholders’ Equity Ratio (right scale)2013

Cash Dividends per Share10
Onward Holdings Co., Ltd. Annual Report 2017

2014

2015

2016

Payout Ratio (right scale)

2017

0

Our History

Our History

1927

90

Years,

Onwardto theFuture

1970S

1960S

1980S

Ready-Made
Clothing Revolution

After

Still
Looking

1950S

Company founder Junzo Kashiyama

Founding

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

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

Bus Stop store on Boulevard Saint-Germain in Paris

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

Grading machine modifies and cuts basic sewing patterns

Onward Kashiyama’s U.S. office

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

Events Seen in Each Era
1920s

Roaring Twenties –World War II

1950s• Westernization of women’s clothing trends(after the Great Kanto Earthquake, 1923~)

1940s• Great Depression originating in the
United States (1929)• World War II (1939–1945)

1960s

Post-war reconstruction –Japanese economic miracle

Pivot of change –Japanese asset price bubble

1970s• Start of mass-production boom (1950s~)• Oil crisis (1973)• Ready-made clothing revolution for men’s
and women’s clothing (1960s~)• Plaza Accord (1985)• Economic boom surrounding
Summer Olympics in Tokyo (1962–1964)• Enactment of Act on Securing, Etc. of Equal Opportunity andTreatment between Men and Women in Employment (1986)

1980s• Emergence of prominent Japanese designers• Japan ranked No. 2 in the world for grossnational product (1968)• Spread of luxury fashion

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Onward Holdings Co., Ltd. Annual Report 2017

Our History

Our History

1990S

2001S

2011S

2000S

2010S

Today

Launch ofCore Brands

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

Maintaining its focus on the department
store channel in the domestic market,
Onward turns its eyes abroad at the turn ofthe century. By accelerating global strategies,
the Company begins its advance into theChinese market, establishes a manufacturing
platform in Italy, and acquires prominent
European brands JOSEPH in 2005
and JIL SANDER in 2008.

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

Launches Nijyusanku, 1993

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

Acquires Jil Sander Group, 2008

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

Omni-channel retailing strategy, whichforms an organic union between online
stores and physical stores, also kicks off.
Seeking to tap into demand from­inbound visitors to Japan and expand­operations in the Asian market, theCompany partners with Laox, the­operator of Japan’s largest networkof d­ uty-free stores, to establish joint­venture Onward J Bridge in 2015.
The Onward Group continues to­increase its global competitiveness whiletackling challenges on the road to­ongoing growth in both domestic
and overseas operations.

Opens Nijyusanku Ginza store, 2011

Acquires Island Co., Ltd., 2009
Launches Kumikyoku, 1992

Launches Onward Crosset, 2009
Acquires Joseph Group, 2005
Opens Onward J Bridge Daimaru Shinsaibashi store, 2016

Events Seen in Each Era
1990s

Bubble collapse – Post-b­­­­­­­­­­­­ubble recession

2001s• Release of Windows 95 (1995)

2000s

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

2010s

2011s

Fourth industrial revolution (Industry 4.0)
• Great East Japan Earthquake (2011)Today• Annual inbound visitors to Japanexceed 20 million (2016)• Burgeoning of fast fashion

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Onward Holdings Co., Ltd. Annual Report 2017

Core Brands

LAUNCHED

1993
ANNUAL SALES¥27.2 billion
NUMBER OF STORESOver 200
Nijyusanku is the leading brand of Onward
Kashiyama. With working women in their
30s and 40s as its core target, the brand isbased on the concept of creating a “Japanesewomen’s standard.” It thus seeks to capture
the hearts of customers of all ages with its
timeless and simple designs, which make for
elegant and comfortable clothing that can beenjoyed by all. The brand’s flagship store,
Nijyusanku GINZA, was opened in the
Ginza district of Tokyo in April 2011.

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Onward Holdings Co., Ltd. Annual Report 2017

Core Brands

LAUNCHED

1992
ANNUAL SALES¥4.6 billion
NUMBER OF STORES

111
Gotairiku is Onward Kashiyama’s core men’s
brand. Based on the concept of providing a“gentlemanly wardrobe for the business menthat represent Japan,” this brand primarily
features suits aimed at businessmen in their 40s.
The brand continues to be promoted throughthe Gotairiku Gonin Otoko campaign,
which features a quintet of Kabuki
actors as spokesmen.

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Onward Holdings Co., Ltd. Annual Report 2017

Core Brands

LAUNCHED

1973
ANNUAL SALES¥9.0 billion
NUMBER OF STORES

63
Founded by Ms. Jil Sander in Germany in1973, JIL SANDER is a luxury brand that isfeatured periodically in Milan Fashion Week.
Onward Holdings acquired JIL SANDER
in 2008. The casual line JIL SANDER Navy
was launched in 2011. Lucie and Luke Meierare named as the new creative directors of
JIL SANDER beginning with the 2018spring/summer collection.

MARIO SORRENTI FOR JIL SANDER SOCIAL MEDIA

MARIO SORRENTI FOR JIL SANDER SOCIAL MEDIAJOLIE DOCUMENTEDJOLIE DOCUMENTED
BY MARIOBY SORRENTIMARIO SORRENTIAT UNESCOAT UNESCOWORLD HERITAGE
WORLD HERITAGE
SITE MALLORCA,
SITE MALLORCA,SPAIN SPAINSEPTEMBERSEPTEMBER
2017
2017

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Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Core Brands

LAUNCHED

1972
ANNUAL SALES¥15.1 billion
NUMBER OF STORES201
The JOSEPH brand grew from a small multibrand store owned by Joseph Ettedgui in
London. After the original label JOSEPH
was launched with the concept of“SLICK&CHIC,” Onward Holdings
acquired JOSEPH in 2005. The developmentof this brand in Japan is being undertaken
by Onward Kashiyama.

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Onward Holdings Co., Ltd. Annual Report 2017

Our Business in Japan

Our Business in JapanThe domestic business is our mainstay business, generating 79.3% of consolidated net sales.
This business consists of 34 companies: core operating company Onward Kashiyama as well as otherdomestic subsidiaries that make fashion proposals in a wide range of fields.

Contribution to Total Sales

Net Sales by Domestic Business Segment

Overseas Business¥ million

20.7%

Domestic Business

79.3%

240,000

Other Domestic Subsidiaries30.1%

180,000¥ 60,791 million

120,000

Onward Kashiyama

60,00069.9%¥ 141,096 million

0

2012
2013
2014
2015
2016
2017
Note: The figures shown reflect net sales prior to the elimination of internal transactions.

strategy by integrating the inventory information, customer management, andservice functions of our physical stores inJapan with online stores.

Performance and Outlook

ICB Izutsuya Kokura Store

Onward Kashiyama
Business Overview
Onward Kashiyama is the Group’s core
operating company, generating 55% ofconsolidated net sales. Onward
Kashiyama manufactures and sells womenswear, menswear, children’s clothing,
and accessories, and 71% of its sales comefrom its main sales channel: department
stores. Key womenswear brands
Nijyusanku, Kumikyoku, ICB, andJiyuku account for 39% of net sales.
Similarly, mainstay menswear brands
Gotairiku and Personal Order are postingsolid performances by capitalizing on
their high-quality suits amid a rise in­demand for luxury menswear.
Future growth strategies will include
reinforcing our e-commerce operations
centering on our directly managed e-­commerce website Onward Crosset. In
conjunction with these efforts, we will
­accelerate our Omni-channel retailing

In fiscal year 2017, we faced a difficult
consumption climate, which proved to beparticularly harsh for sales of fall items in 2016.
Sales at physical stores declined as a result.
Full-year e-commerce sales exceeded
our forecasts at ¥11.0 billion, an increaseof 28% year on year. The strong growthin e-commerce sales coupled with thebenefits of closures of unprofitable storesand the curtailment of sample costs led
the gross profit margin to rise to 49.5%,
up 0.9 percentage point.
In fiscal 2018, we will strengthen our
e-commerce operations to grow sales ofkey and core brands. At the same time, wewill pursue improved profitability throughstructural reforms, including unprofitablebusiness reorganizations and unprofitable
store closures.

JOSEPH GINZA SIX Store

Other Domestic
Subsidiaries
Business Overview
Other domestic subsidiaries leverage theproduct development and sales capabilitiesof the Onward Group to create new values
and lifestyles by making fashion proposals
in a wide range of fields.

Main Domestic Subsidiaries

Creative Yoko offers a lineup of products
for pets as well as an assortment of character goods and toys. This company seeks
to expand its network of unique, largescale integrated pet stores while also
strengthening its character merchandisebusiness. At Onward Trading, a leading
domestic manufacturer of uniforms andsales promotion goods, the apparel expertiseand product planning excellence cultivatedby the Group are used to provide uniforms
to suit any environment while striking thebest balance between style and usability.

Chacott, a manufacturer and retailer ofballet and other dance wear, is capitalizing
on its high recognition as a manufacturer
to broaden the scope of its business into
yoga, healthcare, cosmetics, and othernew fields. Meanwhile, Island, which has
Grace Continental as its core brand, isproviding fashion items with a distinctive
aesthetic that is proving immensely
popular among women with refined tastes.

Shirotan ga Ippai! on official Shirotan TV

Grace Continental

Performance and Outlook
In fiscal year 2017, performance wasstrong among main domestic subsidiaries,
particularly Onward Trading and Chacott.
Other domestic subsidiaries advanced
structural reforms while reorganizing­unprofitable businesses.
In fiscal year 2018, stable growth will
be pursued at main domestic subsidiaries.
Meanwhile, contributions to earnings­improvements are anticipated to comefrom the benefits of the structural reforms
and a new subsidiary that conducts the
manufacture and sale of organic skincare
and haircare products.

Chacott

24

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Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Overseas Business

Overseas Business

JIL SANDER

The overseas business consists of operations in Europe, Asia, and the United States and accounts
for 20.7% of consolidated net sales. Business scale expansion will be pursued centered on Europe,
where operations are the largest, as we strengthen our competitiveness in the global market.

Contribution to Total Sales
Overseas Business

20.7%

Net Sales by Overseas Business Segment

Domestic Business

79.3%

United States10.6%¥ 5,604 million¥ million

80,000Asia

60,00012.1%¥ 6,383 million

40,000Europe20,00077.3%¥ 40,761 million

0

2012
2013
2014
2015
2016
2017
Note: The figures shown reflect net sales prior to the elimination of internal transactions.

We conduct the planning, manufacture,
and wholesale of the JIL SANDER luxury
menswear and womenswear collections
and accessories and of the apparel andaccessories from JIL SANDER Navy,and we are developing stores on a worldwide basis.
Lucie and Luke Meier have been
named as the new creative directors of
JIL SANDER, and this brand will takeadvantage of their talents from the 2018spring/summer collection.
We will promote this new JIL SANDER
to further its growth as a global brand.

JOSEPH

EuropeThe European business—our largest overseas business—primarily conducts the
manufacture and sale of high-end appareland accessories.
In 2014, the current form of Onward
Luxury Group, which merges Italian subsidiaries GIBO’Co Group and Jil SanderGroup, was established.
By generating synergies of the European
business, we will be able to ­exercise ourstrengths in manufacturing as well as thestrengths of Jil Sander (brands) and
Joseph (retail). With this comprehensive

range of functions, we will seek to becomea unique presence in the European fashionindustry.

Business Overview
Onward Luxury Group
Manufacturing
Onward Luxury Group’s manufacturing
divisions undertake the production of theprincipal items that are indispensable toa designer brand line, including apparelas well as shoes, bags, knitwear, andsneakers. Moreover, these divisions areconstructing a manufacturing platformc­ apable of providing the utmost levels of
quality. In addition to the production ofGroup brands, manufacturing divisions
conduct OEM and contract manufacturing and wholesale of outside brand products based on licensing agreements.
In March 2016, we acquired Moreau
Paris, a luxury leather goods and luggage
brand. We seek to generate even higher
levels of synergies within the Group as we
strengthen our fashion accessory businessgoing forward.

Joseph undertakes the planning, manufacture, and sale of JOSEPH brand menswear and womenswear collections andaccessories and is also developing a network of multi-brand stores and JOSEPH
brand stores centered on London.
To accelerate the brand’s global growth,
Joseph is increasing accessory and menswear lineups while expanding operationsin the North American market andstrengthening e-commerce businesses.

JOSEPH Marylebone High Street store

Asia

United States

In our Asian business, Nijyusanku, ICB,
rosebullet, and other Onward Kashiyama
brands are sold in department stores andshopping centers in China, including
Hong Kong, South Korea, Singapore, andVietnam. In recent years, we have beenworking to expand our network of sales
channels by forming franchise contracts
and strengthening e-commerce businesses.
Furthermore, Asia is an incredibly
important production site. To supplement
existing partnerships with Chinese manufacturers that have high overall capacity,
we are expanding our manufacturing
platform in such ASEAN countries as
Vietnam. With our sights set on capitalalliances and the acquisition of production
capacity, we are determined to build amanufacturing platform in Asia withhigh profitability and quality as well as­superior material procurement capabilities
and fast delivery times.

U.S. operations comprise retail businesses
in the United States as well as hotel andgolf course management operations in Guam.
J.PRESS, acquired in 1986, is awell-loved brand among Ivy Leaguers.
We currently have four directly managed
stores in the United States. As part of recent global strategies for European brands,
we have been expanding sales of JOSEPH
in the United States.
As we move forward, we will expand
our U.S. operations as we conduct necessary investments from a medium-to-longterm perspective to grow retail businesses.

Moreau Paris store

OLG Shoes Division

Moreau Paris store

26

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Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Performance and Outlook
In fiscal year 2017, stable revenues weresecured in Europe thanks to the strong
performance of manufacturing operations.
Meanwhile, performance improved in
Asia and the United States as progress wasmade in business reorganizations.
In fiscal year 2018, our goals are to
improve profitability in Europe by stabilizing our manufacturing platform, expand
brand and e-commerce businesses and reform
sourcing networks in Asia, and increase
brand value in the United States. Initiatives
to these ends will be accelerated accordingly.

Our Value Chain

Our Value Chain

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

Production Network

Production Areas
China

72%
Japan

14 %
ASEAN and other countries

14 %Of Onward Kashiyama’s products, 71% are manufactured in cooperation
with trading companies or delegated to factories in Japan or overseas.
Recently, however, we have been expanding our own production
network by strengthening partnerships with highly capable Japanese
factories and expanding our low-cost production and sourcing networks
in China and Vietnam. Currently, about 72% of Onward Kashiyama’s
products are manufactured in China, 14% in Japan, and 14% in the
ASEAN region. We are developing our procurement and production networks in the ASEAN region and reinforcing production in Japan to ensurethat we can always manufacture products in the most suitable location.

Product Flow (primarily used by Onward Kashiyama)
02 6–9 Months Before
03 5 Months Before04 4 Months Before
05 3–5 Months Before

Research

Design and Material Selection

Sample Creation

Exhibition

Product Selection

Product development starts with our designers
and merchandisers actually visiting fashion
capitals around the world to research the latest
fashion trends. They also attend fabric exhibitions in Japan, Europe, and the UnitedStates to seek out new, high-quality fabrics.

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

Samples are made based on concept drawings
created by designers to visualize how the design
and the materials will actually appear.

Buyers and press members are invited
to exhibitions displaying new products.
Alterations are made to samples basedon feedback from buyers as well as
store managers.

From among the samples, the items to becommercialized are selected, and production
numbers are decided through coordination
with sales teams.

Planning and Production Teams

Onward Quality Center

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

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

Production

Planning and Design
01 1 Year Before Start of Sales

28

29

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

06 3 Months Before
Product Planning
Quality control teams ­inspect samples todetermine if any issues exist with the fabricor 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 and order ancillary materials.

Our Value Chain

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.
1. The apparel company owns the inventory and some shop fixtures andprovides their own sales personnel. When a product is sold, it is thenconsidered to have been procured by the department store.
2. The apparel company pays an agreed percentage of its sales to thedepartment store as a tenant fee. Rent and other costs generally do
not apply. (Profit margins are linked to sales.)3. The apparel company records a sale as the amount of the wholesale
price of the item sold less the margin paid to the department store.


08 1–2 Weeks Before

Production

Final Check

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

Finished products are delivered to distribution
warehouses. Stitching and other productdetails are inspected once again before delivery.

Delivery and Sales
07 2 Months Before09
Delivery
Products are transported from distribution
warehouses to stores based on the instructions of sales managers and distributors.


10
Sales
Products are sold at physical storesand online.

Onward Members’ Loyalty Point Card System
Onward Members is a loyalty point card system that can be used both at­target stores with the Group and on the Onward Crosset directly managed­e-commerce website. Through this system, Onward Members users not only
receive points based on purchase amounts, but they are also able to receive
various perks, including brand information distributed through email­magazines and member-exclusive services.
In April 2016, this system had 1.2 million members. Aiming to increase
this number to 2.1 million by fiscal year 2018 and to 3.0 million by fiscal year
2019, we will seek to expand our customer base.

