We would like to express our thanks to our shareholders for their interest in and support of the Onward Group (the Group). During the fiscal year ended February 29, 2012 (fiscal 2012), Onward marked its 65th fiscal period.

In its corporate philosophy, the Group has defined its business domain as “creating a world of fashion that gives refreshment and beauty to people’s lives.” By offering fashion as an integral part of consumer culture, the Group creates new lifestyles and values that contribute to the enrichment of life for all people.

In domestic business activities during the first half of the fiscal year, the Group endeavored to absorb the impact of the Great East Japan Earthquake. In the domestic apparel-related business, ONWARD KASHIYAMA CO., LTD., took the lead in implementing aggressive merchandising and marketing strategies, and through the conduct of efficient management activities, performance improved in the second half of the fiscal year, and income increased for the full fiscal year.

In overseas activities, profitability of the apparel-related business in Europe improved substantially, and increases were recorded in both sales and income during the fiscal year.

In the current fiscal year, the Group will pursue a growth strategy under its New Medium-Term Three-Year Plan, which has the objective of moving into a new growth stage emphasizing fashion.

We look forward to the continuing understanding and support of you, our shareholders.

During fiscal 2012, the Japanese economy showed steady recovery from the effects of the Great East Japan Earthquake, but domestic economic conditions remained uncertain because of concerns about a slowdown in the world economy as a result of the debt problems experienced by European countries and the prolonged appreciation of the yen.

In the apparel and fashion industries in Japan, the drive to spend among consumers cooled off as a result of the earthquake, but, supported by demand for recovery from the disaster, improvement in economic conditions came faster than expected. Nevertheless, conditions continued to be difficult as deflationary trends persisted overall.

Amid these operating conditions, in domestic business activities, ONWARD KASHIYAMA strengthened its marketing activities by aggressively offering proposals for products and worked to use its expenditures efficiently. As a consequence, during the second half of the fiscal year, ONWARD KASHIYAMA reported increases in sales and income, and gains in income for the fiscal year as a whole. Moreover, in overseas activities, profitability in the European region showed major improvement, and increases according to plan were reported in sales and income.

The outlook for the Japanese economy is for the continuation of weak recovery conditions because of the prolongation of the strong yen and concerns about a deceleration in the world economy owing to the debt problems in European countries as well as other factors. In Japan, although there will be demand related to recovery from the earthquake that occurred in 2011, consumer spending will still require careful monitoring because of continuing tough conditions in the income environment and the deep-rooted persistence of the mood of restraint as consumers seek to sustain their current lifestyles.

Amid this economic environment, the Onward Group will move toward a new growth stage emphasizing fashion and implement a growth strategy under its New Medium-Term Three-Year Plan.

In domestic business operations, the Group will work to expand its activities and improve the allocation of expenses by shifting personnel from existing activities to new businesses and to those business divisions that the Group is working to further develop and strengthen. In Internet business operations, where the Group is endeavoring to expand income steadily along with the growth in this market, the Group will accelerate growth in this area by upgrading and further developing its brand offerings over the Internet and increasing the number of Onward website members. In addition, after careful consideration, the Group will move aggressively to undertake M&A deals that will increase its growth potential and realize synergies.

In overseas business operations, the Group will strive to shift its global business activities, which are based in Europe, to a comprehensive global business expansion path and position these overseas operations as the Group’s core income generators. In the North American region, the Group will establish a new business planning office in New York and position this as a base for future business development, while taking steps to improve profitability in existing businesses. In Asia, the Group will continue to build its low-cost production systems by expanding the range of producing regions and strengthening autonomous production capabilities. At the same time, the Group will raise its growth potential through raising efficiency in marketing by expanding its existing large-scale stores, developing new sales outlets, and expanding its position in wholesaling.