30
Onward Holdings Co., Ltd. Annual Report 2017

Our Sales Channels

Our Sales Channels

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

Onward’s Omni-Channel Retailing Strategy
Sales through E-Commerce and Percentage of Total Sales

The advancement and evolution of information and communication technologies brings with it the potential to develop new
customer contact points that have never been seen before.
The Onward Group’s medium-term management plan,
launched in March 2016, positions the acceleration of ourOmni-channel retailing strategy as a priority measure andsets forth the target of generating net sales of about ¥36.0
billion, or 12% of total net sales, through e-commerce operations by fiscal year 2019.

Department Stores
Department stores are Onward Kashiyama’s main sales channel,
accounting for 71% of its total sales. A diverse range of core andother brands are deployed through this channel.
We have been strategically relocating and redesigning our shops
while developing large-scale shops to maximize individual shop sales
and operational efficiency. Furthermore, sales representatives haverecently been armed with tablets to enhance sales promotions andservices linked to e-commerce operations as part of our Omnichannel retailing strategy.

¥ million / %

36.0

40

16.0

12.0
30

12.0
21.0

20

12.0

15.0

8.0

10
0

4.0

2016

Sales through E-Commerce

2017

2018

(plan)

2019(plan)

0

Percentage of Total Sales (right scale)

Recent Initiatives 

Nijyusanku JR Nagoya Takashimaya StoreMy Shop Registration System
The My Shop Registration system, launched in April 2017, is a new service forOnward Members users. Through this system, users are able to register their favorite
brands and stores to create a “My Shop” portfolio. Upon completing this step, purchasehistories through applicable e-commerce sites will be integrated under the My Shop
Registration system, which will make it possible for comprehensive service tobe received that encompasses both physical stores and e-commerce stores.

E-Commerce
Our directly managed e-commerce website, Onward Crosset, forms
the central pillar of our e-commerce operations, and we also operate
brand-specific online stores and list our products on domestic andoverseas online shopping sites.
Growth of the e-commerce channel is anticipated to outstripthat of other channels going forward. We therefore plan to bolster
communication and services through this channel to expand ourcustomer base.

Onward SHOP BLOG
Onward Kashiyama has established the official Onward SHOP BLOG portal site,which provides a source of information on recommended outfits and the latest topics
from various stores. An added degree of convenience came from the release of a dedicatedsmartphone application in March 2017. This application gives users easy access to allof our online shops and brand websites. Furthermore, the SHOP BLOG AWARD program has been established to recognize stores that actively utilize Onward SHOP BLOG to growsales. The aim of this award is to encourage stores to act as originators of information.

Onward Marche

Directly Managed Stores

Train Station Complexes / Fashion Malls

Shopping Centers

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

We offer fashionable and trendy brands and products through this sales channel, which takes advantage of prime locations in train station complexes
and in major urban centers.

These centers serve as a sales channel for Onward
Kashiyama’s brands, such as any FAM, any SiS, andSHARE PARK.

The Onward Marche gourmet e-commerce site was launched in November 2016 topropose enriching lifestyles through food. This site serves to increase customer contact
points through the venue of food, which is more easily accessible than fashion, while
also acting as a tool for promoting e-commerce use. Looking ahead, we will advanceour Omni-channel retailing strategy by expanding Onward Marche outside of Japanto cater to customers in Asia and other parts of the world so that we can promote
e-commerce through gourmet foods as well as through fashion.

32

33

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Our Network

Our Network

As of August 31, 2017

Europe

Asia

Japan

United States

England

China

Japan

U.S.A.

LondonShanghaiTokyo

New York		nJoseph Ltd.

		n

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

		n

		n

Freed of London Ltd.

		n

Shanghai Onward Fashion Co., Ltd.

		n

		n

Onward Trading (Shanghai) Co., Ltd.

		n

FranceDalianParis

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

Milan

		n

		n

Onward Italia S.p.A.

		n nward Luxury Group S.p.A.
O(JIL SANDER)

Florence

VietnamFeeland s.r.l.

	Yasuda (Vietnam) Co., Ltd.

Singapore

Onward Luxury Group S.p.A. (Shoes)

Spain
Madrid		 n

Gallardo Dance S.L.

		n	Onward Golf Resort Guam, Inc.

	Onward Personal Style Co., Ltd.

		n	Onward Mangilao Guam, Inc.

	Onward J Bridge Co., Ltd.

		n	Kokobuy Inc.

		n	Onward Creative Center Co., Ltd.

n	Bien Co., Ltd.

Appareln	Onward Resort & Golf Co., Ltd.

Other

n

Joint Venture Factory		n	O & K Co., Ltd.
	Onward Life Design Network Co., Ltd.

Osaka
	Tiaclasse Inc.

		n

NaganoSingapore	Onward Kashiyama Singapore Pte. Ltd.

		n

		n	

	Sakula Inc.

		n

		n

		 n

Venice		n	Onward Beach Resort Guam, Inc.

	Showa (Vietnam) Co., Ltd.

n nErika s.r.l.

	Intimates Co., Ltd.

		n

n n

Innovate Organics, Inc.

	Onward Global Fashion Co., Ltd.

		n	Onward Kashiyama Vietnam Ltd.

Frassineti s.r.l.

		n

Guam

		n

		n

Onward Luxury Group S.p.A. (Apparel)		 n	Island Co., Ltd.

		n

Ho Chi Minh City

		 n

California

		n

		n

	Onward Kashiyama Hong Kong Ltd.

		n

VeronaOnward U.S.A. L.L.C.

	Onward Trading Co., Ltd.

		n

Taicang Onward High Fashion Co., Ltd.

Hong Kong

J. Press, Inc.

		n

	Chacott Co., Ltd.

Kashiyama (Dalian) Co., Ltd.

Italy

		n

	Onward Kashiyama Co., Ltd.

		n

Taicangn n	Onward Holdings Co., Ltd.

Korea
Seoul
		n

Onward Kashiyama Korea Co., Ltd.

		n

Chacott Korea Co., Ltd.

Number of Stores	Creative Yoko Co., Ltd.

		n

3,307

in 26 countries and regions
The Onward Group engages in business activities through a network that is made up of
83 subsidiaries and 22 affiliates, for a total of 106 Group companies. The Group operates in
the four geographic segments of Japan, Europe, Asia, and the United States.

34

35

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Onward-Approved Factory System

Onward-Approved Factory System

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

Audit Targets
In fiscal year 2015, the Onward Group introduced the OnwardApproved Factory System, which is used when performing auditsof sewing factories in China and the ASEAN region.
In the future, the scope of the Onward-Approved Factory

System will be extended to overseas joint venture factories, overseas
factories contracted through trading companies, and overseas
production partners of domestic subsidiaries.

Audits Performed
Number of factories audited

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

A. Legal compliance and management

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

B. Juvenile workforces

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

C. Forced labor

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

D. Wages, allowances, and benefits

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

E. Harassment and abuse

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

F. Work hours

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

G. Non-discrimination

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

H. Health and safety

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

I. Free association

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

J. Sub-contractors and homeworkers

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

K. Environmental practices

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

Number of factories with no compliance findings

First audit

Re-audit

CSR

QC

Fiscal year 2017 (Actual)

35

11

27

40

Fiscal year 2018 (Plan)

32

26

—

—

Audit Methods
Audits related to CSR are conducted in accordance with Onward
Holdings’ proprietary Suppliers’ Code of Conduct, which is basedon the SA8000 international standard. Actual audits are entrusted
to external organizations, but representatives from the Onward Quality
Center are present when audits are conducted. We thereby endeavor
to help ensure appropriate auditing based on the current businessenvironment and to develop the understanding necessary for us toexercise our responsibility as the order placer to support factories incarrying out any improvements that need to be made. Audits relating to QC are conducted directly by the Onward Quality Center.

The results of audits and any compliance findings are compiled
into audit reports, and the results of both CSR and QC audits areprovided to the factory.
If no compliance findings were discovered through the audit,
a certificate of approval is issued that is valid for two years. If­improvements are deemed necessary, feedback is supplied with­regard to the areas requiring improvements and guidance for actionplans is provided by the Onward Quality Center. The factory is then­re-audited after a period of approximately one year.

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

Factory Audits

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

D. Wages, allowances, and benefits

J.	Sub-contractors andhomeworkers

E. Harassment and abuse

K. Environmental practices

Audits based on
CSR guidelines

Cleared

Audits based on
QC guidelines

Not cleared

Onward-Approved
Factory

Guidance foraction plans

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

36

37

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Environmental and Social Responsibility

Environmental and Social Responsibility

Basic Philosophy

Onward Green Campaign

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

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

2,670,000

460,000

Items Collected

Customers that Donated

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

73% Recycled
27% Reused

These items are recycled and reused to the greatest extent possible with the aim of eliminating waste. Certain clothing items arerecycled through use as solid fuel. For other garments, we sort andcollect usable materials to create blankets, work gloves, and otherrecycled textile products that contribute to the organization’s environmental and social contribution initiatives. In addition, a portion of collected clothing items are sold at Onward Reuse Park*,
and the proceeds from these sales are used to fund environmental
and social contribution initiatives.
* For details regarding Onward Reuse Park, please refer to page 41.

Recycling Process
Customers
Used items

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 theenvironment.
3.	Implement the Onward Green Campaign, which is designed to create an apparel life-cycle
circulation system.
4.	Implement various environmental conservation measures: enhance the energy efficiency of­offices, introduce low-emission vehicles, and participate in forest preservation initiatives at
Tosayama Onward Rainbow Forest.
Our Promise is a reflection of our consideration for the planet’s future and our desire to responsibly
deliver fashion that enriches and colors people’s lives. We are committed to developing strategies
that fulfill Our Promise and our responsibilities as a good corporate citizen.

Donated at dedicated collection booths in department stores

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

Onward Recycling Partners
Disposal
Reuse

RecycleSold at Onward Reuse Park

Materials sorted and collected foruse in textile products

Proceeds

Blankets

Buttons and other non-reusable andunrecyclable articles disposed ofWork gloves

Used in environmental and social contribution initiatives

38

39

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Solid fuel

Environmental and Social Responsibility

Environmental and Social Responsibility

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

Support Programs Using Recycled Blankets
1

Bangladesh

5

Mongolia

7

MyanmarRefugee camp:

Impoverished area:

Impoverished area:

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

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

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

3,000 blankets

2

2,000 blankets

First support program:May 2010

Kazakhstan

6

4,000 blankets

Fifth support program:
September 2012

Seventh support program:
October 2014

Nepal

8

Vietnam

Refugee camp:

Impoverished area:

Impoverished area:

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

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

Regions primarily in thenorthern mountain range
and central highlands

3,300 blankets

4,000 blankets

Second support program:February 20113

9

Regions strickenby the Nepal
earthquake:

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

To be donated to impoverishedindividuals in October 2017

2,000 blankets

1,000 blankets

Indonesia (Planned)

4,000 blankets

Ninth support program:February 2016

Third support program:
September 2011

Forest Preservation Initiatives at
Tosayama Onward Rainbow Forest

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

In 2008, Onward entered into a
partnership agreement with thecity of Kochi and the Kochi
City Forestry Association andhas been participating in forest
preservation efforts at Tosayama
Onward Rainbow Forest, a forest approximately 45 hectares in sizethat is located in Kochi Prefecture. With the cooperation of local
communities, we are conducting a forest regeneration program that
includes forest thinning twice a year.

Bio Tech Jacket—Ecological-Wear That Returns
to the Earth
Since 2010, Onward Kashiyama has beenoffering the Bio Tech Jacket, an ecologicalproduct that returns to the Earth. 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.

KIBOU311 is a Great East
Japan Earthquake relief project
promoted on a global scale by
DORMEUIL, a French manufacturer of luxury men’s apparel.
Donations collected throughthis project are provided to LOOM NIPPON, which uses the donations in turn to fund cherry tree planting events.

Post-Kumamoto Earthquake Support throughOnward Green Campaign

China

Regions heavily
impacted by the2008 Sichuan
earthquake:

2

5
3

4
6

2,000 blankets
Donated to a school andother facilities located in
the mountainous regionsof Sichuan Province thatwere affected by theearthquake in 2008

Onward Reuse Park—Used Onward Products
Offered at Discounted Prices

KIBOU311 Participation in Cherry Tree
Planting Events
Eighth support program:
October 2015, April 2016

Sixth support program:
October 2013

Japan

Regions heavily
impacted by
the Great East
Japan Earthquake:

4

4,000 blankets

Other Activities

178

Fourth support program:March 20129

Together with the Tsuruya Department Store, a program campaign under the Onward Green
Campaign was commenced to provide support for reconstruction from the impacts of the­severe earthquakes that devastated Kumamoto Prefecture in April 2016. In December 2016,¥10 million, equivalent to 5% of the total sales of Onward Green Campaign during the ­periodof the program, was donated to Kumamoto City to promote the reconstruction effort. The ­program
also consisted of a clothing drive. From among the donated clothing items, approximately
10,000 that were up to quality standards were selected, cleaned, and provided to individuals­impacted by the earthquake in Mashiki Town, Kumamoto Prefecture.
Our efforts to date have resulted in a total of 15,000 clothing items being supplied toareas affected by the Kumamoto earthquakes, and we intend to continue these efforts going forward.

40

41

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Corporate Governance
Our Basic Approach to Corporate Governance• Current operation methods, agendas, and composition of Boardof Directors appropriate; no issues requiring urgent attention• Further improvements to the effectiveness of the Board of
Directors will require more efficient operation and more extensive provision of information to outside directors and outside Audit & Supervisory Board members.

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

Corporate GovernanceCorporate Governance Structure
General Meeting of Shareholders

Audit & Supervisory 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 business and management experience as a corporate officer to enhance theCompany’s management, based on his broad perspective,
free from the industry to which the Company belongs.

Yoshihide Nakamura

The Company has adopted an Audit & Supervisory Board structure, under which the Company has appointed four Audit &Supervisory Board members, two of whom are outside Audit &Supervisory Board members. Audit & Supervisory Board members
have also assigned staff to assist them in carrying out their duties
and to strengthen their supervisory function. Each member audits
and monitors the performance of directors; responsibilities include
reviewing the documentation of important decisions and attending important meetings, such as Board of Directors’ meetings,
Group financial account settlement meetings, and Group Business
Management Meetings, in accordance with audit policies and theroles delegated by the Audit & Supervisory Board. In addition, theInternal 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 Directors and the Accounting Auditor on a regularbasis 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 fromeach member in accordance with audit policies and the roles delegated by the Board. Deliberations are undertaken and resolutions
made based on this information as required.

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

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

SuperviseStanding Audit &Supervisory Board Members

ReportReportAudit

Outside Audit &Supervisory Board Members

Onward Group
Compliance
Committee

Internal Control
DivisionGroup Strategy Meeting

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

Audit & Supervisory Board Members
and the Audit & Supervisory Board

Directors and the Board of Directors

Board of Directors

ReportCoordinate

SuperviseGroup Companies

Audit

Business Execution Structure

Directors’ and Audit & Supervisory
Board Members’ Compensation

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

Compensation paid to directors, excluding outside directors, comprises a basic compensation component, bonuses, and compensation
for use in acguiring company stock.
The total amounts of compensation paid by officer classification, the total amounts of compensation paid by type 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

BonusesCompensation
for Use in
AcquiringCompany Stock

Directors (excluding
Outside Directors)

410

214

109

86

—

5

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

36

36

—

—

—

3

Outside Officers

40

40

—

—

—

4

Officer Classification

Name

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

Katsuaki Ohashi

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

Numberof Eligible
Officers

Total Amount of Consolidated Compensation by Officer
Total Amount of Compensation Paid by Type ofCompensation (Millions of yen)

Name
(By Officer Classification)

Reasons for Appointment as an
Outside Audit & Supervisory Board Member

Jotaro Yabe

Stock
Options

Payments of compensation to persons that exceed ¥100 ­million
are disclosed on an individual basis and are presented as follows.

Reasons for the Appointment of
Outside Audit & Supervisory Board Members

3. Overview of results of analysis and evaluation of Board of
Directors’ effectiveness in fiscal year 2017
• Board of Directors effectively exercising functions for establishing management strategies and targets, resolving management issues, and overseeing business execution in accordancewith Onward’s Corporate Governance Policy

Accounting Auditor

Accounting Audit

Total Amount ofCompensation
Paid(Millions of yen)Takeshi Hirouchi(Director)

42

43

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

155

Company
Classification

Basic
Compensation

BonusesFilingcompany

85

42

Compensation
for Use in
Acquiring
Stock
Company Stock Options

27—

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

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

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

Candidates for positions as outside directors and outside Audit &Supervisory Board members will be judged to lack the necessary
independence if they meet any of the following criteria.
1. Positions at companies at which a person involved in operationof the Company serves as a corporate officer
The individual must not be a person involved in operation at acompany at which a person involved in operation of the Company
serves as a corporate officer.
2. Material business relationships
The individual must not be a major customer or a person involvedin operation of a major customer of the Company or a major supplier or a person involved in operation of a major supplier of theCompany.

Policies for Cross-Shareholdings andExercise of Related Voting Rights

3. The Company’s Accounting Auditor
The individual must not be affiliated with the Accounting Auditor
that performs audits of the Company based on the Companies Act
or the Financial Instruments and Exchange Act.

In addition to stocks held purely for investment purposes, theCompany will also hold shares of stocks in listed business partners
with the aim of maintaining and strengthening business relationships and thereby improving medium-to-long-term corporate
value. With regard to major cross-shareholdings, the Board of
Directors will conduct annual assessments of the meaningfulness
and economic rationality of these holdings from the perspectivesof shareholding risk limitation and capital efficiency with consideration paid to the Company’s growth potential and profitability
and to the reinforcement and maintenance of business relationships as well as other concerns. Our basic policy is to sell thoseholdings that are deemed to no longer be appropriate after gaining
the understanding of the business partner in question. In addition,
holdings that have been deemed appropriate may also be soldwhen necessitated by the market environment or by management
or financial strategies.
Furthermore, the Company strives to make the best possible
decision when exercising voting rights related to cross-shareholdings. We therefore determine how these rights will be exercised
based on a comprehensive evaluation of factors, including the
medium-to-long-term improvement of the corporate value of thebusiness partner in question and the medium-to-long-term expansion of economic benefits for the Company and Group companies.

4. External specialists
The individual must not be a specialist receiving large amounts ofmonetary payments or other financial assets from the Company
that are separate from compensation received for services as adirector or an Audit & Supervisory Board member. (Specialists
include lawyers, accountants, tax accountants, patent attorneys,
judicial clerks, and consultants. If the financial assets in question
are received by a company, an association, or other entity, the individual must not be affiliated with that entity.)
5. Donation recipients
The individual must not receive large donations from theCompany. (If the donations in question are received by a company, an association, or other entity, the individual must not be a
person involved in operation of that entity.)

Corporate GovernanceInteraction with Shareholders

7. Past relationships
The individual must not have been applicable under items 1. to 5.
during the past five years.

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

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

Compliance Structure

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

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

2. Provision of IR materials on corporate website
An extensive amount of information is disclosed through Onward
Holdings’ corporate website. Please refer to this website for information on various topics.
• A Message from Management
http://www.onward-hd.co.jp/site/english/ir/message.html• Financial Data
http://www.onward-hd.co.jp/site/english/ir/financ.html• Information on Shares and Shareholders
http://www.onward-hd.co.jp/site/english/ir/stocks.html

Risk Management Structure
The Onward Risk Management Regulations were established withthe purpose of guiding the development of the Company’s risk
management structure. The Compliance Division is responsible
for the development of the risk management structure, the identification of issues, and the development of risk management relatedplans. The division reports to the Board of Directors and works toestablish 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 order to respond appropriately to such risks.

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

44

45

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Board of Directors, Audit & Supervisory
Board Members, and Executive Officers
As of September 1, 2017

Board of Directors

Audit & Supervisory
Board Members

Executive Officers

Representative Director, Chairman

Standing Audit & Supervisory
Board Members

Senior Managing Executive Officer

Executive Officers

Michio Osawa

Tomohiko Sakamoto

Takeshi Hirouchi
Representative Director, President

Michinobu Yasumoto

Hitoshi Aoyama

Managing Executive Officers

Kenichi Iizuka
Outside Audit & Supervisory
Board Members

Director, Vice President

Akinori Baba

Keiko Ueno

Masahiko Yoshikawa

Yoshihiro Higuchi
Takehiro Shiraishi

Jotaro Yabe

Financial Section

Masatsugu Miyoshi

Katsuaki Ohashi

Senior Managing Director

Masanori Shozu

Tsunenori Suzuki

Hidekazu Imamura

Masaaki Yoshizawa
Managing Director

Hisayuki Ichinose
Outside Directors

Hachiro Honjo
Yoshihide Nakamura

Company Organization
As of September 1, 2017

General Meeting of Shareholders
Board of Directors

Audit & Supervisory Board

Representative Director, Chairman
Representative Director, President

Six-Year Financial Summary

50

Management’s Discussion and Analysis

53

Operating Risks

54

Consolidated Balance Sheets

56

Consolidated Statements of Operations

57

Consolidated Statements of Comprehensive Income

58

Consolidated Statements of Changes in Net Assets

60

Consolidated Statements of Cash Flows

62

Notes to Consolidated Financial Statements

89

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 the reportable segments
Apparel Business and Other Business.

Next Generation Business Development

Group Strategy Meeting

48

International Operations
European Operations
North American Operations

Corporate Planning, Structural Reforms,
Legal Affairs, Compliance
Finance, Accounting

Asian Operations
Production & Group Quality Control

Administrative
Division

Distribution Channel Development

Secretary Office, Corporate Communications,
Human Resources, General Affairs

Marketing & AdvertisingOmni-channel Retailing
Information System
Logistics

Chugoku-Shikoku
RegionTohoku-Kitakanto
RegionHokkaido Region

Tokai-Hokuriku
RegionKyushu-Okinawa
RegionKinki Region

Tokyo Region

46

47

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

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
2012

FOR THE YEAR
Net sales
Cost of sales
Selling, general andadministrative expenses
Operating profit
Ordinary profit
Income taxes, current
Profit attributable toowners of parent

2013

2014

2015

2016

2017

300,000¥243,204
127,382¥259,100
133,983¥280,008
149,270¥281,502
152,438¥263,516
144,063¥244,901
131,638$2,175,737
1,169,493

104,160
11,663
13,3307,528

113,298
11,81913,405
7,398

120,538
10,20012,211
3,112

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

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

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

968,897
37,34749,548
13,628

3,529

4,503

4,659

4,204

4,278

4,744

42,14813,181

10,13813,362

16,491

3,632

6,844

60,805(1,962)(10,683)(14,301)(15,657)

1,783

25,271

224,510(7,449)
11,219(7,848)
(545)

2,122
(939)

757
834

(6,357)
5,415(32,856)
32,115(291,899)
285,315

Capital expenditures
Depreciation and amortization

6,230
5,478

8,949
5,721

16,7506,801

26,884
7,219

15,955
7,799

10,5996,663

94,16859,19433,192
98,89524,677
100,320

27,376110,349

31,123
117,052

29,407
121,469

26,097
103,573

231,849
920,157

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

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

92,269273,227
85,684
169,027
165,670819,732
2,427,388
761,230
1,501,662
1,471,842

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

U.S. dollars*1¥   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

¥   28.27
1,101.21
24.00
86.5

¥   31.47
1,116.47
24.00
74.0

280,008

281,502¥ million / %263,516

12,000244,901

100,000

4,000

0

2012

2013

2014

2015

2016

0

2017

Profit Attributable to Owners of Parent¥ million

4,503

5,000

4,659

4,204

4,278

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

2.4
1.3
1.4
45.3
43.9
54.2

2.8
1.6
1.7
46.2
44.5
59.8

—
—
—
—
—
—

OTHER INFORMATION
Number of full-time employees

3,993

5,208

5,224

4,973

5,119

4,456

—

4.6
3.6

2.0

2012

2013

2014

4.0

5,732

2015

3,778
1.4

2016

4,204
1.7

2017

0

Operating Margin (right scale)

4.0

3,529

3.0
2.0

2,000

2.8

2.8

1.6

1.6

2013

2014

2.3
1.3

2.4

2.4

1.3

1.3

2015

2016

2.8
1.6

1.0

1,000

2012

2013

2014

2015

2016

0

2012

ROE

ROA

2017

2017

Total Assets

Total Net Assets and Shareholders’ Equity Ratio¥ million¥ million / %400,000
300,000

2.0

%

4,744

3,000

0

6.0

ROE and ROA

276,939

286,779

313,431

340,854200,000
313,454273,227

150,000

157,303

165,372

56.3

57.1

175,02955.2

185,31553.8

172,33754.2

165,670
59.8

80.0
60.0

200,000

100,000

40.0

100,000

50,000

20.0

2012

2013

2014

2015

2016

0

2017

2012

Total Net Assets

Capital Expenditures
2.3
1.3
4.8
47.6
42.8
56.3

11,81910,200Operating Profit

$0.28
9.92
0.21
—

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

11,663
4.8

8,000

0

¥   22.52
995.11
24.00
106.6

243,204

259,100

200,000

4,000

Yen

Operating Profit and Operating Margin¥ million

2017

CASH FLOWSCash flows fromoperating activities
Cash flows frominvesting activities
Cash flows fromfinancing activities
Free cash flow*2

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

Net Sales

2013

2014

2015

2016

2017

0

Shareholders’ Equity Ratio (right scale)

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

26,88430,000

60.00

106.6

120.0
83.6

20,00016,75010,000

6,230

0

2012

2013

86.5

40.00

15,95524.00

10,599

8,949

80.8

89.6

24.00

24.00

24.00

24.00

74.0

20.00

2014

2015

2016

0

2017

80.0

24.00
40.0

2012

2013

Cash Dividends per Share*1. Yen amounts have been translated, for convenience only, at ¥112.56=US$1, the rate of exchange as of February 28, 2017.
*2. Free cash flow = Cash flows from operating activities + Cash flows from investing activities

48

49

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

2014

2015

2016

Payout Ratio (right scale)

2017

0

Management’s Discussion and Analysis
Overview of Operating Results

Gross Profit
The gross profit margin increased 0.9 percentage point, from 45.3% in fiscal
year 2016 to 46.2% in fiscal year 2017. However, gross profit decreased ¥6,189
million, to ¥113,263 million, in conjunction with the decline in net sales.

In fiscal year 2017, ended February 28, 2017, the domestic economy saw
gradual recoveries in corporate earnings and the job market supported byeconomic stimulus measures. However, conditions remained opaque due
to factors including economic slowdown in China and other emerging
countries, geopolitical risks in Europe and the Middle East, the United
Kingdom’s decision to leave the European Union, and the new government
administration in the United States.
In the domestic apparel and fashion industries, in-store sales suffered dueto the trends toward thriftiness and careful purchasing decisions among consumers coupled with the large decline in demand from inbound visitors.
In this operating environment, the Onward Group moved forwardwith the implementation of the medium-term management plan that was
launched in fiscal year 2017. Based on this plan, we sought to steadily raise
profits by heightening the value of products in core brands and improving
customer service. We also advanced selection and concentration measuresthat included reinforcing our e-commerce operations and other businesses
from which we can expect high margins and strong growth. Another focus
was enhancing the Company’s business foundation in order to weather theharsh operating environment and seeking to effectively implement growthstrategies in this environment. To this end, we undertook structural­reforms by reallocating management resources to growth businesses while
also reorganizing unprofitable brands, closing unprofitable stores, and­revising logistics and organizational structures.

Operating Profit
The ratio of selling, general and administrative (SG&A) expenses to net
sales rose 0.6 percentage point, from 43.9% to 44.5%, due to the lower
net sales. Operating profit, however, increased ¥425 million, or 11.3%,
year on year, to ¥4,204 million, following the rise in the gross profit margin as well as the decrease in SG&A expenses that stemmed from thereorganization of unprofitable brands and stores conducted in conjunction
with structural reforms.

Other Income (Expenses)
Other income, net, amounted to ¥6,776 million, compared with ¥3,353
million in the previous fiscal year. Although ¥2,085 million was recorded in
the form of business restructuring expenses, the overall balance of other income and expenses improved as impairment loss on fixed assets decreased
from ¥14,051 million in fiscal year 2016 to ¥1,659 million in fiscal year 2017.
Another reason behind this outcome was the recording of other income in
the forms of gain on sales or disposal of fixed assets, net, of ¥6,859 million
and gain on sale of investments in securities, net, of ¥3,007 million.

Profit before Income Taxes and Profit Attributable to
Owners of Parent

Net Sales

Profit before income taxes was ¥10,980 million, an increase of ¥3,849­million year on year.
Due to the above, profit attributable to owners of parent increased¥466 million, to ¥4,744 million, from the previous fiscal year.

Sales in the Apparel Business decreased 4.2% year on year, to ¥237,934
million, while sales in the Other Business fell 53.7%, to ¥6,967 million.
The main reason behind the drop in sales in the Other Business was thetransference of shares held in Across Transport Co., Ltd. that was conducted in logistics businesses during fiscal year 2016. As a result, consolidated
net sales were down 7.1% compared with the previous fiscal year, to¥244,901 million.

300,000

259,100

280,008

281,502

263,516

Segment Information

Outlook for Fiscal Year Ending February 28, 2018

Apparel Business

For fiscal year 2018, ending February 28, 2018, the Onward Group forecaststhat consolidated net sales will decrease 2.3%, to ¥239,300 million, while
operating profit will grow 35.6% year on year, to ¥5,700 million.
In Japan, time will likely be required for the domestic economy to cast
off the shackles of deflation given the concerns related to factors such as theopaque state of the European economy, economic slowdown in China, andprojected economic trends in the United States.
In the domestic apparel and fashion industries, the ongoing progress inglobalization and the trend toward digitization will continue to furnish abackdrop for persistently difficult conditions characterized by fierce competition.
In this operating environment, we expect the series of structural­reforms implemented throughout fiscal year 2017 to be generating results,
thus contributing to increased profit margins in fiscal year 2018 and­beyond. The Onward Group will continue to improve product value andenhance customer service with the aim of steadily improving profitability.
At the same time, we will develop new businesses in fields with a promisingoutlook for growth.

In fiscal year 2017, sales in the Apparel Business segment declined 4.2%
year on year, to ¥237,934 million, while operating profit was down 1.7%,
to ¥5,461 million.

Domestic BusinessAt core operating subsidiary Onward Kashiyama, a certain degree of success was seen through measures such as stepping up promotions for core
brands, bolstering lineups of products developed for e-commerce operations, and linking inventory information for physical stores and Onward
Crosset. These accomplishments were achieved despite the adverse impactsof the unseasonable weather that started in summer and continued to thebeginning of fall, and of the struggling sales of apparel products at department stores and via other major sales channels.

Overseas Business
In Europe, we secured stable earnings from production operations. In addition, we were able to improve performance in Asia and North America byreorganizing business structures.

Domestic BusinessIn our domestic operations, we will focus on improving the margins of existing core operations at Onward Kashiyama and other main subsidiaries. At
the same time, we will work to provide products and activities that leave customers highly satisfied, develop stores in which customers enjoy spending
their time, and expand operations in new business fields. In addition, we
will forge ahead with our Omni-channel retailing strategy as part of our
e-commerce operations to realize higher levels of convenience for the customer.

Other BusinessIn fiscal year 2017, sales in the Other Business segment decreased 53.7%
year on year, to ¥6,967 million, and operating profit was down 29.3%,
to ¥445 million. Our resort business posted strong performance as we wereable to create frameworks for stably and continuously generating earnings.
Performance in service-related businesses, meanwhile, was impacted by thefiscal year 2016 transference of shares held in Across Transport Co., Ltd.

Overseas Business
Overseas, we will heighten our growth potential by utilizing our manufacturing platform in Europe to globalize our operations while strategically
expanding our Asian business. Initiatives in North America will include­developing operating structures and carrying out investment from a­medium-term perspective with an eye to business growth.

Net Sales¥ million

Management’s Discussion and Analysis

Operating Profit and Profit Attributable to Owners of Parent

Segment Sales¥ million¥ million

12,000244,901

11,819300,000

10,20010,000243,406

8,000

200,000

6,000

4,503

4,659

5,732
4,204

4,000

100,000

15,694

16,997

17,201

263,011

264,301

2014

2015

15,048

6,967

248,468

237,934

2016

2017

200,000
4,278
3,778

4,744
4,204

2016

2017

100,000

2,000
0

2013

2014

2015

2016

0

2017

2013

Operating Profit

2014

2015

Profit Attributable to Owners of Parent

0

2013

Apparel Business

Other Business

50

51

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Operating Risks

Management’s Discussion and Analysis

Financial Position

Cash Flows from Financing Activities
Net cash used in financing activities for fiscal year 2017 amounted to¥32,856 million (¥6,357 million in the previous fiscal year), owing mainly
to changes in borrowings, dividends paid, and acquisition of treasury stock.

AssetsTotal assets on February 28, 2017, stood at ¥273,227 million, down
¥40,227 million from the previous fiscal year-end. Total current assets­declined ¥17,895 million, mainly from decreases in cash and deposits,­inventories, and other current assets. Fixed assets shrunk ¥22,331 million,
largely reflecting decreases in property, and investments in securities.

As a result, cash and cash equivalents as of February 28, 2017, moved
down ¥2,306 million, to ¥26,024 million.

Capital Expenditure

Liabilities
Total liabilities as of February 28, 2017, were down ¥33,560 million fromthe previous fiscal year-end, to ¥107,557 million. Total current liabilities
declined ¥20,425 million, mainly attributable to a decrease in short-termloans payable. Total long-term liabilities were down ¥13,134 million, largely due to a decrease in long-term loans payable.

We at the Onward Group undertake capital expenditures on a continuous
basis to upgrade and expand our planning, production, sales, and logistics
structures and systems. Our capital expenditures are the wellspring thatenables us to address the diverse needs of our customers.
In fiscal year 2017, our capital expenditures totaled ¥10,599 million.
The details of expenditures by segment are as follows.
In the Apparel Business segment, capital expenditures amounted to¥9,320 million, the majority of which was channeled to sales floors at department stores and directly managed stores with the aim of strengthening
the Group’s sales structure and network.
In the Other Business segment, we invested ¥622 million to upgrade
commercial facilities and enhance operational efficiency.

Net Assets
On February 28, 2017, total net assets were down ¥6,666 million from theprevious fiscal year-end, to ¥165,670 million. Total shareholders’ equity­decreased ¥7,236 million following the acquisition of treasury stock. Total
accumulated other comprehensive income increased ¥834 million, mainly
because of an upward adjustment associated with remeasurements of­defined benefit plans.

Profit Distribution Policy

Cash FlowsAt Onward Holdings, we recognize that the distribution of profits to shareholders is one of our top priorities. Our basic policy is to distribute regularand stable dividends to shareholders based on our business performance,
and we target a dividend payout ratio of 35% or more.
A single dividend payment is issued each year and is decided via
approval at the General Meeting of Shareholders. For fiscal year 2017,
we resolved to distribute a cash dividend of ¥24 per share, the same level
as in fiscal year 2016, based on a comprehensive evaluation of this year’s
performance and our outlook for operating environment.
Additionally, we intend to utilize our retained earnings flexibly andadopt a balanced approach to meet our funding requirements. Based on
this policy, our retained earnings will be used for strategic investments tobuild a solid business foundation and strengthen our financial position as
and when we consider appropriate.

Cash Flows from Operating Activities
Net cash provided by operating activities for fiscal year 2017 was ¥6,844
million (¥3,632 million in the previous fiscal year), mainly from profit­before income taxes, a decrease in trade payables, and income taxes paid.

Cash Flows from Investing Activities
Net cash provided by investing activities for fiscal year 2017 totaled¥25,271 million (¥1,783 million in the previous fiscal year), mainly due
to investments in sales facilities and the sale of real estate.

Total Assets and Total Net Assets

Cash Flows¥ million¥ million

400,000
300,000
200,000

286,779
165,372

313,431

175,029

340,854

185,315

25,271

30,000313,454

172,337

20,000273,227

13,362

10,13816,491
6,844
757 3,632 1,783

2,122

10,0000

165,670–10,000–20,000

100,000–10,683–7,848–14,301

Total Assets

2013

2014

2015

2016

–40,0002017

Total Net Assets

secure rights to use intellectual property owned by our overseas partners.
For unexpected reasons, the relevant contracts may be canceled or theterms and conditions may become unfavorable upon renewal. Such an outcome may have an adverse impact on our Group’s business performance.

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

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

Weather Conditions and Disasters
Sales of our Group’s mainstay fashion products may be affected by the weather.
Consequently, we as a Group have put in place and continue to strengthen
our systems for planning and production for a quick turnaround cycle.
However, unseasonal weather over a prolonged period, such as cool weather inthe summer or warm weather in the winter, or a series of typhoons may resultin the loss of sales opportunities during peak seasons. Such developments
may have an adverse impact on our Group’s business performance.
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 newstrain of influenza, may compel us at the Onward Group to suspend ourbusiness operations. Such an occurrence may have an 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 thetreatment of personal information, we have established “Guidelines concerning the Personal Information Protection Law” and strive to enhance
information security awareness among all officers and employees. Although
we as a Group are strengthening our information management systems,
an issue may arise as a result of an information leak due to unauthorizedaccess in our Group’s computer systems or criminal behavior that may
undermine the trust placed in us by society, leading to an increased costburden. Such an occurrence may have an adverse impact on our Group’sbusiness performance.

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

Overseas Business Operations

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

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

Intellectual Property

Business and Capital Tie-ups

We at the Onward Group own trademarks and other intellectual properties
in Japan and overseas. We strive to safeguard the rights relating to suchproperty in accordance with laws and regulations. However, in the eventof an infringement of such rights by a third party, both the image of ourGroup and brand image may be undermined, resulting in impairment of
our Group’s product development activities. Such an occurrence may havean adverse impact on our Group’s business performance.
Moreover, we at the Onward Group are actively engaged in licensed
brand business activities. In undertaking these activities, we as a GroupAs a part of our growth strategies, we at the Onward Group undertakea variety of investments in Japan and internationally through a broad
spectrum of vehicles, including M&A transactions. In the event of deterioration in business performance and financial position owing to a change
in the business environment that exceeds expectations, we may record aloss on impairment of goodwill. Such an occurrence may have an adverse
impact on our Group’s business performance.

–6,357–15,657–30,000
0

Changes in Consumer Needs–32,856

2013

2014

2015

2016

2017

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

52

53

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Consolidated Balance Sheets

Consolidated Balance Sheets

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 29, 2016 and February 28, 2017

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

Millions of yen

ASSETS

2016

2017

2017

¥ 29,407¥ 26,097$  231,849

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

27,81926,008231,062

		 Inventories (Note 2. (4))

42,77040,217357,290

		 Deferred tax assets (Note 12)

4,705

3,271

29,057

		 Other current assets

17,6038,477

75,316

(835)

(497)

(4,417)

121,469

103,573920,157

			 Less: Allowance for bad debt
				Total current assets

Property, plant and equipment:

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

Millions of yen

LIABILITIES AND NET ASSETS
Current liabilities:

2016

2017

2017

¥ 34,971¥ 13,961$  124,029—

17,948

159,449

		 Short-term loans payable (Notes 3 and 13)

45,32623,531

209,057

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

3,828

13,835

122,909

		 Accounts and notes payable (Note 3)
		 Electronically recorded obligations—operating

		 Accrued income taxes

5,911

1,096

9,739

		 Accrued bonuses to employees

1,002

967

8,592

		 Accrued bonuses to directors

185

182

1,614

		 Allowance for sales returns

303

304

2,702

		 Provision for point program

436

575

5,106

		 Other current liabilities (Notes 12 and 13)

14,14813,285

118,033

				Total current liabilities

106,11085,684

761,230

Long-term liabilities:

		 Buildings and structures

82,71579,848709,381

		 Long-term loans payable (Notes 3 and 13)

16,026

3,418

30,369		Leased assets

8,020

8,354

74,215

		 Deferred tax liabilities—revaluation of land (Notes 12)

2,818

2,675

23,763		 Other depreciable property

34,18834,241

304,204

		 Net defined benefit liability (Note 8)

4,180

3,988

35,428

		 Lease obligations (Note 13)

5,195

4,870

43,261

150

167

1,483

			Less: Accumulated depreciation(76,266)(76,362)(678,414)

48,65746,081

409,386

		Land58,03846,188410,346				 Total property, plant and equipment

106,695

92,269819,732

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

6,638

6,755

60,012

				Total long-term liabilities

35,007

21,873

194,316					Total liabilities

141,117

107,557

955,546

Net assets:
		 Shareholders’ equity (Note 14):
			Common stock:

Intangible assets, net:
		Goodwill

15,652

18,523

164,557

		Other

7,785

7,282

64,702

				Total intangible assets, net

23,43725,805229,259

Investments and other assets:

				Authorized—400,000,000 shares				 Issued—167,921,669 shares at February 29, 2016 and February 28, 2017, respectively

30,08030,080267,232

			Capital surplus

50,04350,043444,592

			Retained earnings

114,181

113,072

1,004,546

			 Less: Treasury stock, at cost, 13,767,509 shares and 21,609,228 sharesat February 29, 2016 and February 28, 2017, respectively(18,040)(24,168)(214,708)

				Total shareholders’ equity

176,264

169,027

1,501,662
2,872

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

33,922

		 Long-term loans receivable

2,276

		 Long-term prepaid expenses
		 Net defined benefit asset (Note 8)

26,2342,225

233,065

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

1,118

323

19,771

			 Deferred gain (loss) on hedging instruments

(303)

57

509

			 Net revaluation loss on land

(10,126)(6,923)(61,509)

661

580

5,151

1,417

3,177

28,222

			 Foreign currency translation adjustments

3,777

528

4,694

			 Remeasurements of defined benefit plans (Note 8)

(975)

341

3,029

				 Total accumulated other comprehensive income(6,509)(5,674)(50,405)

		 Deferred tax assets (Note 12)

11,166

8,593

76,338		Other investments

13,086

11,333

100,684

(675)

(562)

(4,991)

		 Stock acquisition rights

844

780

6,927

		Non-controlling interests

1,738

1,537

13,658

				Total net assets

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

61,85351,580458,240¥313,454¥273,227$2,427,388

Total liabilities and net assets

Per share:
		 Net assets per share

172,337

165,670

1,471,842¥313,454¥273,227$2,427,388
U.S. dollars(Note 2. (21))

Yen¥1,101.21

See accompanying notes to consolidated financial statements.

54

55

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

¥1,116.47$9.92

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 29, 2016 and February 28, 2017

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 29, 2016 and February 28, 2017

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

Millions of yen

Net sales

2016

2017

2017

¥263,516¥244,901$2,175,737

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

Millions of yen

Profit

2016

2017

2017

¥  4,263¥ 4,740$ 42,114(9,875)(593)(5,273)

Cost of sales

144,063

131,638

1,169,493

Gross profit

119,453

113,263

1,006,244

Selling, general and administrative expenses

115,675

109,059

968,897

		 Deferred gain (loss) on hedging instruments

(450)

360

3,200

3,778

4,204

37,347

		 Net revaluation gain on land

294

143

1,273

		 Foreign currency translation adjustments(1,442)(3,098)(27,527)

		 Remeasurements of defined benefit plans, net of tax(1,764)

1,316

11,694

(155)

(361)

(3,211)

Operating profit

Other income (expenses):
		Interest income

108		Dividend income

47

416

Other comprehensive income:		 Net unrealized loss on available-for-sale securities

		 Share of other comprehensive income of associates accounted for using the equity method
			 Total other comprehensive income (Note 9)

464

289

2,571

		 Land and house rent received

1,296

1,121

9,958

		Interest expenses

(546)

(400)

(3,551)

		 Equity in earnings (losses) of investees

43

(316)

(2,804)

		 Comprehensive income attributable to:		 Foreign currency exchange gain

49

535

4,749

			 Owners of the parent

		Rent expenses

(734)

(420)

(3,727)

			Non-controlling interests

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

8,812

3,007

26,714

See accompanying notes to consolidated financial statements.

		 Gain on sales or disposal of fixed assets, net

5,393

6,859

60,934

		 Gain on sale of investments in unconsolidated subsidiaries

1,929

—

—

(14,051)(1,659)(14,739)

		 Business restructuring expenses—(2,085)(18,523)

		 Loss on liquidation of subsidiaries and affiliates

—

(458)

(4,073)		Other, net

590

256

2,278

7,131

10,98097,550		Current

8,680

1,534

13,628

		Deferred(5,812)

4,706

41,808

Profit

4,263

4,740

42,11415

434¥  4,278¥  4,744$   42,148

		 Impairment loss on fixed assets (Note 6)

Profit before income taxes

Comprehensive income

Income taxes (Note 12):

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

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

Yen

Per share (Notes 14, 15 and 17):
		 Basic earnings per share¥28.27¥31.47$0.28

		 Diluted earnings per share

27.96

31.15

0.28

		 Cash dividends per share

24.00

24.00

0.21

See accompanying notes to consolidated financial statements.

56

57

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017(13,392)(2,233)(19,844)¥ (9,129)¥ 2,507$ 22,270¥ (9,093)¥ 2,520$ 22,389

(36)

(13)

(119)

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Changes in Net Assets

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 29, 2016 and February 28, 2017

Millions of yen

Millions of yen

Shareholders’ equity (Note 14)

Accumulated other comprehensive income

Number ofshares ofcommon stock(thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

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

—

—

—

285

—

285

Restated balance—

30,08050,043

122,875(22,833)

180,165

		Cash dividends

—

—

—

(3,770)—(3,770)		 Profit attributable to owners of parent

—

—

—

4,278

—

4,278

		 Purchase of treasury stock

—

—

—

—

(2,294)(2,294)

		 Reissuance of treasury stock

—

—

—

(83)

127

44

		 Retirement of treasury stock(5,000)——(6,960)6,960—

		 Reversal of revaluation of land

—

—

—

(2,159)—(2,159)

		 Net changes other than shareholders’ equity

—

—

—

—

—

—

Balance as at March 1, 2015
		 Cumulative effects of changes inaccounting policies

			 Total changes during the year

(5,000)——(8,694)

4,793(3,901)

Balance as at February 29, 2016

167,92230,08050,043

114,181(18,040)

176,264

		Cash dividends

—

—

—

(3,700)—(3,700)		 Profit attributable to owners of parent

—

—

—

4,744

—

4,744

		 Purchase of treasury stock

—

—

—

—

(6,299)(6,299)

		 Reissuance of treasury stock

—

—

—

(106)

171

65

		 Reversal of revaluation of land

—

—

—

(2,047)—

		 Net changes other than shareholders’ equity

—

—

—

—

—

			 Total changes during the year
Balance as at February 28, 2017

¥ 147¥(13,871)¥ 5,139

—

—

—

Stock
acquisitionrights

Noncontrollinginterests

Total net
assets¥  788¥ 3,410¥871¥1,154¥185,315

—

—

—

—

—

285

Restated balance

11,207

147(13,871)

5,139

788

3,410

871

1,154

185,600

		Cash dividends

—

—

—

—

—

—

—

—

(3,770)		 Profit attributable to ownersof parent

—

—

—

—

—

—

—

—

4,278

		 Purchase of treasury stock

—

—

—

—

—

—

—

—

(2,294)

		 Reissuance of treasury stock

—

—

—

—

—

—

—

—

44

		 Retirement of treasury stock

—

—

—

—

—

—

—

—

—

		 Reversal of revaluation of land

—

—

—

—

—

—

—

—

(2,159)

		 Net changes other thanshareholders’ equity(10,089)

(450)

3,745

(1,362)(1,763)(9,919)(27)

584(9,362)

			 Total changes during the year

(10,089)

(450)

3,745

(1,362)(1,763)(9,919)(27)

584(13,263)

Balance as at February 29, 2016

(303)

(10,126)

3,777

(975)

(6,509)

844

1,738

172,337

—

—

—

—

—

—

—

(3,700)(2,047)

		 Profit attributable to ownersof parent

—

—

—

—

—

—

—

—

4,744

—

		 Purchase of treasury stock

—

—

—

—

—

—

—

—

(6,299)

		 Reissuance of treasury stock

—

—

—

—

—

—

—

—

65

		 Reversal of revaluation of land

—

—

—

—

—

—

—

—

(2,047)

		 Net changes other thanshareholders’ equity

(795)

360

3,203

(3,249)

1,316

835

(64)

(201)

570

			 Total changes during the year

(795)

360

3,203

(3,249)

1,316

835

(64)

(201)

(6,667)¥   323¥  57¥ (6,923)¥  528¥  341¥(5,674)¥780¥1,537¥165,670

Stockacquisitionrights

Noncontrollinginterests

Total net
assets——(1,109)(6,128)(7,237)¥30,080¥50,043¥113,072¥(24,168)¥169,027

Shareholders’ equity (Note 14)

Balance as at February 28, 2017

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

$267,232$444,592$1,014,402$(160,270)$1,565,956——(32,869)—(32,869)

		 Profit attributable to owners of parent——

42,148—42,148

		 Purchase of treasury stock

—

—

—

(55,964)(55,964)

		 Reissuance of treasury stock

—

—

(944)

1,526

582

		 Reversal of revaluation of land——

(18,191)—(18,191)

		 Net changes other than shareholders’ equity

—

—

—

—

—

			 Total changes during the year——

(9,856)(54,438)(64,294)$267,232$444,592$1,004,546$(214,708)$1,501,662

Balance as at February 28, 2017

¥ 11,207

		 Cumulative effects of changes inaccounting policies

Total

—

—

See accompanying notes to consolidated financial statements.

Remeasurements
Foreignof definedcurrency
benefit planstranslation(Note 8)adjustments

1,118

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

Balance as at February 29, 2016

Net
revaluation
loss on land		Cash dividends

167,922

		Cash dividends

Balance as at March 1, 2015

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

Thousands of U.S. dollars (Note 2. (21))
Accumulated other comprehensive income
Net unrealized
Deferredgain onavailable-for-sale gain (loss)
on hedging
securities(Note 4)
instruments

Balance as at February 29, 2016

Net
revaluation
loss on landRemeasurements
Foreignof definedcurrency
benefit planstranslation(Note 8)adjustments$(89,959) $ 33,558

Total$ 9,934$(2,691)$7,498$15,442$1,531,073

		Cash dividends

—

—

—

—

$ (8,665) $(57,823)
—

—

—

—

(32,869)

		 Profit attributable to ownersof parent

—

—

—

—

—

—

—

—

42,148

		 Purchase of treasury stock

—

—

—

—

—

—

—

—

(55,964)

		 Reissuance of treasury stock

—

—

—

—

—

—

—

—

582

		 Reversal of revaluation of land

—

—

—

—

—

—

—

—

(18,191)

		 Net changes other thanshareholders’ equity(7,062)

3,200

28,450(28,864)

11,694

7,418

(571)

(1,784)

5,063

			 Total changes during the year

(7,062)

3,200

28,450(28,864)

11,694

7,418

(571)

(1,784)(59,231)

Balance as at February 28, 2017

$ 2,872$  509$(61,509) $  4,694$ 3,029$(50,405)$6,927$13,658$1,471,842

See accompanying notes to consolidated financial statements.

58

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Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Consolidated Statements of Cash Flows

Consolidated Statements of Cash Flows

ONWARD HOLDINGS Co., Ltd. and Consolidated Subsidiaries
February 29, 2016 and February 28, 2017

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

Millions of yen
2016

2017

Millions of yen

2017

2016

Cash flows from operating activities:

Thousands of
U.S. dollars(Note 2. (21))
2017

2017

(19,267)(171,174)

Cash flows from financing activities:

		 Profit before income taxes¥  7,131¥ 10,980$  97,550

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

7,799

6,663

59,194

			 Impairment loss on fixed assets

14,051

1,659

14,739

			 Net amortization of goodwill on consolidation

3,027

2,132

18,941

			 Increase (decrease) in allowance for bad debt

(15)

(395)

(3,508)			 (Increase) decrease in net defined benefit asset

2,363(1,760)(15,632)

			 Increase (decrease) in net defined benefit liability

181

(151)

(1,344)

			 Interest and dividend income

(573)

(336)

(2,987)

			Interest expenses

546

400

3,551

			 Equity in (earnings) losses of investees

(43)

316

2,804

			 (Gain) loss on sales or disposal of fixed assets, net(5,393)(6,859)(60,932)			 (Gain) loss on sale of investments in securities, net(8,812)(3,007)(26,714)			 (Increase) decrease in trade receivables

1,694

912

8,102

400

1,247

11,078

			 Increase (decrease) in trade payables(4,672)(2,538)(22,547)

			Other, net(10,034)

4,696

41,715

				Subtotal

124,010			 (Increase) decrease in inventories

7,650

13,959

		 Interest and dividends received

625

433

3,856

		Interest paid

(526)

(428)

(3,803)(4,356)(7,125)(63,303)

		 Income taxes paid
		 Refunded income taxes				 Net cash provided by (used in) operating activities

239

5

45

3,632

6,844

60,805

(308)

(5)

(45)

		 Net increase (decrease) in short-term loans payable

4,225		 Proceeds from long-term loans payable

—

383

3,403

		 Repayments of long-term loans payable(3,437)(3,028)(26,899)

		 Acquisition of treasury stock(2,294)(6,299)(55,964)

		 Dividends paid by the parent company(3,770)(3,700)(32,869)

		 Dividends paid to non-controlling interests

(101)

(95)

(845)

		Other, net

(980)

(850)

(7,551)(6,357)(32,856)(291,899)(546)(1,565)(13,906)(1,488)(2,306)(20,490)				 Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 10)
See accompanying notes to consolidated financial statements.

Cash flows from investing activities:
		 Increase in time deposits

533

1,005

8,929

		 Acquisition of property, plant and equipment

		 Decrease in time deposits(12,140)(8,626)(76,634)

		 Proceeds from sale of property, plant and equipment

15,576

21,764

193,356

		 Acquisition of investments in securities(5,522)(4,205)(37,361)

		 Proceeds from sale of investments in securities

128,567

16,73914,471

		 Payments for long-term prepaid expenses

(429)

(183)

(1,627)

		 Payments for security deposits

(538)

(419)

(3,723)

925

1,377

12,237

		 Purchase of investments in subsidiaries resulting in change in scope of consolidation

		 Proceeds from security deposits(4,263)(5,116)(45,455)

		 Payments for sale of investments in subsidiaries resulting in change in scope of consolidation(7,163)

(12)

(105)

		 Proceeds from sale of investments in subsidiaries resulting in change in scope of consolidation

144

6,058

53,820		Other, net(1,771)(838)(7,449)				 Net cash provided by (used in) investing activities

1,783

25,271

224,51060

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Onward Holdings Co., Ltd. Annual Report 2017

29,81828,330251,687¥ 28,330¥ 26,024$ 231,197

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

ONWARD HOLDINGS Co., Ltd. and Subsidiaries
For the years ended February 29, 2016 and February 28, 2017

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

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

The Company had 83 subsidiaries as at February 28, 2017 (81 as at February 29, 2016). The accompanying consolidated financial statements
include the accounts of the Company and 74 of its subsidiaries (72 for 2016). Major consolidated subsidiaries are listed below (the Company andits consolidated subsidiaries are collectively referred to as the “Companies”):
Name of subsidiary

Equity ownership percentage

Closing date

Onward Kashiyama Co., Ltd.

100.0%

February 28

Onward Trading Co., Ltd.

100.0

February 28

Chacott Co., Ltd.

100.0

February 28

Creative Yoko Co., Ltd.

100.0

February 28

Island Co., Ltd.

100.0

February 28

Onward Global Fashion Co., Ltd.

100.0

February 28

Onward Luxury Group S.p.A.

100.0

November 30

Joseph Ltd.

100.0

November 30

Onward Fashion Trading (China) Co., Ltd.

100.0

December 31

J. Press, Inc.

100.0

December 31

Onward Creative Center Co., Ltd.

100.0

February 28

Excel Co., Ltd.

100.0

February 28
February 28

Onward Resort & Golf Co., Ltd.

100.0

Onward Life Design Network Co., Ltd.

100.0

February 28

Onward Beach Resort Guam, Inc.

100.0

December 31

Onward Mangilao Guam, Inc.

100.0

December 31

During the year ended February 28, 2017, FREE SHOES S.R.L. and Zenith S.a.r.L. were newly established, and shares in Tiaclasse Inc., LA
MAISON MOREAU S.A.S., KOKOBUY Inc. and Innovate Organics, Inc. were acquired; therefore, these companies became consolidated subsidiaries of the Company.
Shares in Onward Kaisei (Dalian) Co., Ltd., which had not been accounted for using the equity method, were additionally acquired; therefore,
the company became a consolidated subsidiary of the Company.
As Ypsilon S.R.L. was absorbed into Freeland S.R.L., it was removed from the scope of consolidation.
It was decided that all the shares in VINA BIRZ CO., LTD., which had been a consolidated subsidiary of the Company, would be transferred,and Vintage Co., Ltd., Shanghai Onward Fashion Co., Ltd. and Project Sloane Ltd. were liquidated; therefore, these companies were removed
from the scope of consolidation.
The financial statements of the aforementioned subsidiaries with the fiscal year-end of December 31 or November 30 have been used for consolidation. The fiscal year-end of KOKOBUY Inc. is September 30, and its financial statements prepared on a basis similar to that for the year-end
closing as of December 31 have been used for consolidation purposes. Significant adjustments considered necessary between the fiscal year-ends
and the Company’s closing date have been made for consolidation.
The remaining nine subsidiaries (nine for 2016) 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.

For the purposes of preparing the consolidated financial statements of the Companies, all significant intercompany transactions, account balances
and unrealized profits among the Companies have been entirely eliminated, and the portion attributable to non-controlling interests has beencredited/charged thereto.
The assets and liabilities of newly acquired subsidiaries are measured at fair value at the time of acquisition, and the differences between thecost of investments in the consolidated subsidiaries and the equity in their net assets at fair value are accounted for as goodwill, which is amortizedon a straight-line basis within 20 years.

(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 (17 companies for 2016)
were accounted for by the equity method for the year ended February 28, 2017.
The Company did not apply the equity method to Onward Italia S.p.A. and others as the effect on net income and retained earnings of theirconsolidated financial statements are not material individually or in the aggregate.
Although the fiscal year-end of Gailyglen Ltd. is November 30, its financial statements for the fiscal year-end have been used. Also, the fiscal
year-end of Daidoh Limited is March 31, and its financial statements prepared on a basis similar to that for the year-end closing as of December 31
have been used for consolidation purposes.

(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. Write-downs recorded for the years ended February 29, 2016 and February 28, 2017 were ¥11,016 million and ¥10,002 million ($88,860
thousand), respectively.

(5) Investments in Securities

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

(6) Derivative Transactions

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

(7) Hedge Accounting

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

(8) Property, Plant and Equipment

The Company and its domestic consolidated subsidiaries provide depreciation by the declining-balance method at rates based on the estimateduseful lives of assets which are prescribed by Japanese income tax regulations, except for certain buildings (other than facilities attached tobuildings) acquired on and after April 1, 1998 and facilities attached to buildings and structures acquired on and after April 1, 2016, which are
depreciated by the straight-line method pursuant to an amendment to Japanese income tax act.
Overseas consolidated subsidiaries provide depreciation by the straight-line method.
The useful lives of property, plant and equipment are summarized as follows:
Buildings and structures
3 to 50 years
Other
2 to 20 years(9) Intangible Assets and Long-Term Prepaid Expenses

Intangible assets and long-term prepaid expenses are amortized by the straight-line method.
Software costs for internal use are amortized over their expected useful lives (five to 10 years) by the straight-line method.

62

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Onward Holdings Co., Ltd. Annual Report 2017

Notes to Consolidated Financial Statements(10) Income Taxes

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

(11) Allowance for Bad Debt

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

Notes to Consolidated Financial Statements(21) United States Dollar Amounts

Amounts in U.S. dollars are included solely for the convenience of readers outside of Japan. The rate of ¥112.56 = US$1, the rate of exchange as ofFebruary 28, 2017, has been used in translation. The inclusion of such amounts is not intended to imply that Japanese yen have been or could bereadily converted, realized or settled in U.S. dollars at that rate or any other rate.

(22) 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, 2017.

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

(Changes in Presentation Method)“Proceeds from sale of investments in subsidiaries resulting in change in scope of consolidation,” which was included in “Other, net” under “Cashflows from investing activities” for the year ended February 29, 2016, has been set down separately from the year ended February 28, 2017 sincesignificance of the amount has increased. To reflect this change in the method of presentation, the amounts in the consolidated statement of cash
flows for the year ended February 29, 2016 have been reclassified.
As a result, ¥(1,627) million of “Other, net” under “Cash flows from investing activities” in the consolidated statement of cash flows for theyear ended February 29, 2016 has been reclassified to ¥144 million of “Proceeds from sale of investments in subsidiaries resulting in change inscope of consolidation” and ¥(1,771) million of “Other, net.”(13) Retirement Benefits(23) Goodwill(12) Allowance for Sales Returns

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

(14) Provision for Point Program

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

(15) Accounting for Japanese Consumption Taxes

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

(16) Application of Consolidated Taxation System

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

(17) Cash and Cash Equivalents

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

(18) Impairment of Long-Lived Assets

The standard of impairment of long-lived assets requires that fixed assets be reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying amount of anasset 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 is measured as the amount by which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling priceat disposition.

(19) Accrued Bonuses to Employees

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

(20) Accrued Bonuses to Directors

The Company and its certain domestic consolidated subsidiaries recognize accrued bonuses to directors in an estimated amount to provide for payment of bonuses to their directors.

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

(24) Changes in Accounting Policies

Application of Accounting Standard for Business Combinations, etc.
The Company has applied the “Accounting Standard for Business Combinations” (Accounting Standards Board of Japan (“ASBJ”) Statement No.
21, September 13, 2013; the “Business Combinations Standard”), “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement
No. 22, September 13, 2013; the “Consolidated Financial Statements Standard”), “Accounting Standard for Business Divestitures” (ASBJ Statement No. 7, September 13, 2013; the “Business Divestitures Standard”), etc. from the year ended February 28, 2017 and changed to a method torecord any difference resulting from changes in its ownership interest in a subsidiary over which it continues to exercise control as capital surplus,
and acquisition-related costs as expenses for the fiscal year in which they occur. For business combinations effective on and after the beginning of
the year ended February 28, 2017, the Company has changed to a method to reflect the adjustments to the purchase price allocation based on
finalization of provisional accounting treatment on the consolidated financial statements in the fiscal year in which the business combinations
become effective. Moreover, the presentation method for “net income” and other related items was changed, and the presentation of “minority
interests” was changed to “non-controlling interests.” In order to reflect such changes in presentation, the Company has reclassified items in the
consolidated financial statements for the year ended February 29, 2016.
In the consolidated statement of cash flows for the year ended February 28, 2017, cash flows from acquisition-related costs of investments in
subsidiaries that result in a change in the scope of consolidation are stated in the class of “cash flows from operating activities.”
In accordance with the transitional measures prescribed in 58-2 (4) of the Business Combinations Standard, 44-5 (4) of the Consolidated
Financial Statements Standard, and 57-4 (4) of the Business Divestitures Standard, the Company has prospectively applied the Business Combinations Standard, etc. from the beginning of the year ended February 28, 2017.
The effects on consolidated financial statements are immaterial.
Application of Practical Solution on a Change in Depreciation Method due to Tax Reform 2016
The Company and its domestic consolidated subsidiaries have applied the “Practical Solution on a Change in Depreciation Method due to Tax
Reform 2016” (Practical Issues Task Force No. 32, June 17, 2016) from the year ended February 28, 2017 in relation to the revision of the Corporation Tax Act. Accordingly, the Company and its domestic consolidated subsidiaries have changed the depreciation method for facilities attached tobuildings and structures acquired on and after April 1, 2016 from the declining-balance method to the straight-line method.
The effects on consolidated financial statements are immaterial.

3. Financial Instruments
1. Matters pertaining to the status of financial instruments(1) Policy on financial instruments
The Companies invest their funds in short-term deposits and meet their financing needs through bank loans. The Companies utilize derivatives tohedge various risks as described in detail below and do not enter into derivatives for trading or speculative purposes.
(2) Financial instruments and risks
Accounts and notes receivable are exposed to credit risk of customers. Operating receivables denominated in foreign currencies, being subject torisk associated with changes in the foreign currency exchange rates, are hedged by forward exchange contracts.
Investments in securities mainly comprise stocks of companies with which the Companies have business alliances and are exposed to risk associated with fluctuations of their market prices.

64

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Onward Holdings Co., Ltd. Annual Report 2017

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Accounts and notes payable and electronically recorded obligations—operating are due within one year. Operating payables denominated inforeign currencies, being subject to risk associated with changes in the foreign currency exchange rates, are hedged by forward exchange contracts.
The purpose for loans is for working capital (mainly short-term) and funds for capital investment (long-term). A portion of long-term loans payable are subject to interest rate risk.
Regarding derivatives, forward exchange contracts, interest rate swaps, and currency options are used to hedge the foreign exchange rate fluctuation risk associated with the operating receivables and payables.
(3) Risk management for financial instruments(a) Management of credit risk (risk of default by customers and counterparties)
For credit risk of customers associated with accounts and notes receivable, in accordance with the credit management regulations, the Companies
monitor the status of their main customers and counterparties on a periodical basis and manage due dates and outstanding balances by customer
while working to early identify and mitigate any concerns about collection due to deterioration of financial conditions and other reasons. For
derivative transactions, to mitigate the credit risk, the Companies conduct transactions only with highly-rated financial institutions.
(b) Management of market risk (risk of fluctuations in foreign exchange rates, interest rates and others)
The Companies hedge risk associated with changes in the foreign currency exchange rates arising from receivables and payables denominated inforeign currencies mainly by forward exchange contracts.
For investments in securities, the Companies periodically perceive the fair values and financial conditions of the issuers and continuously evaluate whether the securities should be maintained taking into account relationships with their business partners.
For derivatives, the Companies conduct transactions only for their actual requirements in accordance with internal management rules andmonthly review transaction balances, valuation gain or loss, and other conditions.
(c) Management of liquidity risk related to fund procurement (risk that the Companies may not be able to meet their obligations on scheduled due dates)
In order to manage liquidity risk, the Companies timely prepare and update a schedule of cash receipts and disbursements and maintain sufficientliquidity on hand.
(4) Supplementary explanation of fair values of financial instruments
The fair value of financial instruments is based on their quoted market price if available. When no quoted market price is available, fair value isreasonably 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 and fair values and differences between them as of February 29, 2016 and February
28, 2017.

February 29, 2016

Book value

Fair value

Difference(a) Cash and deposits¥ 29,407¥ 29,407¥   —

27,81927,819—Available-for-sale securities

24,48724,487—

Investments in unconsolidated subsidiaries and affiliates

8,725

3,602

(5,123)(d) Accounts and notes payable(34,971)(34,971)—(e) Short-term loans payable(45,326)(45,326)—(f ) Long-term loans payable (including current portion of long-term loans payable)(19,855)(19,894)

39

(452)

(452)

—

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

Book value

Fair value

Difference(a) Cash and deposits$ 231,849$ 231,849$    —

231,062

231,062—

Available-for-sale securities

157,129

157,129—

Investments in unconsolidated subsidiaries and affiliates

70,75831,397(39,361)(d) Accounts and notes payable(124,029)(124,029)—(e) Electronically recorded obligations—operating(159,449)(159,449)—(f ) Short-term loans payable(209,057)(209,057)—(g) Long-term loans payable (including current portion of long-term loans payable)(153,279)(153,455)

176

1,211

1,211

—

(b) Accounts and notes receivable(c) Investments in securities:(h) Derivative transactions

Notes:
1. Fair value measurement of financial instruments and matters related to securities and derivatives(a) Cash and deposits and (b) Accounts and notes receivable
Since these items are settled in a short period of time, their book values approximate fair values.
(c) Investments in securities
The fair value of equity securities is based on the quoted market price.
(d) Accounts and notes payable, (e) Electronically recorded obligations—operating and (f ) Short-term loans payable
Since these items are settled in a short period of time, their book values approximate fair values.
(g) Long-term loans payable
The fair values of fixed interest rate long-term loans payable are measured as present values obtained by discounting the total amount of principal andinterest at the interest rate which is assumed if any similar loan is newly made. Variable interest rate long-term loans payable are deemed to reflect market
interest rates in a short period of time, so the book value is used as fair value.
(h) Derivative transactions
The fair value is calculated on the basis of the price quoted by the financial institutions.
2. Book values of financial instruments deemed extremely difficult to determine their fair values as of February 29, 2016 and February 28, 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen
Classification

2016

2017

2017

¥710

¥583

$5,177

Investments in securities:
Unlisted equity securities

Millions of yen(b) Accounts and notes receivableThousands of U.S. dollars
February 28, 2017

The fair values of these items are not included in “(c) Investments in securities” because their market prices are not available and fair values are deemed
extremely difficult to determine.
3. The redemption schedules for monetary receivables and marketable securities with maturities as of February 29, 2016 and February 28, 2017 are as follows:
Millions of yen
February 29, 2016

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits¥29,407

¥—

¥—

¥—

Accounts and notes receivable

27,819———		Total¥57,226

¥—

¥—

¥—

February 28, 2017

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits¥26,097

¥—

¥—

¥—

Accounts and notes receivable

26,008———

		Total¥52,105

¥—

¥—

¥—

February 28, 2017

Due within 1 year

1 to 5 years

5 to 10 years

Over 10 years

Cash and deposits$231,849

$—

$—

$—

Accounts and notes receivable

231,062———

		Total$462,911

$—

$—

$—

Millions of yen
Millions of yen
February 28, 2017

Book value

Fair value

Difference(a) Cash and deposits¥ 26,097¥ 26,097¥   —

26,00826,008—Available-for-sale securities

17,686

17,686—

Investments in unconsolidated subsidiaries and affiliates

7,965

3,534

(4,431)(d) Accounts and notes payable(13,961)(13,961)—(e) Electronically recorded obligations—operating(17,948)(17,948)—(f ) Short-term loans payable(23,531)(23,531)—(g) Long-term loans payable (including current portion of long-term loans payable)(17,253)(17,273)

20

136

136

—

(b) Accounts and notes receivable(c) Investments in securities:(h) Derivative transactions

Thousands of U.S. dollars

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

66

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Onward Holdings Co., Ltd. Annual Report 2017

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

4. Investments in Securities

5. Derivative Transactions(1) Information as of and for The Year Ended February 29, 2016

The contract or notional amounts and fair values of derivative financial instruments held as of February 29, 2016 and February 28, 2017 aresummarized as follows:(1) Derivative transactions to which hedge accounting was not applied:(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 29, 2016 are summarized as follows:

Millions of yen

Millions of yen
Carrying
value

Acquisition
cost

Unrealized
gain (loss)¥22,536¥18,190¥4,3463

2

1

22,53918,192

4,347

1,948

2,373

(425)

—

—

—

Securities with unrealized gain:

February 29, 2016

Contract ornotional amount

Fair value

Valuation
gain (loss)

¥100

¥(1)

¥(1)

¥100

¥(1)

¥(1)

Interest rate swap agreements:

Equity securities
Other		TotalFixed rate receive / variable rate pay

Securities with unrealized loss:
Equity securities
Other
Total

1,948

2,373

(425)

		Total¥24,487¥20,565¥3,922

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

Millions of yen
Contract ornotional amount

Fair value

Valuation
gain (loss)

		U.S. dollar¥1,138¥44¥44

		Euro

1,169

(2)

(2)

¥2,307¥42¥42

February 28, 2017

Forward exchange contracts:
To buy foreign currency:(b) Available-for-sale securities sold during the year ended February 29, 2016:
Millions of yen

Proceeds from sale of securities¥18,985

Realized gain on sale of securities

8,888

Realized loss on sale of securities—

Thousands of U.S. dollars
Contract ornotional amountFebruary 28, 2017

Fair value

Valuation
gain (loss)$394

Forward exchange contracts:
To buy foreign currency:(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 29, 2016 was ¥9,099 million.

		U.S. dollar$10,107$394

		Euro10,385(17)(17)$20,492

$377

$377

(d) Amounts of “acquisition cost” in the above table represent book values after the recognition of an impairment loss. For the year ended February
29, 2016, the Companies recognized loss on valuation of investments in securities of ¥8 million as an impairment loss.
(2) Derivative transactions to which hedge accounting was applied:(2) Information as of and for The Year Ended February 28, 2017

Millions of yen(a) Available-for-sale securities with readily determinable fair value:
Investments in securities whose fair values were readily determinable at February 28, 2017 are summarized as follows:
Millions of yen
Carrying
value

Acquisition
cost

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

Carrying
value

Acquisition
cost

Unrealized
gain (loss)

Securities with unrealized gain:
Equity securities¥13,881¥10,534¥3,347$123,321$ 93,580$29,741

Other

3

1

2

28

12

16

Total

13,884

10,535

3,349

123,349

93,59229,757

Securities with unrealized loss:
Equity securities

Hedged item

Contract ornotional amount

Fair value

			U.S. dollar

Accounts payable¥ 7,009¥(285)

			EuroAccounts payable

3,116

(96)

			PoundAccounts payable

64

(7)

			Chinese yuan

Accounts payable

96

(1)

			Singapore dollar

Accounts payable

83

(3)

Accounts payable414

1

February 29, 2016

3,802

4,177

(375)

33,78037,110

Other

—

—

—

—

—

(3,330)
—

Total

3,802

4,177

(375)

33,78037,110(3,330)		Total¥17,686¥14,712¥2,974$157,129$130,702$26,427

Note: N on-marketable equity securities of ¥336 million ($2,986 thousand) are not included in the above table because there were no quoted market prices
available and it is extremely difficult to determine the fair value.

Forward exchange contracts:		 To buy foreign currency:

Currency options:		 To buy foreign currency:
			Call:			U.S. dollar
		 To sell foreign currency:
			Put:			U.S. dollar

Accounts receivable(b) Available-for-sale securities sold during the year ended February 28, 2017:
Millions of yen

Thousands of
U.S. dollars

Proceeds from sale of securities¥13,390$118,958

Realized gain on sale of securities

3,007

26,714

Realized loss on sale of securities——(c) The aggregate carrying amount of investments in unconsolidated subsidiaries and affiliates as of February 28, 2017 was ¥8,211 million($72,949 thousand).

68

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Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

666

(60)

¥11,448¥(451)

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

7. Business Restructuring Expenses

Millions of yen
February 28, 2017

Contract ornotional amount

Hedged item

Fair value

Forward exchange contracts:

Business restructuring expenses for the year ended February 28, 2017 consisted of the following:
Millions of yen

Thousands of
U.S. dollars

2017

2017

Expenses in relation to elimination of unprofitable brands¥  564$ 5,012

Expenses in relation to withdrawal from unprofitable stores

662

5,879

		 To buy foreign currency:
			U.S. dollar

Accounts payable¥2,422¥95

			EuroAccounts payable

567

(0)

			PoundAccounts payable

21

(1)

			Chinese yuan

Accounts payable

43

(0)

¥3,053¥94

Business portfolio restructuring:

Retirement expenses resulting from logistics and organization restructuring, etc.
		Total

859

7,632

¥2,085$18,523

Thousands of U.S. dollars
February 28, 2017

Contract ornotional amount

Hedged item

Fair value

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

Accounts payable$21,514$847

			EuroAccounts payable

5,040

(1)

			PoundAccounts payable

191

(9)

			Chinese yuan

Accounts payable

379

(2)

$27,124$835

6. Impairment Loss on Fixed Assets
For the years ended February 29, 2016 and February 28, 2017, the Companies reviewed its long-lived assets for impairment and, as a result, recognized an impairment loss as follows:

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

February 29, 2016
Location

Usage

Description

Tokyo metropolitan area and other

Business assets

Buildings and structures
Other

1,033

—

—

Goodwill¥11,743¥ 1,275

Balance at beginning of year
Cumulative effects of changes in accounting policies

February 28, 2017
Location

Tokyo metropolitan area and other

Usage

Business assets

Description

Millions of yen

Thousands of
U.S. dollars¥1,375$12,213

625

5,554

Buildings and structures
Other

The long-lived assets are basically grouped by brand, and assets for lease and idle assets are grouped individually by each item. The Companies
have recognized a loss on impairment on assets for lease and idle assets due to a significant decline in their market value and on business assets due
to a continuous loss generated from their operating activities by reducing their book values to the respective recoverable amounts.
The impairment loss on long-lived assets for the years ended February 29, 2016 and February 28, 2017 consisted of the following:

2016

2017

2017

Buildings and structures¥ 1,275¥1,375$12,213

Other intangible assets

457

205

1,822

Other

560

420

3,732

Land

16

—

—

Goodwill

11,743——

		Total¥14,051¥2,000$17,767

2016

2017

2017

¥16,552¥16,206$143,980

(421)

—

—

Restated balance

16,131

16,206

143,980
9,563

Service cost

1,436

1,076

Interest cost

40

41

367

Actuarial differences

660

(168)

(1,498)(1,629)(2,018)(17,932)

(432)

(155)

(1,380)¥16,206¥14,982$133,100

Benefits paid
Other
Balance at end of year(ii) Changes in plan assets

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Millions of yen

Millions of yen

Thousands of
U.S. dollars

Millions of yen

Balance at beginning of year
Expected return on plan assets

2016

2017

2017

¥15,693¥13,443$119,434

232

231

2,051

(1,984)

1,050

9,330

Employer contributions

271

293

2,595

Benefits paid

(558)

(846)

(7,516)

Actuarial differences

Other
Balance at end of year

For the year ended February 29, 2016, based on the result of future cash flow analysis that the recoverable amount of goodwill on Onward
Luxury Group S.p.A., which is a consolidated subsidiary of the Company, and two other consolidated subsidiaries of the Company was less thanthe carrying amount, the Company recognized an impairment loss of ¥11,743 million on the remaining unamortized portion of the goodwill. For
the year ended February 28, 2017, ¥341 million ($3,028 thousand) of the above amount was recorded as business restructuring expenses.
The recoverable amount of these assets is based on their net selling price or their value in use. The net selling price is estimated by using theirestimated disposal price. The value in use is calculated by discounting the future cash flows at discount rates of 5.1% and 5.0% for the years ended
February 29, 2016 and February 28, 2017, respectively.

70

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Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

(211)

—

—

¥13,443¥14,171$125,894

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(iii) Reconciliation from projected benefit obligations and plan assets to net defined benefit asset and liability recognized in the consolidatedbalance sheets
Thousands of
U.S. dollars

Millions of yen
2016

2017

2017

Funded projected benefit obligations¥ 15,392¥ 14,339$ 127,391

Plan assets(13,443)(14,171)(125,894)

1,949

168

1,497

814

643

5,709

2,763

811

7,206

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

4,180

3,988

35,428Net defined benefit asset(1,417)(3,177)(28,222)¥  2,763¥   811$   7,206

Net amount of liability and asset recognized in the consolidated balance sheets(iv) Net periodic pension expenses and their breakdown
Thousands of
U.S. dollars

Millions of yen

Service cost
Interest cost

2016

2017

2017

¥1,436¥1,076$ 9,563(b) Determination of long-term expected rate of return on plan assets
In determining long-term expected rate of return on plan assets, the Companies consider the current and projected asset allocations, as well as current and future long-term rate of returns from various assets constituting plan assets.
(viii) Basis for calculation of actuarial assumptions
2016

2017

Discount rate

0.3% to 0.7%

0.3% to 0.7%

Long-term expected rate of return on plan assets

1.1% to 2.1%

1.4% to 2.6%

B. Defined contribution plans
The amounts to be paid by the Companies to the defined contribution pension plans for the years ended February 29, 2016 and February 28, 2017
were ¥402 million and ¥386 million ($3,426 thousand), respectively.

9. Notes to Consolidated Statements of Comprehensive Income
Other comprehensive income for the years ended February 29, 2016 and February 28, 2017 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016

2017

2017

Net unrealized loss on available-for-sale securities:

40

41

367

¥ (5,978)¥ 2,384$ 21,180

(232)

(231)

(2,051)

Reclassification adjustment for gain and loss

(9,548)(3,332)(29,602)

Amortization of unrecognized actuarial differences

28

763

6,781

Amount before income tax effect(15,526)(948)(8,422)

Amortization of unrecognized prior service costs

(54)

(50)

(452)

Income tax effect

5,651

355

3,149

Other

(9)

(118)

(1,054)

		Total(9,875)(593)(5,273)¥1,209

¥1,481$13,154

Deferred gain (loss) on hedging instruments:

Expected return on plan assets

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

Millions of yen
2016

2017

2017

Prior service costs¥   (54)¥  (51)$  (452)

Actuarial differences(2,615)

1,982

17,609Total¥(2,669)¥1,931$17,157

Amount arising during the year

Amount arising during the year

(443)

84

743

Reclassification adjustment for gain and loss

(229)

442

3,933

Amount before income tax effect

(672)

526

4,676

Income tax effect

222

(166)

(1,476)

(450)

360

3,200

294

143

1,273

294

143

1,273

(1,442)(3,117)(27,695)

—

19

168

(1,442)(3,098)(27,527)(2,644)

1,219

10,828

(25)

712

6,329

(2,669)1,931

17,157

		Total
Revaluation gain on land:
Income tax effect		TotalForeign currency translation adjustments:
Amount arising during the year(vi) Remeasurements of defined benefit plans in accumulated other comprehensive income
Breakdown of items recognized as remeasurements of defined benefit plans (before tax effect) in accumulated other comprehensive income isas follows:
Thousands of
U.S. dollars

Millions of yen

Unrecognized prior service costs

Reclassification adjustment for gain and loss		TotalRemeasurements of defined benefit plans:
Amount arising during the year

2016

2017

2017

Reclassification adjustment for gain and loss¥  266¥215$1,914

Amount before income tax effectUnrecognized actuarial differences(1,706)

276

2,452

Total

¥(1,440)¥491$4,366

Income tax effect		Total

905

(615)

(5,463)(1,764)

1,316

11,694

(155)

(361)

(3,211)

(155)

(361)

(3,211)¥(13,392)¥(2,233)$(19,844)

Share of other comprehensive income of associates accounted for using the equity method:Amount arising during the year(vii) Plan assets(a) Percentage by major category of plans assets is as follows:		Total2016

2017

Life insurance company general accounts

43%

40%

Equity securities

47%

49%

Debt securities

2%

2%

Short-term funds

8%

9%

100%

100%

Total

			 Total other comprehensive income

Total plan assets include retirement benefit trusts established for defined benefit corporate pension plans and lump-sum retirement payment plansof 51% and 55% for the years ended February 29, 2016 and February 28, 2017, respectively.

72

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Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

10. Notes to Consolidated Statements of Cash FlowsThe reconciliation of the difference between the statutory tax rate and the effective tax rate for the years ended February 29, 2016 and February 28,
2017 is as follows:

Cash and cash equivalents at February 29, 2016 and February 28, 2017 consisted of the following:%Thousands of
U.S. dollars

Millions of yen
2016

2017

2017

Cash and deposits¥29,407¥26,097$231,849

Time deposits with maturities of more than three months(1,077)

(73)

(652)

Cash and cash equivalents¥28,330¥26,024$231,197

11. Lease Transactions

Statutory tax rate

2.7

1.7

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

(1.4)

(0.2)

Per capita inhabitant tax

5.1

2.3

Amortization of goodwill

14.0

6.1

Impairment loss on goodwill

58.7

—

Changes in valuation allowance(115.3)

(0.1)

16.8

(0.8)

—

7.9

Differences in statutory tax rate

18.0

3.6

Other

6.0

3.2

40.2

56.8

		 Effective tax rate

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 29, 2016 andFebruary 28, 2017 consisted of the following elements:
Thousands of
U.S. dollars

Millions of yen
2016

2017

2017

¥  2,273¥  2,133$  18,946

7,718

191

1,699

33.1

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

Effects due to liquidation of consolidated subsidiaries

2. Depreciation method for leased assets
The Companies have adopted a method where leased assets are depreciated on a straight-line basis over the lease periods as their useful lives withno residual value.

2017

35.6

Reconciliation:

Consolidation adjustments to gain or loss on sale of investments in consolidated subsidiaries(Lessee)Finance lease transactions
Finance lease transactions that do not transfer ownership
1. Leased assets
Leased assets are primarily comprised of logistic facilities (“buildings and structures”).

2016(Adjustments to deferred tax assets and liabilities due to change in income tax rates, etc.)
On March 29, 2016, the “Act for Partial Revision of the Income Tax Act, etc.” (Act No. 15 of 2016) and “Act for Partial Revision of the Local Tax
Act, etc.” (Act No. 13 of 2016) were enacted in the Diet session, and on November 18, 2016, the “Act for the Partial Revision of Acts, Including
Partial Revision of the Consumption Tax Act for the Fundamental Reform of the Taxation System to Achieve a Stable Source of Revenue for Social
Security” (Act No. 85 of 2016) and “Act for the Partial Revision of Act for the Partial Revision of the Local Tax Act and Local Allocation Tax Act
for the Fundamental Reform of the Taxation System to Achieve a Stable Source of Revenue for Social Security, etc.” (Act No. 86 of 2016) wereenacted in the Diet session. Along with these changes, tax rates for corporation tax and enterprise tax for the fiscal years beginning on or after April
1, 2016 have been changed. Accordingly, the statutory tax rates applied to the calculation of deferred tax assets and liabilities are lowered from
32.3% to 30.9% for temporary differences expected to be settled in the fiscal years beginning on March 1, 2017 and 2018, and to 30.6% for temporary differences expected to be settled in the fiscal years beginning on or after March 1, 2019.
The effect of these changes in tax rates is immaterial.

Deferred tax assets:
Loss on write-down of inventories
Loss on write-down of investments in unconsolidated subsidiaries
Accrued bonuses to employees

331

299

2,654

Net defined benefit liability

2,866

2,685

23,855

Accrued retirement benefits for directors and corporate auditors

68

72

639

Allowance for bad debt

352

2,897

25,737Tax loss carry forwards

10,38014,399127,922

Impairment loss on fixed assets

6,251

6,141

54,561

111

25

224

Investments in securities
Other

5,401

4,108

36,497

		Subtotal

35,751

32,950292,734

Less: Valuation allowance(17,484)(18,407)(163,531)

			 Total deferred tax assets

18,267

14,543

129,203

Gain on securities contributed to employee retirement benefit trusts

(82)

(56)

(499)

Net defined benefit asset

(505)

(973)

(8,642)

Deferred tax liabilities:

Provision for deferred capital gain on real property for tax purposes
Net unrealized gain on available-for-sale securities
Other

(47)

(39)

(349)

(1,264)(909)(8,075)

(509)

(718)

(6,375)

			 Total deferred tax liabilities(2,407)(2,695)(23,940)

				Net deferred tax assets¥ 15,860¥ 11,848$ 105,263

13. Short-Term Loans Payable and Long-Term Loans Payable
Short-term loans payable at February 29, 2016 and February 28, 2017 represented loans, principally from banks. The weighted-average interest rateon these loans was 0.7% and 0.8% in 2016 and 2017, respectively.
Long-term loans payable at February 29, 2016 and February 28, 2017 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Unsecured loans, principally from banks, maturing in installments through 2021
Less current portion with weighted-average interest rate of 0.5% at February 28, 2017
Long-term loans payable, less current portion with weighted-average interest rate of 0.6% at
February 28, 2017

2016

2017

2017

¥19,854¥17,253$153,278

3,828

13,835

122,909¥16,026¥ 3,418$ 30,369

Lease obligations at February 29, 2016 and February 28, 2017 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Lease obligations
Less current portion of lease obligations

74

75

Onward Holdings Co., Ltd. Annual Report 2017

Onward Holdings Co., Ltd. Annual Report 2017

2016

2017

2017

¥5,877¥5,576$49,534

682

706

6,273

¥5,195¥4,870$43,261

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

The aggregate annual maturities of long-term loans payable after February 28, 2018 are as follows:
Millions of yen

Thousands of
U.S. dollars

2019¥3,106$27,597

2020

106

941

2021

106

938

2022

101

893

Year ending February 28 or 29:

Millions of yen

Thousands of
U.S. dollars

Year ending February 28 or 29:
2019

¥628

$5,578

2020

424

3,766

2021

357

3,175

2022

293

2,606

Thousands of
U.S. dollars

Millions of yen

Less: Components not pertaining to common shareholders

2016

2017

2017

¥4,278¥4,744$42,148———

Profit pertaining to common stock¥4,278¥4,744$42,148

Average outstanding shares of common stock (thousand shares)

151,343

150,758

1,689

1,532

Effect of dilutive stock options (thousand shares)

16. Related-Party Transactions
Year ended February 29, 2016

Bonds at February 29, 2016 and February 28, 2017 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Less current portion

Earnings per share of common stock is computed based upon the weighted-average number of shares of common stock outstanding during eachyear. Cash dividends per share shown for each year in the accompanying consolidated statements of operations represent dividends declared as
applicable to the respective years rather than those paid during the years.
The basis for the calculation of basic and diluted earnings per share for the years ended February 29, 2016 and February 28, 2017 is as follows:

Profit attributable to owners of parent

The aggregate annual maturities of lease obligations after February 28, 2018 are as follows:

0.39% in 2016 and 2017 unsecured yen bonds issued by a subsidiary, due 201815. Per Share Information

2016

2017

¥100

¥50

2017

50

50

444

¥ 50

¥—

$ —

$444

The Company leased land from Takeshi Hirouchi, Representative Director and Chairman of ONWARD HOLDINGS Co., Ltd., during the year,
and the rental fee was ¥7 million. Also, Mr. Hirouchi paid a rental fee of ¥16 million to the Company for a house. The rental fees were determinedby the average market prices.
Onward Global Fashion Co., Ltd., a consolidated subsidiary of the Company, sold goods to BOLS 1987 Co., Ltd., over which Hitoshi Futamura, Representative Director, President of Onward Global Fashion Co., Ltd., has 100% of voting rights directly, during the year. The transaction
amount was ¥13 million, and the balance of relevant accounts receivable as of February 29, 2016 was ¥2 million. Prices and other terms and conditions were determined by reference to market prices or general terms and conditions.

Year ended february 28, 201714. Shareholders’ Equity
Under the Companies Act, the entire amount of the issue price of shares is required to be designated as a stated common stock account, although a
company in Japan may, by resolution of its Board of Directors, account for an amount not exceeding 50% of the issue price of new shares as additional paid-in capital.
The Companies Act provides that an amount equal to 10% of distributions from retained earnings paid by the company and its Japanese subsidiaries be appropriated as a legal reserve. No further appropriations are required when the total amount of the additional paid-in capital and thelegal reserve equals 25% of their respective stated capital. The Companies Act also provides that additional paid-in capital and the legal reserve areavailable for appropriations by resolution of a shareholder meeting. 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 29, 2016 and February 28, 2017 represent dividends paid out during
those years. The amount available for dividends is based on the amount recorded in the Company’s non-consolidated books of account in accordance with the Companies Act.
Dividends to be paid after the balance sheet date, which were approved by the General Meeting of Shareholders held on May 25, 2017, areas follows:(a) Total dividends:¥3,511 million ($31,197 thousand)(b) Source of dividends:

Retained earnings(c) Cash dividends per common share:¥24 ($0.21)(d) Date to determine which shareholders receive the dividends:(e) Effective date:February 28, 2017
May 26, 2017

The Company leased land from Takeshi Hirouchi, Representative Director and Chairman of ONWARD HOLDINGS Co., Ltd., during the year,
and the rental fee was ¥7 million ($64 thousand). Also, Mr. Hirouchi paid a rental fee of ¥16 million ($145 thousand) to the Company for ahouse. The rental fees were determined by the average market prices.
Onward Global Fashion Co., Ltd., a consolidated subsidiary of the Company, sold goods to BOLS 1987 Co., Ltd., over which Hitoshi Futamura, Representative Director, President of Onward Global Fashion Co., Ltd., has 100% of voting rights directly, during the year. The transaction
amount was ¥46 million ($404 thousand), and the balance of relevant accounts receivable as of February 28, 2017 was ¥12 million ($108 thousand). Prices and other terms and conditions were determined by reference to market prices or general terms and conditions.

17. Stock Options
The cost recognized for the stock options for the years ended February 29, 2016 and February 28, 2017 was ¥16 million and nil, respectively, whichis 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 five directors of the Company on June 20, 2014. They are exercisable in
the period from June 21, 2014 to June 20, 2044. The terms of the options include certain limitations on the exercisability under which grantees
can exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
The number of stock options granted by type of shares is 122,900 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Fair value at the grant date:¥526 ($4.67)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:2014 stock option plan (No. 16)

Non-vested (shares):
Outstanding at February 29, 2016

122,900

Granted—Forfeited—

Vested—Outstanding at February 28, 2017

122,900

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

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Onward Holdings Co., Ltd. Annual Report 2017

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

2014 Stock Option Plan (No. 15)

Under the 2014 stock option plan (No. 15), stock options were granted to 12 executive officers of the Company and five directors and nine executive officers of 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, or directors or executive officers of the Company’s subsidiary.
The number of stock options granted by type of shares is 146,100 shares of common stock.
A summary of price information for the stock option plan is as follows:		 Exercise price:¥1 ($0.01)

		 Fair value at the grant date:¥466 ($4.14)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:2013 Stock Option Plan (No. 13)

Under the 2013 stock option plan (No. 13), stock options were granted to 14 executive officers of the Company and six directors and nine executive officers of 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 officers of the Company, or directors or executive officers of the Company’s subsidiary.
The number of stock options granted by type of shares is 151,300 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Fair value at the grant date:¥572 ($5.08)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:2014 stock option plan (No. 15)

Non-vested (shares):2013 stock option plan (No. 13)

Non-vested (shares):

Outstanding at February 29, 2016

140,000

Outstanding at February 29, 2016

Granted—GrantedForfeited—

Forfeited

Vested11,900

Outstanding at February 28, 2017

128,100

Vested (shares):126,600——

Vested10,000

Outstanding at February 28, 2017

116,600

Vested (shares):

Outstanding at February 29, 2016—

Vested11,900

Outstanding at February 29, 2016

13,800

Vested10,000Exercised—

Exercised

Forfeited—

Forfeited

Outstanding at February 28, 2017

11,900——

Outstanding at February 28, 2017

23,800The 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.

2013 Stock Option Plan (No. 14)

2012 Stock Option Plan (No. 12)

Under the 2013 stock option plan (No. 14), stock options were granted to five directors of the Company on June 20, 2013. They are exercisable in
the period from June 21, 2013 to June 20, 2043. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
The number of stock options granted by type of shares is 107,000 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Fair value at the grant date:¥629 ($5.59)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:

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

		 Fair value at the grant date:¥458 ($4.07)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:2013 stock option plan (No. 14)

Non-vested (shares):2012 stock option plan (No. 12)

Non-vested (shares):

Outstanding at February 29, 2016

98,100

Outstanding at February 29, 2016

129,600

Granted—Granted—Forfeited—

Forfeited—

Vested—VestedOutstanding at February 28, 201798,100

Vested (shares):—

Outstanding at February 28, 2017

129,600

Vested (shares):

Outstanding at February 29, 2016

8,900

Outstanding at February 29, 2016

11,800

Vested—Vested—Exercised—

Exercised—

Forfeited—

Forfeited

Outstanding at February 28, 2017

8,900

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.

—

Outstanding at February 28, 2017

11,800The 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.

78

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Onward Holdings Co., Ltd. Annual Report 2017

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

2012 Stock Option Plan (No. 11)

Under the 2012 stock option plan (No. 11), stock options were granted to one executive officer of the Company and nine directors and 18 executive
officers of the Company’s subsidiary on March 19, 2012. They are exercisable in the period from March 20, 2012 to February 28, 2042. The termsof the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting ayear after they lose their positions as executive officers of the Company, or directors or executive officers of the Company’s subsidiary.
The number of stock options granted by type of shares is 234,700 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Fair value at the grant date:¥444 ($3.94)

2011 Stock Option Plan (No. 9)

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

		 Average stock price on the date the option was exercised:¥660 ($5.86)

		 Fair value at the grant date:¥444 ($3.94)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:2012 stock option plan (No. 11)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:

Non-vested (shares):2011 stock option plan (No. 9)

Outstanding at February 29, 2016

123,700

Non-vested (shares):

Granted—Outstanding at February 29, 2016

Forfeited—

Granted

Vested13,100Forfeited

Outstanding at February 28, 2017

110,600

Vested11,300

Outstanding at February 28, 2017

88,400

Outstanding at February 29, 2016

61,300

Vested (shares):

Vested13,100

Vested (shares):99,700——

Outstanding at February 29, 2016

61,700Exercised—

Vested11,300Forfeited—

Exercised

26,60074,400Forfeited

Outstanding at February 28, 2017

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)

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

Outstanding at February 28, 2017

46,400The 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.

2010 Stock Option Plan (No. 8)

Under the 2010 stock option plan (No. 8), stock options were granted to five directors of the Company on June 18, 2010. They are exercisable in
the period from June 19, 2010 to June 18, 2040. The terms of the options include certain limitations on the exercisability under which grantees can
exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
The number of stock options granted by type of shares is 115,800 shares of common stock.
A summary of price information for the stock option plan is as follows:		 Average stock price on the date the option was exercised:¥682 ($6.06)

Exercise price:		 Fair value at the grant date:¥510 ($4.53)

Average stock price on the date the option was exercised:¥623 ($5.53)

Fair value at the grant date:¥613 ($5.45)¥1 ($0.01)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:2011 stock option plan (No. 10)

Non-vested (shares):
Outstanding at February 29, 2016

69,400Granted—Forfeited—

Vested—Outstanding at February 28, 2017

69,400

Vested (shares):
Outstanding at February 29, 2016

65,800

Vested—Exercised

21,300Forfeited—

Outstanding at February 28, 2017

44,500The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:2010 stock option plan (No. 8)

Non-vested (shares):
Outstanding at February 29, 2016

52,300Granted—Forfeited—

Vested—Outstanding at February 28, 201752,300

Vested (shares):
Outstanding at February 29, 2016

15,700

Vested—Exercised

15,700Forfeited—

Outstanding at February 28, 2017—

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.

80

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Onward Holdings Co., Ltd. Annual Report 2017

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

2010 Stock Option Plan (No. 7)

Under the 2010 stock option plan (No. 7), stock options were granted to eight 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.
The number of stock options granted by type of shares is 194,600 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

2009 Stock Option Plan (No. 5)

Under the 2009 stock option plan (No. 5), stock options were granted to 11 directors and 19 executive officers of the Company’s subsidiary on
March 18, 2009. They are exercisable in the period from March 19, 2009 to February 28, 2039. The terms of the options include certain limitations on the exercisability under which grantees can exercise their options during a five-year period starting a year after they lose their positions as
directors or executive officers of the Company’s subsidiary.
The number of stock options granted by type of shares is 268,900 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Average stock price on the date the option was exercised:¥721 ($6.41)

		 Average stock price on the date the option was exercised:¥724 ($6.43)

		 Fair value at the grant date:¥475 ($4.22)

		 Fair value at the grant date:¥362 ($3.22)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:2010 stock option plan (No. 7)

Non-vested (shares):2009 stock option plan (No. 5)

Non-vested (shares):

Outstanding at February 29, 2016

76,400

Outstanding at February 29, 2016

79,300Granted—GrantedForfeited—

Forfeited

Vested7,800

Vested10,200

Outstanding at February 28, 2017

68,600

Outstanding at February 28, 201769,100

Vested (shares):——

Vested (shares):

Outstanding at February 29, 2016

52,400

Outstanding at February 29, 2016

37,900

Vested7,800

Vested10,200Exercised

44,000Exercised

22,000Forfeited—

Forfeited

Outstanding at February 28, 201716,200—

Outstanding at February 28, 2017

26,100The 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 five directors of the Company on June 19, 2009. They are exercisable in
the period from June 20, 2009 to June 19, 2039. The terms of the options include certain limitations on the exercisability under which grantees
can exercise their options during a five-year period starting a year after they lose their positions as directors of the Company.
The number of stock options granted by type of shares is 155,000 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Fair value at the grant date:¥432 ($3.84)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 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.
The number of stock options granted by type of shares is 91,100 shares of common stock.
A summary of price information for the stock option plan is as follows:		Exercise price:¥1 ($0.01)

		 Average stock price on the date the option was exercised:¥672 ($5.97)

		 Fair value at the grant date:¥905 ($8.04)

2009 stock option plan (No. 6)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:

Non-vested (shares):
Outstanding at February 29, 20162008 stock option plan (No. 4)

72,000Non-vested (shares):

Granted—Forfeited—

Outstanding at February 29, 2016

Vested—Granted72,000Forfeited—

Vested3,200

Outstanding at February 28, 2017

20,100

Outstanding at February 28, 2017

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.

23,300—

Vested (shares):
Outstanding at February 29, 2016

8,400

Vested3,200

Exercised

3,400

Forfeited—

Outstanding at February 28, 2017

8,200

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.

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Onward Holdings Co., Ltd. Annual Report 2017

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

2008 Stock Option Plan (No. 3)

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

		 Fair value at the grant date:¥944 ($8.39)

2006 Stock Option Plan (No. 1)

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

		 Fair value at the grant date:¥1,541 ($13.69)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:2008 stock option plan (No. 3)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:
2006 stock option plan (No. 1)

Non-vested (shares):
Outstanding at February 29, 2016

32,000Non-vested (shares):

Granted—Outstanding at February 29, 2016

Forfeited—

Granted—

Vested—Forfeited—

Outstanding at February 28, 2017

32,000The 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.

2007 Stock Option Plan (No. 2)

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

		 Fair value at the grant date:¥1,284 ($11.41)

A summary of the scale and movement of the stock option plan for the year ended February 28, 2017 is as follows:2007 stock option plan (No. 2)

Non-vested (shares):
Outstanding at February 29, 2016

16,600Granted—Forfeited—

Vested—Outstanding at February 28, 2017

16,60014,500

Vested—Outstanding at February 28, 2017

14,500The number of rights to vest in the future periods is determined based on the actual forfeited number of the stock option because it is difficult
to estimate forfeiture in the future.

18. Segment Information(1) Summary of reportable segments
The Companies’ reportable segments are components for which separate financial information is available and regular evaluation by the Board of
Directors is performed to decide how management resources are allocated and to assess performance.
The principal business of the Companies is the apparel business (planning, production and sales of textile products, including men’s and women’s clothing). Additionally, the Companies also operate service and resort businesses.
The reportable segments of the Companies 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. The “Other Business” operates
the logistics, sports facilities and resort facilities businesses.
(2) Method of calculating net sales, profit or loss, assets, liabilities and other items by reportable segment
Accounting methods for reportable segments are mostly the same as the accounting methods described in “2. Summary of Significant
Accounting Policies.”
Profit by reportable segment refers to operating profit. Intersegment sales and transfers are based on market values.

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.

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Onward Holdings Co., Ltd. Annual Report 2017

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(3) Information on net sales, profit or loss, assets, liabilities and other items by reportable segment for the years ended February 29, 2016 andFebruary 28, 2017 is as follows:

Thousands of U.S. dollars
ApparelMillions of yen
Apparel
For the year ended February 29, 2016

Japan

EuropeAsia/North
America

Total

Other

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers¥201,824¥39,682¥6,962¥248,468¥15,048¥263,516¥    —¥263,516

Intersegment sales or transfers

1,362

1,952

492

3,806

6,300

10,106(10,106)—¥203,186¥41,634¥7,454¥252,274¥21,348¥273,622¥(10,106)¥263,516

Segment profit (loss)¥  7,010¥      (697)¥     (755)¥  5,558¥   629¥  6,187¥ (2,409)¥  3,778

Segment assets¥148,688¥38,669¥4,481¥191,838¥26,562¥218,400¥ 95,054¥313,454

Depreciation and amortization (Note 2)¥  4,722¥ 1,035¥  547¥  6,304¥   993¥  7,297¥   502¥  7,799

Investments in equity-method affiliates

8,726

73

—

8,799

—

8,799

—

8,799

Total

Increases in property, plant and equipment,
and intangible assets (Note 2)

12,501

1,824

250

14,575741

15,316639

15,955(Notes) 1. Adjustments consist of the following:(1) 	The adjustment amount for segment profit (loss) of ¥(2,409) million includes amortization of goodwill of ¥(3,027) million, elimination ofintersegment transactions of ¥4,266 million, and corporate expenses not allocated to reportable segments of ¥(3,648) million. Corporate
expenses are mainly general administrative expenses that are not attributable to reportable segments.
(2)	The adjustment amount for segment assets of ¥95,054 million includes the unamortized balance of goodwill of ¥15,652 million, elimination ofintersegment transactions of ¥(117,485) million, and corporate assets not allocated to reportable segments of ¥196,887 million. Corporate assets
are mainly assets held by the Company, a pure holding company.
2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses (furniture and fixtures).
3. Segment profit (loss) coincides with the amount of operating profit in the consolidated statement of operations.

For the year ended February 28, 2017

Japan

EuropeAsia/North
America

Total

Other

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers$1,718,747$342,851$52,243$2,113,841$ 61,896$2,175,737$     —

$2,175,737

Intersegment sales or transfers

11,24817,496

5,412

34,15625,45259,608(59,608)—$1,729,995$360,347$57,655$2,147,997$ 87,348$2,235,345

Total$ (59,608) $2,175,737

Segment profit (loss)$   56,663$  (4,081)$ (4,064)$   48,518$  3,951$   52,469$ (15,122) $   37,347

Segment assets$1,245,625$290,247$47,192$1,583,064$233,189$1,816,253$611,135$2,427,388

Depreciation and amortization (Note 2)$   40,183$  8,409$ 1,134$   49,726$  5,651$   55,377$  3,817$   59,194

Investments in equity-method affiliates

70,758716—

71,474—

71,474—

71,474Increases in property, plant and equipment,
and intangible assets (Note 2)

68,994

12,287

1,523

82,804

5,527

88,331

5,837

94,168(Notes) 1. Adjustments consist of the following:(1)	The adjustment amount for segment profit (loss) of ¥(1,702) million ($(15,122) thousand) includes amortization of goodwill of ¥(2,132) million($(18,941) thousand), elimination of intersegment transactions of ¥4,263 million ($37,872 thousand), and corporate expenses not allocated toreportable segments of ¥(3,833) million ($(34,053) thousand). Corporate expenses are mainly general administrative expenses that are not attributable to reportable segments.
(2) 	The adjustment amount for segment assets of ¥68,789 million ($611,135 thousand) includes the unamortized balance of goodwill of ¥18,523
million ($164,557 thousand), elimination of intersegment transactions of ¥(123,515) million ($(1,097,321) thousand), and corporate assets notallocated to reportable segments of ¥173,781 million ($1,543,899 thousand). Corporate assets are mainly assets held by the Company, a pureholding company.
2.	Depreciation and amortization, and increases in property, plant and equipment, and intangible assets include long-term prepaid expenses (furniture and fixtures).
3. Segment profit (loss) coincides with the amount of operating profit in the consolidated statement of operations.

Millions of yen
Apparel
For the year ended February 28, 2017

Japan

EuropeAsia/North
America

Total

Other

Total

Adjustments(Note 1)

Consolidated
total (Note 3)

Net sales to outside customers¥193,462¥38,591¥5,881¥237,934¥ 6,967¥244,901¥    —¥244,901Intersegment sales or transfers

1,266

1,969

609

3,844

2,865

6,709

(6,709)—

Total¥194,728¥40,560¥6,490¥241,778¥ 9,832¥251,610¥ (6,709)¥244,901

Segment profit (loss)¥  6,378¥      (459)¥     (458)¥  5,461¥   445¥  5,906¥ (1,702)¥  4,204

Segment assets¥140,208¥32,670¥5,312¥178,190¥26,248¥204,438¥68,789¥273,227

Depreciation and amortization (Note 2)¥  4,523¥   946¥  128¥  5,597¥   636¥  6,233¥   430¥  6,663

Investments in equity-method affiliates

7,965

81

—

8,046

—

8,046

—

8,046

Increases in property, plant and equipment,
and intangible assets (Note 2)

7,766

1,383

171

9,320

622

9,942

657

10,599(4) Segment information by geographical area for the years ended February 29, 2016 and February 28, 2017 is as follows:(a) Sales
For the year ended February 29, 2016

Millions of yen

Japan

Europe

Other

Total

¥212,199¥26,187¥25,130¥263,516

For the year ended February 28, 2017

Millions of yen

Japan

Europe

Other

Total

¥195,147¥29,912¥19,842¥244,901

For the year ended February 28, 2017

Thousands of U.S. dollars

Japan

Europe

Other

Total

$1,733,715$265,745$176,277$2,175,737

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Independent Auditor’s Report

Notes to Consolidated Financial Statements(b) Property, plant and equipment
For the year ended February 29, 2016

Millions of yen

Japan

Europe

Other

Total

¥87,385¥8,324¥10,986¥106,695

For the year ended February 28, 2017

Millions of yen

Japan

Europe

Other

Total

¥73,940¥7,618¥10,711¥92,269

For the year ended February 28, 2017

Thousands of U.S. dollars

Japan

Europe

Other

Total

$656,892$67,678$95,162$819,732(5) Segment information on impairment losses on property, plant and equipment by reportable segment for the years ended February 29, 2016 andFebruary 28, 2017 is as follows:
Millions of yen
Apparel
For the year ended February 29, 2016

Japan

EuropeAsia/North
America

Impairment loss

¥1,720

¥—

¥288

Total

¥2,008

Other

Unallocatedamounts andelimination

Total

¥—

¥12,043¥14,051

Total

Millions of yen
Apparel
For the year ended February 28, 2017

Japan

EuropeAsia/North
America

Total

Other

Unallocatedamounts andelimination

Impairment loss

¥1,638¥—¥21¥1,659¥—¥—¥1,659Thousands of U.S. dollars
Apparel
For the year ended February 28, 2017

Impairment loss

Japan

EuropeAsia/North
America$14,557

$—

$182

Total

Other

Unallocatedamounts andelimination$14,739

$—

$—

Total

$14,739

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Onward Holdings Co., Ltd. Annual Report 2017

Main Subsidiaries

Main Subsidiaries

As of August 31, 2017

Japan
Onward Kashiyama Co., Ltd.
3-10-5 Nihonbashi, Chuo-ku, Tokyo 103-8239, Japan
Tel: (81) 3-4512-1020

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

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

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

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

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

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

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

Overseas
EuropeAsia

United States

Onward Italia S.p.A.

Onward Fashion Trading(China) Co., Ltd.

J. Press, Inc.

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

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

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

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

Onward Global Fashion Co., Ltd.
Onden Imaizumi Building, 5-7-4 Jingumae, Shibuya-ku,
Tokyo 150-0001, Japan
Tel: (81)3-4512-6900

La Maison Moreau S.A.S

Intimates Co., Ltd.

49, Rue du Faubourg Saint Honore 75008 Paris, France
Tel: (33) 1-7038-7700

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

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

Sakula Inc.

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

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

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

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

Onward Kashiyama
Hong Kong Ltd.

2-10-10 Iidabashi, Chiyoda-ku, Tokyo 102-8115, Japan
Tel: (81) 3-3288-3688

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 Personal Style Co., Ltd.
3-14-21 Kaigan, Minato-ku, Tokyo 108-8439, Japan
Tel: (81) 3-5476-6131

Onward Kashiyama Korea Co., Ltd.

Onward J Bridge Co., Ltd.

Songsan B/D, Seochojungang-ro 61, Seocho-gu,
Seoul, 06651, Republic of Korea
Tel: (82) 2-548-5841

3-14-21 Kaigan, Minato-ku, Tokyo 108-8439, Japan
Tel: (81) 3-5476-5370

Kokobuy Inc.

Onward Kashiyama
Singapore Pte. Ltd.

3-41-7-1404 Sendagaya, Shibuya-ku, Tokyo 151-0051, Japan
Tel: (81) 3-5772-8535

150 Orchard Road, #07-18 Orchard Plaza,
Singapore 238841
Tel: (65) 6838-0690

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

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

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

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

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Onward Holdings Co., Ltd. Annual Report 2017

3rd Floor, 8 Crosby Street,
New York, NY 10013, U.S.A.
Tel: (1) 212-997-3600

Onward U.S.A. L.L.C.
3rd Floor, 8 Crosby Street,
New York, NY 10013, 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

Corporate / Investor Information

History

As of February 28, 2017

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

1927

February

Junzo Kashiyama established Kashiyama Trading.

1947

September

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

1960

October

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

1962

April

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

1964

July

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

1966

September

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

1972

July

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

September

Established Onward Kashiyama U.S.A. INC.

Established

September 1947

Capital¥30,080 million

Common Stock

Authorized— 400,000,000 shares
Issued—167,921,669 shares

1973

February

Established Onward Kashiyama France S.A.

Note: The total number of issued and outstanding shares included 21,609,228 shares of treasury stock.

1974

February

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

9,509

1986

October

Acquired J. Press, Inc.

Stock Exchange Listings

Tokyo, Nagoya

1988

February

Established Onward Kashiyama Hong Kong Ltd.

Transfer Agent

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

Number of Shareholders

Number of Employees(Consolidated)

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

1989

DecemberEstablished Onward Kashiyama U.K. Ltd.

1990

January

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

July

Acquired Chacott Co., Ltd.

4,456

Major Shareholders
Number of
Shares Held(Thousands)

Percentage ofTotal Shares
Issued (%)

Kashiyama Scholarship Foundation

8,710

5.9

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

6,539

4.4

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

Japanese individuals
and others

Japanesefinancial
institutions

25.2%

29.4%

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).

BNYML-Non Treaty Account

5,039

3.4

July

Acquired Iris S.p.A.

Isetan Mitsukoshi Ltd.

5,001

3.4

2006

October

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

Japan Trustee Services Bank, Ltd. (Trust account)

4,701

3.2

2007

April

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

Nippon Life Insurance Company

4,671

3.1

Onward Holdings Customers’ Shareholding Association

4,535

3.1

May

Acquired Frassineti s.r.l.

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

4,470

3.0

June

Established J. Direction Co., Ltd.

September

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

The Dai-ichi Mutual Life Insurance Company, Ltd.

4,200

2.8

MARUI GROUP CO., LTD.

3,417

2.3

Notes:
1.	The Company holds 21,609,228 shares of treasury stock. Treasury stock is not included in the above
Major Shareholders information.
2. Percentage of total shares issued is calculated after deducting 21,609,228 shares of treasury stock.

Foreigninstitutions
and others

Japanese
securities
companies

20.2%

0.9%

Other Japanese
corporations

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

24.3%

Note: Japanese individuals and others data ­includes treasury stock.

Acquired Corporate s.r.l.

2008

October

Acquired Creative Yoko Co., Ltd.

2009

DecemberAcquired controlling interest in Island Co., Ltd.

2010

June

Established Onward Kashiyama Singapore Pte. Ltd.

2011

AugustEstablished Onward Kashiyama Vietnam Ltd.

2012

April

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

May

Established Onward 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.

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

MarchMichinobu Yasumoto became president and representative director.

September

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

March

Acquired La Maison Moreau S.A.S.

April

Acquired Tiaclasse Inc.

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

January

Acquired Kokobuy Inc. and Innovate Organics, Inc.

Acquired Jil Sander A.G.

Stock Price Range and Trading Volume
Stock Price¥

Trading Volume
Thousand Shares

1,200

100,000

75,000900

October

2013

2014
50,000600

2015

25,000300

02015/3

2016/32017/3

0

2016

2017

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

Printed in Japan